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Why We Need a Free Market in Money

What is fiat money and what does it do?

This is essential to understand since today’s worldwide unbacked paper, or “fiat,” money regime is an economically and socially destructive scheme—with far-reaching and seriously harmful consequences. There is an answer, though, and this lies in ending the money production monopoly of states.

The Problem of Fiat Money

The US dollar, the Chinese renminbi, the euro, the Japanese yen, the British pound, and the Swiss franc represent fiat money.

Fiat money has three characteristics:

  1. Fiat money is money monopolized by the state’s central bank. It is created by central banks and commercial banks licensed by the state.
  2. Fiat money is mostly produced through bank credit expansion; it is created out of thin air.
  3. Fiat money is dematerialized money, consisting of colorful paper tickets and bits and bytes on computer hard drives.

Fiat money is by no means “harmless.”

Fiat money is inflationary. Its buying power dwindles over time, and history has shown that this entropy is almost as irreversible as gravity. Fiat money makes a select few rich at the expense of many others. The first to get new money benefit to the detriment of those on the bottom rung.

What’s more, fiat money fosters speculative bubbles and capital misallocation, which culminate in crises. This is why economies go through boom and bust cycles. Fiat money lures states, banks, consumers, and firms into the trap of excessive debt. Sooner or later, borrowers find themselves in a deep hole with no way out.

Fiat money is easy to come by, so the government can finance its adventures and misadventures. Easy money; easy come, easy go. And the government keeps growing as it keeps spending…

…click on the above link to read the rest of the article…

“Monetizing Privacy”: The Fed Fans Out, Touting the “Digital Dollar.” This Time, How Consumers Would Benefit

“Monetizing Privacy”: The Fed Fans Out, Touting the “Digital Dollar.” This Time, How Consumers Would Benefit

But the problemita of pulling the rug out from under the entire banking system still needs to be addressed.

“As cash use continues to decline, the question naturally arises as to whether central banks should provide a digital alternative to cash that also provides some privacy features,” says the blog post, titled “Monetizing Privacy,” by the New York Fed. The post is based on a 26-page academic paper on digital payment methods that have been used broadly, the current market structure of digital payment methods, the data-gathering that occurs, versus cash payments that preserve privacy – and versus the “digital dollar” now being worked on.

Each time a digital payment takes place, the companies involved gather voluminous amounts of data and hang on to it because it gives them a competitive advantage in selling more goods or services to this particular consumer. This data has a lot of value for these companies – a key point we’ll get to in a moment with regards to the “digital dollar.”

While the share of cash in transactions has declined, US dollar bills are being hoarded like never before. “Currency in circulation,” which the Fed reports weekly on its balance sheet as a liability, has soared during the Pandemic, reaching another record last week of $2.06 trillion, having doubled since 2011:

The amount of currency in circulation is demand-based: Banks have to have enough currency on hand to satisfy their customers’ demand for currency, and during a crisis, people load up and hoard cash, much of it overseas, and to meet this demand, banks have to buy more currency from the Fed, usually paying with Treasury securities for this paper.

…click on the above link to read the rest of the article…

The global reset scam

The global reset scam

This article takes a tilt at increasing speculation about statist global resets, and why plans such as those promoted by the World Economic Forum will fail. Central bank digital currencies will simply run out of time.

Instead, the collapse of unbacked fiat currencies will end all supra-national government solutions to their policy failures. Already, there is mounting evidence of money beginning to flee bank accounts into stocks, commodities and even bitcoin. This is an early warning of a rapidly developing monetary collapse.

Moreover, nothing can now stop the collapse of fiat currencies, and with it schemes to control humanity for the convenience and ambitions of government planners. There can only be one statist solution and that is to mobilise gold reserves to back and save their currencies, which in order to succeed will have to be fully convertible into circulating gold coinage. It will also require the role of governments to be reset into a non-welfare, non-interventionist minimalist role, which can only be achieved after a complete collapse of the current fiat-financed system.

Anything less will fail.

The Deep State and The Blob fuel conspiracy theories

Increasingly, people are beginning to realise that their world is undergoing a period of rapid change, with the future of fiat money now uncertain. For most, it is too difficult to even contemplate. But growing uncertainties are driving wild speculation about what those in authority now have in store for the human race in the form of a global reset. It is a time for conspiracy theorists, aided and abetted by our politicians and central bankers who are being increasingly evasive, because events are spiralling out of their control.

