The Internet Reformation

A term I first heard at the Daily Bell, many years ago.  The Daily Bell offers a review of this “reformation,” examining the plusses and minuses.  It is worth reading.

I offered the following comment at the site:

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Very well stated, DB.

There is little doubt that the Dark Ages were not so dark.  There is also little doubt that along with positive change, the reformation brought negative.  Every technological, intellectual, and cultural advance brings the possibility of both more freedom and more control.

However, there is no doubt that the individual has a better possibility of feeling empowered when he has access to more information.  I find this a “good” in and of itself. 

In the meantime, there is significant value in finding others of what might be termed “the remnant.”

It is also empowering to find that there are many more of us than might fit in a phone booth.

If nothing else comes, this is enough. 

If I Can’t Have You, No One Will

O envy, root of all countless evils, and cankerworm of the virtues! All the vices, Sancho, bring some kind of pleasure with them; but envy brings nothing but irritation, bitterness, and rage.

-        Don Quixote

I have been thinking more about my afterthought to my post on the continued importance of the US dollar to the global financial system.  I think the main story is to be found in the afterthought – and I am wondering how I missed this the first time.

In the end, it is a story of envy.  Unlike jealousy, envy does not merely covet what it does not have; it destroys what it cannot have so no one else can have it.

London 1, Brussels 0

To summarize from the previous post, citing Ambrose Evans-Pritchard:

The euro share [of foreign exchange reserves] has tumbled over the last eight years from 28pc to 20.4pc, and is barely above Deutsche Mark share in the early 1990s.

The eurozone is crippled by the lack of a unified EU treasury, joint bond issuance, and a genuine banking union to back up the currency. It would require a change in the German constitution to open the way for fiscal union, an unthinkable prospect in the current political climate.

Despite Brexit, the British Pound is under no similar pressure.  It is starting to dawn on some that Brexit will end up being good for the Pound and bad for the Euro – and not the other way around (as almost every talking head threatened before the vote):

The BIS data showed that London’s share of global foreign exchange turnover has held steady at 37.1pc, down slightly from the last survey but higher than it was a decade ago. The eurozone share has fallen to 8pc.

Whether this will survive Brexit is a hotly-disputed question. Mr Jen, a Chinese-speaker from Taiwan, said Britain would flourish once it has broken free of a region caught in a failed currency experiment.

“London’s position is very secure. The talent is here and so is the scale. There is a very clear and strict rule of law. In five or ten years I think the pound will become a super-charged Swiss franc,” he said.

The Europeans did not come together in the wake of financial crisis, contrary to what was likely expected by the elite.  They formed no “unified EU treasury, joint bond issuance, and a genuine banking union to back up the currency.”  While Britain’s economy performs reasonably well, Europe continues to struggle; from Jeremy Warner:

The British economy sails on as if nothing has happened, but the European one continues to stagnate. It is as if the Brexit shock has been more powerfully felt in Europe than in Britain. Both France and Italy showed no growth at all in the second quarter, and now even the data from Germany is starting to look poor.

That the Eurozone economy is still struggling after everything that has been thrown at it almost beggars belief. In terms of stimulus, it is hard to know how much more of a following wind the euro area could have had. It’s been positively gale force. Austerity has been effectively ended, interest rates have been cut below zero, the economy has been flooded with newly printed money, the euro was devalued and to cap it all, there has been the monumental boost to disposable incomes provided by the low oil price.

What’s clear is that we are fast approaching some kind of tipping point which Brexit is very much a part of; the legitimacy of the entire European project is being questioned as never before, with every possibility that the EU will have changed fundamentally by the time the Article 50 negotiations on Britain’s exit conclude.

It is the Destiny of Mint to be Crushed…

…so says Waverley Lewis Root

“Sir,” said the first lieutenant, bursting into the Captain’s cabin, “the ship is going down.”

