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If We Don't Change The Way Money Is Created and Distributed, Inequality Will Trigger Social Disorder
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Centrally issued money optimizes inequality, monopoly, cronyism, stagnation, low social mobility and systemic instability.
If we don't change the way money is created and distributed, wealth inequality will widen to the point of social disorder.
Everyone who wants to reduce wealth inequality with more regulations and taxes is missing the key dynamic: the monopoly on creating and issuing money necessarily widens wealth inequality, as those with access to newly issued money can always outbid the rest of us to buy the engines of wealth creation.
Control of money issuance and access to low-cost credit create financial and political power. Those with access to low-cost credit have a monopoly as valuable as the one to create money.
Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit.
Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest.
There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes.
The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.
This is the magic of fractional reserve lending. The bank is only required to hold a small percentage of outstanding loans as reserves against losses. If the reserve requirement is 5%, the bank can issue $1,900,000 in new loans based on the $100,000 in cash: the bank holds assets of $2,000,000, of which 5% ($100,000) is held in cash reserves.
This is a simplified version of how money is created and issued, but it helps us understand why centrally issued and distributed money concentrates wealth in the hands of those with access to the centrally issued credit and those who have the privilege of leveraging every $1 of cash into $19 newly created dollars that earn interest.
Imagine if we each had a relatively modest $1 million line of credit at 0.25% interest from a central bank that we could use to issue loans of $19 million. Let’s say we issued $19 million in home loans at an annual interest rate of 4%. The gross revenue (before expenses) of our leveraged $1 million would be $760,000 annually --let’s assume we net $600,000 per year after annual expenses of $160,000. (Recall that the interest due on the $1 million line of credit is a paltry $2,500 annually).
Median income for workers in the U.S. is around $30,000 annually. Thus a modest $1 million line of credit at 0.25% interest from the central bank would enable us to net 20 years of a typical worker’s earnings every single year. This is just a modest example of pyramiding wealth.
Next let’s say we each get a $1 billion line of credit which we leverage into $19 billion in loans earning 4%. Now our net annual income is $600 million, the equivalent income of 20,000 workers. We did nothing to improve productivity, nor did we produce any goods or services. We simply used the power of central banking and fractional reserve lending to skim $600 million in financial rents from those actually producing goods and services.
Note that we are not uniquely evil or avaricious in maximizing our private gain from the central bank system; we are simply responding rationally to the system’s incentives.
The system concentrates wealth and subverts democracy not because participants are different from the rest of us but because they are acting rationally within the system. Would you turn down $600,000 a year? How about $600 million a year?
It makes no sense for banks and financiers not to maximize their gains in this system. Those who fail to maximize their gains will be fired.
I hope you understand by now that the current system of issuing money and credit benefits the few at the expense of the many. The vast privilege and the equally vast inequality it generates is the only possible output of the system.
This inequality cannot be reformed away; it is intrinsic to centrally issued money and private banking.
The problem isn’t fiat money; it’s centrally issued money/credit that is distributed to the few at the expense of the many. If we want to limit the subversion of democracy and reduce wealth inequality, we must decentralize and democratize the issuance and distribution of money.
In the current system, money isn’t created to reward increasing productivity. It is created to increase the wealth and power of the privileged.
If we want to connect the creation and distribution of money/credit with productivity, we must issue new money directly to those creating value and boosting productivity, bypassing the privileged few in central and private banks.
By concentrating wealth and power, centrally issued and distributed money doesn’t just subvert democracy. It also optimizes inequality, monopoly, cronyism, stagnation, low social mobility and systemic instability.
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What are our monetary unfunded liablities?
social disorder is the only effective mechanism for healthy change now
Crypto-currencies are teh answer.
Hey look! Some ZH tards are butt-hurt that some 16 year olds and "computer geeks" can figure out the problem and they can't LOLOLOLOLOL!
Your place on the pyramid is not static, except for a rare few.
If you were one of those "rich" people, making $1 MILLION dollars per year, it would take you almost 80,000 years to catch up to Warren Buffet. And thats assuming you weren't paying any taxes on your rich million. Factor in taxes, and that timeframe doubles to 160,000 years. Just to put things in perspective.......
Warren Buffet is when two patron is argue over last chicken leg at all-you-can-eat-it restaraunt.
That shit reaally happens with the creme de la creme of society these days....
http://www.thesmokinggun.com/documents/stupid/all-you-can-eat-pancakes-r...
Bottom line, the banking system as currently configured is an extremely profitable racket for the banksters -- profitable enough to control governments and world events. Most know that the only time Jesus displayed violence was when he overturned the tables of the moneychangers at the Temple. Something to think about.
A tube of ASE won't even buh you a single Bitcoin today you goddamn retards. You will have to sell 23.5 ASE to buh one single BITCOIN today. Anyone want to wager how much further that gaps up in 2016? Or at what point you will have to sell several Krugerands to buh a single Bitcoin? Hey you fucking mental midgets? You stupid animals?
Dude,
You gotta know when to fold 'em...
I'll take that tube of ASE all day long over a heaping helping of Shit coin.
