Posted on 11/25/2010 9:06:54 PM PST by Pride_of_the_Bluegrass
Let me say that again. ALL MONEY COMES FROM DEBT (for those of us who suffered the most indoctrination by attending schools like Harvard, let's pause here for a moment so we can catch up to the rest of the class). This means in order for governments, businesses, and people to have the liquidity necessary to live, they must agree to sign over a claim on their assets to banks. As the banking system inflates over time passing out credit, which makes everyone feel good with more digits in their accounts, it gathers claims on all the assets in the system for its private capital holders. Admittedly, this is one way of facilitating development (good students would've figured out a better way had they not been stifled). But it's also the method for transferring everyone else's assets to the balance sheets of the capital holders behind the banks once deflation sets in.
(Excerpt) Read more at zerohedge.com ...
She laid it all out, spelled out the future of America in detail and listed all the reasons why it must happen and yet people belittle her as a no talent hack writer.
Dollars *ARE* created as debt. That is the mechanism for creating money in our system.
The FRNs in your wallet and money in your checking account and the bank reserves that Federal Reserve authorizes banks to create via computer.... These are debt instruments but they are backed up by what the Fed has on their balance sheets. The Federal Reserve balance sheets used be 100% US Treasury obligations and that backed up our currency. Obviously these are not commodities but people and banks worldwide have had great confidence in them and foreign banks and central banks keep them in their digital vaults to back up their (often pathetic) national currencies. Even in the Civil War all Treasury obligations were paid off in full
These days the Fed Reserve has all kinds of toxic crap on it's balance sheets that it swapped with the largest banksters. On paper these are temporary swaps but my opinion is they will in effect be permanent. The swaps meant banksters got US Treasuries to put in their virtual digital vaults which made these banks look much more solvent
So what are your FRNs backed now? Toxic debt such as mortgage backed securities and derivatives that banks and Wall Street wanted off their books. Your FRNs are still backed by Treasuries to an extent. My guess it is 50/50 these days as far as Treasuries and toxic garbage on the Feds balance sheets. The Fed Reserve and the crucial NY branch of the Fed are private banks. You can call them super banks that have their own agenda and interests and are beholden to no one. Not to Congress, not to the President, not to the voters and taxpayers of the United States of America. They do answer to their member banks that hold stock in them and get a 6% return (dividend) on it. http://en.wikipedia.org/wiki/Federal_Reserve_System
Also it is implied that that the Federal Government backs up the Federal Reserve. So if they get into a real jam the Feds can sell off some of their vast property holdings in our Western States (coal and other minerals to be mined and forests to be logged) to rescue the gangster/banksters at the Federal Reserve. Think China on that.
Someone once said something which I paraphrase as closely as I know how, The only legitimate function of the government is to protect the citizens from the criminals but inevitably the government USURPS the function of the criminal and becomes a greater threat to the citizens than the criminal could ever be.
In a nutshell that is what happens in all countries sooner or later depending on the structure of the society. Those who want to be left alone to earn an honest living and enjoy the fruits of their labor are overcome by the never ceasing industry of those who want to steal from the workers. My father, who used to work like a madman when it was needed and kick back and relax when he had the opportunity, used to say that a lazy person will work ten times harder trying to avoid work than he will ever work at honest labor. A lazy person trying to avoid work usually winds up as a criminal of one kind or another, sometimes if smart enough he becomes a government sanctioned criminal who is lauded as a “public servant”.
Here's my suggestion, read some honest economics and learn. Start with Henry Hazlitt's "Economics in One Lesson". When you're up to it, tackle Ludwig von Mises "Theory of Money and Credit", throw in Hayek, Rothbard and others. It's called the "Austrian School" of Economics, because many of the leading lights were from Austria and spoke their native Austrian language (according to Barack Obama).
It's this fractional reserve bank that causes inflation. The injection of "new money" into the economy, distorts the economy and leads to wrong economic decisions, because the measuring stick (the currency) is being diluted and distorted. Eventually, the malinvestments pile up and cause a crash. Before growth can resume, the malinvestments have to be washed out of the system, which is the opposite of what all the bailouts are doing.
