Bob Green Innes,


curmudgeon

Hamiltonian by birth & occupation!  

.... seeking to restore values, traditions, institutions, laws and protections Canadians once enjoyed
      .....lost by apathy
          ..... but stolen nonetheless




Jump to Part 1 - Economic Meltdown - The Risk of Being Right. Post #10.

Jump to Part 2 Banking and Money Creation - a key concept (Post 8)

Jump to Part 3 - Jawdropping News - How they lied to us about the first bailout being less than a trillion. post #12.

Jump to Part 4 - The Fight - Battle between inflation, deflation and business as usual.

Jump to Part 5 - Cycles - Can history answer the question?


Just for fun, jump to another page more about our local issues in Hamilton. On top is bizarre account of some reserve accounts kept by my city that illustrate the kind of wacko days we live in - a staid Canadian mid sized city, already on the ropes employment wise, making risky multi million financial investments in ABCPs and student loans and nobody saying anything.

Preamble & recent developments

(#21 - Posted on a foolish April day, 2011)

Readers new to this thread might want to go directly to Part 1. I've often been accused of being long winded so, at the risk of losing many important details, you might also want to jump to a diagram that tries to capture the entire process of money creation in a way that encapsulates the machinations that are confusing people.

Things have moved on since I started this thread. The inflation-deflation thing seems to be resolving itself into - "both", somewhat similar to the stagflation of the '70s. That is, wages, home values, non-productive asset values will deflate while commodities, food, costs of living will inflate. Your dollars will continue to lose value, as they have for like, forever. The only question is now will there be a desruptive hyper stage, or not. "They" are trying their best to avoid that, and who can blame them. But to maintain confidence, the cost is truth. Thus the people are kept in the dark as to what is really going on - aren't we always!

We in Canada have just decided to have a federal election, which is an excellent opportunity to bring the concerns of this thread to the fore, and the only party willing to discuss such issues is the Canadian Action Party with their idea of restoring the Bank of Canada, not to mention the nation itself, to its former sovereign independence. Happily, they haven't yet figured out how curmudgeonly I am, so it looks like I'll be trying to represent them in Hamilton East- Stoney Creek. Trying is the operative word, it's an uphill struggle, but hopefully, as folks cotton on to what is happening, things will progress. By the by, we will explore the BOC idea in further detail.

A recent article in Forbes is an example of how the money issue is slowly progressing into the mainstream. The author, Louis Woodhill says "Stop The Madness: Make The Dollar As Good As Gold". He lays out 4 possible methods to allow this to happen and while I always appreciate having alternatives, it seemed he was only able to prefer his #4 by positing a free lunch aspect to the idea that I could neither follow nor accept. Maybe someone can help me out. Maybe politicians will be able to deliver a free lunch somewhere along the way, but somehow I doubt it.... and think we better not be depending on it.

And now, dear reader, please take a deep breath and dive in as I explore the whole issue of money, whence it came and what seems to be happening - to yours .....


Part 1 Economic Meltdown - The Risk of Being Right (Post #10)

Can we survive how they're fixing the system?

Most folks, perhaps you, are betting that somehow, they will eventually fix the system. Everybody worries, nobody panics except a few tin hat survivalists and conspiracy nuts. While we hear about bailouts, quantitative easing, & bankruptcies, as long as we still have our job or pension/social security income, what can we do about it - so who cares, right? Not most people I run into. Don't want to to talk about it, even at election time. Politicians and the media pontificate as if they have all the answers, convincing most that these troubles are not too serious, just give it time. Any talk of Depression 2 is treated dismissively. In market circles, that is called complacency. Since Canadian banks did ok, I call it smugness.

I have a hard time with this. First, I have been closely following the situation since the tech meltdown, and receive regular mailings that indicate we are headed for major 'adjustments', economic, social, political, even military. Second, I'm changing my mind about the tin hat brigade - they sound much more sensible than mainstream media (MSM) - their ideas are being vindicated. It has not been easy to think what should be done when everyone around is business as usual, and adjustments like paying down debt are difficult, inconvenient, or just 'over-the-top'.

My basic tool is an open mind and a healthy skepticism of our received values, politics, etc.

Nothing for us, money for their friends

Very few changes have been made - some countries tried to stop shorting (see link) in various ways and for various periods. Other than weak reforms such as the Frank-Dodd bill in the US, the system is much as it was before 2008. This is in stark contrast to what Volker did in the early 80s and what FDR did to control the banks in the 30s. I cannot understand why Obama just doesn't drag out the old 30s lawbooks and push the reset button. Well, OK, i do understand - Goldman Sachs & their bank buddies are the biggest contributors to BOTH parties and the US political system is completely corrupted by lobbyists' money ($65 million PER rep PER year!, $600 billion to fight the above mentioned 'reforms'.) Unfortunately, that limited fight drained the political will for reform of the banking sector.

What are the chances this abomination (treason?) against the American people (Canadians= collateral damage) will be unwound? I'm betting it wont be, at least until things get much worse. I hope I'm wrong because no amount of preparation is enough.

Normal capitalism would just let companies fail. Failure, now called creative destruction, is the secret of capitalism's success, painful though it might be. Widespread failure is called recession, even depression, but left to its own devices, history of the centuries before 1913's alteration of the US monetary system shows that repair and relief comes of its own accord relatively quickly, more or less. Now we are driven by too-big-to-fail-fear, instead of FDR's admonition that the only thing we have to fear, is fear itself.