Because if you wish to pull off a real world face to face transaction, you better have something of value physically present to conduct the transaction.
Otherwise, the vendor or private party you are doing business with will probably tell you to go fuck your hat.
So - silver Eagle, or, " Come take a look at my digital wallet I have on the Internet when it comes back on line. "
Which transaction has merit ?
Which trade gets completed ?
World War 3 already started!!!
http://motivationdose.com/alive-after-the-fall/
The real butthurt is people using words like "distribution" and "inequality"...those are real trigger words...as in triggers will be pulled at said trigger talkers.
fail.
you might want to try to read the article and understand what it actually is saying.
smith is against the current system of distribuion of wealth to crony bankers. it's not the government's role to decide who money should be distributed to.
and inequality is fine when it's earned, if you are smarter or work harder than your neighbor, you should be richer. the inequality that's being talked about is the rigged system by which the bankers benefit at the expense of society, because they own the government and the system of money creation. to quote the article:
"I hope you understand by now that the current system of issuing money and credit benefits the few at the expense of the many."
let people become unequal due to their own merits, not because of handouts.
fail.
you might want to stop assuming what he said and read what he said
when your internet is cut off tell us about your "currency"
Sure... brain wallets and Bitcurrency. It will be great.
you do realize you can use bitcoin on your phone....
or even printed on paper (like qr codes or private keys containing specific values) or carved on wood, steel, gold bars or tattooed on chicken skin :)
bitcoin is decentralized and secured by math, science and open consensus
bitcoin is banksters worst nightmare, because it takes away their ability to create unlimited amounts out of thin air as necessary for their criminal schemes
its also the worst nightmare of tyrannical governments because it takes away their ability to impose rules on users and also cannot be destroyed by attacking central point of control
Hey, fake Fonestar wannabe - keep riding that Chinese toboggan of yours HELL FOR LEATHER down the steep slope of Shitcoin devaluation until you hit the big fat Douglas fir tree of monetary reality - If you do not have physical possession of your equity, YOU DON'T OWN IT !
Electrons are easier to manipulate than any other form of physical equity storage, you silly wabbit.
Electrons? Like the ones that make up gold and silver? Teh ones that can be used by IR imaging from teh ghetto bird in teh sky to identify and steal all of your phyzz once SHTF?
Oh fuck, please.
Where is all of my physical ? Many boating accidents later, who knows ?
There are so many pipes and wires in the ground, for power, sewer, electrical, cable teevee etc., that IR imaging is worthless.
Plus, if SHTF, gooberment is gonna be more worried about saving their own miserable asses relative to tracking down some bag holder with a few tubes of coins.
Shit coin is manipulated like the stawk market - boom to bust, no control, no access with no functioning internet.
You are crazier than a shit house rat gnawing on a fresh turd, thinking you are wealthy as a result.
Only reality is real. Internet fantasy is not, you fake Fonestar wannabe.
At least that guy had a head on his shoulders.
save yourself some time and just go hand your money to some hackers, nsa, cia, etc
...funny because we have been using Bitcoin since late 2011 without being "hacked" or tracked. Perhaps you could explain what teh problem is in logical terms?
...funnier because you apparently don't know WTF you're talking about. Try googling "bitcoin hacked" next time, dumbass.
http://arstechnica.com/security/2015/07/hacking-team-broke-bitcoin-secre...
http://www.coindesk.com/unconfirmed-report-5-million-bitstamp-bitcoin-ex...
Those "stories" are about an application vulnerability and an online exchange you dumb shit.
Teh problemo, is that is how the masses gain access to their Shit coins for the most part, oh great crypto con boy.
Bitcoin and crypto-currencies are a GAME, little else. The vast majority of people with bitcoin are holding it (gambling) to hopefully MAKE MONEY. Tell us, how many people cashed out when it hit $500 last week?
It's just another stock market.
Teh crypto currencies are teh answer to someone else's question.
TPTB - " hmm - how do we exert devaluation control and taxation on all income and financial transactions ? Got it - convince sheeple that cryptocurrencies is cool - just like we fucked them with debit cards and credit cards, only better !!! "
Teh debble is in teh details, coin fuck face.
You're an idiot and the biggest smack in teh face is going to come to you dumb bitches when you have to sell gold & silver to send someone far away money in teh form of BITCOIN.
Oh, sure - sending money to some one far away is right up there on my priority punch list of things to do.
I'm still waiting for my 300 million dollars from that nigerian prince guy I am helping to get his billions out of his country.
Funny, he said the same things you are saying, only with a cooler accent.
i guess these big transactions take a lot of time to set up the wire transfers for.
Told you so :D
" And, now, a message from teh fake Fonestar wannabe cryptocurrency pimp, now offering absolutely free, your choice of available luxury condos in ghost cities in China along with any Shitcoin purchase made today on the Zero Hedge Home Shopping Network. "
http://www.zengardner.com/something-extraordinary-happening-world/
An example of a shared economic platform, there can be many, my bud was early...
http://www.ingenesist.com/
LMFAO!!!!! Does it matter if they are never really going to be paid?
Get long sharecropping and guillotines, beat the rush!!!!
