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Fractional-Reserve Banking is Pure Fraud, Part IV
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Fractional-Reserve Banking is Pure Fraud, Part IV
Written by Jeff Nielson (CLICK FOR ORIGINAL)
Part I of this series explained how most of what we call “banking,” and in particular “fractional-reserve banking,” is inherently criminal and fraudulent. What the banks call “business” would be a crime if perpetrated by any other entity in our societies.
Part II of this series noted how after the Big Banks blew up our financial system in 2008 (with their reckless gambling and systemic frauds), both the Big Banks and our corrupt governments promised “never again.” They agreed to reduce the insane “leverage ratio” (i.e. fraud ratio) of the Big Banks back to quasi-reasonable proportions.
What they actually did was the exact opposite. Instead of requiring more than the microscopic capital reserves of the old “Basel II” rules, the new “Basel III” rules effectively allowed this financial crime syndicate to operate with near-zero reserves. “Fractional-reserve” fraud has now become no-reserve fraud.
Why would the tentacles of this financial consortium even want to operate with virtually zero reserves? As they march our markets higher and then lower, these corrupt organizations will absorb some losses ontotheir own balance sheets. The response of the Big Bank crime syndicate is simple: “who needs reserves when we can steal as much as we want , any time we want?”
What happens when a Big Bank suffers a supposed “catastrophic loss?” It runs crying to one of our corrupt governments for a bail out. Of course, the banks have already looted every penny out of our public treasuries, with the $10s of TRILLIONS they extorted from our governments at the end of 2008.
Now, when the banksters want to steal capital to cover the losses from their gambling and illegal frauds, they demand a bail- in. This is another example of their euphemistic liar-language, which simply meanstaking other peoples’ property (to which they have no legal claim, whatsoever) in order to cover their own losses.
Part III of this series pointed out the obvious truth that we don’t need any of this. Fractional-reserve fraud is not a necessary tool of economic development. Rather, it is a reckless short-cut, guaranteed to sabotage our economic development over the longer term.
Today, attempting to produce a slightly higher rate of growth (through the borrowed capital of fractional-reserve fraud) comes with a guaranteed cost: it will lead to lower growth when either the debts must be repaid or the whole system simply implodes ( i.e. Debt Jubilee ). When we attempt to “have more” for ourselves today, we do so by mortgaging the future of our children.
At this point, many readers may be thinking to themselves that it can’t get any worse. We have a financial crime syndicate which sits legally above our governments, dictating the rules of a “system” (i.e. organized crime) which transforms our entire markets and economies into a playground of crime. Here, the criminals fleece their victims with reckless, rapacious impunity because they know they will never be punished – no matter how many times they are caught breaking laws.
Worse still, with a “leverage ratio” (fraud ratio) which is becoming limitless, this crime syndicate can conjure, out of thin air, near-infinite quantities of funny-money to fuel their financial crimes. We see this demonstrated with what bankers call “the derivatives market”: a private, illegal, unregulated, crooked casino, where the quantum of the bankers’ gambling exceeds twenty times the size of the entire, global economy.
However, we still have not seen the pinnacle of this criminalized, financial insanity. In order to make this corrupted system infinitely worse, our governments have allowed the Federal Reserve racketeers to impose an additional element of infinite fraud: 0% interest rates.
There is no such thing as “a 0% loan.” Just ask the Tax Man. Try giving or receiving any 0% loans in your own financial affairs, and before the ink is dry on your virtual tax return, the tax enforcers will be knocking on your door.
They will tell you that your 0% loan is a sham transaction, prima facie fraud. They will tell you that the transaction is legally null-and-void, and that they will treat the so-called “loan” as what it really is: a gift. Yet in the ultra-fraudulent realm of our financial system, once again what is totally illegal for ourselves is just “business as usual” for the One Bank.
