I forgot to post my video on my own blog!
I’m launching a new video series to dig into the details of the monetary system. There is WAY too much disinformation out there that’s going to have us going down the wrong path as we try to reform the system.
The issue is WHO controls the system, not WHAT backs it.
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Another awesome lesson. I remember balance sheets in Accounting 101 but the description that there are privately owned capital owners who actually created the banking system is priceless. We are so caught up on the theories and whether to keep interest rates low or high or whatever, that everyone misses the big picture. Well at least the vast majority of the people, including me. Can’t wait for lesson 2, your previous series of lessons were amazing. Thanks for keeping me awake to what’s really going on.
My Best,
Tim
I agree with you 100% that the issue is who controls the monetary system, Damon. And it seems to me that the reason that the founders insisted on gold and silver as money was to prevent the cupidity they had witnessed in Europe at the hands of the bankers with their paper money. Their warnings against the evils of banks and paper money were many and often as I’m sure you know. The whole reasoning behind the drawing up of the Constitution, which touched upon these matters along with others, was an attempt at the prevention of tyranny in all of its forms.
The problem underlying this project was summed up, I think, by either Madison or Jefferson who said, “The reason men form governments is that men are not angels. The problem is that governments are made up of men”. As Shakespeare might have said, “Aye, there’s the rub”. And indeed there is the rub. We see that man’s corrupt nature is infinitely resourcefull in its machinations. All of the best efforts of this nation’s founders were swept aside by the the would-be oligarchs and the many who were willing to serve them for personnal gain.
It has been my purpose to illuminate these issues by citing the history of the subversion of gold and silver as money. It has not been my purpose to suggest that a return to bullion as money would be any kind of a permanent fix. Indeed, the founders tried that and it was un-done in short order.
Is it possible to address the problems at hand without a radical remedy within the heart of humanity? It does not seem to me that relying on laws that take advantage of man’s frailties, such as using jealousy in connection with the division of powers, will carry the day. After all, it was Adam Smith who told us that it was seldom ,when competing interests get together in the same room, that they don’t discuss restraint of trade. It would seem that more than a change of clothes or laws is required.
What are your solutions? I think we all see the problem.
Alas it will take a monumental sea change. Damon has brilliantly illustrated the fallacies and inadequacies in this enslaving monetary system.
However, if he were to start proposing solutions he would get devoured. He would be labelled or pigein-holed. Be his proposal keynsian, austrian, or any other ism or shism, his message would be lost.
The objective is to educate as many as poossible to the existing paradigm. That really is the way to break through. I didnt get to year 11 at school, yet I had a grasp of economics beyond my peers that spent an extra 2/4 years in high school.
Ultimately the best economy is no economy. Does anyone think that in 100 years time our great-grand children will be umming & ahhing over who has the levers of control with regard to currency and debt?
Excellent explanation. It’s a destructive system. This country has an abundance of resources and it seems they are underutilized because it’s a lot easier to add digits to a balance sheet than to get our hands dirty. In the near future we may have physical needs, and the country is in no position to face that reality. I’m all in favor of ditching the current system, but as you explain, the banks have the power and control and something like a resource-based economy is counter-intuitive for those in charge.
Excellent explanation!!
Great stuff as usual. Looking forward to the follow ups. One thing you don’t explicitly state in the video are the mechanics of money entering the system, e.g. direct pumping into banks and purchases of US bonds by banks to lower interest rates.
Is the BOJ issuing money directly to merchants/corporations in their latest intervention? Would this exchange be an asset on the merchants balance sheet? I don’t know if there is a banking intermediary in this exchange?
Sidenote – You’re right that the Austrian critique of the monetary system doesn’t address “money as debt” at least in the readings I’ve come across. However, an up-and-coming Austrian, Bob Murphy has come to see the light – http://consultingbyrpm.com/blog/2010/08/is-our-money-based-on-debt.html. The Austrians are at least aware that centrally controlled money supply and interest rates don’t work and are the root cause of our ills.
thanks for the link. I’ll have to check it out because, as far as I can tell from austrians in the media, they’re about a century behind in understanding the system. heck they still claim multi-national corporations are a good thing and governments need to keep disappearing from earth!
Ouch. You may want to re-read some of their literature before passing that type of judgment as it’s much deeper than “lower taxes” and “no govt”. I actually find what you’re saying and what Austrians say pretty similar hence your Lew Rockwell appearance.
Peter Schiff and Marc Faber understand the intricacies of today’s markets pretty well with all Austrians calling for the abolition of central banking/planning/corporatism and pushing all power down to localities/individuals. Austrians also study the psychology of power/action within systems and individuals, which they call praxeology – http://www.lewrockwell.com/rothbard/rothbard38.html. It’s the basis for all their theories.
This seems to be exactly the type of solution you’re implying except you seem to believe in some form of communal-ism (I think) whereas they believe in individual freedom and contracts/private property.
Austrians and Monetarists despise corporatism. Multi-nationals aren’t inherently bad as long as they’re free to fail or trade internationally without help from govt. I’ve read some Austrian articles stating huge multi-nationals are just part of a continuum or evolution of understanding where we discover that mid-sized companies are actually most optimal and efficient for innovating and distributing wealth/goods. (There’s a German word for this concept that escapes me – Mittelstand(?).)
But yes, there is an on-going academic study about “anarchy” (in the sense of sovereign individuals w/ no govt monopoly on force) vs. minarchy (small govt) that is intriguing to those who like to fantasize about the next, next, next thing.
Regardless, all systems will implode if our spirituality and psychology don’t evolve past the God of Abraham or other sacred books.
Ranallo, I was being sarcastic about talking heads and politicians who claim to be Austrians. But after hearing Lew claim on a recent podcast that Walmart is good for the world, I’m not totally sarcastic. Just focusing on low prices rather than the bigger picture is grossly flawed. Walmart is one of the pieces of the global empire that has resulted in China owning the US. So when I heard him say that, it seemed Austrians had this odd belief that US govt can’t get involved at all in US market, but they’re fine with China owning it.
As you say their focus is private property and contracts. That’s PRECISELY the world we have where global bondholders have taken most countries private via central banks and replaced their laws with the commercial code that gives them superior contract rights to everyone else. That’s PRECISELY the justification Treasury used to steal trillions from the people to give to the bondholders/bankers…Kashkari said “we honor contract law.” The bondholders and bankers are hijacking Austrian theory to serve their ends. Schiff and Faber attack governments, thereby playing into the bankers’ spin to undermine the notion of commonwealth so they can come in with the globally privatized solution. The problem is the most senior PRIVATE capital pools.
