• Monetary Metals
    05/02/2016 - 01:28
    The price of gold shot up this week, and silver moved proportionally. Headlines are screaming for gold to hit $10,000 or $50,000. Does this alleged new bull market have legs?

Michael Maloney: "We Pay Tax For The Privilege To Have Currency"

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Tue, 10/25/2011 - 17:39 | 1810096 Conrad Murray
Conrad Murray's picture

The government can print all the USD they want. Why do you slaves pay taxes and prentend defecits matter?

Tue, 10/25/2011 - 17:49 | 1810123 TruthInSunshine
TruthInSunshine's picture

If there was a movement to ensure that all 8th graders (or high school seniors - or even college freshmen) truly understood what fractional reserve banking was, how it operates in the real world, and the toxic consequences its very practice, many would begin to question almost everything they had been told their entire lives, on the assumption that they were being told the truth.

Fractional reserve banking using inherently worthless fiat currency is the most cunning and destructive ruse that man has ever created.

Tue, 10/25/2011 - 17:53 | 1810130 dwdollar
dwdollar's picture

Yeah right...

It's not taught for a reason.

Tue, 10/25/2011 - 17:57 | 1810135 TruthInSunshine
TruthInSunshine's picture

You are absolutely correct.

Fractional reserve banking as state doctrine is akin to having a system in place whereby all babies would be born pre-addicted to a potent drug, and then keeping them on that drug for the rest of their lives, withdrawing it or providing it in excess, depending upon what behavior TPTB wanted to induce from the populace.

Fractional reserve banking allows a handful of people to create a broken-willed herd of debt serfs.

And it is extraordinarily efficient.

Web of Debt
Tue, 10/25/2011 - 18:01 | 1810142 Pladizow
Pladizow's picture

Again Mike is promulgating a myth as to how interest is paid to the Fed, it does NOT have to be borrowed!

WHO CREATES THE MONEY TO PAY THE INTEREST? - G. Edward Griffin.


One of the most perplexing questions associated with this process is "Where does the money come from to pay the interest?" If you borrow $10,000 from a bank at 9%, you owe $10,900. But the bank only manufactures $10,000 for the loan. It would seem, therefore, that there is no way that you - and all others with similar loans - can possibly pay off your indebtedness. The amount of money put into circulation just isn't enough to cover the total debt, including interest. This has led some to the conclusion that it is necessary for you to borrow the $900 for the interest, and that, in turn, leads to still more interest. The assumption is that, the more we borrow, the more we have to borrow, and that debt based on fiat money is a never-ending spiral leading inexorably to more and more debt.

This is a partial truth. It is true that there is not enough money created to include the interest, but it is a fallacy that the only way to pay it back is to borrow still more. The assumption fails to take into account the exchange value of labor. Let us assume that you pay back your $10,000 loan at the rate of approximately $900 per month and that about $80 of that represents interest. You realize you are hard pressed to make your payments so you decide to take on a part-time job. The bank, on the other hand, is now making $80 profit each month on your loan. Since this amount is classified as "interest," it is not extinguished as is the larger portion which is a return of the loan itself. So this remains as spendable money in the account of the bank. The decision then is made to have the bank's floors waxed once a week. You respond to the ad in the paper and are hired at $80 per month to do the job. The result is that you earn the money to pay the interest on your loan, and - this is the point -the money you receive is the same money that you previously had paid. As long as you perform labor for the bank each month, the same dollars go into the bank as interest, then out the revolving door as your wages, and then back into the bank as loan repayment.

It is not necessary that you work directly for the bank. No matter where you earn the money, its origin was a bank, and its ultimate destination is a bank. The loop through which it travels can be large or small, but the fact remains all interest is paid eventually by human effort. And the significance of that fact is even more startling than the assumption that not enough money is created to pay back the interest. It is that the total of this human effort ultimately is for the benefit of those who create fiat money. It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.

Tue, 10/25/2011 - 18:02 | 1810151 tmosley
tmosley's picture

The interest rate is less than or equal to the default rate.  If more people default than the interest rate, the result is price inflation.

Not justifying it in ANY way, but that is the way it is supposed to work.

Tue, 10/25/2011 - 18:22 | 1810209 Ratscam
Ratscam's picture

The PRESENT interest rate is less than equal to the PRESENT default rate.
just fixed it.

