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Wednesday, October 24, 2012

End the pretense

The UK's central banker, Mervyn King, finally admits what was always apparent.  One wonders how long it will take Helicopter Ben to do likewise:
Warning that the next generation may have to live with the consequences of past excesses “for a long time to come”, he said Britain’s banks needed to drop the “pretence” that their debts will be repaid.

“I am not sure advanced economies in general will find it easy to get out of their current predicament without creditors acknowledging further likely losses, a significant writing down of asset values, and recapitalisation of their financial systems,” he said.

“Only then will it be possible to return to a more normal provision of the vital banking services so crucial to an economic recovery... Just as in 2008, there is a deep reluctance to admit the extent of the undercapitalisation of the banking system in parts of the industrialised world.”

He compared the situation to the “pretence that debts could be repaid” in the 1930s and added: “We must not repeat that mistake.”
They've already made the critical mistake, which was failing to shut down the UK's zombie banks and attempting to prop them up with massive amounts of money printing, government-incentivized lending, and stock market pumping.  But further financial raping of the economy for the benefit of the banks isn't going to restore them or the economy to health.

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49 Comments:

Anonymous Idle Spectator October 24, 2012 3:36 PM  

Unexpectedly!

Anonymous Noah B. October 24, 2012 3:45 PM  

But nothing like that could ever happen in the USA.

Blogger tz October 24, 2012 3:55 PM  

In 1920 we had a horrendous recession/depression, but it was over in a year since everyone went bankrupt and capital was redeployed. No one became zombies.

Japan is still the land of the rising dead. They lost two decades.

No amount of time will bring a zombie back to life.

I think it was Sweden who a few years ago did something similar - nationalized all the banks, let the unrecoverable die, helped or merged the recoverable, and let the healthy out.

Anonymous Noah B. October 24, 2012 4:07 PM  

You might be thinking of Iceland, tz. But you're right, the path they chose was the best way out.

Anonymous zeonxavier October 24, 2012 4:09 PM  

When does the pretense wear thin enough that the banks start toppling like dominos?

Blogger IM2L844 October 24, 2012 4:09 PM  

Speaking of government debt, this guy cracks me up: A Black Man's Hatred of Obama.

Anonymous VD October 24, 2012 4:11 PM  

You might be thinking of Iceland, tz. But you're right, the path they chose was the best way out.

No, it was Sweden. It was before the current financial crisis, so it escaped most people's attention.

Anonymous Anonymous October 24, 2012 4:25 PM  

Excuse my ignorance, but what is a zombie bank?

Anonymous Poli_Mis October 24, 2012 4:32 PM  

No Anonymous posts. Double ignorance FTW!

Anonymous Anonymous October 24, 2012 4:41 PM  

King is a smart guy (a former professor of mine). I figured he would eventually get around to this view despite the institutional bias at the BoE against it.

I have no such illusions with respect to the Bernank.

Cheers.

Anonymous Amir Larijani October 24, 2012 4:54 PM  

heavens no!

Anonymous JartStar October 24, 2012 5:03 PM  

If it’s too late to turn the Titanic, and it is inevitable that it will sink, then it is completely rational to enjoy the midnight ballroom dance as long until you drown. What difference will it make if the US bankrupts owing $50 trillion or $150 trillion, or even $100 quadrillion? It will never be paid off and things will just be written off in the resulting chaos regardless.

Assuming 20 years ago we could have even gotten a handle on the debt any daring politician would have been immediately voted out at the next election cycle and the incoming guy would have won by promising to fund everything that was cut.

Given human nature I fail to see how anything but the current outcome is remotely possible. Behavior economics is a fledgling field, but research shows people are completely, and stupidly irrational with money.

Anonymous Noah B. October 24, 2012 5:09 PM  

"Assuming 20 years ago we could have even gotten a handle on the debt any daring politician would have been immediately voted out at the next election cycle and the incoming guy would have won by promising to fund everything that was cut."

20 years ago I was urging people to vote for Ross Perot, since he was the only one even talking about paying down the debt. What I didn't know then was that the nature of the monetary system makes paying off the national debt impossible.

