Some excellent analysis from Mr. Vrabel, who perfectly understands what is going on, and what needs to be done. It was refreshing to read his erudite perspective on the need for Constitutional control of the Banking Branch just a day after I published my own views on the subject. From his latest article (here http://canadafreepress.com/index.php/article/23683):
"The fact is we are in the mist of a global chess game being played above the heads of national governments in which debt and leverage are used to restructure the world under a new global money and banking system. I suggest Bernanke’s sole purpose is to hide the real role the Federal Reserve has played in this game while also helping to keep Congress from asserting its power.
The media likes to claim that voicing opposition to the Fed is lower class populism. But of course the media doesn’t think. It just promotes left or right groupthink for the few corporate powers that own the media. They don’t want you thinking about the question of a central bank. If they did, we might better understand the pros and cons.
The first con of the Fed’s form of central banking—it puts currency control in private hands. Rather than the Fed having power over the banks, its structure actually gives the primary dealer banks (mega firms like JP Morgan Chase, Goldman Sachs, and many foreign banks) significant power to tell it what to do. Entrenched powers behind these firms working together in cartel groups like the New York Fed and CFR have far more leverage than the president, i.e. an individual with no financial experience who rotates into office for a short period of time completely surrounded by bankers and their allies. The entire purpose of the Constitution and having a republic, despite its flaws, was to put power in the hands of the public vs. a concentrated private oligarchy. But the Fed system creates such an oligarchy, as many Americans now see since the crash of 2008.
Oligarchic monetary systems tend toward a 2-tiered society, money pushing rulers vs. money using servants who scramble to pay the rulers back plus interest. The ruling financial class eventually takes over the productive economy and then parasitically destroys the host upon which it lives as gambling and speculation replace savings and production as the engine of growth. Such is the power of a monetary system based on nothing but debt.
A debt-based monetary system enshrines usury, i.e. living off the backs of others by doing nothing but subjugating a population to systemic interest-bearing debt. So the foundation of our monetary system under the Federal Reserve is built upon immorality.
An oligarchic monetary system forces the great mass of the population into servitude. It effectively creates a predator/prey structure in society. In a system based purely on debt, the banking powers are able to super-inflate the system to drive up asset prices, and then deflate the system sucking value and assets up the pyramid to consolidate power. We saw this over the last 10 years. This is the biggest and brightest example of why Jefferson said “banking institutions are more dangerous than standing armies.” It’s also the best example of why the Constitution demands that government regulate the currency.
So how can we get the one pro of a central monetary authority regulating the value of the currency without any of the cons above? Do precisely what Ben says we shouldn’t do—reestablish the republic by putting currency regulation in the hands of public officials as the Constitutions says. If a country doesn’t have a sovereign currency, it doesn’t have a sovereign government. We are learning that painful lesson now as we see Greece being attacked and taken over by financial institutions. The same thing has happened to many countries in the past and it will happen in the future if governments don’t take charge. At that point everyone will know the truth—governments are held hostage by private financial interests. But more and more Americans are realizing the truth now and pushing for change.
However, the change is not as simple as ending the Fed. Without a transition plan, that would cause a disaster since it is the basis for the money supply. The key is to nationalize the Fed, and possibly its primary dealers during the transition phase, to keep them from holding us hostage with the threat of collapse. Then with honest public officials in Treasury and other agencies that don’t represent Goldman Sachs and the rest of the financial cartel—people like William Black, Brooksley Born, Janet Tavakoli, Michael Hudson, Eliot Spitzer, Harry Markopolos—it will be possible to restructure the monetary system. Other components of the solution involve the US Treasury printing sovereign US notes, state banking systems like North Dakota to restore state power, etc. (see details at Freedom’s Vision)
Showing posts with label Government Banking. Show all posts
Showing posts with label Government Banking. Show all posts
Friday, May 28, 2010
Tuesday, May 25, 2010
Would Government Banks Be a Good Thing?
Ellen Brown makes a persuasive case for state government banks, in an article published over at Seeking Alpha.
http://seekingalpha.com/article/206606-the-mysterious-cafrs-how-stagnant-pools-of-government-money-could-help-save-the-economy
Her essential point: the state has billions of dollars in savings, which are deposited in private banks. Why not charter a state government bank and deposit state funds there instead?
