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Fiat Money In Death Throes

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#1 lowrentyieldmakessense(honest!)


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Posted 05 July 2009 - 07:58 PM

someone else who gets it


"Banking was conceived in iniquity and born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take away that power, and all the great fortunes like mine will disappear -- as they ought to in order to make this a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, then let them continue to create deposits." ~ Sir Josiah Stamp (1880-1941), one time governor of the Bank of England, in his Commencement Address at the University of Texas in 1927. Reportedly he was the second wealthiest individual in Britain.

Make no mistake about it: in this credit collapse we are witnessing the death throes of irredeemable currency. In vain have governments and their client banks tried, for hundreds of years, to graft this repulsive and degenerate ******* on the living organism of society. The result was always the same: the healthy organism rejected the unnatural implant in its own good time. The present episode is no different from earlier ones except, perhaps, in the degree of the conceitedness of the perpetrators, and in their contempt for the native intelligence of man.

When on August 15, 1971, Richard Nixon defaulted on the gold obligations of the United States and declared the irredeemable dollar the "ultimate" means of payments and liquidator of debt, he was relying on the expert advice of Chicago economist Milton Friedman. Five years later the world's oldest central bank, the Swedish Riksbank would bestow upon Friedman the prize it established in memory of Alfred Nobel. The reward would be in recognition of the brilliance of Friedman's idea that if a central bank robs the people piecemeal (read: it dilutes the currency at a fixed rate of, say, 3 percent per annum) then the victims would not cry "we wuz robbed!" They would never notice the robbery.

In all previous episodes shame and disgrace were part and parcel of the government's default on its promises to pay. Not so in 1971. In this latest experiment with irredeemable currency there was a new feature: far from being a disgrace, the default was presented as a scientific breakthrough; conquering "monetary superstition" epitomized by gold; a triumph of progress. Sycophant governments and central banks overseas that were victimized by it and had to swallow unprecedented losses due to the devaluation of the dollar were not even allowed to say "ouch!" They were forced to celebrate their own undoing and hail the advent of the New Age of synthetic credit, irredeemable currencies and irredeemable debts.

The regime of the irredeemable dollar was put to the test soon enough. In 1979 the genie escaped from the bottle. The price of oil, silver, and gold were quoted at twenty times that prior to 1971; in the case of sugar the rate of increase was more like forty times, so much so that the Coca Cola Company found it too expensive to put into coke and started using corn syrup instead. Interest rates were quoted in double digits well past the teens. There was panic across the land and around the globe. Hoarding of goods became a way of life. Everybody was expecting the worst.

It was at this time that the notion of "targeting inflation" was invented. Previously the claims of central bank power were rather modest. Central banks were supposed to target short-term interest rates. Later they graduated to targeting the money supply. Now they were claiming supernatural powers of micromanaging price increases. It was apparently working, and the genie was put back in the bottle.

A government can take total control of the people either by the use of military force, or by the use of irredeemable currency. The former is readily understood, while the latter is a subtle national drug that is not generally recognized as such. Rather, it is readily embraced by its victims. For these and similar reasons irredeemable currency is the favorite device of modern governments that want to bring people under total control. Indeed, it enables the government to succeed in controlling the masses while, at the same time, earning their approval and even their enthusiastic support. Irredeemable currency must be seen as the habit-forming drug that the government uses to intoxicate people. Under this intoxication people will want more and more national spending, more and more government control, and more and more debt.

This intoxication obscures the sad end that arrives when the merry-go-round is coming to a jerky halt, when credit is exhausted or withdrawn, and the kitty is found empty. The nation is facing a most serious economic disaster followed by prolonged economic pain. Unfortunately, government economists, university professors, and financial journalists have taken their share of the fun and they failed miserably in their duty to forewarn people of the coming disaster.

It is useless to expect a mass movement on behalf of a sound currency. The daily experiences of people provide them with a warped outlook. They confirm in their minds the alleged virtues and benefits of an infinitely inflatable currency. People lack sufficient understanding of monetary science to see that no currency can be made infinitely inflatable without inviting disaster. Like a drug addict, people exposed to irredeemable currency do not regard it as a dangerous and undermining narcotic agent. Even the loss of purchasing power does not disturb them to any great extent. Their response is to demand more money, and they take pride in the fact that the government listens sympathetically to their demand. They welcome the soaring stock indexes and real estate prices, and put great stores on them. Heavy taxes and burgeoning debt are not regarded with anxiety. A frequent and common agitation is for ever more government spending.

