Dollar Replacement Soon - Russia and China non-dollar trade agreement

The entire edifice of the US economy is supported right now by the status of the USD/FRN as the international trade currency.  

 

When the Federal Reserve Note (US Dollar) loses its privileged trade status, we can expect a massive one-time hyperinflation, I estimate on the order of 300%-500%, as well as a vicious crash in the U.S. economy.

 

The recent Russia-China trade agreement moves us another big step towards that day. 

 

Notice that the elevation of the Chinese currency to international reserve status is the EXPLICIT policy of the Chinese government.   Judging by the policies of the Fed Reserve and US Congress, losing reserve status for the dollar appears to be the policy of the American government as well.... 

 

As reported last Friday:

 

Russia and China will switch to trade in rubles and yuan to boost bilateral trade and economic cooperation, following an agreement signed between the central banks of both countries, Russian Central Bank Deputy Chairman Viktor Melnikov said on Thursday.

People's Bank of China Deputy Chairman Ma Delun said the agreement would give the two nations the opportunity to increase the value of deals in their national currencies and "help bring them closer to international reserve currencies."

Source article:

http://en.rian.ru/business/20110623/164798920.html

 

 

Debt Jubilee demonstrated in China

China again demonstrating the principles of jubilee in action.   Previously, they had been raising the reserve ratio to suck money out of the banking system to cut off inflation.  Now they are practicing large-scale debt relief of local governments.  

 

China has a number of advantages that allow them to accomplish these feats of economic sanity.  For one, they are not ruled by an internationalist banking class.  They are Communist, and they are Nationalist.   Their sole concern regarding economic policy is what is good for their people.    They are living exemplars of the "People First" concept.  Our guiding mantra of "profits first" is anathema to them. 

 

Therefore they do not have a parasitical rentier class sucking their blood.  If an economic decision is good for the economy, such as debt write-offs, they do it.   Simple, easy.  The only thing preventing us from doing something similar is the domination by the parasites of our economic and political system.

 

Jubilee Theory in Action

 

The economic theory is simplicity itself: rather than let bad debt slow down economic development, the government simply cancels the debt or pays it off.   In the Chinese case, it is done in partial steps, with some being written off and some restructured and sold. 

 

When the government issues the national money, it has total and complete Jubilee power.   The sovereign control of the money supply is, in fact, the greatest power that government has, probably greater than its military/police power.  Certainly greater than its legislative power.  The fact is, he who has the money controls the laws and the military. 

 

Medieval Concept of Commodity Money

 

Many people have a hard time "getting" the Jubilee concept, because they still harbor the medieval belief that money is a thing.    In fact, money is not a thing, it is just a trick to get us to work together.   Debt is also a "social illusion" of the same variety.   

 

The Chinese elite realize this, and they use their monetary power accordingly, for the benefit of the people.  Our elite realize it too, but they use their monetary power for personal enrichment and political control, keeping the people in the dark.  

 

 

 

quotes from the article below (http://www.reuters.com/article/2011/05/31/us-china-economy-debt-idUSTRE74U3CO20110531):

 

China's regulators plan to shift 2-3 trillion yuan ($308-463 billion) of debt off local governments, sources said, reducing the risk of a wave of defaults that would threaten the stability of the world's second-biggest economy.   ...

Many analysts see China's pile of local government bad debt as a major risk to the economy, especially as growth slows.

But few see a widespread banking fallout as they believe cash-rich Beijing can step in to soak up losses. Still, the scale of the plan is much bigger than a government move in 1999 to clear debt from the books of large state-owned banks.

 

 

 

Refutation of Classic Free Trade Arguments - Vox Day on Hazlitt

Writer Vox Day has begun a formal refutation of the classical arguments for international free trade.  It is a worthwhile public service, as many people are still unaware of the advances in economics which allow us to criticize the classical theories.

 

His choice of target is one many of us are familiar with: Henry Hazlitt's Economics in One Easy Lesson.   Like Vox Day, I also have fond memories of that book.  I read it as a self-education project when I was 17 years old, while I was a freshman in college.  It is no exaggeration to say that Hazlitt's book provided the foundation of my economics knowledge, and a fine foundation it is.  Unfortunately, the explanation of free trade is out of date, written as it was in 1946 when economic and monetary conditions were vastly different than today, and thus, justly requires amendment. 

 

Below are my concise summarizations of V.D.'s criticisms.  (You can find the full text here: http://voxday.blogspot.com/2011/06/mailvox-hazlitt-international-trade.html) 

 

 

 

1 - Hazlitt's theory deals with tariffs as protection from foreign competition, not protection from domestic companies that offshore their production. Thus, the assumption that the primary beneficiary of the tariff is the manufacturer is wrong.  The primary beneficiary is the worker. 

 

2 - Hazlitt mistakenly assumes that the reduced price for the imported good (if the tariff is eliminated) will go somewhere else in the domestic economy.  If fact, is more likely than ever to get spent on another import. 

 

3 - Foreign business do not have to recycle their trade-gained dollars back into the American economy; they may just hold on to them, or spend them elsewhere, as the dollar is the international currency of trade. 

 

4 - It is a mistaken assumption to assume those foreign-held dollars will ever get re-spent into the U.S. economy.  Quoting here, regarding the extended period of time over which the U.S. has run a dollar-shedding import surplus: "35 years and counting is a long time to wait for this postulated inevitable return, and is unlikely to do any good for the worker who lost his job more than three decades ago."

 

5/6 - It is a mistaken assumption that overall employment will not go down as a result of lost jobs. "There is no reason to assume that the loss of a job in one sector will create any additional demand in another sector, indeed, to the extent there is worker mobility between industries, all the loss of the job in the one sector will do is create downward pressure on wages in the other sector."  

 

7 - Assuming that cheaper consumer goods pay for lost jobs is a fallacy.  An unemployed worker cannot also be a consumer, meaning, production comes before consumption;

 

 

Populism in the NYTimes: Krugman denounces Creditor Class, (almost) calls for Jubilee

Surprising article (http://www.nytimes.com/2011/06/10/opinion/10krugman.html) by Paul Krugman nailing the cause of our economic malaise squarely on its head: the Rentier Class.  Rentiers is an archaic word for the asset-owners and creditors, the people who don't do any work but profit wholly from money and their ability to drive up prices for things people need. 

 

A sane society would make their economic activities illegal.  They are economic parasites, living off of the production of others, contributing nothing.   

 

Krugman calls them out as having hijacked the political process.  Public policy now favors creditors, and the rentier class in general, continuing to squeeze the average worker and small business owner.   As he puts it:

 

"Consciously or not, policy makers are catering almost exclusively to the interests of rentiers — those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense."

 

Krugman Calls for Jubilee?

 

Krugman even admits that debt relief could do a lot to promote overall economic recovery.    Dare we say he is on board with the Jubilee solution?   Reading this quote, it appears he is almost there:

 

 "But the reality is just the opposite: creditor-friendly policies are crippling the economy. This is a negative-sum game, in which the attempt to protect the rentiers from any losses is inflicting much larger losses on everyone else. And the only way to get a real recovery is to stop playing that game." 

 

Other choice quotes:

 

"While the ostensible reasons for inflicting pain keep changing, however, the policy prescriptions of the Pain Caucus all have one thing in common: They protect the interests of creditors, no matter the cost. ... No, the only real beneficiaries of Pain Caucus policies (aside from the Chinese government) are the rentiers: bankers and wealthy individuals with lots of bonds in their portfolios."