If Austrians think the multi-national corporate empire is going to magically devolve back to mid-sized businesses, they don’t understand the power of finance and the embedded momentum toward perpetually increasing scale. This is an example of how Austrian theory sometimes seems like a childlike faith as opposed to a realistic understanding of the world we’re actually living in today.
Why do you overlook the Austrians continual and vehement REPULSION of central banking throughout its history? They’re preaching “End the Fed” and replace with a currency competition to see what’ll win out. I do see and agree with your point that the current pools of capital owners may be too strong to overcome even if the Fed goes down without govt intervention/force.
Looking forward to learning more about your near and long-term solutions.
PS – I’m NOT an officially licensed or sanctioned Austrian economist:-)
I know they oppose central banking, but they don’t understand it because they think it’s “government.” They advocate supremacy of private property and contracts. Again, that’s precisely what a central bank does…privatizes countries and replaces existing laws with contract rights for the richest people in the world. There’s a disconnect as they cheer private property, which inevitably supports the rich capital pools behind central banks because it delegitimizes the idea of governments reestablishing sovereignty.
Advocating competing currencies is another sign that they just don’t understand that freedom for the masses involves limiting the powerful. Competing currencies at this point would mean that JPM Chase would own all of us. What little entrepreneur do Austrians magically think could compete with Chase at this point? It’s a nice theoretical idea, but absurd in reality unless it involved breaking up the mega banks so they were less powerful than states just like happened to Standard Oil.
Hi Damon (and Ranallo):
Since you seem more active in the blogs I will in the future try to interact with you and the others here rather than by direct e-mail (although I did respond today by mail to your latest part 3 video). Since I consider myself “Austrian” in my outlooks I will try to at times try to more fully fill in the “Austrian” perspective but people should understand I am more a free market in “government” sort of “Austrian” along the lines of Murry Rothbard and Hans Hermann-Hoppe. (This is what some might call “anarcho-capitalist”).
I don’t think an “Austrian” would consider “debt money” as it is used today to be at all a satisfactory condition. They prefer some kind of exchange that cannot be easily gamed by fraud or counterfeiting. They would prefer that people be allowed to freely choose for themselves what they wish to choose in their value exchanges. And historically this tends to be precious metals when people are free to choose without compulsive interference from an outside force. People tend to choose what is easily mobile, difficult to fake, durable, and of recognized intrinsic value (or very highly trusted to be exchangeable by truly enforceable contracts- for something of intrinsic value). These features highlight the problem with state issued paper money (as exampled by Lincoln’s civil war “greenbacks”). If the state decides that today it will not honor redemption of the note, good luck trying to “enforce” the contract on them or gain timely restitution, the flaw being the that “state” had a monopoly on adjudication and enforcement. After much time and expense those who challenged the state for adjudication in the Supreme Court lost as the Courts will usually side with the state even when the issue is obvious breach of contract which is what their legal tender rulings after the civil war amounted to (or to put it plainly as the court might see it, since we are the state and we are more important than you, we can steal from you when it is really really important to us since we are the “sovereign” and we have the ultimate power to tax you anyway so this is just another way to tax you, and in order to be able to “serve” you we must survive so our survival trumps everything else, and shut up and like it cause you aren’t sovereign we are- we got more guns and we will use them cause we are the “‘law” and you aren’t).
And for those who are interested there is quite a body of anti-FED work that has been done, especially by Rothbard, as can be seen by net searches and checking mises.org. And almost every “Austrian” i respect is fiercely anti-FED.
And if one applies the principles of a true free market an “Austrian” might argue that the current phenomenon of of “multinational corporations” is dependent on the continuing granting of special favors from organized crime syndicates called “states”. And one of those many favors is favorable collusion with the central banking money powers if you are the right kind of multi-national. Other favors being barriers to entry and carefully crafted regulations that favor established firms, and the selective privileged granting of “licenses” and on and on.
In a free market anyone would be free to compete against any corporation. In general, although there are economy of scale factors that promote bigness, there are many factors that in a free market would strongly inhibit the possibility of large multi-nationals continuing to evade bankruptcy. Things like bureaucratic inefficiencies of size and slower reaction times, lack of awareness of local market conditions (and all markets have local factors based on culture/custom, and even that are unique to each individual customer and their unique set of preferences at a particular place), using older less efficient technology more obsolete than newer start up firms, the anti-social tendencies of largeness tend to alienate a certain segment of the market (I hate going to Wallmart – I hate the environment and I hate the lines and the low morale of the work force etc.), and we have not even talked about the whole idea of “limited liability” (a perk granted by the criminal state) that directly works against the principle of just restitution as adjudicated in a genuine free-market (un-owned/ non-monop0ly) system of justice or arbitration. The short answer is that businesses in general, tends to have a shorter “life span” in a genuinely free market and thus the tendency for “bigness” is mostly self-limiting. The ingredients for success in the free market are difficult to meet on a long term basis, organizations tend to eventually make mistakes. They tend to try to crib the system though “government” privileges in order to counteract these negative tenancies with insider advantages.
If you truly understand these dynamics then you will also understand why it is almost impossible to see anything like a stable monopoly in goods or services that are non-unique (an exception maybe being unique artistic works of artisans) without the assistance of the criminal state. And the reason I keep referring to the “state” as criminal is that a true free market advocate such as myself only views legitimate transactions as those based on voluntary exchange of what is justly possessed (“just” is quite exact in its meaning here), without the initiation of force or fraud, thus the “state” (when a an entity forcing exchange against the will of a just party) fails that test of legitimacy.
An excellent tutorial, as usual. Thanks.
When you get done with this series, do you have plans to explain how the secondary bond and equity markets interact with the monetary system and reinforce it? Most people look to what’s happening in the stock and bond markets to understand the health of the real economy, but they might as well watch the payouts at the roulette tables of a Las Vegas casino. In fact, I’d argue that we’ve reached a point where what is good for the stock market is bad for the real economy, that maintaining the illusion of perpetual earnings growth requires decapitalizing the U.S. economy and investing that capital abroad (the process of destroying productive capital in they U.S. is commonly and incorrectly called “offshoring jobs”).