* * *

If we are to be saved from the ultimate evil consequences of the regime of irredeemable currency, needed action must come from the leadership of the opposition party when it is its turn to take over government. The new President and his Secretary of the Treasury, or the new Prime Minister and his Secretary of the Exchequer must be statesmen. They must act as informed and tough monetary surgeons, men who can and will persuade Congress or Parliament to reinstate redeemable currency.

Once that step is taken, the people should experience a breath of fresh air. Government would once more be subordinated to the Constitution, bringing greater freedom to the people. Optimism should be wide-spread, because the currency of the people would once more had integrity. Business should prosper, domestic and foreign trade expand. Imbalances in foreign trade should rectify themselves. Gold should start to circulate and flow in from abroad. The control of the public purse would be returned to the people where it belongs if human freedom is to be preserved and responsible government is to be obtained.

But as the last presidential election in the United States has shown, the needed leadership is lacking. The party of the opposition is just as much in thrall to the same toxic ideology as the governing party. The last change of guards took place in the middle of a financial and economic crisis involving the destruction of quantities of wealth unprecedented in all history, with more destruction coming. Yet when the new president appointed officials at the Treasury, confirmed others at the Federal Reserve, and named economic advisors, they turned out to be the same men who were responsible for the credit collapse in the first place. Not only do these officials continue the dangerous course of the previous administration; they increase the stakes by several orders of magnitude in announcing more bailouts, more stimulus packages, hence more government spending, more government debt, and more fiat money creation.

The situation is no better in the United Kingdom, another important country expecting a change of guards, which could take the initiative to put a peaceful end to the regime of irredeemable currency now in its death throes. Rather than initiating a national debate on the utter failure of the present financial system which was supposed to end bank runs, deflations and depressions, serial bankruptcies and unemployment for once and all, and on the return to sound money and sound book-keeping, Her Majesty's Loyal Opposition is plotting a course how to cure the collapse of bad debt with the injection of more bad debt.

What this means is that there is no hope for change through peaceful means. When change finally does come, it will be through violence. When the economic pain inflicted on the people reaches unbearable heights, law and order will break down, anarchy and chaos will ensue.

Looking at the ruins of our civilization will be a bitter reminder of what the great monetary tradition of the English-speaking countries, in ruling out irredeemable currency and mandating a metallic monetary standard, was designed to prevent

Edited by lowrentyieldmakessense(honest!), 05 July 2009 - 08:01 PM.

Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty.

All tyranny needs to gain a foothold is for people of good conscience to remain silent.
Thomas Jefferson

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.

Sir Josiah Stamp, director of the Bank of England and the second richest man in Britain in the 1920s

#2 SMAC67


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Posted 05 July 2009 - 08:05 PM

Spot on, the death of our currency is going to make life very entertaining.............
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#3 three pint princess

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Posted 05 July 2009 - 08:39 PM

Didn't the gold standard in the UK fail during it's first crisis and the public lost trust in them. It's never worked because the trust issue is the same, and trust has never been stronger, even after the recent events would Gold have done any better.

Sterling has fallen but only on the same fears of trade not trust.

Edited by Tom Peters, 05 July 2009 - 08:40 PM.

#4 Injin


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Posted 05 July 2009 - 08:42 PM

Didn't the gold standard in the UK fail during it's first crisis and the public lost trust in them. It's never worked because the trust issue is the same, and trust has never been stronger, even after the recent events would Gold have done any better.

Sterling has fallen but only on the same fears of trade not trust.

It isn't the gold or not - it's the fact that the guy on the other end is a known liar and thief.

If you can't stop dealing with him - you simply stop doing anything at all, hence depression.
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#5 GrinAndBearIt


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Posted 05 July 2009 - 08:50 PM

The Islamic countries of the Middle East must be laughing their socks off now. Not as much as the Far East though their inscrutable nature means it's more like a sly smile. The West is dying.