When the Federal Reserve claims to have “loaned” countless billions or trillions to the One Bank (we don’t know how much, because it refuses to fully disclose these activities), it has actually been giving these billions/trillions to the crime syndicate. It is free money, in every sense of the word.
Meanwhile, when our local or provincial/state governments need financing to help people survive the economic penury inflicted upon them by the One Bank, every penny of their money is always borrowed –really borrowed, at a real rate of interest.
How do these governments pay the ever-increasing interest payments on this debt? More and more, we see these governments do so by selling off assets: the assets of the People. Generally it is our best assets, and generally the asset-sales are at pennies on the dollar, because these governments are desperate. It is a distressed liquidation.
Who is the receiver of the ever-growing interest payments on these debts? The One Bank. And who is the buyer of most of these choice assets? The One Bank. It buys the best assets of the people (at pennies on the dollar) with its mountains of free funny-money, which starts with the 0% gifts from the Federal Reserve. This is a violent economic violation.
However, we still haven’t reached the culmination of these fraudulent, financial atrocities, which is combining “fractional-reserve” fraud with “0% interest” fraud. This is best illustrated through a simple numerical example. We’ll pretend the system is less-fraudulent than it is, and pretend there are less of these Big Bank tentacles than there are, in order to maintain more comprehensible numbers.
Let’s start with the $800 billion or so in new, official funny-money which the Federal Reserve was cranking out – each year – between 2010 and 2014. Every penny of this money was handed, for free, to the One Bank.
Let’s assume that there are only four Big Bank tentacles in this crime syndicate (in reality, there are dozens). Let’s assume that the actual leverage ratio/fraud ratio is the most stringent number officially on the books in the “Basel III” rules: 16:1 (rather than the de facto no-reserve fraud which these Big Banks are actually allowed to perpetrate). To make it even simpler, let’s assume that the Fed hands its entire free of $800 billion to a single tentacle: Big Bank A.
What does Big Bank A do with that $800 billion, all free money, from its 0% loan? It “loans” all of that money at 0% to Big Bank B, except multiplied by the 16:1 fraud-ratio of our fractional-reserve system. Suddenly, the mere $800 billion in free crime syndicate money becomes $12.8 trillion in the hands of tentacle B. All loaned at 0%; all free.
What does Big Bank B do with its free windfall of $12.8 trillion? That’s right, it loans it all to Big Bank C, at 0%, except once again multiplied by the 16:1 fraud ratio. Now the $12.8 trillion becomes $204.8 trillion, but why stop there? Big Bank C then loans its $204.8 trillion to Big Bank D at 0%, again multiplied by the 16:1 ratio. What began as a paltry $800 billion of free money in the hands of Big Bank tentacle A has become an insane mountain of free, conjured paper totaling $3.3768 QUADRILLION (or $3,376.8 trillion), in the hands of Big Bank D.
Remember that this ocean of funny-money, in the hands of history’s most-rapacious crime syndicate, would come from just one year of Fed money-printing. This was the subject of a commentary in April called The Multi-Quadrillion Dollar 0% Interest Scam. That commentary drew little reaction at the time, showing how numb people have grown to the rapacious frauds of the One Bank.
As a reminder; the numbers used in the previous hypothetical example were not real. In reality, the One Bank is not comprised of a mere four Big Bank tentacles, but rather dozens. In reality, the current fraud-ratio in our “fractional-reserve” system is not 16:1, but rather near infinity. Thus the reality is infinite mountains of free, fraudulent, funny-money.
We have a word for currency conjured out of fraud: counterfeit. Our official “fractional-reserve” monetary system, with official 0% lending rates, essentially zero regulation, and literally zero law enforcement is a system of institutionalized counterfeiting. The crime syndicate that sits atop the system is legally allowed to counterfeit all the money it could ever desire to finance its Empire of Crime.
Naturally, conjuring infinite quantities of funny-money can have only one outcome: hyperinflation. This is the near-infinite dilution of a currency, as its corresponding exchange rate plummets to zero. Thus the One Bank isn’t finished. It has declared an unofficial War on Cash, pressuring its puppet governments to “ban cash” in our (supposedly) “free societies.”