What is it $200 trillion? Yeah that's money for poor people so I don't want to hear this bullshit about poor people getting nothing.
Non GMO seeds are a good idea for a cheap hobby. It might pay off.
Personally, as a son of a scientist, I believe we will see GMO crop failures and unintented "social costs"
Like shitloads of BUGS, like a biblical plague, or weeds fom hell etc.
Not to mention plain poisoning of many other plants, animals, humans...
http://www.naturalnews.com/GMO.html
Long Bug Nets and Heirloom seeds.
No shit sherlock. Useless fucking "article". Yes, we all know what the outcome of a "let the majority eat cake" monetary experiment is and this time will eventually be no different.
Yes, bankers and financiers are nothing but useless middlemen between the computer/printer (where money is now created without and real collateral requirements) and the producer/consumer in the real economy.
Want to really recover?
Time to execute the fucking middlemen!!!
How can you change it now without creating deflation?
The rich have all the money, the poor and middle class are strapped.
And if you create deflation now, the rich will own EVERYTHING and the rest will get less and less!!!
And oh yeah... THE FED ALREADY DID THAT ONCE!!! DURING THE GREAT DEPRESSION VERSION 1!
IT WOULD BE THE ULTIMATE FORM OF FASCISME TO STOP NOW WITHOUT DOING ANYTHNG FOR THE AVERAGE PERSON!!!
So the only is to KEEP WAGES IN TRACK WITH INFLATION!!!
THAT THE REAL CULPRIT!!
INCREASE PURCHASING POWER IS WHAT MADE OUR ECONOMIES TO WHAT IT WAS A DECADE AGO!
PUR CHASE ING POWER!!!!!!
That IS the plan.
Elite 1 Folks 0
Labor no longer pays a return on investment. Thats your problem with deflation.
Technology (computers labor) causes deflation. Wages are just labor costs with those costs falling at an exponential rate what do you expect.
If banks want to be more then just trading platforms then they need to get out of the money creation business. Remove loan origination from banks (they never should have had that to begin with). That would allow banks to be banks and everyone else to be subject to risk and responsibility.
Deflation is exponential because technology is exponential.
No.
Deflation happens because currency is issued against real productive output that has not yet happened, and may never happen. It is done by issuing a loan from thin air... A loan of something that doesn't exist, and might never.
But one man's loan is another's paycheck. So when the real work springing from a loan isn't enough to pay it back, it wipes out the loan and it's collateral, which in turn wipes out that guy's loan, and so on.
InCHSs examples, $100 secures $1,900 In loans.
Stop there. It is impossible to pay back $1,900 with $100... unless a lot of people get stiffed. The assumption that the loan will be paid with money earned from elsewhere doesn't work. The money elsewhere has its own loans to repay same as this $100 does.
Obviously it is impossible.
They keep it running by printing up another $1800 so it is possible to repay all $1900. Otherwise the $1900 would never exist...but would just be that same old $100 changing hands til it got back to the bank.
But they don't just give that $1800 to the debtor. They give it to their cronies.
The cronies spend it. The guy who took out the loan then has to serve the cronies to get the $1800 and pay back his loan.
Except the $1900 loan was a loan of NOTHING. There was no $1900 anywhere until the bank wrote the loan.
Producing the $1900 from nothing bids up prices. Printing the money so it can be paid back empowered people who produced nothing. And when that happens the wealth of those cronies is sucked from your wallet into theirs. How? The number in your wallet will stay the same...but it will buy less. That's inflation.
An if Mr debtor doesn't please Mr Crony, he can't pay back the loan. Which will mean gave away $1800 for nothing.... And the guy who deposited $100 will get nothing....but the banker and the crony will be fine.
When you put money in a fractional reserve bank you are putting on a slave collar. And forever afterward you will be owned either by banker or crony.
http://www.zerohedge.com/news/2015-10-12/deflation-disruption-debt-demog...
Bring back the gold standard.
Stop accepting their fucking paper!!!
Nothing changes otherwise!!!!
In France, we're forced into digital salaries. (mandatory gank bank account)
get a job in the black economy
"Bring back the gold standard."
Right, because "We teh people" did such an awesome job of keeping the bankers honest teh first time. Nah, they would never be able to fool you guys (or your grandkids) again...
the gold & silver standard are already law in the U.S. and have been since the birth of the constitution
but following law is so passe
How EXACTLY?
So tell us, how do you borrow when you have a gold standard? That's money creation all over again.
Or if you are serious, then first, the government would confiscate all privately held gold and silver, and make it punishable by death to hold anything but government issued coinage or gold certificiates. Of course the governemnt will then go on to debase the "currency" to "make" more money. That's where we are today.
Gotta cause new bubbles somehow.
Soap and water was always good and as a kid, all I had to do was swear, 10minutes there would be bubbles guaranteed
"the poor you will always have with you"
...if the 1% have anything to say about it.
That's because "Poor is a state of mind."
that's the way the fed likes it
Thanks for this information. Now that I know how to fix the entire global economy I'll get right on it. Should be fixed by around noon on Tuesday.
At some point of taxation it's like a game of civilization where you have a peasant uprising.