 

How They Maintain Their Power

 

Krugman offers only the most superficial analysis of how this Rentier Class maintains their hegemony on political power, but he is correct insofar as his analysis goes:

 

"And that explains why creditor interests bulk so large in policy; not only is this the class that makes big campaign contributions, it's the class that has personal access to policy makers — many of whom go to work for these people when they exit government through the revolving door. The process of influence doesn't have to involve raw corruption (although that happens, too). All it requires is the tendency to assume that what's good for the people you hang out with, the people who seem so impressive in meetings — hey, they're rich, they're smart, and they have great tailors — must be good for the economy as a whole."

Fight of the Century: Keynes vs Hayek

Oil Futures Speculation and the Spiking Price of Gas

 

The business pages agree and now even the President is chiming in, although it seems the establishment mainstream press tends to avoid publicizing these discussions.   How can the price continue to rise even when surpluses continue to stockpile? [***see below for relevant news***]  According to the theory of supply and demand, when there is an over-supply, prices are supposed to fall...

 

Ed Wallace in Business week says "It's no secret that speculators are driving up fuel prices. ...  It's no great mystery who is responsible for higher gas prices. As I and others have written in the past, the biggest culprits are the speculators gaming the futures markets to line their own pockets. We know all that."

Huh, maybe no secret to him, but definitely a secret from most of the American public, who blame oil company greed for expensive gas. 

 

Even Goldman Sachs is alarmed over the inflating bubble in oil speculation:  "Goldman Sachs advised its clients on Apr. 11 to get rid of their commodities holdings, including oil. The Guardian quoted Goldman's advice as warning: 'The record levels of speculative trading in crude have pushed their prices up so much in recent months that in the near term, risk reward no longer favors holding those commodities.' "

 

Wallace ultimate pins the blame on the easy money policy at the Fed, which is flooding the world with cheap dollars, enabling and encouraging financial speculators to pump up bubbles in commodities:

"The problem starts with Ben Bernanke, no matter how many of his Fed presidents claim they are not to blame for the high price of oil. The fact is that when you flood the market with far too much liquidity at virtually no interest, funny things happen in commodities and equities. It was true in the 1920s, it was true in the last decade, and it's still true today."

In the end, it comes down to creating big profits for banks at the expense of the American citizens, because banks need the profits to pay off the bailout loans that the fedgov gave them:

"Ben Bernanke doesn't seem to understand that while he is allowing huge profits for banks and investment firms so they can recover massive losses from the financial meltdown, he is intentionally damaging what could be a much stronger recovery with the misery he's causing the average American consumer. Maybe he does understand and just doesn't care. There's always China to blame."

[read the whole of Wallace's article here: http://www.businessweek.com/investor/content/apr2011/pi20110419_786652.htm]

 

The Law of Supply and Demand Drives Futures Markets Too

The President characterizes the futures contracts as "bets", which is the standard interpretation and justification for these things.  The problem is, the financial elite don't "bet on the market", in the same way that a small dealer is betting when he takes out a futures contract. 

Rather, the financial elite are driving the market, because of the tremendous amount of money they can bring to bear.   When they issue a buy order, the money flows in.   The greater money inflow drives up prices. 

When you have the billions in free money, you can move the market like that.  It is like a money-making machine.  When they issue the sell order, the prices will automatically fall, because they represent such a huge market stake. 

An organized movement to rein in the madness can be found here:

Stop Oil Speculation Now   http://www.stopoilspeculationnow.com/home.aspx

Obviously, financiers should not be allowed to speculate in markets like this.  It should be made illegal, no exceptions, with harsh penalties for those who attempt to profit like parasites on people's need for basic commodities like food and energy.   Only people with legitimate economic interests in a market, i.e. the producers, retailers, and consumers, should be allowed to purchase futures contracts to hedge their financial positions.   

 

***The oil minster of Saudi Arabia, for example, points to the large surplus in oil production and stockpiles:

"Saudi Arabia's oil minister says the current high oil price is unjustifiable and that speculation over the future oil markets is mainly behind the hike.  Ali Naimi told reporters the lower demand for Saudi oil in March compared to February was a sign of an existing surplus on the global market.  He says large quantities of oil were available as commercial stockpile or surplus production in some oil-producing countries. Naimi spoke after a meeting on Tuesday with Dutch Economic Affairs Minister Maxime Verhagen.  [http://www.businessweek.com/ap/financialnews/D9MMP3LO0.htm]

 

 

Banks Should be treated as Public Utilities - Thomas Hoenig, KC Fed President

The analysis that banks are public utilities is a very basic and honest one.   Of course they should be regulated as one, as suggested by Kansas City Fed President Thomas Hoenig (http://ca.news.yahoo.com/big-banks-government-backed-feds-hoenig-20110412-112137-434.html).  

 

The situation with banks is actually worse than with utilities.  Utilities at least provide something of value for the economy.   Banks provide none, they are totally 100% parasitic.  Profit to a bank is a direct loss to someone else. The more profits a bank makes, the more in debt the rest of productive society is.   Growing profits in the banking sector should be looked with alarm, like a growing colony of parasites on a healthy body.  If it is not controlled, the body could die, as we are seeing in our current debt deflationary episode.   Because the economic interests of banks are diametrically opposed to the economic interests of the productive economy, the whole banking sector should be regulated very carefully, with strict caps on usury and profits. 

 

The Outdated Theory of Banking Utility

 

The economic utility of banks supposedly resides in their ability to bring together the supply of unproductive capital with the demand of creative business ventures.   Indeed, that logic had value back when money consisted of gold, and the economy suffered from the pressure of constant money shortages.   

 

However, such a situation no longer applies.  Banks don't make profit because they are agreeing to take on the risks of making loans.   Today, banks make profit from CREATING MONEY through loans.   It is money they never had in the first place, so they certainly aren't risking anything by giving it away.   The money is literally created in the process of issuing the loan.   

 

Thus, the banks are in a NO RISK position.  If the loan goes bad, they lose nothing, since they ventured nothing in the first place.  If fact, they may gain something, if the loan was secured by some real collateral (such as real estate) and they get to seize and resell the collateral if the loan fails.    The only so-called "risk" they face is if their books get so far upside down that they can no longer meet their deposits, and in that case, the bank is simply nationalized.

 

The Fractional Reserve Scam

 

This is the fundamental lie and scam at the heart of fractional reserve lending.  Under the "10% reserve requirement", supposing you have $100, you can lend out $500 to your mom, $300 to your dad, and $200 to your sister, while getting to hold on to the original $100!    This is a far cry from the old days, when banks faced actual risk with a limited and real supply of money. 

 

Under the old system of real money, if a bank lent out that $100, if the loans went bad, they could be wiped out, along with their depositors.   Note that the gold piece money still existed somewhere.  In other words, society still had as much money, but the particular bank would be wiped out.   This created an iron discipline in the banking system, creating competition in an environment of real risk.   This risk was very real and personal to the bank owners, because it was their personal capital that was at risk if the bank was wiped out.

 

Perversion of Capitalism

 

Today, the risk profile has been inverted.  Under the Fractional Reserve System, banks can never actually be wiped out.  At the last resort, the Federal Reserve jumps into the picture, takes ownership of the bank, and creates the money to honor the deposits.   The owners of the bank do not face bankruptcy in this scenario, either, since their personal wealth is shielded away from the performance of the corporation.  

 

Society as whole might be wiped out by inflation or deflation, but banking deposit accounts will always be made whole, and bank owners face no personal risk.  In other words, in good times, banks make all the profit while taking no real risk.  While in bad times, they are bailed out by the government.  Profit is privatized, loss is socialized.  This is not your grand-daddy's "capitalism". 

 

That is why banks are essentially agents of the government.  They are not truly private enterprises, facing free and open competition, under the threat of being put out of business and personally impoverished by bad decisions.    Their ability to make a profit is based on a government-protected monopoly in money creation.  If they mess up, the government has to bear all their losses.   Heads they win, tails you lose.   Nice time to be a banker, no? 

