These comments are in reply to the interview found at:
http://www.thedailybell.com/1558/Dr-Mark-Skousens-Five-Questions-for-President-Obama.html
@DB, I can understand why your afterthoughts went the direction they did, in order to deflect from the less than compelling comments by your interview subject. This was one horrific set of comments by your interviewee.
First of all, his five questions: talk about dancing on the periphery. These are questions of the type one would ask if one believed tinkering on the edges of a corrupt system would actually change things.
Further:
“Europe is cutting back on government spending…”
Where, exactly is this happening? As far as I can tell, there may be reductions on what was planned for growth…at best. But when a EUR 10 billion "cut" is accompanied by a EUR 100 billion bank bailout, tell me, where exactly is the reduction in government spending?
“…while engaged in monetary expansion…Of course, libertarians do not believe in managing the economy through central banking, but we are stuck with the system we have.”
What libertarian speaks like this? We are also “stuck” with the system of politicians spending more money than they take from the governed, but Skousen has no trouble speaking against this.
“Within the parameters of this system, monetary expansion is likely to be more effective than government spending…”
Who says? Austrians would take honest money over balanced budgets, knowing the former is a much greater provider of discipline on the latter than the other way around. Creating play money sends the worst of all signals to the market, as “money” is the most basic building block in any free-market, capitalistic system. Government deficits, honestly financed, are far less distortive to the economy than printing funny money.
“Since then, I have argued that once you have gone off the gold standard it is very difficult to go back on it because it would cause a major redistribution of wealth to the gold holders who tend to be speculators and wealthier individuals.”
THIS is the big concern? As opposed to the major distributions of wealth caused by fiat money? So the scam artists who siphoned trillions from the bubbles created over the last 100 years can continue their game, but those who happened to rightly see the end of the scam approaching should not be allowed to be kept whole? The dot.com and real estate thefts can continue, but not a return to honest money?
And, it isn’t so difficult to return to a gold standard. Just allow competition in money, without legal tender laws or other tax consequences that penalize one choice over another. The market will resolve this false difficulty, and reasonably smoothly.
Where to begin regarding his discussion of the EU? He could have done a much better job separating the issue of the EU from the Euro, and his answer was fully supportive of the benefits of aggregation of government power in ever higher and less accountable forms.
“Have you ever seen the picture of how much water is surrounding the China sea and how much they consider is theirs? It's not 200 miles – it just keeps going and going.”
He is worried about China? Take out “China sea” from his quote and insert “United States.” This will make the perspective of his viewpoint much more clear.
“The majority of time Americans are problem solvers; the sun eventually comes out again. Traditional bond and stock markets perform better. It would be sad commentary if we didn't have that kind of situation. It would be like being a millionaire on a sinking ship. Who wants to be a millionaire on the Titanic?”
This quote could have come from any number of drug peddlers at the NY Times. It does nothing to properly address the current situation of the United States or the rest of the world.
“So, I am optimistic that we will get new leadership, reasonable policies and sound economics.”
The answer will be found in politics? Seriously?
“They paid me $100,000 in advance for Econopower.”
Who cares?
DB – I would appreciate seeing the list of the other speakers you have coming to your event in April. It is sad commentary if Skousen is representative of the conference. Your writing and philosophy are a world away from his comments. I do not understand why there would be such a connection….
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Sunday, November 28, 2010
Tuesday, November 23, 2010
Ron Paul and Focus
This post is in reply to points made by Lila Rajiva and the subsequent discussion at The Daily Bell regarding Ron Paul and his focus.
The subject article is entitled "End of the Fed?" and can be found at www.thedailybell.com/1547/End-of-the-Fed-.html
Lila
Re Ron Paul, I don't have any answers for you; I will only put a few thoughts out there. If they add value, so be it; if not, it won’t be the first time for me.
Unique Selling Proposition (USP). In order to be truly successful, one must have one and stay focused on it. I don’t speak only of businesses, but certainly also of those who want to effect change, change opinion, educate, etc.
What is Ron Paul's USP? He seems quite focused on increasing individual freedom and reducing the power of the state. He seems to have chosen two critical areas to focus on in this regard: 1) Centralized money power, manifest in the FED, and 2) Military and foreign policy intervention by the US in the rest of the world.
I cannot disagree that these are two of the biggest items to knock down if we are to have some chance to move toward liberty and peace. I keep reflecting on the four planks of the Daily Bell/Tea Party platform, of which these are two (the others being separation of education and state, and ending the drug wars/prohibitions). If one stays focused on any one of these items, and affects change in the dialogue of the same, they have really done good work, and can be said to have had some real fulfillment in life. Other encroachments are enabled from these four (actually, end either central banking or government funding of education and the other three would likely start to crumble on their own).
Ron Paul certainly has changed the dialogue as it relates to the FED. I believe I stand on safe ground stating that the national dialogue on the FED would be quite different today had he not run for President three years ago – yes, he was assisted by the internet and the financial crisis, but I look to him as the messenger.
So why not go after Goldman Sachs, etc? When I have heard this come up to him (if my memory serves), Dr. Paul always goes back to the root – the FED. Strike at the root and the tree cannot stand. In any case, the prosecutions will come as sure as I am typing right now. As the economic world continues to implode, the anger will be deflected by going after the bankers and other such participants who are also actually just pawns. The politicians will do this to try to save their own skin. The bankers will be sacrificed if it means saving the system or postponing the killing of central banking.
As to September 11, I also do not recall him making strong statements about getting at the facts – certainly a new investigation is in order. But to press this might seem to take away from his USP. Yes, what might it cost him to take a few minutes or days to work on this? The issue is, no organization or individual can thrive if they go after every battle worth fighting. (Yes, the battles one chooses, or chooses to avoid, say something.) I go back to USP, and cannot disagree with the battles he has chosen, and see each one as a full time job.
Rosa Parks: the most I recall is he had to comment about why he voted “no” on some commemoration. Ron Paul never raised the issue; he was reacting to an item brought up for vote. He volunteered to put up the money out of his own pocket if the other congressman would do the same. They obviously preferred to spend OPM. To the extent he has had to defend his position, he has spoken on this. But I have not seen him proactively raise this issue. I might be wrong.
So, I see Ron Paul as one who is trying to stay on message. I believe he rightly sees that if he goes after all targets in all corners that he would lose his effectiveness in going after the items he feels most crucial – you might feel other items are more crucial, but as I said before, I cannot disagree with the battles he has chosen. He would certainly add to the list of people going after him. This would absolutely diminish his effectiveness in his key topics, his USP.
