Something a little different and interesting. However, whether or not we can take too much notice of someones whose sole, admitted qualification is "pamphleteer" is something to think about.

You replace one form of quackery for another.
We need a government to *govern* the economy, that is to control excesses and to invest in areas that private interests will not or cannot do so.
The previous government did not govern the financial system, allowed it to play with the money supply, and so generated a "bubble" of profits and spending. Now we pay. They simply failed to govern.
Government spending *can* provide benefits: Roads, rail, water, sewage, power and education are all things that *only* government can do well. Of course the government should use the markets when building: competitive and *transparent* tendering ensures real competition.
I agree that giving taxpayers money as cash is a poor way to fix the economy. I am assuming that this is more a wealth redistribute after Howard's decade of generational theft.
To assume that all government spending is like taking blood from the leg and injecting into the arm is just a tad simplistic.
I guess "pamphleteer"s don't quite get the education they think they have.

I will certainly be interested in the observations of people better qualified than I on economic matters. But I find the arguments a little too self-conscious to be entirely credible.

His reliance on Keynes as the visible spanner in the works of economic theory looks just a touch too convenient. After all, much of the "biggest orgy of spending in the entire history of the world" that the author refers to, was on borrowed money, which was in turn secured by nothing more than a salesman's hot air. Was this contemplated in Keynsian theory?

I may be way off the mark, but this also looks somewhat suspect:

"...when the government injects money into the economy, it gets the money by taking it from the economy. This makes no more sense than drawing blood from a man’s leg and injecting it into his arm to “stimulate” his health"

The logic here is that we are dealing with a zero-sum game.

But we are not talking about "real" money here, any more than the "real" money that caused the crisis in the first place.

As I understand it, the hole that appeared in the world economy was caused by the creation of money (via borrowing) that was not backed by sufficient assets. This money was then spent, on plasma TVs and SUVs. The recognition that there was more money borrowed than was able to be paid back, caused the spiral effect of lower asset values, lower borrowing power, lower spending etc.

Again, as far as I can tell, governments around the world are trying to reverse this process from the bottom up, by borrowing even more money, and giving it to people to spend. That's presumably the Keynsian "pump-priming" that the writer sneers at.

What I failed to discern from the article was any sense that there is an alternative, just waiting in the wings, if only governments realized how stupid they are being.

It's not pretty, I will agree. Borrowing more in order to solve a problem caused by borrowing also doesn't appear terribly logical.

But "quackery"?

Not proven, I'd suggest.

>>Thus according to Keynesian theory we can increase society’s wealth by burning down our houses, because this will create “jobs” to re-build them.<<

Isn't this what the measure of GDP does already? It values activity whether it is of benefit or not. The real problem here is a lack of efficiency in terms of how resources are used (to build houses or whatever else).

>>We as a society can generate wealth out of thin air just by printing paper. We can all get richer by taking money from productive people and pay it to make a loss digging holes and fill them in again.<<

I agree with this argument where the productivity referred to is well directed and giving a benefit to the nation and society. But what about the situation where people are working hard for the sake of working hard, or just to make the boss rich, say? In this case, I'd say an eventual shake-out is warranted in order to give someone else a chance who might be able to do a better job.

Pouring taxpayers' money into the banks is not likely to produce a solution to the current problems, and spending our way out of trouble only implies more debt, the cause of it all. HOWEVER, this piece is just too simplistic and ideological to know where to begin. Some of the many weaknesses have already been pointed out.

'The government-funded economists who directed all those presumptively clever central banks'

Here, the author is apparently trying to blame government for 'directing', not just allowing, the banks and Wall street to create this massive bubble of what are now (oxymoronically) called 'toxic assets'. Yet the gist of his piece is for government to get out of the way and let the banks get on with it! Had the incompetent US government behaved as a good government ought to, protecting something like true values in the economy, perhaps this situation would not have developed.

'Prime Minister Rudd and President Obama have never run so much as a corner shop in their lives.'

Completely irrelevant, but I'd ask JJ if he has ever run a corner shop himself. Maggie Thatcher is the one for you, JJ, she really did have a corner shop background and mentality. What a disaster that was; Britain produces virtually nothing these days, except, apparently, 'wealth' out of thin air! And I don't exculpate Major, Blair and Brown for their roles, either.

As for reducing taxes, didn't Bush try that? Massive tax cuts for the mega-rich and just plain rich. The USA will be irredeemably bankrupt if Obama doesn't RAISE those taxes again

“Pyramid building, earthquakes, even wars may serve to increase wealth … [if politicians can't think of anything better to spend the money on]."

JJ, has it not occurred to you that JMK was being just a little bit ironic? The bit in brackets should have given it away. You advocate less government and lower taxes (as far as I can see that's the sum of your 'solution') yet such a scenario had it pertained around the world in the last twenty years might have produced an even greater cataclysm. You castigate the idea of creating wealth from thin air, but of course that is precisely what unregulated money markets and banking has done on an almost unimagined scale. The total value of the world's credit default swaps and other derivatives is over $600 TRILLION. Perhaps burning down houses is not so stupid.

It is true.Daniel Hannan to Gordon Brown,"You cannot spend your way out of recession or borrow your way out of debt!"

What must happen is the shrinking of Govt and reduction in taxes!

The author of this article is a complete idiot. He mostly engages in speculative resoning rather than fact. But his probably his silliest claim is that in order to put money into the economy, government must first take it out, thus netting all government spending to zero.

This is an utterly ficticious claim and lacks even the simplest understanding of the most basic functioning of our modern monetary economy. The federal government does not collect tax revenue in order to spend it, for dollars taxed by the federal government are immediately extinguished from existence. The fed spends first and then taxes later, largely in order to create demand for the currency it issues.

The author should stick to handing out pamphlets.

Is Goldman/Sachs Running the Plunge-Protection Team?
http://republicbroadcasting.org/?p=1280

Is the current stock/market rebound based on fundamentals,or are more sinister forces at work?..Tyler Durden,author of the ZeroHedge blog,
http://zerohedge.blogspot.com/
one of the best financial bloggers around,have found some circumstantial evidence that suggests the mysterious Plunge Protection Team(PPT)has recently been boosting the stock market.
http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm

And some might say Goldman Sachs is running the show…
http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets

The Working Group on Financial Markets,known colloquially as the Plunge Protection Team PPT),was created in 1988 by Ronald Reagan,in response to the Black Monday stock market crash in 1987...Their operations have always been shrouded in secrecy,with a Washington Post article from 1997 writing that the group aims to prevent the“smoothly running global financial/machine”from locking up.

Conspiracy-theorists have long claimed that the PPT manipulates U.S. stock markets by using government funds to buy stocks in the event of market dislocation,but skeptics argue that such an operation would be unworkable.

Durden,cites an unusual piece of data on program trading,a part of the stock market that is controlled by mysterious computer/programs that use mathematical/formulas to buy and sell stocks.

According to the New York Stock/Exchange,ast week’s volume of program trading was 8% higher than the 52 week average...It’s strange that program trading volume would be increasing so sharply when overall market volume is declining,says Durden...It’s even stranger to note that principal trading,..which occurs when a brokerage buys or sells stocks for its own account,..is running 21% above 52 week average..New York Stock Exchange weekly volume,on the other hand,is running about 9% below 52 week average.

“A very interesting data point, also provided by the NYSE, mplicates none other than administration darling Goldman Sachs in yet another potentially troubling development,”writes Durden.“Key to note here is that Goldman’s program trading principal to agency+customer facilitation ratio is a staggering 5x,which is multiples higher than both the second most active program trader and the average/ratio of the NYSE,both at or below 1x.”

The implication is that Goldman Sachs trades much more often for its own(principal)benefit.“In this light,the program trading spike over the past week could be perceived as much more sinister

"What must happen is the shrinking of Govt and the reduction of taxes"

I don't have a problem with lowering the (federal) tax rate to some degree as the dollars don't pay for government spending since they are extinguished.

But I prefer to think that the size of government - federal in particular - must grow rather than shrink. For starters, how much further can we shrink it without compromising basic social services that the private sector cannot provide to everyone equitably? Government as an employer has already fallen from a quater of the labour force 20 or so years ago, to around 14% today.

