 
#  CRACKERNOMICS

# and

# THE 'DEMOCRATISATION' OF MONEY

#

# Andy Perry

Copyright 2013 Andy Perry

Smashwords Edition

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# For Denise

Who suspects I might be right.

# FORWARD:

This book is designed around the material I originally wrote for my 'United States of Everywhere' blog under the title of 'The Money Pit'. The United States of Everywhere was originally hosted on what became the Microsoft 365 site. It was then transferred to Wordpress. The extra material I have included here is really a means of illuminating or expanding upon the blog. I have avoided use of quotes unless they are strictly necessary.

I would like to thank Paul Okojie for his valuable assistance in preparing my arguments and Joe Jones for helping me to think aloud.

#  CONTENTS

INTRODUCTION

GLOSSARY

MONEY PIT BLOGS 1:2009-2011

Blogs on the Credit Crunch and Democratised Money

SCRIPT: THE GREAT MONEY TRAIN HIJACK

Explaining the Democratisation of Money

MONEY PIT BLOGS 2: 2011-2013

Blogs on the Credit Crunch

SCRIPT:2023

The Future Under Democratised Money

ON DEMOCRACY

Blogs on Democracy

CONCLUSION

What Can Be Done About Democratised Money?

CRACKERNOMICS IN A PAGE

### 'You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete'

Buckminster Fuller

### As Milton Friedman said -- quoting Clemenceau -- "monetary policy is far too important to be left to central bankers".

The Telegraph Monday 21 January 2013

### And the fifth angel sounded, and I saw a star fall from heaven to the earth: and to him was given the key of the bottomless pit.

Revelation 9:1 Webster's Bible Translation

#  GLOSSARY

#

Bog Standard (B.S.) Economics

Economic theory mass produced after the Second Germanic War. Similar in character to public housing projects, hospitals and schools etc produced to offset criticism of the Germanic elite. i.e. cheap, crude and plentiful.

Corporates

Opposition to Insurgents in Crackernomics. Advocate return to a financial system as close as possible to that which existed before the Credit Crunch. Believe that Credit Crunch is cyclic in nature.

Crackernomics

Post Credit Crunch economic framework in the Germanic world. Crackernomics supersedes political economy and the mainstream (B.S) economics that dominated the post second Germanic War period.

Democratisation

Process by which a self defined group seizes control of and exploits a resource.

Democratisation of Money

Process of a self defined group seizes control of and exploits the creation and distribution of money.

Dreaded Creeping Socialism (Socialism)

Monetarist description of the tendency for capitalist economies and societies to fall under complete control of the state.

Globalisation

The movement of Supercredit around the world

Insurgents

Opposition to Corporates in Crackernomics. Advocate return to a financial system as close as possible to that which existed before the deregulation of financial markets in the 1990's. Believe that Credit Crunch is cyclic in nature.

L.Q.E.(Literary Quantitive Easing)

Mass produced commentary on the Credit Crunch that may or may not all become totally valueless at any moment. Privatised version of post war government produced B.S. economics. The Stuff of Crackernomics.

Supercredit

Non sovereign credit produced without restraint.

Back To Contents

#  INTRODUCTIONS:

## Q: What could you have to say about the credit crunch that hasn't already been said better by someone else?

A: It is certainly true that the Credit Crunch has generated billions of words, orthodox and radical, from mainstream professionals and a host of amateurs. It all adds up to 'literary quantitive easing' (L.Q.E.) - and has about as much net positive effect. The Credit Crunch has rolled on its own merry way impervious to all previous attempts to predict where it will go next or remedy it. I don't think it would be very hard to say something better or more original than that.

## Q: What could you know that all the others don't?

A: Facts on the crisis and its aftermath are available in abundance to anyone who cares to look. In fact, we are drowning under a tidal wave of statistics, facts and figures, none of which in themselves point to an obvious solution. It's not about the quality or quantity of information- it's about the way we interpret it .

## Q: Well, what makes your interpretation different from all the rest?

A: First of all, I emphasise that the ongoing Credit Crunch debate is not an objective investigation into an 'accidental' economic collapse; it is part of a battle to establish who is to blame for the crisis, what punishments should be handed down and what policies if any, are needed to repair the damage.

How the available information is interpreted by any group or individual depends upon the stake that group or individual has in the outcome of this debate.

This is what used to be called 'political economy'. However, 'political economy is no longer an acceptable framework for discussing events like the Credit Crunch in the western world. A new framework has emerged under the tutelage of the media, politicians and economists on both the so-called left and the so-called right. An appropriate name for this new framework is CRACKERNOMICS.

My analysis differs from CRACKERNOMICS in this key respect: I argue that the nature of the change being brought about by the Credit Crunch is a fundamental and permanent change in the legal relationship between citizens in the Germanic world and their respective national currencies- a change unprecedented in capitalism and unprecedented in human society. I have attempted to describe and define this change within the framework of the 'DEMOCRATISATION OF MONEY'. It is the purpose of this book to explain what the Democratisation of Money is, how it relates to CRACKERNOMICS and how it will permanently change the world that you live in

# 2: THE MONEY PIT AND ME

# A brief history of writing my blog and how and why I changed my ideas as I was doing it.

About a year after the Credit Crunch began, I decided to write a blog about it. I had never really considered blogging about economics (or anything else) before, but I was becoming so frustrated with the argument as it was unfolding in the 'mainstream' and 'alternative' media, that I had to do something.

I decided to call my blog 'The Money Pit', after the 1980's comedy of the same name.

In 'The Money Pit', Tom Hanks and partner Shelley Long, are conned into buying a dilapidated 'bargain' to renovate with the intention of creating their dream home. The renovation turns out to be vastly more complicated and expensive than they ever could have thought. Despite their willingness to live for months with the privations imposed by their ambition, the entire structure finally collapses around their ears, having taken everything they own and leaving them with nothing.

Ordinary punters sinking everything they have into a financial death trap property is now the stuff of post 1990's cliché and of course, it's easy to scale the whole thing up to the vast amounts of money being taken from tax payers around the western world and poured into saving an unsaveable, rotten financial system. Which means in effect, that the stuff of eighties 'screwball' comedy was being played out as mainstream economic policy in the real world.

I wanted to understand how and more importantly, why, this could happen. Two more or less believable Credit Crunch stories had quickly emerged in the immediate aftermath of the crisis:

## The 'Corporate' story

The explanation heard most often through corporate media. It is still the most broadly accepted account of the crisis. This story has it that under western governments of both left and right, financial regulation had become progressively lax over a period of decades.

Somehow, by the early 2000's the system had become too complicated to understand, even by the people running it. This finally led to the collapse of Lehman Brothers which, having been allowed to fail by the Federal Reserve, was then discovered to be, in the definitive cliché of the time; 'too big to fail'.

Faced with the implosion of the western banking system there was no alternative for politicians but to reluctantly prop up the financial system with state money and of course to regulate the financial sector.

Ever since then the politicians and financial sector have been working diligently to regulate the system, reign in excesses and restore everything to the wonderful way it was before.

## The 'Insurgent' story

This is the 'alternative' analysis which you are more likely to hear on the edges of the debate. This version tells us that the Credit Crunch was the result of a Federal Reserve created credit bubble, inflated after the NASDAQ collapsed in the USA in the 1990's.

The main villains of the piece are Federal Reserve boss Alan Greenspan and his replacement Ben Bernanke. Insurgents argue that the government provided credit post emergency simply to defend the accumulated value of the stock market and the banks at a massive cost to the public.

Some versions of the story claim that the Federal Reserve did this because 'The Banksters' threatened the reserve with financial collapse and martial law on the streets of America's cities.

The insurgent analysis tends to be favoured by radicals and outsiders. The two handed game which forms the basis on which the Credit Crunch and its consequences are discussed by just about everybody is the basis of what I came to call CRACKERNOMICS.

The differences between CORPORATE and INSURGENT narratives boil down to a debate within these two arenas:

Was the Credit Crunch collapse part of a 'natural' repeating cycle, or was it qualitively different from other crises that had gone before?

Was the Credit Crunch inevitable or was it the consequence of voluntary actions? The answers you favour on either or both of these questions shape the way you answer the questions everyone wants to know:

### Will the Credit Crunch happen again?

### If the Credit Crunch happens again will it be bigger?

### If another Credit Crunch happens again, will the system be able to control it?

### If the Credit Crunch is a unique and unprecedented event, why has it happened now?

### What changed within the financial system to cause The Credit Crunch to happen?

and most important of all:

### Could or should 'we' try to return the financial system to its pre-Credit Crunch condition?

Both the CORPORATE and INSURGENT narratives have this in common: They believe it is possible to 'correct' the system and return it to some previous state.

The CORPORATES immediately made it clear they wanted to return to a system as close as possible to the one that existed just before the CREDIT CRUNCH. The INSURGENTS responded that they wanted to return the system to something more like that which existed before the Clinton administration repealed the GLASS-STEAGAL Act and ushered in the financial 'free for all' that caused the crisis.

Both these solutions imply that the central problem is that Bankers have somehow gotten out of control and need to be reigned in by the political system. This would be the central feature of any proposed Credit Crunch solution.

After a couple of years it was becoming apparent to everyone that none of the solutions implemented so far (austerity, record low interest rates, quantitive easing), have restored the system to its pre-crisis state.

Despite this, there is no serious move to change these prescriptions in favour of something that might work. The CORPORATES have had nothing to say other than 'more of the same'.

For the INSURGENTS this was proof positive of a bankers plot to loot the entire western economy.

From the beginning, I believed that the Credit Crunch was the consequence of a political phenomenon called MONETARISM that had overtaken political and economic debate in the 1970's and that this new crisis was in essence a political phenomenon rather than an economic one.

However, although I differed from the mainstream analysis in this crucial respect I did not at that time draw out the implications of this political perspective:

The Credit Crunch was the result of a unique change within the post WWII political system itself and not a voluntary or involuntary hi-jack of the system by the bankers. It is not a question of forcing or persuading politicians to control the bankers- the bankers are already doing the bidding of the politicians. It is the politicians who are pulling all the strings. In contrast to everyone else,

I argue that the bankers are the stooges of politicians; not the other way around!

In order to preserve and extend the new political and economic system they created after 1970 it was necessary to make a formal legal change in the relationship between the citizen and money. The purpose of these legal changes is to make the new political system irreversible.

The scope and nature of these legal changes makes them as significant as the changes that were implemented in Russia in the post Soviet period.

Originally I thought of this process as the Privatisation of the money supply, but this was obviously confusing -money is private anyway isn't it?

I needed a new way of describing this legal system centred on another more illuminating aspect of the process. To zero in on the specific nature of changes that was taking place in the use of state issued currency, I called this change the 'Democratisation' of Money.

The Democratisation of Money is permanent. There will be no attempt to return to the previous system. The following observations certainly seem to bear this out:

There has been little or no growth in the western economic system for five years. Many economists now refer to this low growth as the 'new normal'.

Central Bank Interest rates across the world have been co-coordinated to remain at what is effectively a zero percent interest rate. This has been gong on for four years.

Bank of England interest rates have remained at their lowest level since the creation of the Bank itself in the 1600's.

In order to achieve this, massive amounts of central bank 'money' have been 'printed' and distributed from central banks to the finance sector through 'quantitive easing'.

Quantitive easing by the USA Federal Reserve is now described as permanent until further notice.

Despite this 'quantitive easing' there has been no hyperinflation as predicted by all right-wing mainstream economists. They have not been able to explain why this is so.

Gold prices are relatively stable and have not reached the stratospheric levels predicted by the Insurgents in CRACKERNOMICS.

Commodity prices are inflating but prices of manufactured commodities are deflating. This has occurred for four years.

The prolonged systematic collapse in housing markets across the developed world has been successfully managed so far. A new 'rental economy' has been successfully created.

A systematic and prolonged attack on welfare provision across the developed world has been taking place since the onset of the crisis.

The Anglo-Saxon 'left' has effectively ceased to exist and shows no signs of return.

There have been no significant reforms of the banking system along the lines of those proposed by the Insurgents. None are planned. Disparities in wealth show that the Crisis condition has become normalised

# 3: THE QUEEN'S QUESTION:

# Why no-one had predicted the Credit Crunch until everybody had.

While visiting the London School of Economics the queen famously asked:

WHY HAD NO-ONE SEEN IT COMING?

The answer she received; 'everybody seems to have thought that someone else was taking care of things', could hardly have been satisfactory. One can almost see that famously fleshy Hanoverian mandible perceptibly clenching at the news. Having lost what can be conservatively estimated to be tens of millions of pounds sterling in value on her stock portfolio, we can surmise that she was somewhat under-whelmed at this explanation as to the reason.

From the very moment the crisis began, the hunt was on to find pundits who had predicted the Credit Crunch. The media quickly produced a variety of candidates, perhaps most notably Nouriel Roubini of the famous 'Black Swans'.

Since 2008 both mainstream and alternative media have tried to populate the debate with pundits they can have access to, and agree with.

These pundits are here to tell us what is going to happen next and perhaps more importantly, what should happen next. Being the first or only one to predict an occurrence or development gives the predictor access to the 'high ground' in any ensuing debate:

Being the first establishes bona fides. It seems reasonable to assume that the ability to uniquely predict an outcome indicates an understanding that others do not have. And of course this implied superior understanding gives the predictor a better position when the time comes in the battle to influence public opinion. This is why it is so important for the competing factions in the debate to supply their own Credit Crunch prophets and seers.

Of course, as I pointed out in Part 1 of this introduction, it soon became clear that outside of a few anodyne guesses, these fortune tellers had no real idea what was coming. More importantly, they remain afraid to even try to predict the future of the crisis. How could someone with the prophetic ability to predict the Credit Crunch mysteriously lose this gift the day after the Credit Crunch actually happened? The fact that these economic psychics are now so conspicuously silent should give you some insight into their real abilities.

On the other hand, since I actually have an understanding of the nature of the crisis and its aftermath, I have no such reticence. I am happy to establish my bona fides by means of predicting developments in the Credit Crunch.

First, the terms of the forthcoming debate: The so-called 'austerity' debate, the debate between welfare and state vs. private can be regarded as an aria to the forthcoming drama. It will of course be resolved in favour of austerity and privatisation.

With that detail out of the way, the real battle can commence between:

Producers and consumers of resources Vs. Producers and consumers of commodities.

State currency depositors Vs State currency lenders.

Those with access to central bank issued Quantitive Easing finance and its descendents Vs Those with no access to it.

Those who promote and use new currencies like Bitcoin Vs Those who cannot or will not.

Those who use Gold and other precious metals as commodity stores of value Vs Those who cannot or will not.

Those who use food, water and other resources as the basis for democratised currencies Vs Those who cannot or will not.

# 4: THE MONEY ABORIGINES

# Why the 'opposition' to Democratised Money will inevitably fail

The opposition to democratised money; those people who are doomed to lose out permanently as a result of the new legal/political system, will inevitably fail in their attempts to protect their livelihoods. This is because of a variation on the 'Aboriginal problem.