One direct connection between the secondary stock market and the monetary system is the employee incentive stock option. Shares traded in the secondary stock market are priced based on expectations of the future cash flow of the company and do not reflect the actual book value of the company. If the company were liquidated, a shareholder would only receive his share of whatever value remained after the company paid its debts (i.e., his pro rata share of the book value), and in many cases this would be zero. Whenever an incentive stock option is exercised, money is created, but this time the accounting is done on the corporate balance sheets. The explosion of the use of incentive stock options and restricted shares over the last twenty years surely drove asset price inflation here in the SF Bay Area (e.g., “we lost our bid for the house because some dotcom millionaire paid $100k over the asking price”).
thanks Tao. I wasn’t planning those topics but I could add them.
for now I want to stick to some basics, focusing on power and balance sheet warfare. economists from every spectrum have royally screwed up the world by making the false assumption in micro that firms are just profit maximizing entities. having been in the real world, that’s about as accurate as 2+2=purple. it’s a preschool level perspective on the income statement. but it completely ignores the strategic work firms do with regard to balance sheets. that’s why no economists, even the brilliant Steve Keen who has blown economics out of the water with his debt models, seem to understand what’s really going on in the world of high finance. actually Michael Hudson gets close because he talks about feudalism and the acquisition of power.
couldn’t agree with you more on ISOs. in addition to what you mention, they’ve given a tiny clique on the west coast the incentive to participate in building the integrated global empire…the 2nd tech bubble is all about eliminating stand-alone business/consumer data so everything is in the “cloud,” controllable by the banking central planners.
@Damon,
I’ve become convinced that the failure of mainstream economics to describe reality is viewed by its founders as a feature, not a bug. Economics are, in fact, politics. Dropping the word political from “political economics” was a marketing move intended to legitimize a discipline that existed to divert attention away from the man behind the curtain, i.e., the financial speculator who drives boom-busts cycles through debt-fueled asset price inflation.
FYI — I don’t think Hudson quite gets it, either.
The real economy has become financialized to the point where the management of publicly traded companies and governments alike are convinced that they must manage their operations to simulate a financial instrument that grows perpertually. As my CEO used to say (and still does, at his new start up), if you aren’t growing, you’re dying. This attitude completely changes the basis for economic decision making in a public company (which is why I will never work for one again). A similar dynamic has arisen in government, where the perceived need to demonstrate perpetual GDP growth to the bond market led the U.S. government to exalt the FIRE sector over the productive sectors of the economy.
The net result is that both private enterprise and governments in the United States have been incentivized to work against the interests of American citizens, and most of the people in charge don’t even realize it.
I think you’re correct Tao. Econ was designed that way. But most practitioners/students don’t know that…they think they’re doing good for the world.
Damon, when Galileo offered his light to the world,those stuck in the darkness tried to dim that light but did not succeed, your light is most welcome and has reached us in Europe . Many thanks
Excellent video Damon!
By choice, not necessity, our government borrows money from the privately owned and operated Federal Reserve banking monopoly. When the Fed decides to increase the supply of money, they buy government issued bonds with money they create for free. The money is endowed with value as it is backed by the credit, people and property of the United States. If we alone back the money, why are we borrowing it?
Thomas Edison elegantly explained this conundrum:
“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good also…Both are promises to pay, but one fattens the usurers and the other helps the people. If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges…”
Congressman Wright Patman was one of the few politicians who understood and was honest about the absurdity of our nation borrowing its own money:
“When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money.
The Constitution of the United States does not give the banks the power to create money. The Constitution says that Congress shall have the power to create money, but now, under our system, we will sell bonds to commercial banks and obtain credit from those banks.
I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue. I make that statement after years of study.” – Wright Patman: excerpts from September 29, 1941, as reported in the Congressional Record of the House of Representatives (pages 7582-7583)
The truth is startling – there is no need for a national debt or for the national government to borrow what it alone has the sovereign power to create.
Larry
This website is a breath of fresh air. I was wondering if there is a book that could be said to represent the viewpoint of senior capital pools without being academic nonsense (ie. brazen in your face). What do you think of the review of this book:
http://seekingalpha.com/article/221607-making-money-in-the-21st-century-financial-darwinism-create-value-or-self-destruct-in-a-world-of-risk-by-leo-tilman
Dave, the mentality of the most elite capital holders is very different than the smaller capital holders and the operational bankers. They sit behind the scenes paying bankers to be their public front men. I don’t know of a good book on them…they don’t want exposure.
@Ranallo,
“Austrians and Monetarists despise corporatism. ”
That statement blinks reality. I’ve read Friedman, Hayek, Rothbard and Mises. I’ve studied how the Chicago and Austrian schools as currently constituted came to be, and who funded them. The fact is that Austrians and monetarists are corporatists through and through, as the corporation is the preferred means of such neoliberals for accumulating economic and political power.
The Chicago and Austrian schools of economics are, in fact, two heads of the same neoliberalism monster, which was born after WWII ended. You can read a bit about that in the extended preview of “The Road from Mont Pelerin,” which I’ve linked to below.
The Chicago school created Damon’s “monetary vortex,” which exists to claw back all of the wealth that was lost to “socialism” as a result of the Great Depression. When the vortex collapses, as any Ponzi scheme must, the Austrian school is waiting in the wings to blame the vortex on “Keynesianism” (it has already begun, in spite of the fact that Chicago monetarism has been the official policy of the U.S. and the Fed since at least 1975, when Congress issued House Concurrent Resolution 133) and insist on the abolition of central banks and the institution of “free” banking (which manifestly is not free, else they would not have had to market it as such; it simply would have been understood). Adopting the Austrian scheme will ensure that all the ill-gotten gains of the Ponzi scheme are retained by the fraudsters who perpetrated it and provide a monopoly over money that will allow its owners to create economic depressions at will. You don’t actually need a central bank to have a money monopoly. (And don’t think for a moment that the Austrian approach will end financial speculation financed through fractional reserve lending; the financial “innovators” were able to skirt reserve requirements that were adjusted in real time, and they will find it that much easier to avoid reserve requirements that never change.)
http://books.google.com/books?id=kSyzcrfecuwC&printsec=frontcover&dq=road+from+mont+pelerin&hl=en&ei=0u61TIr-DIumsQOOhfXSCA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC8Q6AEwAA#v=onepage&q=road%20from%20mont%20pelerin&f=false
Interesting interpretation. Neoliberalism? Not familiar with that term…liberal in the Thomas Jefferson/18th century sense? Or liberal in the modern central planning/civil liberties sense?
FYI – The Austrian school has its roots in Carl Menger (1871) with Mises appearing in the early 1900′s here in the US. It was almost lost down the memory hole during WWII when Hayek failed to challenge Keynes. Rothbard kept the tradition alive after Hayek until Rockwell & Co reignited it recently. Also funding for Mises Institute is NOT from the Koch Brothers.
