IN THIS SECTION:
We are absolutely without a permanent money system.... It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.
Robert H. Hemphill, Credit Manager, Atlanta Federal Reserve Bank
What we are using all over the world is not money! The best and brightest brains will not see that the world is not using money at all. The blindness that prevails is of vast philosophical importance. We are living in a deluded world and the outcome of this delusion is going to be nothing less than apocalyptic in its overwhelming, destructive consequences for mankind.
Hugo Salinas Price, Financial Sense Online, 21.9. 2007
Could anyone have predicted in 1998 that the USA would not only become the world’s greatest debtor by 2008, but would become bankrupt in the most literal sense? In a curious way it was predictable, for once the gold backing of the US dollar was removed in 1971, the end result of being able to print money at will was as predictable as putting a bottle of whiskey in the hands of an alcoholic. The enormous fraud that is called “the subprime crisis” could not have been predicted, nor the global casino where hundreds of trillions of dollars are gambled in financial derivatives, nor the Bush-Paulson initiative (or boondoggle, as some have called it) which commits trillions of American taxpayers’ dollars to bailing out the banks. These are some of the main components in what is now turning out to be the perfect economic storm, a coming together of economic and political developments on such a scale as to make it difficult even for the experts to grasp their significance – if indeed there are any experts in this economic turmoil. A proper appreciation of the suicidal economic situation in which the world now finds itself calls for a good deal of reflection. This simple and condensed presentation will not be enough, but it will, hopefully, provide an introduction to greater understanding of a subject that is of vital importance to everyone on the planet.
The complexity of the global forces now at work has kept the issue hidden from public understanding, but the first step towards understanding the bewildering economic events now unfolding must be some understanding of the nature of money, the way it has changed form through the centuries and the key role it has played in creating civilization. What we are now witnessing and living through is the end of a civilization which has been brought down by the abuse of fiat money; that is to say, money which is created at will by governments. It might oversimply be called paper money, but its defining characteristic is that it is money as credit, that is to say, debt or IOU’s from governments that are increasingly defaulting on them by inflating their currencies. Beyond a certain point inflation starts to feed upon itself and become hyperinflation. The big question for America and other countries is whether or not the tipping point can now be avoided.
What were you doing on August 15th, 1971. It is unlikely that you will remember, but history will show, and indeed is already showing dramatically, that was the day on which western civilization entered into its final phase. It was the day when a new form of money was invented, and when the global banking system started on the road to self-destruction, with social consequences that can hardly be imagined. It was the day when President Nixon declared that America would no longer redeem dollars for gold. It has taken thirty seven years for the consequences of that decision to become apparent, but it began the reshaping of the economic world.
Money, banks and civilization are in a symbiotic relationship. This page of the website is devoted largely to showing how the nature of money has changed through time. Its companion pages Banks and the New Slavery and the Just-for-Profit Community need to be viewed to give a rounded picture of what is involved and, hopefully, convince the viewer that the need for a new kind of economic world is now beyond doubt.
A hundred years ago money in Britain was the gold sovereign and various silver and copper coins, and although banknotes for £5 and upwards existed, the average person could go through life without seeing one. It may seem like a million years ago, but in the early part of his working life my father received his weekly pay in sovereigns. After World War One the sovereign was replaced with the pound note, but nothing much changed in commerce because of that. After World War Two the use of cheques as money by the general public came in slowly, for while they had existed long before, first as a means of exchange between banks, for several decades only the “upper class” had access to personal cheques. My father was probably fifty before he had his first cheque book, and I am pretty sure that my mother never had one. In the early days shops would take cheques from anyone who had a cheque book, assuming that the holder was well-to-do, trustworthy and had money in the bank.
The concept and the physical form of money and the system of monetary exchange have been evolving for five thousand years, and the most recent change has been the invention of money-as-credit. It has reached its limit of development in the widespread use of credit cards, which we were once promised would create the cashless society. That is unlikely to happen, for cash has great convenience, but we are now able to make purchases in seconds from almost anywhere in the world in any major currency, thanks to smart terminals and PIN numbers. What we usually forget, until the monthly statement comes in, is that we are buying not with our own money but with debt that gives us the illusion of real money.