In any case, my two cents. If it is worth even less, apologies to DB for stressing the server.
The subject article is entitled "End of the Fed?" and can be found at www.thedailybell.com/1547/End-of-the-Fed-.html
Lila
Re Ron Paul, I don't have any answers for you; I will only put a few thoughts out there. If they add value, so be it; if not, it won’t be the first time for me.
Unique Selling Proposition (USP). In order to be truly successful, one must have one and stay focused on it. I don’t speak only of businesses, but certainly also of those who want to effect change, change opinion, educate, etc.
What is Ron Paul's USP? He seems quite focused on increasing individual freedom and reducing the power of the state. He seems to have chosen two critical areas to focus on in this regard: 1) Centralized money power, manifest in the FED, and 2) Military and foreign policy intervention by the US in the rest of the world.
I cannot disagree that these are two of the biggest items to knock down if we are to have some chance to move toward liberty and peace. I keep reflecting on the four planks of the Daily Bell/Tea Party platform, of which these are two (the others being separation of education and state, and ending the drug wars/prohibitions). If one stays focused on any one of these items, and affects change in the dialogue of the same, they have really done good work, and can be said to have had some real fulfillment in life. Other encroachments are enabled from these four (actually, end either central banking or government funding of education and the other three would likely start to crumble on their own).
Ron Paul certainly has changed the dialogue as it relates to the FED. I believe I stand on safe ground stating that the national dialogue on the FED would be quite different today had he not run for President three years ago – yes, he was assisted by the internet and the financial crisis, but I look to him as the messenger.
So why not go after Goldman Sachs, etc? When I have heard this come up to him (if my memory serves), Dr. Paul always goes back to the root – the FED. Strike at the root and the tree cannot stand. In any case, the prosecutions will come as sure as I am typing right now. As the economic world continues to implode, the anger will be deflected by going after the bankers and other such participants who are also actually just pawns. The politicians will do this to try to save their own skin. The bankers will be sacrificed if it means saving the system or postponing the killing of central banking.
As to September 11, I also do not recall him making strong statements about getting at the facts – certainly a new investigation is in order. But to press this might seem to take away from his USP. Yes, what might it cost him to take a few minutes or days to work on this? The issue is, no organization or individual can thrive if they go after every battle worth fighting. (Yes, the battles one chooses, or chooses to avoid, say something.) I go back to USP, and cannot disagree with the battles he has chosen, and see each one as a full time job.
Rosa Parks: the most I recall is he had to comment about why he voted “no” on some commemoration. Ron Paul never raised the issue; he was reacting to an item brought up for vote. He volunteered to put up the money out of his own pocket if the other congressman would do the same. They obviously preferred to spend OPM. To the extent he has had to defend his position, he has spoken on this. But I have not seen him proactively raise this issue. I might be wrong.
So, I see Ron Paul as one who is trying to stay on message. I believe he rightly sees that if he goes after all targets in all corners that he would lose his effectiveness in going after the items he feels most crucial – you might feel other items are more crucial, but as I said before, I cannot disagree with the battles he has chosen. He would certainly add to the list of people going after him. This would absolutely diminish his effectiveness in his key topics, his USP.
In any case, my two cents. If it is worth even less, apologies to DB for stressing the server.
Wednesday, November 3, 2010
More Antal Fekete Fallacies
This is in response to Dr. Fekete's editorial at The Daily Bell, and a further response to some of his positions regarding Real Bills.
The editorial at the Daily Bell can be found here:
http://tinyurl.com/27swhs3
Dr Fekete: “I made the central point that the source of commercial credit is not saving but consumption.”
Fekete’s most fundamental flaw is that he confuses money with savings. It is the same flaw behind every Keynesian and Monetarist. It is the flaw behind Bernanke and Greenspan. However, he does not limit himself to this one flaw.
He goes on to use an example of disappearing banks. Paper is wealth. However, his example is flawed. If banks disappear, the wealth does not. There are still farms. There are stores of grain. The previously built factories still exist. My home still provides shelter.
The problem is he cannot be more precise in his example – because it would expose the fraud of his claim, quoted above. In his example, we all starve if the banks disappear, except for the miracle of RBD. However, as is clear, starvation may (or may not) come only to the extent that real wealth disappears. If the real wealth disappears, his Real Bills will not save him, as SOMETHING must fund production. The worker must eat while he is engaged in producing something else for later consumption.
It is unequivocally true, that if all the WEALTH disappeared, there absolutely must be savings to support production. I can’t fund a fishing net unless I have caught and saved enough fish to last the ten days it will take me to fabricate the net. But Fekete cannot make this more accurate observation, because it would expose him.
Fekete confuses financing with funding. He makes the case that real bills can finance the production of goods, but there is no funding to support this financing. Funding can ONLY come from savings. Paper cannot fund production. Only goods ready to be consumed can fund production.
Consider: while a good is in production, those employed in producing that good must eat. By definition, they cannot eat what they are producing, as it is in production. They cannot trade it for food; after all it is in production. Without someone previously having saved food, where would they get their food?
Will they eat real bills? Of course not. But perhaps they could trade the bills for food. In that case, someone had to SAVE food for there to be a trade. Financing is not funding. This is the exact same false belief system of Ben Bernanke. By creating money, we will increase the economy. But the money doesn’t satisfy the need for food. Only food does.
More importantly, now inflation is absolutely introduced into the system. The bills, drawn on unfinished goods that are not ready for consumption, are an increase to the money supply – competing to purchase the food someone else has saved. The paper Real Bills are now competing with the previous stock of money. By definition prices will be higher than they otherwise would be SOLELY due to the introduction of this fiduciary media. This conclusion is unavoidable.
The entire motivation for RBD is to fund something that (supposedly) otherwise could not be funded. Fekete is clear: absent RBD, there would be many not able to compete in the market to purchase previously finished goods available for consumption. How does this not raise prices higher than they otherwise would have been absent RBD? Every economics discipline recognizes that the moving of the demand line higher raises prices for a given supply. The supply of finished goods has not changed, yet the demand curve has shifted. This is the consistent and unavoidable result of relying on paper printing for “money.”
Fekete goes further to argue that there isn’t enough gold coin to satisfy the funding needs of production. But gold doesn’t fund anything in the basic sense – one cannot eat gold. Gold historically has been used as a store of wealth and medium of exchange, with the benefit of Mother Nature providing the discipline to minimize the manipulations of man. Gold does not fund production – actual goods fund production. Fekete ignores this most basic fact of survival.