## ' What is the 'Aboriginal Problem'?

The Aboriginal problem plagued native American and Australians, Maori and others when fighting back against Anglo Saxon invasion. In a nutshell these natives did not understand the terms of the conflict they were forced into as the result of invasion and enslavement.

Evidenced by the observation that:

There were no 'Americans' - Anglo Saxon invaders invented being 'American.'

There were no 'Australians'- Anglo Saxon invaders invented being 'Australian'. There were no 'New Zealanders' until Anglo Axon invaders invented them. There was not even any such thing as being 'British' until Anglo Saxons invented it.

Before invasion, native peoples in these regions understood the land as an 'open resource'. As such they had never defined or understood ownership in legal territorial terms. To do so would have required them to fundamentally change the way their societies were organised; to change their fundamental social identity; to socially become different people. In other words no matter what happened, win or lose, in a battle for owned territory they could no longer remain what they were. Their social extinction was inevitable.

But even more fundamental than this was that natives could not understand what was being taken away from them by the invaders: The permanent removal of land usage rights to be replaced with 'democratic' ownership rights.

By the time they began to understand the consequences of what was happening to them and their relationship to the land, it was too late. Under Anglo Saxon 'democratic ownership', a Sioux Indian, an Australian or even a British aborigine is free to own land in their occupied territory- if they can purchase it. These are Saxon 'democratic' rights.

But the rights of common usage, the right to freely travel over the land, the right to gather food from the land they enjoyed before the Saxon land ownership system was put in place, were gone. You will have seen the dire consequences of this system for North American and Australian tribes and of course, the Welsh.

We have been money aborigines; we have understood money as an open resource that has allowed us certain rights and benefits as a matter of custom. As these rights and benefits have been accepted as customary we have never been forced to define or understand them in detail. We have never had to.

As a consequence, we cannot understand what is being taken away. The permanent removal of usage rights to be replaced with 'democratic' ownership rights.

Just as native Americans and Australians did not understand the consequences of private land ownership until it was too late we will face the same catastrophic knowledge gap unless something is done about it.

The consequences of Democratising Money in the long run will be as devastating for its victims in the heart of the Germanic world as the Anglo Saxon system of land ownership was for the native peoples of America, Australia and the indigenous British.

# 5: THE TERMS OF THE DEBATE

Looking back, I realise that the way I approached the democratisation of money pointed to a number of generalised aspects of democracy itself.

This led me to the final section of this book which deals with the process of 'democratisation' in generalised terms. In observing the democratisation of money I have had an amazing opportunity to see this process of 'democratisation' in action.

This is a social experiment on a scale that has not been seen for 150 years. Of course, you have that opportunity also. When everything is in place, in their final open attack on state issued currency, the proponents of democratised money they will argue that their new currency system is democratic and progressive. State issued currency, they will say, is non-democratic and old fashioned. Since this is true, they will win the argument unless the very idea of the 'democracy brand' itself is challenged.

We have moved irreversibly away from the terms and premises that shaped classical economics, this in itself is not a revelation. But we must also understand that we have moved away from classical western post war politics. Control of the state is no longer the mechanism of policy; it is now the objective of politics itself. Again, this development has been alluded to many times before.

What is new is that both of these observations have tended to come dressed in the language of oppression, not democracy, (think of '1984'). What is of utmost importance to understand is that it is now democracy itself that poses the biggest threat to the livelihood and well being of the mass of people in the entire world.

In '1984' Winston Smith asks of his interrogator why the state is given over to a monstrous system. O'Brien answers: 'because we can'. This is the least convincing sentiment in the whole book. Orwell argues that the world system he could see coming into view would be brought about by callous cynicism, but it won't be. It will come with a clarion call to 'freedom'. It will come couched in the highest ideals of 'western' freedom.

The future system will come from the tradition of extending democracy to every aspect of society-including money. It will come from the desire for equity in distributing the hardship that comes from the western world's partial fall. It will be portrayed as a 'just' system because everyone will have a fair chance. There will be winners and losers in the new economy but hey, isn't that 'our way of life'?

At its heart, this new movement rests on the argument that there is nothing that can be better done to serve the interests of people in general than to democratise everything, even the money they use. But this is just not true.

This is the first shot in the battle between democracy and the people.

I hope you enjoy the book.

# THE SINGLE MOST IMPORTANT POINT IN THIS BOOK

#

Battles are lost because the loser did not understand the nature of the battlefield. Debates are lost because the loser did not understand the terms of the debate. The terms of the debate are the topography of any intellectual battlefield and what determines victory or defeat.

Back To Contents

#  BLOGS 2009: 2013

# (Spring 2010) Five Short Answers to Five Big Questions

## Question 1: Is this Crisis unique?

Yes. All the previous financial and economic convulsions in the last century were the result of the operation of the international market system. The present crisis is different because it is not the result of a market problem; it is a result of a previous fix in the market. We are not seeing the effect of a new disease, we're seeing the effect of the medicine we took for the last disease we had. If we stop taking this particular brand of medicine, the side effects it caused may disappear, but the symptoms from the previous disease will just as quickly reappear. (For your information the original disease was called The Dreaded Creeping Socialism and the medicine was called Monetarism.)

## Question 2: Why did this Crisis start now?

It started because the previous fix could not last forever, despite the fact that the markets and the politicians managed to delude themselves that they had permanently solved the problem of Creeping Socialism. In late 2007, three consequences of the monetarist fix came home to roost at the same time.

Consequence 1: Supercredit

The provision of hyper cheap credit went through the roof in the nineties because of the permanently low inflation environment Monetarists wanted to create. Enter 'Super Liquidity'; tidal waves of white-hot investor money chasing investment opportunities around the world. Of course, there had to be the now familiar bloated financial services sector to take care of all these lovely uber-profitable, hot money transactions. (For your information, Capitalists called this hot money bath 'Globalisation').

Consequence 2: The Shadow Economy

Fundamentally, the Monetarist medicine seeks to cure Creeping Socialism by putting the patient, (that's you), on a strict diet that controls the amount of money allowed to flow through the economy, squeezing out of society all 'undesirable' social economic activity, keeping the economy artificially small but ideologically pure. 'Undesirable' activities include state provision of schools and hospitals etc. all evidence of Creeping Socialism. But what about all those people who cannot be found something profitable to do in the new 'pure' national economy? They will be shunted off to corporations and financial institutions that effectively exist outside the control and off the books of any national or international regulatory state; the new Supra-national Shadow Economy.

## Consequence 3: False Profits

Since Monetarism wants to force society to focus on those things that are profitable and since 'Hot' money makes speculation and Casino Capitalism the hottest thing around, we have seen society skewed towards a burgeoning financial sector. But here is the central problem with the Monetarist project- What kind of Profitable? (Otherwise called the 'Bonus Culture' problem).Because what is profitable in the short term for a minority is not profitable in the medium to long term for the majority. It is this that exposes the central con-trick in the Monetarist project. The collapse and the hardship that is now to come reveals the whole project since 1980 as nothing more than a scam to transfer public wealth from the many to the few.

## Question 3: When will this Crisis end?

The more any given national economy had adopted the Monetarist medicine the longer and harder its consequences will be to overcome. So Britain and America, Australia and Canada are going to suffer most. The growth crisis or recession has passed its first acute phase and in the near term we may see some undersized 'green shoots'. However, in order for economies to grow in a systematic way, it will be necessary to create a workable balance between providing Monetarist or 'Hot' credit and the pre-Monetarist inflationary kind. Notice I say balance.

The Monetarists even now dream of being able to re-instate their scheme in some modified way in the future. In order to allow desperately needed 'green shoots', Capitalists will have to allow some inflationary 'weeds' to flourish. To resolve the financial crisis, the 'shadow economy' must be reabsorbed into national regulatory structures through legislation, monetisation and substituting funny money for the real stuff.

The problem with this is that it will cause even more inflation and inflation you will remember, is the proof of non capitalistic activity and creeping socialism that all this palaver was created to stamp out in the first place.

So the question now is: How much of the 'evil old world' are the Monetarists prepared to allow to re-emerge? When they decide this and make appropriate arrangements they will declare the emergency over.

## Question 4: What will happen after?

As I said, there will inevitably be some inflation, but don't worry, despite Monetarist black propaganda, this is not necessarily a bad thing. It will help to off-set all the personal and governmental debt in the economy. At the same time increased interest rates will get 'Hot' credit down to something more like realistic levels of borrowing.

Don't let right wingers frighten you, governments will not allow interest rates to go haywire, it is politically impossible. All the real heavy action will take place in the realm of international currency markets.

This 'international' inflation will be new and extremely destabilising for two reasons. It will primarily affect imported food and raw materials. Imported manufactured goods will continue a real terms decline in price, there may well be global manufacturing deflation lasting up to a decade.

But new inflation will become increasingly hard to calculate even in nominal terms, due to rapid fluctuations in exchange rates.

Finally, national governments and international regulators will be forced to step in to create regional currency stabilisation zones including a Euro-Zone (which UK will be forced to join), a Dollar Zone (watch the fireworks as they try to force Latin Americans like Chavez to join!) and a Yen zone (Japan China reconciliation) etc. But this is only stabilisation of a temporary character.

The central fact is that the dollar can no longer be the worlds' reserve currency and America, in its current national form, cannot survive the consequences of this decline. With a crippled America unable to enforce the post WWII international settlement, war becomes inevitable.

## Question 5: What should I do?

Regional conflict is highly likely in the next ten years. Economic blocs will become de-facto political-military blocs, so stay out of them unless you want to be dragged into regional wars. But the pressure from these supra national blocs on all nations will ratchet up.

Prepare to see international political parties in the next five years. The international struggle for resources will push food and energy prices up attacking living standards; more inflation, more regional conflict.

There will be alternating periods of credit flood and credit famine. When credit becomes available borrow what you can. Banking interest as a source of income will die.

Save your money somewhere else than a bank. Direct, close, investment will be the key to making some return if you have anything to save or invest. Long complex chains of investment such as stock market pension schemes will be poison. And everything will have to change of course.

# July 9 2010

# Democratisation of Money.

We may be unsure about precisely when it started and we may not know when it's going to end, but we can all agree that we are in still deep in the Crisis.

The Credit Crunch has been described as a classic bubble and collapse; as the indirect consequence of East-West trade imbalance, intensified by a long period of Government overspend, but this is not the point.

This is truly an innovative economic situation that heralds a permanent change in the way that capitalism is run, the 'Democratisation' of Money.

The Democratisation of Money seems to imply everybody is going to get a bit of it, (the money I mean). But this is not the case; any more than capitalist democracy means that everybody gets a bit of the power.

'Democratisation' in this, as in so many other spheres, refers to the enfranchisement of a particular group of people within society, not the whole of society.

I will look very briefly at 'Democratisation' in terms of the social history of money. The most primitive societies used what could be termed 'Gold money'. This kind of money is its own value, bound up with the specific value of what it is made from. This value is socially agreed by broad consensus, rather than set by central authority. This is like barter or exchanging things for bits of gold.

This initial state of affairs is superseded by 'State Currency', a derived currency; coinage and notes backed up by gold, administered by the state for the general social good. This last point is very significant. If the state currency is bastardised everybody loses out, including the rich.

When State Currency is no longer backed by concrete assets such as gold, it is superseded by what some right-wingers have called a 'Fiat' Currency, money backed entirely by the value of the economy at large.

This is where we were just before New Labour financial deregulation when Gordon Brown took the BOE out of government control. Pretty rapidly after this, Electronic Currency is able make an appearance, characterised by computer driven mega-fast flows of credit and the 'inability' of central states to control the overall system.

It is important to understand that this is not a process outside political and economic control, in fact Neo-Con policy and Monetarist thought played an increasingly important role in this and what happens next. Previously,

I have observed the way Monetarism reduced the role of the state and brought about widespread deregulation. This allowed the creation and trading of the infamous derivatives and credit swaps that caused the present crisis, which brings us back to where we started, or not quite.

The key word here is provenance; the value of a currency asset as a function of where it comes from, as in a comparison between a cheque and cash. In order to establish the value of a cheque you have to be able to make an informed assessment with regard to the finances of the issuer. Accepting, holding and cashing the cheque is a risk limited transaction; once you cash the cheque, you are out, (i.e. no longer liable for the consequences of the risk you took in accepting the cheque).

Cash is fundamentally different. The person accepting the cash cannot make a realistic assessment about the finances of the issuer (a national government), and there is no way out, you are ultimately forced to hold cash of some kind.

In the lead up to the Crunch, financial institutions issued 'financial instruments' derived from the amalgamated value of a number of indeterminate assets, including rubbish mortgages. They effectively aped the actions of national governments in deriving amalgamated wealth from unknown provenance.

These financial instruments were in effect, privately issued cheques which usurped the national functions of money.

Through Monetarist deregulation, governments allowed financial institutions to effectively print their own money and set up their own off-shore economies! (See article). All of this was running nicely in line with the Monetarist philosophy of non-governmental interference, until the 'classic' capitalist state was forced to step in (through monetising debt etc.), when the social consequences of the Credit Crunch could no longer be ignored.

So far this is only an alternative reading of the crisis. The implications of this alternative reading that are what make it so interesting. The first implication is that this 'democratisation' of Money Functions was inevitable under capitalism. To illuminate this point consider the 'democratisation' of land that occurred in the C18th in (pre) capitalist countries. Common land held by the state for the benefit of the people, was put forcibly into private ownership. 'Democratisation', (more accurately described as 'enclosure'), did not mean more people would own land. It meant anyone could own land in theory.

In fact, it meant that a small group of people owned the land and the mass of people lost the benefits that came from the usage of common land

Feudal state ownership of land was a barrier to absolute Capitalist domination of all resources in society. It was only a matter of time before they would successfully remove it. Two and a half hundred years later, this same process is about to take place in relation to another common good; money.

Up to now money has been administrated by the state or more precisely, the issuance or production of money has been administered by the state as a common good, (State Money).

The Monetarist project has effectively replaced this with Electronic Money which everyone will be able to issue in theory, but as with land ownership before, only the privileged few will be able to issue in fact.

The state will become the guarantor of the right of privileged producers to do this in the same way the state ceased to administer common land and became instead the arbiter and guarantor of private land rights. The Money Function will have become:

Democratised.

Enclosed.

Privatised.

From now on the job of the state will be to arbitrate, guarantee and clean up the periodic mess that is created by this enclosed money system. The chaos you see around you is not a temporary state of affairs; it is the model for the future. This crisis will become semi-permanent. And you will face losses comparable to losing the usage of common land.

More on this later.
July 12 2010

Effects of The Democratisation of Money.

I have observed that the state has lost exclusive rights to control key Money Functions including most importantly, the right to issue currency. As a consequence, as the elite gains and exercises their new advantages, the public at large will lose subsequent key benefits that derive from state administration of money in the public good.

These benefits can be grouped together under the term 'access to money.' Modern capitalistic money and credit systems have nationally developed in tandem since WWII. Credit such as this is a relationship between two parties equally under the authority of money.

The parties have leeway to vary this relationship but it is finally arbitrated by the fact that it has to be resolved in money.