In our current system of fraud, we voluntarily “deposit” our wealth into the hands of criminals. They then use that wealth as a financial tool to control and mistreat us, and then they simply steal that wealth. Instead, the One Bank wants a system of absolute coercion. We would all be forced to place all of our wealth into the hands of history’s most-rapacious thieves – except for what we (prudently) protect in the form of “hard assets,” such as gold and silver.
Whatever wealth we choose to shelter in history’s most reliable wealth-preservation vehicles is immune to the banksters’ rapacious, paper system of infinite fraud and infinite theft. This is why the One Bank relentlessly attacks the precious metals market. It attacks these markets with relentless (and illegal) price-suppression. It attacks these markets with relentless (and absurd) propaganda, attempting to discredit these wealth-preservation vehicles to an unknowing general public.
We live in a system of infinite financial fraud: the fraud of “fractional-reserve banking,” multiplied by the fraud of 0% lending. The goal of this institutionalized fraud is nothing less than the theft of all of our wealth. The only answer to such infinite fraud is the absolute protection afforded by history’s ultimate safe havens: gold and silver.
A fractional-reserve fraud system, in any form, could never be justified in any legitimate society. However, we have today something much, much worse than mere “fractional-reserve banking.” Instead, we have a system of infinite debt, infinite gambling, infinite counterfeiting, infinite fraud, and infinite crime. A criminal bankers’ paradise.
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Fractional-Reserve Banking is Pure Fraud, Part IV
Written by Jeff Nielson (CLICK FOR ORIGINAL)
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Over 95% of my savings WERE physical gold and silver at that time.
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BTW, I don't want to pretend I was some kind of genius to convert my gold and silver to my self-sufficient digs right at the time of highest gold and silver prices.
I wasn't.
It was pure luck and coincidence that I chose to move at that time.
I understand that sometimes I come across as a wise-ass. And sometimes I am rather wise and smart. But sometimes I'm just as lucky, unlucky or stupid as anyone else, and that was one of those cases.
90% of the time my luck is bad-luck... call it Murphy's Law. Fortunately for me, that was one of the few exceptions, because if I had waited another 5 years, I would not have been able to create my self-sufficient digs. Well, maybe I could have just barely. But then I couldn't have purchased my little airplane, which makes my self-sufficient digs in the extreme boonies so extremely convenient, wonderful and fun.
HonestAnn:
You are right about the luck part. We have employed different strategies to get to a similar end point. I invested in paper. You invested in gold.
If you invested in gold in 1980 you saw your investment slowly die and only return to life in 2006 (actually later if you exchange it for things other than dollars). If you did it in 2000 and then converted it to a sustainable life support system in 2011, you look like a genius.
My paper was doing just fine until about 2006. As I was converting it to a sustainable life support system, its value was diving. I only protected about 1/2 of it, it happened so fast.
A proper store of wealth would not yield such disparate results.
Yea thats kinda why I am always interested in your opinions Ann. I dont need to explain much if anything to you. You might be the only outside observer I will ever have a chance to chat with. Thanks as always.
Legal tender laws, tax laws....FORCE
Legal tender laws, tax laws....FORCE
So remove those laws. How does life change for you? What would you be doing differently?
Ah, apply them to your well managed, perfect system ?
My life does not change much, what changes is the formation of capital.
The current MOE requires force to operate, as does the gold / paper standard.
Ah, apply them to your well managed, perfect system ?
Application of law is unnecessary for a properly managed MOE process. A better process can not exist.
However, it a law forced such a system on us, your life would change dramatically. Assuming you've never defaulted on a trading promise, you would pay zero interest. In the case of a house, you would pay for it only once ... not twice or three times as is now the case. That's a pretty big different. And it applys to anything you buy on time. Further, anything you save will not lose value. It can't. It closes the 4% leak the current system delivers.