Don Baker calls for National Debt Repudiation - the Jubilee plan revisited

The irony here is that I was pointing out the necessity of Jubilee two years ago on Seeking Alpha, and I got lots of thumbs down.  Now major articles are being published there agreeing with me (http://seekingalpha.com/article/262724-defaulting-on-debt-is-not-the-end-of-the-world) 

 

Jubilee is totally logical and practical.  Debt is killing the economy currently, and it is only going to get worse.  The sooner we declare the Jubilee, the better off our real economy will be.  The longer we wait, the more severe will be the recovery. 

 

To be precise, the Jubilee plan is different than default.   The Jubilee plan means that all debts are PAID OFF.    The government simply writes electronic checks to pay off all debt.  

 

Simultaneously, the government raises the banking reserve ratio, to soak up all the extra liquidity. 

 

The result: the cancellation of all debts, without the violation of any contracts, without any inflation.   

 

The debt deflation would be over instantly, and the economy could reset.   Jubilee!

 

 

Should government be prohibited from borrowing - from the Adam Smith Institute

An article over at the Adam Smith Institute (http://www.adamsmith.org/blog/tax-and-economy/government-should-be-banned-from-borrowing/)   questions the utility of government borrowing.   Clearly, a prohibition on government borrowing should be written into the Constitution as a hard limit on government.

 

Government borrowing is a moral wrong: no men have the right to set debts upon their children and grandchildren.    It is functionally equivalent to hereditary slavery.  It is wrong. 

 

The very idea of sovereign powers needing to borrow is absurd.  If you can create new money at will, why would you ever need to borrow?

 

The practice of government borrowing from banks is simply a scam that the banking elite has perpetrated: it amounts to a permanent transfer of wealth from the nation to the banking elite.   It is functionally equivalent to a tax or tribute payment.   Old habits die hard: the parasitic elite still acts as if it has the right to leech off the nation's wealth.

 

If government needs extra money, it can just print it out, plain and simple.    The idea of government borrowing from banks is archaic and retrograde, a relic of a previous barbaric age when people believed a nation's wealth was defined by its gold supply.   

Walmart CEO sees big inflation coming in June

 

 

U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.

 

The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

 

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

 

Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

 

"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

 

Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

 

The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.

 

"We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."

 

Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.

 

Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."

 

 

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm

German Economists Recommend National Jubilees

The idea of Jubilee is common sense beyond doubt.  By cancelling debt loads, economies can recover.   The overwhelming approval of the German economics professors confirms it.  

 

On the larger issue: the idea that sovereign nations need to take out debt is odious.  It is just a trick, a hidden income transfer from the workers of the nation to the banking parasites. 

 

Nationalization of credit is a sovereign power.  Unfortunately, it has been abdicated in our modern world to the international banking class.   In effect, national governments exist to fund the banking class.  The "floating debt" is a permanent tax paid by the people to the banking elites, who do NOTHING whatsoever of economic value for the country in turn. 

 

Here is the article:

 

http://news.ph.msn.com/business/article.aspx?cp-documentid=4670516

 

Almost 200 German economics professors have signed a declaration rejecting current proposals to resolve the eurozone debt crisis, instead calling for a way for distressed countries to declare bankruptcy.

Instead of the collective support mechanism set up last year that could be made permanent in a modified form from 2013, the economists argued it would be better to let countries restructure their debts.

"Restructuring allows the countries concerned to reduce their debt and start over," said the economists.

Food Price Inflation at Record Highs

Notice, this record-setting food inflation is not being driven by supply-demand.  It is a product of our tottering economic/financial system.  As the article puts it: "agricultural commodities are attracting excess liquidity in international markets." 

 

That means all the extra money printed out by the Fed is being exported as inflation in commodities.   It is exacerbated due to the fact that most foreign nations are "net food importers", not producing anywhere close to the amount of food they need to feed themselves. 

 

The fact that America is a "net food exporter" means that we have an extra layer of insulation from the food prices rises.  The way we feel about oil prices is the way foreigners feel about food prices: an out-of-control skyrocketing import item.

 

There is also talk about placing capital controls on food commodities, to help prevent international investors from driving up prices on captive populations.  Of course, only America could do that, as the producer of most of the world's food, and it would involve a major repudiation of free-market principles.  Free-market principles meaning the elite investors can freely drive up food costs as a profit source, well.... maybe that repudiation would be a good thing.  

 

Certainly it should be the economic policy of any food-importing nation to achieve food sovereignty and gain control over its own food supply.  One major step in that direction would be to place import restrictions or tariffs on food imports, which of course, the international globalist community is fighting against.  

 

When you get down to brass tacks like this, it is hard not to look at the international economic system as a big enterprise in exploitation and parasitism:

 

--The advanced economies, with their mechanized agriculture, drive local food producers out of business... 

--Which then forces them to import most of their food... 

--Leaving them at the mercy of their international speculators...  

--International laws are written to prevent any defense against this process...

 

Without factories to build things, what exactly are they supposed to do for economic development???  Hell if I know...  

 

I guess if they are lucky (and they keep their wages low enough), some international company will set up a factory there... Meaning that profits will be "internationalized", i.e. extracted into foreign "ownership" hands.  What a clusterfuck!     

 

 

 

http://ipsnews.net/news.asp?idnews=54412

 

The world is living through another major upswing in food prices.

 

World food prices surged to a new historic peak in January, for the seventh consecutive month, as the FAO Food Price Index reached 231 points, up 3.4 percent from December 2010.

 

The accumulated increase in food prices during 2010 amounted to 25% relative to the 2009 level.

Price movements are no longer determined only by the basic driving forces of supply and demand: agricultural commodities are attracting excess liquidity in international markets and other factors, far less transparent and constantly changing, such as expectations and appetite for risk, start to play an important role in determining the direction of the prices.

Furthermore, food markets are more and more intertwined with financial and energy markets, both of which are characterized by greater volatility. Facing these multiple sources of uncertainty, agricultural commodity markets tend to overreact to any changes in the demand or supply projections, as it happened in mid-2010 in the case of wheat.

Although the world produces enough food, global production needs to be gradually increased to keep pace with the growing population. Chronic underinvestment in agriculture throughout the years, in developing countries in particular, made them more vulnerable to risks associated with the new dynamics that rule the world market. Investment in agriculture, which would allow to increase productivity and improve resilience to climatic risks, together with strengthening of rural institutions and better governance of commodity markets, are needed to reduce the incidence of price spikes.

Russia Demonstrates Economic Common-Sense

Russia is providing an example for how sane societies conduct economic policy.    The funny part is, they are doing what America did in the 1980s, in response to the Japanese car invasion.  They are saying, if you want access to our market, you have to open up factories on our soil.  

 

Of course, China has been doing that for the last 20 years as well, so their economy is booming while ours continues to shrink. 

 

The iron rule of economics remains the same: production comes before consumption.  If you don't make something, you have nothing to trade.  It is common sense: productive jobs have to come first.    The basis of any sane economic policy has to be providing people with productive jobs. 

 

Here is the article about Russia:

 

http://news.yahoo.com/s/nm/20110228/bs_nm/us_russia_autos

 

MOSCOW (Reuters) – The world's biggest carmakers have until the end of Monday to sign up for Russia's latest scheme to entice major players and strengthen its local industry ahead of any future crisis.

Russia was on the verge of overtaking Germany to become Europe's biggest car market before the country's 2009 recession caused annual sales to collapse by half.

A sharp recovery in 2010 -- aided by a government sponsored scrappage scheme -- has revived industry optimism about future Russian growth and prompted state attempts to pin down foreign players to invest and support the domestic industry.