I also think we have a misunderstanding of corporatism. To me, it means govt and business colluding to entrench favored interests at the expense of competition and consumer value. Big corporations despise Austrian theories b/c they make them continually compete and adapt without help from the tax payer, govt or military. Austrians are also proponents of 100% reserve banking standards. If you’re a monopolist, then you’re not a friend of Austrian theory.
Maybe I’m just too attached to dismantling the current monetary system AND replacing it with competing currencies. (BTW, this would entail the end of mark-to-market and all the big banks being liable for their illiquid debt on the Fed balance sheet, thus bankrupting them. Fannie and Freddie too.) Then create a sovereign govt that maximizes individual freedom, rule of law, free markets and peace. Pipe dream? Maybe.
Let’s hear some alternatives please.
Neoliberalism is a political movement created in the late 1940s by people like Milton Friedman, Hayek and Mises and funded by the likes of Rockefeller, the Volker Fund and other corporate/banking interests. Hayek’s “The Road to Serfdom” was essentially the first stake in the ground for the movement, which started out with the mission of returning to classical liberalism but minus the collectivist sentiment (i.e., concerns for the common good) they believed led inexorably to the creeping socialism they had witnessed from the end of the 19th century into the 1940s. Milton Friedman’s “Free to Choose” was originally intended as the American version of “The Road to Serfdom.”
Neoliberalism is the ideological basis for the so-called Washington Consensus, which has driven the domestic and international policies of both political parties in the U.S. since at least Reagan’s presidency, and I’d argue since Nixon.
Most people refer to the purest form of neoliberalism these days as “libertarianism,” although I’d argue that modern libertarianism has very little to do with the libertarianism of the 18th and 19th centuries. Mainstream “libertarian” sites like mises.org and lewrockwell.com are drenched in neoliberal rhetoric, although there are a lot of variations on the theme that draw from more traditional libertarian themes of civil liberties (an area in which I agree whole heartedly with people like Ron Paul).
An essential feature of neoliberalism is its “double truth” doctrine. There’s one truth for the masses, and one truth for the elites. The way to “decode” the elites’ truth from the common message found in the writings of Hayek and Friedman is to understand that the “individual” they refer to is not a human being but a corporation. The masses, of course, understand the individual to be human beings like themselves, which is what Friedman and Hayek intended.
There are a lot of things that neoliberalism stands for in theory, but neoliberalism in practice proves the asserted beliefs to be lies. It really is important to compare what neoliberals do to what they say, and the Chicago Boys’ playful romp in Pinochet’s Chile should tell you pretty much all you need to know.
There are many more things that I can say about neoliberalism, but I’d like to turn to the discussion of corporatism and the monetary system.
Big corporations do not despise Austrian economics. Why should they? The political reality is that Austrian economics can do nothing of any consequence to big corporations because the neoliberal Washington Consensus will ensure that those with the most economic power (the big corporations) will have the most political power. Once a government does what neoliberalism requires of it and lets the market decide, the decision makers become the big corporations. That’s how it works when there is no society, when there is only an aggregation of individuals each making their own choices. The Austrians’ 100% reserve lending backed by a gold standard will all but guarantee that new small businesses cannot compete with the big corporations because of the availability of credit and major differentials in interest rates. Small businesses will be forced to accept usurous rates, while the entrenched monopolies will receive highly favorable rates. (FYI — we already have examples today of how the TBTF banks receive favorable interest rates compared to the smaller banks.)
Personally, I’m for something like the sovereign/commonweatlh money advocated by Damon and Ellen Brown. Barring that, if we must stick with private money, I’d like to see (1) fractional reserve lending maintained for loans made to productive industries and perhaps consumers, (2) 100% reserve lending required for loans made to the FIRE sector and financial speculators, (3) criminalization of financial speculation funded through fractional reserve lending, and (4) the loss of limited liability for corporations involved in fractional reserve lending to financial speculators. While we’re at it, I’d require that banks forego the corporate form entirely and be operated as partnerships, and while I’m fine with the corporate form, for industries that are vital to the self-sufficiency of the country, I would not allow them to have their shares publicly traded on the secondary equity markets, which provide the FIRE sector a means of controlling the real economy.
To deal with collusion between government and entrenched interests, I’d actually take a free market approach and seek to redistribute and de-centralize the enforcement of laws and regulations to market participants. This would prevent regulatory capture. One key goal would be to provide these local means for self-regulation in a way that foregoes the traditional legal system, which is far too expensive these days for anybody other than the most wealthy to use to their advantage.
Tao Jonesing, I’m curious if you have an opinion on accuracy of this fellows claim “giant global pyramid scheme by lending with loan to deposit ratio greater than 100%. The banks cash reserves were depleted and the money multiplier reached stratospheric levels”
http://gregpytel.blogspot.com/
@Dave,
While I agree we have a “global pyramid scheme,” I don’t agree with Prof. Bartlett’s description of it, or his conclusion as to what caused the financial crisis.
First, I don’t agree with his analysis because it seems to start with the fallacy that money is first deposited and then it is lent out. In fact, as pointed out by Damon and others (including a 1990 paper by the Federal Reserve), debt is created first. That is, we have a debt-money system, not a fiat money system. In that sense, for a period of 9-12 months, the loan-to-deposit ratio is infinite until the new reserves backing the loan are created and deposited (divide any number by 0 and you get infinity).
Second, the cause of financial crises is always debt-financed speculation in financial assets where the financing is achieved through fractional reserve lending. For example, the financial crisis of 2008 was not caused by consumer defaults on sub-prime mortgages but by the plummeting values of derivative “bets” placed on those mortgages, bets that were financed through loans. There’s no other way to explain the fact that the bank bailout dwarfed the size of defaulting subprime mortgages by at least an order of magnitude.
Unfortunately, every economist or thinker who ever arrived identified the debt-financed speculators as the culprit has been essentially “disappeared” from polite conversation. Karl Marx understood it (“the roving cavaliers of credit). Henry George understood it, and neoclassical economics was invented to discredit him. John Maynard Keynes understood it, but was much more circumspect in saying so than Mr. George (his comment about euthanizing the rentier was as close as he would dare). The neoclassical synthesis of Keynesian ideas left this part out, though. Hyman Minsky also understood it (he even says so in his book “Stabilizing an Unstable Economy), but he made sure that did not suggest that the rentier be euthanized but rather “contained” somehow when at the tipping point (this is the path that Steve Keen follows). But all we hear about Minsky is that he disagreed with Chicago school assertions that the economy is inherently unstable. His disagreements went much farther than that.