In our current system, public money is deposited with private banks, and private bank owners pocket the profits. If that same money is deposited with a government bank, the profit would be used to balance the budget or lower taxes.
The main question she is answering is "Who shall benefit?" Right now, private banks get all the profit. We have no say in their policy, nor do we receive any advantage from it.
Why should the parasitic banking class receive all the benefit from the fractional reserve money power?
If a governmental body ran a bank, the people would have some influence on policy and receive some advantage from the interest income. The state, meaning the people, would gain the power and advantages of fractional reserve credit.
Private bankers do it, and profits go in their parasitic pockets. If states do it, profits go to reduce government spending and budgets. What is wrong with that?
The hyperinflation argument is a distraction, a red herring, not a real objection. The macro economic effect of a state bank would be no different than a private bank. The money is already being leveraged somewhere, the only question is "Who benefits?"
http://seekingalpha.com/article/206606-the-mysterious-cafrs-how-stagnant-pools-of-government-money-could-help-save-the-economy
Her essential point: the state has billions of dollars in savings, which are deposited in private banks. Why not charter a state government bank and deposit state funds there instead?
In our current system, public money is deposited with private banks, and private bank owners pocket the profits. If that same money is deposited with a government bank, the profit would be used to balance the budget or lower taxes.
The main question she is answering is "Who shall benefit?" Right now, private banks get all the profit. We have no say in their policy, nor do we receive any advantage from it.
Why should the parasitic banking class receive all the benefit from the fractional reserve money power?
If a governmental body ran a bank, the people would have some influence on policy and receive some advantage from the interest income. The state, meaning the people, would gain the power and advantages of fractional reserve credit.
Private bankers do it, and profits go in their parasitic pockets. If states do it, profits go to reduce government spending and budgets. What is wrong with that?
The hyperinflation argument is a distraction, a red herring, not a real objection. The macro economic effect of a state bank would be no different than a private bank. The money is already being leveraged somewhere, the only question is "Who benefits?"
Thursday, May 20, 2010
The New Command Economy: a Challenge to Libertarian Economists
Great progress in economics and monetary theory has been made in the last half century. However, precious few economic theorists today have accurately grasped the implications of our new monetary system.
Unfortunately, most of the few theorists who are popularizing the new monetarism are leftists, and are no friends of liberty or decentralization. Most of the right-wing monetary theorists who are concerned with liberty are stuck in the past, dreaming of a return to the gold standard. If the friends of liberty want to be effect positive changes for freedom in the 21st century, they need to update their theories.
Is it possible for paleo-libertarians to move beyond their hallowed canon? Probably not. Perhaps this is just The Way Thing Are, that progressives continually out-innovate conservatives. Encountering libertarian economists today is like being transported back to the year 1600AD, listening to traditional horse-mounted, heavily-armored, lance-carrying noblemen denounce the use of mass armies, polearms, and muskets. Sure, the noblemen had Honor, Right, and Good on their side, but the more they clung to those traditional standards of warfare, the more antiquated and irrelevant they made themselves, and the more they guaranteed their own defeat.
Such is the condition of libertarian economic theory today. Unless their update their arsenal to cope with today's economic weapons and tactics, they are simply irrelevant. Facts: Money is paper, money is credit, the money power looms as larger than ever, unleashing monetary weapons of mass destruction upon the body politic.
In the 20th century, the Soviet command economy simply told everyone what to do, and required their acquiescense. Today, the American command economy relies on the money power to get everyone to do what they want. The American command economy is, however, far more insidious than the Soviet version, because it is cloaked in the illustion of freedom and capitalism.
In fact, the power to print money gives the American economic elites almost unlimited power over the American and world economy. They don't have to force people to do their bidding, like the Soviets; they can just pay them to do it. There is no limit to their power to do so.
Worse off, there is no Second World to show such fraud for what it is. The Soviet system collapsed not because of its own failure, in fact, it was spectacularly successful. It failed because of its relative status versus the Free World. This power to co-opt free markets through monetary creation is leading to our own impoverishment, no less so than the Soviet command system. However, unlike them, we don't have an external comparison that will demonstrate our own failure.