Mortgage Reform set to benefit the Banks - a Jubilee Counter Proposal

The federal government is currently in the position to implement large scale mortgage jubilee, since it has nationalized the organizations that own all the mortgages.  Instead, they are going to modify the rules so that banks will be set for greater profits!  I guess we should not be surprised.  The bankers own the government, so of course they make rules to benefit themselves. See the story here  http://www.cnbc.com/id/41533702

 

The one thing this article doesn't account for is the fact that, absent government guarantees, the demand for housing goes down, and therefore, the price goes down along with it.    Thus, while interest rates go up, real estate costs actually go down, if government stops subsidizing its purchase. 

 

Cheaper real estate benefits everyone!  Well, except the parasitic bankers who reap more interest payments on higher-value purchases.   If you have less or no rent/mortgage payment, you have more money to spend in the real economy for goods and services.  Our entire concept of mortgaging residential property needs to change.  The whole system is set up to keep people on a perpetual treadmill of debt enslavement. 

 

That is the secret reason why real estate is not being allowed to reach its natural equilibrium level, much lower than today.  Expensive real estate overwhelmingly benefits the parasitic banking class.  The last thing they want is for people to be able to buy land without mortgages.   How can the parasites suck their blood if people don't always have to finance everything? 

 

A good example of a deceptive program that is supposed to benefit the people but really benefits the parasites is the mortgage interest deduction.  It benefits banks to have people take out bigger mortgages!  The government subsidy in effect goes straight to the bank, in the form of higher purchase costs.  The tax payer is just a pass-through vehicle.

 

Of course, the interest deduction doesn't even kick in until you buy a high value house.  For someone with an affordable mortgage, the standard personal deduction is greater than the mortgage interest deduction.  In other words, the mortgage interest deduction disproportionately benefits the wealthy, with a sliding scale of more benefit the wealthier you are!

 

A mortgage itself is one of the biggest scams in history!  A typical mortgage pays the bank twice as much in interest as the amount of the original purchase price.   What a scam, huh?   And god forbid you have a downturn in your ability to pay... in the next 30 YEARS of your life....  because then they get the whole property back totally free and can "sell" it again, without having to pay you back a cent that you'd been putting in all those years!    95% of your payments in those first few years goes to interest payments...  95% interest sounds like illegal usury to me!    At least it was before the bankers got the anti-usury laws thrown out...

 

 

Non-Exploitative Housing Policy Makes Us All Richer:  Interest-Free Mortgages

 

The government, as representative of the people, should make their housing policy benefit the people, not the parasite classes. The right to exist on this earth without paying for the privilege is what separates free men from serfs.  Unfortunately, our government works continually for our enslavement, having been taken over by the parasite classes.       

 

Imagine you didn't have to pay interest payments on your house...   100K house, paying 1k a month... You would pay the thing off in 8.3 years!      If you wanted to pay off that same 100k house in the same 8.3 year period, under a mortgage of 10%, you would have to pay over $1,480 a month!  Even under a 5% mortgage, you would have to pay over $1,225 a month to pay it off in that period.  If you only had $1,000 a month to spend, you would end up paying it over 18 years under a 10% mortgage!    In other word, the bank would skim tens of thousands of dollars off of you. 

 

Here's the big mind-blowing question of the day: why doesn't government simply provide interest-free mortgages?    Would the country come crashing down if people weren't spending huge amounts of their earned cash on interest payments???  The same free market in housing would still apply, you could still only buy the house you could afford, you could still lose it if you didn't make payments... What would change???  Nothing! Except the parasites would be shut out of the equation!    People who sit around, doing nothing to improve the world or make anyone's life better, just pushing papers around, skimming off the hard work of others... in other words, economic parasites! 

 

Please tell me one reason why the government doesn't simply issue interest free mortgages???   Along with leaving you more money to spend on the real economy, the best thing about interest-free mortgages is that THEY WOULD KILL THE PARASITES!!!   Not being able to sit around and skim money off other people's accounts, they would actually have to go out and produce something!    Rather than being parasites, being forced to provide some good or service, they would be contributing to the common good, increasing our wealth, making our lives better!     Banking parasitism is not only a drain in and of itself, it is a huge lost opportunity cost.  Supporting parasites make us all poorer!

 

Other reforms are possible as well, such as a policy of keeping land costs low.  Land ownership statutes could include preventing land ownership concentration, or perhaps providing for homestead ownership as a right of citizenship, maybe actual land giveaways.   If the government represented the people, these are the types of reforms we'd be talking about, not more policies that serve the parasitic banks.   

 

 

 

 

 

 

Corporate Loyalty to the Global Market, not the U.S.

Charles Hugh Smith presents an excellent analysis of why the U.S. middle class is being destroyed, at his website here: http://www.oftwominds.com/blogfeb11/corp-jobs-02-11.html

 

 

In a nutshell, corporate profits are now increasingly from overseas consumers, almost half of all revenues.  Due to the logic of corporations, being abstract entities whose sole purpose is to deliver profits to shareholders, they have no loyalty to America.   

 

Yet, amazingly, they are allowed to make contributions to political candidates.  In fact, they have come to dominate the political process, hijacking the national parties so that the government essentially becomes captive to their globalizing agenda. 

 

As Smith puts it:

 

The erosion of the American middle class is of little concern for one simple reason: it no longer matters much on the global stage. All that Global Corporate America needs from America is a stable foundation that won't offer up any surprises or spots of bother.

 

Policy Reforms Needed

 

Obviously, corporations should not be allowed to make campaign contributions.  This is a basic no-brainer.  Only U.S. citizens should be allowed to make campaign contributions.  Corporations, which by definition, have no loyalty to the U.S. should not be influencing its economic policy.

 

Corporations should also be taxed differently.  A sliding scale of taxation should apply based on the percentage of U.S. domestic workers.  Perhaps the percentage of revenues from foreign sources should also be taxed at a higher rate.  

 

Our tax policy should reward domestic businesses, and handicap corporations that offshore jobs. 

 

There seems to be little hope of reform at this point, as economic elites have utterly hijacked the political process.  As Smith points out, the irony is that increasingly, it is international profits which allow global corporations to exert greater influence on domestic policy:

 

The concern for domestic jobs is mere political expediency. U.S. corporations are pulling $500 billion in profits from non-U.S. sales, and they hold $1 trillion in stashed overseas profits in various tax havens. All the growth in their revenues and profits are coming from non-U.S. sources. Spending $3-$5 billion on lobbying and campaign contributions is an "investment" with extremely high returns: for that small sum, U.S.-based global corporations make sure the U.S. government and citizenry don't become overly burdensome or obstructive.

 

Something needs to be done, and it needs to be done now.   We are in desperate needs of a people's political uprising to challenge the unholy alliance that has hijacked our political process.  Unless people start to organize in their own self interest, we will continue to get more of what we are getting: the cancerous growth of poverty.   

Fed Changes Rules to Prevent its own Losses

It is quite amazing how the financial elite rigs the game.  "Heads I win, Tails you lose" kind-of-thing.  Facing mounting catastrophic losses on its capital balance, the Fed simply changes the rules to book the losses elsewhere. 

 

"Elsewhere" is, of course, on the public, meaning, me and you.  Yup, the Fed Reserve, a private entity, representing mainly foreign banks, with complete immunity to public inspection or control, gets to transfer its losses to the American government's balance sheet.    

 

The circle is complete.  Profits are kept private, while losses are made public.  The government is now officially a financial subsidiary to the banks, the final absolute guarantor of assured profits.   Remarkable, really. 