There is no distinction between the funding of working capital and fixed capital. In both cases, savings of previously completed goods MUST be consumed while the production is performed. Whether for a week or five years, the worker must eat while he is in the process of manufacturing a good not yet ready for final consumption. From where will he get the food, unless someone has previously saved it?
Further, it is claimed that Real Bills serve as a clearing mechanism. But this is a solution looking for a problem. Gold can clear, as can any other object society chooses to use as money can clear.
I will clarify. There are these things called computers. These computers can hold records of gold (or other specie) balances for individual account holders. The gold holdings of each individual account holder can be divided and subdivided almost infinitely, as the computers can handle an infinite number of digits to the right of the decimal, thus dividing the gold into infinite fractions of ounces or grams. Gold is, both physically and virtually, quite divisible.
There is modern communication technology. This technology allows instant communication anywhere around the globe. It is capable of handling countless billions of transactions per day – or per hour or minute, if you like.
The physical gold does not have to move a billion times per day. Balances can be netted daily or otherwise as the market determines. Private clearing houses can be established to net the balances. See what James Turk is doing. Is this not a living example of how gold can be directly used as money?
Antal Fekete, like Ellen Brown, is (to take one from Dr. North) a wolf in sheep’s clothing, and should be recognized as such. Like Ellen Brown, he starts by speaking the language of sound money, the disasters of the current banking system, etc. This draws people in. “He doesn’t like Ben Bernanke. He doesn’t like the banking cartel.” However, he takes Ellen Brown one step further – to draw in the seemingly hard-money crowd. “He believes gold is the ultimate extinguisher of debt” This sounds good to people, he is talking about the problems of the current system correctly. He mentions gold.
Once he has them in the tent, he sells them a bill of goods (a Real Bill of goods?). He promises wealth simply by the creation of paper. He says this paper will create wealth without inflation. He says we don’t have to rely on savings for credit. Once he has them in the tent, he talks like a central banker. Any apologist of a central bank uses the exact same words, and these words have the exact same meaning and will produce the exact same results.
The editorial at the Daily Bell can be found here:
http://tinyurl.com/27swhs3
Dr Fekete: “I made the central point that the source of commercial credit is not saving but consumption.”
Fekete’s most fundamental flaw is that he confuses money with savings. It is the same flaw behind every Keynesian and Monetarist. It is the flaw behind Bernanke and Greenspan. However, he does not limit himself to this one flaw.
He goes on to use an example of disappearing banks. Paper is wealth. However, his example is flawed. If banks disappear, the wealth does not. There are still farms. There are stores of grain. The previously built factories still exist. My home still provides shelter.
The problem is he cannot be more precise in his example – because it would expose the fraud of his claim, quoted above. In his example, we all starve if the banks disappear, except for the miracle of RBD. However, as is clear, starvation may (or may not) come only to the extent that real wealth disappears. If the real wealth disappears, his Real Bills will not save him, as SOMETHING must fund production. The worker must eat while he is engaged in producing something else for later consumption.
It is unequivocally true, that if all the WEALTH disappeared, there absolutely must be savings to support production. I can’t fund a fishing net unless I have caught and saved enough fish to last the ten days it will take me to fabricate the net. But Fekete cannot make this more accurate observation, because it would expose him.
Fekete confuses financing with funding. He makes the case that real bills can finance the production of goods, but there is no funding to support this financing. Funding can ONLY come from savings. Paper cannot fund production. Only goods ready to be consumed can fund production.
Consider: while a good is in production, those employed in producing that good must eat. By definition, they cannot eat what they are producing, as it is in production. They cannot trade it for food; after all it is in production. Without someone previously having saved food, where would they get their food?
Will they eat real bills? Of course not. But perhaps they could trade the bills for food. In that case, someone had to SAVE food for there to be a trade. Financing is not funding. This is the exact same false belief system of Ben Bernanke. By creating money, we will increase the economy. But the money doesn’t satisfy the need for food. Only food does.
More importantly, now inflation is absolutely introduced into the system. The bills, drawn on unfinished goods that are not ready for consumption, are an increase to the money supply – competing to purchase the food someone else has saved. The paper Real Bills are now competing with the previous stock of money. By definition prices will be higher than they otherwise would be SOLELY due to the introduction of this fiduciary media. This conclusion is unavoidable.
The entire motivation for RBD is to fund something that (supposedly) otherwise could not be funded. Fekete is clear: absent RBD, there would be many not able to compete in the market to purchase previously finished goods available for consumption. How does this not raise prices higher than they otherwise would have been absent RBD? Every economics discipline recognizes that the moving of the demand line higher raises prices for a given supply. The supply of finished goods has not changed, yet the demand curve has shifted. This is the consistent and unavoidable result of relying on paper printing for “money.”
Fekete goes further to argue that there isn’t enough gold coin to satisfy the funding needs of production. But gold doesn’t fund anything in the basic sense – one cannot eat gold. Gold historically has been used as a store of wealth and medium of exchange, with the benefit of Mother Nature providing the discipline to minimize the manipulations of man. Gold does not fund production – actual goods fund production. Fekete ignores this most basic fact of survival.
There is no distinction between the funding of working capital and fixed capital. In both cases, savings of previously completed goods MUST be consumed while the production is performed. Whether for a week or five years, the worker must eat while he is in the process of manufacturing a good not yet ready for final consumption. From where will he get the food, unless someone has previously saved it?
Further, it is claimed that Real Bills serve as a clearing mechanism. But this is a solution looking for a problem. Gold can clear, as can any other object society chooses to use as money can clear.
I will clarify. There are these things called computers. These computers can hold records of gold (or other specie) balances for individual account holders. The gold holdings of each individual account holder can be divided and subdivided almost infinitely, as the computers can handle an infinite number of digits to the right of the decimal, thus dividing the gold into infinite fractions of ounces or grams. Gold is, both physically and virtually, quite divisible.
There is modern communication technology. This technology allows instant communication anywhere around the globe. It is capable of handling countless billions of transactions per day – or per hour or minute, if you like.
The physical gold does not have to move a billion times per day. Balances can be netted daily or otherwise as the market determines. Private clearing houses can be established to net the balances. See what James Turk is doing. Is this not a living example of how gold can be directly used as money?
Antal Fekete, like Ellen Brown, is (to take one from Dr. North) a wolf in sheep’s clothing, and should be recognized as such. Like Ellen Brown, he starts by speaking the language of sound money, the disasters of the current banking system, etc. This draws people in. “He doesn’t like Ben Bernanke. He doesn’t like the banking cartel.” However, he takes Ellen Brown one step further – to draw in the seemingly hard-money crowd. “He believes gold is the ultimate extinguisher of debt” This sounds good to people, he is talking about the problems of the current system correctly. He mentions gold.