The current MOE requires force to operate, as does the gold / paper standard.
No it doesn't. My supermarket is totally free to accept sea shells in exchange for groceries if it chooses to. And I can choose to trade in sea shells there, or some other medium somewhere else. The reason we use dollars is because, in spite of the corruption, it is the best game in town.
If you think our money is legal tender, try to get anything but a check from a financial company like Fidelity. They refuse to give you cash. So what is this legal tender law doing?
Glee - I am a producer.....no interest is paid because no monies are borrowed.....
No Glee, that is incorrect - your store cannot accept sea shells - it must use legal tender. Not can your bank loan you seashells, it must use legal tender.
Furhtermore if you want a barrel of oil on the world market you must use US dollars - because the sellar will require it.
Glee, a check is a promise to pay using legal tender, dollars. The check given you cannot be traded for seashells at the bank.
The check can be traded for dollars at the bank.
Zero interest paid......does this mean zero interest on savings ?
This one makes me smile. Personaly? Id like to think not one tiny bit between my wife and I. Professionaly? Biggest smile put on my face so far today. I would be building and prolly sellin some realy nice cars.
Professionaly? Biggest smile put on my face so far today. I would be building and prolly sellin some realy nice cars.
Please explain? What's your profession? How are legal tender laws restraining you?
The legal tender laws are the force behind the magic money games. One of those games is unlimitted credit at or near 0 to some and very little to others. That part has realy messed things up. Talk about a missalocation of capitol. We are pretty much stuck using this coin.
This makes the auto industry a tough place for the upstarts. Its real hard to compete with a company that does not need to make a proffit or even follow the rules. Oh and zero money down took the wind right out of the repair industry. Whats to keep them from doing it to any upstart?
Me I just fix stuff. These days its shop equipment. Nex maybe regenerative thermal oxidizers? Who knows 3d printing is kinda wide open and fun. One never knows? My little car thing is at the printer now.
VWAndy:
I think you mischaracterize the issues. It's not about credit. It's not even about profit. It's about delivering on trading promises. Credit is just an expression of a trading promise. Profit is just a result for your account if you over deliver (which of course was your intention in the first place if your trading promise was to create something productive ... rather than consumptive).
The fiat games take many forms. The control of where credit goes cannot be understated in its improtance. The disconect between those issuing it and who the risk falls on matters. Limiting the issue of credit to post production goods would seem to be a better way of keeping credit in balance with risks.
VWAndy:
Define credit and with your definition I will prove you wrong. If you believe in a concept that credit can be issued, you are just buying into the current MOE con job we live under. If you believe the capitalists are absorbing the risk of default, you are naive.
What in the world is a "post production good"?
If its mine and someone wants to have one. Its my choice to trust that I will be paid. All the risk is mine the one that owns said item to start with.
I read the article you are referring to. The main flaw I've found in it is high vulnerability to misuse. It cannot be simply stated that 'the system is good but the bad guys have abused it'. It's similar to saying that communism is a great idea and it's solely a sin of some people who screwed it and turned it out to be the most horrible system in history.
In real world everything that can be screwed will be screwed, especially, as far as money is concerned. The system that doesn't take this into consideration is utopian at best and, in case of persisting duration despite apparent and proven repeating abuse, a deliberate fraud.
Fractional reserve is subject to misuse when you have a monopoly issuing bank, like the Federal Reserve. Thanks for reading and I appreciate your comments. I need to draw the example and logic out further in additional writing.
Suggestion for your next article:
"How to tell the difference between a real unicorn and a donkey with an ice cream on its head."
LOL dude, that's hillarious.
Best article on ZH for a loong time.
Thanks!
no. shit.
We should do away with fiat currency and fractional reserve banking so that we can give the grifters a new goal to achieve because right now they are pretty much at 100% goal attained other than taking the last gold fillings out of few dead bodies laying around.