This little slice of recent monetary history shows how rapidly the concept and use of money has evolved in a century; but if we look further back in time we can see how radical that evolution has been and, more importantly, where it is now headed. The Death of Money is the title of a recent book by Joel Kurzman, which argues that computerisation has created a bastard form of cash, which will destroy the global economic system unless new mechanisms are found to eliminate the potential for fraud. It is doubtful, however, that new mechanisms will solve anything, for money is so bound up with the human community, and thus with human nature, that no permanent cure is possible without redesigning social structures. Economic reform now calls for radically new thinking on both a technical and ethical level, as the American dollar, which is the global reserve currency, loses value at an accelerating rate and the banking system collapses. To quote the Nobel Laureate, Paul Krugman,
“large parts of the financial system will need to be reinvented.”
Any attempt to rebuild on the old foundation will, inevitably, result in future collapse. This is why a new concept of money and of the economic community is now needed. Unless we go down to this level of economic understanding, reinvention of the financial system would be meaningless.
Since there is no immediate alternative to the US dollar as a global currency, the ongoing corruption of the monetary system will doubtless continue for some months, if not years. During that time, we will almost certainly see a de-globalization, as countries or trading blocs, like “Euroland,” set up tariff barriers and exchange controls, despite resolves to the contrary expressed at the G20 two-day meeting held Nov. 15-16th, 2008. Along with this we may expect to see new kinds of local and regional currency initiatives springing up, as happened in the Great Depression of the 1930’s.
Wider reform that will eventually rebuild a global trading system will need to start by considering the origin and purpose of money. In its first appearance, as precious metals, it was clearly understood as a uniquely useful item in a system of barter, and that function has never disappeared, despite the mantra that “Gold is a barbarous relic” which economics students in high school and university are trained to repeat, without ever examining the evidence for its truth. The phrase has the authority of Lord Keynes, although it was actually first used in the nineteenth century by the less well known monetary reformer Alexander del Mar.
The use of money raised economic activity above the level of barter, enabling a society to become civilized and to cross the barrier between tribe and tribe. Without money, trade is restricted to primitive and immediate exchange, saving for the future is impossible and the planning of capital projects for the benefit of the community made virtually impossible. As the world’s monetary system collapses around us, the time is appropriate to make a statement that only recently would have seemed outlandish or even unintelligible:
Just as human progress from savagery to civilization has depended on the invention of money, future progress will depend upon a new definition and use of money.
Money in classical economics has three functions. It is
So far, so obvious, but whatever the textbooks say, money today is not a reliable store of value, for it is constantly depreciating through inflation and, by the same token, is not a reliable measure of value either, a fact which economic theory conveniently overlooks.
Of no less importance are the many social roles that money plays in addition to its classical functions. It is critical in metaeconomic theory to understand that money
Consideration of these factors extends the science of economics deep into social and political territory. Away from the imposing equations of professional economists, the whole purpose of economic activity is brought into question, and with it ideals of ethics and of community and even the purpose of life itself. Money has achieved an almost sacramental status in modern society, and become an all-purpose good, like grace in Christian theology, so that making money is often taken as an unquestioned end in itself. In Danny deVito’s immortal non-sequitur, “Everyone needs money; that’s why it’s called money.” “Money,” to quote the convicted fraudster Bernie Cornfeld, “has a strange purity.” It has been called “frozen desire,” but could equally be called “crystallized power,” for with money in the bank we can get people to do things for us, like making a suit or building us a house, or we can get governments to do our bidding, if we have enough money.
While we tend to assume that money is essentially coins and notes, it can, in fact, take many physical forms. Anything which is universally acceptable can be pressed into service, and this has varied enormously across time and cultures. Initially the universal medium of exchange was livestock, and a man’s wealth was measured (and still is in some pastoral societies) by the number of cattle or goats he possessed. These ancient forms of money are remembered in some economic terms today: pecuniary is related to “pig”, and salary to the salt which Roman soldiers commonly accepted as part of their wage. Anything easily portable and generally desirable can function as a means of exchange. In Berlin just after the Second World War, when economic structures were shattered, a carton of cigarettes was the accepted form of money, and had the advantage over other desirables, such as nylon stockings, in that it could be divided into ten packs of twenty cigarettes for small change, as it were.