Once he has them in the tent, he sells them a bill of goods (a Real Bill of goods?). He promises wealth simply by the creation of paper. He says this paper will create wealth without inflation. He says we don’t have to rely on savings for credit. Once he has them in the tent, he talks like a central banker. Any apologist of a central bank uses the exact same words, and these words have the exact same meaning and will produce the exact same results.
Monday, October 25, 2010
China and the West: The Transition
I posted at The Daily Bell regarding their article entitled "What's Behind the US Currency Promotion?" The original article can be found here: http://www.thedailybell.com/1471/Whats-Behind-the-US-Currency-Promotion.html
I felt it necessary to expand on the comments I made at The Daily Bell. Following are my exact comments (in quotation marks), with further explanation and clarification added. Additionally, while this is inherently a political analysis, I feel I should state clearly that my desired preference for social order is quite anarcho-libertarian. However, the reality is that a power and political transition is ahead of us. Following is my speculation on this transition:
"The US wants to maintain control, while trying to pretend that the emperor has clothes. The Chinese want a seat at the table, while pretending (as best they can, because it is so obviously laughable) that the emperor's clothes are still stylish (let alone...exist) in order that the transitions occur as smoothly as possible."
It is obvious on its face that the world order is undergoing a major transition, driven by the drastic economic dislocations which inherently will drive politics, alliances, and control. For much of the last century the US has established and maintained the dominant position on the world stage. For even longer, this can be said about the West in general.
However, while it is obvious to all, both the US and China are trying to go through the transition without admitting the emperor (the US) has no clothes. The US, of course, wants to maintain the appearance of power. China wants a more enhanced seat at the table, with a clear path that corresponds to China's likely continued growth. China, of course, wants the dollar to remain reasonably strong - however recognizes that the US has no political will to make it so (and in fact it may be too late, anyway). Dollar weakness comes sooner if the US is sooner exposed as naked.
"The Chinese will go along with the act as long as they feel power is appropriately being allocated toward them. I believe the Chinese can accept a power-sharing arrangement with the West, as long as they view it is "fair" in their eyes."
It doesn't strike me that China wants to dominate the globe the way the West has attempted to do so. They just want the respect of their position on the world stage.
"The US will move as slowly as China allows. In the long run, this can only be a delaying tactic ‒ absent the US taking China on directly, militarily, which is...NFW."
Certainly, the US doesn't want to race off the stage, they will move as slowly as possible. China, understanding respect - and that an orderly transition is better than a violent one - can go along with this pace, as long as progress is evident.
However, it is only a delaying tactic; the transition will happen...unless the US wants to make military hash of the world to avoid the de-throning. I view this as highly unlikely. The costs and risks are too high, and the US and USSR showed that some sort of sanity can prevail when the alternative is global Armageddon.
"China, and a few others will play their parts in G20 and other global organizations, while at the same time having other conferences without the Western powers in order to focus on alternatives."
To think China and other countries are not working independently to try and find the best path forward is naive. Yes, they will work in established structures, but these structures are dominated by the West - G20, UN, BIS, IMF, World Bank, etc. There is likely some lack of trust by China and others of these institutions, wouldn't you think? For China, pursuing parallel paths is prudent, and I think that it is happening is virtually certain.
"Nothing says China only has the gold they say they have, just as nothing says the West has all the gold they say they have. Both have reasons to share the common lie."
It would cost the dollar if China said they had far more gold than they admit already, and if the US says they have far less. Yet both are possible, and plausible. First, the actual gold reserves are not audited anywhere. Second, it benefits both parties to share the same false information. Third, how much gold has the FED lent to bullion banks which have sold the gold to third parties? We don't know, other than it happens. And to my understanding, this gold is still shown on the FED's books. But if the banks sold the gold to a third party, is it not also on the third party's books as well? Yes, I think.
"China's reserves aren't worth much to the extent they are denominated in USD & EUR (among others). China knows this."
There may be reasons for the Yuan to be a strengthening currency. To the extent the reserves are in USD and EUR, the quality of reserves is not one of the reasons. It is well publicized that China is trying to diversify its reserves. Do we really know how much?
"It is in China's interest (and in the interest of the USG and EU) to lie - in the same direction - regarding China's holdings of these currencies."
Both parties have reasons to say that China's holdings of USD (and separately EUR) are higher than they actually might be. The US wants some semblance of credibility to the dollar, and China doesn't want to lose value in reserves...during its race against diversification.
"China is buying real assets, spending their fiat currency reserves - others still take dollars & Euros in exchange for real stuff."
This is the race - trade pictures of dead Presidents for real stuff. Is China already out in front of the crack up boom? Very likely.
"China, in combination with Russia could easily institute a gold backed currency. Both countries have a complimentary use for each other. While transitioning to a gold backed currency will cause short-term internal havoc in China, such havoc is coming anyway and the CCP needs some way out for the long term. The Chinese are nothing if not long-term thinkers."
Now, I am going way out there (in case you felt I wasn't out there already).
China has a problem. They have a problem no matter what they do. They must transition their economy because they know the US can no longer buy what they used to buy. And even if the US could, does China still want the paper in trade?
China is buying assets, locking up future supply, etc. These can easily be priced in dollars. A strong Yuan (relative to the dollar) would work wonders for controlling future price inflation in China (which is quite well baked in from the monetary side). What better way to strengthen the Yuan than tie it to gold? Maybe backed 20% or so. Then pay for the assets for pennies on the Yuan, so to speak.
Going to a gold backed currency will cause a large disruption to China's economy. But this disruption is here and now, and is only going to get worse no matter what. In this case, why wouldn't China try to gain some real long term benefit for this pain?
With Russia, there are plenty of gold reserves. With Russia, China secures long term access to commodities. With Russia, military equivalence with the West (if not superiority) is assured.
"This move will be the final dagger to the West's dominance ' a death blow to the self-inflicted wounds (both economically and militarily) begun in the early 1900s."
Inflation in the West skyrockets. With a destroyed currency (relative to the Yuan), what can the West buy?
Everyone looks at currency from the seller's perspective - product can be sold cheaper, therefore I can sell more (a false equation, but one parroted exclusively). However, in order to sell, one must buy. With a weakened currency, the West buys less, so it sells less. Let alone, the drastic impact to the standard of living brought on by mass inflation.
The West has been committing suicide since at least 1914 - so much happened then, but it is enough to say the FED, and WWI. WWII put the nail in the coffin, and having false gold-standards (and after 1971, no gold standard), removed all discipline from the system, allowing clear sailing for complete self-destruction. This end was certain, only a question of when.