Worse still, with a “leverage ratio” (fraud ratio) which is becoming limitless, this crime syndicate can conjure, out of thin air, near-infinite quantities of funny-money to fuel their financial crimes.
You mischaracterize the problem. What you describe is "counterfeiting". Counterfeiting is DEFAULT and must be met with a like amount of INTEREST collections. Our system allows counterfeiting (by the most irresponsible traders ... governments), and charges them the lowest interest (rather than removing them from the marketplace with INTEREST collections commensurate with their propensity to DEFAULT ... i.e. 100%).
It's the process that is flawed.
A properly managed process is governed by the relation: INFLATION = DEFAULT - INTEREST = zero.
A properly managed process requires an omnipotent benevolent man of absolute virtue..........to operate ?
Or a perfect system that cannot be corrupted by force, avarice or extortion ?
Let the producers and consumers determine their MOE without force, let your system compete with others, or does it require force to operate ?
let your system compete with others, or does it require force to operate ?
There is no necessity that the MOE (or the several MOE alternatives) be forced on people. In fact they should not be forced on people. Many MOE's can coexist. However, those that don't employ a properly managed process will not be competitive. Again, it's very much like insuring risk ... just vastly simpler and vastly less profitable.
A properly managed process requires an omnipotent benevolent man of absolute virtue..........to operate?
An internal combuston engine is a properly managed process. It requires no "benevolent man". It just requires a well designed governor with an automatic negative feedback loop.
A properly managed MOE process is little different. The error term that is automatically driven to zero is DEFAULTs - INTEREST COLLECTIONS.
It is nearly identical to the management of a mutual insurance company. In that case the error term driven to zero is CLAIMS-PREMIUMS.
While I don't disagree with the basic thesis that our financial system is predicated on fraud, there's a problem with the extension that one of the only safe havens for one's wealth is precious metals. There is absolutely nothing stopping the criminals from confiscating one's precious metals as FDR did previously. In truth, there is little that is 'safe'; except perhaps a small, self-sustaining garden in one's backyard...
Not only do they confiscate, they make it illegal to trade in gold at the same time.
It is fraud only if you are clueless about what money is ... always has been ... and always will be. Money is "a promise to complete a trade".
Traders create promises and get them certified. These certificates then circulate as what we know as money. Almost all of us have created money at some time (and subsequently destroyed it by delivering on our promise). Mortgaging a house is an example of a trader creating money. Money just allows simple barter exchange to take place over time and space.
Fractional reserve banking just limits trader's ability to get promises certified (10% reserve requirements). It also delivers the privilege of promise certification to an elite few. This allows them complete control over the enormously profitable manipulation they call the "business cycle" through non-zero inflation and arbitrary interest collections.
Money is a store of value, what you refer to is MOE.......paper promises.
A properly managed MOE process is a "perfect" store of value. Yes, what I refer to is MOE ... and money "is" MOE. And money "is" a promise to complete a trade. It is created by traders. It is destroyed by traders. The promises are "not" paper. The promises are "recorded" ... most often as ledger entires. A tiny fraction circulate as paper we know as Federal Reserve Notes (and used to know as Silver Certificates ... for which there was likely not sufficient silver to redeem them ... ever).
What you confuse for money is things like gold coins of defined and certified weight and purity. It's been a very long time (over 100 years) since such have been used as money, except for small change before 1965. And when they were, their use in that way was tiny. Such a system is described in the constitution but as described it could never serve our whole economy as money.
A properly managed MOE is fantasy to facilitate trade on a national scale. Pure fantasy land......
What I confuse.......jedi mind reader, huh ?
A gold coin can act as money just as a MOE digit, or a bin of grain, barrel of oil. Consumables have shelf life, as does debt note from the Fed.
Silver coins are used as money all the time in my world, and they act as currency.......
I ask this, Mr.MOE....we'll call you moe. Moe, what would the first move be to transition into your MOE process...we being the US ?