Second, government is capable of doing something that the private sector has cleary demonstrated itself incapable of - employing all surplus labour. If we compare the current era with it's hands-off approach by government with the previous era where government was more actively engaged with the economy, we see that the hands-on era gave us an unemployment rate averaging around 2.5% over at least 25 years. The current period has given us an average unemployment rate in this country of around 7.6%, only falling under 5% around the peak of the boom, now gone bust. We never even got really close to the employment success of the preceeding era. And that doesn't even count under - employment.

There are a great many potential jobs in community and environmental services that could both enhance the wellbeing of our communities and absorb much of the labour that the private sector is currently shedding. Despite providing worthwhile services, the private sector will not go there because it is not lucrative enough. Govt could easily solve many of these problems if it abandoned it's neo-liberal outlook.

I think we need to distinguish between Capitalism, and finance Capitalism.
It has been said:"every crisis is an opportunity". Now is the time to take the banks' ability to create money out of thin air away from them, and end the debt based monetary system.
Printing 'greenbacks' is far less inflationary than fractional -or post fractional- banking.
The author is absolutely right about one thing.
Going into debt, to get out of debt, is really stupid.

Justin Jefferson could be my housecleaner, for all I care. It does not matter what people state as their profession. What matters is IDEAS. Discuss the merits of Jefferson's ideas. What would you people do if you did not have the NAME or any information about the author at all? Could you possibly debate the ideas using your own mind?

I congratulate Justin Jefferson. I am an economist, and this is a very well-written summary of communism vs capitalism. But don't take Justin Jefferson's or my word for it. Research it for yourself. Better yet, go try living in a communistic country. Rose Wilder believed in socialism/communism until she LIVED it. She then became a dogged defender of capitalism. Jefferson is absolutely correct. Communism does not even work in theory. I recommend reading Mao's Last Dancer and Wild Swans: Three Daughters of China for some research into this issue without having to relocate.

Janet H Thompson,

Hi Janet, you are a gem. You are totally correct and I might add probably prepared to think outside the square. Good on you.

I don't mean to be patronising at all. But I'd be prepared to bet you'd probably read Mises and Von Hayek unlike just about every Australian University trained economist and lecturer I've ever spoken with.

Justin,

a change of christian name to Thomas would not be inappropriate as that great man's writings are as simple and straight forward as yours. Well done and I concur completely.

Everyone else except Arjay:

Education is not about what to think but about how to think. Our schools and universities only do the former nowadays. I would wager Justin to be as well read as any person I know, including me. Opps egotism, I must be reading to much Rudd, ... lately!

Kind regards to you both

ps Pericles, Justin did give an alternative ... didn't you recognise it? The Greeks once mastered that option.

pps Fozz, when you point a finger at someone there are three pointing back at yourself.

Keith,thanks for the complement.I suspect that Justin does a lot more than deliver phamplets.We are are too often impressed by titles.In a business next to mine,I have an ex-corporate lawyer making bees wax candles of all things.

We are experiencing the largest economic collapse in since the Great Depression and all the so called economic geniuses got it wrong.I will gladly listen to the likes of Justin Jefferson who have insight based on real experience.

This is a tricky one to answer, for I don't think that the author,
or anyone else for that matter, really know.

The fact is that Obama was dealt a really bad hand and is taking
advice from the best minds that he can bring together, including
Buffett, Summers etc.

What we know is that when Paulson let Lehmann crash, the global
economic system as we know it, nearly came to a halt.

Now lets say the US did nothing and let everyone crash. What would
have been the global consequences? AIG, the major banks, all
are connected and once that pack of dominoes starts to fall, down
come the rest of the dominoes.

If GM crashes, ok so add a few million unemployed, for there is
a downstream effect, but we could still buy Toyotas or whatever.

But if the banking system crashes and major banks close, life as
we know it cannot function, for people need banks to buy food,
to live daily lives.

How many businesses could pay wages, if their bank was closed?
How many people have enough money under the mattress, to keep
going for a few months, until things are sorted out?

So I'd say with this in mind, the Americans tried to keep the
wheels on the financial cart, for the alternate option was
disaster in action and nobody really could predict where the falling
dominoes would end. The fact is, with a global economy we are
all connected.

“Discuss the merits of his ideas”

I have re-read the article but am hard pressed to find anything merit-worthy among the dribble.

The problem I have with it is that pretty much all of his arguments are an extension of a false premise – that government can only inject money into the economy by sucking it out first. This is completely wrong.

As an economist Janet, I’m sure you are aware that the federal government is the currency monopolist, is able to create Australian currency at will and does so when it spends. It does not need to borrow or tax in order to spend and of course taxes levied by the federal government do not pay for anything since that sum is extinguished.

Justin bemoans deficit spending, accusing the US of spending a sum that equates to nearly three-quarters of the entire US GDP. He offers no explanation as to the origin of this vast sum. He has already suggested that the fed must tax in order to accrue revenue before it can spend. Tax three-quarters of GDP from a country already plummeting down an economic precipice. No? Well then, perhaps Justin has seen deposit slips for stupendous sums given to the fed by some mysterious lender.

Kieth – maybe you and the other two fingers could spell it out for me? I have already given an explanation of why I think the author is spouting garbage.

FOZZ quote<<..create currency at will>>..fozz the govt surrendered the right to issue money wholy to the fed reserves..[the proces now is govt issues a bond[INTREST BEARING bond to the fed..[the fed monetises it and collects intrest on it]

the fed also collects all our taxes..[because along with the EXCLUSIVE right to issue'fiat'reserve/currency,..it is the govts exclusive banker[any'money'it lends]it needs to repay to the fed to get its bond back with intrest on top,..paid for by our taxes]

the fed uses our tax take to leverage more credit to its central/banks[for private gain[and control]..over all credit]..the bankers running this exclusive GLOBAL CARTEL,have used the issue of the globes gobal currencies to manpulate the worth of our global currencies via setting the exchange rates..[bankrupting who so-ever they chose,setting the intrest rate as they chose..[and by never having to account[nor audit]..have total control over the worlds gold and silver,..leased to their mates/at mates-rates

[so much so that the trade in currencies is done via another fed agency that issues gold futures..paper..[every day 3 times all the gold ever recovered gets traded in these paper gold securities..[they are virtually impossable to cash in,but via them gold has been artificially held down..[its real value should be near 3000 us[thats if you could get any of the real stuff

<<It does not need to borrow or tax/..government do not pay for anything>>..totally incorrect the fed'orders'govt to do as IT..[the bankers cartel].[money changers]..tell govts to do..[or your money falls into hyper-inflation..[see argentina[/iceland,/germany,/zimbabwe

the money-changers..are[now]demanding their latest con[the carbon/tax]for their derivitive-traitors to trade in for huge bonus..[and greater tax burdon on the people..[..serfs made homeless by the whim of a few bankers and the 3 traitors who set the prices of default[read unpaid debt]swaps

..the fed creates any ammount at their whim..[the latest issue means soon the hyper/inflation deflates the worth of the yanki to equate argentia[or zimbawe]/germany

[as soon as the bankers start spending their windfall..[anytime they chose]..ANYTIME...but they hold the real/shares and real/gold etc..[we just hold thier soon to be worthless[fiat]paper...spend it while you can folks[soon a barrel of it wont buy a loaf of bread

Study your history.During the Great Depression they did exactly what we are doing now ;ie borrowing more printed money from the international banking cartells and paying interest on inflated,worthless money.

The Geat Depression did not end until after WW2 when our Govts reduced taxes and spending by 33%.

Kevin Rudd already has us in debt of over $200 billion or $20,000.00 for every working person or $40,000.for every household.This is just an estimate.Great Britain under Gordon Brown presently has a Govt debt of $110,000.00 for every household.Just 12 mnths ago we had a surplus of $25 billion.

Perhaps Kevin wants to emulate Gordon Brown in trying to defy the laws maths,but we should not be seduced by the folly of voodoo economics,whereby debt it seems can be eliminated by creating more debt.If this trend of creating IMF cyber money continues,then hyper-inflation will destroy both our savings and our jobs.