So we used debt because that masks unsustainable spending and kicks the can, but alas as in all can kicking eventually you arive a the point where the can weighs 10 billion trillion pounds and all you do is break your foot off and it moves no where.
WHEN we get there is the existential question I wish I knew, it's not here yet I don't think, but it's out there and one day it wiil go clunk and I think the people in charge know this and will just start over with a newer more impressive lightweight kickable can.
That we will inevitably fall for this is the other existential part of the equation and why?
I think more than anything these people are masters of manipulation and control. If any science is behind what they do that's what it is.
It's like paying a tech company that is secretly embedding viruses into your software to get more billable fees that says aren't you glad we're here? To date we've removed 100 viruses from your system! "Nevermind we planted all 100 and nevermind the 50 we haven't removed yet wait until you see what THOSE do :)"
What the author and a LOT of posters here miss is the simple fact that without this money creation and banking, we would still be in the dark ages.
It is BECAUSE of banking that we have the standard of living we do today. Yet how many people want to throw this all away becasue they demand equality?
Equality brings everyone down to the LEVEL OF THE LOWEST, it doesn't bring the lowest up to the average.
"It is BECAUSE of banking that we have the standard of living we do today."
This is your defense? More crap and more rules does not equal a better life, on the contrary.
Besides, the advantages gained could have been gained in other ways, without the serfdom.
Besides, the advantages gained could have been gained in other ways, without the serfdom.
OK, so tell us HOW everything we have today could have been gained in other ways? In a socalist system? Hasn't that been tried? Tell us, how well did people live in the Soviet Union? How about today in Cuba and North Korea? These your ideas of socalist utopias, eh?
If the entire world was socalist, then NOTHING we have today would have been created. There's no incentive. reward or NEED to create anything in a socalist utopia. That's why there never amount to anything.
Without the banks creating loans (inflation) the costs of everything would have fallen to the point that most of what we have would seem free. Take any price you see and move the decmal to the left 3 places. That is what we have lost.
Without banks creating loans, we would still be living an agraian life in feudal europe, and the "new world" still wouldn't have been discovered.
The exploration of the world in the 1400's was BECAUSE of banking. Those expediditons were financed. Likewise the entire industrial revolution, again everything progressed quickely because of banking and finance. Without banking, none of that would have happened.
How much interest did Columbus have to pay on his ships?
says the wannabe king
I gave you a thumbs up for a valid point. The problem is the degree. Does fractional reserve ratio need to be 10 to 1 at this point in time? Maybe decades ago, when the system could tolerate that kind of rate of fractional resserve, iot was OK. Think of fractional reserve as a drug. A little may not be enough, but too much is certainly deleterious, and dose shou,d be adjusted as events warrant. But this is not the case. The system has run amok for the benfit of the few elites.
As far as living standard, I liked my standard of living back in the 70-80s, so IMO the law of diminshing returns applies.
And the industrial age was well underway before 1913. So what if it would have theoretically taken longer for us to reach our level of technology?
The degree of money creation isn't the issue. It's a question of whether it's possible or not. Without creation of money through banking and lending, even the "new world" wouldn't have been discovered by Christopher Columbus. His expedition was financed, in hopes of finding something valuable. His voyage wasn't for discovery, it was for business.
Recently, money creation has been grossly distorted not becasue of the banks, but becasue of QE "experiments" all over the world. Look at the turn of the century, the richest families were Rockefeller, Carneigie, etc. They didn't make their money through banking, they made it through business. Even today, the majority of the richest people made their money though building companies.
You are alleging that only through debt, or rather, the degree of debt created by fractional reserve banking creates is necessary to finance civilization?
Absurd.
Reckless credit expansion only encourages malinvestment. Money is a facsimille for barter. Money is not fuel, it is a technology for facilitating trade in goods and services. Not all investments are equal. When money becomes divorced from tangible reality, investment behavior changes. It also becomes a self reinforcing mechanism where you must counterfiet to seek greater return because you've been counterfieting. Sound familiar?
Hayek. Mises. Rothbard. Boom bust cycle. Look these up. Money must be grounded in physical reality, because trade is. Remove this link and you distort the entire market.
And the reserve ratio doesn't restrain any one institution that specializes in loans that can be bundled into public debt securities. Unless they are forced to keep a portion of every tranche of every issue on their books, they'll put their unbundling peers out of business.
I'm going to buck the trend here on ZH for a moment and agree with you to a degree; I think for any given economy there is some optimal level of duration-matched credit creation. That said, such an economy would be radically different than the one we have now where every artificial person optimizes their capital structure by pushing for it to consist of 100% unsecured borrowing of other people's money.
We have to remember that money creation includes lending for mortgages, vehicles and other things we consider "necessities". Consumer credit? Not so much.
But without that money creation to borrow for a mortgage for a house, what's the alternative? Save up your entire life to buy (build) a house just so you can die in it?
In the 'old days', a commercial bank would sell certificates of deposit and or structure participation loans with their wealthy clients, or syndicate with other banks, to fund the long term borrowing of their customers. National banks had to hold 25% or more in reserves against deposits and notes.