…click on the above link to read the rest of the article…

Do Not Trust Governments With the Control of Money

If there one thing that is fairly certain in this life – besides the seeming inescapability of death and taxes – is that once someone is appointed to almost any position in the political and bureaucratic structures of a government they soon discover how important and essential is the organization of which they are a part for the well-being of the nation. The country could not exist without it, along with its increasing budget and expanded authority. This applies to the Federal Reserve, America’s central bank, no less than other parts of government.

The news media has reported that the apparently unlikely appointment of Dr. Judy Shelton to the Federal Reserve Board of Governors probably will be successfully maneuvered through the full Senate confirmation process. Shelton would then sit on the Federal Reserve Board for a 14-year term. Hers has been one of the more controversial nominations to the Fed in recent years, with critics fervently expressing their negative views of her.

For instance, Tony Fratto, a former Treasury official and deputy press secretary under George W. Bush, was recently quoted as saying that Shelton’s appointment would be “a discredit to the Senate and the Fed. It screams. Nothing at all is serious. Not us. Not you. Not them.”

Mainstream Economists Against Anyone for Gold

Back in August of this year, over one hundred academic and business economists issued an open letter to members of the U.S. Senate calling for rejection of her nomination to the Fed. Among those who signed were some economics Nobel Laureates, including Robert Lucas and Joseph Stiglitz. They insisted on her unfitness for such an appointment. Why? They said: “She has advocated a return to the gold standard; she has questioned the need for federal deposit insurance; she has even questioned the need for a central bank at all.”

…click on the above link to read the rest of the article…

Getting Out of Dodge

GETTING OUT OF DODGE

Recently I received an email from a reader who asked for some feedback regarding a decision he was about to make. He’s in his early 50’s, single with an adult child and is considering resigning from his well paid and secure job in order to gain access to his substantial pension fund, which represents at least two thirds of his total wealth.

Why would he do such a crazy thing? Well, when he considers the growing financial, political, social, environmental and resource disruptions, he feels it may make sense to retrieve his pension now before the dollar devaluation accelerates and his pension fund loses significant purchasing power or is substantially lost to government decree and Wall Street greed.

He has talked to friends and acquaintances about what’s going on in the world these days and his thoughts about getting out and moving on with his life in a more prudent and thoughtful manner. All believe he’s nuts. Gone round the bend in fact.

So, he turned to me for some feedback (an “informed perspective” he said, though I’m not too sure about the informed part) carefully explaining he understands this is his decision alone and he’s responsible for any and all consequences of any action he may pursue.

Wow! Someone who is actually considering a radical life change and is already burning his get-out-of-jail-free victim card. What a refreshingly rare and responsible point of view. He actually led with that in his email and I couldn’t help but sit up and take notice.

Clearly this person warranted a detailed and in-depth response from me, if for no other reason than to show respect for his maturity and forthrightness. What follows below is a much expanded and edited version of my thoughts, which I promptly emailed back to him.

…click on the above link to read the rest of the article…

What Are You Going To Do As Our Money Dies?

What Are You Going To Do As Our Money Dies?

Central banks are killing our currency to protect the already-rich

In our recent article It’s Time To Position For The Endgame, Chris Martenson explained how the US Federal Reserve and its sister central banks around the world have been engaged in the largest and most egregious wealth transfer in all of history — one that has been drastically exacerbated by the covid-19 pandemic.

The official response, tremendous monetary stimulus by the central banks paired with massive fiscal stimulus from national legislatures, has been pitched as “saving the system”.

Yet, in reality, it has merely served to accelerate the transfer of capital from the public into the pockets of the already-rich.

Anyone with eyes can see how the central banks have abandoned all pretense of monetary fiduciary responsibility and have simply cranked their printing presses up to “maximum”:

In concert with this surge of liquidity, national legislatures have added their own emergency measures. In the US alone, the CARES Act pushed nearly $3 trillion in fiscal stimulus into the system, and will highly likely soon be followed by another $1-3 trillion depending on which party’s bill gets passed.

Despite these staggering sums, the amount of money trickling into the average US household has been meager and is drying up.

Instead, these $trillions are mostly finding their way into the coffers and share prices of corporations. We have seen the fastest and most extreme V-shaped recovery in the history of the financial markets since the March swoon. The major indices are now back to record all-time-highs, despite the major carnage covid-19 has wreaked on the global economy.

So who benefits from that? Oh yeah, the people who own those companies. The already-rich.

Remember: 84% of all stocks are owned by the top 10% of households.