Tue, 10/25/2011 - 19:59 | 1810436 gangland
gangland's picture
no no, wars open "free-markets" so We Pay Taxes For The Privilege To Have WARS

 

there, fixed.

 

neoliberalism + militarism is where "free-markets" "Washington consensus" "trans-Atlantic alliance" and Neoconservativism meet & converge & = fascism

#PeacePrize bichezz Kinetic War for Kinetic Peace (Iraq, Vietnam after we left)

Full Spectrum Hope & Change

Print & Awe

 

#antisec

Stop Nato

Tue, 10/25/2011 - 20:15 | 1810505 Ricky Bobby
Ricky Bobby's picture

I know I have jumped the shark because that made perfect sense to me.

Tue, 10/25/2011 - 20:43 | 1810568 wisefool
wisefool's picture

Same with me. ZH has been a terrible mixed blessing. Its kinds like knowing in advace what the reaper/revenuer will be wearing when they show up on your doorstep. (To the IRS: Fonzi garb will be the best for me to see as you take my stuff)

Tue, 10/25/2011 - 20:56 | 1810597 The Fonz...befo...
The Fonz...before shark jump's picture

Whoa!

Tue, 10/25/2011 - 21:21 | 1810665 gangland
gangland's picture

 

unreal...no, no, no, seriously...WTF? very fractalish

Wed, 10/26/2011 - 02:27 | 1811375 Fish Gone Bad
Fish Gone Bad's picture

War is needed to create social upheaval and unrest.  The upheaval is needed to liberate the spoils of war, i.e. the victors get to loot the place.  In the process of conquering a country, wealth that had been "trapped" is then liberated/stolen. 

This has been going on for a very long time.  It is what people do.  Maybe I should get a job with the state department.

Wed, 10/26/2011 - 08:59 | 1811876 FEDbuster
FEDbuster's picture

Of course there are practical solutions to this messed up debt based currency.  Bill Sill offers an elegant one in this eight minute video, but will people (politicians?) adopt something like this?  I would have more "trust" in this than what we have now:

http://www.youtube.com/watch?v=qoVlcWvxffc&list=FLDqTwQ_Aj90G1wgtmXVbQxA...

Tue, 10/25/2011 - 20:22 | 1810526 Bicycle Repairman
Bicycle Repairman's picture

I learned about fractional reserve banking in college.  The entire economics department at my university were avowed communists, so they had no problem laying it on the line.  When we got to the point in the lecture, the professor changed his tone to a jovial one and said, "then the Fed  makes the money up out of the air.  They just print it!!!".  He finished with a flourish and paused.  The students didn't react and continued taking notes.  Their notes probably said "money printed by FED".  I thought "crazy commie!!!"

Tue, 10/25/2011 - 21:42 | 1810763 Al Gorerhythm
Al Gorerhythm's picture

Crazy tenured Keynesian commie.

Tue, 10/25/2011 - 23:24 | 1811128 jekyll island
jekyll island's picture

Crazy tenured Keynesian Fabian commie.  

Tue, 10/25/2011 - 23:40 | 1811180 UP Forester
UP Forester's picture

Probably the reason I got a D in Econ 101.  If shit don't make sense the way it's taught, you kinda zone out....

Tue, 10/25/2011 - 22:26 | 1810925 palmereldritch
palmereldritch's picture

It wasn’t note taking as much as it was those future Apparatchiks diarizing their job 20 years hence as communist central bankers/primary dealers to loot and rob the wealth of a vulnerable ‘free market’ middle class corralled by fiat debt and consumption after they were naively led astray in their pursuit of the false promise of economic liberty and independence.

Wed, 10/26/2011 - 07:56 | 1811677 myne
myne's picture

I believe this is partly the logic behind central banks.

They sit outside of the normal accounting standards, so one of their roles is to remove currency from the system. 

Also, the explanation of the fractional reserve system is rather simplistic. It focuses on the stock of currency and ignores the flow.

Steve Keen's models detail how exogenous money creation can work and can provide profits. Interest is a form of profit, so therefore his model shows that interest can work.

I believe his statement was "profits are equal to investment".

Of course, it always results in an ever expanding currency supply.