Anopheles:
Your thinking is very elementary and juvenile. You need to 'dig' much deeper. 'Money' is a 'tool'. Re-think your analysis with this fact in mind. Also, banking must be a level field for all; not just a few. What you have now is the source of all injustice and poverty. The 'money' must be 'honest' and not susceptible to willful management by any agency. Until you see the flaw in your reasoning, you'll continue to buy the BS pedalled by TPTB...
Bullshit. All the author and a LOT of us posting on zero hedge want is equality within of the rule of law. Restated, it's that everybody plays, operates, saves, spends, and invests by the same rules of the game. Because when money can be created out of thin air, you can champion any cause, promote any whim or punish any adversary.
Removing central banking and the FORCE by which the system is run will allow for more productivity, creativity and therefore savings (or capital to invest) causing the level to RISE for everybody willing to work for it.
Just imagine the benefits of a fair tax taken in real time at the register (in lieu of income tax and the thousands of other taxes and fees). This tax covers basic government overhead and is collected in real time as the4 end-of-day reports are run, allowing the government(s) to actually operate within an approved budget. And if you don't want to pay the fair tax, grow and consume your own food, generate and consume your own energy, etc. It removes all force from the system. Those who can save in this system will become private bankers creating wealth OPPORTUNITY for all and RAISING the level for everybody. Legally, ethically, morally. Period.
"Note that we are not uniquely evil or avaricious in maximizing our private gain from the central bank system; we are simply responding rationally to the system’s incentives."
Maximizing private gain is the definition of avaricious, is it not?
There is a choice here. One can choose to use the central bank system or not.
who's "we" ?
like anyone but the royalty has any power to change it
which is what the royalty wants
medevil times are back baby !
break out the giant turkey legs and beer steins
all hail the kings !
"We" is the people who deposit our paycheques with the banks.
"We" is the people who tacitly agree to all of this because it's easier.
"We" is the people who have allowed it all to unfold before our very (ignorant) eyes.
Trillions in Fed Easy Money just made the rich even richer, the working classes poorer and the lazy poor more comfortable. Exactly as planned and predicted!
A guaranteed cash minimum "income" regardless of one situation. Currently $3000 a month per person will do....less crime, less poverty, less misery.
That idea is so bad its not even wrong. Raising the minimum floor on wages:
1) kills entry level and menial jobs (burger flippers and wal-mart greeters), as well as the companies that provide them
2) raises the floor of all goods by roughly $3000 per month per person
3) costs $11.5 trillion per year against 3.1 trillion in revenue (US)
4) NOBODY is going to work for $2500 and get topped off to $3000. I sure as hell wouldn't.
So tell us, WHO is going to PAY all those people? Where is the money coming from?
What a fucking numb skull you are! I think advocates of this call it a "living wage". Who the heck is going to pay for this?
Too late, ivory tower fool. The only solution has been locked in by the pilfering pimps in DC. Do you think they care about inequality? The powers that be USE inequality issues to permit their ongoing pilfering.
I suppose that money creation power creates all of the other problems, including: banks and people who are too big to prosecute, rampant corruption and the destruction of the rule of law.
The banks have shown themselves incompetent to provide a fair and equitable system. So, being failures, they should have their power removed. Removing the money creation power from the banks would resolve the issue, but most likely only temporarily to have it pop up in another vehicle of corruption.
If the elitists are depending on creating social disorder, I think they are in for disappointment. Most likely the elitists will have to murder all of the people themselves.
Big Hughie! I'll tell you how to distribute the money: send it to me.
We NEED social disorder.....
money is only printed after it is created, through the issuance of credit. the fed can't just print money, there has to be some underlying demand (no matter what helicopter Ben thinks) consider however the origin of credit creation, not all of it is centrally based, much of it, especially during the prelude to the financial crisis, was being created in the private sector, or the shadow banking sector. [my private OP, the Fed crashed the market to get control of the money supply, stock values were still quite good when the Fed stepped in] and for the same reason the Fed is concerned that a hedge fund savant bought up nearly 500B of the Tbonds China dumped on the secondary market (but so far so good) if that position blows up who knows what happens. in concert the Fed issued 500B of reverse repo to the banks, which gives them, the Fed more control over interest rates, and the money supply. as we know real economic activity is dead, money velocity is zero and going lower, the little guy is a concern, but he still needs to buy some beans, at issue is all the credit which was issued as deferred payment to a lot of poor Chinese, who now want to call their marker, and the thinly veiled threat to collapse the dollar in order to facilitate the orderly closing of their rather stupid position in all this. now we are finally getting to the MONEY part, so the Chinese sell 1/2T in US Tbonds they get crisp hundred dollar bills and they go shopping but the store is empty, sure there is some RE on the west coast, which quickly turned into a bubble, but no military hardware and the US doesnt make anything China needs or wants. so those dollars are burning a hold in their pocket, they even managed to fill their petroleum storage. so the Chinese had bonds they could not spend which they trade for money they cannot spend. now who's problem is it really? meanwhile the shadow banking system in the US is pumping up the volume again, and stock asset prices are robust, but this is all based on ten unspendable dollars to every one that does some work,and its getting worse. those poor people in China did the work and they got nothing really. thats the story, and we'll probably have a war and blow half of them to pieces. they were going to die broke anyway. sad sad sad what they call the science of economics
The social disorder will once again be manifest in fascists vs socialists. Half this country thinks they should defend the status quo that is actually keeping them down, and the other half thinks the only solution is massive re-distribution.