We have a clear choice,either we suffer a short sharp recession or go the way of the Great Depression of long and deep human suffering.

Under one God,

Apologies, but your style of writing is a little hard for me to follow. It appears you are arguing the RBA is in total control of all of our governments spending decisions and that it dictates what spending commitments the elected sovereign government will make – that the federal government must ask the reserve very courteously how much it can have to spend and what on? Is this what you are suggesting?

The federal government has ZERO need to borrow from anyone and is not told what to do by the reserve.

Taxes levied by the fed DO NOT pay for anything – the act of taxing extinguishes that sum. There is no bank account holding tax money collected by the fed. The taxed money is accounted for but that is all – it does not go anywhere in particular, much less into the reserve. If you were to pay your taxes to the fed in cash, you would get an official receipt saying that your taxes had been paid – and the cash you handed over would be tipped straight into a shredder. In the past, taxes paid in cash were incinerated.

Now let’s be crystal clear about one thing – deficit spending by the federal government does NOT equal any kind of debt that must be repaid by future generations etc etc. They have ZERO need to borrow what they can (and do on a daily basis) create.

Arjay says that Rudd already has us in debt to the tune of $200 billion. That is one-fifth of GDP. So where did that enormous sum come from? We had a surplus (a false concept economically at the federal level) of $22 billion, who loaned us the rest?

The period you refer to Arjay (after WW2), was the Keynsian period – a period of strong govt spending, high govt engagement with the economy and – not coincidentally – very strong growth and very low unemployment.

FOZZ<<The federal government has ZERO need to borrow from anyone and is not told what to do by the reserve.>>so why we pay tax[if govt creates money,..why we need ever more govt taxes?

<<Taxes levied by the fed DO NOT pay for anything..the act of taxing extinguishes that sum.>>what sum[you say there is no sum...loltax PROVES there is a sum[because OUR CASH [tax gst etc paid it]

<<There is no bank account holding tax money collected by the fed.>> so where does my wage DEDUCTION go[where gst go[my tax i PAY on my BOOZE or fags IT GOES TO THE FED

<<The taxed money is accounted for but that is all>>accounted to WHO[THE FED}

<<it does not go anywhere in particular,>>lol..it goes to treasury who sccounts it back to the fed

>>If you were to pay your taxes to the fed in cash, you would get an official receipt saying that your taxes had been paid..and the cash you handed over would be tipped straight into a shredder.>>yeah because the fed issues it UNDER sole licernce GLOBALLY

<<In the past,taxes paid in cash were incinerated.>>allowing the issuer to issue more[every dollar returned to the fed creates 10 more credits it lends out at intrest, globally[because lending CREATES money, that when it returns to its issuer is shedded,..by the cartel who owns the fiat..but its credit remains..[and its intrest in reserve fiat needs..new borrowings..to pay the ursury....ursury payable ONLY IN FIAT CURRENCY..owned and issued and controled by the fed reserve banking CARTEL[globally]

<<They have ZERO need to borrow what they can(and do on a daily basis)create.>> yes they = the fed,govt is not owning the fed..[the BANKERS do]

Fozz’s argument is just more of the confused belief that in government we have discovered a magic pudding; that we can create real wealth by digging holes and filling them in again. For some reason, we only need forced redistributions – taxation or inflation - to work our magic, but the redistributions involve no net cost, only benefit.

The belief that we can create net wealth – real wealth - by forced re-distributions is nothing but confusion. We can’t, no matter how strongly anyone believes it. All that government is doing, by either taxation or inflating the currency, is taking from A and giving to B, that is all.

Nothing can change this fact, because there is no magic available. The money you get from Canberra is the money you sent to Canberra, minus freight both ways.

The stimulus packages will only destroy wealth, because *that’s all they can do*.

Rapscallion
What do you mean by ‘true values in the economy’? How would government be able to know, in advance, for every single transaction, the difference between the market price and the supposed true value? Then how would government be able to ‘protect’ them? If what you are saying were right, total government control of the economy would work.

Money and banking are not ‘unregulated’. The whole purpose and effect of monetary policy, central banks, banking regulations, government monopoly of currency, legal tender laws, deposit guarantees, etc. etc. etc., is to control or influence the price of money. Therefore your assertion is not valid and the argument fails.

Grim
How do you define the difference between ‘capitalism’ and ‘financial capitalism’? Presumably just plain old ‘capitalism’ is of a non-financial kind?

This looks like more confusion about basic economics.

Leigh
Personality is irrelevant. The real issue is whether anyone can show reason or evidence against my argument, rather than more of the personal insults and confused voodoo of the ‘let’s burn down our houses’ school.

Janet, Keith
Thanks; much appreciated.

Pericles
The viable alternative is to stop doing what’s causing the problem in the first place, which is, monetary policy to lower the rate of interest.

“Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production.

“It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation.

“In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters.

“The age-old disapprobation of interest has been fully revived by modern interventionism.

“It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether….

“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Mises, ‘Human Action’, p. 570

I think that was the mistake I made, Jefferson.

>>The viable alternative is to stop doing what’s causing the problem in the first place, which is, monetary policy to lower the rate of interest.<<

I thought that the idea was to address the problem as it exists today. Silly me.

Yours would be a good idea if we hadn't dug this hole in the first place (and I guess that was also what Keith refers to when he says "Justin did give an alternative ... didn't you recognise it? The Greeks once mastered that option."), but I think people are more concerned about cures than prevention right now.

One real alternative would of course have been to "let the market sort it out". Banks would be made to survive or die without government handouts, and we punters would have to get by without our own personal red envelopes. The "problem" would disappear as real asset values reasserted themselves, and bad loans absorbed back into the system..

But I think you would agree that while "effective" in economic theory, it would have caused significantly greater misery to all parties. So we are left with a distictly un-pretty political solution, which we can all pick holes in until the cows come home.

As a solution to the immediate issues, "shrinking government" is a non-starter. Again, it is a nice theory - and one, by the way, that I support wholeheartedly as a longterm goal - but will take literally decades to implement.

Of course, I could be wrong, and the solution might be staring us in the face. In which case, I'd be delighted to hear something less like a political slogan, and closer to a workable action plan.

Jefferson; Capitalism is about making something. Capital.
Finance Capitalism is about making a profit from the exchange of money. Nothing is created, nothing is built, nothing is manufactured.
Except debt.

In the next 3 yrs the tax revenue loss will total $ 115 billion.Add to this the cost of growing unemployment and we are going into serious debt.That $200 billion deficit mentioned earlier,is the projected total deficit for the next 3 yrs.It could be easily much more.At the end of the last recession in 1995 Labor left us with a Govt deficit then of $98 billion which would be more than double in todays money plus interest.

The size of Govt must shrink in proportion to the tax revenue loss.It is better that people find productive jobs than the contrived micky mouse ones in our bloated bureaucracies.There is no doubt that many people are working hard long hours,but how productive are many of these jobs? We have the farce of OH&S putting too much regulation on business.Govt contracts with annointed contractors costing the tax payer 3 times the real cost because of regulation,fear of litigation and just plain incompetence.

Either we make the hard decisions now or suffer a prolonged servere downturn.Going into debt for productive long term infrastructure projects is fine,but going into debt to prop up a failed,inefficient private and public sector is folly of the highest order.Kevin is currently bailing out failed state Govts and thus is rewarding stupidity and nepotism.

None of our Govts especially NSW have a clue about productivity or efficient use of resources and we seem destined to repeat past failures.

under one God,

these are all good questions and all perfectly logical to ask. One of the most confusing things is the fact that money is not a real, physical thing – it is an abstract concept, an idea. It exists, but not in a physical form and is thus not bound by any law of physics.

It is perfectly logical to assume that a federal budget functions exactly like our household budget, only larger – but it doesn’t. When it comes to currency, the federal government is unique. It is the currency monopolist. It and it alone can create currency (in Australian dollars). This medium of exchange is entirely imaginary (though very much legitimate) and the currency monopolist can create any sum it chooses for that very reason.