Here is the theoretical problem: money is not a thing, and there is no constraint on its supply. By issuing its own money, government can co-opt whatever resources and labor it desires. Yet, we are compelled by the force of law to use nothing but this federal money. In short, we are kept unwilling slaves to the federal leviathan.
Here is the practical problem: because it is under no budgetary contraints, and can freely print it own money, the government can outbid any other market participant, for anything. As with traditional command economies, huge inefficiencies enter the system, and overall wealth levels constantly decline, a long slow death spiral.
The tax collection and budgetting routine is just a sham, a puppet show for the ignorant masses. The government could tommorrow cancel all tax collection and simply pay its budget by creating new credit money.
The more money it creates, the more it can outbid the free economy for labor and resources. There is no natural limit to the number of people who can work directly for the government or be dependent on government funding, since there is no limit to the government created money supply.
The money creation power is the ultimate power in existence. With it, there is no limit to the power or scope of government influence.
With every government job, we as a society get poorer, but who can realize it? Government can offer higher paying jobs, and jobs where no others exist, so all market participants are forced to take the poison bait. Government makes them wealthier than they were otherwise, but meanwhile decreases the wealth in the whole system.
We are trapped. Who shall point the way out?
Unfortunately, most of the few theorists who are popularizing the new monetarism are leftists, and are no friends of liberty or decentralization. Most of the right-wing monetary theorists who are concerned with liberty are stuck in the past, dreaming of a return to the gold standard. If the friends of liberty want to be effect positive changes for freedom in the 21st century, they need to update their theories.
Is it possible for paleo-libertarians to move beyond their hallowed canon? Probably not. Perhaps this is just The Way Thing Are, that progressives continually out-innovate conservatives. Encountering libertarian economists today is like being transported back to the year 1600AD, listening to traditional horse-mounted, heavily-armored, lance-carrying noblemen denounce the use of mass armies, polearms, and muskets. Sure, the noblemen had Honor, Right, and Good on their side, but the more they clung to those traditional standards of warfare, the more antiquated and irrelevant they made themselves, and the more they guaranteed their own defeat.
Such is the condition of libertarian economic theory today. Unless their update their arsenal to cope with today's economic weapons and tactics, they are simply irrelevant. Facts: Money is paper, money is credit, the money power looms as larger than ever, unleashing monetary weapons of mass destruction upon the body politic.
In the 20th century, the Soviet command economy simply told everyone what to do, and required their acquiescense. Today, the American command economy relies on the money power to get everyone to do what they want. The American command economy is, however, far more insidious than the Soviet version, because it is cloaked in the illustion of freedom and capitalism.
In fact, the power to print money gives the American economic elites almost unlimited power over the American and world economy. They don't have to force people to do their bidding, like the Soviets; they can just pay them to do it. There is no limit to their power to do so.
Worse off, there is no Second World to show such fraud for what it is. The Soviet system collapsed not because of its own failure, in fact, it was spectacularly successful. It failed because of its relative status versus the Free World. This power to co-opt free markets through monetary creation is leading to our own impoverishment, no less so than the Soviet command system. However, unlike them, we don't have an external comparison that will demonstrate our own failure.
Here is the theoretical problem: money is not a thing, and there is no constraint on its supply. By issuing its own money, government can co-opt whatever resources and labor it desires. Yet, we are compelled by the force of law to use nothing but this federal money. In short, we are kept unwilling slaves to the federal leviathan.
Here is the practical problem: because it is under no budgetary contraints, and can freely print it own money, the government can outbid any other market participant, for anything. As with traditional command economies, huge inefficiencies enter the system, and overall wealth levels constantly decline, a long slow death spiral.
The tax collection and budgetting routine is just a sham, a puppet show for the ignorant masses. The government could tommorrow cancel all tax collection and simply pay its budget by creating new credit money.
The more money it creates, the more it can outbid the free economy for labor and resources. There is no natural limit to the number of people who can work directly for the government or be dependent on government funding, since there is no limit to the government created money supply.
The money creation power is the ultimate power in existence. With it, there is no limit to the power or scope of government influence.