Because of this state of affairs, it has seemed obvious that credit is an associate and a derivative of money. But what will happen if one of these parties is no longer subordinate to the authority of money to the same extent as the other as a consequence of money 'enclosure'? Then the link between credit and money as we have previously understood it will become broken with only the privileged having full access to money.

Note that the public access to money will not be completely removed. We will still have access to use money in the same way that ramblers still have rights to visit the land that their ancestors once owned in common.

The loss of access will take place in the sphere of credit. The destabilising effects of these new enclosed currency flows will mean that generalised inflation will become increasingly difficult to forecast. It follows that attempts to settle wages based on generalised nominal rate of inflation will become increasingly untenable.

The result of all this will be an increase in basic commodity inflation. Foodstuffs and other resource commodities will begin to exert a kind of internal 'barter' value irrespective of money value. When 'Classic' economists observe this effect they will claim it is a by-product of increased global scarcity. In the national sphere there will be an increasing clamour from right-wing economists for the end of generalised inflation statements.

The Monetarist War on Inflation will reach its logical conclusion with abolition! However, to prevent the destabilising effects of enclosed money production, there will have to be internationally agreed currency control blocs which will set broad area exchange rates as I have described in another piece.

It follows from this that generalised interest rates will correspondingly become impossible to rely on either as a planning tool or a way of storing wealth. Saving in cash will become an increasingly complex and unprofitable business, to offset this effect, value will be stored in other ways.

Expect to see a plethora of more complex financial instruments that serve as vehicles for obtaining credit and for medium-long term private saving.

So how will this effect people in their day-to-day lives?

National economies will seem to be increasingly fragmented and localised with many national indicators such as interest and inflation rates bearing little or no relationship to the prices and values that people experience in the day to day. While manufactured commodities will at times appear to be absurdly cheap, the flow of goods and the reliability of supply will gradually become increasingly disrupted. Big loads of a particular good at a low price will appear and once sold off be unseen again for an indeterminate time.

Resource commodities, those things that are essential, will begin and continue an inexorable upwards rise in relative price.

Wage settlements and house prices will take on a localised nature, regional economies will become more differentiated.

This will have political side effects. Where national and local regions become more fragmented, international economic relations will enter a new period of much more structured interaction. Regional currency blocs will have a corresponding effect on political and military alliances.

In essence, in the near mid-term politicians and economists will be claiming that the local and national economy has reached stability and needs no regulation when in fact it is just the opposite. At the same time they will be claiming that the international economy is highly unstable and needs more control when the fact is just the opposite

# July 16 2010

# WELCOME TO THE VHS ECONOMY

Remember the tale of VHS and Betamax? The classic capitalist parable about human behaviour in the marketplace tells us how the market saddled the world with the second best option.

Once upon a time there were two different systems for watching home video.

From the start everyone knew that Betamax was technically the better system. VHS knew this as well as anyone and it knew they were going to be found out. So they developed a plan.

VHS made sure it had the best distribution system for video cassettes. So people chose a VHS or Betamax system not on the basis of how good the actual system was, but what films you could see on it.

VHS won out and everyone got the crappier system and the lesson is......... If you can't win the argument as it stands, change the ground it is fought on.

The Crisis put an end to any more bullshit about a Free Market Economy. The free market economy (if there ever was one), died when the first of trillions of dollars in state hand-outs was injected into its diseased, decaying frame to keep it going. Capitalism is dead; Long Live Capitalism!

Make no mistake, without that government action the game would have been over and you would probably be getting this blog by means of a town crier rather than the internet. There is no intellectual argument left for a free market. No argument that a free market should exist or ever could exist. The argument is lost. So why don't we have something else? VHS logic: 'Capitalists' have lost the economic argument but 'socialists' have lost the political argument.

Free Marketers changed ground because they knew they were going to lose the technical argument. This is essentially what Monetarism or 'Friedmanism' is; an attempt to re-define economics in a way that avoids defeat. Chicago School economics claims to be a struggle to diminish the role of the state; 'Dreaded Creeping Socialism', in society.

But Friedman and all those other creeps knew that the battle was lost long ago. They know that the role of the state will get bigger and bigger, but in a different way. In a way that favours the people that Monetarism represents. It worked, now we have the worst of both worlds;

Socialism for the Rich; Capitalism for the Poor.

Happy Watching.

# 7 August 2010 Five More Questions About the Crisis

## 1. Are all the cuts in government spending really necessary?

It depends upon why you want to cut. If, like the Tories your political purpose is trying to manoeuvre Neo-Labour into defending state spending from the left, then the cuts are both useful and necessary. If your objective is to consistently and permanently shrink the welfare state in line with Monetarist philosophy, the Crisis and resulting cuts are the logical and desired outcome of everything you have been working for the past thirty years, so yes, useful and necessary. If your purpose is minimising the amount of Inflation necessary to re-stabilise a 'Democratised' money system, then the cuts are necessary.

## 2. What is happening to inflation?

Inflation has been running consistently higher than Government target for a number of quarters. There is no sign of the hyper-inflation predicted by right wing hysterics despite massive government spending and printing money. It will become clear that calculating a generalised rate of inflation will become increasingly difficult because of the Democratisation of money (see elsewhere). Two further things feed into this process: Until a certain level of inflation is reached the crisis cannot be bottomed out. But the government wants to 'enclose' this inflation as a part of its plan to enclose or 'Democratise' money.

To do this the government is channelling money directly into monetising privately issued 'currencies'. This process is extending the crisis because as of yet they are building the mechanisms for doing this 'on the fly'. This takes time and they have to do it in secret.

The government is taking money out of the state to limit and control the resultant overall inflation. They are aided in this by the lack of credit and unemployment which are forcing commodity prices down. What is genuinely surprising is the control Monetarists are exercising over the debate and the way the public has passively gone with it.

## 3. What is happening with the banks?

Recent bank results show significant increases in profitability. The banks appear to be rebuilding their businesses- which would all be great except the books are being cooked. Repossessed properties are being kept off the market to prevent a glut and loss of value. Bad deals and loans are not being liquidated and brought onto the books as losses. It's simple. Imagine you were a con man who wanted to pass some bad cheques. The last thing you need is to look poor. Go and buy a new suit, hire a flashy car. People are much more likely to accept a con from someone who looks like they don't need the money. The banks will turn in three or four good quarters of results and then start passing the funny money off.

## 4. Is America going down the toilet?

Unemployment, housing and state deficits all reveal a bad picture for the USA. Infrastructure is in poor condition to face the rigours of the coming decades of competition and USA is unable to generate the wealth necessary to for an overhaul. Wage levels are stagnant or falling, putting pressure on spending and credit power in the economy. What growth there is reveals ongoing dependence on Chinese imports.

The fact is that the level of fundamental restructuring required to reconstruct the USA economy is massive. I cannot think of another example of an economy undertaking restructuring on this scale without having first undergone a fundamental military or political upheaval. It seems inevitable that political stresses will become intensified despite the fact that there is no opposition worthy of the name. If you want to know what the effect of this is going to be on the rest of the world, the answer is that the Americans will make sure it is a lot.

## 5. Is a new world order emerging?

Yes, a new world order is clearly being formed, but it is not the right wing fantasy of 'world government', quite the opposite. Privatisation of money production in the advanced economies represents a major dismantling of the old state structures and their replacement with a new framework. International systems are being created which will support and mitigate the effects of the Democratisation of Money in national economies.

The fundamental relationship between international financial players, national governments and international agencies is being altered. International financial organisations have never been able to challenge the authority of national governments. In the new structures national governments will no longer be able to directly contact super-national organisations, never mind control them.

# 17 October 2010

# The Credit Crunch Mystery and The Big Lie.

It has become obvious to everyone that mainstream economics is unable to offer a single coherent explanation of the Credit Crunch. They find it no easier to forecast what the medium and long-term consequences of the Crisis are going to be. In part, this must be attributed to political considerations.

The neo-con right uses the Crisis as an excuse to push forward permanent state downsizing. For the left, it is a pretext to re-float Keynsianism. Since the truth of the matter serves neither side of this particular argument, it is unlikely that either side will go to much trouble to unearth it. Away from the political trench warfare, a recent article posted on the New York Review of Books website offers valuable insight into why it is proving so difficult for mainstream economists to 'solve' the mystery of the Credit Crunch.

In The Slump Goes on; Why?' Krugman and Wells review the usual suspects. Despite their ability to identify many of the elements that make up a new analysis they fail to develop coherent conclusions based on their observations. This intellectual failure follows from a confusion of classes.

The confusion centres on the definition of what an economic bubble is. An economic bubble is a dysfunctional relationship where money no longer reflects adequately the generalised value of a given commodity. This inadequacy means at some stage there will be a correction, bringing the value of the commodity more accurately in line with its monetary value. This 'correction' can take place either in a modification in valuation of the currency (inflation or deflation, in the national economy), or in the supply of the given commodity.

In the present crisis, there is a mismatch between generalised value of housing and monetary value, but the nature of the mismatch is entirely different from that found in a 'classic' bubble. Although these two kinds of crisis share a mismatch of value it does not mean they share the same mismatch. This morphing of the two separate 'classes' of bubble leads the pack of economists to conclude incorrectly that the crisis is the result of a 'classic' bubble, in this case mainly housing.

Krugman and Wells identify the failure of the system to rebound in the expected way after a classic boom and bust:

### 'little relief is in sight: unemployment is still rising in the hardest-hit European economies, US economic growth is clearly slowing, and many economic forecasters expect America's unemployment rate to remain high or even to rise over the course of the next year.'

They note the inability of the plethora of the literature on the Credit Crunch to address these problems which:

### 'show(s) a notable unwillingness on the part of the dismal science to offer solutions to the problem of persistently high unemployment and a sluggish economy. There has been a furious debate about the effectiveness of the monetary and fiscal measures undertaken at the depths of the crisis.... But proposals for positive action to dig us out of the hole we're in are few and far between.'

Having established that the present recovery is unlike what has gone before and slow to respond even to innovative treatments, K&G briefly rehearse the main strands making up the standard analysis that have been formulated over the past two years:

### 'the low interest rate policy of the Federal Reserve after the 2001 recession; the "global savings glut"; financial innovations that disguised risk; and government programs that created moral hazard.'

K&G clearly realize that this is hardly enough to explain the extent and persistence of the problem and try to identify characteristics of the Crunch that are different from previous bubbles. Specifically, they note extensive residential house inflation:

'During the past few years, the key asset-price effects of the global saving glut appear to have occurred in the market for residential investment, as low mortgage rates have supported record levels of home construction and strong gains in housing prices.'

K&G correctly identify this specific cycle of rising house prices as a defining cause of the present crisis but fail to question why this sector in particular should be specifically prone to such excessive inflation. They observe that Federal Reserve Chairman Bernanke:

### 'failed to realize (was) that home prices were rising much more than they should have, even given low mortgage rates. In late 2005, just a few months before the US housing bubble began to pop, he declared—implicitly rejecting the arguments of a number of prominent Cassandra's (sic):—that housing prices "largely reflect strong economic fundamentals."

Here K&G charge Bernanke with making a 'classic' mistake in failing to spot a 'classic' bubble. To explain this failure they bolt on to this explanation the now famed magical 'financial instruments' that no one understands:

'Bernanke failed to realize that financial institutions and families alike were taking on risks they didn't understand, because they took it for granted that housing prices would never fall.' (my emphasis)

K&G's analysis forces them to alter reality to fit their argument. To say that the financial community were unaware of the possibility of house prices falling is plainly absurd. What had changed in the psychology of dealers was the awareness that even if house prices did fall it would not affect the deals already made. This truly novel characteristic of the bubble is closer to the specific nature of the problem that must be analysed. K&G do understand a significant change had occurred:

'the old model of banking, in which banks held on to the loans they made, was replaced by the new practice of originate-and-distribute.'

They describe 'originate and distribute' thus:

### 'Mortgage originators—which in many cases had no traditional banking business—made loans to buy houses, then quickly sold those loans off to other firms. These firms then repackaged those loans by pooling them (my italics), then selling shares of these pools of securities; and rating agencies were willing .....to bestow their seal of approval, the AAA rating, on the more senior of these securities, those that had first claim on interest and principal repayment. '

K&G again cite some kind of mass collective amnesia to explain how underwriters and credit agencies ignored the potential risks:

### 'Everyone ignored both the risks posed by a general housing bust and the degradation of underwriting standards as the bubble inflated (that ignorance was no doubt assisted by the huge amounts of money being made). When the bust came, much of that AAA paper turned out to be worth just pennies on the dollar.'

They develop the argument:

### 'What is arguable is that financial innovation made the effects of the housing bust more pervasive: instead of remaining a geographically concentrated crisis, in which only local lenders were put at risk, the complexity of the financial structure spread the bust to financial institutions around the world.'

And

### 'it is clear that there were major failures in oversight. In particular, Ben Bernanke has admitted that the Fed failed to use its regulatory powers to rein in the excesses of the mortgage lenders—a tragic oversight.'

Again and again, K & G return to the theme that it is the extent and size of the lending chaos that makes the Crunch uniquely difficult to deal with. Only belatedly do they concede that:

### 'the widespread scrutinising of mortgage loans has made the mess much harder to clean up.'

A point they go on to expand:

### 'In a housing market that is now depressed throughout the economy, mortgage holders and troubled borrowers would both be better off if they were able to renegotiate their loans and avoid foreclosure. But when mortgages have been sliced and diced into pools and then sold off internationally so that no investor holds more than a fraction of any one mortgage, such negotiations are impossible.

and

### 'because of the financial industry lobbying that prevented mortgages from being covered by personal bankruptcy proceedings, no judge can impose a solution.'

Despite being an advance on what has gone before, this is still no more than observation on the fallout from the Crisis. K&G persistently fail to analyse the significance of this characteristic: That the Crisis is legally impervious to any standard solution to the problems it has created. They note the legal character of the problem but do not put it into context and give it sufficient weight.

The intractable nature of the crisis is forcing nation states in particular USA, to devise new legal solutions to the problem. These legal solutions are of a scale and complexity comparable to the privatisations of the Soviet economy after the overthrow of Soviet Russia.

This developing legal framework points to new financial instruments that act as money. If a private company is liquidated, its assets and liabilities can be drawn together and a portion of the loss assigned to each creditor. The new 'Democratised' Private money cannot be broken up in this way. Assets and liabilities cannot be fairly distributed amongst creditors. Thus, to mitigate the public effects of a collapsing private currency, the relevant states are forced to substitute national money for Private money on a one to one basis and then try to carry out a classic bubble resolution,(see below.) These effects are clearly explained by the understanding of the democratisation of money I have elaborated elsewhere. The broad differences between a classic bubble and the present crisis are summarised below:

The Nature Of The Generalised Mismatch Between A Commodity And Currency In A Bubble vs. The Nature Of The Specific Mismatch Between Housing And Currency In This Bubble

NOTE: The commodity in question is taken to be primarily residential housing although it is not limited to this alone.

Currency value is derived from a generalised valuation of the economy. It follows from this that the money value of any given commodity is derived from its generalised value in relationship to the economy as a whole.