Imagine the fed was a bowling alley. Does a bowling alley need to keep say, 100 000 points in reserve, just in case a team of really great bowlers comes through and scores all the available points? Is it possible for the alley to run out of points? Does it ever occur that the alley announces “attention all bowlers! All available points have now been scored so we are forced to close down”? Of course not. As long as there are people to keep setting up the pins and keep bowling, there is NO LIMIT to the number of points that can be scored because the points are only an imaginary concept. So too with money. The currency monopolist is perfectly capable of creating any amount it sees fit. They do not have to borrow points from another bowling alley and do not have to collect all points scored before the bowlers go home so they can be “spent” (used at the next days gaming) – that would be ridiculous

My full post has exceeded the word limit. I will answer your questions about the role of taxation and others later.

90% of all human commerce & ECONOMIC activity is concerned with potential SEXual gratification.

That means the whole purpose of economic stimulus packages is to convince women to have more children IN EVERY COUNTRY not just in the target stimulus nation.

In turn this creates IMMIGRATION pressure into first world countries from poorer nations where the flow-on of stimulus packages create additional children and greater aspirations.

Further, the stimulus packages will only work once the world's population has increased 5% to account for the 5% loss in real growth that we have seen since the downturn began last October.

This result creates ONLY negative consequences for global sustainability:

1. It favours and empowers women as the consumer of choice to enrich major corporations and Big Governments. This will create rich/poor social divisions never seen before in human history. In essence it will subtly reinstate and continue the excesses of the recent past because the same sexual motivation will not have been addressed.

2. It disenfranchises men who will react with a natural violence that will shake the entire planet with strikes and war. It will also disenfranchise women who will ultimately (if not already) become the goods & chattels of steel-ceilinged corporations and Governments

3. It guarantees exponential increases in oceanic effluents & toxic gaseous emissions that will kill marine ecologies, thus raising ocean heat capacity,retention&phase-energy breakout points. This will lead to expanded climate change patterning such as more severe flooding, drought, tornadoes and hurricanes.

These changes WILL occur rapidly from now on. This is guaranteed by the REAL population growth AIM of stimulus packages occurring quickly as DESIGNED.

Economic growth without global population growth is NOT POSSIBLE.

Fozz, your statements about govt. being a currency monopolist, leaves out the banks' collective creation of many times more 'imaginary' money than the mint. It is this credit out of thin air, without any real products associated with it, which is the problem.

Fozz<<One of the most confusing..money is not a real,physical thing..it is an abstract concept,an idea...It exists,but not in a physical form and is thus not bound by any law of physics.>>fo bro mate you deluding or decieving[not sure which]it egsists in coin and note[as well in credit and REAL DEBT, owed in their franchised fiat

the fed constitution allows govt to issue COIN=legal tender[ie copper silver and gold coin]thats legal tender[via the fed it releases promises to pay coin or more IT..[USED TO RELEASE promise to pay in sterling silver]read a pound note[promise to pay bearor one pound sterling [silver]

but then the fed got privatised..[the real;silver went from our silvercoin-age[replaced with nickle]and the bankers stole the REAL silver and gold..[our real wealth got stole right there]

THE FED govt WAS unique,..but the right to issue currency got stole BY THE FED

<<It>>..IE THE FED..<<is NOW the currency monopolist...It and it alone can create currency(in Australian dollars).This medium of exchange is entirely imaginary though very much legitimate) and the currency monopolist can create any sum it chooses for that very reason.>>

<<The currency monopolist is perfectly capable of creating any amount it sees fit. They do not have to borrow points>>..EGSACTLY[with a few minour edits].clearly you know whats what [just seem to be confused ABOUT WHO OWNS THE EXCLUSIVE RIGHT TO PRINT our money

[see prior to the fed privatisation we DIDNT HAVE INCOME tax[that only came up when the fed went bankrupt[and the bankers..[money changers]..stole the peoples means of money creation for free into our FIAT/money created for your fee,

govt has to lend it so do thee,only the bankers give it to their mates for free[i will swap mine for yours...for them currency swaps cost nothing]..plus any debt is in their power to print,its repayment..any time THEY chose..[not govt]

Hi Grim.

The mass trend towards debt as an everyday tool for everything instead of saving first then spending later certainly is problematical and the banks certainly love it. Living on ever-increasing debt was never going to be sustainable.

However, banks cannot actually create money, only a currency monopolist (in Australia, the federal government) can do that. Banks can access a vast pool of money from the inter-bank market an on-lend it at a margin. ALL money loaned by banks was originally issued by a currency monopolist.

under one God,

I am struggling to decipher your post. Notes and coins are REPRESENTATIONS of money. Actual money is an abstract concept. Every time you swipe your plastic card, money was transferred without needing notes or coins. The government does not spend by sending out shipping container loads of notes to banks – it simply credits bank accounts. The money simply appears in the account as an increased numerical value.

I’m not sure what you mean by “The fed got privatised”

As promised: the role of taxation at the STATE government level is indeed to finance the government’s spending. They are not sovereign. But the role of taxation by the FEDERAL government is to create demand for the currency issued by the fed so that they can spend their otherwise worthless currency

FOZZ<<Notes and coins are REPRESENTATIONS of money.>>money IS notes and coins[coins USEd to be REALLY gold and really silver thus not abstract nor a concept[but a limited REAL commodity rare enough to hold a constant value[now coin is cupra nickle, ITS REAL VALUE[in nickle]is less than face value, so NOW it has become a legal tender[having only value because it is 'lawfull currency''..but its not constitutional[rule 115 a state shall not make anything but gold or silver COIN a legal tender in payment of debts]fed constitution]

<<I’m not sure what you mean by“The fed got privatised”>>
http://forum.onlineopinion.com.au/thread.asp?discussion=2441
http://www.galwayindependent.com/letters/letters/who-owns-and-runs-the-central-bank?-/

<<the role of taxation at the STATE government level is indeed to finance the government’s spending. They are not sovereign.>>neither is the federal govt,yet the federal reserve is

<<the role of taxation by the FEDERAL government is to create demand for the currency issued by the fed so that they can spend their otherwise worthless currency>> WERE IT STILL SILVER AND GOLD it wouldnt be worthless[as it is now]

[but the fact its 'legal tender makes it have legally[not constitutionally ;real worth,..despite only being printed paper[and nickle coin]..

funny how the nickle almost is about parity with the price of nickle[but the silver coin [the shilling]contains about 3 dollars in silver..

thats how much value the federal reserve has stolen from each of us[our parents bought their house for 300 pounds [of silver]ITS STILL WORTH ARROUND 300-POUNDS OF SILVER[its the value the bankers stole, giving us fake silver coins while stealing the real silver

Fozz, your arguments hold true if fiat money leads the money creation cycle. Steve Keen has demonstrated that private banks lead the cycle and force the Reserve to relax reserve limits or to create new reserves after banks have created credit. Currently the ratio of debt to GDP is running at 3-6 times historically safe levels.

If the govt is really in charge of money creation or the RBA, then they have been abject failures in allowing credit/debt levels to blow out as they have.

In the '30's we had the non-Keynesian Premiers Plan which brought us out of the depression much quicker than the USA which enacted big government spending programs.

Jefferson is right in saying recovery won't come from an engorged public sector but from the private sector investing again. Rudd would have been better off saving money to take up the slack in employment when it happens. With a lazy $200B deficit in the next few years, and our endless current account deficits we are going to need all the production we can muster to pay our way.

Instead we'll get an estimated 5% increase in total tax take and a load of international pressure to cut government spending. And a Mexico style rape of our resources to pay for Rudds premature ejaculation of more borrowed money into an economy crushed by debt already.

If Rudd really knows best then why wasn't he pushing this barrow 2 years ago? If the Treasury or the RBA really knows what's best why didn't they do something before the crash?

And why are Ratings Agencies still listened to?

Pericles
The cure and prevention are the same: a return to sound money.

Everyone is agreed that there should be political action, so the fact that there would need to be political action is not an argument against a return to sound money.