Silver coins are used as money all the time in my world, and they act as currency.......
You and I are in the same world, and silver coins have not been used as money in my world since 1964. I remember when their use was discontinued. Nothing changed except the pre 1965 tokens quickly disappeared.
Currency is just another term for money. Coins are also money. Records in a ledger are also money. Silver coins (pre-1965 in USA) are not money. If you want to use them as money, you will exchange them for similar money in current use. For example, if you have a pre 1965 quarter, you'll want to exchange it for 12 or 13 current quarters before trading with them as money. Otherwise you are simply a fool.
The pre 65's act as money, they circulate like currency.......trading with pre 65's is common place, all kinds of goodies can be purchased using them. Same with chickens - they appreciate for a short period then decay rapidly.
A person can trade with money without using legal tender, why do I need to exchange good money for bad, at an exchange rate, to buy goodies ?
I acquire copper bars through a trade, labor for metals. If I exchange them for legal tender I am the fool, the bars have a store of value and an inflation hedge for those interested........Seems foolish to me to exchange my labor for metals only to exchange for MOE........when my bars are MOE
So it seems your definition of money is "anything" you trade for which is "not" the end objective of your trade.
Fine. Now let's talk about efficiency. All of the things you mention do what your definition suggest inefficiently compared to what we reasonable people refer to as money ... that being the dollar (and records thereof) in the USA.
If you live in a barter world where you have to keep in mind the relative value of all different kinds of objects, fine.
Don't suggest the rest of us live in that ridiculous environment. We can do (and do do) much better. The inefficiencies of what you are describing far exceed the 4% leak the FED sticks us with. It is possible to have a process with a 0% leak. That's what we should be striving for.
Your copper bars won't buy you a dozen eggs at any super market I know of.
So because "you" dont understand the world others live in "you" want to force others to your way of thinking.
I find these quite efficient when you compare to an hour of "skilled" labor.
You mentioned Buffett, Gates, Trump etc, as people who could create your MOE - I dont trust them, period.
I advocate a free society where your ideas and mine can compete and coexist. If your MOE looks rational for me I may use it. If you need my labor I say bring real money.
Force is the issue
So because "you" dont understand the world others live in "you" want to force others to your way of thinking.
Help me understand. I don't want to "force" anything ... especially thinking. I am certainly trying to lead you to a proper view of things. Frankly, I'm flummoxed with how difficult that is.
I find these quite efficient when you compare to an hour of "skilled" labor.
What "these" are you referring to?
You mentioned Buffett, Gates, Trump etc, as people who could create your MOE - I dont trust them, period.
I don't either. But I don't trust them less than I trust governments. I really trust them more than any government I have ever seen. Regardless, if they or a government built a process (say like PayPal) that employed the proper management of the MOE process, their result could bring them no profit and no loss. But it would sure give governments a problem, because their system (with it's inherent counterfeiting) could not compete in a free trading market.
I advocate a free society where your ideas and mine can compete and coexist. If your MOE looks rational for me I may use it. If you need my labor I say bring real money.
So do I. But bad ideas can't compete with good ideas. Ideas based on false premises cannot compete with ideas based on correct premises. Copernicus proved this ... but not in his lifetime ... and Bruno paid a big price for his suppor of the obvious.
If you need my labor I say bring real money.
If in your eyes that is gold, so be it. But if in someone else's eyes, who is delivering equivalent labor, that is a properly managed MOE, I'll trade with your competition. Even if it's in an improperly managed MOE like FRNs, I'll also trade with your competition. And as you properly say, I should be free to do so.
Force is the issue
The only impenetrable force I've run into in my lifetime is government. I can circumvent every other attempt to force something on me. The government force comes in several forms. Among them is imposition of taxes and the requirement that I pay them in FRNs. Other forms are regulations that remove my freedoms.