"Germany (without EU baggage) and Japan would be natural fits for this China / Russia combination, they just need to figure out how to un-encumber themselves from a no-longer-welcomed tenant."
Germany and Japan bring technology that both China and Russia desire. Russia offers resources desired by both Germany and Japan. In fact, could Australia also be brought in to this new alliance? It makes more sense for Australia economically to be tied in here than with the West.
How does Germany, Japan, and maybe Australia break the current strings? I don't know, but it won't be the first time alliances change. Especially alliances brought on only because of conquest in war, as in the case of Germany and Japan.
"Unlike the West, China does not have a history of desiring global dominance - they just don't want to be dictated to about what they view as their own internal affairs. It is not likely that a new global elite will emerge from China."
If I understand correctly, China voluntarily stood down 500 years ago - destroying the fleet and all records, etc. They haven't explored far since. They just don't want to be told what to do. Given the way the world is turning, that isn't likely to be a problem for China in the coming years, especially under the scenario painted in this speculative piece.
I felt it necessary to expand on the comments I made at The Daily Bell. Following are my exact comments (in quotation marks), with further explanation and clarification added. Additionally, while this is inherently a political analysis, I feel I should state clearly that my desired preference for social order is quite anarcho-libertarian. However, the reality is that a power and political transition is ahead of us. Following is my speculation on this transition:
"The US wants to maintain control, while trying to pretend that the emperor has clothes. The Chinese want a seat at the table, while pretending (as best they can, because it is so obviously laughable) that the emperor's clothes are still stylish (let alone...exist) in order that the transitions occur as smoothly as possible."
It is obvious on its face that the world order is undergoing a major transition, driven by the drastic economic dislocations which inherently will drive politics, alliances, and control. For much of the last century the US has established and maintained the dominant position on the world stage. For even longer, this can be said about the West in general.
However, while it is obvious to all, both the US and China are trying to go through the transition without admitting the emperor (the US) has no clothes. The US, of course, wants to maintain the appearance of power. China wants a more enhanced seat at the table, with a clear path that corresponds to China's likely continued growth. China, of course, wants the dollar to remain reasonably strong - however recognizes that the US has no political will to make it so (and in fact it may be too late, anyway). Dollar weakness comes sooner if the US is sooner exposed as naked.
"The Chinese will go along with the act as long as they feel power is appropriately being allocated toward them. I believe the Chinese can accept a power-sharing arrangement with the West, as long as they view it is "fair" in their eyes."
It doesn't strike me that China wants to dominate the globe the way the West has attempted to do so. They just want the respect of their position on the world stage.
"The US will move as slowly as China allows. In the long run, this can only be a delaying tactic ‒ absent the US taking China on directly, militarily, which is...NFW."
Certainly, the US doesn't want to race off the stage, they will move as slowly as possible. China, understanding respect - and that an orderly transition is better than a violent one - can go along with this pace, as long as progress is evident.
However, it is only a delaying tactic; the transition will happen...unless the US wants to make military hash of the world to avoid the de-throning. I view this as highly unlikely. The costs and risks are too high, and the US and USSR showed that some sort of sanity can prevail when the alternative is global Armageddon.
"China, and a few others will play their parts in G20 and other global organizations, while at the same time having other conferences without the Western powers in order to focus on alternatives."
To think China and other countries are not working independently to try and find the best path forward is naive. Yes, they will work in established structures, but these structures are dominated by the West - G20, UN, BIS, IMF, World Bank, etc. There is likely some lack of trust by China and others of these institutions, wouldn't you think? For China, pursuing parallel paths is prudent, and I think that it is happening is virtually certain.
"Nothing says China only has the gold they say they have, just as nothing says the West has all the gold they say they have. Both have reasons to share the common lie."
It would cost the dollar if China said they had far more gold than they admit already, and if the US says they have far less. Yet both are possible, and plausible. First, the actual gold reserves are not audited anywhere. Second, it benefits both parties to share the same false information. Third, how much gold has the FED lent to bullion banks which have sold the gold to third parties? We don't know, other than it happens. And to my understanding, this gold is still shown on the FED's books. But if the banks sold the gold to a third party, is it not also on the third party's books as well? Yes, I think.
"China's reserves aren't worth much to the extent they are denominated in USD & EUR (among others). China knows this."
There may be reasons for the Yuan to be a strengthening currency. To the extent the reserves are in USD and EUR, the quality of reserves is not one of the reasons. It is well publicized that China is trying to diversify its reserves. Do we really know how much?
"It is in China's interest (and in the interest of the USG and EU) to lie - in the same direction - regarding China's holdings of these currencies."
Both parties have reasons to say that China's holdings of USD (and separately EUR) are higher than they actually might be. The US wants some semblance of credibility to the dollar, and China doesn't want to lose value in reserves...during its race against diversification.
"China is buying real assets, spending their fiat currency reserves - others still take dollars & Euros in exchange for real stuff."
This is the race - trade pictures of dead Presidents for real stuff. Is China already out in front of the crack up boom? Very likely.
"China, in combination with Russia could easily institute a gold backed currency. Both countries have a complimentary use for each other. While transitioning to a gold backed currency will cause short-term internal havoc in China, such havoc is coming anyway and the CCP needs some way out for the long term. The Chinese are nothing if not long-term thinkers."
Now, I am going way out there (in case you felt I wasn't out there already).
China has a problem. They have a problem no matter what they do. They must transition their economy because they know the US can no longer buy what they used to buy. And even if the US could, does China still want the paper in trade?
China is buying assets, locking up future supply, etc. These can easily be priced in dollars. A strong Yuan (relative to the dollar) would work wonders for controlling future price inflation in China (which is quite well baked in from the monetary side). What better way to strengthen the Yuan than tie it to gold? Maybe backed 20% or so. Then pay for the assets for pennies on the Yuan, so to speak.
Going to a gold backed currency will cause a large disruption to China's economy. But this disruption is here and now, and is only going to get worse no matter what. In this case, why wouldn't China try to gain some real long term benefit for this pain?
With Russia, there are plenty of gold reserves. With Russia, China secures long term access to commodities. With Russia, military equivalence with the West (if not superiority) is assured.
"This move will be the final dagger to the West's dominance ' a death blow to the self-inflicted wounds (both economically and militarily) begun in the early 1900s."
Inflation in the West skyrockets. With a destroyed currency (relative to the Yuan), what can the West buy?