ultra-sarc:
Naw, everything is cool brahs. We manage the way money is distributed by dropping it from helicopters. Then we have our right honorable congress people like Denny Hastert continously tweak a 2000 page tax law, with a 71,000 page operation manual and give it to goons with guns to "regulate" how much munny from the skies everybody actually gets to save or spend, how-when-why. Specifically: you can give it to the IRS/MIC --or instead-- give it to the 501c3s like genius George Soros' Hegelian Dialectic hate machines. But you are not in anyway allowed to keep it for yourself based on what you earned. And don't worry about using the munny to help your neighbor (the ones that soros did not teach you how to hate yet) we got social security, medical benefits and infrastructure paid for with the 18 trillion national debt.
Speaking of the international stage, we write treaties in secret, that even the honorable congressmen who write tax code are not allowed to read before they vote on it 'cause national security and stuff.
seriously dudes, every thing is exactly the way it is supposed to be brahs.
/ultra-sarc
it is already happening...and it is a change for the better.
Money can be created 2 ways:
1. In the form of free credit for the central government as QE creates reserves that go into the banks and are never lent out. How do you think the U.S. Treasury ended up with "obligations" of over $1 Trillion at zero interest? Great gig if you can get it!
2. In the form of bank loans that go to the highest "bidder" (the most creditworthy investments) via the private economy. For all intents and purposes, QE, ZIRP and massive overregulation throughout the economy have rendered this avenue for credit creation DEAD.
The banksters are starting to seriously fight back against bitcoin. They want to use the tech behind bitcoin (the blockchain) but it is very clear that they do not like the currency that makes the distributed ledger possible because they cannot control it and it is bail-in and negative interest rate proof like cash and precious metals. This video shows Blythe Masters and members of the Bank of England talk about bitcoin, negative interest rates, the blockchain and how the government will (in their opinion) eventually ban the use of bitcoin and other cryptocurrencies for these reasons. It is fun to watch them try to defend the old system of control and theft...Enjoy! https://www.youtube.com/watch?v=ZiMl2b5O7Ho&feature=youtu.be&t=3h54m54s
"The problem isn't fiat money."
That's debatable. Fiat money isn't a problem if and only if more of it is never created. If you allow any additional to be created, it will inevitably become a problem.
Where the money enters the system is largely irrelevant to its long run consequences. It is only relevant to the short term consequences of who ends up better off, but in the long run, everybody suffers for it.
The people who create fiat out of nothing - collecting seigniorage - are always and forever better off.
By concentrating wealth & power the Central Banks, Banksters, Mafia, and Oligarchy, as well as Illuminati, have all signed their collective Death Warrants due to the fact that they are powerless in the real face of power that they are not capable of grasping, or understanding, enough to actually know what power really is.
On March 10th 2008 @ 11:00am Bear Stearns time New York shitty the entire Oligarchy, Worldwide Organized Crime/Mafia, Illuminati, lost all power to corrupt absolutely. And by my calculations they should be collectively starting to realize this fact right about now.
Have a nice time in Hell & Purgatory, motherfuckers!
:)
I'd say we already have social disorder!
Charles spot on, except that someone needs to create a new system. No solutions as much as I can see in the article except a return to pre FED multiple currencies. Or gold in comments. I don't believe that either is the best approach as multiple currencies would be difficult to use (unless all electronic trackable currencies which is a different set of problems) and easy to manipulate. Gold being non elastic would be better, but it would cause many problems due to its inelasticity in long term growth.
Hence I believe we need three exchangable currencies on a national level and one of these on international level. This makes it easier to push reforms as well as everyone gets piece of the cake.
We need a currency for current consumption (present). This currency should be issued by the market or owners as purchases of futures to any busineses where value is added (from energy production to hairdressers). This currency should continuously inflate in a way in which past services (IOUs) lose value.
We need a currency for acumulated goods (products, real estate, railroads, etc.) (past). This currency should be government issued electronic "gold". Form of money that does not inflate, but correctly determines the amount of accumulated weatlh. Currency would be based on the amount of energy used to create these products minus the amount of energy required to bring them to brand new condition (amortization). Every house owner would have a registered value in this accumulated energy pool of the nations wealth. This currency if based on energy, could also be used for international trade. And ofcourse wealth tax which I strongly believe in.
And finaly we need a risk based currency (future). Banker issued currency in a 100% reserve banking system for the first two currencies. Anyone wanting to invest their money would put the accumulated goods money into the bank which would be the base for creation of risk based money.
All currencies interchangable.
Triangles 'offend' me....
With the infinite amount and variety of social, cultural, economic, financial, political, monteary, global, etc problems, I can see how the world's regime leaders will just jump right on this issue and change the global money system very quickly - AS SOON AS the earth enters the Twilight Zone.