Fozz
Money is not an abstract concept if we understand its origin. It is merely the most marketable commodity that comes to be valued as a medium of exchange. My mother-in-law remembers depositing a gold sovereign, and when she went to withdraw it, getting back a piece of paper. She doesn't think of money as an abstract concept, and clearly understands the theft that monetary policy involves.

But the effect, and indeed the purpose, of government-monopoly money, is to forcibly replace society's preferred and freely chosen forms of money - usually precious metals - with tokens of nothing but the authority of the state, the same people who stand to benefit most by defrauding the population with fiat money. The effect is to make money *seem* to be an abstract concept - nothing but the fiat (L 'make it thus') of the political class.

Money substitutes are substitutes for money proper, which used to be gold. But since that itself has been changed to mere worthless paper, people confusedly think that money is not 'real'. But that is merely to fail to understand the nature of the fraud, which is two layers deep:
1. money proper replaced with government paper and called money, and
2. money substitutes issued out of all proportion to money on deposit.

If we returned to sound money, people would better understand once again
a) that money is real, and valuable
b) the difference between money and money substitutes
c) the fraud that is monetary policy, and
d) the fact that the fake money is itself used to promote privilege in society and self-aggrandisement in government and its political favourites

Grim
Mises and you are in agreement that banks should be prohibited from lending out money substitutes unless they are 100% backed by money truly so-called. But Mises is consistent: he says no-one, private or public, right wing or left, should have the privilege of defrauding the population with fake money; whereas you, correct me if I'm wrong, think the banks should not be able to do it, but the state should. The effect economically and ethically is no different: it's counterfeiting, it's fraud, not matter whether the party who does it is public or private.

Palimpsest
Steve Keen has not demonstrated that the 'roving cavaliers of credit' would be able to profit from printing money substitutes in excess of money proper, in the absence of the entire panoply of monetary policy instruments and institutions, all of which promote inflation and the privilege to inflate. He assumes the existence of them all as the backdrop to his analysis, and confines his policy conclusions to twiddling with this dial here and that dial there, but leaving the entire framework of legal fraud in place. Certainly government is implicated up to its neck, and it is all too easy for academic economists to claim that *their* particular form of (government-funded) meddling is the one that would be our salvation. Keen disposes of the neo-classicals: he has never refuted the Austrians.

All
The way out of this mess is explained in this article, especially at the end: http://mises.org/story/3386

I would be interested in your comments on it.

Simply stunning, Jefferson.

>>The way out of this mess is explained in this article, especially at the end: http://mises.org/story/3386 I would be interested in your comments on it.<<

"...if we want to return to sound money, and if, by doing so, we want to prevent the total destruction of the exchange value of existing fiat monies, the only option available is a re-anchoring of the stock of fiat money to [gold]"

That was a twist I didn't see coming. The return of the gold standard.

Draw me a picture, if you can, of how this will prevent massive misery around the world. And why gold? Why not oil? Or pork bellies? Or copper? They are all tradeable commodities, after all.

The only possible opportunity to achieve this magic trick would be during a prolonged period of worldwide total political and monetary stability.

Doesn't sound like 2009 to me.

Like many classic academic economists, von Mises had little or no connection with the real world. As The Economist observed in 1957:

"Professor von Mises has a splendid analytical mind and an admirable passion for liberty; but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard"

Jefferson, this is fairyland stuff..

>>Pericles The cure and prevention are the same: a return to sound money. Everyone is agreed that there should be political action, so the fact that there would need to be political action is not an argument against a return to sound money.<<

Cure and prevention are most definitely not one and the same.

As an objective, rebuilding real value into the system, and sticking to policies that recognize the dangers of falsifying market signals, is highly relevant and very necessary.

But it is the journey that is the problem.

It is not a switch, that you can simply turn on at will. Think for a moment what would happen to the price of gold on day 1 of your policies swinging into action.

Then look ahead to day 100, and day 1,000.

Nasty, isn't it?

Jefferson, on this matter I agree with Mises. I do, however think the banks are the more vile of the two. Governments have been accomplices. You'll find this link interesting:
http://www.brasschecktv.com/page/604.html
But I also agree with Pericles:
"...but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard".
A far more interesting and on the ball economist was, I think, Thorstein Bunde Veblen.
Pericles, I stand by an earlier quote; every crisis is an opportunity. Particularly in politics, we must strike while the iron is hot, because voters have very short memories.
Now is the time to at least make a start. Even more than the introduction of the GST, this requires a paradigm shift in thinking, and remember how long it took to get the public to rethink that one?

Changes in money standards, changes in location. The Romans tried EVERYTHING & still the Empire fell because of external population pressures & migration patterns.

The Romans were far too 'exclusive' within the broader framework of growing populations. Populations which used Roman technology but which had their own ideas on sustainability and social robustness. The Romans had Tunnel Vision and saw surrounding population growth as inferior value, which of course proved untrue over the following 2 millenia.

In a very real sense, Sesterces evolved into Dollars, Euros, Roubles, Rupees, Yen and Yuan and all this ultimately represents is a change in population numbers and the markets and the real VALUE they represesent.

The modern global dollar economy is also far too exclusive and it is falling into the same tunnel-vision Clayton's protectionism trap as the Romans. The protectionism you have while your telling everyone you're into free trade.

If the human race is to survive another millenium or even another century it is likely America and the global dollar economy will collapse and become a devalued Asian economic outpost. The new global currency will then represent new evolved values (most likely clean ENERGY units) and Not those values (sexual favouritism) we are forced to negotiate today.

Now, that evolutionary change in money and its true value is historically credible and probably will happen, except for ONE thing:
When Rome went belly-up there were still fertile places on the planet to discover. The Earth was for all intents, an infinite economic medium.

As world populations soar to 9 billion and crucial potential energy supplies become insufficient it is clear this planet is FINITE and far more fragile in terms of livability & sustainability.

Whatever global currency of the future and whatever its true value, it will be very short lived as the human race sexualises itself into a Lemming like oblivion: The USDollar-value EQUALS "access-to-women" & Women are programmed not for EQUAL-rights but for ALL-THE RIGHTS-THEY-CAN-GET including unlimited power-garnering, environment-destroying reproductive rights.

Unless new monetary value includes one-child reproductive restrictions, the Human-race will converge not to a new monetary-value-system but to extinction.

Continued from last night...
But wait!
If I look down (whilst standing directly over the North Pole, with one eye shut), I notice my toes are in front of me. This means my toes must be 'south' of 'me'.
Therefore my heels must logically be 'north' of my toes.
Therefore it must be possible to look north, while standing at the north pole.
All one needs to do, is spread one's legs slightly, bend over and place one's head between one's knees.
Coincidentally, this is the posture I would be inclined to adopt, if you ask me where 'east' is, outside our galaxy.
Bushbasher's answer was more succinct.
Dan, in reply to your question, I have always relied on the ethic of reciprocity (golden rule).
I would suggest 'evil' could be defined as utter selfishness; the evil person is one who feels no sympathy, compassion or empathy for anyone but him/her self. Only their own personal gratification counts.
Strangely, I was actually thinking of psychopaths when I wrote that, not free trade finance capitalists...

read the links;IGNORANCE IS NO EXCUSE
http://www.youtube.com/watch?v=SN9WhFSnkls
YouTube..Economist William K.Black pulls no punches in spelling out who is really responsible for our current economic disaster

alex jones[see after 4 min mark]

http://www.youtube.com/watch?v=7xbCWU67xV4

http://www.infowars.com/the-great-geithner-coverup/Geithner Coverup

Bank of England,Sterling/Government Treason
http://www.infowars.com/bank-of-england-sterling-and-government-treason/
Mike Robinson.The Bank of England was originally set up as a core part of the British Empire/making huge profits from loans to the British East India Company/like imf today
http://www.infowars.com/china-slows-purchases-of-us-and-other-bonds/

http://www.infowars.com/luke-rudkowski-on-russia-today-us-media-doesnt-want-truth/

http://www.infowars.com/dutch-publication-prince-bernhard-was-deeply-involved-in-weapons-trade/

http://www.infowars.com/self-righteous-neocon-republicans-complain-about-dhs-report/
Malkin, Gingrich,Weiner,Hannity and the rest really do not have a problem with government assessments formulated in secret,..so long as they are directed against their political enemies.

http://www.infowars.com/national-guard-on-alert-for-tea-party-protests/

http://www.infowars.com/goldman-sachs-tries-to-shut-down-financial-blogger/
WHY..How did Goldman do it?