VS

This currency value is derived from a portfolio 'national' capital pool and is specific until it is traded*.

A Commodity bubble reflects a mismatch between generalised value of a commodity and the national economy

VS

Crunch bubble does not reflect a mismatch between a generalised value of commodity and the national currency. It reflects the mismatch between commodity as a 'national' capital pool and a currency privately issued on the back of this pool.

In the first phase, resources are taken from other areas of the economy and put into the bubble commodity because it is more productive e.g., produces more cash money both in total and over a shorter specific time period.

VS

Manufacturing money is a new profitable enterprise for banks and other financial institutions.

Credit is employed to draw extra resources into the process. At this stage, the bubble commodity is already over valued.

VS  
Banks and other institutions create housing purchase credit is to provide part of a capital portfolio for money printing. Credit issued by the private banks is theoretically unlimited except for government regulation.

An unsupportable proportion of other resources are drawn into the bubble or the currency inflates to compensate.

VS

The amount of printing or gearing up of debt to capital ratios accelerates.

Interest rates rise. The bubble can no longer be funded by credit

VS

Interest rates and inflation are decoupled from the bubble which continues to accelerate

The price collapses and 'corrects' or the currency undergoes orderly devaluation through inflation.

VS

This collapse is much more like a complete national collapse than a sectionalised private one.

The deals cannot be wound up and put to bed as in mark to market*

The only options are to devalue like a national currency or to replace with another national currency hence 'monetisation'

*The end value of the privately issued currency is unknowable at this time and is always will be. Therefore the national currency or the private currency must one destroy the other

### 'Whatever the precise causes of the housing bubble, it's important to realize that bubbles in general aren't at all unusual. On the contrary, as Yale's Robert Shiller explained at length in his justly celebrated book, Irrational Exuberance, they are a recurring feature of financial markets. (Not coincidentally, Shiller warned early on that we were experiencing a massive housing bubble.) Bubbles have happened in small economies and large, in individual nations and in the global economy as a whole, in periods of heavy public intervention and in eras of minimal government. The North Atlantic housing bubble, as Roubini and Mihm say, was a "white swan"—a common sort of event, not a highly unusual one, albeit much bigger than most.'

Even if they are consciously unwilling to place themselves in one or another so-called left or right, camp, mainstream economists are unable to break away from two fundamental assumptions:

1. That this is some form of classic or cyclic economic event and

2. That its intractable nature is tied up with the fact of its colossal size

It is the nature of the collapse not its size which makes it both novel and unresponsive even to novel classic remedies. 'Too big to fail' is the big lie in this story. One 'corporate' narrative tells us that when the USA authorities saw the extent of the fall out from Lehman's failure they decided that they could not face the possible knock on effects throughout the system. Thus, they decided to bail out the other banks. The other 'insurgent' narrative tells us that it was a matter of policy and choice to defend the private accumulation of speculative wealth with the tax money of ordinary citizens. In reality, both of these perspectives are partially true.

The systematic threat to the system was not one of extent, but rather that attempting to resolve Lehman without modification of the legal framework, regulating the financial sector would wreck the forty-year-old monetarist project to restructure the financial system with 'democratised' or privatised money production. This was both a matter of choice in that the central protagonists were all firmly committed to the Grand Monetarist Project and a matter of necessity in that they were all unable to conceive of any other alternative, which is why they embarked on Monetarism in the first place. This is what 'Too Big To Fail' really means.

### 'Runs on repo brought down Bear Stearns and Lehman Brothers. And by many estimates, by 2007 repo and other forms of shadow banking accounted for about 60 percent of the overall US banking system—yet shadow banking remained largely unregulated and unsecured. "It's little wonder," write Roubini and Mihm, "that the shadow banking system was at the heart of what would become the mother of all bank runs."'

NB: As of posting this article, the 'Robo-Signing' scandal that has broken out in the USA goes to emphasise just how much this is indeed a systemic legal problem preventing the program of resolving the Crunch going ahead. After the mid-term elections expect to see new legislation rushed through, developing the project of legally enabling 'democratised' private currencies.

# NOV 3 2010:

# THE NEXT BEND IN THE ROAD

We cannot see where this road will end. We can only see as far as the next bend in the road, the next significant change in direction. I will add to this and amend it as the direction of travel becomes clear.

In the next six months:

In America, a significant minority of people become aware with increasing rapidity of the democratising of money process that has been going on for the past decade. This awareness will create an understanding of how significant democratisation of money is and a resulting challenge to the process.

As I have said elsewhere, resolving the legal mortgage problem embodied in the foreclosure crisis will require a social/economic change as significant as the fall of Soviet Russia. This will permanently change the legal basis on which Capitalism is conducted in USA and then throughout the Saxon world. It will cause a political and economic rift between Europe and USA.

After six months to two years:

In USA, there will be an incident analogous to the bombing of the Russian Parliament by Yeltsin where executive power will trump the legislature, permanently creating a system strikingly similar to present day Russia. The executive can no longer allow itself to be hamstrung by the legislature. This executive take-over, if carried out by Obama will be lauded by the 'Left' and 'Progressives' moving the right left debate from one of economics to one of 'freedom' and 'constitutionality' etc.

There will be an international agreement to create broad bands between which regional currency blocs will be required to trade. This will be justified by the USA economic/political emergency. This emergency may be related to immigration on the USA border.

If this is the case, the new executive will propose a 'new relationship, (New Reality?)' with all of Latin America under the auspices of the trade bloc allowing increased travel across the border. This may be used as a justification to revisit the terms of the UN Security council and other associated international governance bodies.

Ethnic White national sub-groupings, (Russia/France), subordinated under Whiteism will again be drawn into the USA sphere of influence for fear of China. USA will exploit this to have them fight proxy wars on its behalf. Long-term French Russian involvement in Afghanistan related territories blockade of Iran etc.

Within three years:

A surprise rapprochement between China and Japan will form one of these regional currency blocs. Taiwan may be abandoned by USA to achieve this. This may be used as a justification to revisit the terms of the UN Security council and other associated international governance bodies. Germany will emerge as a major world player. Some symbolic action will be taken, possibly by the Russian leadership to signal that the WWII is officially 'closed'.

Within five years:

An intellectual 're-evaluation' of Hitler and the Nazis will be proposed, probably by the English. The Chinese political leadership is exposed to a culturally purer nationalist opposition that will emerge in mainland China. Chinese Marxism is a western creation. The Politburo is vulnerable to a challenge from the East. This East opposition will agitate against Japan in conflict with its own national elite.

# 13 DECEMBER 2010

# DEMOCRATISATION OF MONEY BECOMES CLEARER

# New Orthodoxy For Markets Is More Beijing Than DC Credit: Reuters/Laszlo Balogh By Sebastian Tong

We can see the way that national governments are devising macro economic policy to deal with the effects of 'Democratised' private money. A Recent Reuters article dubs this approach the 'Beijing consensus,' presumably under the impression that it represents some kind of return to post WWII communist style state control of financial policy.

'This so-called 'Beijing consensus' eschews liberal capitalism in return for the state's hold on the exchange rate and an ability to mobilise state-owned firms - an alluring alternative for emerging economies trying to limit destabilising capital flows and currency appreciation that threatens to erode their competitive advantage'. (my emphasis)

Reuters tells us the 'free market' monetarist orthodoxy that has for so long dominated the White financial system is being overturned in favour of Maoist state intervention!

"The rule book has been thrown out the window. (!) 'Because capital flows are so strong, there's a sense markets implicitly endorse more unorthodox economic policies," said Deutsche Bank emerging markets strategist John-Paul Smith.'

Meaning that all this is apparently being done at the behest of those very captains of finance for whom all the deregulation was instigated in the first place! In evidence of these seismic developments Reuters looks at.

'Brazil's capital tax to discourage hot money flows.'

and

### 'Hungary's unorthodox deficit-slashing plans,'

which are to be:

### '....cuts, paid for in part by windfall taxes on banks.'

And

### 'A radical pensions overhaul, reminiscent of Argentina's nationalisation of its private pensions industry late 2008, (which) will also see the state effectively seize 10 billion euros from private pensions.'

Massive increase in taxes and the looting of private pension funds is to be met with only

### 'Muted investor reaction'

These astounding developments are not just taking place in one or two economies feeling the economic pinch:

### 'Poland is seeking to reduce private pension contributions to rein in public debt and Ireland is raiding its national pension fund to help support its banks.'

It seems that all across the globe a new way of doing things is emerging. And here comes the (ha,ha), science:

### "Governments will become more inventive. You'll see measures to cut deficit and debt levels that you've never seen before," said Cheuvreux strategist Simon Quijano-Evans.'

### "There's an element of social contract; a recognition that the state may intervene in the economy for social stability," said Cambridge-based academic Stefan Halper.'

Previously, I outlined some of the ways that the consequences of the democratisation of money would be felt in the realm of international finance. I saw that national governments would increasingly find themselves devising strategy to accommodate the flows and effects of democratised money around the world. The more vulnerable the target national economy was to these money flows, the more explicit the actions that national governments would be forced to take.

The international rabble will increasingly call for controls and intervention at an international level. They will be much quieter about calling for action at a national level where the grand larceny of democratised money is taking place.

Unsurprisingly, Reuters reporters and the talking heads they draft in to spiel about these developments are unable to understand that this is not about a return to communist state control; it is not even about the extent of state intervention in macro or national economic policy. It is a fundamental change in the nature of the relationship between the state and money.

National governments will see their role as arbitrating and ameliorating the macro effects of democratised currencies, not controlling the production of currency itself. It seems likely that in the near to medium term, national currencies will exist as a mechanism for carrying out this function. Perhaps the IMF is groping towards seeing itself in a supervisory role:

An IMF paper this year said capital controls could be part of a policy mix to cope with sudden capital surges while the G20 last month endorsed.

### "carefully designed macro-prudential measures" for emerging economies coping with investment flows.'

What is a new and startling development, though, is the possibility that those national vehicles for saving and investment old style national currencies, such as pension funds may not be able to survive this change. It may turn out to be the case that when national currencies are replaced by democratised ones, the national and international financial structures powered by them may go as well.

I saw back at the beginning of this change that old style investments would become increasingly problematic; I also foresaw that new democratised products for investment and lending would be created. The ransacking of national pensions may be the beginning of this process. We will see.

# 3 APRIL 2011

# THE MONEY PIT YEAR 3

# The Independent April 9 2011 Sean Farrell Called To Account: Banks Await Fate.

Around two years ago I began to write about the financial crisis. I argued that the significance of the crisis was not as mainstream or even 'alternative' analysis would have it.

As more evidence about the true nature of the Crisis was revealed I developed these ideas in a piece entitled 'The Democratisation of Money', in which I described a move towards the privatised control of money, which I reasoned, is the inevitable consequence of Monetarism.

I argued that the next stage in the development of capitalism was the end of money control as a political common, national, good, replaced by the control of money as a function of 'democratised', privatised, property in developed capitalist nations.

This 'democratised' money was issued in its early stages on the back of specific sectors of wealth, in the case of the first crisis on the back of residential property. I argued that the Crisis showed that the capitalist legal system as presently constituted was unable to wind down these democratised money enterprises in case of failure

This led to the specific nature of 2008 crisis as distinct from previous ones. I argued that this crisis is the first of many such crises which are part and parcel of democratised money.

This crisis, instead of being an obstacle to this process of Democratising Money, is a laboratory and opportunity to develop strategy in the ongoing project to create full money democratisation. I went on to describe some of the developments in international and domestic policy that would be necessary if this scenario was to unfold.

I predicted an absence of internal regulation, despite the sterling pledges of national and international governmental organisations across the globe to rein in what they called the 'excesses' of the previous decades.

At the same time, I predicted that governments reluctant to act in the national sphere would be all too keen to increase international regulation, specifically the establishment of regional currency blocs. Blocs such as these would be essential to offset the fundamentally unstable national and regional systems that would be created by Democratised money. There is evidence that blocs such as these are coming into existence.

In Europe, Portugal is heading for a bailout, Ireland is on its third bailout or thereabouts, Greece is fully hooked up to the system. All the western fringe economies are collapsing. All the southern European nations are in various stages of crisis. Northern European states are restructuring and cutting back on state expenditure. Britain, although not a Euro zone country is completely enmeshed in preserving a European Currency Bloc by means of providing credit to Ireland, Portugal etc.

The Euro bail out will be the starting point for a Europe Currency Bloc.

In the far East, China is making moves to float the Renmimbi in relation to a basket of currencies; effectively the first step in building a Far East Currency Bloc which I predict will include Japan. The earthquake might be the opportunity for China to begin to offer integrated aid to Japan. There will be a surprise (but not to me), rapprochement between Japan and China!!!

The USA situation is more complicated due to the role of the dollar. There has been some kind of minor revival in the USA economy thanks to the wholesale use of the international reserve role of the dollar to stimulate some amount of growth. But this policy is encountering ever stiffer resistance around the globe. The use and abuse of the dollar as a reserve currency has meant that inflation is becoming increasingly entrenched in the global economy.

This inflation has led to raw material commodities becoming increasingly viable as a vehicle for building the next round of democratised money issuance. This has compounded the inflation problem as commodities are held in reserves as the basis for currencies. America will come under increasing domestic and international pressure to realign the dollar and American economic policy in relation to Pan America.

Obama will announce a major new currency stabilisation initiative which will appear to accept USA's new diminished role. The dollar will devalue more. Latin America and China will reach a bi-lateral deal which will form the basis for a Pan- America regional currency settlement with which USA will de facto accept.

This is only part of the picture, India and the Arab states will also be interesting. What is clear is that the international structures that support democratisation of money must be established securely before governments and bankers are willing to go ahead with the next step.

In England the Independent Commission on Banking is due to unveil the measures it deems necessary to safeguard baking in the aftermath of the crisis. The possible courses of action are summarised by Sean Farrell in the Independent * as follows:

Break up of Banks-

Make Casinos and High street banks separate organisations. Not judged as likely because it supposedly damages international competitiveness of English banks if other nations are not doing it.

Functional subsidiarisation-

Split 'casino' and 'high street' banking within one organisation. Not likely says Farrell because the Banks 'hate it'.

Operating subsidiarisation-

Effectively bailing out the high street part of any given banking operation. Seen by Farrell as likely.

Breaking up Lloyds.–

Seen by Farrell as unlikely since it would seem to undermine Gordon Browns previous judgement.

More branch sales. -Quite likely.

Switching and pricing measures -making it easier for customers to change from one account to another. Farrell says likely but also might be watered down.

More Capital -internationally agreed. Likely.

In line with my analysis we can quickly see that Government and Banks will avoid like the plague anything that jeopardises their ability to subsidise possible failure of casino operations with tax-payers money. The justification of this being that this jeopardises international competitiveness, (in a way that bankrupting the national economy periodically apparently does not.)

At the same time those things which appear to offer a superficial fix of the situation will almost certainly be adopted. Some kind of phoney extra regulator is a distinct possibility.