Anonymous Daniel October 24, 2012 5:17 PM  

You are missing something, JartStar. What is coming isn't death, but suffering. Fessing up now isn't going to do anything but bring a world of pain, yes, true.

Fessing up later brings a galaxy.

Guys like Ben Guggenheim had something on the Titanic disaster that we do not in the Financial one - the sweet release of a certain, ice cold, watery death.

Anonymous bw October 24, 2012 6:05 PM  

Sweden is also the country that has all but gone cashless.
Nationalizing banks. Everything tracked. Sounds like a win to me.


Anonymous Porky? October 24, 2012 6:17 PM  

What is coming isn't death, but suffering

Suffering is what we were made for, Daniel.

We are born unto trouble, as the sparks fly upward.

Bring it on.

Anonymous zen0 October 24, 2012 6:56 PM  

One wonders how long it will take Helicopter Ben to do likewise:

Rumor has it that if Romney wins, Bernanke will be dropped back into Princeton by helicopter to take a teaching position.

them that can, do.
them that can't, teach.

Anonymous Azimus October 24, 2012 7:05 PM  

JartStar October 24, 2012 5:03 PM
Behavior economics is a fledgling field, but research shows people are completely... ...irrational with money.


Is this statement intentionally ironic?


Blogger Unknown October 24, 2012 7:14 PM  

As was evident in Germany, the debts were irrelevant just as they are irrelevant now. A sovereign entity has no reason to borrow that which it has the exclusive right to establish as the means of exchange.

The purpose of sovereign debt issuance is to change the terms of the existing money in circulation, it has absolutely nothing to do with borrowing anything. It is an accounting exercise to better quantify how the money supply is expanding.

And remember, if you allow fractional reserve lending - you must have sovereign deficit spending otherwise exponentially increasing debts will consume an ever larger component of the GDP and personal household income. This is why the economy has sucked since the surplus days in the 1990s. There was not enough money in circulation, so people took out more and more loans.

Blogger Unknown October 24, 2012 7:21 PM  

Noah: Ross Perot is a fool.

By the 1990s, the deindustrialization of the US was complete. The National Debt is the singular source of wealth in the US. We compel most of the world to use US dollars for foreign exchange, and treasury debt is the primary means foreign entities participate in this system. 75% of all global trade is denominated in US dollars, which means 75% of all global trade transactions have to clear a US financial institution, which then takes a cut.

That's the US economy right there. If there was no national debt, the country would utterly collapse. We have no functional economy.

The wealthy advocate budget surpluses because it makes the middle class poorer. This was a concerted effort beginning in the late 1990s. The only way the middle class could continue to thrive as it had was to take out ever increasing amounts of debt, often simply to service existing debt.

The amount of household income devoted to debt service DOUBLED from 1990 to 2010.

Anonymous Azimus October 24, 2012 7:28 PM  

"Warning that the next generation may have to live with the consequences of past excesses"

This is why I am 100% sure the current model is doomed. The only consideration society makes for the future is that we make sure there's a tab for them to pay. At every level society focuses on "seizing the day" - from politicians vying for votes to businesses focusing on beating quarterly earnings estimates, etc., etc., etc. No one in any kind of position to do so meaningfully considers the future of our people or nation.

Debating the wisdom of it is one thing, but in 1930 when the economy sucked, America built hydroelectric dams, roads, canals, electrical infrastructure - things to provide a better future. In 2008 when the economy sucked we just gave everyone $600 to spend at Baskin Robbins and Wal Mart. What a difference.

The FedGov spends 84% of it's revenue on 3 things: keeping the unproductive fed, housed and healthy, maintaining an eroding empire that provides no return, and paying interest on money borrowed for basically the same thing.

Anonymous Azimus October 24, 2012 7:48 PM  

Unknown October 24, 2012 7:14 PM
As was evident in Germany, the debts were irrelevant just as they are irrelevant now.


They are only irrelevent as long as they do not effect the stability of the currency and the political system. As you see in the EU today.

A sovereign entity has no reason to borrow that which it has the exclusive right to establish as the means of exchange

Except where that is not true, as in the US system. Money creation is the privelage of the Federal Reserve, and not the sovereign government.