Debt by itself is not the problem, it is what debt is used to purchase. Debt incurred to increase the productive capacity of an economy is a good thing because the money gets spent in the real economy. Debt incurred to place bets in a casino is a bad thing because it does not get spent in the real . Since about 1998, the finance sector has had the greatest amount of outstanding debt of any sector in the U.S. economy. Most of this debt was incurred to place bets in the secondary markets and the derivatives market, which explains its huge size relative to the real economy.
From this perspective, a loan to deposit ratio greater than 100% is not necessarily a bad thing. In fact, if an economy is expected to grow naturally through the addition of productive capacity and an increasing labor pool, imposing an arbitrary limit of 100% on the loan to deposit ratio could artificially constrain growth. If tomorrow’s economy is going to be 110% of today’s economy, limiting the available funds to merely that of today’s economy creates a scarcity of capital that allows the capital holder to extract excess rents from other people’s entrepeneurial endeavors. My problem with Austrian economics is that it seeks to punish the entire class of economic actors for the bad deeds of the financial speculators, and it does so in a way that benefits the financial speculators during both the booms and the busts. I’m fine with 100% reserve lending for financing speculation in financial assets, but it seems like overkill for other areas.
@Tao Jonesing
I do not think you really understand my analysis of the financial crisis (or read it with due attention).
1. It is my analysis, not Prof Bartlett’s
2. You wrote: “First, I don’t agree with his analysis because it seems to start with the fallacy that money is first deposited and then it is lent out. In fact, as pointed out by Damon and others (including a 1990 paper by the Federal Reserve), debt is created first.” If you understood my analysis you would have easily realised that it does not matter in my analysis whether money is first deposited and then debt is created or the other way round. This argument is IRRELEVANT. So if you wish you can reverse this in my article and still end up with… exponential money expansion (with the base greater than 1).
Greg Pytel
@Tao
You’re highly misrepresenting the influence of Rockefeller with Mises, who was an outsider that couldn’t get an academic job while in the US. Also, you seem to want to put Friedman with the Austrians. Those camps split when Friendman invented tax withholdings and promoted a “Fed that acted like the gold standard.” I know it doesn’t fit into your paradigm of the “neo-liberal”, but those are the facts about the fringe Austrian group.
I’ll take a look at that commonwealth fund idea. Your other regulations would be interesting to learn about when you get into the details as with all regulations. In the end WITH A NEW MONETARY SYSTEM NOT BASED ON DEBT, as long as these speculators and banks’ assets aren’t guaranteed by our cash/FDIC, are transparent (no off sheet b.s., no mark to market Enron non-sense) and free to fail, then regulations shouldn’t be necessary.
Agreed about corporate personhood hurting the rest of us.
@Ranallo,
I said neoliberalism as a movement was (1) created by certain people and (2) funded by certain other people. I made no statement about any influence on Mises by Rockefeller per se. I merely identified a connection. I’m sorry if I came across as more aggressive than I intended to be.
I have no desire to put Friedman with the Austrians. Friedman was of the Chicago School. Mises and Hayek were of the Austrian School. Although their economics are undeniably different, their politics are the same: neoliberalism. Spend some more time looking through history of the movement. I did not start with the neoliberal paradigm, I ended with it after seeing brilliant men like Friedman, Hayek and Mises say things they were too smart to say, asserting truths they must have known to be false.
Again, the Chicago and Austrian schools are the one-two punch of neoliberalism. The Chicago School of ponzinomics was designed to scoop back all the wealth that was distributed more widely as a result of post Great Depression reforms and accumulate it back into the top 0.1%. The Austrian School of rentieronomics will ensure that the ill-gotten gains provided by ponzinomics will be retained. Hayek knew that it would take at least a generation for the strategy to pay off.
Regulations are always necessary. Indeed, what you’ve outlined about asset guarantees and “free to fail” are rules, i.e., regulations. The question is how are those regulations implemented? My problem is that financial speculators for centuries have figured out how to avoid reserve requirements and bet other people’s money in the financial casino, so merely allowing them to fail isn’t enough because their failure leads to the failure of others and economic crises. That’s why I want to criminalize financial speculation financed through fractional reserve lending. Any other kind of regulation is not strong enough.
“The question is how are those regulations implemented?”
That’s usually my concern with regulations that require force vs. those that require doing nothing. Granted the Coinage Act of 1792 had a pretty severe penalty for screwing with the monetary system. Guess those guys knew where power resides.
I’ll keep digging about the high-jacking of neoliberalism specifically the Austrians by the power brokers. I definitely see it with supply-siders, monetarists and even some of Hayek’s teachings vs. Mises/Rothbard who were out casts.
One area where you and Damon seem to agree is that if the current system were to collapse then the current power brokers would just buy up all the pieces as they have real assets to retain power. The cycle continues or gets worse as they trump up wars to distract us. I believe this to be true. My Austrian vision is that AFTERWARDS if we can maintain focus and sanity by not killing each other (that’s a big IF), we can implement a truly competitive and free market with no interference, special privileges or hand-outs by govt to anyone. Then, OVER TIME/DECADES they will be out-competed and lose power just like Microsoft has with Google. Pipe dream? Maybe. Can people change their spirituality and psychology to make this work? I’m optimistic.
“Americans always do the right thing…after exhausting every other option.” – Winston Churchill
hi Ranallo, I like your focus on spiritual/psychological awakening. But how does that jive with wanting a “truly competitive” world? I think therein lies one of the massive disconnects we’re suffering from: people living in competition = good. Looking back at 19th century small towns, they were “free” but that meant a lot of commonwealth behavior, common interests, forming of community (does not mean communism). It was the out-of-town bankers and corporatists who moved in to take advantage of the lack of defenses that has been spun as “free market.” Standard predator/prey model in every species. Free competition does not mean benevolent environment for all. How in the world were the masses sold that “yeah it’s good to open our weakest up to attack by the strongest?” (I include myself because I was totally sold). One thing Marx was right about was the consolidation of markets/power as the strongest keep winning. That’s what we’re seeing.
By the way, the tech sector is totally driven out of Wall St / DC. If you think Google was just a magical winner of a benevolent free market, you’re in for a big surprise once you see how it’s a key technological piece of the global empire. Microsoft is out now because the corporate establishment has chosen “cloud computing” as the new standard for the empire. It was a top-down decision.