With every government job, we as a society get poorer, but who can realize it? Government can offer higher paying jobs, and jobs where no others exist, so all market participants are forced to take the poison bait. Government makes them wealthier than they were otherwise, but meanwhile decreases the wealth in the whole system.
We are trapped. Who shall point the way out?
Thursday, July 23, 2009
Credit Contractions and the Consolidation of Wealth
The wealthy love credit contractions and they use their banks to facilitate them. Here why and how:
It is an axiom of human psychology that people will fall victim to easy credit. I chalk it up mainly to the inevitable fact that young people with the keenest need for status displays have the least available savings. For that and no doubt other reasons, people are happy to go into debt to get something today rather than wait until they have saved to afford it.
Easy credit serves to consolidate wealth in the bankers’ hands in two ways. For one, there is a systemic shortage of dollars to pay off loans. Because we operate under a debt-based money system, collectively, there is not enough money. In short, money is created is based on the value of loan collateral, but there is no extra money created for the interest payments.
Thus, there is a mathematical shortage of money relative to outstanding debt owed, which guarantees a constant percentage of loan failures. A loan failure means a permanent transfer of wealth into banking hands.
This constant transfer of wealth into banking hands is a low-level phenomenon under the normal conditions of an expanding credit supply, but undergoes a massive spike upward when credit conditions tighten, which is the second reason why the wealthy love credit contractions.
The conditions of easy credit create a greater demand for credit, because the easy credit drives up prices. For example, if housing has to be paid for in cash, there will be less ability to afford houses, i.e., lower demand. On the other hand, if housing can be 100% financed with loans, more people will be in the market for housing, the greater demand driving up prices. The higher prices then mean that fewer can afford the prices, driving up the need for credit. Rising prices then drag in speculators hoping to ride the upward tide of prices. Thus, as you can see, easy credit and higher prices form a feedback loop, producing what are commonly known as price bubbles.
The wealthy love price bubbles because they know exactly when they are going to pop. They know this not because they have psychic powers or are economic geniuses, but because they themselves cause the bubble to pop. The wealthy pop the bubble themselves by removing their own investments, known as profit taking.
Profit taking is happy enough for them, but it gets even better, because after taking their profits, they also tighten credit availability. Tighter credit, combined with their initial burst of selling, produces a bubble collapse. Masses of common people are left sitting on devalued collateral but overvalued loans, resulting in mass defaults and panic sales at low prices.
Now, of course the wealthy love getting to repossess and resell the collateral, but even more than that, they love swooping in and buying up the goods at ultra-cheap prices from distressed sellers.
It is really the simplest game in the world for the banking class: pump up prices with easy credit, take profits, pop bubble, acquire cheap assets, repeat.
But you object, banks get hurt in the process too, don’t they? Well, the big ones don’t, not at all, they are “too big to fail”, remember? But even more importantly, you are confusing banks with the banking class. Sure, some banks fail, but that is part of the process of tightening credit and lowering asset values. A bank may “fail” but the bankers are still getting rich. A bank is just a legal fiction, so the bankers are not actually going broke when a bank fails. Their personal assets are squirreled away and safe, sitting in cash and other valuable goods. Remember, they are the ones who know exactly when to cash out, because they caused the bubble collapse themselves.
When you are rich enough, you are not riding the market, you are moving the market. The common investors are just along for the ride, hoping for the scraps that fly down from the feast. Additionally, this banking class is in contact with one another, so they have the ultimate insider information. Because they themselves move the market, and are in close contact with others who do the same, their trades will always occur before the masses. Its like the built-in house advantage at the casino. Just enough commoners make money to keep the whole operation going, but it is the house that is always getting rich.
Unfortunately, our debt-money system is structured so that you are forced to play at their game. They create the money, so they get the goods, it’s really that simple.
For the common people, the main solution is to get the base of our money supply off the debt system. People will always be going into debt to banks, but the government should be putting debt-free money into the economy to counteract the money shortage.
Government can also prevent asset bubbles by regulating interest rates and bank charges, as well as guaranteeing consumer rights (rather than bank rights). These government actions would not regulate bank credit creation directly (which would be almost impossible), but would effectively control bank credit creation by squeezing its profitability.