Tinned food was also passed from hand to hand, not for eating but as money, and an economic journalist tells of how in the hyperinflation that ravaged the former Jugoslavia from 1991-94, he took a tin of sardines in exchange for something, but decided to eat its contents, and thus realise its value. To his dismay, the tin had been passed around for so long that the sardines had gone bad, and this little story illustrates a profound truth about money, namely that almost any token of value will function as money, so long as no one wishes to redeem it for the material value that it represents. The economic crisis unfolding today is caused by increasing numbers of people looking behind the token value of the US dollar and discovering that it has, like the sardines, gone bad. A little thought experiment in the box below will start to open up some of the complex aspects of money which the ordinary person never suspects.
Imagine an island, perhaps the size of the Isle of Wight, that was self-sufficient in the necessities of life, but had no monetary system. Without money as a common medium of exchange economic activity would be reduced to barter. And imagine in this situation that a rich individual were to distribute to everyone on the island a brown envelope on which was printed, “This envelope contains a twenty Euro voucher. I will redeem it for twenty Euros in six months, so long as the envelope remains unopened. Once opened, I will not redeem it.”
If the signature under the notice were, say, Richard Branson, who is very rich, there would be no particular reason not to trust him or to open the envelope, and while waiting to redeem their windfall, everyone could use the brown envelope as a means of exchange – i.e., as money. I could exchange my envelope for groceries, and the grocer could buy further stocks at the wholesaler, or buy a coat, and so on. Our benefactor has kick-started the island’s economy, but in a stuttering kind of way.
The first problem arising would be what to use for small change, and, at the other end of the scale, how could sufficient envelopes be accumulated to be able to pay for, say, a new school. Soon a wider economic difficulty would surface, for although the island is more or less self-sufficient, its population is too small to have a pharmaceutical industry, and soon the need for common drugs would arise, and with it the problem of what to use as money to pay for imports from other countries. Some more sophisticated monetary system would be necessary to promote economic well-being.
Now imagine that the signature on the envelope was Tony Blair or Lord Mandelson. Would confidence in the redeemability of the contents of the brown envelopes be so high and, if not, what would be the consequence of diminished confidence? Probably, there would be no temptation to accumulate the brown envelopes, but even in considering this scenario, one realises that if some entrepreneurial soul did hoard them, he or she would bring the economic revival to a halt, for there would be few envelopes in circulation, and if the entrepreneur was very successful, there would eventually be none at all, and business activity would cease.
The fantasy island is actually not so fantastic in this respect, for the top one per cent of individuals in the United States own forty per cent of the country’s wealth, and the current worldwide economic calamity can be traced in large part to the withdrawal of debt-currency by the banks. When a business’s line of credit or overdraft facility is withdrawn, this amounts to withdrawing cheques or notes from the economy, and thus shrinking trade throughout the system.
This brown envelope vignette shows up quickly some of the complexities of defining and creating money in a modern economy. The island’s economy could not get very far with twenty euros apiece. What would have happened if the benefactor in question had given everyone a thousand or a million euros? With twenty euros for each individual, the island’s economy would be in permanent depression, but with a million, there would be wild inflation.
Now extend this little economic thought-experiment and imagine two similar islands in fairly close proximity, one of which has rich farmland and timber stands but no mineral resources and the other which has little farmland or forest but coal, iron, copper and other deposits. While the first has a brown envelope form of money, the second uses a rather rare kind of shell, covered with lustrous mother of pearl, as a means of exchange. A small shell might be exchangeable for a sweater and fifty large shells might buy you a modest cottage.
The sea around both islands swarms with fish, so both communities can live at a subsistence level, and have long done so, although tribal antagonisms between them have kept them apart. Eventually, however, they make an attempt to form an economic community for mutual benefit, trading food for ironware, coal for timber, etc. Here arises the monetary challenge, for pretty shells and brown envelopes are not mutually acceptable. A new kind of monetary arrangement is needed.
The point?