The purpose of sovereign debt issuance is to change the terms of the existing money in circulation, it has absolutely nothing to do with borrowing anything.

I tend to agree, however this is only true if the bond issue is not fully purchased and new money is created by the Fed to purchase. In a fully purchased bond issue the value of the money does not change because the supply does not change.

And remember, if you allow fractional reserve lending - you must have sovereign deficit spending otherwise exponentially increasing debts will consume an ever larger component of the GDP and personal household income. This is why the economy has sucked since the surplus days in the 1990s. There was not enough money in circulation, so people took out more and more loans.

I would like very much for you to expand on what you're saying here. The act of taking out a loan would increase the money supply, would it not?

Blogger ajw308 October 24, 2012 7:58 PM  

I don't know if we compel most of the world to use US dollars. For a long time I've thought the US dollar was quasi-backed by the price of oil since by purchasing so much of it, the value of the dollar was linked to barrel of oil. There's a lot of financial momentum there.

The Iranian Oil Bourse, the Chinese and a few other suspects have been trying to delink the US dollar from the global commodity that's helped stabilize it. I suspect that the growing cost of gas under Obama is as much due to his fiscal activities as it is due to the delinking with the value of a barrel of oil.

Blogger Joshua_D October 24, 2012 8:04 PM  

Daniel October 24, 2012 5:17 PM

You are missing something, JartStar. What is coming isn't death, but suffering. Fessing up now isn't going to do anything but bring a world of pain, yes, true.


Also, the amount of debt that gets run up will have a direct impact on how many real assets the thieving criminals in the Washington/Wall Street Axis of Evil can steal before the fit hits the shan.

Anonymous Josh October 24, 2012 9:14 PM  

As was evident in Germany, the debts were irrelevant just as they are irrelevant now. A sovereign entity has no reason to borrow that which it has the exclusive right to establish as the means of exchange.

The purpose of sovereign debt issuance is to change the terms of the existing money in circulation, it has absolutely nothing to do with borrowing anything. It is an accounting exercise to better quantify how the money supply is expanding.

And remember, if you allow fractional reserve lending - you must have sovereign deficit spending otherwise exponentially increasing debts will consume an ever larger component of the GDP and personal household income. This is why the economy has sucked since the surplus days in the 1990s. There was not enough money in circulation, so people took out more and more loans.


You wouldn't happen to be a greenbacker, would you?

Anonymous Para Noid October 24, 2012 9:22 PM  

I don't know if we compel most of the world to use US dollars.

Catherine Austin Fitts, who has been in a position to know, certainly thinks so - and it is done with the U.S. military. To your point, specifically right now in the M.E., on which we are oil dependent. Have we "deposed dictators" who happened to be seeking other currecy to sell their oil?

the growing cost of gas under Obama is as much due to his fiscal activities as it is

It is a paper bubble. That is why it fell as fast as it did 2 or 3 years ago. Price dropped 50% in what - 8 to 12 weeks? That has nothing to do with Government policy or supply and demand or "costs" by the oil producers. It's a buy up/sell off, used for political purposes as well as "investment". That last dump was just before an election. Imagine that.

"One of the things that is interesting about reading conspiracy theory is that much of what folks think is conspiracy is really many people acting in concert to make or protect their money." - Catherine Austin Fitts



Anonymous zen0 October 24, 2012 10:05 PM  

As was evident in Germany, the debts were irrelevant just as they are irrelevant now. A sovereign entity has no reason to borrow that which it has the exclusive right to establish as the means of exchange.

All the Keynsians say that, but it is an assertion without proof. One has to be more specific, like, HOW does debt matter?
The Central Bank of Canada is threatening rate increases and using the growth in household debt as a reason.

If debt did not matter, there would be no fiscal crisis.

If debt did not matter, there would be no unemployment and no one on food stamps.

Anonymous zen0 October 24, 2012 10:37 PM  

If debt did not matter, the world banking community would not agree to the Basel 111 initiatives, which require 5 times more capitalization for banks and more for other financial institutions.