It is you sir, who are uninformed, ie ignorant. The good news is that can be fixed with knowledge. Get thee some true knowledge.
you stopped a bit short...
the sheriff gets a cut of the action, EVERY action...
and as the city slicker needs to expand his operation, he merely asks the sheriff to print some more paper, of which the city slicker 'lawfully' gives another big chunk off the top to to keep the sheriff happy...
eventually, the sheriff decides that he wants to be the main player in the game, and bends the slicker and the farmer over, under the 'lawful' penalty of death from his 'lawfully' held guns...
somethin like that ???
You are the one making false statements and calling correct statements ignorant. Not me. FYI I have read all the books you mention.
Absolutely, Rip.
Generally, but with certain qualifications, true.
Suppose the Russians have discovered a rich vein of gold and decide to dump it. Or, suppose some lab has found a way to synthesize it economically.
The value of gold will decline.
It's a commodity.
When commodities are regarded the guarantor of value, we're in deep sh!t.
That's happening now.
On the other hand, work-- in the general sense-- doesn't always create wealth either. Example: the buggy whip makers add no appreciable wealth regardless their effort.
Likewise, novelty--invention, creativity has no inherent value outside of demand: figuring a way to increase the quality or volume of buggy whips is of marginal advantage at best.
Wealth can't be measured by any particular commodity, regardless it's rarity, or as some repository of accumulated labor.( a marxist notion)
It relies in the actual or anticipated utility of the thing.
Gold has value because it serves as an independent repository of wealth, and because it is for all intents and purposes indestructable.
Just like any other commodity it is subject to market forces. Increase supply without a concamitant increase in demand and the price will fall.
“When commodities are regarded the guarantor of value, we’re in deep sh!t.”
Not really. Commodities are a restoration from the insanity of fractional reserve banking. They have intrinsic value.
“work— in the general sense— doesn’t always create wealth either. Example: the buggy whip makers add no appreciable wealth regardless their effort.”
I did not say that all work creates wealth. All I said is that all wealth is created through work. You are quite right that work can in a sense be productive or unproductive.
“Wealth can’t be measured by any particular commodity, regardless it’s rarity, or as some repository of accumulated labor.( a marxist notion)”
True. Commodity values are always determined by supply and demand. However, so is one’s wealth. If one’s labour is in high demand, they are likely to be more wealthy than other people.
Thanks for you reply BenKenobi,
On my remark about work as the source of wealth, I was actually debating with myself—running down the alternatives if you will. I didn’t mean to suggest that you said that.
(At least I don’t recall it that way)
I just don’t trust the idea that Gold, or pork bellies or any commodity can store value or create wealth. On one hand they are potentially as unstable as stocks, and on the other, stagnant — like my old man once said about dead people:” you gotta take them everywhere they go.”
A material even gold offers little benefit beyond its purchasers and sellers, until someone does something to it— build electronics, make rapper JZ’s new gold caps, or the necklace I buy for my wife’s birthday (when it has great utility!)
Like you say, they are a refuge from stock bubbles inflation, panics and the like. It’s stupid not to use them in times like these. But it’s lamentable that we need to.
When capital flees to such harbors it’s bad three ways:
1. It shows that things are bad and that there’s no confidence. 2. It drives the price of raw materials up, and 3. It removes the capital from active investment to a relatively dormant stash which appreciates only while everything else decays. It compounds problems.
Disclaimer: I’m not an economist and don’t even play one on tv.
Most of my wealth is in commodities. They are also ‘productive instruments’, per se, as an economist would look at them.
I really don’t see it as a time to have substantial holdings in cash. I try to give what I can away to make for other ‘real goods’, that have benefit to other people, that won’t simply vanish in a puff of wind.
When the marxist leaves, I’ll consider otherwise, but until then, if he’s going to confiscate, he’ll have to have someone show up at my door.
BTW, they never pointed out, where I went wrong.
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