Everyone looks at currency from the seller's perspective - product can be sold cheaper, therefore I can sell more (a false equation, but one parroted exclusively). However, in order to sell, one must buy. With a weakened currency, the West buys less, so it sells less. Let alone, the drastic impact to the standard of living brought on by mass inflation.
The West has been committing suicide since at least 1914 - so much happened then, but it is enough to say the FED, and WWI. WWII put the nail in the coffin, and having false gold-standards (and after 1971, no gold standard), removed all discipline from the system, allowing clear sailing for complete self-destruction. This end was certain, only a question of when.
"Germany (without EU baggage) and Japan would be natural fits for this China / Russia combination, they just need to figure out how to un-encumber themselves from a no-longer-welcomed tenant."
Germany and Japan bring technology that both China and Russia desire. Russia offers resources desired by both Germany and Japan. In fact, could Australia also be brought in to this new alliance? It makes more sense for Australia economically to be tied in here than with the West.
How does Germany, Japan, and maybe Australia break the current strings? I don't know, but it won't be the first time alliances change. Especially alliances brought on only because of conquest in war, as in the case of Germany and Japan.
"Unlike the West, China does not have a history of desiring global dominance - they just don't want to be dictated to about what they view as their own internal affairs. It is not likely that a new global elite will emerge from China."
If I understand correctly, China voluntarily stood down 500 years ago - destroying the fleet and all records, etc. They haven't explored far since. They just don't want to be told what to do. Given the way the world is turning, that isn't likely to be a problem for China in the coming years, especially under the scenario painted in this speculative piece.
What Would Friedman do, according to CATO?
Of course, we needed no further proof. It is well known that CATO represents the beltway libertarian view - the libertarian view that is acceptable in polite company. In other words, the view that excludes Lew Rockwell, the Mises Institute, and anyone associated with either.
However, we were handed further evidence in spades, courtesy of the following editorial:
"What Would Milton Friedman Say about Fed Policy Under Bernanke?"
http://www.cato.org/pub_display.php?pub_id=12502
This is a gem. For those of you who thought that libertarians believed in...liberty, well CATO has another idea. Let's look at some of the highlights:
"However, Friedman's views may not be well understood even by those who would claim him as their intellectual fountainhead — which could be problematic for policy-making."
Right off the bat, CATO is supporting "policy making", not so subtle code for government intervention, meaning market intervention by force and coercion. Isn't this a little wide of the libertarian mark?
"...the Fed should aim to stabilize inflation expectations."
Now wait a minute. Even much of the mainstream is beginning to recognize that the FED IS the CAUSE of inflation and inflation expectations. CATO appears not to even advanced this far from the command and control policies that have brought the world economy to the brink. The FED as the cause of inflation should aim to stabilize expectations? It has been said enough: since the creation of the FED almost 100 years ago, the dollar has lost well over 95% of its value. In the 100 years prior to this, the value has been almost completely stable.
"...the Fed should try to minimize swings in nominal income."
A Soviet Commissar couldn't have said it better.
"Similarly, were Friedman alive today, he would balk at the notion that the Fed is out of ammunition. He would remind us that in the early-to-mid-1930s, when the economic environment was far worse and short-term interest rates were near the zero bound, monetary policy easily generated a recovery. Therefore, the Fed could do likewise today.
"Friedman would likely make the case today for more aggressive monetary action. It is time for "Helicopter Ben" to earn his nickname."
The acceptable libertarian think tank is advocating for an even more aggressive FED policy than the one seen over the last two years. On the one hand, stunning. On the other hand, expected. This is, after all, CATO.
If one thing the last two years has proven, anything espoused by Chicago School monetarists (including Friedman) as regarding centrally planning the money supply is a failure. Nowhere was it ever expected that in one month a central bank would more than double its 95 year old balance sheet. If someone wrote a dissertation on the reasons why such beneficial actions would need to be taken one day, please let me know. If these desperate actions haven't convinced you of the fallacy of centrally planned money, then nothing will.
But of course, such central planning has been discredited - both in the Soviet Union, and now in the halls of the Federal Reserve. However, we shouldn't expect to read the obituary in the mainstream press. And of course, we will not read about it from CATO.
Some professors associated with GMU have come out against the FED (this was discussed heatedly at The Daily Bell more than once over the last month or two), and advocate free-market money and banking. GMU and associated institutions are supported by the Koch brothers, the same people that support CATO. It would be refreshing to read a strongly worded rebuttal to this editorial from one of the scholars.
However, we were handed further evidence in spades, courtesy of the following editorial:
"What Would Milton Friedman Say about Fed Policy Under Bernanke?"
http://www.cato.org/pub_display.php?pub_id=12502
This is a gem. For those of you who thought that libertarians believed in...liberty, well CATO has another idea. Let's look at some of the highlights:
"However, Friedman's views may not be well understood even by those who would claim him as their intellectual fountainhead — which could be problematic for policy-making."
Right off the bat, CATO is supporting "policy making", not so subtle code for government intervention, meaning market intervention by force and coercion. Isn't this a little wide of the libertarian mark?
"...the Fed should aim to stabilize inflation expectations."
Now wait a minute. Even much of the mainstream is beginning to recognize that the FED IS the CAUSE of inflation and inflation expectations. CATO appears not to even advanced this far from the command and control policies that have brought the world economy to the brink. The FED as the cause of inflation should aim to stabilize expectations? It has been said enough: since the creation of the FED almost 100 years ago, the dollar has lost well over 95% of its value. In the 100 years prior to this, the value has been almost completely stable.
"...the Fed should try to minimize swings in nominal income."
A Soviet Commissar couldn't have said it better.
"Similarly, were Friedman alive today, he would balk at the notion that the Fed is out of ammunition. He would remind us that in the early-to-mid-1930s, when the economic environment was far worse and short-term interest rates were near the zero bound, monetary policy easily generated a recovery. Therefore, the Fed could do likewise today.
"Friedman would likely make the case today for more aggressive monetary action. It is time for "Helicopter Ben" to earn his nickname."
The acceptable libertarian think tank is advocating for an even more aggressive FED policy than the one seen over the last two years. On the one hand, stunning. On the other hand, expected. This is, after all, CATO.
If one thing the last two years has proven, anything espoused by Chicago School monetarists (including Friedman) as regarding centrally planning the money supply is a failure. Nowhere was it ever expected that in one month a central bank would more than double its 95 year old balance sheet. If someone wrote a dissertation on the reasons why such beneficial actions would need to be taken one day, please let me know. If these desperate actions haven't convinced you of the fallacy of centrally planned money, then nothing will.