@Ranallo,
First, thanks for accepting the challenge to dig into the link between the founders of the Austrian school and neoliberalism. I do highly recommend “The Road from Mont Pelerin,” much of which is available online for free at Google Books (link is above).
Austrian economics have not been hijacked by the “power brokers.” Rather, Austrian economics have been adopted by the power brokers because Austrian economics serve their purposes so well, particularly with the faux-liberty promised by Hayek’s and Mises’ after-market neoliberal propaganda, which purposefully distracts passionate intellectuals from what is really happening. The neoliberal “truth” promised to the masses- one of individual freedom and liberty– is heady stuff, and I cannot blame people for taking it at face value, even when I know that truth is a lie.
For my part, I’ll dig into Rothbard and Mises a bit more. I have my own Mises library, but I could get some more Rothbard (and I know where to go to get it).
To the extent I understand Damon– I think we’re all still learning how to normalize our language and worldviews so that we can communicate about our world effectively– I have yet to find myself disagreeing with him substantively.
FYI — I am against war. I am for individual liberty. I just don’t accept Hayek’s conception of individual liberty, which I view as an abomination against human nature, something that was designed to reduce the masses to a collection of sociopaths and narcissists while leaving the elite free to rule without interruptions or concerns about the truly productive members of the world. I, too, am an optimist that people can change their spirituality and psychology, but I think the starting point for accomplishing that is throwing off the neoliberal “liberty” and “free market” propaganda that permeates American society across the political spectrum. If you look really closely, you’ll see that Hayek’s conception of the”market” and how it picks winners and losers is nothing more than a secular recasting of the divine right of kings. Neoliberalism is actually neofeudalism, and the intent is nothing less than to rollback the clock to before the Enlightenment.
http://michael-hudson.com/2010/05/neoliberalism-and-the-counter-enlightenment/
- If Austrians think the multi-national corporate empire is going to magically devolve
- back to mid-sized businesses, they don’t understand the power of finance and the
- embedded momentum toward perpetually increasing scale. This is an example of
- how Austrian theory sometimes seems like a childlike faith as opposed to a realistic
- understanding of the world we’re actually living in today.
If you think the multi-national corporate empire is going to magically evolve into yet bigger business, you don’t understand the power of fundamental market forces, and the embedded momentum toward perpetually balanced aggregate “scale” (do you think the income gap and the current collapse are NOT connected?). This is an example of how this theory seems like the faith of all ages as opposed to a realistic understanding of the world we have lived in throughout history.
The difference between what they think and what you think, and I’m no Austrian, is that Austrians believe in the long run market forces win out. That the “momentum toward perpetual increases” of any kind, that you reference here as some sort of market force, are simply fallacy. And to that end, I would use the US housing market as a perfect example. How well are those “perpetual increases of scale” going? Oh, right… 18 months of extra inventory on the market.
Bottom line: Maybe it’s time discussions on these topics weren’t simple bifurcations: Krugman vs. Schiff; deflation vs. inflation; socialism vs. capitalism. Maybe people on both sides need to give up the cowardice, surviving on the lifeblood of people willing to subscribe to some one ideology, and instead, listen to all sides of the discussion.
Matt, do you think the current collapse is pushing power back to the middle and lower classes or to smaller scale entities? Think through deflation. It is centripetal…pulls power, wealth, assets to the top of the pyramid. And the government stripped trillions more from the bottom and passed it to the top because the capital holders it serves have grown so big in scale that they can tell the most powerful government in the world what to do.
There’s no such thing as “fundamental market forces” in a financial dictatorship.
What you call “fallacy” is the very basic math of the monetary system.
The housing market is in fact perfect proof of what I’m talking about. What do you think the 18 months of inventory is doing? Killing small builders, small banks, small investors, and every other small person caught in the mess. Meanwhile the big banks have consolidated into even bigger scale and received government backing as they work on a new global regulatory framework for even bigger scale. All power and wealth have been stripped to the top.
@Matt That,
“That the ‘momentum toward perpetual increases; of any kind, that you reference here as some sort of market force, are simply fallacy.”
The rules of the game for public companies actually require a quarterly confirmation that the public company will increase its earnings in perpetuity.
All of the stock market analysts use net present valuation techniques with assumptions of future growth based on current data (and a terminal value which assumes perpetual growth at some rate after a number of years) to project future free cash flow and, therefore, earnings. This is how they arrive at their price targets and quarterly earnings estimates, and it is quarterly earnings estimates that drive near term stock prices.
The whole point of issuing incentive stock options to top management is to ensure they are incentivized to maintain the illusion of perpetual growth for as long as they can. And that is precisely what they do. “If you’re not growing, you’re dying,” and so is all that paper wealth you’re sitting on. This dynamic leads to what Damon observes below, which is the management of public companies focusing on maintaining the illusion of perpetual growth at the expense of profits and other considerations, which accounting rules allow them to paper over.
@Tao, Matt, Damon
I think we’re talking across each other here.
In the current monetary system where money is debt (no debate by anyone so far), free markets/Austrian ideas/Keynesian/all economic models only increase power to the top. Agreed.
When this current monetary system fails and needs to be replaced (no supra-currency!), that new system and governance model are where we should focus our efforts after we see the rest of Damon’s tutorials of course.
Having just read a little about this commonwealth bank, it makes the same mistakes as all these “big plans”, which is too much power in the hands of the few (elected officials). I can already hear the same arguments against this concept as monetarists make against a gold standard, i.e. “they’ll just break the rules when a crisis hits”. (BTW, this happened in Australia according to the lawyer Ellen Brown.)
A spiritual and psychological awakening need to be the focus as any system can be corrupted by power/money-hungry douches.
Can we agree that any new system should emphasize local experimentation and decentralization of power so us planners can innovate?
Thanks for fun today!
Interesting. But we have some differences on this subject.
). Wearing his little poverella outfit of the lowest of the low. Best not to forget that men’s hearts are won NOT ONLY with money. STILL, even now. Thank.. God for that.
There is one MAJOR mathematical operation that is missing from the demonstration. It’s multiplication. The PRODUCT. Because.. you can string along all of those + signs, and they will NEVER make a product. A product is NOT a sum. A product and a sum are in different universes, even. All of the fundamental mathematical operations have momentous metaphysical and psychological ramifications that we tend to not think about, as you mention, because they are so much a part of our daily existence that we skim right over them without… thinking about what they mean, and how they structure the way we see our world.