What they are doing is trying to fix the system by throwing money at it - called Quantitative Easing, now on its second round, more to come, both here and in Europe. Instead of giving people money to put in their bank accounts, they are essentially giving money to banks to, um, repair their balance sheets. They don't dwell on the bonus thing. The problem is that nobody is admitting how big the problem is and how much money it will take to repair it. All the (US, European) banks are lying, covering up, dragging their feet. This is more or less the approach Japan took and it has been mired in no growth for two decades with worse to come. But we still buy a lot of Japanese stuff so their problems have been mitigated. We also hear of some austerity measures, which to date have been inadequate, and resisted anyway, because it comes usually from the IMF, the external 'enemy'.

Inflation, deflation

Where is the inflation that would normally result from quantitative money creation? They tell us not to expect any because all the money is doing is balancing the liquidity (amount of money in existence/ ability to borrow money) that is drying up (deflating). Official gummerment lies, er statistics show only a few percent inflation. Families and renovators know better. They pay the real prices for stuff. Web sites such as shadowstats.com have pieced together the real numbers and charts showing real inflation (double digit), real unemployment (double what the gummerment says) and real economic growth (shrinkage really), once real inflation is factored in. The middle class and real wages have been shrinking for decades - but I hope you knew that already. The story of how the gummerment achieves this corrupted story is quite fascinating, but that's for another day. Just keep in mind that the gummerment and the media** (for their own reasons) would prefer you didn't know.

The war between inflation and deflation is real enough - houses, consumer spending and certain sectors are still deflated/deflating (in real terms) because of the lack of credit, tighter lending criteria, unemployment, increased (panicky) savings, etc. Where is all the created money going? Into liquid assets (stocks, bonds), commodities and, er, bonuses. But because life is going on, day-to-day, people are confused. Bankers like it that way.

Understanding why requires a brief look at banking.

First however, I will try to summarize what we face in terms of problems.
PROBLEM SOLUTION STATUS REMARKS
Bailout money, good now / bad later (inflation) Stop. Help people instead of bankers Continues to infinity will destroy western currencies. Leads to hyperinflation.
Excessive Leverage (=bad loans) Restrict leverage like Canada through government control Leverage is contracting as bankers worry about repayment Got to be 50:1 instead of a reasonable 5:1

= Expansion now, crash later

Securitization - selling loans/ mortgages to investors wanting income,

Causes loss of responsibility

Abolish or regulate heavily Very slow. Bankers prefer you to take the risk. Caused sub-prime meltdown as bankers felt free to make NINJA loans
Derivatives = 'weapons of mass destruction' - Completely unregulated Abolish or regulate heavily Very slow. Requires bankers to come clean therefore no action. This mountain = 100 x world economy
Uncontrolled, instantaneous global money flows Control, Tobin Tax to slow down speculation Discussed, not implemented? Swamps whole economies, then dries them up by leaving.

Destabilizes everybody in aftermath

Bank integration (retail+ investment + insurance + +

brings in perverse incentives & greater risks

ReEnact Glass-Stegal act of 30s No action. Bankers too strong Undermines trust, enslaves people
Short selling, naked short selling - creates duplicates, counterfeits, destabilises markets and employers, non-transparent, dishonest to unsuspecting buyers

Short ETF's - makes shorting easy for anyone.

Abolish or restore uptick rule. Hang naked shorters (generally the biggest banksters). Tobin Tax on hedge funds and similar short speculation Many countries curtailed shorting in certain sectors temporarily. A few countries enacted subsequent controls. The manufacture of virtual shares, bonds, undermines value but is not disclosed to the public. Instead, metrics such as market capitalization mislead the public as to the true public support, which becomes unhealthily inflated. See link below.
Hedge funds (going long & short simultaneously

Exacerbates previous problem, volume of shorts grows.

Abolish or regulate heavily No action. now constitutes 1/4 of stock market
Electronic de-papering of the world enables hidden manipulation such as naked shorting plus outright criminality/ fraud (home titles/mortgages). People are robbed, systemic confidence will be destroyed or real wealth destroyed. We must restore the paper title system and or

We must serialize all stock and bond transactions

No action People remain blissfully ignorant of danger to themselves. Convenience has trumped security.
Title insurance, deposit insurance, flood insurance (US) is insuring the uninsurable (Kotlikof). The fee based title insurance contributes to peoples' poverty and bankers riches. Restore old title system, limit deposit insurance and advise folks they are responsible for risks Public remains ignorant. No action The simplicity and strength of the old paper title system is incredible. Bankers and lawyers tricked us out of our birthright
Federal Reserve/ Bank of England = Privateers control our currency More control by democratic governments No change possible? See next blog - below
Western Governments irresponsible debt & deficits Reduce socialistic tendencies of people to vote themselves benefits Austerity measures coming via IMF People (our kids) eventually pay for chronic overspending (taxation or inflation).
Corporatism, globalism, banksterism overpowers democratically elected gummerments Riots, upheaval, breakdown, cheating,

or Restoring supremacy of democracy, hanging lobbyists

perennial human problem throughout History. No change possible except by will of people. Riots, upheaval, breakdown, cheating,
Lobby - huge magnitude - $65mln / rep / yr! Hang bribers/takers, Revert to Athenian Democratic concepts, term limits No effort Impossible to retain honesty, concern for taxpayer
Monetary breakdown via inflation Restore monetary discipline - gold standard? Bankers fighting for control, stalling inevitable Inflation will catch people by surprise, unprepared
Dishonest statistics

Dishonest media

People must turn to bloggers, sites such as Shadowstats

Break up media (like Standard Oil earlier)

No action Both people and even legislators remain ignorant of true facts.

Results in wrongheaded policies

All commodities, oil becoming scarce (peaking).