What this makes clear is that as I said above it is impossible for any serious bulwark to be put between the democratised money issuers and the public purse. Meanwhile internationally Basle has promised 7% or possibly more core capital requirements against loans.

This measure which is in effect little more than a fig leaf to cover the nation states covering the money issuers' activities will go through on the nod.

So what is the state of play in Year 3 of the Crisis?

First attempts to formally commit governments to permanently bailing out democratised money. No chance of democratised money being separated from the public teat. Some cosmetic changes to make the situation more palatable. Wide scale and systematic application of the international structures necessary to support democratised money being implemented.

# 5th June 2011

# New Independence Day

Now then Aficionados of the Stock Market and its machinations will have noted the arrival of GLENCORE as a public listed company valued at something around £35 Billion.

GLENCORE specialises in trading commodities around the world, an activity in which it has proved so adept that it is now estimated to be controlling half the global total market in copper as well as more than half of the world zinc market. Metals are not the only thing that GLENCORE are interested in, as well as food and resource commodities there is a host of other esoteric items that GLENCORE are prepared to trade for profit.

Of course, commodities' dealing is a widespread practice older than capitalism itself. Those who have wealth seek to enhance it by manipulating access to whatever resources the majority can manage to obtain.

However, the rise of a new type of super traders like GLENCORE is a modern phenomenon and one which has appeared to catch much of the mainstream by surprise. It is not just the sheer size and influence of a corporation like GLENCORE that makes it a new and interesting addition to capitalism. It is the qualitively different nature of its activities; something that will become ever more apparent in the coming years.

This is illustrated in the first place by the very fact that GLENCORE has chosen to go public at all. Commodities speculation is coming under increased, if belated, scrutiny across all sections of the media and government as end prices of basic goods seem to inexorably rise from year to year despite near recession levels of consumption demand.

The mainstream gaggle have rushed to blame the BRIC nations and in particular the Chinese for having the temerity to want meat once a week and even a refrigerator to put it in! It might seem obvious that this is little more than a transparent attempt to divert attention from the parasitical activities of the market onto a more convenient target, but the truth is more complex and ultimately much more disturbing than a simple bit of tub thumping xenophobia.

In the past GLENCORE has been keen to avoid any kind of public discussion of its activities. There might be any number of reasons for this. Over the past couple of decades GLENCORE has found itself in conflict with differing national jurisdictions around the world.

The attitudes and philosophies of a number of the companies' leading lights have also been the cause of raised eyebrows at one time or another. Yet a stock market flotation is bound to bring about increased outside scrutiny and even possibly control from investors. So why, given the fact that they have been so successful up till now, would GLENCORE choose to go down this road? GLENCORE itself states in rather bland terms that the aim is to prepare the conditions for a renewed round of company expansion, best served by offering a piece of the action to Stock Market fund investors.

This explanation hardly stacks up. If it is a matter of raising capital, GLENCORE has seemed to do OK up till now, and since stock market money inevitably comes with increased scrutiny surveillance and restrictions, it would seem in the light of Glencore's past attitude, too big a price to pay.

But I can think of one reason that GLENCORE might want to go public despite all the inconvenience this might bring. I have previously observed that the housing finance crisis is not a 'classic' bubble situation and will not have a 'classic' resolution. In fact, the housing bubble was so far the largest incidence of an asset class being used as the basis for issuing private 'democratised' currency.

I predicted that housing was only the first of many such asset classes to be used this way. I further predicted that it was likely that commodities such as metals or food may very well be next. That is what we are seeing now.

This is how it will go down. GLENCORE floats on the stock market. Gradually, pension funds etc. all take a piece of the action through stock holdings. Then GLENCORE starts passing off CDO's and other 'democratised' money to the funds that already own part of GLENCORE. The funds can't lose, they take GLENCORE paper and as a consequence the value of their GLENCORE shareholdings rises!

Which means that the newly issued 'democratised' money is backed up by an increasingly large and stable capital base, which means that its tradable value rises, which means the value of GLENCORE shares rises.....which means that the democratised money is backed up by an increasingly large and stable capital base See where this is going?

I argued in a previous piece that it is precisely this kind of sealed, self referencing bubble mechanism that differentiates 'democratised' money from a 'classic' bubble in the housing collapse. This is what makes it so dangerous. No outside mechanisms kick in to prevent the bubble from expanding forever in theory. And when the crunch does come, surprise, surprise there is no legal way to disentangle all the competing claims and counter claims on the asset base. The company is therefore deemed 'too big to fail' and the public picks up the tab. Corporate media is unwilling and unable to describe the true nature of these developments so it continues to bellow confused and confusing messages with half the hacks saying there is no regulation, the other half shouting just as loudly that banking is going drown in regulation ink! Jeremy Warner in the Telegraph online tells us:

### '...over the next few years the Bank (of England), acquires new powers and responsibilities that will make this 317-year-old institution arguably the most powerful authority in the land – more powerful in terms of its influence over the economy than the Chancellor himself'. (The Bank of England's astonishing escape from the financial crisis) These new powers will be:

### '....a grand experiment in macroeconomic management (my emphasis), the like of which has never been tried before. In addition to its existing powers to set interest rates and manage the money markets, the Bank of England will acquire responsibility not just for banking supervision but for controlling the credit cycle (my emphasis), in the round – a function known as "macroprudential regulation"'.

All of which he finds a little confusing because the BoE appeared to screw things up so royally in the Crunch:

### 'Does it really make sense to be placing so much faith in an institution which many accuse of being asleep at the wheel as the biggest financial crisis in 100 years came crashing down on the economy?'

Meanwhile, over at Bloomberg they see things altogether differently:

### 'There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo today in response to a question about price swings. "Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes."'

### (Mobius Says Another Financial Crisis 'Around The Corner' Kana Nishizawa - May 30, 2011 12:10 PM GMT)

According to this article:

### 'the number of "too-big-to-fail" banks will increase by 40 percent over the next 15 years, according to data compiled by Bloomberg. '

As a consequence Mobius is calling for more regulation:

### 'Separately, higher capital requirements and greater supervision should be imposed on institutions deemed "too important to fail" to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.'

### '"Are the banks bigger than they were before? They're bigger," Mobius said. "Too big to fail." '

So it seems that Bloomberg is reporting the need for more regulation while The Telegraph wants less regulation if anything. At first glance it may seem strange that three years after the crisis began, there still has not emerged any widespread, clear, coherent understanding of the nature and causes of the problem and the solutions required. Yet at the same time it is clear that some actors within the drama seem to be moving with purpose.

The oddly named macro-prudential regulation offers some insight into this purpose. This indicates that the BoE is going to be tasked with regulating the credit cycle whatever that might be which is really code for clearing up the ongoing messes that result from the Democratisation of Money. In the new dispensation, national currency and national central banks will fulfil the role of enabling democratised money through the way they regulate the national banking system. They will inject national currency when required and withdraw it when required to stabilize the flows of privately issued currency.

Since we have already had a little taste of what this will mean for the national finances and consequently national provision of governmental services, it is important to make sure there can be no democratic blowback from this new state of affairs. But this has already been arranged. An independent Bank of England will provide the support for independently issued Democratised currencies all independent of any political control whatsoever as you have seen in Portugal Spain and Greece. It was making the Bank of England independent that made this all possible-an action carried out by Gordon Brown. Remember that.

### 'As the Bank prepares to take on its new, all-embracing powers, the most remarkable thing about it all is quite how durable, in the face of abject disaster, the Brownite settlement around independence has been.'

# 5 June 2011

# No Such Thing As A Free Crunch

# THE BATTLE BETWEEN PRIVATE PROPERTY AND CAPITALISM or WHY NOT HAVE WORLD-WIDE LOW INTEREST RATES FOREVER?

We are endlessly told there is no such thing as a free lunch. Everybody has to pay his or her own way in the world, and MOST IMPORTANTLY OF ALL, over and over, that we ALL have to pay for the credit crunch.

Of course, all this ignores the biggest free lunch of all. In the aftermath of the credit crunch, the G20 nations got together and agreed to slash interest rates and to hold them at an unprecedentedly low position for as long as necessary. This historic act of international co-operation was remarkable, more so as there was no serious dissent or even discussion of any alternative approach.

The argument went, if all the major nations affected by the crunch acted in a co-coordinated way, there would be no relative disadvantage for any one nation. Exchange rates etc would effectively be synchronised. So was this then, the real deal, an actual bone fide free lunch. If it was, why not have permanently internationally agreed low rates of interest forever? Wouldn't that benefit everyone? And why has nobody ever thought of this before?

I know another well worn capitalist adage: If it seems to be too good to be true, then it probably is. Well this is too good to be true. So who is paying for lunch? While no individual currency is becoming relatively weakened in relation to any other, all state money, the very concept of state issued money is becoming weakened.

How can state issued money be weakened and weakened against what? State money has most obviously been weakened as a store of wealth against gold, silver and traded commodities.

Anyone paying attention to the energy markets will have noticed government dumping of strategic oil reserves onto the market to control prices. Look a little deeper, one will become aware of mounting evidence that certain agencies state and otherwise, are manipulating the gold and silver markets to control surging commodity values in metals.

On top of all this, commodity inflation-the value of goods against national currency is spiralling out of control. Governments are increasingly using export controls etc to manage prices and forestall popular discontent.

It might be argued that all of the above is simply a response to the inflationary pressures that are devaluing international trading currencies; in particular the Dollar. If this is the case it is possible that these pressures will in due course, dissipate; (this is certainly the line that the B of E is taking). And such an explanation might even be fairly plausible.

But these extraordinary measures are being taken by regulatory authorities precisely because they refuse to raise interest rates or allow any other normal means by which these democratised notes could find their own true exchange rate, which is effectively zero.

Lowering interest rates and injecting capital into the banks in exchange for crap paper increases liquidity and dilutes the debt – this is the stated intention of the national banks that have engaged in 'quantitive easing'. Like the process of osmosis the weaker concentration flows into the stronger, diluting the stronger concentration. National currencies are effectively being 'diluted' by the private money.

Effectively the total amount of money is doubled tripled or quadrupled and the value of each note, each portion of the total value is a fraction; ½, 1/3, etc of what it was. Just stop to consider the fact that national banks are buying up bank money with national money at a notional exchange rate of 1:1, is this really the minimum amount that the state would have to shell out if its purpose was to prevent the collapse of 'too big to fail' banks?

There is no rational basis for doing this, it is an ideological commitment to the concept of privately issued money; a political statement which in effect says that 'democratised' money is just as good as state money.

What are the consequences of this ideological political assertion? The state reserve is weakened. Existing surpluses are used up. If further capital is needed it is harder and harder for states to raise it except through exceptional measures and taxation! Privately raised, government debt is seen by the population as an ever more onerous burden. Government bond yields go up causing pressure on interest rates. If this pressure is not responded to it will cause increased inflation etc. Investors will be looking for a better bet for investment and the storage of wealth. The parlous condition of state money will encourage the next attack of 'irresponsible' private issuing and further weaken state money.

For some time now the debate has been staged in terms of 'moral hazard', which is to say that if private enterprise can rely on government to cover its losses it will become increasingly irresponsible. This obscures the true nature of what it happening here. What we are seeing is nothing less than a battle between private property and capitalism!

The irresponsibility is all on the side of national governments that are deliberately sabotaging their own national currencies which will allow the space for private currency to thrive. Every day that this continues the balance of power between state money and the new private notes alters in favour of the private. The confusion and paralysis over inflation and sovereign debt is damaging national currency. Before too long we will reach the point of no return. '

What does not kill you makes you stronger.'

That's bullshit as well.

# 15th October 2011

# The Future of Money

THERE IS A WAR ON. THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY. THIS OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY

Money is, or was, a common good. This is reflected in the fact that money is lent under a common interest system. If you lend money from a bank you pay interest. If you lend money to a bank they pay you interest on your deposit. These rates of interest fluctuate, supposedly in accordance with economic factors, in reality as a result of indirect political control. That is the way it has worked. Now I know that in fact the central banking system allows the Banks to skim off interest on every pound or pound credit that is issued, but that does not affect this argument, well not directly anyway.

We have a COMMON INTEREST SYSTEM. Democratising money will get rid of all that.

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY. THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY.

The fact that interest is paid on deposits is a reflection of this COMMON INTEREST SYSTEM. Banks, at least in theory, have had to pay you to use your money. They lend out your money to make more money, pay you your interest due and pocket the difference. The fractional lending system massively magnifies this power for the banks to make money from money. Despite this, the key point is that the very fact of issuing money does not advantage any one user of money over any other user of money. This is a common interest system. This system is now being modified to your disadvantage.

Imagine if banks did not have to pay you interest, even nominal amounts of interest on the money you keep with them. Imagine if you had to pay them for the privilege of their storing and using your wealth for their benefit. That would be a pretty good deal for the banks wouldn't it? You bet. So guess what is coming to a bank near you in the near future?

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY.

THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY

It's going to work like this. The first part of the scheme has already been put in place. State money is effectively paying zero interest all over the western world. This was a result of the policy synchronisation of all major nations occasioned by the excuse of the credit crunch. On the other hand Banks are charging what are effectively massive rates to lend ordinary people money. Although the nominal rates of interest are relatively low, banks are simply not lending money to poor people. This is effectively the same as charging hyper high interest rates. The second part of the plan is creating consistently high inflation on the necessities of life. Devaluing all state money has meant that the value of all commodities has increased in relative terms. This process will be ongoing. This means holding state money for any length of time is financial suicide.

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY. THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY

I explained previously how this combination of high inflation and low deposit interest is destroying state money as a general concept. Now it is becoming possible to say how this process will be specifically used against you. The state will continue to produce currency as before. This is the currency you will be paid in and pay for the basics in, at least for the foreseeable future. But when you receive this money there will be no way to save it. If you don't spend it straight away high inflation and no deposit interest will destroy its value. This means: You will have no way of saving wealth. You will have no interest in saving wealth. You may as well be up to your neck in debt as a permanent condition of life. And so you will be.

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY.

THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY

After a while you will be desperate to find some way to save wealth. The banks and other institutions will be ready with 'financial instruments'. And they will be ready to charge. They will have privatised wealth storage. The state will carry on with unprofitable exchange.

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY. THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY.

A number of fools are trying to create their own currencies such as Bitcoin or hoarding precious metals to overcome the debasement of state currency. This is what neo liberals want them to do. The only possible short to medium term strategy is.

DEFEND STATE CURRENCY. DEFEND COMMON INTEREST.

THERE IS A WAR ON.

THIS WAR IS BETWEEN DEMOCRATISED MONEY AND STATE MONEY. THE OUTCOME OF THIS WAR WILL SHAPE YOUR ECONOMIC REALITY.

And you are losing.

# 28th July 2011

# The Penny Drops?

It might be wishful thinking on my part but sometimes I think that the Credit Crunch penny is finally starting to drop. However, between fits and starts of optimism I have to acknowledge that even the most perceptive explanations of the crisis I have come across are still hamstrung by past assumptions.