 

 

http://www.cnbc.com/id/41198789

 

Accounting Tweak Could Save Fed From Losses

 

"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.

End the Fed - Save the Economy - Support Kucinich HR6550

Kucinich's End the Fed bill is causing the parasitic banking class and its media apologists to erupt in fits, because, plainly stated, the bill would drive a stake through their blood-sucking hearts. The bill is based on a cogent diagnosis of our current economic problems, and offers a brilliant solution that would positively revolutionize our national finances and government, reviving our national economy and improving our lives. As an opponent of elite financial power and an advocate for citizen rights and quality of life, I strongly support this bill.

The bill's two most important effects, that strike most directly at the heart of the financial elite's unjust powers:

a) The end of fractional reserve banking
b) The end of the national debt

The bill's two most important effects, that would result in a positive return for the average citizen:

c) The funding of full employment
d) The funding of infrastructure modernization


A) End of Fractional Reserve Banking - the source of financial elite power

Imagine your family is in financial trouble, and you have $100 cash in your wallet. So, you write a check for $500 to your mom, a check for $300 to your brother, and a check for $200 to your sister, and on top of that, you get to keep the $100 untouched in your wallet.

Of course, this would be an illegal fraud, UNLESS you are a bank, in which case it is called "fractional reserve lending with a 10% reserve ratio". In other words, under the 10% reserve ratio, you get to create $1000 in loans based on your $100 of cash. With a lower "reserve ratio", you could create more loans on top of your cash reserve.

That would be a pretty cool power, wouldn't it? The ability to create money at will, and charge interest on it, without actually loaning out your own cash. That's right! You even get to charge interest on the money you lend out, even though you never had the money to begin with! This is how banks create money, and thereby, create financial bubbles/bust and inflation/deflation cycles.

Kucinch's bill would end this ridiculous, illegal, and unjust abuse, which is the heart and soul of the power and influence of the financial establishment.

B) The end of the national debt - a yoke of perpetual slavery laid on the neck of the taxpaying public

Think about it: the ability to create a money supply is a sovereign power, meaning, the government does it. Since the government creates the supply of money, why would it need to borrow it? If you could literally create money, you would never need to borrow it, right? Why would you borrow money from someone else, and pay them back with interest, when you could create the money for yourself? It doesn't even make sense! The idea of a national debt is a repudiation of governmental sovereignty.

It is like a tribute payment, a tithe to the banking establishment. It's a line item in every budget that goes directly towards banking profits. It is nothing less than a government subsidy for the banking establishment.

Kucinich's bill would end this outrageous, immoral, and illogical exploitation of the tax-paying public.

C) The funding of full employment - bailing out the worker instead of the banks

The whole reason behind TARP and the other bank bailouts of the last 2 years was to avoid an economic collapse. But the collapse happened anyway, because the banks never "loaned" the money back to the public. Despite receiving interest free money from the government, credit cards continue to charge over 20%, small business loans have dried up, capital financing is limited, loans for the housing market have been heavily restricted, and thus, the economy has contracted leading to perpetually high unemployment.

Instead of bailing out banks, and hoping they loan the money back to the public to get the economy going, why not skip the middle man, and directly pay the public? This is called the funding of full employment. Lots of people need jobs, and there is lots of work to be done, so why not just pay those people directly to do the work?

Some libertarians object to the idea of expanding governmental scope like that, but let's think about the alternatives: government-administered overhead, or banking-administered overhead. It is one or the other, there is no escaping the "inefficiencies" or the "external controls" or "restrictions on freedoms". The way I see it, we either bow to the power of the financial elite-controlled banking establishment, or we use government to reign in their power and be a vehicle to advance the general good.

The idea that there is a "free market" is a total joke, a complete fiction, really. The parasite banking class has completely perverted our rules and laws to their own benefit. Kucinich's bill would seek to fight back and regain our real freedom from the financial oligarchy that currently rules.

D) The funding of infrastructure improvement - modernizing America

Why is China setting records for next-gen bullet trains and laying thousands of miles of new highways, while we are slashing budgets and can't even afford to repair our broken down streets, bridges, water lines, electrical grid, and so on? The answer is keyed to the money supply: we are suffocating from lack of money. We have millions of people able and willing to work, and millions of things which need to be done. A government jobs program is just the trick to meet those needs.

The alternative is what, borrow money to meet spending needs, under increasingly high interest rates? Think about it: either the government creates the money, or private banks create the money through fractional reserve banking!

The fear of hyperinflation is misguided. Either the money gets created to get the work done, or people continue to stay unemployed, and our infrastructure continues to crumble. The only question is: who creates the money. No one is going to print out worthless paper money under Kucinich's bill.

Money would be created only to finance work, which would "spend money into existence". This would lead to a stable money supply, with slight growth as a built-in feature. This is exactly what the Fed Reserve claims to attempt, and completely failed to deliver!

Which is better for a stable and healthy economy: debt-based money created by private banks to their personal enrichment, or a permanent no-interest no-debt money supply maintained by government according to popular will?

Creating the money through government program at least offers the possibility of pubic input, while avoiding the exploitation and injustice of usury. Allowing the parasitic banking elite to continue their control of our money supply simply guarantees more misery and exploitation, as the rich would continue to get richer.

Study the full text of Kucinch's proposal here, and please, help spread the word: http://kucinich.house.gov/UploadedFiles/NEED_ACT.pdf

China demonstrating use of key method in modern Jubilee - raising reserve requirements

The modern Jubilee method is for the government to pay off all debts using electronic checks. Inflation due to oversupply of money would be prevented by raising banking reserve requirements. Thus, all debts would be cancelled, without violating any contracts or causing inflation.

This week, China is demonstrating the technique of raising the reserve requirements to stem inflation. Most Americans are not familiar with this technique, because the Fed uses open market operations and interest rate adjustments to attempt to manipuate the money supply. These Fed methods are indirect methods, and used mainly because they involve huge financial transactions which enrich the Federal Reserve member banks who conduct those operations.

The Chinese method is direct, and doesn't enrich anyone. The Chinese government is not controlled by the bankers, but rather, the government controls the bankers, so they use the superior method for controlling inflation, not the superior method for enriching the bankers.

http://news.yahoo.com/s/ap/us_wall_street

Quantitative Easing Explained

Off-shoring Jobs is Official Federal Policy

It is really almost beyond belief. But, nonetheless true. Even in the midsts of a horrible economic depression, it is still the official U.S. governmental policy to reward companies for off-shoring jobs.

Not just be neutral about it. But to REWARD them.

"...a bill that would have ended certain tax credits and deferrals to companies expanding or moving overseas was voted down in the Senate last week." (from the LA Times, here, the very last sentence in the article)

This is the danger of handing government over to the money powers. The money powers then use government to advance their own interests, over those of the people.

It also speaks to the dangers of the handing the voice of the media over to the money powers. They will not bring these issues up to the public consciousness, and will, in fact, suppress any discussion of them.

Read the whole Times article. The pace of off-shoring, even in the midst of this depression, continues to increase. It is an economic truism that without a job, you have nothing to trade; i.e., productive jobs are the foundation of economic activity.

Thus, on the immediate horizon: long stagflation, meaning rising inflation along with shrinking wages and fewer jobs. In other words, we continue to get poorer and poorer.

And this is the official governmental policy.

That is all.

David Knox Barker Recommends Jubilee Cycle

Boxer has a nice consideration of the macro-economic effects of Jubilee (here). He correctly points out that a regular Jubilee cycle would eliminate the long wave Depression cycle, by preventing a toxic build up of debt. As he puts it:

"The Jubilee law was actually crafted astutely to prevent the buildup of excessive debt levels in the economy, and not primarily to justify its cancellation. Debts were only forgiven if banks violated the Jubilee law that prevented the buildup of excessive debt. The Jubilee was not a bank bailout or stick taxpayers with others bad debts. Consider the passage from Leviticus 25: 8-19. This ancient text provides remarkable insight into the current global financial crisis, which is at its heart a global debt crisis."