If debt did not matter, there would be no crisis in Greece, or Spain, or Portugal, or Italy.

If debt did not matter, I could buy whatever I wanted any time I wanted it.
If debt did not matter, the Sun would not need to rise, nor the Moon give her light, nor the street sluts prowl the alley wayz, nor would the nagging wantoness in my belly be satiated.

Without debt, life would not be possible!!

Blogger Unknown October 25, 2012 12:04 AM  

"They are only irrelevent as long as they do not effect the stability of the currency and the political system. As you see in the EU today. "

This is true. The EU however is a different animal. What you can see in Europe is the crucial issue I am making. Money is a social construct. Different people have different ways of life and require different monetary policies. This is expressed via variable levels of deficit spending between countries.

"Except where that is not true, as in the US system. Money creation is the privelage of the Federal Reserve, and not the sovereign government. "

You are mistaken. Congress can at any time disband the federal reserve. The treasury can in fact issue currency created by fiat, and has done so in the past.

"I would like very much for you to expand on what you're saying here. The act of taking out a loan would increase the money supply, would it not?"

And what happens if the only way you can expand the money supply is by issuing new loans? What if the only way you could pay your credit cards was with cash advances from other cards? You wouldn't last long.

This is why deficit spending is essential, and why budget surpluses are evil.

Blogger Unknown October 25, 2012 12:09 AM  

"The FedGov spends 84% of it's revenue on 3 things: keeping the unproductive fed, housed and healthy, maintaining an eroding empire that provides no return, and paying interest on money borrowed for basically the same thing."

For my entire life, I have been hearing this. What you say is true for many countries, maybe most, but not the United States.

The national debt provides an ENORMOUS benefit. I cannot stress this enough. It is the single greatest driver of the economy. If you don't get that, you'll spend the next several years entirely perplexed as to why the economy hasn't crashed yet.

It's easy. This country exists via plunder in a very obtuse fashion, and we are extraordinarily good at it.

Anonymous Aviendha October 25, 2012 1:01 AM  

The national debt is the result (at least the recent growth) of deficit spending which helps the economy, and gives the world some place to park their reserves even if it is a low return. The USD and the fact that many commodities particularly energy commodities are brokered via USD provides benefit. Seigniorage provides benefit. I for one appreciate the post 'Unknown' and would like you and others to expand on it.

The economy hasn't completely crashed due to the deficit spending. The economy does not necessarily equal stock valuations but it is interrelated. Am I completely off the mark? I realize I'm not super clever but it's hard to be with this smarter than most audience.

Anonymous Noah B. October 25, 2012 1:13 AM  

"It's easy. This country exists via plunder in a very obtuse fashion, and we are extraordinarily good at it."

And if you have dollar-denominated assets (except physical commodities), it's you who's being plundered. It's basically just another tax.

"That's the US economy right there. If there was no national debt, the country would utterly collapse. We have no functional economy."

You have no idea what you're talking about. The US is extremely productive, largely thanks to ever-increasing automation, even though the economy is hamstrung by excessive regulations, high overall tax rates, ever-present threats of nonsensical litigation, and idiotic trade policies.

"The only way the middle class could continue to thrive as it had was to take out ever increasing amounts of debt, often simply to service existing debt."

"This is why deficit spending is essential, and why budget surpluses are evil."

You fail to understand that the entire problem is the debt-based monetary system itself, which favors well-connected bankers who are able to profit from money they borrow at lower cost than anyone else. Should they happen to lose, those particular bankers might lose their jobs, but they will be replaced with new ones. If we stay with the system, the only guarantee is that the people will fall increasingly under the control of the government and the banks. That's why ending the Fed and ending the system of debt-based money is the only way out. Andrew Jackson understood this well enough, and it's no accident that the strongest period of economic growth in US history occurred when there was no central bank.

Anonymous map October 25, 2012 1:21 AM  

Unknown is right, but not for the reason he sees.

American wealth is built on taking advantage of the mercantilist system that underpins the world economy. Basically, America became the importer of last resort, the one nation willing to take in all of the exports of world's export-driven economic systems.