“Very well, Mr. Spoker,” said the Captain; “but that is no reason for going about half-shaved. Exercise your mind a moment, Mr. Spoker, and you will see that to the philosophic eye there is nothing new in our position: the ship (if she is to go down at all) may be said to have been going down since she was launched.” 

-        The Sinking Ship, by Robert Louis Stevenson

One can say the same for the European project: it “may be said to have been going down since she was launched.”

Wörgl Enters the Mainstream

The “Miracle of Wörgl,” Silvio Gesell, stamp scrip, Bernard Lietaer, Anthony Migchels; the memories flood my soul, like the time I ate street-side bar-b-que from a vendor in small town in Korea and felt it for the next four days…. And now, more than three years after my last writing on the topic…excuse me while I once again must offer tribute to the economic porcelain gods….

What is Wörgl and who are these characters that are causing such stomach pains in bionic?  Well, give me a moment to recover, and I will explain….

I have written several commentaries on this supposed Miracle of Wörgl.  The most concise was published at the Mises Institute site.  To make a long story short, I offer the opening paragraph from this post:

The "Miracle of Wörgl," refers to the story of currency demurrage and the impact it had on the economy of Wörgl, a small town in Austria. For a bill of such currency to retain its face value, the currency holder must pay a regular, periodic payment (a tax) for a stamp or other marking. Wörgl is regularly touted by advocates of demurrage as a successful implementation of such a currency, one designed to encourage velocity due to the incentive to spend it in order to avoid the periodic tax.

The theory behind the experiment of Wörgl comes from German economist Silvio Gesell (1862–1930).  He had many highly-respected fans at the time:

Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks ... I am a humble servant of the merchant Gesell.

— Prof. Dr. Irving Fisher

Quack.

Gesell's chief work is written in cool and scientific terms, although it is run through by a more passionate and charged devotion to social justice than many think fit for a scholar. I believe that the future will learn more from Gesell’s than from Marx’s spirit.

— John Maynard Keynes

Quack, quack.

Returning to the supposed miracle that occurred in this small Austrian town during the depression in the 1930s….  The town and surrounding region was suffering from significant unemployment.  The mayor convinced the locals to implement this scheme of currency demurrage – requiring a payment representing 1% of the face value of the currency every month in order for the currency to remain “good.”  The payment was evidenced via a stamp on the currency.

The “miracle” was a massive increase in projects financed by the government, thereby greatly increasing employment.  The ability to pay for these projects came from many sources, but the main one was that – in order to avoid paying the 1% fee as the end of the month drew near – the people used the currency to pay off their significant taxes owed in arrears.  They even paid taxes in advance.  This resulted in a major boon to the local government treasury.

The Austrian central bank shut down the experiment at about the same time all arrears had been paid.  In other words, the game was up one way or another.

So why is bionic regurgitating this bad meal, after more than three years?  OK, here goes: Want a Free Market? Abolish Cash.  So writes Narayana Kocherlakota.  Before I continue, who is Narayana Kocherlakota?

Narayana Rao Kocherlakota (born October 12, 1963) is an American economist and is the Lionel W. McKenzie Professor of Economics at the University of Rochester. Previously, he served as the 12th president of the Federal Reserve Bank of Minneapolis until December 31, 2015. Appointed in 2009, he joined the Federal Open Markets Committee in 2011. In 2012, he was named one of the top 100 Global Thinkers by Foreign Policy magazine.

Connected; well respected by the people who count.

He entered Princeton University at age 15 and graduated four years later with an A.B. in Mathematics in 1983. He earned a Ph.D. in economics from the University of Chicago in 1987.

A whiz kid; earned his Ph.D. at the most free-market economics school in the politically-acceptable world.

So what does Kocherlakota have to do with Gesell?  Let’s return to his article:

Exceptional Nation

If there’s one core belief that has guided and inspired me every step of the way, it is this. The United States is an exceptional nation.

-        Hillary Clinton, from her recent speech at the American Legion’s national convention in Cincinnati.