“The Merchant of Venice”, Shylock’s tirade, Act 1, iii, 67-92, the discussion on the justification of interest/usury has Antonio saying “Was this inserted to make interest good ? Or is your gold and silver ewes and rams ?” and Shylock replying “I cannot tell ; I MAKE IT BREED AS FAST.” But… usury is NOT multiplication for the expressly stated reason that exponential multiplication lies in NATURE’s power, and not in man’s direct CONTROL. Man forgets this at his own peril. (But then, our Enlightenment ancestors even expressly wanted to BE gods.. Somebody said way back “the fathers have eaten green grapes, and their sons’ teeth are spoiled”.)
The balance sheet falls under the same remark : it is a binary way of looking at business, and exclusively binary. Binary… like computer think binary. Thus… reductionist as an economic model for anything. And as a model it is purely static, and not dynamic. Multiplication is dynamic.
On power…here is where our major difference lies.
Money certainly gives power. BUT…ALL power does not come from money. To imagine so is to indulge in idolatry of money, and that is precisely our greatest failure at this time : Imagining that ONLY MONEY gives power. And imagining that thinking this way is “realistic”.
The kind of power that money gives is not the ONLY POWER in this world.
When Saint Francis crossed enemy lines to reach an Islamic sultan TO TRY TO CONVERT HIM (!!!), spent two weeks with him, and came back showered with presents, he had POWER (no conversion though…
Idolatry of money is what happens when men do not have enough oxygen, enough places to dream, to hope in, and their lack of faith (a bond is a PROMISE, right ?) drags them down into the buying and selling grind with no hope of any promised land.
I said on my home blog just last week, it is amazing that it is POSSIBLE STILL, to see what is going on in the financial world as installment number 2,763,846 in the ongoing series of “People get led out of Egypt, are ETERNALLY grateful to God for three generations, then they lose God, fritter away their existences in heavy duty buying and selling, speculation, idolatry. Prophets warn that God is not happy, and that people should mend their ways. People ignore prophets (sometimes they listen, sometimes. Not often though…). Situation deteriorates. All hell breaks loose. People all of a sudden find God again. And the cycle begins anew. (Remember.. I did NOT say what/who “God” was.) We are nearing the end of a cycle right now…Idolatry is once again bringing us down. NOT the idolatry that our Protestant ancestors were so incensed about, because idolatry is an incredibly complex problem, one that has little to do with simple graven images.
Idolatry is totalitarian concentration, and the elimination of diversity in all areas. In my opinion.
I do not have enough specialized knowledge to make any kind of detailed critique of the SPECIFICS of your demonstration.
A sum can never equal a product?
2 + 2 = 2 x 2 = 4
What do I win?
Just kidding, Debra. (How’ve you been?)
Tao,
You might have added that multiplication is simply mulitple addition. 4 x 5 is simply the addition of five four times, ergo 4 x 5. I realize that this is all very ‘metaphysical’, and complicated of course, to realize that the product [4 x 5 = 20] and the sum [5+5+5+5 (5 added 4 times, ie, 4 x 5)] are the same thing and that yet multiplication and addition and sums and products are in separate universes. It’s way to deep for me, Tao, maybe you can fathom it.
Damon, you discussed the exponential growth of debt that must occur to satisfy the yearly R.O.C (Return on Capital) demands of the private capital pools. You mentioned debt saturation but often around the internet it is postulated that the financial system must rapidly collapse outright after the zenith of debt saturation has occured. Is that really unavoidable?
Also, in reference to R.O.C in the video and previous references to “mathematical, formulaic nature…”, I’m not sure what you mean by maximizing profit is an outdated viewpoint as it relates to what is occuring today. Is the old way simply accounting ‘goodness’ as seen on the balance sheet and the new strategic aim is complex mathematical expression that transcends the balance sheet?
I don’t think I made this clear enough in the video. I’m focused on balance sheets because they’re about machiavellian power. The amount of assets an entity controls (and leverage on those assets) reflects its power. Imperial corporations focus on expanding power, capturing competitor balance sheets (marketshare), and basically using the power on their balance sheets to conduct corporate warfare. This is what determines whether a corporation will be able to deliver R.O.C. for the capital holders long-term. So an imperial bank like JPM Chase will expand its assets (everyone else’s debt) as much as it can within the realm of plausibility to ensure it’s the most powerful knight that can always bring home the goods to the king. Economics assumes all of that away by saying firms just maximize profits. In fact I’ve never been in a corporation that maximizes profits (many minimize profits for tax purposes). Instead they manage revenues and costs to steady Wall St quarterly expectations by managing sales people to steady quarterly targets. But the strategic people in the firm focus on building power to ensure they can keep meeting expectations.
I’m harping on this issue because economists have a mental model that corporations simply exist as is and pursue profits, which implies they don’t scheme to build power/scale/control/collusion/etc. So when I talk about the banking cartel colluding to maintain power, many people call it conspiracy theory when in fact it’s the very essence of what corporations do. Microeconomics has failed to model the firm.
Tao Jonesing wrote:
The fact is that Austrians and monetarists are corporatists through and through, as the corporation is the preferred means of such neoliberals for accumulating economic and political power.
The Chicago and Austrian schools of economics are, in fact, two heads of the same neoliberalism monster, which was born after WWII ended. You can read a bit about that in the extended preview of “The Road from Mont Pelerin,” which I’ve linked –
http://books.google.com/books?id=kSyzcrfecuwC&printsec=frontcover&dq=road+from+mont+pelerin&hl=en&ei=0u61TIr-DIumsQOOhfXSCA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CC8Q6AEwAA#v=onepage&q=road%20from%20mont%20pelerin&f=false
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Thank you for that link I will read the book. Here’s another link from the UK Guardian, George Monbiot, entitled “How the neoliberals stitched up the wealth of nations for themselves”
One may only hope that those who call themselves libertarians discover that the current flavor is actually neoliberalism – what a hoax!
Larry
@Larry
“But as David Harvey proposes in his book A Brief History of Neoliberalism, wherever the neoliberal programme has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%. In the US, for instance, the upper 0.1% has already regained the position it held at the beginning of the 1920s.”
The reason that wealth gets concentrated at the top in these MIXED economies, as free markets don’t exist here and haven’t since at least 1913 (maybe never), is because govt’s create laws that entrench the power brokers, e.g. the Federal Reserve Act or any agriculture subsidy. Is this the fault of the greedy power brokers for asking govt to implement these laws for our “safety”? Or is it the fault of our elected officials who intentionally or unintentionally allow this to occur?