Barker rightly condemns any attempt to transfer the debts of some, such as mortgage owners, onto the public purse, as some form of dishonest debt forgiveness program.

A Jubilee Year, correctly done today by the federal government, would not violate any contracts, because it would pay all debts in full. The federal government would simply write checks on behalf of private citizens to pay off their debts.

The creditors would be paid, the contracts would be honored, and the end result would be the cancellation of all debt, the resetting of the financial system, and the freeing of the productive economy. As Barker describes the renewal process: "The only way to address a debt problem is to reduce the amount of outstanding debt and create conditions for a booming economy and new long wave spring season..."

How Hyperinflation Happens

Excellent article written by Gonzalo Lira, here, about how hyperinflation happens. His key point: hyperinflation is not to be confused with inflation, although most people think hyperinflation is just a case of normal inflation on steroids.

--Normal inflation happens because of growing demand, and growing credit, driving prices up.
--Hyperinflation happens because the currency is collapsing.

People commonly confuse the cause with the effect in economic events.

Like a) the common idea of blaming the Great Depression on protectionism. In fact, protectionism was a response to the Great Depression.

Or like b) blaming the German printing press for causing their hyperinflation of the early 1920s. In fact, the German money was collapsing in value, which led the government to print more money to help people cope with having less wealth. The political impetus to follow this line of action is almost irresistable, and we shouldn't be surprised to see our own government do the same thing.

In short, hyperinflation happens because money-holders start selling dollars to buy other commodities. The result is that the dollar collapses in value, while the cost of all goods shoots up quickly.

Although he doesn't talk about it in his article, I would point out that America is especially vulnerable to this type of inflation because we don't make any of our own goods anymore. Because all of our consumer goods are made in foreign countries, a sell-off on the dollar means that not just commodities, but also all consumer goods, will shoot up in price.

Note that this event would not necessarily be drawn out with dramatic scenes of barrels of paper money being exchanged for bread. That would only happen if the federal government attempts to alleviate our suffering by printing and distributing paper cash. If the government starts doing that, then the hyperinflation can be dragged on, and money can gradually shoot towards infinity.

Most likely, our government will not resort to printing out piles of cash. In that case, our hyperinflation would be short and sharp. Everything would rise 300-1000% in price, and we would also be tremendously poorer, but then things would stabilize. The new normal would us simply being much poorer with a greatly devalued dollar. The world would have to find a different country to be buyer of last resort, and the dollar would lose its status as reserve currency.

Does the Fed Create Money? A Clarification

Excellent comment by Ralph Sampson, over on Ellen Brown's blog, explaining exactly what is meant by the Fed creating money.

"From my perspective Ellen explains the monetary system well but she periodically injects points of confusion. Here is an example: she says the Fed prints federal resereve notes and lends them to the banks at interest and the banks in turn lend them to us. This is sort of true but not really.

The Fed creates some paper currencey (Federal Resereve Notes) but that is a small part of the money created by the banking system. (Even that is not true. The Fed orders the notes from the mint, more specifically the Burea of Printing and Ingraving, who creates them and charges the Fed for the service.)

The main concept is that the Fed authorizes, and sometimes creates, reserves that the member banks then use as an insurance pool to back the bookentry loans (making money out of thin air) they in turn make to legal entities which are made up of individuals and non flesh-and blood-legal entities.

To just casually say the Fed prints federal reserve notes which it lends is the principal paradigm of the monetary system is, again, just not true and confuses the readers trying to understand that system.

Most of the circulating money is credit, not currency and coin, where credit is the term for purchasing power in the form of entries in a financial journal that, these days, takes the form of computer bits in a digital memory somewhere."

Steve Keen Calls for Debt Cancellation, or Does He???

Steve recognizes the solution to our debt-deflation-depression is to cancel debt. However, he seems to dispair that the politicians lack the will to do it.

Darn it, Steve, grow a backbone! Instead of fatalistically resigning yourself to defeat, ADVOCATE FOR CHANGE. Use your prestige and popularity to initiate the process of systematic debt cancellation.

This apathy is soul-death, it disgusts me. If even the man who has identified and quantified the problem, who has built up a world-wide following pointing out that DEBT IS THE PROBLEM, simply lowers his head and licks his own balls rather than speaking out for the positive solution, good lord, what hope is there.

It is clearly not a failure of intelligence on Keen's part. It is nothing short than a failure of COURAGE. The choice is plain: Be a ball-licking dog dragging your head in the dirt, whipped and whining... or stand up to our banking overlords and DEMAND FREEDOM from their debt enslavement trap. Which is it, Steve???

From the latest article over at Steve's blog, http://www.debtdeflation.com/blogs/2010/07/07/naked-capitalism-and-my-scary-minsky-model/:

The motive force driving the crash is the ratio of debt to GDP–a key feature of the real world that the mainstream economists who dominate the world’s academic university departments, Central Banks and Treasuries ignore. In the model, as in the real world, this ratio rises in a boom as businesses take on debt to finance investment and speculation, and then falls in a slump when things don’t work out in line with the euphoric expectations that developed during the boom. Cash flows during the slump don’t allow borrowers to reduce the debt to GDP ratio to the pre-boom level, but the period of relative stability after the crisis leads to expectations–and debt–taking off once more.

Ultimately, such an extreme level of debt is accumulated that debt servicing exceeds available cash flows, and a permanent slump ensues–a Depression.

Its final stage emphasises a message that Michael Hudson, one of the very few others to see this crisis coming, puts very simply: “Debts that can’t be repaid, won’t be repaid”. As Americans now seem to be realising, the financial crisis has not gone away, because the debt that caused it is still there.

Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt–either directly by abolishing large slabs of it, or indirectly by inflating it away. I have very little confidence in the ability of the Federal Reserve to do the latter, while the former will take a level of political fortitude that is far beyond our current politicians.

Preserving our Way of Life with a New Economic Policy

Jim brings up a great question over at his Great Depression blog. In the international race to the bottom in wages, can we do anything, or are we doomed to economic collapse as cheap-labor countries wipe us out? Here my thoughts on a rational economic policy in our globalized world.

Part of our high pay rate is definitely our social net. From environmental protections to health care costs to retirement benefits, our entire government-based social services safety net, in fact our entire quality of life, is build on the bedrock of our wages.

Because our entire quality of life, and the government itself is build on it, clearly, gov't policy should be to preserve our high wage jobs. But how to do so in a world of global capital flows and international communication as the basis of the information economy? We are no longer in the 1930's, so tarriff walls against imported products, while an important step, will not be sufficient

We need a new concept: call it a "foreign labor tarriff". Meaning, a company's percentage of foreign workers would determine its tax treatment. It is no longer enough to worry about imported goods. We also have to combat outsourincing in "knowledge work" service field, such as medicine, information technology, accounting, and education.

Companies whose path to larger profit lines is along the road of wage arbitrage need to be stimied. Wage arbitrage by global companies has one end result: greater concentration of profits for the parasitic global investment class, at the expense of the deteriorating American quality of life and impoverished American working class.

It is a basic economic law: you have to be a producer before you can enter the market as a consumer. If you aren't producing something, you have no basis of wealth to enter into an economic transaction. In short, JOBS HAVE TO COME FIRST.

This is common sense. Who exactly is distributing the crazy pills? Until our gov't forumates an economic policy that is based on preserving our quality of life, we will continue to get poorer and poorer.