…click on the above link to read the rest of the article…

Central Planners At Work

Consumption without Production

“Every man is a consumer, and ought to be a producer”, observed 19th century philosopher Ralph Waldo Emerson.  “He is by constitution expensive, and needs to be rich.”

Ralph Waldo Emerson (May 25, 1803 – April 27, 1882), who inter alia opined on consumers and the need to not only consume, but also produce. The latter activity has recently become even more severely hampered than it already was. And yet, government is spending like a drunken sailor. [PT]

These days Emerson’s critical insight is being taken to its extreme.  Consumers, many whom lost their jobs due to government lockdown orders, no longer produce.  Yet they still consume.  They are expensive.  Not rich.

What’s more, this consumption is not funded through personal savings.  Nor is it funded through government transfer payments.  Rather, it is funded via the printing press.

Emerson, no doubt, was lacking in the unique perspective we are presently granted.  He did not have the special opportunity to watch his government destroy the economy in short order.  Perhaps if he had, he would have penned a neat axiom to distill the essence of what happened.

The world today looks nothing like Emerson’s day.  The 19th  century was an age of honest money.  Central bankers did not roam the land.

Printing money to buy bonds and stocks, and to sprinkle on people, would have been quickly dismissed.  The experience of the Continental Congress during the American Revolution, and their over-issuance of paper “continentals”, had shown that resorting to the printing press was an act of suicide.

 

Promises, promises… “not worth a continental” became a saying after this early experience with paper money. [PT]

 

Currently, printing press money is considered enlightened central banking policy.  Inflation targets, zero interest rate policy (ZIRP), direct bond purchases, twisting the yield curve, unlimited credit.  This is merely a partial list of the trouble central bankers are up to.

…click on the above link to read the rest of the article…

 

On Inflation (& How It’s Not What Happens Next)

Everyone is convinced the dollar is going to inflate because more dollars are entering the system.

But are they really?

That is the question that sparked a succinct Twitter thread by Travis K (@ColoradoTravis) explaining why inflation is not what happens next (emphasis ours):

Let’s take a look at how dollars are born and how they die.

A dollar is ‘born’ when a loan is made against collateral on a bank’s balance sheet. Banks can issue multiples of dollars for every dollar of collateral they have.

It’s this multiplication effect that expands the amount of total dollars.

Generally, banks are limited in how much they can lend – let’s say it’s 10x their collateral. So for every dollar of collateral they have, they can lend 10 dollars.

By so lending, they ‘birth’ new dollars into the system.

As banks lend more, more dollars are created and the money supply increases. This multiplicative lending is the chief driver of total dollars in the system.

Banks lending a lot → more total dollars and inflation.

When do dollars die?

Dollars ‘die’ when debts are paid back. This reverses the multiplication effect of lending, leading to less total dollars in the system and a contraction of total dollars in circulation.

So what is the Fed ‘printer’ doing – creating dollars, right? Actually no, not really.

The printer only increases the collateral banks have to lend against. It does not directly ‘birth’ dollars, only *potential* dollars.

Banks are still the midwives, and the only ones who birth dollars into the system by lending.

The Fed can increase collateral by 1000x but unless the banks lend against that collateral, dollars will not enter circulation for you and I to interact with.

…click on the above link to read the rest of the article…

Why Martians Are Wrong About Gold

A martian — Warren Buffett once razzed — would marvel that earthlings dig gold from the ground… only to rebury it in vaults.

That is, the business is idiotic… pointless… and wasteful.

At first blush, our space man is justly puzzled. Why would humans shovel up hunks of metal — only to lock them away, idle?

Yet the martian — and the Nebraskan — jump past a fundamental truth of human nature.

As one insightful fellow (whose identity we cannot recall) has noted…

Men act with purpose. They do not squander their time or resources on pointless, juiceless pursuits.

Why would they expend vast resources to haul up gold… and risk their lives deep in dangerous mines to grab it… if they lacked compelling reasons?

We note that Mr. Buffett has recently purchased 21 million shares of Barrick Gold. Has this man forgotten his martian?

And so we arrive at this question: Why do men still toil extravagantly to wrest gold metal from stingy earth?

The Gold Standard of Money

Perhaps men continue digging up gold because thousands of years of history demonstrate that gold is worth digging up.

Gold is perhaps the ideal money, money par excellence — if you will forgive the expression, the gold standard of money.

Money must be rare. Rocks cannot be money — for example. Nor can dirt.

Yet there must be enough money to “go around.”

Gold is rare. But there is enough to go around. Hence it meets money’s strict conditions.

Gold is also durable. Gold mined thousands of years ago lives yet, fresh as a sprig, no wrinkles, no sags.