You may as well pray for random genetic mutations to effect a huge improvement in the fatally flawed human species.
Bottom line: Every person alive now and born in the next century is going to live and die under the existing system.
InnVestuhrr, I think you are being unreasonably optimistic regarding the view that young people will live and die under the existing systems, since WE ARE ALREADY IN THE TWILIGHT ZONE, regarding the degree to which the excessive successfulness of the banksters controlling civilization has resulted in that civilization becoming criminally insane with respect to the longer term consequences of what it was really doing. My opinion is that, within a few decades, the exponential growth of the established systems will be running into real limits, that those systems will not be able to cope with.
A Human Tsunami of OvershootWithin that context, that article above was yet another superficially correct analysis from Hugh-Smith. The deeper problems are that civilization necessarily operates according to the principles and methods of organized crime. The banksters are currently the best organized gangsters, that effectively control governments, which are the biggest forms of organized crime.
MONEY IS MEASUREMENT BACKED BY MURDER.
Any different monetary system would have to have a different murder system to back that up. The deeper problems are that the debt controls have always been backed by the death controls, while the death controls were always the most socially successful when done through the maximum possible deceits and treacheries, which was how and why we ended up with the currently established systems, where governments ENFORCE FRAUDS by privately controlled banks, through their POLITICAL FUNDING.
The currently established systems operate as Hugh-Smith described, EXCEPT WAY WORSE, because "money" made out of nothing has "paid" for strip-mining the planet's natural resources. Given those background underlying situations, where civilization was built on the basis of being able to make "money" out of nothing as debts, in order to "pay" for strip-mining the planet, the real limits to those systems were being approached at exponential rates, and those are just beginning to manifest as diminishing returns, which are manifesting first and foremost through their effects within the fundamentally fraudulent financial accounting systems.
The currently established systems have NO ways to sanely adapt to no longer being able to continue growing at an exponential rate. Rather, they have already seriously overshot whatever might have been relatively sustainable. While older, richer people, who live towards the center and top of the established social pyramid systems, may well reasonably expect the established systems to last throughout the rest of their life span, the younger, poorer people do not have any reasonable expectations of that being possible for them.
Everyone who was making "money" was making a living inside of systems that were based upon ENFORCING FRAUDS, so that they were always actually living inside the TWILIGHT ZONE, because the ability to back up lies with violence never stops those lies from still being false. What was built by civilization was systems of organized lies operating robberies, that were able to grow at exponential rates, given a fresh planet that had never been raped and plundered before by the technologies developed by exponential progress in science.
The ONLY thing that civilization actually does is operate as entropic pumps of environmental energy flows, which must have that environmental energy in order to operate. Since civilization was systems of more or less organized lies operating robberies, it developed extraordinary elaborate bullshit regarding itself doing that. The currently existing monetary and taxation systems are fundamentally FRAUDS, which are symbolic robberies. However, those are publicly presented as being the opposite of what they really are.
A series of comments and replies by Anopheles posted above were playing devil's advocate by presenting the successfulness of developing bigger and better organized systems of symbolic robberies as being good things, which that may well be for those who directly benefited from those. However, Anopheles example of the exploitation of the New World being made possible by the funding from the bankers, tends to deliberately disregard the amount of genocides, and accelerating extinction of species, etc., that the bankers' funding enabled. The international bankers have been controlling civilization, in ways which were based upon being able to ENFORCE FRAUDS, which never stops those frauds from still being false! Their fundamentally fraudulent financial accounting systems enabled them to privatize the profits made from raping and plundering the planet, which also enabled the vicious spirals of the feedback loops of those privatized profits providing the POLITICAL FUNDING, which then enabled the continuation of the ENFORCED FRAUDS. However, at the same time, the socialized losses were accumulating. Thus, the BIG PICTURE issues for the foreseeable future are not merely that the currently existing monetary and taxation systems automatically drive worse and worse social polarization. It is MORE IMPORTANT that those systems enabled the destruction of the natural world, in accumulating ways which could trump the social polarization, as well as drive even more overwhelming pressures through the social polarization being magnified by the destruction of the natural world.
In my opinion, we are already in the TWILIGHT ZONE, where the socialized losses have exceeded the privatized profits. However, since those privatized profits are able to continue to operate through their POLITICAL FUNDING ENFORCING FRAUDS, civilization continues to be able to deliberately ignore, disregard and discount, the socialized losses, which were always the flip sides to everything that was enabled to be done through fundamentally fraudulent financial accounting systems. The BIG PROBLEMS for the systems based upon ENFORCING FRAUDS are with respect to running into real limits with respect to strip-mining the planet's natural resources. "Money" made out of nothing as debts did NOT "pay" for anything, except that it "paid" for systems of organized lies operating robberies to be able to continue to operate. Meanwhile, while it is theoretically possible that there could be systems of creative alternatives, the most probable futures are for extreme overshooting, due to the exponential growth of the debt slavery systems, generating numbers which are debt insanities, are actually resolved by provoking death insanities.