Damon Vrabel on Nationalizing the Federal Reserve

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)

Central Banks as a Branch of Government

As we learn from an early age, our Founding Fathers designed a system of checks and balances designed to safeguard liberty. From our contemporary vantage point, we can pinpoint a number of weaknesses and outright failures of their system.

One major failure was their failure to anticipate the rise of the supremacy of the judicial branch. The Founders were heir to a centuries-long political and military struggle that firmly established the Supremacy of the Commons, meaning the ultimate authority of the representative body of the common people. Today, the unelected, unaccountable, and permanently seated judges routinely throw out laws, as well as directly supervising legislatures and executives with various judicial orders. Were a new Constitution written today, the friends of liberty would need to reign in judicial power to prevent our current situation of Judicial Supremacy.

A good analogy for the power of the contemporary Judicial Branch is the medieval power of the House of Lords. The Lords were unelected and immune from popular censure, yet all laws had to be approved by them before they could be implemented. The commoners were simply petitioners to the Lords, they could do nothing without their approval. Such is our status vis a vis the judges today.

The other major failure of the Founders was their failure to anticipate the rise of the power of the banking class. Although the Founders failed to adequately limit the power of the judiciary, at least it was conceived as a branch of government that needed to be balanced. As we can see today, the Banking Branch is a real wing of power, exemplified in the Federal Reserve Banking system.

Unfortunately, their failure to limit its power has allowed the Banking Branch to grow into a "shadow government" that essentially controls the outlines of the entire political process, but without any checks or balances on its power. Central Banking policies are set and implimented with almost complete autonomy from oversight, even indirect oversight. They operate in almost total secrecy, with total immunity to any policy input or control.

Perhaps a good analogy for the power of the contemporary Banking Branch is the medieval power of the Church. The Church stood as a nominally separate power, yet was a repository of tremendous wealth and power. The siphoned a regular percentage of the people's money to themselves, enabling them to live in luxury as parasites on the working class. They had their own parallel power structure and hierarchy, which was internationalist in perspective, though they often interfered in the affairs of state. They invariably sided with the nobility and kings to preserve the status quo against commoner attempts at reform and empowerment.

Just as medieval commoners were forced to contribute their tithe to the church through forced taxation, we are forced to contribute our wealth to the Branking Branch through interest payments on perpetually floating debts. Popular government is an expression of the people's will, how could it possibly require "extra" financing? The concept is abhorrent, as well as abberant to a free-thinking mind that hasn't been brainwashed by the Banking Powers.

Creation of money and credit is a sovereign power, as has been recognized since the founding of the first central banks. As that renown scholar of banking history George Selgin demonstrates (http://www.independent.org/pdf/tir/tir_14_04_01_selgin.pdf), central banks have one purpose: the nationalization of credit and money creation for the advantage of the central government. Long gone, destoyed by the inauguration of central banks, is that superstitious era when men believed national wealth was measured by its stock of precious metal.

When used for the public welfare, such monetary power is a great blessing. When used to enrich the private interests of the Banching Class, such power is a curse, nothing short of a yoke of perpetual servitude chained around the common neck. The power to create and extinguish money is perhaps the greatest of all governmental powers, providing government almost unlimited power and influence.

If we were to design a Constitution again today, we would certainly need to specify and limit in greater detail the powers of the Banking Branch. Reformers now and in the future will find this a more daunting task, as their powers have been allowed to grow some pervasive and entrenched.

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?"

Food Prices Spiking

Hmm, the beginnings of the inflation tsunami everyone has been expecting? Delivered in the usual high style of the inesteemable Mogambo Guru:


http://dailyreckoning.com/food-price-inflation-to-spur-zombie-takeover/


“US food prices jumped by 2.4 percent in March 2010 in the largest monthly leap in more than 26 years, and the sixth consecutive monthly increase.” Yikes! A 2.4% monthly leap! That’s a 28% annualized increase in the price of food! In One Freaking Year (OFY)! Yikes!


So I say to her, as I am sweeping by her on my way to the MBOPS and trying to keep a tone of incredulousness out of my voice, “Do you realize that the National Inflation Association says that fresh and dry vegetables are up 56.1% in price in the last year? How about that fresh fruits and melons are up 28.8% in price in that selfsame last year? How about eggs ‘for fresh use’ being up 33.6%, or beef and veal up 10.7%, or dairy products being up 9.7%? Does any of this inflationary horror mean anything to you?”

Necessary Regulations, Now and Forever

Here is a great summary of financial regular we need, What we are getting, of course, is just about the opposite. Great article overall, read it all by following the link.



If Congress really wanted reform, they would
--reinstate Glass-Steagall,
--regulate the OTC derivatives market,
--thoroughly audit and terminate the Fed while transferring its powers to the Treasury Department,
--terminate and disband the PPT,
--implement the "Volcker rule" against proprietary trading by banks,
--require that the FASB (Financial Accounting Standards Board) enforce mark to market rules for financial reporting,
--stop all black box front-running trading activities,
--fire and investigate for fraud and obstruction of justice virtually all of the regulatory heads who fiddled and watched porn while Rome burned,
--expand the funding and manpower available to all regulatory authorities,
--encourage the state regulatory agencies to intervene wherever and whenever they desire,
--insist on thorough policing of the system with full accountability for regulatory failure,
--thoroughly investigate and punish all past financial crimes, with plenty of jail time and humongous fines to be doled out to provide a deterrent against future criminality.
--And most of all, require full accountability for losses without so much as another dime going to bail out financial criminal fraudsters.

http://www.theinternationalforecaster.com/International_Forecaster_Weekly/The_Morality_Of_The_Financial_Monetary_System_Is_Really_What_is_Broken

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?

Analysis of potential Idaho Silver Currency

Fascinating happenings in Idaho related to currency reform and local currency. A bill was killed in Senate committee that would have created a silver coin for Idaho that could trade as money. The currency was potentially the real deal in alternative currencies, and met all the requirements that trade tokens require to be considered legitimate and widely used as money.

As I have detailed before, the most important thing about a local currency is that its use should be tied to the health of the local economy, a fact explicitly recognized by the crafters of this money, as the silver mining to create the coins would help the Idaho economy.

The coins have been christened Idaho Gems. Interestingly, the bill will also allow the state treasurer to hedge its silver position in the financial markets. It also defines all state and local taxes as payable in this coin.

According to the bill, the state will sell the one ounce coins at the daily spot price for the one ounce American Eagle. The treasurer will also accept the coins for payment at the daily spot price. The bill guards against too much state loss by allowing the treasurer to suspend acquisition if the daily market price falls below the cost of minting. According to the bill, the state will issue silver as payment to any vendor who requests it.

Unfortunately, the bill appears to have died in a Senate committee:
http://www.examiner.com/x-16226-Boise-Economic-Policy-Examiner~y2010m3d24-Harts-Silver-Gem-Act-fails-in-Senate-committee


Alternative money needs to have a buyer of last resort, to guarantee its acceptance as general currency. The problem facing alternative currencies in general is, nobody wants to hold a currency if it is a burden to find someone who accepts it. However, if the state of Idaho accepts the medalions as payment for taxes, that would exactly fit the requirement as a surefire buyer of last resort.

The monetary value of the issue of the coins, at least at first, would be limited by the size of the Idaho budget. Anything beyond that would run the risk of non-redeemability. Especially in the early stages of an alternative currency, it is important to create the expectation of full redeemability, so that people become confident using the new coins. If redeemability became an issue, people would be hesitant to accept the coinage, and it would become little more than a gimmick or collector's item.

After a general confidence in the redeemability of the coins has been established, under the condition of wide circulation and usage in general commerce, the state could produce a excess of coins beyond the limit of the state's financial budget.