See, there is no free trade. Nations followed Japan's example of focusing on exports and restricting imports. The trouble is, if everyone is exporting and no one is importing, then who is buying all of these exports? The nation that positions itself to do so. The world is in a prisoner's dilemma: it has to sell to the United States because there is no where else to move their output. The "global economy" is just the American economy extended globally.

The world cannot make a judgement call based on American indebtedness or the value of US currency or the lack of tradeable goods because the disadvantage of being a first mover is too great. If Honda decides that it does not want to export cars to the US because it does not want US dollars, then, so what? Honda goes out of business and Kia slots into its place.

The US economy is, however, largely self-sufficient in manufacturing food, weapons and medicine, exactly what you need to maintain a war machine. It also exports the world's most valuable commodities: making local dictaotrs, warlords and petty politicians rich and powerful.

You will never see a Greece-style problem in the US. Greece neither exports anything valuable nor is it key importer. Greece is toast.

Anonymous Roundtine October 25, 2012 1:52 AM  

I'm reading a good book, Debt: The First 5000 Years. Interesting how credit systems grow and collapse throughout history, but the book gets to fundamental ideas of debt.

The national debt provides an ENORMOUS benefit. I cannot stress this enough. It is the single greatest driver of the economy. If you don't get that, you'll spend the next several years entirely perplexed as to why the economy hasn't crashed yet.

The U.S. could plunder more if it saved. Then the only way for foreigners to obtain U.S. currency would be to sell Americans their land, factories, art, gold, etc. Imagine if Scotland issued the reserve currency.

But yes, I love it when even Ron Paul says let the people keep more of their money, or Obama says he'll use savings from defense cuts. There are no savings, it's all borrowed.

Anonymous Josh October 25, 2012 7:44 AM  

The national debt provides an ENORMOUS benefit. I cannot stress this enough. It is the single greatest driver of the economy. If you don't get that, you'll spend the next several years entirely perplexed as to why the economy hasn't crashed yet. 

What is this ENORMOUS (if you write it in all caps it must be true) benefit? How does our national debt drive the economy?

Anonymous Azimus October 25, 2012 8:56 AM  

Unknown October 25, 2012 12:09 AM
The national debt provides an ENORMOUS benefit. I cannot stress this enough. It is the single greatest driver of the economy. If you don't get that, you'll spend the next several years entirely perplexed as to why the economy hasn't crashed yet.


I do understand the benefit of being the de-facto global reserve currency, as it provides more stability to the purchasing power of the dollar by creating a higher demand and of course the 3-4% "off the top" we get in any international trade.

I also understand that we basically get our energy resources on interest only by buying a billion in petroleum and then selling the same party a billion in T-Bills @ 0.25%.

And I understand these two things create a demand for dollars (and dollar-denominated financial instruments) that keeps the purchasing power stable. I get all that.

But this is, IMO, akin to saying "Look how great the heroine makes you feel!" Eventually you're going to destroy your body (look at what you yourself admit has happened to the US economy), and even the heroine won't be able to keep you going. This is a system that is almost completely unethical and can only be maintained, in the long term, by force. It is a very delicate equilibrium dependent on fear in those who understand the system to remain compliant and promotes ignorance for the rest (the vast majority). It actually follows very closely my first post - it lives for the "now" and not for the future.

Blogger Unknown October 25, 2012 11:04 AM  

"You fail to understand that the entire problem is the debt-based monetary system itself, which favors well-connected bankers who are able to profit from money they borrow at lower cost than anyone else."

I won't respond to the rest of this post, because you seem to be infected with the libertarian virus that prevents you from grasping reality.

There has never been an advanced civilization in the history of mankind that did not employ significant money lending combined with inflationary monetary policies.

Fine. You think money lending is bad. Then what is your solution? Do you really think it exists simply to rape people? No. It is a proven motivator, especially of those of average ability. What is your replacement?

What I am arguing is that money exists only because a government demands its payment in taxes. The government has the right, and obligation, to regulate how money is used to maximize productivity and efficient exchange. The extreme corruption of which you speak should be banned. Banking is more similar to a public utility than an actual productive enterprise, and it should be treated as such.