#6 InternationalRockSuperstar


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Posted 05 July 2009 - 09:20 PM

The Islamic countries of the Middle East must be laughing their socks off now.

nah, it's illegal to laugh there.

or to wear socks.

#7 Sinking Feeling

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Posted 05 July 2009 - 09:21 PM

............and their cars are crap!
People take part in the ups and downs of popular feeling not only as entrepreneurs but also as savers and consumers. In the boom they confidently put their savings in the illiquid form of securities and mortgages while in the depression they hold them mistrustfully on demand deposit at the banks. It is of special significance that the bankers themselves are also subject to the psychological ebb and flow. So it is that in the boom, infected by the general ardent optimism, they loosen the reins of their credit policy, sift less strictly the demands for credit, look less fastidiously at collateral, overestimate the productivity of the credits they grant and are satisfied with less liquidity. In the depression the memory of the sins of the boom, and the " frozen credits " with which they atone for these sins, cause the banks to fix the most extreme requirements for their liquidity and to subordinate to this all other considerations.

Wilhelm Ropke 1931

In the summer of 1931 a Labour Government suddenly sagged at its knees and fell dead. High Finance had killed it as High Finance will kill the next Labour Government, and the next again............

Excerpt from The Financiers and the Nation, Thomas Johnston, 1934

#8 MarkG


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Posted 05 July 2009 - 09:32 PM

Didn't the gold standard in the UK fail during it's first crisis and the public lost trust in them.

The gold standard was doing exactly what it was intended to do: stopping government from printing money they didn't have.

The problem was that 'the public' _like_ government printing money they don't have... until the point where the whole 'boom' fantasy collapses.
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#9 CokeSnortingTory


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Posted 05 July 2009 - 09:35 PM

All you need to know about the Gold Standard here: http://books.google....y...lt&resnum=4

Haven't read it, but the gist seems to be that the crisis was caused by an increasing reluctance of central banks to cover each others' imbalances.
"Man is a machine." -- G.I. Gurdjieff

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#10 Mega


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Posted 05 July 2009 - 09:39 PM

I think there was a Labour goverment in power back then as well...................My what a shock......not.

#11 the_austrian


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Posted 06 July 2009 - 06:27 AM

Bretton Woods established the price of the dollar at 1/35th an ounce of gold. But the United States Government was inflating the currency much like Britain has done so eventually the world called their bluff, in particular Charles de Gaulle of France. It turned out they had not been mining gold at the rate that they had been printing currency so it all went pop. Aside from the endemic crime that is modern Fractional-reserve banking, it (closing the gold window) was the biggest default in the history of mankind.

#12 Warwick Yellow

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Posted 06 July 2009 - 06:44 AM

I think there was a Labour goverment in power back then as well...................My what a shock......not.

Do not doubt Our Dear Leader!

It is purely coincidental that ZanuLabour governments always lead to bankruptcy and economic ruin........ :huh:

#13 interestrateripoff


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Posted 06 July 2009 - 07:16 AM

I think there was a Labour goverment in power back then as well...................My what a shock......not.

Because the Tories did a runner again?

Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default


"The trouble with the world was that prices were so low that only the rich people could buy and the aim of the Conference was to raise them to a point where it would again be possible for poor people to buy something."

"Northern unemployment is an acceptable price to pay for curbing southern inflation" Eddie George former Governor of the Bank of England

New digest on the credit crisis and economy Part2 Part 3


#14 scottbeard


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Posted 06 July 2009 - 07:41 AM

The Islamic countries of the Middle East must be laughing their socks off now. Not as much as the Far East though their inscrutable nature means it's more like a sly smile. The West is dying.

Not really - the wealth of the world is just evening out, as it must. We can't have a situation in perpetuity where the Chinese slave away for a pittance so we can live the life of Riley.
"A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain." Mark Twain

#15 DrGUID


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Posted 06 July 2009 - 08:14 AM

> The Islamic countries of the Middle East must be laughing their socks off now.

Of course they're not, the place needs Western money and expertise to keep the oil flowing, not that we need much of the black stuff now.

And thanks to global warming, their countries will probably be uninhabitable by the end of the century anyway.

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