Earth being raped, abused, over harvested

Conservation, regulation, penalties, cooperation Got diverted into Global Warming/Carbon control (GW) GW = bankers trick to tax people into slavery and submission,

Further horrors such as depopulation to come in name of environment

Globalism, corporate takeover.

UN undemocratic, socialistic by force of numbers. West will crumble

The driving force, source of manipulations over centuries is hidden, undemocratic, and essentially elitist and monopolistic. Power remains unofficial, when it becomes official, humanity will revolt in one final convulsion - and use up all resources in the process. Civilization at risk. Humanity will enter prolonged dark ages as predicted by Jane Jacobs in her last book. Rothschild, Rockefeller, and their lieutenants must come into the open or risk armageddon in their effort to enslave us.

Recognize effective class system, income disparity and shift tax burdens accordingly

Shut globalism doors

No action. People remain ignorant, unbelieving. Internet is our only hope on this one but we must turn away from our entertainments. Otherwise, the history of Rome will be repeated in the west at least. Unknown outcome.
Liability - the paralysis of the modern world End lawyer hegemony on all political systems Getting worse not better Canada's old retainer fee system stopped abuse. Was replaced by US style contingency billing system. Fear of liability causes a retreat from provision of, or overpricing of public goods. Doing nothing is better than taking a chance. Innovation stifled.
Demographic winter - aging boomers

potentially deflationary effect

swamp health & pension systems

too few young taxpayers

Canada can stop trashing unborn babies thru abortion

adopt child friendly policies & subsidies

roughly 100,000 abortions/yr

inreased health costs, children discouraged,

makes no sense,

politically correct policies are self defeating

Removal of Civil Liberties, loss of Habeas Corpus, new enclosure movement in US, increasing regulation of diverse 'peoples'' areas such as bake sales, natural foods, holistic remedies, organic food, increasing policing / surveillance, usually under the guise of homeland security, FDA, safety, and other good soundbytes People need to turn off entertainments, regain civic awareness and involvement Getting worse not better stay tuned

PS. It is now the ides of March and this CNBC clip turned up on the sites I pay attention to. It appears at least one MSM commentator is getting onto the story about the banks. Is it part of "the plan" for ever greater control? Who knows, but for now, this is as good as it gets. One just has to wonder what took 'em so long! Lesson: Never underestimate them tin hats!!


Part 2 - Banking and the creation of Money. - Blog #8

I've been trying to wrap my mind around the present economic situation in order to figure out if we are going to fall over a cliff or not. Depression 2 or not. Deflation, hyperinflation or not. The essence seems to be rapidly increasing public and private debts and, especially for Canadians, the possibility the US dollar may crash with very negative consequences for our industries that export to the US. I explore this in another blog, this effort is more of a likelihood or 'risk' analysis.

This section focuses on the Banking sector because of its centrality in the financial system and because so few people understand it.

Banks & Money - Necessary background

Money is created by two mechanisms, firstly by the government and secondly but mostly in your neighbourhood banking outlet! Criminals bring money into existence by counterfeiting, a long complicated, messy, risky business. Bankers, your smiling friendly local banker, merely waves his magic wand, approves a loan, and so doing, calls forth legal dollars from thin air - just like pulling a rabbit out of a hat!. Really. This can happen because we have a system called Fractional Reserve banking, which means your deposit does NOT get loaned out - it stays in the bank as reserves, constituting a fraction of that loan. In Canada, the fraction (see note) is about a twentieth (or is it a tenth?) no matter. In the US, it got to be a really really small fraction, like 1-2%. Traders call this multiplication effect leverage. The bankers' risk was that the loan would not be paid back and would become a real loss. The missing money eats into the banks' reserves until it is written off. First, they reduced their risk by getting gummerment to insure deposits to eliminate what they once feared - a run on the bank, because of mistakes or fraud. Then they got rid of the remaining risk by selling off their loans as securities that went into our pensions as income instruments. Once they disconnected their risk, they went crazy making stupid loans. They called it innovation. They should have called it fraud. The problem is that in doing so, they manufactured massive quantities of money. This strained the ability of gummerment to insure the resulting increased money deposits without affecting the value of money in a serious way. Economist Kotlikof describes deposit insurance as a fiction.

In order for your local banker to manufacture money, he must have starter money, something like starter dough for sourdough bread. These come from deposits, the most basic of which is primary money in the form of a cheque from the treasury, say for welfare or pension payments. Everyone should bone up on the story of the Federal Reserve System, nicknamed the Fed , which is neither a reserve nor Federal nor a system. It is a bank owned by a consortium of the largest US & foreign banks! Through a complicated process depicted below, the primary money is created as an obligation of gummerment, of the people. It is a debt obligation of the people, through their gummerment, to the banks! The lender is always the boss.

As a sop, the people's president gets to pick the Fed Chairman and another director. From the ranks of banks. For 14 years. You should Google up the story on the clandestine creation of the Fed at Jekyll Island. Makes a conspiracy theorist blush. FDR was enraged, but did not abolish it. Kennedy was shot a few weeks after musing about doing just that. Them rabbit making banksters can be a mean bunch.

This is critical material to understand and to help myself wrap my mind around it, I created this diagram**, illustrating both aspects of the money creating system in the US.

Before looking at the chart, please keep a quotation in mind.