And unlike gems or diamonds, gold is divisible. It can be fashioned into bars or coins as needed.

Meantime, money must be a store of value. And gold maintains its value across centuries, across millenia.

…click on the above link to read the rest of the article…

Gaia, the Return of the Earth Goddess

Gaia, the Return of the Earth Goddess

Temple worship in Ur, from Sumerian times. Note in the lower panel people are bringing all sort of goods to the temple represented as the abstract structure on the right.
House founded by An, praised by Enlil, given an oracle by mother Nintud! A house, at its upper end a mountain, at its lower end a spring! A house, at its upper end threefold indeed. Whose well-founded storehouse is established as a household, whose terrace is supported by lahama deities; whose princely great wall, the shrine of Urim! (the Kesh temple hymn, ca. 2600 BCE)
Not long ago, I found myself involved in a debate on Gaian religion convened by Erik Assadourian. For me, it was a little strange. For the people of my generation, religion is supposed to be a relic of the past, opium of the people, a mishmash of superstitions, something for old women mumbling ejaculatory prayers, things like that. But, here, a group of people who weren’t religious in the traditional sense of the word, and who included at least two professional researchers in physics, were seriously discussing about how to best worship the Goddess of Earth, the mighty, the powerful, the divine, the (sometimes) benevolent Gaia, She who keeps the Earth alive.

It was not just unsettling, it was a deep rethinking of many things I had been thinking. I had been building models of how Gaia could function in terms of the physics and the biology we know. But here, no, it was not Gaia the holobiont, not Gaia the superorganism, not Gaia the homeostatic system. It was Gaia the Goddess.

…click on the above link to read the rest of the article…

What You Will Find When You Follow the Money

What You Will Find When You Follow the Money

It has been a rough go for California Governor Gavin Newsom.  Late last week it was revealed that the state Department of Public Health had tickled the poodle on its COVID-19 record keeping.  Somehow the bureaucrats in Sacramento undercounted new coronavirus cases by as many as 300,000.

Perhaps this oversight prompted Newsom to imbibe in a little meditation and reflection.  At his Wednesday coronavirus news conference, shortly after quoting Voltaire, Newsom offered the following epiphany:

“Businesses can’t thrive in a world that’s failing.”

Often the simplest insights into reality are the most essential.  We’ll give Newsom that.  Yet, this is hardly an insight.  Rather, it’s readily obvious…even to a numskull.

The world that’s failing, where businesses can’t thrive, is a direct consequence of government lockdown orders.  And Newsom, more than any other public official, has his fingerprints all over the offense.  If you recall, California, under Newsom’s command, was the first state to order lockdowns.  It’s a shame he didn’t pause for meditation before committing the state to ruin.

The dynamics of what would follow Newsom’s lockdown orders were predictable.  When government decrees froze the economy, bills were still due.  Yet many people’s incomes, in the form of paychecks, disappeared.

For businesses, outstanding accounts payable were still due.  Though accounts receivable quickly became overdue.  In short, the flow of cash, as delivered by an open economy of give and take, broke down.

Certainly, Newsom thought he was doing the right thing.  He had to keep everyone in the Golden State safe by locking them down.  Many governors followed Newsom’s lead, having the same disastrous results.

But that was just the beginning.  Soon the uplifters in Washington swung into action…

Printing Press Money

…click on the above link to read the rest of the article…

ECB v Fed

ECB v Fed

QUESTION: Martin,

You mentioned in a recent blog post that the ECB, unlike the FED, can go bankrupt.

Can you explain further?

Not sure where you get the time, energy and resources to research and write all that you do buy it is truly amazing.

Regards,

M

ANSWER: The Federal Reserve does not need permission to create elastic money. It has the authority to expand or contract its balance sheet. However, it cannot simply print money out of thin air. The ECB is the only institution that can authorize the printing of euro banknotes. The Federal Reserve must back the banknotes by purchasing US government bonds. The Fed buys and sells US government bonds to influence the money supply whereas the ECB influences the supply of euros in the market by directly controlling the number of euros available to eligible member banks. This structure was created because of Germany’s obsession with its own hyperinflation of the 1920s.

Each member state retained its central bank and those central banks issue the banknotes — not the ECB. Therefore, the ECB works with the central banks in each EU state to formulate monetary policy to help maintain stable prices and strengthen the euro. The ECB was created by the national central banks of the EU member states transferring their monetary policy function to the ECB, which in effect operates on a supervisory role.