Government can also go into the banking business itself. Much government revenue would be created through interest charges, and even loan failures would go to the public good. Competition with government would also drive down the costs associated of the private bankers and decrease their overall power. Government directly banking could also be used to finance crucial government infrastructure functions, debt free, saving us all money.
It is an axiom of human psychology that people will fall victim to easy credit. I chalk it up mainly to the inevitable fact that young people with the keenest need for status displays have the least available savings. For that and no doubt other reasons, people are happy to go into debt to get something today rather than wait until they have saved to afford it.
Easy credit serves to consolidate wealth in the bankers’ hands in two ways. For one, there is a systemic shortage of dollars to pay off loans. Because we operate under a debt-based money system, collectively, there is not enough money. In short, money is created is based on the value of loan collateral, but there is no extra money created for the interest payments.
Thus, there is a mathematical shortage of money relative to outstanding debt owed, which guarantees a constant percentage of loan failures. A loan failure means a permanent transfer of wealth into banking hands.
This constant transfer of wealth into banking hands is a low-level phenomenon under the normal conditions of an expanding credit supply, but undergoes a massive spike upward when credit conditions tighten, which is the second reason why the wealthy love credit contractions.
The conditions of easy credit create a greater demand for credit, because the easy credit drives up prices. For example, if housing has to be paid for in cash, there will be less ability to afford houses, i.e., lower demand. On the other hand, if housing can be 100% financed with loans, more people will be in the market for housing, the greater demand driving up prices. The higher prices then mean that fewer can afford the prices, driving up the need for credit. Rising prices then drag in speculators hoping to ride the upward tide of prices. Thus, as you can see, easy credit and higher prices form a feedback loop, producing what are commonly known as price bubbles.
The wealthy love price bubbles because they know exactly when they are going to pop. They know this not because they have psychic powers or are economic geniuses, but because they themselves cause the bubble to pop. The wealthy pop the bubble themselves by removing their own investments, known as profit taking.
Profit taking is happy enough for them, but it gets even better, because after taking their profits, they also tighten credit availability. Tighter credit, combined with their initial burst of selling, produces a bubble collapse. Masses of common people are left sitting on devalued collateral but overvalued loans, resulting in mass defaults and panic sales at low prices.
Now, of course the wealthy love getting to repossess and resell the collateral, but even more than that, they love swooping in and buying up the goods at ultra-cheap prices from distressed sellers.
It is really the simplest game in the world for the banking class: pump up prices with easy credit, take profits, pop bubble, acquire cheap assets, repeat.
But you object, banks get hurt in the process too, don’t they? Well, the big ones don’t, not at all, they are “too big to fail”, remember? But even more importantly, you are confusing banks with the banking class. Sure, some banks fail, but that is part of the process of tightening credit and lowering asset values. A bank may “fail” but the bankers are still getting rich. A bank is just a legal fiction, so the bankers are not actually going broke when a bank fails. Their personal assets are squirreled away and safe, sitting in cash and other valuable goods. Remember, they are the ones who know exactly when to cash out, because they caused the bubble collapse themselves.
When you are rich enough, you are not riding the market, you are moving the market. The common investors are just along for the ride, hoping for the scraps that fly down from the feast. Additionally, this banking class is in contact with one another, so they have the ultimate insider information. Because they themselves move the market, and are in close contact with others who do the same, their trades will always occur before the masses. Its like the built-in house advantage at the casino. Just enough commoners make money to keep the whole operation going, but it is the house that is always getting rich.
Unfortunately, our debt-money system is structured so that you are forced to play at their game. They create the money, so they get the goods, it’s really that simple.
For the common people, the main solution is to get the base of our money supply off the debt system. People will always be going into debt to banks, but the government should be putting debt-free money into the economy to counteract the money shortage.
Government can also prevent asset bubbles by regulating interest rates and bank charges, as well as guaranteeing consumer rights (rather than bank rights). These government actions would not regulate bank credit creation directly (which would be almost impossible), but would effectively control bank credit creation by squeezing its profitability.
Government can also go into the banking business itself. Much government revenue would be created through interest charges, and even loan failures would go to the public good. Competition with government would also drive down the costs associated of the private bankers and decrease their overall power. Government directly banking could also be used to finance crucial government infrastructure functions, debt free, saving us all money.
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