Blogger Unknown October 25, 2012 11:07 AM  

"The U.S. could plunder more if it saved. Then the only way for foreigners to obtain U.S. currency would be to sell Americans their land, factories, art, gold, etc. Imagine if Scotland issued the reserve currency. "

I'm not advocating this particular system, I am simply describing what it is. If you study this stuff more, you will see that all empires have thrived by creating demand for their currency over a large geographic area. Historically, this was achieved through the collection of taxes. The US took a novel approach in hijacking global trade, such that we compel demand for our currency throughout the world, far beyond our borders and the reach of the tax man.

I would much prefer traditional plundering, especially in places like Africa.

Blogger Unknown October 25, 2012 11:15 AM  

"What is this ENORMOUS (if you write it in all caps it must be true) benefit? How does our national debt drive the economy?"

Josh, dispense with the insults. I don't have time to cite every single thing. There is nothing I can write here that will perfectly explain to you how our financial system works. All I can do is attempt to rhetorically get you to start asking questions, and hope you will spend the time reading about these things. To fully understand our monetary system will take at least 6 months. This is not easy stuff.

In any event, if you are unaware how much of the GDP is generated from the FIRE economy, I can't really help you. All I can say is if by some change in fate, the US can no longer maintain military hegemony across the world, Wall Street and all the wealth that comes from it will be gone.

The other concept, which I can't easily explain in an post, is this financial system allows us to export inflation. Yes, the US has been printing a great deal of money. No, hyperinflation is not here and won't be for some time. This is why. To understand the exact mechanism, you will need to do a LOT of reading.

How many people on the far right have been clamoring about Weimar inflation? It hasn't happened. How many years must go by until people change their mind?

The sad reality is this Imperial system I describe could easily continue for another 20 years, at which point it will be too late to save European civilization in America.

Blogger Unknown October 25, 2012 11:21 AM  

"But this is, IMO, akin to saying "Look how great the heroine makes you feel!" Eventually you're going to destroy your body (look at what you yourself admit has happened to the US economy), and even the heroine won't be able to keep you going. This is a system that is almost completely unethical and can only be maintained, in the long term, by force. It is a very delicate equilibrium dependent on fear in those who understand the system to remain compliant and promotes ignorance for the rest (the vast majority). It actually follows very closely my first post - it lives for the "now" and not for the future."

Again, I am not advocating this system. As I said in a previous post, the danger is too many people of the New Right believe in this libertarian nonsense. They have for five years told us hyperinflation and economic collapse is right around the corner, meanwhile nothing could be further from the truth. How many more years must go by before people start questioning these dire predictions?

We don't but a few decades to save European civilization in the Americas. There is no more time to waste on fantasies that are obviously proven wrong.

Anonymous Noah B. October 25, 2012 12:01 PM  

"There has never been an advanced civilization in the history of mankind that did not employ significant money lending combined with inflationary monetary policies."

As I pointed out previously, the US did not generally have inflationary monetary policies from 1832 to 1913. This was the greatest period of economic growth in US history, and probably in world history. You have offered no rebuttal for this.

"Fine. You think money lending is bad."

This is a straw man -- I never made a blanket statement that "money lending is bad."

"Then what is your solution? Do you really think it exists simply to rape people? No. It is a proven motivator, especially of those of average ability. What is your replacement?"

As I said before, ending the debt-based monetary system would be a good start. The current system of money based on debt ensures that interest will always be paid to the bankers, and it puts them perpetually in charge of the economy. Yes, this system exists to guarantee that big banks will profit. The replacement is simple: freedom. People should be free to use what currencies they like. They should be free to borrow and lend as they like, provided it's an entirely private matter and no one else is dragged into private business by virtue of government guarantees to banks.

"What I am arguing is that money exists only because a government demands its payment in taxes."

It's obvious from this statement that you are parroting something you've previously read but failed to comprehend. Money came into existence to facilitate trade and existed long before governments did, and individuals engaging in trade were free to choose what was mutually acceptable as money. The fact that laws requiring taxes to be paid with a certain kind of money guarantees demand for that money is an entirely separate issue.