A FORBES online recent article (Jul 25 2011), 'Money Blindness' hints that blogger Reuven Brenner is getting to grips with some of the true meaning of the Credit Crunch:

'The present financial crisis started with private real estate and is now continuing with "national" real estates. Common behind these crises has been the fact that far too much mispriced credit was extended to private and national entities.'

Brenner identifies the failure to set a correct 'price' for credit as connecting the different phases of the ongoing crisis and their resistance to any solution. Picking out the failure of this 'price' mechanism offers a real insight into what had changed in the period leading up to the Crunch. That is the positive development. Unfortunately, Brenner is still unable to break free from the need to rehash the standard:

### '...leverage in real-estate-related financial instruments. ..facilitated by the governments' misguided policies, ..combined in this case with a criminal (?..my question mark) lowering of underwriting standards and ...rating agencies' detachment from reality, as well as the Federal Reserve's utter misunderstanding of what the extension of the shadow banking implied –'

This is more or less a re-run of the 'everything was too complex and got out of hand' narrative which has haunted both corporate explanations of the Big Crunch and those that have tried to go a little further (see the Big Lie). Because Brenner falls for the same old kind of story in the end he finds himself plaintively asking the same old kind of question:

### 'How is it the mistake of wildly extending mispriced credit gets repeated?'

The problem here is the assumption that the 'mistake' in the present crunch is the same mistake of extending credit in the same way as a 'classic bubble'. But it is not. The whole point is that the 'classic' mechanism for controlling and resolving an asset class bubble has been bypassed by a new system. 'Democratised' money means that in the new world, credit is taken, not given.

Back to the Future Brenner correctly identifies the significant change brought about by the transition to Monetarist policy first in the Anglo Saxon and later other western economies:

### 'Although much has been said about the role of "shadow banking" ....' nobody pointed out the main implication ....... of having a significant shadow banking system develop since the 1970s.'

### '...The implication is that we should have stopped talking a long time ago about monetary "aggregates".

Which means we should have started to realise that as a consequence of the shadow banking system brought about under Monetarism, there is now more than one effective issuer of money and that some 'moneys' are more equal than others. 'Left wing' Crunch commentators have attacked monetarism in general terms but they have failed to understand the specific relationship between the structures it created and the Credit Crunch.

### 'Attention should have been on the institutions needed to manage the different kinds of domestic moneys(sic) that were coming into existence, and the type of collateral that central banks would accept'.

There are now two broad classes of money, State money and Democratised money. Brenner is in effect saying that an exchange rate mechanism between new, Democratised and state money should have been established. Brenner goes on to say that the failure to establish these institutions was one of the key elements in the crisis.

"Shadow banking" would have never gained the significant role it did unless people believed that the Federal Reserve would be there to supply needed liquidity to it when the public wanted suddenly to convert more deposits into cash than they traditionally did. The negligible differences in the rates on deposits between traditional and shadow banking suggested that that assumption was made - and the Fed did indeed offer the liquidity at the end. Here is the payoff to Brenner's analysis: The exchange rate would be equivalent to the differences in rates on deposits between State and Democratised money.

The Fed underwrote the entire system and the markets as a consequence felt confident enough to go on with it. But the key question is: Why did the Fed choose to underwrite the system in this way?

Although in the ideal monetarist world of the future there will be a variable exchange rate, especially if this reflects the superiority of Democratised money over the state kind, in the initial phase of the process, Democratised money will inevitably be too weak to hold its own. So the exchange rate will be held at 1:1 to protect the birth of Democratised money.

This is an ideological political position that underpins the phrase 'Too Big To Fail', which really means 'Too Important To The Monetarist Project To Fail'. Brenner suggests that although the Fed was helping to create de facto a new form of money issuing function it was still in thrall to Keynesian ideas about money and this mismatch caused the Credit Crunch: 'The panic happened, in part, because central bankers relied for decades on the abstract Keynesian theorizing about "money" as if it was some homogenous aggregate that central bankers controlled.

To really begin to understand what has happened, here are the questions that Brenner should be attempting to answer:

By your own admission money changed since the seventies: Did money ever used to be a 'homogenous aggregate'? If so, when did it change into something else?

If money is not a 'homogenous aggregate' now, then what is it ?

Why did the money issuing function change?

If central bankers don't control money now who does?

But Brenner avoids questions like these and instead tries to move on to devising a solution:

### '.... what should have become clear was that there were various types of domestic "moneys", and that the Federal Reserve was not about to provide liquidity (in the narrowest, cash, sense) to all of them'.

But this is to miss the point: the newly issued democratised money is not state controlled. The state only moves to guarantee Democratised money in the event of collapse, not before it. So this would not have prevented the development of what was rapidly becoming a semi-autonomous system.

Brenner seems to acknowledge this fact in general if not specific terms: 'Perhaps "shadow banking" would have expanded significantly nevertheless, but if the Federal Reserve made it clear that it could not access its windows,

"shadow banking" would have operated with more reserves, and the public would have known that not all domestic "money" are(sic) created equal.'

But how could this have been done without addressing the questions I outlined above? So Brenner offers another possible way to head off the coming disaster:

'... the Federal Reserve could have announced a shift toward the "real bills" doctrine ..... But properly done that would have meant anchoring the dollar in gold - an option that was not in policy makers' field of vision.

What is meant by 'anchoring the dollar in gold'- return to the Gold Standard?! Moving to specifics Brenner attempts to put his finger on the exact cause of the catastrophic information failure that caused central banking authorities to fail to act.

### 'Housing is the major component of price indices guiding the policies of the Federal Reserve and other central banks, presumably imposing a discipline. Unfortunately, they cannot. These aggregate indices have been way off the mark - bringing central banks into the maze of errors that allowed them the extension of much mispriced credit.'

This is precisely the feedback loop described in the Big Lie,(see above); but the key is that the state is no longer in the centre of the web, either in terms of information gathering or being able to act.

### 'The out-of-sight and out-of-most-minds impact of legislation and (sic) these institutions was that the statistical bureau's calculation of price indices went awry. This happened because buying homes with heightened expectations of flipping them over and expecting capital gains with low initial pay and high eventual debt payment had the effect of rising home prices - yet keeping rents stable.'

This is Brenner trying to blame politicians and individual householders for the effect of the feedback loop, all the time avoiding naming Monetarism and the structures it is creating as the central cause of the Crunch.

'As a result, the housing component in price indices, relying on rents (to be precise "rent equivalents"), being about 30%, did not change - even though housing became more a speculative asset class than merely lodging. To many observers, including at the Federal Reserve, the stability of this price index suggested that there was no excessive credit creation in spite of the rapid increase in home prices.'

So Brenner is suggesting that the failure of rents to rise in line with changes is nominal house price value is what deceived the Fed into thinking there was no problem.

This is fundamentally wrong; it was because a credit spiral was established with housing as an asset class allowing for the provision of more internally issued money or credit, credit that was taken not given.

## Stop Making Sense

'There have been heated discussions about whether central banks should look at asset prices and shape policies by taking them into account too. This debate misses the main point that statistical aggregates become unreliable when there are drastic changes in laws, regulations, policies and institutions. Once again, the misguided debates and policies were the consequence of having been blinded by long-ingrained Keynesian disastrous language of aggregates.

At this point, Brenner goes over the side. What 'changes to laws regulations, policies and institutions', is he talking about? Throughout this whole piece, his central charge is that regulators, (and therefore the laws and policies that control them), have remained unchanged in their commitment to old fashioned Keynsianism- this caused all the problems.

Then he says old fashioned Keynsianism won't work because these very same laws policies and regulators have changed so much! So which is it; Have they changed too much or not enough?

Like a number of others, Brenner circles around the matter so much that he ends up running into himself. Talking about asset prices in general is exactly right- housing is only the first of a number of asset types that will form the basis for democratised money. Brenner is also correct to say that central banks can no longer sit on top of a system like this, but the attack on Keynsianism is meaningless in this instance.

It is not that statistical aggregates become unreliable, it is that the nature of issuing currency means that there is no direct relationship between the value of a given piece of currency and the total overall value backing it up because currency by its nature cannot be liquidated.

### '... the fall of the dollar and rise of gold prices suggested that something was wrong, even though the traditional aggregate statistical measures did not make any alarm signal.'

The falling of state money against gold and other stores of wealth is an inevitable consequence of its diminished role because of the effect of democratised money.

### 'And yet, something must keep central banks disciplined. If there is no such alarm signal, mispriced credit will be unduly extended every 30 or so years, as there will be nothing to force the new generation to absorb the lessons of past mistakes'

.

This brings us back to the idea that all this is somehow part of a 'natural', cyclic process.

Ho-hum.

Brenner has gone some way to identify the alteration to mechanisms by which central authority was unable to receive useful information about the housing bubble at the centre of the credit crunch. He identifies Monetarist developments since the seventies in the form of the 'shadow banking' system as the basis for these mechanisms. Because he fails to put all the pieces together, to identify the unique, original change in the way that the economy and the state relates to the issuing of money, the piecemeal solutions he offers as ways that the crisis could be avoided now and in the future don't make sense and would not work.

Some kind of return to the Gold Standard??!!

The charitable interpretation could be that because Brenner and those like him see the crisis as cyclic and unique only in terms of extent, he can identify all the main pieces of the puzzle and yet he still can't put it all together.

But the cynical part of me feels it is hard to avoid the feeling that Brenner and those like him are wilfully avoiding the consequences of their own observations and analysis.

It seems I will have to wait a little longer for the penny to drop.

Back To Contents

# SCRIPT: THE GREAT MONEY TRAIN HIJACK

### (The Great Money Train Hi-Jack can be seen on You Tube)

This little film is about the Credit Crunch, but it is called 'The Great Money Train Hi-Jack' because that is what the Credit Crunch really is- a hi-jack in progress.

But this is something more than just garden variety crime. The masterminds behind this adventure are not just trying to take a train. That's been done before. What these thieves want is nothing less than to hi-jack an entire network-The Money Train Network, and more amazingly, to keep it. We can watch the crime of the century being committed in real time.

Watch.

Everyone who trades, who buys or sells anything, a house, a car or even individual work power rides on the money train. If we want to change houses, first we must swap the existing house for currency.

This currency is really only a ticket on the Money Train. We ride on the money train until we find a house we like. When we have found a house we like, we swap our currency tickets back for this new house. We have come to the end of this particular journey.

Like train tickets, money notes are not actually worth anything themselves. The value of these tickets comes from the fact that they give us permission to access a system.

A train ticket allows us to access the rail system. Currency allows us to access the money or economic system.

Sharing travel time on the money train network is the way we share out the economy. The more trains that are on the money train system at any time the more people are taking part in and benefiting from, the economy.

In the last century the European money train system was wildly disorganised and chaotic. This chaos in the flow and amount of money available helped bring about two world wars- and not surprisingly, when most of us realised where the European money train led, we completely lost faith in the system and the people who ran it.

After the war, rich and powerful elites were very scared by the fact that ordinary people had little or no faith in the money train system. They were willing to pay for distractions. They grudgingly allowed us much more access to the money train system than ever before. To rebuild support for the system politicians encouraged us to believe that the money train would run when and where we needed it. This policy was called Keynsianism. Keynsianism was really only a way to save as much of the pre war financial system as possible.

But in the 1970's Keynsianism was replaced by a right wing extremist doctrine known as MONETARISM.

The reason for the change was that most of the business and political elite had always hated Keynsianism. After the Second World War they had kept quiet in case people remembered the war, chaos and poverty their ideas had caused over the past decades. But in secret, they were deeply angry and resentful that the money train network was being used to provide common benefits like housing, hospitals, schools and social benefits and paid holidays for two weeks a year.

Then the economic crisis of the seventies came along and these right wing extremists the got the chance they had been desperately waiting for. Re-branding themselves as Monetarists they complained loudly and often about inflation. They claimed inflation was a social evil caused by the Keynesian policy of putting as many trains on the tracks as were needed to keep people like us more or less happy.

But inflation was not the real reason Monetarists were unhappy. What really makes monetarists unhappy is the very idea of a rail system itself. You see the rail system and the money system have another important thing in common. Those people, who think of themselves as the elite, don't like sharing with the mass of the population. I don't just mean sharing seats in train carriages, they don't want to share access to the system itself.

And what makes Monetarists crazy angry, is central planners controlling rail or economic systems on behalf of society as a whole. They call this socialism and they say it is evil.

What Monetarists really want is this. This is their secret dream of the way a perfect economy and a perfect society runs. They dream this alternative to the money train system; one which everyone uses but no-one has to share.

On motorways, old slow cars go in the slow lane and new, fast expensive cars go in the fast lane. If a train breaks down on a railway track, all the other passengers have to wait until someone comes along to clear the line. But when someone's car breaks down on the motorway, you can just pull out into the next lane and go by. It is the cherished dream of monetarists to make the money train system into a money motorway system so that they don't have to wait in line with everyone else. So that they won't be held up any longer. So they won't be held up by people like you.

Fifty years after the end of WWII the next generation of monetarists had arrived.

This generation were ready to gamble that enough people had forgotten about the problems extremist right wing ideas had caused to allow them to edge one step closer to the money motorway they dreamed of.

So they started work on a network within a network. This was to be called the shadow banking system. This shadow system would not follow the rules set down for it by central planners. It would follow the rules set down for it by Monetarists.

And Monetarists really have only one rule: Just like a motorway, it will not affect the system if any individual money train gets to its destination or not. So what happened next was inevitable.

Everybody held their hands up in surprise and said how shocked they were that this Credit Crunch had happened out of the blue. The law rushed to the scene of the crime; The courts put Monetarism in the dock. The guilty were punished.

Yeah right.

It is 2009. The shadow money train system is now one big crash site. Millions of lives were tangled in the burning wreckage of sub-prime mortgages that littered the track.

Not surprisingly everyone was losing faith in the money train again – after all, who would be so stupid as to get on a train while it is being hijacked and burnt out. That would be like ....

But this is not the 1950's. The elite aren't trying to persuade ordinary people onto the money train any more. They have another tactic.

First, Monetarists in central banks across the Developed world have issued an unlimited supply of free tickets to the Shadow Banks so they could all transfer over to a first class carriage on the main line. They call this quantitative easing; I call it Keynsianism for crooks.

But there is still a blocked track. So now we wait. Until the line is cleared nothing can move. If we won't pay to clear the track then as far as the monetarists are concerned we will all stay here.

The hi-jack has turned into a Mexican standoff between the Monetarists and the rest of us. And If we do clear the track The elite will soon be on their way back on the main line already thinking of the next parallel rail track they will build.

If they are allowed to get away with the first GOTH they are going to repeat this heist over and over again. Until there is no money train network only a money motorway. And they will have got what they have been working for forty years. Guess which lane you are going to be in?

The moral of the story is: Don't try any really serious crime unless you have got the police and the courts on board.

Back To Contents

#  BLOGS: 2012- 2013

#

# 6 July 2012

# SAWING THE LADY IN HALF

I have always been mystified by conjuring and those people who are entertained by it. Not in the sense that I wonder how 'illusions' are accomplished, I just can't understand how anyone could be entertained by such a banal pastime.