Problem is, we're fucked when we hit zero population growth. We'll have to resort to saving based system, probably using a commodity currency like gold.

Tue, 10/25/2011 - 18:04 | 1810152 TruthInSunshine
TruthInSunshine's picture

In the interest of objectivity and fairness, this is the literal playbook of The Federal Reserve Bank, in implementing its practices of fractional reserve banking (posted so those who are interested can read it and interpret it as they wish):

Modern Money Mechanics : Federal Reserve : Free Download

The purpose of this booklet is to describe the basic process of money creation in a "fractional reserve" banking system. The approach taken illustrates the changes in bank balance sheets that occur when deposits in banks change as a result of monetary action by the Federal Reserve System - the central bank of the United States. The relationships shown are based on simplifying assumptions. For the sake of simplicity, the relationships are shown as if they were mechanical, but they are not, as is described later in the booklet. Thus, they should not be interpreted to imply a close and predictable relationship between a specific central bank transaction and the quantity of money.

 

Tue, 10/25/2011 - 18:18 | 1810199 Pladizow
Pladizow's picture

If your not already familiar with this work - it may interest you.

Merrill Jenkins - Money: The Greatest Hoax on Earth - Published in 1971 (Out of Print)

Tue, 10/25/2011 - 19:31 | 1810416 dick cheneys ghost
dick cheneys ghost's picture

just found this video of what seems to be the author......

 

http://www.dailymotion.com/video/x8mdd4_money-the-greatest-hoax-on-earth_creation

Tue, 10/25/2011 - 22:03 | 1810843 kridkrid
kridkrid's picture

that was interesting.  Thanks for sharing.

Wed, 10/26/2011 - 06:43 | 1811482 pelagivore
pelagivore's picture

agreed, excellent video clip; it's amazing how long imbalances can be sustained, particularly when markets go global

thanks for posting

Tue, 10/25/2011 - 18:20 | 1810204 Buzz Fuzzel
Buzz Fuzzel's picture

Money = wealth

Wealth = the sum of unconsumed human productivity

increased productivity + reduced consumption = increased wealth

increased wealth = increased money supply

trying to convince yourself there is another way = hopeless

Tue, 10/25/2011 - 18:23 | 1810215 Motley Fool
Motley Fool's picture

Your mistake is in the first line.

 

Money  != wealth.

 

If it were, then the FED could print everyone a million dollars tomorrow, and everyone would be rich.

Tue, 10/25/2011 - 19:42 | 1810446 s2man
s2man's picture

No, the Fed creates currency, not money.  Money has value.

Tue, 10/25/2011 - 20:05 | 1810485 Silver Bully
Silver Bully's picture
"Gold is Money. Everything Else is Credit."

-J.P. Morgan

Tue, 10/25/2011 - 22:59 | 1811043 TruthInSunshine
TruthInSunshine's picture

 

 

In a fractional reserve banking system:

money = debt

debt = money

Wealth is something far more lasting and rare, but typically consists of true storehouses of value (I dare a Keynesian to tell me how gold hasn't preserved its purchasing power using a hundred year...or a thousand year!...chart), revenue generating assets (preferably owned free of any encumbrances/debts) and assets that provide a means to ascertain what's needed to live a healthy life.

What good does it do a man to save every measure of fiat that he earns, for an entire lifetime, if someone as reckless and/or evil as The Bernank can reduce the value of said savings to nil on a whim?

Wed, 10/26/2011 - 00:23 | 1811260 Buzz Fuzzel
Buzz Fuzzel's picture

Your mistake is you did not read and comprehend the full idea.

Money is a what we use to represent wealth.  Printing money does not produce wealth only human productivity creates wealth.  What ever it is that the Fed and Central Banks all over the world are doing has no impact on wealth.  Creating more currency out of thin air only subdivides the wealth into ever increasing ammounts of currency, also know as inflation.  Judging by the response I see perhaps this concept is too difficult for a majority here at ZH.

You want to be wealthy you got to work, or think and produce value.  You can also obtaing vast amounts of money through theft but then you are really poor, as in poor in spirit which is poverty defined.