The state also faces the potential problem of seasonal deflation, as coins are removed from circulation to pay taxes. Encouraging general circulation and usage in non-tax-related commerce, would allow the state to mint enough coins so that the seasonal redemption would be less noticable.

The ultimate way for the state to overcome the issue of seasonality and limited usage would be for the state to not only take the coins as payment, but also distribute the coins as income, starting with its own state workers and welfare recipients. Afterall, the state's tax receipts exactly match the states outgoing payments. If the state agrees to receive the coins in payment, it has to have a method for redistributing them. Without a regular channel of distribution, the coins again fall into the gimmick/collector item category.

From the wording of the bill, the focus seems to be on silver money as a store of wealth.

And, as always with a commodity-based money, the state would have to be concerned with the value of the underlying commodity. If silver, as a metal, rises in price relative to the US dollar, the silver coins would be hoarded if they are fixed against the dollar.

So, the legislature is in a bit of a bind. In order to issue the money to its own workers, the coins would have to be exchangable for US dollars. If that exchange rate is fixed, hoarding could quickly become a problem. Especially given the problem of the rapidly inflating US dollar, the value of silver can be reasonably expected to rise, dragging the value of the coins up with it.

Lets say the coins are issued on par with dollars. The following year, the dollar inflates by 10%, but the silver coins remain stable. 100 coins originally bought the same as 100 dollars, but now 100 dollars only buys 90 coins. Which would you rather be paid in?

The coins! Think of the converse side: 100 coins now buy 110 dollars. Holding or being paid in coins means you are getting richer in dollars. This would actually increase the value of the coins, exactly as the Idaho legislature hoped, spurring their demand and thereby stimulating the Idaho silver economy. In order to meet the demad, and discourage hoarding, the state could prudently issue more coins.

In short, against the background of an inflating dollar, doing business in Idaho silver gems would naturally increase your own wealth. But this would only work if the silver coin was not fixed versus the dollar. If the Idaho legislature had the discipline to not inflate their supply, the demand would remain strong for their silver coins.

Notice that under these conditions, people would stop paying their taxes in silver coins, preferring to pay them in depreciating dollars.

Of course, if the price of silver fell, the conditions would reverse, and the state would see its monetary position wiped out. Under conditions of falling silver, people would flee the silver coins, as they'd be worth less and less relative to dollars. Citizens would pay their taxes only in the increasingly worthless silver.

The state, as a governmental agency, is thus put in a double bind. No matter which way the currency is going, by giving the citizens a choice in payment, the state will always be paid in the worse currency.

This is the whole point of legal tender laws and capital control laws. Without those expedients, the citizens will always work to make the state the loser in currency arbitrage. With legal tender and capital controls, the state can foist the currency costs off on its beholden citizens.




http://www.silverbearcafe.com/private/03.10/medallion.html

With only one state representative dissenting, the Idaho House State Affairs committee voted on Monday to endorse HB 633, a bill that would allow Idaho citizens to pay their state taxes with an official state silver medallion.

The news comes just a month after a South Carolina legislator introduced a bill seeking to ban Federal currency altogether, and replace the upstart greenback with gold or silver coins. A half-dozen other states have considered similar legislation, reports the Tenth Amendment Center. But there's a key difference between the Idaho plan and the bills proposed in other states, most of which fall somewhere on a spectrum ranging from Tea Party rage to Ron Paul goldbug-ism. (The South Carolina bill, for example, claims that "the State is experiencing an economic crisis of severe magnitude caused in large part by the unconstitutional substitution of Federal Reserve Notes for silver and gold coin as legal tender in this State.")

In contrast, the sponsor of the Idaho bill, Republican Phil Hart, seems to be marshalling wide support by crafting legislation that is straight out industrial policy aimed at boosting Idaho's silver industry. The text of the bill is quite clear.

The intent of this act is to use the abundant silver resources of the state of Idaho to create a means whereby the people of Idaho can pay their taxes to the state using silver mined from the ground of Idaho, processed in Idaho and finally minted into a medallion in Idaho. It is the intent of the Legislature to create mining jobs in Idaho while giving the people of Idaho a means to store their wealth in a precious metal that is immune from the effects of inflation while complying with the mandates of our federal Constitution.

The Idaho bill therefore incorporates tax incentives for silver processors located in Idaho.

From The Idaho Reporter:

That, Hart believes, could bring hundreds, if not thousands of jobs to the state. In conjunction with the creation of the medallion, Hart's bill would also try to lure silver processing companies to Idaho, and in particular, north Idaho, which, according to Hart, was once called "the silver capital of the world." The bill would give companies that come to Idaho to process silver for the medallion a 10-year exemption from income taxes, as well as property taxes. The exemption would be open for 20 years and would sunset after that period of time.

Hart believes one of the advantages of silver is that it would resist inflationary pressure better than paper money. But since states aren't allowed to mint their own money, the value of the silver medallion will have to fluctuate according to market forces. In just the last ten years, the value of an ounce of silver has zig-zagged between four and twenty dollars.

Gold, the Dollar, and the Hidden Inflation Right Before Your Eyes

So, gold popped above USD1200 today, the first time in quite awhile. The last time it did so, it was seesawing with a falling dollar, sliding to 77 at that time.

Today, amazingly, dollar is holding strong, rising in the 84 range, and gold is rising anyway.

Basically, we are witnessing the drop of all currencies together, relative to gold, in other words, worldwide inflation.

The USD/FRN is rising relative to the crashing Euro, but it is still falling in an absolute sense.

Inflation is all around us. On the radio just two days ago I heard how airfare is over 30% higher than a year ago. Some for the price of gold, and the price of gas. If obvious measures like gold, gas, and airfare are up over 30-40% in one year, how do they expect us to believe inflation is flat. And the price of food such as bread lately? Good lord.

As I have endeavored to show in articles on this blog, economics is really common sense, and you should never be afraid to believe your own eyes.

The History of Free Banking and Alternative Currencies

The academic study of the history of free banking and the contemporary practice of alternative currencies are strongly related. It seems clear to me that the contemporary monetary reform movement should be based upon lessons of monetary history, but such a connection rarely seems to take place. Perhaps because monetary history is so obscure, and monetary theory so confusing?

A wonderful interview was recently published by the Daily Bell (http://www.thedailybell.com/975/George-Selgin-Austrian-Finance-Central-Banks-Free-Banking.html), with an academic expert on the history of free banking, George Selgin.

One important takeaway: Dr. Selgin drives another nail in the coffin of the "100% non-fractional gold reserve" argument. He appears to conclusively demonstrate through the historical record that free market conditions will not result in a 100% gold standard. As I have argued before, we have moved onward, never to return to a gold standard, because our monetary theory has simply advanced to far. The idea of non-fractional gold as the only legitimate form of money is excessively retrograde, IMHO.

Another important takeaway is the limitations of viewing pre-Civil War America as a true example of free banking. In that era, bank charters often contained onerous provisions related to capital requirements. As I have detailed elsewhere, any asset can be monetized, which is to say, used as collateral to create a money supply. In the Wildcat Banking Era (as in most eras), land and government debt were the primary collateral monetized by regional banks.

In Dr. Selgin's view, as I interpret it, it was the instability of land speculation in that boom-bust pioneer era which caused the instability of those banks, not anything inherent in the institution of free banking itself. In effect, our most popular idea of why Free Banks were a failure, is simply wrong.

A third important takeaway is the history of free banking in early modern Scotland. Monetary reform advocates have over a century of history to plumb in their search for workable alternative monetary solutions. I look forward to researching more into this era myself, particularly with an eye towards how the Scottish Free Banking system was related to the real bills system and the gold standard system of the same era.