Well, as Floyd Norris..chief financial correspondent for the New York Times..explains,Goldman simply didn't report results for December 2008,..a month in which it took huge write-downs...Its easy to look profitable when you can cook the books .

http://www.washingtonsblog.com/2009/04/how-goldman-posted-profitable-quarter.html

http://www.washingtonsblog.com/2009/04/dont-fall-for-old-divide-and-conquer.html
http://whatreallyhappened.com/

It Is Time to Dissolve All Central Banks
http://www.prisonplanet.com/it-is-time-to-dissolve-all-central-banks.html
the Federal Reserve has failed on its own terms..Specifically,it has failed to provide the counter-cyclical/influence on the economy..which is its very justification for existing in the first place.

Scope of Emergency Loan Plans
http://www.prisonplanet.com/fed%e2%80%99s-kohn-dudley-defend-size-scope-of-emergency-loan-plans.html

Federal Reserve’s top policy makers defended the Fed’s emergency lending,..saying the programs won’t cause an inflationary surge or create“significant”risk for taxpayers.

Fannie Mae Exec Chosen to Oversee TARP:White House
http://www.prisonplanet.com/fannie-mae-exec-chosen-to-oversee-tarp-white-house.html
The executive chosen to lead Fannie Mae through a government takeover has been tapped to oversee the $700 billion rescue of the U.S. financial system,
http://www.counterpunch.org/

The international monetary system’s breakdown is underway
http://www.washingtonsblog.com/2009/04/instead-of-bailing-out-mainstream.html

If we believe US leaders and their scores of media experts,China is only dreaming of remaining a prisoner,and even of intensifying the severity of its prison conditions by buying always more US T-Bonds and Dollars.
http://www.prisonplanet.com/summer-2009-the-international-monetary-system%e2%80%99s-breakdown-is-underway.html

OBAMA’S NEW WORLD ORDER?Frightening 150 Page Report into Obama's New World Order.Report is Under Threat of being Taken Offline.Must See Now.
http://www.antichristidentity.com/
http://republicbroadcasting.org/?p=1362
http://republicbroadcasting.org/?p=1358
http://republicbroadcasting.org/?p=1301
http://republicbroadcasting.org/?p=1234
http://republicbroadcasting.org/?cat=8
http://republicbroadcasting.org/?cat=7
http://republicbroadcasting.org/?cat=4
http://republicbroadcasting.org/?cat=6

MONEY WATCH ARCHIVE
http://www.prisonplanet.com/section/money-watch
http://www.haaretz.com/hasen/spages/1079197.htm
Posted by one under god, Tuesday, 21 April 2009 5:39:42 AM

Jefferson, I take your point that Keen doesn't yet have a complete package as yet. But there are things in common, most relevant here being that money (or money substitutes) come out of thin air without relevance to productive use. And that this inevitably leads to asset bubbles.

Re your link to Mises- like Pericles I can't see how going back to the gold standard would work. This might be dumb of me but the distribution of gold around the world is not in ratio to the worth of nations where it is found. After reading Keen I would suggest that money/debt creation be linked to production of goods and services and that the multiplier thru FRD and reserves be severely limited.

This at least would delay and minimize the booms and busts while still allowing for 'robust' entrepreneurial activity.

Grim
I don’t recall anything in the golden rule about using violence or threats of violence to force other people to pay for one’s values and obey one’s opinions. But socialism consists of nothing else.

Palimpsest
Notice how Keen is government-funded, and concludes that the problem has got nothing to do with government, or monetary policy? We only need more of their wonderful economic management, apparently.

You, and I, and government, don’t have to figure out how the gold will get to its end users any more than we have to figure out how shoes, or wheat, or pizzas will. It goes by individuals, not nations.

All we have to do is stop government from stealing the gold, and granting privileges to banks to steal it. While ever government retains the power to issue fiat currency, establish central banks, cartelise the banking industry, inflate the money supply, lower interest rates, suspend redemption on demand, and all the rest of it, the problem will not and cannot be solved by yet more interventionist central government manipulation of banking and money.

Pericles
You seem to be saying that it is desirable but not practical to return to sound money.

But a return to sound money is practical in the sense that it, and nothing else, will fix and prevent the problem permanently.

The biggest impediment to a return to sound money *in practice* is that majority opinion does not understand the issues or the solution. Like Grim, they think that the solution is a slide into ever more fascism!: http://www.lewrockwell.com/orig10/celente2.html

But “That a fact is deemed true by the majority does not prove its truth. That a policy is deemed expedient by the majority does not prove its expediency.”: Mises.

It may be said that a return to sound money would involve great social dislocation. But avoiding that is not an option. The original economic problem is that manipulation of the price of money has caused capital and labour to be diverted, on a massive scale, into producing stuff for which there is no ‘real value’ demand, to use your expression.

And we ain’t see nothin’ yet. Just wait til the US dollar collapses. No government intervention whatsoever can fix this. Bailouts, stimulus packages and so on are nothing but price controls, and can only make it worse.

This all re-proves that it is not open to government to suspend the laws of physics or economics.

The article said that if all the money and money substitutes were divided by the banks’ ounces of gold, it would be $36,000 per ounce. Let’s assume that is right. That does not show the impracticability of returning to sound money. It shows the unsustainability and immorality of the alternative to sound money: continuing the fraudulent interventionist manipulation of the money supply.

At least with a return to sound money, we would be doing all that is humanly possible both to fix the problem as soon as possible and prevent it happening again. No-one remembers the US depression of 1921 because President Coolidge did *nothing* to try to re-bubble the economy, and it was over in a year. Compare that with the depression of 1929 and all the wonderful government interventions to fix it.

The most practical thing we can do is stop believing and spreading what we know to be wrong, and start understanding, explaining and demanding what is true, workable, and just.

There is no need for this problem. The choice is literally between inflation, fascism and increasing chaos; or peace, freedom - and gold. This is a re-run of the 1930s.

Why gold and not oil or pork-bellies? Because oil and pork-bellies make your pockets greasy? Seriously, anything that people freely choose as money is fine, so long as they are not being compelled into it by force or duped into it by fraud as they are now with fiat money.

But if government’s monopoly were abolished, it is highly likely that the commodity to emerge spontaneously world-wide by the common consent of billions of people, would be gold. In the unlikely event it wasn’t, it would still serve the purpose, unlike fiat money

Sincere apologies to all for my previous post; it was meant for another forum.
Jefferson, I don't consider myself a socialist or a fascist. As I have already said, I agree with Mises -and you- for the need for 'sound' money. I also agree that it does not have to be a gold standard.
I seem to recall some free marketeers (Freidman, perhaps) posited the idea that in a truly free market, every bank could issue it's own currency; promissory notes, basically.
I think that's crap.
I firmly believe in Democracy. First, last and always the idea that every citizen should have an equal vote, and be equal before the Law. In a corporate environment, it is one share, one vote.
The thought that we are evolving into this kind of society fills me with disgust.
A democratic government must be the only provider of currency. And currency must only be the means of exchange for products.
It must never be a product.
While I don't consider myself a Christian, one of the most appealing aspects of the story of Jesus -to me- was the incident at the temple.
The only thing that provoked Jesus to violence was the money changers.

The Gold Standard is done, it will not return. Seriously, as of 2001, the estimated amount of gold ever mined was about 145,000 tonnes. At the current price of approximately US$28.6 per gram, that means the total current value of gold is only about 4.2 trillion US dollars- globally.

There isn't enough gold to sensibly revalue it at such a high rate.

Besides, the Gold Standard failed to prevent the Depression of 1807, Panic of 1819, Panic of 1837, Panic of 1857, Panic of 1873, the Long Depression (1873–1896), Panic of 1893, or the Post-World War I recession.

Somehow I think something else might be in order. Personally, I'm hoarding Teddy Bears. When the economy finally dies and you are all eating each other, I'll be having a picnic.