"The government has the right, and obligation, to regulate how money is used to maximize productivity and efficient exchange."

This is merely an expression of your own beliefs, and in saying this, you reveal that you are a statist who believes in the supremacy of government over individual liberty. Most of us here probably do not believe that government has "rights" of any kind and do not accept that it is the duty of government to control the economic activity of individuals. Certainly, I do not accept that.

"The extreme corruption of which you speak should be banned. Banking is more similar to a public utility than an actual productive enterprise, and it should be treated as such."

Oh, I see -- the problem is that we just don't have enough laws outlawing fraud, theft, and corruption. To the statist, the solution is always more government control, regardless of what twisted and ugly form that solution may take.

Anonymous Josh October 25, 2012 12:05 PM  

Josh, dispense with the insults. I don't have time to cite every single thing. There is nothing I can write here that will perfectly explain to you how our financial system works. All I can do is attempt to rhetorically get you to start asking questions, and hope you will spend the time reading about these things. To fully understand our monetary system will take at least 6 months. This is not easy stuff. 

That's not an answer, your naked assertion has no merits.

Anonymous Josh October 25, 2012 12:09 PM  

What I am arguing is that money exists only because a government demands its payment in taxes. The government has the right, and obligation, to regulate how money is used to maximize productivity and efficient exchange. The extreme corruption of which you speak should be banned. Banking is more similar to a public utility than an actual productive enterprise, and it should be treated as such.

What gives the government the right to regulate the money supply? They've had that for a hundred years, look what's happened to the value of the dollar.

Anonymous Noah B. October 25, 2012 12:10 PM  

"Josh, dispense with the insults. I don't have time to cite every single thing. There is nothing I can write here that will perfectly explain to you how our financial system works. All I can do is attempt to rhetorically get you to start asking questions, and hope you will spend the time reading about these things. To fully understand our monetary system will take at least 6 months. This is not easy stuff."

Josh is well respected here and has consistently proven himself to be thoughtful and knowledgeable. He asked you a direct question, and the rules require you to answer.

"We don't but a few decades to save European civilization in the Americas. There is no more time to waste on fantasies that are obviously proven wrong."

Here's another direct question. If the policy of infinite borrowing and spending is working so well, what is the nature of this imminent threat to European civilization in the Americas? Global warming/climate change? Animal spirits angry at the libertarians?

Anonymous Josh October 25, 2012 12:22 PM  

Here's another direct question. If the policy of infinite borrowing and spending is working so well, what is the nature of this imminent threat to European civilization in the Americas? Global warming/climate change? Animal spirits angry at the libertarians?

Joos. Duh.

Anonymous duckman October 25, 2012 2:30 PM  

1930?

Blogger Unknown October 27, 2012 8:33 PM  

"It's obvious from this statement that you are parroting something you've previously read but failed to comprehend. Money came into existence to facilitate trade and existed long before governments did, and individuals engaging in trade were free to choose what was mutually acceptable as money. The fact that laws requiring taxes to be paid with a certain kind of money guarantees demand for that money is an entirely separate issue."

Noah, you're being an ass. So, I'm not going to bother responding to everything you wrote.

There is ZERO evidence for what you say. From the dawn of civilization, sovereignty meant to tax a populace in a given geographic area and to demand payment in a currency established by the state. The fantasy that rational actors decided one day to use money couldn't be further from the truth. It's in fact so absurd, even neoliberals now admit it's an obvious lie.

The archaeological evidence alone is overwhelming.

Within a generation of the collapse of any major empire, people resorted to barter. From Roman England to Mongol controlled lands. As soon as the tax man stopped coming, no one bother to obtain the currency of the empire.

As for the period preceding 1913 - you have no idea what you're talking about. How do you think railroads were constructed? And canals? And what about the Civil War?

Anonymous Stilicho October 28, 2012 7:35 AM  

The extreme corruption of which you speak should be banned. Banking is more similar to a public utility than an actual productive enterprise, and it should be treated as such.

Yeah, you just need to get some honest people to perpetuate the fraud. That'll work.

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