There are four decision-making bodies of the ECB that are mandated to undertake the objectives of the institution. These bodies include the Governing Council, Executive Board, the General Council, and the Supervisory Board.

…click on the above link to read the rest of the article…

The path to monetary collapse

The path to monetary collapse

Few mainstream commentators understand the seriousness of the economic and monetary situation. from a V-shaped rapid return to normality towards a more prolonged recovery phase.

The fact that a liquidity crisis developed in US money markets five months before the virus hit America has been forgotten. Only a rising gold price stands testament to a deeper crisis, comprised of contracting bank credit while central banks are trying to rescue the economy, fund government deficits and keep the market bubble inflated.

The next problem is a crisis in the banks, wholly unexpected by investors and depositors. At a time when lending risk is soaring off the charts, their financial condition is more fragile than before the Lehman crisis. Failures in European G-SIBs in the next month or two are almost impossible to avoid, leading to a full-blown monetary and credit crisis which promises to undermine asset values, government financing and fiat currencies themselves.

We can now discern the path leading to the destruction of fiat currencies and take reasonably guesses as to timing.

How central banks view the current situation.

The financial world is bemused: what is it to make of the economic effects of the coronavirus? The official answer, it seems, is on the lines of don’t panic. The earliest fears of millions of deaths have subsided and in the light of experience, a more rational approach of easing lockdown rules is now being implemented in a number of badly hit jurisdictions. Whether this evolving policy is right will be proved in due course. But the motivation is moving from saving lives to restricting the economic damage.

…click on the above link to read the rest of the article…

“Revolutions And Wars”: What According To Ray Dalio Comes After “Printing Money”

“Revolutions And Wars”: What According To Ray Dalio Comes After “Printing Money”

Having seemingly conquered the world of finance, Ray Dalio and Howard Marks have been competing who can be a more productive writer in recent weeks, and just two weeks after writing a lengthy thesis on the rise and fall of fiat currencies (which had no less than 43 mentions of gold for obvious reasons), Dalio is back to discussing one of his favorite topics, namely the rise and fall of empires, among which the US and China, over the last 500 years. 

The third chapter of his “Changing World Order” series (preceded by Chapter 1 “The Big Picture in a Tiny Nutshell”,  and Chapter 2, “The Big Cycle of Money, Credit, Debt, and Economic Activity” and its appendix “The Changing Value of Money“), takes a closer look at the rise and fall of the Dutch, British, and American empires and their reserve currencies and, in what will spark howls of outrage from both sides of the discussion, touches on the rise of the Chinese empire, which Dalio views as the next ascendent superpower “to bring us up to the present.”Ray Dalio@RayDalio

In this latest release of my series The Changing World Order, I will review the rises and declines of the Dutch, British, and American empires and their reserve currencies and will touch on the rise of the Chinese empire to bring us up to the present…


https://bit.ly/TCWOch3 The Big Cycles Over The Last 500 YearsNote: To make this an easier and shorter article to read, I tried to convey the most important points in simple language and bolded them, so you can get the gist of the whole thing in just a few…linkedin.com


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Permaculture and Money – Part 3

Permaculture and Money – Part 3

The Practice of Being Open

In part 1(1) of this series, we explored the relationship between money, psychology and violence, while in part 2(2) we looked at some ways in which the stories we tell as a culture to do with money could be seen as encouraging destructive patterns of behaviour. Looby Macnamara would describe such destructive patterns as “spirals of erosion”(3) and this part will explore in more detail some practical ideas for how we can transcend such erosive behaviours and create “spirals of abundance”(3) instead.

Alternative Economic Theories

In parts 1(1) and 2 (2), I mentioned theories about the possibility of a moneyless society, or a society where money takes a different role, such as Sacred Economics(4) author Charles Eisenstein and Satish Kumar, who among other roles was a practicing Jain monk as a child(5).  Both of these writers can be said to be influenced by EF Schumacher, whose book Small is Beautiful (6), published in 1973, critiqued the unsustainable model of resource and profit-driven industrialised capitalism, and recommends instead a philosophy of “enoughness” and appropriate use of technology(6).  Schumacher was himself influenced by Oriental thinking and in particular Buddhist ideas of moderation (see for example ref 7). In modern society, we can see an example of “enoughness” in practice in the Thai concept of “sufficiency economy” (8).

Peace Pilgrimage

The above examples show some ways in which alternative economic ideas have been influencing the world, and are somewhat encouraged in some mainstream societies. Yet if money is the very problem, it seems we need to explore more radical alternatives.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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