In my opinion, within a few decades, people who are young and poor now are going to be more and more facing runaway death insanities, due to them growing up inside of a political economy that was operated through fundamentally fraudulent financial accounting systems. Therefore, I do NOT agree with the view that:
My view is that, within a few decades, the existing systems will have their exponential growth run into real limits, which those systems have no ways to cope with, other than provoking death insanities. There are going to be forced to occur dramatic changes in the death control systems, when the exponential growth of the total human population and activities have already seriously overshot, by becoming based on being able to strip-mine the natural resources of a fresh planet with the technologies of the industrial revolutions, whose applications were directed by fundamentally fraudulent financial accounting systems, which tended to deliberately ignore the principle of the conservation of energy, as well as deliberately misunderstand the concept of entropy in the most absurdly backward ways.
Mostly the articles and comments published on Zero Hedge tend to provide superficially correct analysis, followed by superficial "solutions." (Although those are far superior to what is presented in the mainstream media.) For instance, there are those who call for the return of some sort of material backing for the money, like returning to the gold standard, or whatever. However, the conservation of matter, which was the source of the ring of truth in the real money backed by gold, or silver, etc., ought to be reconsidered in light of the demonstration that matter is a form of energy.
My view is that there should be an energy standard for money. However, when one thinks that through far enough, one then discovers the theoretical reasons for the empirical observations that MONEY IS MEASUREMENT BACKED BY MURDER. Generally speaking, most of the superficial analysis that points out what is going wrong with the banksters' abilities to make the public "money" supply out of nothing as debts, while that is FRAUD ENFORCED by governments, tend to continue to promote bogus "solutions," that do not admit and address the deeper reasons for how and why human beings and civilization live as entropic pumps of environmental energy flows, which necessarily most closely match the principles and methods of organized crime regarding how those actually operate.
The basic reasons for why I do NOT believe that people who are young today will live through their entire life times within the currently established systems, continuing to operate as they do now, are that THOSE SYSTEMS ARE OPERATED BY THE BEST AVAILABLE PROFESSIONAL HYPOCRITES, who are unable and unwilling to admit and address those basic facts about themselves, and the systems that they are running. The excessive successfulness of controlling civilization through the methods of organized crime has resulted in the civilization developing in ways which have become runaway criminal insanities. Since that civilization is adamantly unable and unwilling to understand how and why it does, and must necessarily, operate according to the principles and methods of organized crime, it can not change and adapt in any relatively rational ways to running into the real limits of diminishing returns from being able to continue to strip-mine the planet's natural resources at an exponentially accelerating rate. Everyone who previously benefited from doing that has every advantage within the established systems to continue to spin through the vicious spirals of POLITICAL FUNDING ENFORCING FRAUDS. Indeed, as the comments and replies from Anopheles attempted to assert, those are still seen as positive and good things to do, by those who were on the sides that benefited from doing that, regardless of whatever else happened to those on the other sides, that suffered from that being done.
The basic ways that people THINK, based upon the dualities of false fundamental dichotomies and the related impossible ideals, are things that they almost all take completely for granted, which is why most of the content published on Zero Hedge tends to be relatively superficial, if not childish. However, in my view, the globalized monetary systems will change due to factors beyond their control, although that will be expressed through behaviors which are still within their control. A deeper analysis of the monetary system reveals that the debt controls were always backed by the death controls. Since money is measurement backed by murder, there are no ways to change the combined money/murder systems, except by changing both at once. Those changes are going to primarily be driven by factors beyond human control, namely whatever turn out to be the real limits of the environmental energy sources, which will manifest more and more as the development of the problems of diminishing returns, getting worse, and worse ... Those changes will manifest through human systems, which will primarily become the systems of debt controls backed by death controls having their runaway levels of debt insanities provoking death insanities.
As long as there are enough natural resources left to sustain those being sufficiently strip-mined, then the currently existing systems could continue. In my view, that may well be possible for another few decades, or so ??? Therefore, if my expectations turn out to be correct, then younger, poorer, people who are alive today will NOT "live and die under the existing system," but rather die due the psychotic breakdowns of the existing system, where there are series of crazy collapses into chaos, while severe social storms blow through ...
There is no such thing as "fiat money", only "fiat currency"; money == gold, and no gold is fiat. So-called "gold receipt money" is an inherently fraudulant bastardization.
And yes, "fiat currency" is bad, very bad, inherently bad.
I agree with the intent of the article, but not all the statements or logic.
Great article. In the UK the situation is even worse than fractional reserve banking. We have never had a reserve ratio so in fact we have "No reserve banking."
There is a lot of ignorance and confusion about money amongst the general population. Many of those who see that something is wrong do not always have a good understanding of how the system works, let alone how it could be made to work better. The American Monetary Institute in the US and Positive Money in the UK are both campaigning to improve the public's understanding of how money is created and the toxic effect this has on the lives and wellbeing of all of us, (including those at the top of the pyramid actually.)
Ultimately both organizations are calling for the power to create money as debt out of nothing , for their own profit, to be taken away from commercial banks and given to a publicly accountable body acting in the public interest. Government would spend the money into circulation but it would not decide how much.