But of course, such central planning has been discredited - both in the Soviet Union, and now in the halls of the Federal Reserve. However, we shouldn't expect to read the obituary in the mainstream press. And of course, we will not read about it from CATO.
Some professors associated with GMU have come out against the FED (this was discussed heatedly at The Daily Bell more than once over the last month or two), and advocate free-market money and banking. GMU and associated institutions are supported by the Koch brothers, the same people that support CATO. It would be refreshing to read a strongly worded rebuttal to this editorial from one of the scholars.
Tuesday, October 12, 2010
Copyright at The Daily Bell
This is in response to two article at The Daily Bell, listed here:
http://www.thedailybell.com/1437/The-Tyranny-of-Copyright.html
http://www.thedailybell.com/1441/Copyright-Redux-and-the-Brilliance-of-Kinsella.html
Until recently, I have purposely avoided internally addressing this subject of IP, in whatever form (copyright, patent, etc.). For some time, at Mises by Kinsella and others, it had been addressed, but I ignored the subject - I think for two reasons: 1) on my "change the world if I could" list, I had several items far more valuable than this to me (for example, the four planks of the Daily Bell Platform all carry much more import), and 2) I didn't want to have challenged my belief that such protections were necessary in the forms currently practiced.
Over the last week or two, I have begun to cross into this swamp of my own creation. Therefore I found TDB's article today and yesterday quite timely.
It was the feedback from yesterday’s article that helped to clarify the issue for me. Such condemnation of TDB – aggressive and angry. And often, complete support that the state’s enforcement was necessary in this instance. This was quite disheartening to me. Feedbackers coming out foursquare on the positive benefits of government force in this matter.
Eventually, I went from disheartened to some real peace on this issue. Indulge me while I share my journey....
The state is the monopoly of legalized violence over a given geographical jurisdiction. For the moment, I avoid addressing my view of the "right" answer for protection of IP (if any), but I know the wrong one. For me, there is no cause that justifies praying to the state for the answer. The monopoly of legalized violence. I let that sink in while I read the feedback advocating a desire for this (inherently uncontrollable) beast to provide salvation.
This worship is most dangerous on items such as IP (also climate change, financial regulation, etc.). Inherently, the solution must be global. To allow a "leak" in the state's protection services of IP in any jurisdiction inherently leaves the floodgates open (as pointed out in today’s article) - unlike localized, "physical" crimes that may or may not be illegal in other jurisdictions (e.g. drugs, prostitution). These "preferences" can be quite localized.
Not IP. It must be enforced globally or it doesn't do the trick. (Perhaps one reason, for those who wonder why the PE “allowed” the internet, that they “allowed” the internet). Therefore, those praying to the state for salvation of IP are praying for the continued path toward one world government. I don't see how this is avoided. But even if it can be "localized", it is still praying to the state - the monopoly of legalized violence.
What is the private solution? I have some thoughts, but the reality is - I don't know. Thank God, like almost everything around me, human action has brought forth solutions to many problems I knew I had, and human action has created conveniences I never dreamed of. I don't have to have "the" answer for how a market might protect IP, just like I didn't have to come up with the answer for almost everything I enjoy in modern life. However, I am certain the answer does not lie in the state.
Philosophy does matter. Not "whatever works" or "expediency of the moment." Granting some people a monopoly of legalized violence is agreeing to your own death wish. People who are drawn to such positions in government are never agreeable to limiting the applications of force. We see this around us every day, and even those who see it most clearly can become blind to it if the subject is too close to home.
So there it is. Thank you feedbackers - not so much the ones who supported the DB's view (although you were quite wonderful in your comments) - but to those who so aggressively attacked the DB's position while advocating state force as the only/best solution. It was this attitude that reminded me that even the most seemingly rational people with monopoly power cannot be trusted to lord over the rest of us.
http://www.thedailybell.com/1437/The-Tyranny-of-Copyright.html
http://www.thedailybell.com/1441/Copyright-Redux-and-the-Brilliance-of-Kinsella.html
Until recently, I have purposely avoided internally addressing this subject of IP, in whatever form (copyright, patent, etc.). For some time, at Mises by Kinsella and others, it had been addressed, but I ignored the subject - I think for two reasons: 1) on my "change the world if I could" list, I had several items far more valuable than this to me (for example, the four planks of the Daily Bell Platform all carry much more import), and 2) I didn't want to have challenged my belief that such protections were necessary in the forms currently practiced.
Over the last week or two, I have begun to cross into this swamp of my own creation. Therefore I found TDB's article today and yesterday quite timely.
It was the feedback from yesterday’s article that helped to clarify the issue for me. Such condemnation of TDB – aggressive and angry. And often, complete support that the state’s enforcement was necessary in this instance. This was quite disheartening to me. Feedbackers coming out foursquare on the positive benefits of government force in this matter.
Eventually, I went from disheartened to some real peace on this issue. Indulge me while I share my journey....
The state is the monopoly of legalized violence over a given geographical jurisdiction. For the moment, I avoid addressing my view of the "right" answer for protection of IP (if any), but I know the wrong one. For me, there is no cause that justifies praying to the state for the answer. The monopoly of legalized violence. I let that sink in while I read the feedback advocating a desire for this (inherently uncontrollable) beast to provide salvation.
This worship is most dangerous on items such as IP (also climate change, financial regulation, etc.). Inherently, the solution must be global. To allow a "leak" in the state's protection services of IP in any jurisdiction inherently leaves the floodgates open (as pointed out in today’s article) - unlike localized, "physical" crimes that may or may not be illegal in other jurisdictions (e.g. drugs, prostitution). These "preferences" can be quite localized.
Not IP. It must be enforced globally or it doesn't do the trick. (Perhaps one reason, for those who wonder why the PE “allowed” the internet, that they “allowed” the internet). Therefore, those praying to the state for salvation of IP are praying for the continued path toward one world government. I don't see how this is avoided. But even if it can be "localized", it is still praying to the state - the monopoly of legalized violence.
What is the private solution? I have some thoughts, but the reality is - I don't know. Thank God, like almost everything around me, human action has brought forth solutions to many problems I knew I had, and human action has created conveniences I never dreamed of. I don't have to have "the" answer for how a market might protect IP, just like I didn't have to come up with the answer for almost everything I enjoy in modern life. However, I am certain the answer does not lie in the state.
Philosophy does matter. Not "whatever works" or "expediency of the moment." Granting some people a monopoly of legalized violence is agreeing to your own death wish. People who are drawn to such positions in government are never agreeable to limiting the applications of force. We see this around us every day, and even those who see it most clearly can become blind to it if the subject is too close to home.