Mayer Amschel Rothschild, from the quintessential everyking's banking family, made the following statement from his bank in Frankfurt, Germany, "Let me issue and control a nation's money and I care not who writes the laws."
1796

How Money is Created

Don't get me wrong, bankers are also a prolific bunch and can make a lot of beneficial business rabbits and you know (or at least Aussies know) what rabbits do. They begat more business rabbits, and begat and begat, until the US became very wealthy. That was because, in part, FDR put them on a leash. But slowly, thanks to bankers' lobby cranks, the leash became very long and loose, and finally fell off altogether in the late 90s when the Glass Stegal was finally repealed (by Clinton). The bubble burst in 2000 and again in 2008. Now, we seem to have a slow dull burning up of public confidence or trust, which is all that really holds the whole thing together.

Do the following sentiments sound familiar?

"The bank mania... is raising up a moneyed aristocracy in our country which has already set the government at defiance, and although forced at length to yield a little on this first essay of their strength, their principles are unyielded and unyielding. These have taken deep root in the hearts of that class from which our legislators are drawn, ....."
--Thomas Jefferson to Josephus B. Stuart, 1817.

"The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause and consequences, and silence by their authority the interested clamors and sophistry of speculating, shaving, and banking institutions. Till then, we must be content to return to the savage state, to recur to barter in the exchange of our property for want of a stable common measure of value, that now in use being less fixed than the beads and wampum of the Indian, and to deliver up our citizens, their property and their labor, passive victims to the swindling tricks of bankers and mountebankers."
--Thomas Jefferson to John Adams, 1819. ME 15:185

Bankers made all kinds of other innovations, such as derivatives, swaps, securitizations, etc. far too complex for this discussion, but which increases the overhang/money/ leverage in the system. They rarely disclosed this stuff, few understood it, and they STILL don't want us to know, gutting the Frank-Dodd bill to near uselessness. As the above quotes show, banking and money is one main thing to try and get right.

So, um, what exactly is the value of a dollar? What is the value of money? Is it inflating or deflating? Is money being created by Quantitative Easing or is it being destroyed as liquidity (ability to get or keep money) evaporates due to a newfound appreciation of risk?

Please reflect on this quotation, reputedly from Thomas Jefferson:

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issuance of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property - until their children wake up, homeless and destitute on the continent their fathers conquered."

So, where are we at in this process. With the dollar having lost at least 95% of its purchasing power since 1913, long term inflation rules, a necessary result of central banking that selects an inflation target greater than zero. Severe deflation has occurred once since 1913, in the great Depression. Ben Bernake vows not to let this happen again, and appears to be doing so. However, he is also transferring the bad debts of bankers to the backs of the people as debt instruments. He uses the too-big-to-fail argument as cover.

I will try to conclude in a third part but first will add the first part as an intro to this topic


** reference for creation of the chart. I had a hard time finding an official flow chart - not an auspicious indicator of officialdom - but eventually, a chart turned up on this 'conspiracy' page A rather dubious source but since it seems to have originated from another more reasonable source~~ and that it seems compatible with what I understand to be the case, I believe it is more or less correct and probably taken from a brochure put out by the Fed. However, I decided that the presentation might be technically correct but representationally is in error because the People and the Gummerment were shown at the top and the Fed at the bottom. In reality, and legally, it is the other way around. The people are always at the bottom, no? But again, it is instructive to note that official sources are there to mislead not to guide.

Note. The fractional part of reserve system has been replaced in Canada and other countries by somethinng called Capital Ratio. This ruse permits banks to manipulate harder since this metric, like Earnings or Profits can be juggled at will, more or less. Simple-to-count cash reserves are too passe for our modern banksters.

While you have the Bank of Rome page open, we should discuss it under the general rubric of conspiracy sites. To believe or not to believe?

Frankly, I couldn't follow their Bank of Rome idea, even after a link or two. I'll shelve that in the long list of 'possible but not proven' conspiracy theories along with the moon landing was a hoax idea. Given that those in power are duplicitous to a fault, i never dismiss such theories outright anymore, just shelve them for future consideration. All because of John.

John was an old buddy i used to hike with who tried valiantly to get me off the global warming theory. I hotly defended the Global Warming Theory using every bit of compelling evidence i knew. Unfortunately he died before I was able to see through the manipulations, deceit and plain wrong headedness that fuels the movement, whose true intentions are globalist and elitist. I'll get into this on another blog (see link on right) but it taught me a lesson. Never totally dismiss fringe theories, never blindly accept mainstream ideas. This conspiracy page is a case in point.

They try to make the case that the US Fed system is usury. It seems to be based on the exponential curve of inflation - see his chart below his Fed's money flow chart. It is true that historically, all fiat currencies have eventually failed. It is also mathematically true that even at a low inflation rate, the numerical changes in any year increase to the point perhaps of unusability. Our grandfathers may have experienced inflation as 5 candies instead of 6 for a penny whereas we experience the same thing as a candy bar going from $5 to $6. If that one dollar change occurs every month, then we have entered what is usually known as hyperinflation (above 15%/yr). But if the targeted 2% holds steady, then the candy bar will eventually go from $5000 to $5100 in one year. So what. It's still only 2%. If folks don't like dealing with high numbers we could easily just issue a new currency at a ratio of say, 100:1 every hundred years or so. So we have to conclude that inflation per se is not the problem and that it even makes us mathematically smarter, no?!:-)

His other point is that private bankers are engaging in a practice that inevitably leads to collapse because, if i follow his argument, that since additional dollars required to pay off the interest on the debt were not created as primary money so how can the debt ever be paid off? This sounds logical but if the conspiracy argument is based on this alone, I believe it will be a discarded theory. Working people and nations can pay off their debts if they are disciplined as did Canada after WW2. Most are not however and end up repudiating their debt, albeit, after a painful process.