Nothing I describe as the proper management of an MOE has anything to do with force. Everything is completely voluntary ... and sustains itself by being the most efficient competitive method possible.
lol. Its true value is a big fat zero.
This is thinking in fiat terms. Store of wealth? Thats just faith based sillyness.
lol. Its true value is a big fat zero.
You humor yourself. I can guarantee you that this very day you took one of those "big fat zero" valued objects (we call dollars), and exchanged it for something you value. Since you are able to do that, you can't say it has no "true" value.
Not by choice.
Oh really? And what would you choose if you had a choice? And what keeps you from having that choice?
A coin measured in joules of energy.
Men with guns,tanks,bombs and a willingness to kill?
A coin measured in joules of energy.
Is that different than a ledger entry measured in joules of energy? How about a ledger entry measured in hours of unskilled labor (HULs). The value of HULs has not changed throughout recorded history ... but the value of a joule of energy has changed dramatically over the same time period.
Dang thats a thought! I will have to chew on that one for a bit.
An hour of unskilled labor varies by the minute. Its value is different depending on the individual.
An hour of unskilled labor varies by the minute. Its value is different depending on the individual.
More realistically, it's based on skill. I know of no one who has no skill. I also know people who claim great skill who really have very little skill. I know people who have little useful skill (economists and lawyers) who charge large numbers for their hours.
That not-withstanding:
In the year zero, if you wanted a hole, you supplied an implement (shovel) and labor (the cheapest you could obtain that could accomplish the task) and you got your hole.
If you did the same thing today, supplying the same implement and acquiring labor the same way, you would get your hole for virtually the same number of hours of labor.
Depending on the supply and demand for labor and the integrity of the MOE, the cost of your hole can vary widely. But the number of hours of labor for obtaining the hole is probably more predictable over that 2,000 years of time than anything else you can suggest.
In high school (1960) we got summer jobs at $1.50/hour. There was no minimum wage rate. That's comparable to a minimum wage job today bringing about $9/hour. Using that as a measure, a pretty good estimate of annual inflation of the dollar is 3.3% (compounded).
You can read novels, biographies, and histories for just about any period and make estimates of how long it took to do things and what people earned for doing them in the money of the time. If you focus on the hours, you can then relate the money inflation over that period, even if the MOE changes several times.
Now if you go back and look at the price of gold in 1913 ($18.92) compared to today ($1,075) you come up with about 4.0% annual inflation. If you look at the price 4 years ago ($1,850) you come up with quite a different result (4.7%) because of the dramatic drop in the price of gold over the last 4 years.
But how much unskilled labor would a dollar procure in 1913? I found a rate of $0.228/hour. This would suggest an inflation of 3.7% up to today ... and 4.1% up to 1960.
If you do it for the price of gold you get 4.0% (as opposed to 3.7) and 1.3% up to 1960 (as opposed to 4.1%). That's a pretty dramatic difference.
This thumbnail sketch mixes apples and oranges. The numbers I get are not given in hours per hole. They're given in $/hour. But my assumption that hours per hole is constant over all time is pretty valid ... especially when you consider my other alternative measures.
Further, you can see that trying to tie the MOE to gold appeared to be containing inflation (1.3%). What this doesn't show is that the official number of $35 was fake. By 1970 the real number was more like $70 and that's when the French let us know the jig was up. The problem wasn't from coming off the "gold standard". It was from lying about the numbers.
A properly managed MOE process makes it impossible to lie about the numbers. They are perfectly objective and transparent.
Yes, a perfect system is infallable. On this we agree.
There is no, and will be no, perfect system. Men are fallable, period.
Using your insurance analogy, consider this - Insurance only works if there is a capital pool. Capital is the key.
The capital must maintain a store of value at least as long as the policies are in effect, or an increase in capital is required.....rate increases.
MOE is, or is not capital ?
Depends, from my view......Capital = saved production. How does one store saved production using MOE that requires trading commitments ?