The 'art' of conjuring is derived from a few embarrassingly simple tricks based on observed crowd psychology. But these tricks are not enough on their own to create successful illusions. The audience has to suspend logical thought and to be complicit with the creation of 'magic'.

The real mystery in conjuring is: Why does the audience comply?

Which brings us to 'Sawing the Lady in Half'' and Democratised Money.

'Sawing the Lady in Half' is an illusion I am sure you are familiar with. An assistant, usually female, is placed in a box which is then divided up one or more times with a sword or saw. The assistant wiggles fingers and toes which protrude from strategically placed holes in the box and then re-emerges, reintegrated and unscathed at the end of the trick.

Of course the assistant was not really cut into pieces and brought back together. It is obvious. Only a credulous fool could profess not to understand the trick. Yet when it comes to the world of finance and fiscal policy it appears the world is full of credulous fools.

Across the financial spectrum from Keynesian left to libertarian right a debate is raging, as to whether the global financial system is experiencing inflation or deflation.

Some see indicators for inflation. Some see indicators for deflation. But it can't be both can it? Nobody seems to know. Just like the Sawn Lady Trick the fools in the audience look at the wiggling fingers of inflation and the wiggling toes of deflation and gasp in confusion and wonder at this disintegrated/integrated system.

But if the money system is not a whole then what is it? In response to the 2008 financial crisis, governments around the world implemented extraordinary fiscal measures, ostensibly for the purpose of stabilising the world financial system. Primary among these measures was a massive increase in the supply of money across the globe and the synchronised lowering of interest rates, effectively to zero. I explained elsewhere the effect of these measures was not to privilege one national currency against another, but rather to diminish all state issued currency. If the role and power of all state issued currency is being diminished, what will take up the slack in the system?

Since the first bout of serious financial deregulation in the Nineties the scene has been set for the introduction of 'Democratised' Money, which is in matter of fact a plethora of privately issued currencies. This is the privatisation, not of money, (money is private anyway!) but of the money function,

What is the money function?

The money function comprises the services money provides equally to all members of society, irrespective of how much money you have or indeed whether you have any money at all.

The money function is part of the social commons. I know these ideas are quite hard to get your head around from the outset, so let me offer a simple illustration which will help you to understand.

In the 'old days' (pre Credit Crunch), anyone could deposit money in a bank and the bank would pay interest. When you deposited money in your bank or building society you were equal to a big company or hedge fund. Everyone who put money into a bank was entitled to interest.

The rules and processes that governed the way that money was issued and utilised in capitalism meant that earning interest was a universal social benefit; a social commons. These rules and conventions have now been changed.

Post 2008 no ordinary depositor can get interest on savings. Effectively this part of the money function which was a social commons has been taken away from millions, even billions of ordinary people world-wide.

The right to earn interest on money is no longer a universal money function; it has been 'Democratised'.

Contrary to what you think the word 'democracy' means, ending universal access to common money functions is what the Democratisation of Money is all about. But not to worry!

Since the universal social commons of earning interest on state issued money has gone, the small scale saver is 'free' to find a private provider who will offer a return on deposits, (of course, there may be a few 'strings' attached). And of course the 'free market' will have provided these new 'charged for' Democratised Money functions in response to the clamour from the 'man in the street' for a place to put his pennies proving once again that capitalism serves the interests of the people!

So how does this tie in to the inflation and deflation debate?

Inflation and deflation are part signalled and part controlled by interest rates. Since the interest earning function is no longer universal, the full feedback loop provided by interest rates within the system is no longer available. The system has been hobbled. It is like cutting three fingers off a blind man and then being surprised when you find he can no longer read Braille as well as he could!

But this is only the smallest part of the absurdity. Interest earning is not the only money function that is being stripped away from state issued currency. This is not the place to list all such money functions. Suffice it to say that when this programme of amputation is finished the only money function left will be that of exchange.

Why?

Because that is the only function that is not potentially profitable. That one will be left to the state.

As each money function and its corresponding feedback loop is progressively stripped away and 'Democratised' , the system as a whole will become progressively 'blind' until there will be no way for you, me or anyone else to calculate a generalised rate of inflation, or deflation for that matter.

The Monetarists will have in some twisted sense succeeded in their plan to destroy inflation!

State issued currencies are displaying separate and distinct rates of inflation compared to nascent 'private' currencies such as derivatives and other 'financial instruments'.

This multi currency world is becoming increasingly unstable; just look at the seemingly inexplicable fluctuations in value of Gold, Oil and other commodities and the derivatives and swaps that are traded on the back of them.

Determining a general rate of inflation/deflation and producing policy will become as impossible as navigating by compass in a world with three or four North Poles. What economists of the 'left' and 'right' have failed to understand is that the seemingly endless debate over inflation and deflation only makes any sense at all in the context of a cohesive money system.

The dissolution of a state guaranteed money Social Commons is the true story of the Credit Crunch and its aftermath. It is the creation and implementation of the Democratised Money system that will determine what happens nationally and internationally over the next decade.

When people begin to see the effects of privately issued currencies in their private lives and on the global stage there will be a profound political and economic realignment across the world.

To return to the Sawn Lady: so long as there are only two sets of fingers and two sets of toes wiggling it is possible to maintain the illusion that there is one body in the box. But if there are four sets of fingers and seven sets of toes wiggling even the most stupid audience member will start to realise that something is not quite right. Then the trick will be over.

Then what?

I am more troubled than ever by the question that I asked at the beginning: Why does the audience comply? Why does the audience agree to divert itself with something that is obviously by any logical measure impossible? I can think of no possible answer that is not more than a little frightening.

# 20 July 2012

# CAPITALISM: REAL LIFE MEDICAL EMERGENCIES

In really serious cases of burn, trauma or disease, patients are put in a medical coma in the hope this will allow healing to take place while unconscious.

At the very least the patient will not have to be awake and suffering.

Given the risks, this treatment is only undertaken in the direst of circumstances. The Cold War was a global induced coma to preserve the Germanic Cult of Capitalism after the Holocaust.

Soviet Communism was a hallucination that the patient experienced under treatment.

In the 1980's it was no longer clear that the effects of the treatment were more or less damaging than the original disease. Chief Surgeon Ronnie Regan, assisted by head nurse Thatcher ordered that the patient be woken up and put on a strict diet of Chinese food. Wakey, wakey: IT'S MORNING IN AMERICA! Needless to say that the patient failed to thrive as old diseases manifested again; this time compounded by the new radical Chinese diet. After twenty five years of Monetarism a catastrophic heart attack prompted the desperate decision to put Capitalism under again.

Only this time the old drugs and methods would no longer be sufficient. This time the treatment involved stopping all heart and brain activity in the hope that they could be restarted at a later date!

The first capitalist Coma; the so called 'Cold War' involved a system of halucinogenics and tourniquets blocking off the majority of the worlds population from capitalism. This incredible situation lasted for thirty years from the end of WWII until the mid 1970's.

The second freeze instigated after the Credit Crunch, has had to be much more intrusive and extensive.

The fundamental laws of capitalism; its very heartbeat and its brainwaves have been stopped. Capitalism is now a vegetable hovering in the grey twighlight between life and death.

All over the globe billions worth of property, loans, derivatives and other 'financial instruments' are held in limbo. If brought to market; sold off or defaulted, the entire system would immediately collapse.

You and your family would literally be starving in three months. I am not exaggerating. So these gangrenous deals are left.

Governments refuse to allow the people who made these deals from being made to account. AND THEY WILL CONTINUE TO DO SO; NO MATTER WHAT.

At this most delicate of times it is unfortunate but inevitable that the subject of harvesting any remaining viable organs will arise.

Of course at the beginning the very idea is abhorrent but little by little the death watch entourage start to consider the previously unthinkable. And this is where we are right now.

Here is the Saxon family gathered around the emaciated frame of capitalism atop the hospital bed.

The Saxon Libertarian right, little blue eyes puffy with tears are singing 'God Bless America!' and remembering better days. The Saxon left are studying the frame of their patriarch trying to imagine an Eco Frankenstein they could make out of the salvageable organs.

The Saxon middle, shell shocked with fingers crossed, saying:" lets keep the patient deep under and hope something turns up".

Doctors and technicians stand in the background muttering something about needing a decision right now". And everybody knows they are running out of time.

# 24 July 2012

# They Still Don't Get It...

You may have read reports of trillions of dollars stashed in offshore accounts denying governments billions in tax revenue. You may be aware that corporations are carrying trillions in cash surpluses lying unused in accounts for lack of profitable investment opportunities.

You may also be aware of increasing media pressure to lower central bank lending rates, despite that fact that most simple cash deposit accounts are paying negative interest to banking customers.

In the last few economies that are still seen as viable, Government bonds are paying the lowest return they have in decades, in many cases a negative rate meaning that you have to pay the Government to store your money! But what does it all mean?

Surely the massive surpluses corporations hold are an indication of returning profitability and an imminent return to profitable investment.

Surely the low rate of return on Government bonds means long term interest rates can be kept down, smoothing out the housing market and providing credit for companies and individuals.

Are these good signs? If so, why all the talk of credit downgrades, contraction and deepening depression across the globe?

Bog Standard (BS), economists of every hue try to explain ongoing economic developments in terms of nations or regions relatively going up or down, in terms of inflation or deflation or sustained (if anaemic) recovery or further downturn. None of this can adequately explain confusing and apparently contradictory indicators in the global economy.

Every time BS economists hazard even tentative predictions as to future events they are shown to have no idea what is coming next. The only thing that is absolutely sure in an increasingly unstable economic environment the BS explanation will continue to offer no insight at all.

This is because without fail, all BS narratives miss the explanation that can tie all the observed monetary phenomena together- the degradation and collapse of state issued currency.

The degradation of state issued currency is part product of deliberate political policy and part inevitable result of the development of capitalism. It will result in the DEMOCRATISATION OF MONEY. The degradation of state money means that Government money pays no interest, no matter where or when it is invested. No interest destroys the inflation feedback loop which means that the system is increasingly blinded as to the amount and velocity of currency in circulation.

The flight of currency from collapsing state bonds to marginally more secure ones does not mean that some nations are faring better than others, it is just a spasmodic reflex: state currency circling the drain; a tsunami sloshing around the international bond market after the underground collapse of the system. While some Keynesians advocate reintroducing 930,s style centralised system to mitigate the effects of the Democratisation of Money, they do not understand the underlying process, much less its potential implications. Therefore their recommendations will fail to receive any real consideration.

STATE ISSUED CURRENCY IS COLLAPSING. IT WILL BE REPLACED BY PRIVATELY ISSUED DEMOCRATISED MONEY

# 4 August 2012

#  tesco-bank-launches-bid-for-high-street-mortgage-market-money-the-guardian

This is what Democratised Money will look like. TESCO and other high street retailers introduce a range of banking/credit products. Next they tie these products to a wider range of shopping so that if you buy your groceries from TESCO you get a discount on your mortgage interest. Then they tie the whole thing into the loyalty card scheme. Then they link the arrangement into long term credit purchases like cars etc.

Then they offset all these new debt arrangements against deposits and finally... They get you to make your PENSION ARRANGEMENTS with the new bank. THEN THEY SELL YOU SHARES IN THE ORGANISATION. Hey Presto! they have captured all of your financial arrangements. You are no longer free to enter into agreements or not as you please, just like you are not free to use pounds sterling or not as you please. In effect TESCO are issuing their own currency. Democratised Money

# 18 December 2012

# CRACKERNOMICS: The Fiscal Cliff Is A Diversion: The Derivatives Tsunami and the Dollar Bubble.

PAUL CRAIG ROBERTS is the great uncle of CRACKERNOMICS What is Crackernomics? CRACKERNOMICS is a relatively recent form of 'radical' economics practiced by (Germanic) White Protestants. It was created in the aftermath of the Credit Crunch.

CRACKERNOMICS is derived from Monetarism and Reganomics and takes elements of traditional Germanic right wing and left wing politics and analysis to create a new synthesis. It tries to explain the economic and political emergency that has swallowed the Germanic world as follows

The CREDIT CRUNCH is the result of specific discretionary policy decisions such as the repeal of the Glass Steagall Act in the 1990's.

The CREDIT CRUNCH is not the inevitable consequence of economic and political developments since the end of the GERMANIC wars in 1945.

It is possible to materially change what is happening to the GERMANIC economic system (usually by buying gold or attacking the Big Banks etc.) see Max KEISER

Paul Craig Roberts argues that the entire economic policy of the United States is

### '...dedicated to saving four banks that are too large to fail', '

implying that this is a distorted and imbalanced economic policy caused by the undue influence of a small group in the American economy. As a consequence of this savers are deprived of 'interest income' which forces them into government bonds to protect what wealth they have remaining.

Roberts argues that the real problem is the massive amount of derivative creation that equals many times the worlds real GDP. However, Roberts correctly observes that much of the derivative exposure 'nets out' meaning that the real extent of the exposure to risk it represents is impossible to calculate. He then goes on to express the hope that this situation will somehow bring about a revolution of some kind blah, blah....

The reality is this Government monetary policy is dedicated to preserving the developing DEMOCRATISED MONEY system that is being created, not specific institutions. The repeal of Glass Steagall is only one element of the deregulated framework necessary for DEMOCRATISED MONEY.

State issued money is being stripped of most of its core functions in preparation for these functions being transferred wholesale to DEMOCRATISED MONEY The function 'interest producing' is the main function that is being stripped away at the present time. Government issued bonds will now perform this function in the short to medium term.

When this process is finished only the exchange function will remain in the control of the state and this state of affairs will continue unless and until this also can be made profitable. Derivatives are simply one form of DEMOCRATISED MONEY.

Their net worth is impossible to calculate in the same way that any form of independent National currency is. That is the whole point of the exercise. Each form of DEMOCRATISED MONEY will have its own inflation and exchange rate. When the government finally is able to abandon the interest function you and everyone else will be forced to choose one of many forms of democratised money to protect your 'wealth'. Then you will find out that these new forms of money are money like lottery tickets than rail tickets. And then we will all be 'risk takers' and 'entrepreneurs'. Whether we like it or not.

CRACKERNOMICS spends its time lamenting this new state of affairs and suggesting hair brained schemes to allow the Herrenvolk of the Anglo Saxon world to hang on to their ill gotten gains. Germanic world domination is coming to an end.

Whom the Gods would destroy they first make mad

# 29 December 2012

#  americas-deceptive-2012-fiscal-cliff-counterpunch-tells-the-facts-names-the-names

If such a thing is possible Michael Hudson is an economist with a good heart but like all Germans he is infected with some of the most poisonous ideas that come from CRACKERNOMICS.

Hudson believes that somehow THE BANKS have managed to completely usurp the control functions of Anglo Saxon societies and to coerce or persuade the Government to embark on a programme that will ultimately impoverish or destroy vast swathes of the economy.

Michael Hudson evidently holds out hope for a return to Keynsianism, unable or unwilling to understand that Keynsianism was simply a step on the road that led to the system developing into the cesspit we see before us today.

Michael Hudson seems to me a little bit like the prisoner who hopes the good cop (nice politicians), will come back for a little bit to give him some relief from the badgering and bullying of the bad cop (bankers).