The bankers have a point. If gummerment wants to take the easy road and spend more than it takes in through taxation, it has to get the money from somewhere. If it borrows the money from bankers, a discipline is exerted on the system that may not be exerted if, for instance, the gummerment were to simply print their own money. Since gummerments are undisciplined by human nature, both lead to eventual ruin which is why fiat currency has always failed. Zimbawe is the latest example.

In the short term though, Lincoln, under great duress, did print money successfully until he was shot, as noted earlier, by the bankers' man. Early American settlers also expanded their economy by printing their own money until Britain forced their taxes to be paid in English money, of which there was very little. This, not taxation per se, is said by many to be the real cause of the American Revolution. It is worth noting that England and its Bank of England 'enjoy' the same setup as the Federal Reserve - ie. based on private central banks. Rothschild is the granddaddy of them all. If this all sounds too fantastic, just Google for awhile and you will be presented with plenty of evidence.

Getting back to our question, I find it hard to accept that governments cannot pay down their debts, even if the necessary discipline is usually lacking. People do pay off their mortgages. I suppose it is possible that in trying to pay off the last portion to the bankers, that something could happen to interest rates as the government tried to find the so called missing dollars. Especially if bankers played silly bugger, which they always do.

Canada did pay off its wartime debts (albeit under favourable circumstances) which brings us to consider the unique system in Canada, whose chart is a bit different than above. Mackenzie-King, the wartime Prime Minister, established the government's Bank of Canada as having the perogative of primary money creation. In theory this still exists but Trudeau emasculated it in return for membership in the G7, Club of Rome, etc. This illustrated that debts can be paid off, that discipline is possible, that proper governance can control the money supply. Will it take a World War 3 to do it? Canadians may want to pay a bit more attention to the Canadian Action Party, which espouses a return to Mackenzie-Kings's system.


~~ The diagram is originally from the Truth in Money book by Theadore R. Thoren and Richard F. Wagner. Thoren and Wagner were experts on the Federal Reserve System and monetized debt creation.

I was able to download a pdf file giving a precis of the book. The problem I have with the concept therein, that gummerments alone should be responsible for the creation of money, is that politicians are just as fallible as bankers, but generally a whole lot stupider. Well, maybe that is a little mean - as you can see, this stuff is not easy to understand. If we want the system to be made right by our politicians, then we all have to understand it. I'm not sure politicians are up to the job of educating us, at least on any sustained basis.

.


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Since this is a money/banking blog, I'm hoping you might be interested in the other major effort to correct things in this area - please scroll down and click on the second link under "Other Interests". . . . . "Discover unsettling truths........

Part 3 will be an attempt to assess the chances for the negative scenario I posit in the original blog.

Stay tuned.

:-)


Part 3. News Update - Jaw Dropping Details. (Post #12)

From the blogosphere

I normally ignore news. I'm usually quite out of date about all the goings on in the world and about town. I just try to pay attention to important stuff, the fundamentals. Especially since our meltdown of 2008. Remember that? Seems so long ago when we were glued to the TV, wondering about pensions, bailouts, collapses in real time. Not so dramatic as 2001 but worrisome nonetheless. We watched and shuddered as Congress had fits over the throwing of mind-numbing quantities of money into the jaws of banks and car companies. About $700Bn as i recall. Took them two tries. Just as we get over that, along comes QE2 at what, $800Bn? Gets easier doesn't it? Well guess what? I was browsing around yesterday and ran across this link which had a story from this site - LAROUCHEPAC.com

It seems that what we saw was just theater, staged for our benefit. The real skullduggery was going on behind the scenes. Only now, two years later, are the details being prised loose from the tight fisted money men at the private bank called the FED. Here's what LAROUCHE had to say

The Fed and the Caymans: New 'Jaw-Dropping' Bailout Details December 9, 2010 9:57AM

Analyses including some from the staff of Sen. Bernie Sanders, whose amendment has forced the Federal Reserve to release the details of its bank bailouts since mid-2008, continue to show that "TARP was just pocket change" and that the bailout was in the many, many trillions " perhaps in the range of $16 trillion total. Much of it went to foreign financial firms, and/or was loaned by the Fed against crap collateral, in violation of the Federal Reserve law.

Sixteen Trillion! Not 700Bn. That's $16,000,000,000,000.00 Ever seen the email going around showing what a trillion looks like? The football field of double stacked pallets of hundred dollar bills. My mental calculator is busted and the electric job is downstairs but can we agree that the difference is about 20 times. Out by an order of magnitude x2. Is there more? Probably. Will the supposed loans ever come back? Go ask a PIIG. What does it all mean? Dunno. But you probably want to read the full Laroche post. OK, the site seems a bit Republicanish but facts is facts and the Sen Birnie Sanders thing checks out at Rense.com who gave the credit to HuffingtonPost.com.

But I promised to get to work on the competition between inflation and deflation. I'm betting that this hit goes to the inflation team. Frankly, i doubt my feeble brain will ever be able to make a decision on any well founded basis. But since my HTML capabilities now include table making, and the most pertinent words from my mum on this subject, just before i got my ears boxed, was 'Is the table set yet?' Y=safe, N=BoxBob. So next up, I promise, will be to set a table and lay out everything i can think of from the monetary cutlery drawer. How does that go - inflationary forks on the left and deflationary knives on the right, and bankers' spoons which can help either story at the top of the place setting. Ok, the last was a stretch.

Till then .... stay tuned


Part 4. The Fight. (Post #13)

OK. That's it. No more procrastination. The question is - over the edge or not? Collapse or not? Panic or not? Never mind inflation, even uncounted inflation, which we've lived with for years. Most of us have not experienced serious deflation or depression. We have not lived with hyperinflation (brief bout in 70s aside). We have not experienced a currency collapse, or any collapse for that matter. But we have seen Iceland fail, Greece and Ireland get bailouts with austerity strings attached. We hear of strikes, the odd riot but all seems calm enough. If that's all there is, then I worry for nothing. Some people took a hit but not enough to be called a breakdown. Maybe I should talk to an Icelander. In fact, we should be educating ourselves about the differences in actions taken. Not now.