In ancient times the precious metals of gold and silver were universally valued, as a means of ornamentation, but money itself did not appear until these metals were coined, that is to say, stamped into uniform pieces with an identifying mark. Proto-coinage appeared five thousand years ago with the Sumerian shekel, which was a certified weight of silver, and seems to have been valued as a quantity of barley, since both words have the same root. The shekel is still the currency unit of Israel. However, although coins began as a measure of weight (the root meaning of words like pound, lira and peso), they soon were accorded an intrinsic value unrelated to their metal content. Human nature being what it is, ways of cheating started to appear almost as soon as money was born. The temptation to make money without working for it is universal and very powerful.
The three methods used were
clipping • counterfeiting • debasement
all being different forms of counterfeiting, since they enable bad coinage to be passed off as good, until the deception is discovered. Since coins were not so precisely stamped as today, it was possible to file or clip the edges, and melt down the filings, before putting the coins back in circulation. (It was, in fact, Isaac Newton, as Master of the Royal Mint, who introduced the milled edge coin to prevent clipping. He was a very competent economist, as well as a scientific genius.) Counterfeiting was much more profitable than this DIY method of clipping, and consisted of stamping look-alike coins made from base metal, usually covered thinly with precious metal. In all countries, until a couple of centuries ago, counterfeiting was punishable by death, for it struck at the very heart of trade and thus of society.
Debasement of the coinage, by contrast, was usually a government initiated kind of counterfeiting, in which the content of precious metal was systematically reduced, until the resultant coin was too obviously a dud to have any use in trade. Over a period of two centuries, as the Roman empire declined, the silver content of the denarius was reduced from 95% to 1%. This debasement was largely to enable the government to pay for war, a factor which has played an absolutely crucial part in the history of money, banking and economics, and a part to which academic theory rarely gives proper emphasis. Today counterfeiting in the cause of war is done by means of inflating the currency, and the consequences of that may be seen on the page The Endgame and particularly the section The Bankrupting of America.
In 2001 there was published a book entitled Gold Wars, by Ferdinand Lips which revealed the extent to which the international banking system, headed by the US Federal Reserve, would go to ensure that the American dollar, and not gold, was taken as the universal standard of value. Lips, who died in 2008, was Swiss, a banker of extreme competence and a trustee of the Foundation for the Advancement of Monetary Education. He was a co-founder of Rothschild Bank AG in Zurich, but later resigned and founded his own Bank Lips AG in 1987. During these years he had become aware that the Money Power was working to take control of the financial system of the one Western country that had held out against it, his own Switzerland. The Money Power is as shadowy as its name, but through his wide experience Lips is able to name individuals and institutions and track their operations.
The plot hinges on the fact Switzerland was the only country in the world with a currency backed completely by the gold reserves in the Swiss Central Bank. As such it was a latent to threat to both the global dominance of the US dollar and the principle of money-as-debt which has become essential in the global banking system. The two great banks in Switzerland (initially three, but now Credit Suisse and UBS) had long been independent but were in fact being integrated into this global network whose centre was in New York, and were, in effect, transferring their national loyalty to the international cartel.
The main point at issue was to demonetize gold completely, so that the US dollar could not be valued by reference to it, and thus would become the de facto measuring rod for currency values. The strategy employed by the Money Power, as Lips came to realise, was to persuade the Swiss government to sell off its gold reserves (as Gordon Brown had done in Britain) and invest the proceeds largely in US Treasury bonds. Ostensibly this provided the benefit that the T-bonds generated interest, whereas gold did not, and at the time the possibility that T-bonds would lose value through inflation was not considered.
What Lips records in Gold Wars is a campaign orchestrated by money interests of varying kinds to generate guilt feelings in the Swiss people at large about the supposed theft by their central bank of the assets of German Jews who had perished in the Holocaust. This disinformation was accompanied by a legitimate debate about the need to rethink Switzerland’s political and financial independence in view of the emerging European Union and a common currency. Switzerland, despite its neutrality, has long had an international outlook, as witness the Red Cross and the complex of international institutions located in Geneva. Hence there was a bias towards accepting the logic of joining a financial world that seemed at the time to function perfectly well without a gold-backed currency, and the sell-off of the country’s gold was decided by referendum in 1997. However, as Lips chronicles, the propaganda blitz by the Swiss government and the way in which the referendum was rushed through without time for public debate marks a shameful chapter in Swiss democracy.