So there it is. Thank you feedbackers - not so much the ones who supported the DB's view (although you were quite wonderful in your comments) - but to those who so aggressively attacked the DB's position while advocating state force as the only/best solution. It was this attitude that reminded me that even the most seemingly rational people with monopoly power cannot be trusted to lord over the rest of us.
Monday, September 27, 2010
Ambrose, you are getting warmer!
Ambrose Evans-Pritchard is getting warmer. In June, he wrote a commentary with the provocative title: "Time to shut down the US Federal Reserve?" I thought he finally got it, the FED is the problem and not the solution. It turns out he was only upset because some employee at the FED wrote that economics should only be discussed by those who have trained at an acceptable school. I wrote about it here:
http://bionicmosquito.blogspot.com/2010/06/ambrose-you-almost-fooled-me.html
Well, he is getting closer to the truth now. "Shut Down the Fed (Part II)" he calls it. His commentary is here:
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007777/shut-down-the-fed-part-ii/
"I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing."
He doesn't cut himself any slack after this opening paragraph, for example:
"So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control."
Ambrose is now getting much closer. He sees that the FED can only inflate, it can do nothing else. A simple look at the track record since 1913 makes this quite clear. In this time the dollar has lost over 95% of its value. For the 100 years prior to that, there was virtually no net change in the purchasing power of the dollar.
He is not yet all the way there however. Ambrose is still trying to makes sense of this madness within a worldview that believes the FED is there to keep inflation low and to maintain employment and economic growth. Yes, that is the stated mission. However it certainly is not the real mission.
The confusion clears up quite easily when one considers that the real purpose of the FED is to protect the big banks. Full stop. Keep them liquid. To the extent possible, keep them solvent. The FED does this by trading treasuries for junk, providing a backstop for every and any investment, keeping interest rates low, etc. Mostly it does it by inflating the currency. The FED is the backbone of a cartel.
With this understanding, the actions are quite consistent. The banks like inflation, they want inflation, they need inflation. Since 1913, they have received plenty of it. They need it in 2010 more than ever. Monetary control in a fiat environment is the greatest wealth transfer scheme ever invented, and the mothership of this scam is the FED.
The FED wants you to keep your eye on the CPI, while the scam is ongoing in the assets -- as assets are where the wealth is transferred. This is part of the game. As long as CPI is benign, the theft through asset inflation can go on uninhibited. Thus, all the productivity improvements over the last 100 years have been offset 20-fold by the devaluation of the dollar. This productivity has gone to the banks and those who collect interest on the fictitious money created by the FED and the fractional reserve banking the FED makes possible. What a tremendous transfer of wealth.
Ambrose, this is the next step you must take - the final step in the journey. The FED's purpose is not the one stated; the purpose is to protect the banks. It is a cartel. It inflates because this is good for the banks, it protects the banks, and it transfers wealth to the banks. It allows capital to be multiplied 10- 20- or 30-fold, with interest collected on multiples of the actual savings. All of this interest is taken from the masses, where real wealth is actually produced. Yet the masses get to enjoy only a fraction of the beneft, and over the last 40 years, maybe none of the benefit.
You are too smart not too see this and not to understand it. I suspect in a couple of months, you will write "Shut Down the FED (Part III), The Final Act". In this, you will state with no hesitation that the power over money cannot be trusted to a handful of men meeting in secret. The market can and must determine "money" as it is quite capable of doing - after all, the market resolves far more complex needs than a means to transfer and store wealth.
Historically the market has entrusted gold and silver to do this job. You will finally say it.
Then, I can finally say, welcome - you now get it.
http://bionicmosquito.blogspot.com/2010/06/ambrose-you-almost-fooled-me.html
Well, he is getting closer to the truth now. "Shut Down the Fed (Part II)" he calls it. His commentary is here:
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007777/shut-down-the-fed-part-ii/
"I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing."
He doesn't cut himself any slack after this opening paragraph, for example:
"So all those hillsmen in Idaho, with their Colt 45s and boxes of krugerrands, who sent furious emails to the Telegraph accusing me of defending a hyperinflating establishment cabal were right all along. The Fed is indeed out of control."
Ambrose is now getting much closer. He sees that the FED can only inflate, it can do nothing else. A simple look at the track record since 1913 makes this quite clear. In this time the dollar has lost over 95% of its value. For the 100 years prior to that, there was virtually no net change in the purchasing power of the dollar.
He is not yet all the way there however. Ambrose is still trying to makes sense of this madness within a worldview that believes the FED is there to keep inflation low and to maintain employment and economic growth. Yes, that is the stated mission. However it certainly is not the real mission.
The confusion clears up quite easily when one considers that the real purpose of the FED is to protect the big banks. Full stop. Keep them liquid. To the extent possible, keep them solvent. The FED does this by trading treasuries for junk, providing a backstop for every and any investment, keeping interest rates low, etc. Mostly it does it by inflating the currency. The FED is the backbone of a cartel.
With this understanding, the actions are quite consistent. The banks like inflation, they want inflation, they need inflation. Since 1913, they have received plenty of it. They need it in 2010 more than ever. Monetary control in a fiat environment is the greatest wealth transfer scheme ever invented, and the mothership of this scam is the FED.
The FED wants you to keep your eye on the CPI, while the scam is ongoing in the assets -- as assets are where the wealth is transferred. This is part of the game. As long as CPI is benign, the theft through asset inflation can go on uninhibited. Thus, all the productivity improvements over the last 100 years have been offset 20-fold by the devaluation of the dollar. This productivity has gone to the banks and those who collect interest on the fictitious money created by the FED and the fractional reserve banking the FED makes possible. What a tremendous transfer of wealth.
Ambrose, this is the next step you must take - the final step in the journey. The FED's purpose is not the one stated; the purpose is to protect the banks. It is a cartel. It inflates because this is good for the banks, it protects the banks, and it transfers wealth to the banks. It allows capital to be multiplied 10- 20- or 30-fold, with interest collected on multiples of the actual savings. All of this interest is taken from the masses, where real wealth is actually produced. Yet the masses get to enjoy only a fraction of the beneft, and over the last 40 years, maybe none of the benefit.
You are too smart not too see this and not to understand it. I suspect in a couple of months, you will write "Shut Down the FED (Part III), The Final Act". In this, you will state with no hesitation that the power over money cannot be trusted to a handful of men meeting in secret. The market can and must determine "money" as it is quite capable of doing - after all, the market resolves far more complex needs than a means to transfer and store wealth.
Historically the market has entrusted gold and silver to do this job. You will finally say it.
Then, I can finally say, welcome - you now get it.
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