I agree with Bugsy, the days of the gold standard have long gone.

Today I see money as just another commodity. But nobody is forced
to store their assets in money form. They are free to buy gold,
oil, diamonds, houses, whatever floats their boat really.

I personally like good farmland as one investment, as it is still
relatively cheap, doesent rust or rot and demand for food is highly
likely to continue.

"Don't put all your eggs in one basket" was a handy thing to
learn as a kid and it certainly applies to assets and investments.

REAL gold..[as in real gold currency,is an impractability,

what hapens with real/gold..real/silver is people accumulate it,and somehow there seems always more''promise of gold certificates''[read paper money]..than silver/gold coin it is based on

never the less we need to have a standard-measure only real gold/silver allow..thus..there needs to be a virtual-linkage to the gold/silver..[because we know nearly egsactly how much of the real stuff there is]

currently the real stuff is near impossable to get..[because it was stolen long-ago,..thus the only'fair'thing is to re-monetise it,to achieve currency stability..[by seizing its physical possesion back under the physical control of the state]..

then issue a central/accounting..[but not possesion]of it,..that issues the relitive fiat for each country..[by factering in value added improvements to the countries infastructure/peoples living standards]

all coinage is as good as gold/silver..[yet not'[real'gold and silver,..the countries are allowed to maintain their coin-age issue under rights of seignorage,..but the fiat notes are dependant on real assets..[or grants/gifts or reperations via a central body,like the imf,..yet NOT the current imf..[ie not a bankers/cartel[but a wholesale credit provider to the banks]

its time for seperation of finatial powers as well as the sepperation of govt powers,..we retain the current birth bond,and securities currently bonding the people as surity..but add value according to the skills ready ness of its citisenry..[educating your people allows you more money]..to spend on your peoples services

anyhow we need a surity,..gold silver can give that surity,..but bankers should not hold the franchise..[just as elected leaders couldnt be trusted,..it thus has to be done democraticlly or systematiclly,..all abouve board..[with real civil/servants validating and delivering when certain standards are met]

all debt must be repaid..[ursury clearly is abhorant/bankers need to cover charges..[thus get a transaction tax..[say 1 percent of all repayments,cash into the bank,as a handeling charge]

all payments..[plus one percent transactioning fee]..on loans repay the loan debt..[no ursury and a fixed measure must be the basis for real currency stability],..inflation disappears as does all income/wage tax,..say a reasonable transaction/tax on bying/or rather selling

we can figure out a better faier way
lets try

Jefferson, under Mises 100% reserve where do the funds come from to enable the sorts of innovation and development we continue to have come from?

Isn't the price we pay for technological advancement that we allow banks the privelege of 'making money out of money'? The system we allowed meant everyone could regard money as a commodity and thru speculation we could all make a motza? I'd suggest that money should not be treated as a commodity or good except in this limited way where banks had a smallish ratio to issue credit.

Keen is starting to look very middle of the road after my crash course in economics these last few weeks. Somewhere between Mises and Minsky.

Hi palimpsest

What are you saying? That commercial lending activities are compelling the reserve to lend to the commercial banks through the discount window? And this is responsible for the creation of fiat?

The RBA’s accounts should show very strong use ( I would say a big upsurge) of the discount window – probably tens if not hundreds of billions of dollars worth over the past five or six years if that were the case. Commercial banks are generally reluctant to use this facility because of the costs involved.

I think that in the absence of federal deficit spending, no significant new net monies have entered the economy (as they are now thanks to the deficit). People have simply been willing to part with an ever-increasing portion of their income as debt, which creates deposits in the commercial banks. Certainly, the debt-to-income ratio has exploded in the past decade.

The reserve ratio isn’t that significant in the long run because banks lending is not reserve constrained.

Jefferson,

Returning to a gold standard is probably impossible for a modern economy. The use of gold itself as the only legitimate medium of exchange is a history written in the blood of countless millions. Unlike fiat, gold cannot be created. Some countries are blessed with large natural gold reserves, some have little and some have none. Every time you imported, you would drain your money reserves and would be unable to create more any faster than you could mine or export – or kill and take. The European empires great wars of conquest were largely motivated by the lust for gold. If you cannot create your own currency because it is a rare earth element, the motivation exists to seize it from someone else. With fiat currency, you don’t need to worry about where your money supply will come from, nor is it possible or necessary to forcibly take it from someone elese.

Grim
Jesus didn’t get a band of armed men to take the money-lenders’ money by violence or threats, give it to himself and his favourites to spend on anything they like, and claim a higher moral and social justification, did he?

It is utter moral confusion and vanity to think that the golden rule provides any justification for socialism.

Democracy adds nothing to government but majority opinion. Yet if a majority vote for slavery or rape, you don’t think that’s okay, do you? What puts robbery or fraud in any better position?

Bugsy
Governments have a perpetual interest in inflation for a number of reasons, and virtually all their interventions in money and banking serve to permit and encourage inflation. This in turn causes the so-called business or trade cycle. (Interventionism cycle would be a better name.)

Government is behind the 19th century depressions you mention, by permitting banks to refuse redemption of their receipts, in other words, licence for theft. Government borrowed from banks to fund war with England in 1812. The banks printed new paper money. People withdrew their gold. So government stole it – granting banks the privilege of refusing payment. This in turn stimulated inflation and ‘wildcat banking’ which went on throughout the 19th century as banks realized they need have no fear of bankruptcy after an inflation. Both government and the banks profited from ripping off everyone else, as today, please see http://mises.org/money.asp

The problem with assigning to government the power to regulate money is the same as with anything. How are they, in their offices, to know what to do? They are human beings like everyone else, and simply do not and cannot know what they would need to know. The economic chaos of socialism *must necessarily follow* because, absent the price mechanism which they are deliberately setting out to displace, they have no means of economic calculation.

Fozz
Fiat money is always imposed by force and always takes over from, or hijacks, a pre-existing commodity money. (It cannot exist ab initio because the government would need to stipulate the price structure of everything

on day one which is impossible.)

If the government monopoly is abolished, society immediately reverts to its preferred underlying commodity or commodities.

Fiat money states have killed more people in a century than in all previous centuries in history, but that is not the point. It is not the use of this or that as a medium of exchange that is responsible for deaths, it is killing people, for which the killers have and must always have the responsibility.

When governments print or permit money substitutes above the level of money in specie, or when they print fiat money out of all proportion to the commodity money it parasitizes, they *are* forcibly seizing the wealth of others. They are not creating real wealth out of thin air as they pretend. The value of the extra paper money comes from diluting the value of the existing stock of money at the time of printing, that is all. They are thieving. Their actions are based on their claim of a legal monopoly, which only works because it is backed up by police, prisons, weaponry – in short, violence or the threat of violence. And majority opinion is no justification for robbery.

Where gold is dug up is irrelevant any more than it matters where wheat is grown. People can simply trade it in exchange for other valuable goods and services. Nor need gold be the only legitimate medium of exchange. Money and banking should be free, resting on nothing but the contracts of the parties, and the law against fraud.

The idea that the government needs to, or even can, manage the supply of money is based on fallacy. If it were true, total government control of the economy would work.

Far from protecting us against force and fraud, fiat money consists of nothing else – on a massive and unprecedented scale.

The gold standard, far from being impossible, is eminently practical and just, awaiting only the understanding of people brainwashed to believe chaotic interventionism is necessary or desirable.

Mises lived through the early 20th century. He witnessed the rise of communism in Russia, Nazism in Germany and Fascism in Italy. In 1940, he fled Europe, and arrived in New York.
Is it any wonder he was terrified of the threat of totalitarianism?
Not since the public forums of ancient Greece, have the people had the ability to monitor the workings of Government that we have today.
I suggest, Jefferson, every time time you use the word 'Government', have your word processor replace it with 'the people'.
Currently, Government issued cash represents about 3% of all money in circulation. The other 97% is created when a person, business or government walks into a bank and says "if you give me money today, I will pay back MORE than I borrowed".
Why do the blindly faithful followers of Mises continue to blame the 3%, and ignore the 97%?
Roughly half the cost of just about every item we purchase today, can be attributed to interest.
The reason governments all over the world are frantically propping up banks is because the fastest way to get money into the system is if someone borrows it.