What Lips does not deal with, and what may turn out to be more important, is the derivatives trading in which Credit Suisse and UBS later became involved on a very large scale. If, as has happened in the US, the Swiss government may need to step in to save them from bankruptcy because of this, Swiss taxpayers may find themselves with an enormous future burden, and the once rock-solid Swiss franc may suffer accordingly.
This brief and simplified excursion into Swiss economics raises controversial and questionable issues. Any viewer seeking confirmation of the bare facts here can consult Angelo M. Codevilla’s Between the Alps and a Hard Place. Professor Codevilla was formerly a US Senate Intelligence Adviser.
War is an unproductive economic activity, even though successful conquest may conceal this fact for a time, and the historian Paul Kennedy has shown in his best-selling book The Rise and Fall of the Great Powers how, in general, empires fall because they must ultimately devote too much of their productive output to maintaining armies. The First World War toppled Britain from an almost unassailable position of global hegemony by bleeding the country’s economic resources, and putting it in debt to the United States, from which time the American hegemony has grown, to the point where the dollar is the global reserve currency and America dominates international bodies such as the International Monetary Fund and the World Bank. Now, after half a century of almost uninterrupted war, cold and hot – in Korea, Vietnam, Kuwait, Iraq and Afghanistan – America’s cash reserves too have been bled dry, and new economic empires are on the rise.
America’s global influence was once largely welcomed by other countries, since it seemed a better alternative by far than communist domination. America’s ability to wage war was at first maintained by its industrial power, but that is now ebbing away, as manufacturing facilities move overseas, mostly to what are called the BRIC countries – Brazil, Russia, India and China. Its dominance in manufacturing and the wealth which enabled it to import from other countries made it the so-called “locomotive” which pulled the rest of the world’s economies along. America’s economic power, however, was sustained by doing something which no other empire has been able to do, namely taxing not only the conquered but all the citizens in the world. While this process may have started almost accidentally, it has been pursued silently and deliberately for many years, certainly since 1944, in a coordinated strategy. It has been made possible because the US dollar has been accepted since 1944 as the global reserve currency. The abuse of this privilege has led to global economic breakdown, and it is likely that within six months the G20 nations will change this situation.
The strategies used to tax the world by the US government, or by its financial proxy – what has been called “the Fed Cartel” - are all based on the need to conceal the fact that the US dollar is being printed in huge amounts and is thus losing value all the time. There is no official guide as to the figures, because publication of the M3 or money aggregates was arbitrarily discontinued in November 2006. This is part of a wider policy of obfuscation and deliberate deceit, aimed at confusing both the public and economists, which has so far enabled the dollar to retain its global power. Other measures include manipulation of the gold market in order to suppress of the price of gold (which would otherwise be too obvious a marker of the dollar decline), manipulation of the stock market, to ensure that share prices do not reflect decline in industrial activity and profitability, and the falsification of the official government inflation figure. The latter is going on in the UK and elsewhere as well, and one does not need to be a trained economist to note how “the pound in your pocket” has been shrinking much more than the government tells us. The impact of these policies and how the government gets away with them will be dealt with in the section The Free Market in Chains on the page A New World Order. Attention here is limited to the overarching strategy by which America has kept the dollar strong, despite inflating the money supply, and levying a silent tax on the whole world. This has been achieved by the simple fact of ensuring that until very recently oil has been priced in dollars.
The significance of this is profound, and the mechanism is simple to understand. With the active support of Japan and Britain, America has been able to insist that oil is priced in dollars, so that every country in the world must first buy dollars before it can buy oil. So long as the dollar was backed by gold, this presented no problem, for in buying dollars one was effectively buying a claim on America’s gold reserves, and countries were able, if they so wished, to take the gold. When the gold-dollar link was broken by President Nixon in 1971, however, there was no backing to the dollar except trust in “the full faith and credit of the US government”, which has been criminally abused. Dollars have been printed in huge abundance to pay for American wars and to maintain a high standard of living. President Johnson promised Americans that the government would be able to provide both guns and butter, and he was able to do it by diluting the value of the dollar and imposing a silent tax on those countries which held their national reserves in dollars.