A lie, falsehood, or misrepresentation to be found in every sentence.

And it’s not just that we have the greatest military or that our economy is larger than any on Earth.

Well, I will give her that one.  It is true that the US has the largest economy, when measured by GDP.  That’s about it….

The United States certainly has the largest military spending of any country on earth; I don’t know if that translates automatically to “the greatest military,” especially considering that there hasn’t been a major war in which the US came out on the winning side since 1945.  So, I would label this a lie.

It is a lie that these are not the only reasons one might consider the US an “exceptional nation.”  If not for global fear of the US military and financial repression via the international standing of the dollar, who would listen to this supposedly “exceptional nation”?  (Hint: not Japan, not Germany and much of Europe.)

It’s also the strength of our values, the strength of the American people.

Explain the strength of those “exceptional” values to the millions of dead, injured and homeless throughout North Africa, the Middle East and Central Asia.

And part of what makes America an exceptional nation, is that we are also an indispensable nation.  In fact, we are the indispensable nation. People all over the world look to us and follow our lead.

They follow for fear of invasion or financial repression.

My friends, we are so lucky to be Americans. It is an extraordinary blessing.

“We” are lucky only because we have a very large ocean on each side of the continent protecting us from most attack – well, except for those either orchestrated by the US government or prompted in retaliation for actions taken by the US government.

It’s why so many people, from so many places, want to be Americans too.

In addition to the relative economic opportunities and relative freedoms offered in the US as compared to most places on earth, a big reason is that – unlike virtually every other square inch on earth – so far US territory has been relatively safe from the US military machine.  (Well, except for places like Waco, Texas and Ruby Ridge…and depending on your views of 911 and Boston.)

The decisions we make and the actions we take, even the actions we don’t take, affect millions even billions of lives.

Well, this is true also – that makes two.  Unfortunately, the actions affect billions virtually always to their detriment (see Syria, Libya, Iraq, Afghanistan, Pakistan, Ukraine, Egypt, Palestine, and Yemen).

Our power comes with a responsibility to lead, humbly, thoughtfully, and with a fierce commitment to our values.

Like “humbly” and “thoughtfully” cackling at the sodomizing and murder of Kaddafi.  She is at least right about the “fierce commitment to [her] values” part.

Because, when America fails to lead, we leave a vacuum that either causes chaos or other countries or networks rush in to fill the void.

When America leads, they create a vacuum that “causes chaos” and allows other “networks” to “rush in to fill the void.”  (See Syria, Libya, Iraq, Afghanistan, Pakistan, Ukraine, Egypt, Palestine, and Yemen).

The United States built the international coalition against ISIS.

I think she added a few words by mistake; should read “The United States built the international coalition against ISIS.”

You don’t build a coalition by insulting our friends or acting like a loose cannon.

“Loose cannon” – that’s a good one.  Hilarious Hillary!

At our best the United States is the global force for freedom, justice and human dignity.

At “his” best, one could say the same for Stalin, Hitler, Mao, and even Satan.  One could also say that “best” was never witnessed in any of these characters.  When was the last time “at our best” was witnessed in the behavior in any of the leaders of the United States government?

We stand up to regimes that abuse human rights.

Saudi Arabia?  Israel?  Turkey? 

We stand up for religious and ethnic minorities….

Christians in the Middle East? 

Maybe the soldiers of other nations wouldn’t have bothered, or maybe they’d have taken revenge on those family members [of bin Laden, in his supposed complex] of terrorists, but that is not who we are.

Wedding parties?

We’ll make a renewed push to reduce the world’s nuclear weapons.

Like announcing another trillion dollar program to further modernize and weaponized America’s nuclear arsenal?

Conclusion

Sadly, this stuff sells to a large swath of Americans.

There is nothing exceptional about citizens standing and saluting their government and their military – no matter how tyrannical.  There is nothing exceptional about praising soldiers who fight in foreign fields.  There is nothing exceptional about spreading values at the end of a loaded gun.