Wed, 10/26/2011 - 01:05 | 1811315 Transformer
Transformer's picture

Wealth is roads, power plants and distribution systems, dams, public water systems, communications systems, buildings, factorys, homes, gov buildings, cars, trucks, trains, planes, furniture, TV's stereos, swimming pools,  and on and on and on.  Money represents the latest things produced in this wealth economy, so that the producers can exchange their production for more of whatever they want.

If you doubt this, just go to some desolate 3rd world country, and see what's there.

 

There, fixed it.

Wed, 10/26/2011 - 16:45 | 1814179 Buzz Fuzzel
Buzz Fuzzel's picture

What is missing in those 3rd world countries, and I have visited a few, is the rule of law and the freedom to benefit from the fruits of your own labor.

Watching the accelerating destruction of the rule of law in the US and the ever increasing constraints on our freedom and right to the fruits of our own labor I am confident that we are on the road to 3rd world status ourselves.

Wed, 10/26/2011 - 06:44 | 1811483 onthesquare
onthesquare's picture

To fix the entire mess would be simple.  All the US has to do is start printing Chinese Yuan.

Wed, 10/26/2011 - 11:39 | 1812765 I did it by Occident
I did it by Occident's picture

increasing wealth = increasing free will

or in other words, wealth breaks down constraints to a man's free will.  Being poor doesn't give a person many options.  Having wealth gives one many options and thus more "freedom."  but in gaining that wealth one has to work and produce, which makes one wonder if one is really free.  I am of the opinion freedom is an illusion even for the wealthy. 

Wed, 10/26/2011 - 16:40 | 1814165 Buzz Fuzzel
Buzz Fuzzel's picture

Freedom is a state of mind.  It defines the condition of your spirit.  You can be free in prison or imprisoned in a mansion on your own private tropical island surrounded with escape mechanisms and all the stuff you ever wanted to posess.

A very free person once said "you shall know the truth and the truth shall make you free".  Knowing and believing are the keys to freeing your mind, body and spirit. 

That free person inherited the estate of the one who gave you the gift of your free will.  They await our acknowledgment of the gift at which point we have been promised participation in the inheritance.

Freedom is no illusion.

Tue, 10/25/2011 - 19:15 | 1810375 Timmay
Timmay's picture

Capital = labor

Labor = physial work and/or skills

Wealth = excess capital over and above that needed to survive

Money = store of wealth and/or medium of exchange of capital

Increased productivity + reduced or level consumption = increased wealth

increased wealth = more free time (REAL WEALTH) 

Wealth = a reserve capacity of Capital

Money printing/Fractional Reserve Lending = theft of the true value/excess reserves of Capital

Tax = Forcible confiscation of Capital

Debt = Future capital (labor) pulled into current time

Strike = Refusal to contribute Labor or Capital and then be taxed

Riot = Realization that "Wealth" is not what is created with money printing, debt is what is created. See definition of debt. Taxes will be used to pay off debt. See Taxes.

War = Since so much debt has been created and can never be repaid, realization that the debt was backed by current and future Labor through taxes, realization that those that control the issuance of debt actually control the population to service that debt through taxes.  And nations who, facing rebellion from its' citizenry over the "discovery" that the current fiat monetary system has not, in fact provided prosperity but debt enslavment, realize they must have REAL resources to calm their populations and the control of those REAL assets can only occur through forcible actions since every other nation realizes the same thing at the same time. 

Fiat Currency = no longer will be an asset under taxpayer rebellion.

 

 

Tue, 10/25/2011 - 19:15 | 1810376 Timmay
Timmay's picture

Capital = labor

Labor = physial work and/or skills

Wealth = excess capital over and above that needed to survive

Money = store of wealth and/or medium of exchange of capital

Increased productivity + reduced or level consumption = increased wealth

increased wealth = more free time (REAL WEALTH) 

Wealth = a reserve capacity of Capital

Money printing/Fractional Reserve Lending = theft of the true value/excess reserves of Capital

Tax = Forcible confiscation of Capital

Debt = Future capital (labor) pulled into current time

Strike = Refusal to contribute Labor or Capital and then be taxed

Riot = Realization that "Wealth" is not what is created with money printing, debt is what is created. See definition of debt. Taxes will be used to pay off debt. See Taxes.