Jefferson,

your argument is not consistent with the facts. Fiat currency does not dilute the existing stock.

It matters very much where the gold is if it is to be used as a medium of exchange. Why would I want anything I don't desperately need from you if trading your widgets for my gold means diminishing my stock of money if I can niether mine it in my own back yard nor produce it as I can with fiat. Why do you think the empires plundered the world for gold? Without it, their growth would eventually run into the limits of the supply of a money which cannot be created, no matter how badly you need it.

Once again, the point you have ignored: if a sovereign nation can create it's own money supply without needing to get it's hands on a rare earth element that exists in limited supply (and is not evenly dispersed over the earth), it is so much the better off. How much gold do you envisage might be left on earth? There are some things we have already run out of.

I think I now understand what a "pamphleteer" is.

Someone with an idea too wacky to justify anything except self-publication.

I'm completely unconvinced that the author understands i) basic economics (even the kind that runs a household on a daily basis), ii) the gold standard (what it was and how it worked) or even iii) how to make a coherent argument.

Even his introduction of the gold standard turns out to be a red herring.

>>Where gold is dug up is irrelevant any more than it matters where wheat is grown. People can simply trade it in exchange for other valuable goods and services. Nor need gold be the only legitimate medium of exchange. Money and banking should be free, resting on nothing but the contracts of the parties, and the law against fraud.<<

This is the basis of a barter system. Nothing wrong with that. Communities existed and thrived for centuries, exchanging goods and services for other goods and services. It may be viewed, through heavily rose-tinted glasses, as a utopian form of cooperation and community.

But it only ever worked in the most basic of societies.

We live in substantially more complex times, and simple systems cannot any longer meet society's needs.

Whether that's a cause for celebration or mourning is a completely different topic.

Hi Fozz, Ive had a look at the RBA site and drew a blank on Discount window levels on Oz, but came across a few things. The RBA has both reduced margins here and extended the duration of these loans . Ditto in the US with the Fed. Discount window figures are available for September/October 08 in the US- from $US19B to$US111B.

Interesting too that last year there were news reports that this is exactly what the CBA was planning to do. I do not know if this went thru or not.

And no I was not saying that banking activities were forcing DW lending and thus the creation of fiat money, although that may be what has effectively happened in the US now. Inter bank lending has decreased and the govt. is stepping into the hole left. The argument is that credit creation, ie private debt which we consumers spent and producers accept as money is more relevant to our situation than fiat money. Debt levels are way beyond money levels and have greatly increased over the last 10 years. Simply saying the debt to income ratio has increased does not explain where the money comes from or account for the compounding quality of the debt.

Agree with you on the effect of the reserve and also the effects of a return to the gold standard.

I have shown how monetary policy is incapable of improving the problem it is claimed to improve and actually makes it worse; and how freedom of contract in money and banking is a viable alternative.

The only critical arguments I am left facing depend on an underlying belief in magic:
• That forced re-distributions from A to B magically create net wealth
• That we can magically create real wealth by printing paper
• That the state mystically ‘represents’ the people when it uses force and fraud to expropriate them
• That the state has the magic power to manage the economy in the absence of economic calculation which it forcibly displaces.

Q.E.D.

The end

Quite possibly, Jefferson.

>>I have shown how monetary policy is incapable of improving the problem it is claimed to improve and actually makes it worse; and how freedom of contract in money and banking is a viable alternative.<<

Unfortunately, you also claim to show that i) barter can work in the twentyfirst century, ii) returning to the gold standard is a really neat idea and iii) that one or the other of these is actually a cure for what ails us, right now.

You are living in "if only..." land.

If only we had done y instead of x.

No-one will ever know whether your theories would have left us in a better place, so it is easy to present alternatives without the need to test them out in real life. Which is of course the really useful thing about theories presented after the fact.

I have very little quibble with the "if only..." part, except for the fact that it is self-indulgent dreaming. Nothing wrong with that. We all do it.

What does disturb me though, is the suggestion that we can instantly magic ourselves into that land of milk-and-honey, without any transitional pain.

What an astonishing bad article that was. If individuals are going to introduce accusations of ‘quackery’ then they should not be protected from receiving the same currency – the face at the bottom of the well is their own.

The issue is one of balance. Why mention;

“… a hundred million lives sacrificed in the 20th century to the communist and socialist experiments” without mentioning the two hundred million lives sacrificed during feudalism, colonial slavery and capitalism.

The Jefferson pamphleteer has earned his degree in quackery. Capitalism is not “the private ownership of the means of production”. Private owners can choose whether to operate as feudalists, capitalists or socialists. Capitalism only exists if private owners of means of production subsequently use their position (however gained) to expropriate wealth from others. If there is no expropriation by capital – there is no capitalism.

You can have capitalism even when the means of production are owned socially, or even by the State. If publicly owned means of production use their market power to expropriate wealth from the rest of society – they are capitalists. Those who simply associate capitalism with private ownership, and delve no deeper, are Jefferson quacks.

As we are now finding out, capitalism can only be imposed for a relatively short time while its inherent contradictions (particularly increasing per capita debt) build up into crisis proportions. Jefferson has not differentiated money (which exists under socialism), from capitalist markets that are falsely fueled by money plus debt.

Jefferson thinks the solution is to:

“…reduce both taxes and government. A good start would be to stop restricting and penalising the population for engaging in employment, saving, business, and investment.”

But this means more:
- capitalist wage expropriation,
- larger piles of capital seeking expropriation,
- more capitalists trying desperately sack workers to protect themselves, and
- more and more debt, interest payments on yesterdays debt, and future interest on today’s $20 trillion dollar bailouts.

So, properly considered, it appears Jefferson quackery leads directly to an unmitigated capitalist catastrophe.

You cannot rectify bad economics with bad politics.

Fozz,

I understand that governments create money out of nothing, but I do not understand exactly how they do it and i have been searching for an explanation for some time. Are you able to direct me to a comprehensive explanation? Thank you.

Chris - gov may 'create' a very small amount of our money out of thin air as it prints and provides the 'hard cash' currency and coins you (and most of us in other western 'democracies') use, but it is actually private banks who do most of the 'out of thin air' creation, although they expect something tangible for 'service' on that money they create, which is a lot of money, a lot of interest, and the source of all of our problems. It's much too long to get into in 350 words, but you might find some enlightenment of what is happening here - Global Financial Meltdown: Forces beyond our control, or the greatest scam ever? http://www.rudemacedon.ca/greatest-sting-ever.html . Our correspondent Justin might also benefit from a read, as he seems to have any number of - ummm - nonsensical ideas in his pamphleteering defence-of-capitalism lexicon.

Thanks, slamdave. I will read your link with interest.

i wont comment on how you tube bloggers are being systematiclly shut down[thats on alex jones infowars]

Federal Reserve Cannot Account for $9 Trillion
(Money News)

The Federal Reserve apparently can’t account for $9 trillion in off-balance sheet transactions.

When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed’s expanded balance sheet, the IG didn’t know.

Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are.

“I am shocked to find out that nobody at the Federal Reserve is keeping track of anything,” Grayson says.

Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.

“What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.

“We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”

Translation: Nobody at the Fed knows where the money went.

Do you know what who got the $1 trillion or more in the Fed’s expansion of its balance, Grayson pressed.

“I do not know.We have not looked at this specific area at the particular point on that specific review,”Coleman answer.

What about the trillions of off-balance transactions since last September,Grayson asked.

Coleman demurred again,saying the IG does not have jurisdiction to audit the Federal Reserve.

Grayson pointed out that it was the inspector general’s job to audit such spending and asked again if the office had done any investigation at all.

Coleman’s answer:Not enough yet to even respond...“We are in not a position to say if there losses.”

Grayson concluded,“I am shocked to find out that nobody at the Federal Reserve including the inspector general,[that is supposed?]to be keeping track of this.”
..article continues at
http://republicbroadcasting.org/?p=1895
and infowars/prison planet/what-really-happend[but not a youtube...lol]