So what am I talking about? Not just a little inflation or deflation. A breakdown is where many or most folks' lives are jolted rapidly so their lifestyle requires immediate drastic adjustment. Moving in with others, selling the car or house (if possible), bankruptcy, public disorder, soup lines, unemployment doubles from here, business and consumerism contract bigtime, tax revenues dry up so tax rates have to increase or programs collapse, roads/ bridges/ buildings become unsafe, even martial law/ state of emergency, FEMA camps, etc. These are results, consequences. Leaving aside exogenous factors such as nuclear incident or other horror, what could cause such drastic effects?

  • Sudden serious jumps in prices that cannot be hidden by false statistics.
  • Conversly, deflation or deflationary expectations could cause similar effects.

We have been suffering from a kind of prolonged recession but we the kind of serious stagflation of the 70s or depression of the 30s is either not here or is hidden from us. But how can we avoid some kind of serious adjustment given the magnitude of hidden transfers described in Part 3, flaws in the politico-banking system per Part 2 or the risks factors identified in Part 1. Something has to give unless they can somehow freeze the action long enough to allow 'normal' inflation to make the needed adjustments. That is what they are hoping for if MSM can just keep us quiet for long enough.

The present worry is a collapse of the US dollar or its rejection as reserve currency in which most goods are priced. Some folks go so far as to suggest a complete rout, a complete demise of paper money as a viable means of exchange such as happened in Zimbawe. This would be a major shock - but that allows imbalances to be rectified. Hyperinflation would render most contracts meaningless thus amenable to renegotiation to 'better' levels - probably downward. Better for whom? Probably not the people. Basically, unaffordable costs would be paid with worthless currency which gets politicians off the hook. Nasty decisions are avoided. Could it get this bad? Could hyperinflation be in our future?

Looking down the list of fear factors in Part 1, I realized that only a few items were unequivocally inflationary - bailouts and that $16trillion of new loans spread around the world. Basically, inflation is new money chasing the same goods, so prices rise inexorably unless controlled by fiat. Inflation was said to be a purely monetary (money printing) phenomenon by someone much smarter than me (Friedman). This might be true, but only in the long term. In the short term, all sorts of reasons can drive prices higher or lower. Looking at the list, most items, such as long running gummerment deficits have been pushing borrowed money out the door for decades, which has tended to increase prices. But we know that deficits, and most of the other factors, have to came to some sensible discipline, shrinkage or end, sooner or later. When that happens, will not the reverse occur? Will not deflation set in? If peak oil really does occur, price will rise, yes, but will not consumption fall with resulting impact on our economy so severe as to 'deflate' the economic bubble we have been living in? Once folks cotton on to proper statistics so as to cause loss of official credibility, will not politicians have to contract their obese spending, allowing deflation to set in? Once all the derivatives, short selling, swaps, impossible insurances, speculations, hot money flows, lobbying, corporatism, earmarks, legal/ regulatory fence building that aided and abetted the great expansion is unravelled, unwound, and undone, by political disgust, if nothing else, will not the process reverse so as to unwind all the expansion of the past 100 years? Not to mention the demographic boomer bulge that is set to start contracting with its own deflationary (selling) logic. Taken together, this amounts to is one mighty deflationary force. Like a house of cards collapsing or perhaps like quicksand, ready to swallow any debt laden person or corporation. Against this we have Helicopter Ben, ready to throw enough paper into the quicksand that it will not start collapsing and /or retain enough stability for our debt burdened structures (corps & govs) to climb out.

Who can predict the outcome of that? It reminds me of the dismay I felt upon listening to the podcast of Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds, available at LibriVox.org. The listener gets an appreciation of much more basic and conservative life under historical, metal based money and wonders how we ever came to believe we could do without it, how the 'peculations' of modern banking funny money ever came to be believed in.

So now you understand why they created such huge amounts of money so quickly and stand ready to do more. Perhaps some understanding can be gleaned from historical relationships between the banking sector, which has grown manyfold to become over a quarter of the economy, and the metal money sector (precious metal mining) which has shrunk from being about a quarter of the economy to less than one percent. To be sure, energy and technology would account for some of that shrinkage, just like in agriculture, but do we really think that the manipulative machinations of bankers, whose money making inventions (unlike physical inventions) cost almost nothing, are so beneficial, now that we see the downside? This is what Warren Buffett has referred to as the mispricing of risk. He ought to know.

So I, mere scribbler should not presume to determine which 'flation wins, or how quickly all this plays out other than to suggest that for mere mortals, for common folk, life will get significantly harder, at least in the Western world that has been playing this great game and whose lifestyle seems so much more greedy-unsustainable than the huge numbers of still-humble people around the world just starting up the economic-energy ladder. Some sort of evening out is inevitable, and perhaps even desirable. Many are hoping technology will save the day, but really, this is asking energy/oil to save humans from financial misguidedness. There may be some relief but do we not have to become more modest, more conservative in our expectations?

But if your scribe is unable to answer the opening question by looking at the fight between 'flations, there is one more tack to follow - history. A new part V is required. In the meantime, note that the bet being made by the big boys is for inflation to hurry ahead of the deflationary monster before it can maul the economies of the world. Will it be cataclysmic? If a slow motion train wreck is slow enough, maybe not. But it's still a train wreck. We risk the birthright of Western civilization for the sake of our impatience, our greed, our convenience and our laziness. Maybe others did it to us, but as Plato said - our silence gave our consent.