War = Since so much debt has been created and can never be repaid, realization that the debt was backed by current and future Labor through taxes, realization that those that control the issuance of debt actually control the population to service that debt through taxes.  And nations who, facing rebellion from its' citizenry over the "discovery" that the current fiat monetary system has not, in fact provided prosperity but debt enslavment, realize they must have REAL resources to calm their populations and the control of those REAL assets can only occur through forcible actions since every other nation realizes the same thing at the same time. 

Fiat Currency = no longer will be an asset under taxpayer rebellion.

 

 

Tue, 10/25/2011 - 20:21 | 1810524 wisefool
wisefool's picture

Timmay G = Leader of fight club.

Not to diminish anything you proved in your post, but in that context, and to add to it as the peanut gallery should in times like these.

There are a ton of smart people. many of them go into banking. if the USA was not fight club, we probably could find a non tax cheat to put in charge of TRES/IRS. The USA put a tax cheat incharge of Sec-IRS.

Timmay(OP) is wise beyoind his years.

Tue, 10/25/2011 - 21:13 | 1810641 KickIce
KickIce's picture

If we stayed true to the founders tax would be protection in exchange for the ability to conduct ones business in a manner he/she sees fit within the boundaries of society. 

Wed, 10/26/2011 - 06:46 | 1811486 onthesquare
onthesquare's picture

Wealth = excess capital over and above that needed to survive + material and resources stolen from others.

Tue, 10/25/2011 - 21:43 | 1810760 thurstjo63
thurstjo63's picture

Money ? Wealth. "Wealth consists of physical energy (as matter or radiation) combined with metaphysical know-what and know-how." (Buckminster Fuller).

Money is only a commodity that is useful as a medium of exchange. You're making the assumption that even without government coercion we would still be using dollars or euros. It's a fantasy!

May I suggest, for those who want a better understanding of this to get, "The Mystery of Banking" by Murray Rothbard.

Wed, 10/26/2011 - 03:07 | 1811399 acttang
acttang's picture

What you said is how it is SUPPOSED to work, but not how it ACTUALLY does. Your 1st line should be

Money should be = wealth

This assumes that credit creation ultimately leads to wealth ceation. But if credit merely leads to more credit, enabled by a financial system that multiplies credit much faster then it can possibly create wealth, you get what we have today.

Wed, 10/26/2011 - 16:55 | 1814197 Buzz Fuzzel
Buzz Fuzzel's picture

No, what I said is the way it is.  We can fool ourselves into believing the laws of nature have bee suspended and that human work and productivity is no longer necessary to produce wealth but eventually mother nature catches us in our arrogance and house of cards collapses.  Money is = to wealth.  You can not increase money without increasing wealth.  You can create a currency to represent money but by creating more currency without creating more wealth you simply devalue each unit of measure in the money supply. 

Wed, 10/26/2011 - 03:07 | 1811400 acttang
acttang's picture

What you said is how it is SUPPOSED to work, but not how it ACTUALLY does. Your 1st line should be

Money should be = wealth

This assumes that credit creation ultimately leads to wealth ceation. But if credit merely leads to more credit, enabled by a financial system that multiplies credit much faster then it can possibly create wealth, you get what we have today.

Tue, 10/25/2011 - 19:44 | 1810449 traderjoe
traderjoe's picture

This speech got it wrong on a couple fronts. One, the Primary Dealers can create the frns themselves to buy the treasuries. Commercial banks create most of the money in the system. Second, when you have $100 on deposit at a bank, the bank can create $900 and loan it out. See the Credit River case and decision.

Tue, 10/25/2011 - 20:18 | 1810519 Nobody special
Nobody special's picture

Yup.  I picked this part up quickly too.  It's exponential growth without end, not $100 becomes $1000.  It is by definition, an unrestrained ponzi.

Tue, 10/25/2011 - 22:33 | 1810955 palmereldritch
palmereldritch's picture

TIS it's not Federal Reserve

it's Federal Re:Serf

Tue, 10/25/2011 - 18:06 | 1810162 Motley Fool
Motley Fool's picture

You know.

 

Part of the reason the Keynesians have been winning so long, is because their opponents waste enormous amounts of time and energy fighting them on things that aren't even problems.

 

Fractional reserve banking is not the problem.

 

Go learn some economic theory. Think a bit.

 

Even in a 100% gold backed standard fractional reserve banking happens.

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