To abandon the dollar standard would have brought chaos to the world’s trading and financial systems. So, taking advantage of this tacit blackmail, the US government has continued to print dollars with reckless abandon, and other countries have continued to buy them or exchange them for goods in full knowledge that they were a depreciating asset. The ongoing meltdown of value of the dollar may be roughly measured by comparing the $8,000 that would have bought a modest car in 1970 to the $35,000 it would cost today. The actual cost to the world’s citizens is impossible to calculate accurately, but it would probably be true to say that the average British householder has been paying at least £40 per year to support America’s imperialism and provide the good life for its citizens.
This silent extortion is the single greatest fact about economics today, yet, as the Mexican economist Hugo Salinas Price has pointed out, not a single Nobel Prize winning economist has ever drawn attention to it. Mainstream and academic economics is carried on largely in a parallel universe to the real world, and the most system-shattering events seem to come as a surprise. Take for instance, the opinions of the two most eminent economists, the American Irving Fisher and Lord Keynes a few weeks before the 1929 crash. From the former, “Stock prices have reached what looks like a permanent high plateau,” and from the latter, “We will not see another crash in our lifetime.” Both lost heavily in the crash, and neither seemed to suspect that it had been engineered and timed, so that those responsible cashed in their shareholdings just before the stock market peaked. Fast forward to 2008, a few weeks before the Paulson plan and the Big Brown Give-away, and the same professional optimism appears again, with the associate editor of The Times, Anatole Kaletsky, offering his opinion that, “The bail out of Fannie Mae and Freddy Mac virtually assures economic recovery” and “a US economic recovery is now assured.” The individual most responsible for global economic collapse is arguably Alan Greenspan, who was knighted by the Queen in 2002 for his “contribution to global economic stability,” presumably on the advice of her professional advisers. By September 2008 Greenspan’s dreadful legacy had become so obvious that Giulio Tremonto, the Italian Economic Minister, could call him “the man who has hurt America the most after Osama bin Laden.”
America’s taxation of the world and its political and military consequences have been made possible by an accident of geology, which left about a quarter of the world’s oil reserves under the sands of Saudi Arabia, and has enabled successive US governments to carry on a protection racket on a grand scale. They have offered the Saudi government military protection (as much against its own citizens as any external aggressor) in exchange for the Saudi’s pricing their oil in dollars and turning the tap on or off, so to speak, in order to control the world oil price according to American wishes. This situation has been changing for several years, as the giant American oil companies have lost their near-monopoly on world oil production, and countries like Russia, Venezuela and Indonesia have nationalized their oil industries, in effect if not in name, and priced their oil in Yen, Euros or Roubles.
America’s attempts to prevent this happening have been extreme, most obviously in starting two wars to maintain its domination of the world’s oil supplies. There is no doubt that the invasion of Iraq was not because it represented a terrorist threat or had weapons of mass destruction, but was a response to Saddam Hussein’s expressed intention of pricing Iraq’s oil in Euros. From the viewpoint of American imperialism, this could not be allowed to happen, and the so-called “war on terror” was the thinnest of pretexts for taking over Iraqi oil resources. President Bush has effectively admitted this. On Sept 13, 2001, he said, “The most important thing for us is to find Osama bin Laden. It’s our number one priority,” but six months later, on March 13, 2002, when asked at a news conference about the success in finding him, he seemed to have forgotten his lines, for he said to reporters, “I don’t know where he is. I have no idea, and I really don’t care. It’s not so important. It’s not our priority.”
MORE INFORMATION AND INTERNET LINKS
There is an enormous amount of information available on the evolution of money in books and on the Internet. The two below go to the heart of things in quite different ways.
Ferdinand Lips, The War Against Gold (New York: The Foundation for the Advancement of Monetary Education, 2001) makes the case for gold as the only basis for stable currency, and shows the attempts of the US government, with central bank allies, to destroy this basis.
Thomas H. Greco Jr, Money: Understanding and Creating Alternatives to Legal Tender. (White River Junction VT: Chelsea Green Publishing Co., 2001) offers historical and contemporary examples of alternative monetary systems. This is also treated in a more summary way in my paper The End of Economics.