Dec 16, 2010


Part 5. Cycles. (Post #16)

A consideration of history and cycles should include realistic scenarios applicable to circumstances today. There is no use trying to predict unusual variables, sometimes called exogenous variables - except insofar as underlying conditions should be accounted for. An asteroid strike is hardly worth considering (we are not in the asteroid belt) but the likelihood of a 911 (assuming straightforwardly, that it was not an inside job) was somewhat predicated by known underlying conditions of hostility.

Today, there exists a wide range of underlying conditions that can lead to instability - economic imbalances, public deficits /debt loads, human migrations, oil dependency, military adventurism, religious/ cultural issues, environmental degradation, etc as per the list in Part 1. In addition, various factors such as just-in-time delivery, monoculture, operate to exacerbate vulnerability to instability . It is hard for those living in the West to imagine a situation when basics are not available, when the shelves might not be always stocked. 911 only resulted in market losses and travel inconvenience for the larger population. If there were no underlying condition of being in a tech bubble, the world would have hardly noticed. There was a condition, the world did notice - but really it was just a bump. It set in motion a trend, but that trend lasted only a few years until it was broken by 'new' economic activity. If that activity had been real and healthy instead of artificial, debt-and-derivative induced, we might not be having this conversation. We are having this conversation because the underlying conditions are still unhealthy, they have not been corrected - despite the election of a president who promised change. Despite political posturings and promises, nothing has really been done to indicate future corrections will be any more effective than the recent past. Since any drastic fix (ie. allowing failures) was avoided, imbalances continue to build. About the only thing that can be suggested, is that imbalances, ie. public debts, are building slightly less quickly than before. They did not diminish in absolute or even relative terms, that is the point. What does history say about this?

History generally deals in longer terms than our day to day media. Anything from decades to centuries, and longer. Like the rise of fall of Rome over centuries. Some historians think of history as his-story. They become school teachers who make us learn long lists of dates, wars, kings and flags. Other historians think in terms of causes. These become professors and authors such as Jared Diamond who wrote a number of fascinating books trying to understand why the West got so far ahead of the rest of the world (Guns, Germs and Steel) and how environmental factors are critical in a society's survival (Collapse). There is another group however that analyzes the past in terms of cycles.

Probably the first and most sophisticated developers of a cyclical idea of time is the Hindu and Vedic philosophy which encompass everything from 'truti' (microseconds) to 'mahamanvantara' (311 trillion years) and includes ever increasing cycles in a never ending circularity and repeating system of destruction and rebirth. More or less - I am not too familiar with this system but folks are trying to figure out how Hindu ideas have relevance to the times we are in.

The next group of people interested in cycles are those interested in mathematics and markets, starting with Fibonacci in the 12th century and the interesting Russian economist Nikolai Dmitriyevich Kondratiev who discovered the so called long waves (super cycles or K-waves) within capitalist systems, (50-60 year lifetime). His "theory was later developed by Joseph Shumpeter, who actually linked K-waves to major discoveries or innovations. Similarly, there has been identified that each cycle has four sub-cycles or seasons: spring is the revival, hope and moderate growth, summer is accelerated growth and unlimited optimism, autumn means recession, while winter is falling down and pessimism." (blogger A. Gates)

Dozens or even hundreds of people have developed similar cyclical ideas about markets and given the strong profit motive in the economy, there is no end of effort to discover new cycles that can be used to advantage. Here is a link discussing a 120 year commodity cycle due to come to a depressionary end in a year or two. Elliot Wave theory is another system that posits waves within waves: secular, cyclical and short term as per this interesting link. Google the term 'grand super cycle' for more.

Superimposed on, or more accurately, underlying many human/economic cycles are natural cycles. We are now familiar with El Nino and La Nina oscillations in the Pacific Ocean that influence weather and storm patterns around the world. Drought cycles in particular should be of interest as we found out during the Dirty Thirties and in the mid 1800s when Niagara Falls ran dry. Aztecs, Myans and Anasazi Indians in New Mexico were forced into wrenching changes by drought, although this falls more into the exogenous variable category. Droughts have occurred in North America 1810 (6yrs), 1860s (7 yrs), 1930s(8), 1950(5). Not exactly predictable but, periodic nonetheless.

The above cycles might be viewed as technical in nature. Many others attempt to look at human nature - the one I am somewhat familiar with is that by professors Neils and Strauss who wrote The Fourth Turning. This fascinating study found a repetitive, 4-generation cycle in human affairs (saeculum) that they show can be related to history as seen through the eyes of the long dominant Anglo-American world. It is based on the idea that children are shaped by the situation their parents faced, which sounds reasonable. They use the US Civil War and WW2 as starting points of crisis which built a hero generation that once the crisis was over, went on to build a formidable economy (the High) - and a large batch of protected but spoiled children. These children became the boomer generation of naive and idealistic people who during the high economic plateau, rebelled, experimented and examined everything (Awakening) - and somewhat neglected their children. These children (Nomad generation) become 'technocrats', not rebelling like their parents, working hard in the system, more aloof but more family oriented but also not stemming the unraveling phase that leads up to a new crisis phase. The new crisis is to be managed by the old boomers generation, but whose cannon fodder were/ will be the young hero generation whose confidence, optimism, and collective outlook will be tested and forged in the crisis they are thrust into. This sketchy summary describes a time period varying from about 80 to 120 years - the authors show 5 distinct cycles from the middle ages. According to this timing, WW3 or whatever crisis is to come, could start by 2020, which feels about right to this observer, although I am usually 'too early' (ahead of my time?)