I say it’s both. However, it’s the responsibility of our elected officials to help we the people by saying NO to these advances, which entrench the powerful at the expense of us. I wish the greedy/power-hungry just minded their own business and kept away from govt. But they don’t as they seek satisfaction in materialism/power/money. I wish the elected officials would say NO to these people, but they don’t (well accept Andrew Jackson and Coolidge) as they too have power issues.
So what’s the answer once we get rid of the monetary system and decentralize power? Create a system based on volunteerism? Or one based on force?
Once again (I’ve stated this previously here), any economic system will fail WITHOUT a spiritual and psychological awakening.
The political system is dependent on the oligarchs for funding and promotion. It is almost impossible for an honest man to make any headway in the system. The government has been utterly usurped by capital.
Also remember the gov is not a person or a being; it is an agency with a flow of individuals in and out…for instance there is a revolving door between corporate boardrooms and all the important government agencies…eg Wall St and the treasury…big agriculture (eg Monsanto) and the EPA…etc.
A mistake a lot of Americans make is to personify the government as if it has an agenda in itself…it doesnt…its agenda is the sum effect of all the forces acting on it…and the most powerful force is the power of money.
He who pays the piper calls the tune.
I’m in agreement with your prescription. The problem, as it seems to me, is that you can lead a horse to water but you can’t make it drink. Sorry about the cliche, but it seems to me that there are many who are committed to the ego game of wealth and power and are not interested in waking from their dream.
Tao, in the video Damon mentions ‘Chartalism’. I was curious because I’ve noticed converts running about the internet extolling its benefits. After perusing Warren Mosler’s website for about 15 minutes, I came to the quick conclusion that its permanent slavery and worse than then current system. Whats it all about really?
Dave,
You’ve pushed beyond the limits of my current knowledge. I’ll certainly take a look at Mosler’s site to expand my horizons.
Since I see that Mosler appears to advocate chartalism, the conclusion that it results in permanent slavery appears to be your own. Would you care to elaborate?
Thanks.
it’s a conspiracy, get educated!
Get a grip on what is going on!
holy cow, we’re going to need a lot of rope!
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Hey, Damon, I just wanted to know about the people who have the capital and control the banking system: first off, what do you mean by capital (in economics they use the same word to mean so many different meanings)? are you talking about machinery, as marx was, money, land? and second question, who are these people? Are they the g. Soros types? bill gates? queen elizabeth? Bilderbergers? Can you get specific?
Thanks,
Rocky
it’s a ton of people. it’s not about naming names. it’s the system. on the upper east side of NY you find hundreds of nondescript firms like XYZ Capital Partners, ABC Equity LLC. these are the “capital.” the biggest concentration is there, but then there are hundreds more around the rest of the country, and hundreds in London, Frankfurt, Paris, Tokyo. also the big foundations and hedge funds. also the senior capital holders behind the big banks. this is the class of people that literally does nothing but lord over banks, companies, governments, people by issuing all the money. and then they hangout in the hamptons eating lobster that millions of poor people bought for them. the system must be changed.
I hold this truth to be self-evident: state-chartered corporations was a bad idea.
It took our Founding Fathers about ten years to wrest sovereignty from England and set up a banking system. We’ve tried several versions of central banking now wherein the control of money was left to private interests, thinking they’d act in the nation’s best interest. They haven’t.
It should therefore be self-evident that banking is a necessary function of Congress. If we can’t trust Congress to keep their grimy hands out of the till, we need to change the way we elect our Representatives. If our elections are corrupted by corporate interests, we need to cut the grimy hands off of the greedy corporations. That can be done by fiat.
Fiat is a GOOD thing when the sovereigns doing the fiating are the People. Corporate charters should only be granted by fiat of the People.
If, as many here are stating, the Constitution of the Republic of United States is incapable of creating and administrating a sound economy, the Constitution needs Amendment.
A good place to start amending the Constitution would be to clarify what “citizen” means and limit its protections and duties to that class of being. Groups of citizens should have no inherent rights beyond those granted to its individuals, individually. Contrarily; groups of citizens should be closely watched to insure they don’t pose a threat to national security (that means banks and multi-national corporations especially).
Let’s drop the theories and labels and just look at the mess we’re in, in terms of common sense. It ain’t working; and we all know why. Big shots in control of vast supplies of Other People’s Money have usurped the US Government; and by the leverage of US military might, the majority of foreign governments, too. Foreigners can’t fix this problem; it’s ours, and ours alone, to deal with.
Damon is already implying that the status quo is untenable. I think so too. Privately managed banking has brought us to the brink of global insolvency because the corporate culture has no love for the humanity it is supposed to serve. The *Corporation* knows only to “profit and grow”. Corporate managers know only to serve the *Corporation*. Congress must therefore be suspended long enough to institute an Amendment declaring corporate charters illegal, their funds confiscated, and the Treasury placed in control of monetary policy. This can be done by military coup, violent popular uprising, or a groundswell of voter outrage. Let’s choose one of the above and get on with the campaign.
Jefferson warned us. Every twenty years.
Damon,
would you agree, though, that the system has its rudimentary control in the monopolization of Land and Resources, which are always required in production? Hence, if you control L&R you control production (everything that’s made), the economy, and, thus, the world. The free lobster dinner always came from what the classical economist up to Henry George called rent, or wealth that was earned in one’s sleep, doing nothing.
The slick thing about a debt backed monetary system is that the money becomes a de facto land or resource, it fuses itself with land by being made a necessity (because there’s never enough to pay the interest) for production. Therefore, to invade another country is made much easier than the old fashioned way of divide and conquer. It becomes more of a chess game, with different factions vying for control of the world. Countries that won’t open up to the NWO banking system (the game), and open themselves up to their rent and economies being funneled out from under their noses, get invaded — or embargoed.
However, the fact remains that even if you destroy the monetary system, the control of land and resources would still be in place. So, as Dr. Michael Hudson correctly says, you need financial and fiscal reform; That would end the speculation in land and resources which leads to the boom bust scenario and would end the free lunch from land rent and monetary interest.
Here’s Dr. Hudson giving a recent lecture:
Rocky
With tears in my ears, you sir, I say THANK YOU SO MUCH!! You have changed my life… I don’t have a degree in economics…but this just makes SO MUCH SENSE!!! THANK YOU THANK YOU!!! Finally I understand. Please, I BEG YOU! Keep it up!! I only wish I had the ability to teach others what you have taught me in these few short videos…