Both authors are eminently well qualified in different ways. Ferdinand Lips, who died in 2008, was the Managing Director of Rothschild’s Bank in Zurich, and founded his own bank, Lips AG. Thomas Greco is a former professor of business, with hands-on experience of creating and managing local currencies.
The connections between oil, money and political power are treated in a good many books. William Engdahl’s Oil Wars, and Stephen C. Pelletier’s America’s Oil Wars offer fairly similar overviews of a complex situation, which is changing almost by the month.
The Internet offers a bewildering richness of economic material. An extension of the ideas on this page can be found in Stephen Zarlenga, “The Lost Science of Money” on the website of the American Monetary Institute website: www.monetary.org
Ongoing commentary of very varied quality and reliability, but invaluable for those who have the time to sift through it for the nuggets, can be found on: www.321gold.com
and the website of Financial Sense Online: www.financialsense.com
A word of warning to the viewer coming new to financial matters. Predictive economics includes so-called technical analysis, which anticipates future market behaviour from graphs of the past. While this is eminently sensible in itself, it is not reliable when significant new factors have emerged. Furthermore, finding sophisticated mathematical patterns in the graphs, with names like Fibonacci Retracement or Elliott Wave, can become as subjective as seeing shapes in clouds.
Iranian plans to set up an independent oil bourse to sell its oil in yen and euros, are now operational, but were set back almost two years by having their computer installations sabotaged, by unknown agents. The war in Afghanistan, though ultimately about oil supplies from central Asia, has more tangled roots. There is a geopolitical agenda here regarding control of the world’s oil, which is slipping out of America’s grasp after half a century. The world economic order is entering into a terminal phase, and when it has collapsed entirely, we can either attempt to rebuild it on the old foundation, thus ensuring future disaster, or do some radically new thinking about what economics is all about. That is what constitutes metaeconomics.
The great problem which faces academic and business economists is that the very nature of their training results in an unconscious déformation professionelle. As with anyone working within the system, it is extremely difficult to see it from the outside, and thus “the problems of the system” are seen in terms of the relationships between different parts of what is taken for granted, and the validity or usefulness of the system itself is never questioned. This is more widely true of human activity in general, as, for instance, in religion, science or politics, where those within the system, even individuals with great vision, are unable to see the value of the system itself within a wider context. In this respect, it may be said that we need a “meta-revolution,” a new Copernicanism, if our species is to go further in evolution.
As regards present economic problems, it is largely assumed that after the present global turmoil has worked its way through, economic life will go on as usual, and familiar structures will regenerate, as they eventually did after the Great Crash of 1929, but this is to ignore several new factors, not least that America is now in debt to the world to a mind-boggling degree. China alone has well over a trillion US dollars of US Treasury bonds (which are interest-paying IOU’s) in its national reserves, and Japan about the same. This is not a static situation, for these debts are probably worth no more than 80% of their face value when issued and are still depreciating. Yet despite seeing their assets shrink, and in the knowledge that they will shrink further, neither country can take decisive action without damaging their own interests and sending the value of their dollar hoard plunging. So too for all the other countries on the planet, since all have a large proportion of their reserves in dollars.
This constitutes an economic Catch 22 that paralyzes the victims of a scam of global proportions, but sooner or later, as with any bankrupt, something has to give. The more one looks at the options, the more it becomes obvious that the only way out for America is deliberate inflation of the currency. This has already been started, through Congress’s agreement to print almost two trillion dollars – adding this sum to the national debt - in order to bail out the bankrupt mortgage agencies, Fannie Mae and Freddie Mac and implement the Paulson Plan. History, as well as simple logic, demonstrates that this process can lead only to hyperinflation and the destruction of the currency. A few voices are starting to make this point, but its significance is not widely appreciated. All empires fall, either by foreign invasion, moral decay or what Lenin called “debauching the currency.” There is happening before the world’s bewildered eyes the most ominous debauching in history - that of the American dollar
A New Kind of Money | The Birth & Death of Money | What is Money? | Instant Monetary Theory | Gold Wars | Money & War | America Taxes the World | More Information and Internet Links