Then of course, there is the granddaddy of them all, the 26,000 year Myan calendar ending in 2012. This is said to coincide with the Eclipse of the Milky Way! Whether this will really open up hyperspace to an alien invasion or knot, only time will tell but in the meantime, one truth is certain. Thanks, in part to the media, many folks are and will be getting hyped up about all the predictions made about 2012 by many ancients including Nostradamus (on History channel all evg Dec 30) and given that da boyz in da blue suede shoes never "let a crisis go to waste", one can surmise that black ops will be out in full force. What the dear gummerment will try to do is unknown but if the recent past is any indication, it is likely they will try to further close the gate on freedom, perhaps by jettisoning what's left of the protections of the US constitution. If nothing else, they can try to at least make the US as vulnerable as Canada to foreign control via its Constitution - have look at clauses Trudeau "imposed" on his gullible supporters - I am chagrined to admit that I was one of them. We boomers have a lot to atone for, and it is not too late..... But only if we wake up, which is looking unlikely at this point, going at least by my hometown's continuing frustrating and foolish attempts to spend its way to prosperity by 'investing' in non-essential foolistructure (football stadium). Given the almost laughable incompetence exhibited by council (and the province) to date, the answer this essay tries to unravel may lie in watching actions taken here in Hamilton. If we do build a new football/PanAm stadium, or the giant pipe to Developers Paradise (AEGD), you can be sure that the bottom will drop out, probably at the half-built point when most of the money will have been squandered. Set your watch list to the Pan Am Games. If however, this craziness is somehow aborted, it may be a sign that folks are awakening to the awful fate that awaits and drawing back from the edge. We shall see.

So where does all that leave us. I do not pretend to be an expert in reading the cyclical tea leaves of the future. My own dark conclusion is based more on the state of public honesty and morality that seems to not exist than on any numbers that I can reliably crunch. That others are finding the same parallels, the same quicksand under our structures, the same unsustainability in our collective lifestyle - is it not significant?

Therefore the answer, dear reader, must not be given by me but rather made by you, not only as an observer like me, but as a potential mover and shaker! As you study and gain an appreciation of these possibilities, and go beyond these few links, you, will be reacting one way or the other. You may reject all this cycle stuff, all the worrisome signs I outline in this series as pure bunkum. You may accept it and react either by building a bunker or by fighting to stop it or you may even wish to "join 'em if you can't beat 'em" as the old saying goes. Like if I started playing the shorting game again. After all, if we the people accept our servitude to the elite, better suck up to the elite, no? Each of us must make our way. Let history be our guide, even if our understanding is imperfect - that's life. I'll close with these lines from an expert on life - Robert Frost - probably a better guide on these matters than any economic pundit.

Fire and Ice
Robert Frost

Some say the world will end in fire;
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice

By the way - Happy New Year.

Or as i like to say - humbug, from your humble curmudgeon.

Dec 31, 2010

Stay tuned .....

Bob Green I


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    MyStoneyCreek asks pertinent questions - i'd better explain myself - if that is possible!

    Solar energy vs the last of the PIIGS vs local efforts

    Banking, money risks, a modest proposal

    Reflections on a Greek phrase

    Forcing my mind to grapple further with that pesky smart meter thing. I'd hate to be a party pooper when it comes to the good intent of the smart meter - BUT.........

    So much to mention - GMO foods, fluoridation, dogcast listening, Puppy - maybe I'll put up a sort of note space for miscellaneous

    Ongoing economic meltdown - two threads: Hamilton's unique problems and the more general economic melting down of the US. Four Horsemen.

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Bob's 'Breviations

  • LRT - Light Rapid Transit
  • MSM - Main Stream Media
  • k, Mn, Bn, Tn - thousand, Million, Billion, Trillion Dollars
  • GMO - Genetically Modified Organism Foods
  • PIIGS - Portugal, Iceland, Ireland, (Italy?) Greece, Spain,
  • OSAP - Ontario Student Assistance Program.
  • RAP - Repayment Assistance Plan
  • CSLP - Cdn Student Loan Program
  • Cdn, US, Aus, GB, Fr, Ont, PQ - Places abbreviated
  • F - fluorine or, because I'm lazy, fluoride, fluoridated water


Pet Peeves

      * gummerment overspending
      * what we're doing to our political and educational systems -

      * banksterism.

      * political correctness (equity policies) along with

      * MSM - mainstream media, especially the Spectator, our local rag

      * human rights commissions and their guilty-until-proven-innocent destruction of our ancient rights. Soon to get worse.

      * Overmedication in our society - this link relates to kids ADD, ADHD

      * Rigid thinking, dismissiveness, judgementalism, The Spectator

      * legal liability issues - playgrounds, bake sales gone. This is stupid (corporatism).

      * senior (upper levels of ) gummerment funding - distorts and deflects responsibility

      * Public sector unions

      * credentialism

      * a little rant on mailboxes!

      * spelling in the English language. The real culprit is Johnson and his dictionary that picked words before they ripened!

      * apathetic people. Plato said 'Your silence gives your consent'

      * aphids, Torx screwdrivers, proprietary parts, the great Eyeglass ripoff





    * retired Professional Engineer, married, father of 2 including one still in the system.

    * pursuing many interests - partial list below

    * small-c conservative (but not a Harper PC - that's the party of big business!)

    * investigating causes of economic problems, finding troubling trends and possibilities

    * Former candidate, Hamilton East Stoney Creek, FCP, Public System Trustee, Ward 4



Links to other Interests.


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