America is not an exceptional nation.  As far as empires and tyrannies go, it offers pretty standard fare.

The Reports of the Dollar’s Death are Greatly Exaggerated

NB: I have added an update, below.

Some facts worth keeping in mind:

The US dollar is tightening its grip on the global financial system at the expense of the euro, entrenching American hegemony and rendering the US Federal Reserve more powerful than at any time in history.

…the dollar’s share of the $5.1 trillion in foreign exchange trades each day has continued rising to 87.6pc of all transactions.

Roughly 60pc of the global economy is either in the dollar zone or closely tied to it through currency pegs or ‘dirty floats’, and the level of debt issued in dollars outside US jurisdiction has soared to $9 trillion.

It is much the same picture for the foreign exchange reserves of central banks, a good barometer of global trust. The dollar share has recovered to 63.6pc, roughly where it was a decade ago.

Outside of the dollar, basically the Chinese yuan has increased share at the expense of the Euro, which has lost share.

Conclusion

What isn’t happening?  The world isn’t walking away from the dollar.  Despite China, Russia, Iran and others establishing bilateral trade in their own currencies, despite the establishment of alternative global institutions such as the Asian Infrastructure Investment Bank, despite the dollar losing 96% of its value in the last 100 years…the needle hasn’t moved in any meaningful manner.

As I recall, once Rome started seriously devaluing the coinage it took a couple of centuries to hit bottom.

You might mark the beginning of this path for the dollar in 1913, with creation of the Federal Reserve.  It strikes me that the more appropriate mark would be 1971 and Nixon’s closing of the gold window.

Either way, we have a long way to go.

Update:  I have been thinking about further aspects of the cited article, written by Ambrose Evans-Pritchard.  First, more on the Euro:

The euro share has tumbled over the last eight years from 28pc to 20.4pc, and is barely above Deutsche Mark share in the early 1990s.

This is really a stunning statement.

The eurozone is crippled by the lack of a unified EU treasury, joint bond issuance, and a genuine banking union to back up the currency. It would require a change in the German constitution to open the way for fiscal union, an unthinkable prospect in the current political climate.

This was certainly the plan of the elite – throw Europe into a financial crisis in order to drive the continent to union.  It hasn’t gone to plan.

Then, London and the British Pound:

The BIS data showed that London’s share of global foreign exchange turnover has held steady at 37.1pc, down slightly from the last survey but higher than it was a decade ago. The eurozone share has fallen to 8pc.

Whether this will survive Brexit is a hotly-disputed question. Mr Jen, a Chinese-speaker from Taiwan, said Britain would flourish once it has broken free of a region caught in a failed currency experiment.

“London’s position is very secure. The talent is here and so is the scale. There is a very clear and strict rule of law. In five or ten years I think the pound will become a super-charged Swiss franc,” he said.

I might not go as far as “a super-charged Swiss franc,” but which currency will survive even past the next generation?  If you had to bet meaningful money on the Euro or the Pound…well, one of the two has a history that stretches back several centuries.

The Europeans did not come together in the wake of financial crisis, contrary to what was likely expected by the elite.  One might consider that, due to this “failure,” the Anglo-elite have thrown in the towel on its European integration experiment.  Bringing together the tribes has proven much more difficult than expected, perhaps. 

But why throw in the towel?  Brexit occurred to save the Anglo-Empire from the European continent – consider the stable position of London and the British Pound, and the aforementioned stable position of the US Dollar – by cutting it loose from its sinking brethren.

Finally: as the European masses have not gone along with pan-European integration (and the European elite have not been able to guide the masses toward this objective), are all of the mass-migration efforts in Europe designed to put the final knife in the possibility of Europe developing into a rival, another potential rival in a multi-polar world? 

If you are not with us, you are against us.  If you are against us, we must destroy you.