As I understand your MOE, or is it MMT......It would not be " intelligent" to save it in my hands as a store of last years unused production ? Is this accurate ?
Capital is the key.
Proper application of actuarial science is the key. Capital is safety stock. It is a function of the arrival times of the claims vs the arrival times of the premiums. If you marry an MOE process and an Risk management process, you can do it with zero capital. Our government pretends to do this ... but they do it by counterfeiting (making trading promises they never deliver).
The main contrast between insurance management and MOE management is in the profit. Insurance makes profit on investment income. MOE process management has no source of profit.
The capital must maintain a store of value at least as long as the policies are in effect,
With a sufficiently large pool and perfect actuarial prescience, new premiums come in at exactly the same rate as claims are paid. Like any inventory control problem, provisions are needed for "safety stock". However, with a properly managed MOE process, there is no need for safety stock. Changes in default experience can be immediately met with changes in interest collections (on new trading promises).
MOE is, or is not capital ?
MOE is "not" capital. It is an "in-process promise to complete a trade." The counerparty is the entire marketplace and the continual flow of new trading promises (from which interest can be collected on delivery proportionate to the trader's propensity to default).
Capital = saved production. How does one store saved production using MOE that requires trading commitments ?
I don't dispute what savings is. With a properly managed MOE process, the MOE never loses value (INFLATION = 0). If a trader delivers more than he promised the surplus is for his account. If he delivers less than he promises, the DEFAULT is mitigated with like INTEREST collections. People with a higher propensity to default pay higher interest. Again, it's actuarial science and careful record keeping ... particularly default monitoring ... which our current process doesn't do at all!
As I understand your MOE, or is it MMT......It would not be " intelligent" to save it in my hands as a store of last years unused production ? Is this accurate ?
An MOE is a Medium of Exchange (and also refers to the media within that medium). What is an MMT?
The media of a properly managed MOE process is a "perfect" store of value as it guarantees zero inflation of the media itself. Our current mismanaged MOE process is deficient in this respect. It shoots for a 2% leak and delivers a 4% leak. 0% is the proper amount of leakage (i.e. inflation of the media itself).
The value of hul is not a constant as I see it. Again its better if we dont measure with a veriable like dollars or gold either if its not in a fixed system. Both are abstract as of now.
That measurement thing is key. It either can be measured correctly or not. On the meat and potato end of the economy X must be a constant. Thats realy the best reason to go with joules of energy.
Anything else is as RM says is measurment by murder.
Of all the different ways to skin the coinage thing energy keeps coming up as the cleanest way to do it.
The value of hul is not a constant as I see it.
The value of joule is not a constant either. But the work it work and energy it represents is. That's not the issue. A HUL will be the same number today as 2000 years ago. It's a shovel and muscle process and holes don't get dug manually now any faster or slower than they did 2000 years ago. The value of the hole, the shovel, and the muscle, however are all perceptions and do change.
We see it the same.
That measurement thing is key. It either can be measured correctly or not.
Correct. And know what to measure. It is DEFAULTs that must be measured, and that can be done with precision and transparency. Management of the MOE process is "not" covert. Traders getting their trading promises certified can not expect secrecy. If they want secrecy they need to find another way to make their trade over time and space. Most of us don't need the secrecy.
Anything else is as RM says is measurment by murder.
I'm far from being on the same page with RM. Murder is a pretty clumbsy tool.
Of all the different ways to skin the coinage thing energy keeps coming up as the cleanest way to do it.
Thats realy the best reason to go with joules of energy.
Where can I buy a joule meter? Where could I buy it 2000 years ago? How can it measure physical labor? How can it measure brainpower labor? How can it measure a yard of dirt?
I favor the HUL because it is an easy to measure lowest common denominator unit. Measurement can be by sundial if you don't work nights.
Of all the different ways to skin the coinage thing energy keeps coming up as the cleanest way to do it.
That is easily demonstrated not to be the case. I defy you to measure energy right now.