But this is the bit where the prisoner has to sign a blank statement so that the cops can fill in the 'confession' later. It does not matter which of them persuades/forces you to do it-

You Are Going To Sign

In fact the political class are behind all this. They are the ones who have been working toward this end since they were defeated in 1945. There are no separate political parties in this respect. Keynesianism was a concession by the political class as a whole to society as a whole. Now it is being taken back. And a whole lot more

# 1 January 2013

# CRACKERNOMICS: CHASING YOUR OWN TALE :A DONE DEAL"

On the 17th October 2010 I wrote the following

### 'the Crisis is legally impervious to any standard solution to the problems it has created...' The intractable nature of the crisis is forcing nation states in particular USA, to devise new legal solutions to the problem. These legal solutions are of a scale and complexity comparable to the privatisations of the Soviet economy after the overthrow of Soviet Russia.

It is finally becoming apparent even to corporate commentators that a fundamental change is taking place in the relationship between financial institutions and the governmental structure. Through wilful obtuseness or sheer stupidity these dummies will continue the farcical process of trying to give a meaning to these developments through the existing framework of law.

But gradually it will become undeniable that something fundamental has changed. Then a couple of years will be spent arguing over what the nature of that change is. And then finally, when there is no other viable option left the commentariat will be forced to agree with the position I laid out from the beginning.

The only logical way to understand the new legal relationship between finance and government is to characterise the financial sector as sovereign money makers. But of course, by then it will be a done deal.

# 25 January 2013

# Spiked Online

# PARADISE LOST

# Angus Burgin 'The struggle to moralise capitalism'

Every single one of us is an absolute prisoner of cultural conditioning. Intellect can only be understood materially as the expression of cultural conditioning. Any attempt to depict it as something other rests on metaphysics. It is impossible for any intellect to step outside the cultural conditioning that created it. It would be easier to physically pick yourself up by your own shoelaces than to do it. However, this has never prevented self styled Germanic fakir intellectuals from claiming to be able to achieve this feat by means of one or another intellectual discipline. At root, the fallacy of this belief has been obscured by the success Germanic science achieved with deterministic disciplines such as 'classic' Chemistry and Physics.

Germanic science underpinned a military/political empire making it possible to argue that other Germanic 'disciplines' such as economics or history were equally as powerful, universal and 'true' as classical science. Of all the claims that Germanic 'humanities' make, the claim to 'universality' is the key to unravelling their meaning and purpose.

To justify this claim of universality, Germanic intellectuals attempt to sidestep discussion of specific cultural identity by dealing with historical events as 'scientific' abstractions- claiming their story for the entire world and telling it.

In order to be able to claim the prize of universality, Saxon intellectuals on 'left' and 'right' made a deal with the devil and both are forever trapped by its consequences. But it is the left who has paid the heaviest price for their bargain. Most damagingly of all the left has collaborated in presenting the emergence of neo-capitalist ideology in this ahistorical way. It is this as much as anything that has given the right advantage in the post Credit Crunch world. Why does the left do this? What could any 'left-wing' gain from this 'grand bargain' that would make it worth losing the argument over the free market?

The Great Persuasion: Reinventing Free Markets Since the Depression, by Angus Burgin is reviewed by Frank Furedi in an effort to explain the rehabilitation of free market ideology in the post WWII era.

That the 'market principle' has actually been rehabilitated will come as something of a surprise to most of us, given that we are in the fourth year of the largest economic and financial crash that we have seen for a hundred years.

We have seen a truly unprecedented level of direct state control of markets, monetary and trade policy. Incredible levels of inter-state co-operation in the management of interest levels. Mind boggling production of credits, literally trillions of dollars worth of credits to prop up the banking system. Leading American banks told the Federal Reserve to provide unlimited liquidity for the banks or there would have to be a declaration of Martial Law!

In three years of trawling the World Wide Web I have not found a single person anywhere who advocates further deregulation of financial markets as a response to the Credit Crunch. The Credit Crunch itself makes a literal nonsense of the very idea of further deregulation- it is the result of deregulation.

The only way to protect the market from the corruption and excesses of the people who run and own it is through increased interference by the state. Every solution proposed to remedy the Credit Crunch from maximum to minimum interference relies on the state to implement it. So in what sense can anyone in their sober and right mind suggest that 'free markets' have been rehabilitated??!! Something must be seriously wrong; either in the standard Germanic definition of 'rehabilitation' or the definition of 'free markets'.

In his review of 'The Great Persuasion: Reinventing Free Markets Since the Depression', Furedi suggests that 'despite the unpopularity of so-called neoliberalism, alternatives to it are conspicuous by their absence.

### 'Which is why this era of global economic depression really does not feel anything like the 1930s'

However, liberals:

### 'have made significant headway on the economic front but have suffered a string of defeats on the cultural front'

and

### 'What Friedman...characterised as a half-won battle can also be understood as part of a war with no clear victors'

So on closer inspection this rehabilitation of the free market seems a little less successful than first supposed; let us look closer:

## The Not Very Formidable Thinkers

Burgin's history of two influential liberal groupings around The Mont Pelerin society and the Colloque Lippman recounts the struggle to reconstitute the broad philosophical basis of capitalism and argues that:

### '...an idea that was consigned to the margins of society in the 1930s succeeded in making such a triumphant comeback in the 1970s ...... as a result of the hard work and dedication of a handful of formidable thinkers'.

But these 'formidable thinkers' completely failed in their primary purpose; to form a:

### 'comprehensive moral worldview'.

Indeed, they appear to have failed even in such a simple task as to even be able to figure out a name for themselves.

### 'the failure... to name themselves generated a problem that would plague the movement in later years... in the absence of a shared reference, its members increasingly identified themselves with divergent labels and focused intensively on the differences their respective choices entailed'.

Explaining the intellectual ascendancy of the free market by means of the native genius of these liberal intellectuals is no easy task. Furedi himself points to this:

### 'What is less clear is the role of groups and their ideas in the realisation of this development. What this fine book lacks is an assessment of important external developments – the postwar boom, the loss of the moral authority of the Soviet Union, the disintegration of the welfare state – which influenced the trajectory of economic thinking from the late 1960s to today.'

So, if the dominance of free markets did not come about: 'as a result of the hard work and dedication of a handful of formidable thinkers' -how did it happen?

## The Dreaded 'C' Word

From the onset of the Great Depression and the second Germanic War, political advocacy of the 'free' market (whatever that might actually be), was effectively dismantled- globally and internally within the Germanic empire. This was not voluntary- nor was it the result of reasoned debate. It was more like a moral collapse; a David Icke style 'shift in consciousness' (breakdown), in the Germanic world.

That chaos, death and misery flowed from Germanic domination was becoming obvious to the entire world in the early C20th. War, chaos and deprivation meant that tiny self styled cliques of intellectual liberals, conservatives and later Monetarists were literally too scared to openly call themselves capitalists, instead employing weasel phrases like the 'free market' and the 'the mixed economy':-

'Though in the Fifties he presented himself as a radical, even Chicago School economist Milton Friedman had problems describing his outlook. Burgin suggests that, in this respect at least, Friedman '

was at a loss for words'.

Furedi implies from this that as liberals and later Friedman were too scared to say who they were or what they wanted, that they were somehow linked or equivalent. This is more than just simple error. There is no historical flow between the liberals of the 1930's and the Monetarists. Friedman had nothing to do with the liberal intellectuals that went before, anymore than Tony Blair came from the trades unions that formed the Labour Party, or the devil in the Garden of Eden had anything to do with snakes.

## Understanding Friedman

Just as the devil did not assume the form of a snake to promote educational opportunities in the Garden of Eden or the interests of serpents in general, so Monetarism did not come into existence to defend liberalism. To understand what Friedman and the Monetarists really are, we have to look at what they actually did.

The central political goal of Friedman and the Monetarists was to spread the idea that inflation was a social evil and from this point to argue that any other purpose of economic policy including moral purpose, is overridden by the fight against inflation.

### 'During the period between the late 1960s and the mid-1970 ...the problems associated with the massive expansion of public expenditure and the inefficiencies of welfarism* had diminished the appeal of planning.'

Since all the things ordinary people want cause inflation, (the inefficiencies of welfarism*), in the interests of 'efficiency', the public should not be allowed a say in public policy, and especially public monetary policy. Control of the money supply is the means of controlling and eradicating all but 'core' capitalist economic activity and much more importantly, all but core capitalist political activity.

Furedi fails to ask the simple question: To whom was the appeal of planning diminished? Are we to believe that by the 1970's Herrenvolk in the Germanic empire did not want the state funded health care and state funded housing? That the public wanted a return to the economic conditions their parents and grandparents endured in the 1930's?

With this in mind it becomes obvious that Friedman's appeal was never really a popular one. Furedi's assertion that:

### 'Friedman was a uniquely effective public intellectual who possessed impressive communication skills'.

is simply nonsense.

Friedman was clearly personally repellent and a grotesque. His trademark leering grin reveals just how twisted his inner psychology was. In a Germanic empire supposedly enthralled by his ideas, 99.9% of the public have no idea at all who Milton Friedman even is.

Friedman and the Monetarists needed the cover of liberalism for a new project and the milieu around Neo-Liberalism provided it. Friedman and the Monetarists needed a past and the Liberals needed a future- it is really no more complicated than that.

Traditional liberalism had no future other than Monetarism; just like the Labour Party had no future other than the New Labour parasites that invaded it. The Monetarist mantra of anti-inflation was taken up and repeated first by Germanic fakir economists and then the fakir political class. The immorality revealed by post WWII revelations of death camps left Germanic fakirs with no defence against the 'moral' argument put forward about inflation.

'Moral' monetary policy was the method by which the Monetarist snake gained a form with which to enter the Liberal Garden of Eden. Like the serpent, Friedman offered nothing less than a taste of the fruit of the tree of knowledge:

The only real intellectual achievement of Friedman and the Monetarists was that they conceded Marx's analysis that the state will inevitably subsume every capitalist economy. Friedman and the Chicago School called this process 'Socialism'- MONETARISM is the political response they devised.

Monetarists understand 'Socialism' to be the collectivisation of every aspect of society that is brought under the ambit of the state.

Monetarists understood that the state will be forced by crisis to finally expand into every corner of the capitalist world. Monetarists accept this.

Liberalism is by definition, powerless in the face of this development. Given there is no possibility of avoiding the state consuming the economy, the only possible answer for the elite is to take over the state and restructure it, to create an autonomous state-a state 'free' from influence of the people. Upon completion of this formulation Friedman:

### '...concluded that 'we have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course.'

This was not liberalism or even conservatism; this was the antithesis of liberalism and conservatism.

Friedman is explicitly acknowledging there can be no return to a liberal Garden of Eden now that the new right have terrible knowledge of the future of the state. Instead there will be a permanent battle to prevent the public gaining access to the state.

This will be the battleground of politics and economics from now on. That is why on the sidelines of this battle, the remnants of the left constantly sees the state as withdrawing and the remnants of the right constantly sees the state as overweening. Both are right from their individual perspectives.

As I have explained elsewhere, the Democratisation of Money is the formal legal enactment of this process of removing the state from popular control. The achievement of the Monetarists in establishing a 'moral' argument around inflation and using this as a political springboard to hijack the state was driven by necessity.

But the success of this political enterprise in the Germanic empire has come at a high price; not least the realisation in the rest of the world that there is such an historical phenomenon as Germanic economics.

Think of the increasing division between the Catholic and Germanic nations and you will realise what a serious blow has already been dealt to the idea of 'universal' capitalism right in its heartland.

### 'Unlike Hayek, Friedman did not face a world where economic planning enjoyed ideological hegemony. In such circumstances, his free-market liberalism was of the moment and his receipt of a Nobel Prize in 1976 merely confirmed this'.

Having implied that Friedman and the liberals were similar or equivalent, Furedi goes on to argue that a change in external conditions contributed to the success of Friedman where the liberals had previously failed. This is trying to pass off an observation as an explanation.

The world where economic planning did not enjoy ideological hegemony was created by Friedman in the Germanic sphere; it did not appear deus ex machina! Furedi then compounds the distortion with the suggestion that a tin star issued by a gang of German capitalists reflects new, objective, global truth. In the same way I suppose that awarding a Nobel peace prize reflects the reality of Obama creating world peace!

## Paradise lost

Liberals did not rehabilitate capitalism. More importantly, the Monetarists who followed the Liberals did not seek to rehabilitate capitalism; their purpose was to adapt the philosophy of power to the emergent truth that Marx was right about the state. Given the primacy of the state, Monetarists created a political movement whose purpose was to hijack the state to prevent it ever falling into the hands of anyone but them. These actions were to protect what they saw as the core of capitalism.

But why would the Saxon 'left' go along with his project?

Examine the neo liberal search for a 'heritage' for capitalism and clues emerge. First of all there is the question of why Germanic intellectuals wanted to address cultural issues.

### 'In 1972, neo-conservative ideologue Irving Kristol was critical of the tendency of market advocates to promote materialism'.

How apposite this change in appreciation was! Monetarists now knew that Marx was right about the all consuming state, and that the politics and the economics of 'free market' capitalism were a busted flush. It was time to change tack and talk about the 'culture' of capitalism but:

'

### 'the absence of an intellectually compelling moral foundation for capitalism meant that it was always exposed to a cultural critique of its values.'

What is 'an intellectually compelling moral foundation for capitalism'? To whom does this 'moral foundation' need to be compelling? To the people all Germans liberal and conservative want to control and to whom they can offer nothing other than propaganda.

This substantial list has worldwide close to 6 billion names extant. Elites need to dominate intellectually precisely and exactly to the extent that they cannot offer material benefits to comply. Here they are addressing exactly this point:

### 'In 1972, neo-conservative ideologue Irving Kristol warned that capitalism was living off the 'accumulated moral capital' of the philosophies that preceded it.

He was critical of the

### 'failure to recognise the perils of cultural decline'.

What a bizarre Germanic idea: 'accumulated moral capital'. Surely only the German mind could conceive of culture, history and morality as a bank balance! But this telling phrase finally begins to tease out the differences between Neo Con and Neo Liberal; the new Germanic right and the New Germanic left. Germanic Neo-Conservatives get their culture from Germanic Protestantism together with some scavenged body parts from the mediterranean bronze age cult of Democracy. This is the 'accumulated moral capital' that Kristol refers to. On the other hand, Germanic Neo Liberals and the Left from the 1960's onward increasingly overtly express German paganism in personal sexual and social matters, most tellingly environmentalism.

This is the new division at the heart of Germanic society and between Germans and everyone else.

### 'This so-called cultural contradiction of capitalism emerged with full force in the late 1960s, when many of capitalism's values were explicitly challenged.'

But the values of capitalism were not really challenged in the Anglo Saxon world. What this phrase actually refers to is German Protestantism challenged by Germanic Paganism. The Cold War, in offering a common white Slavic enemy, allowed the two Germanic factions to avoid developing their differences:

### 'supporters of the free market were able to avoid facing up to this question during the Cold War. Against the manifest failures of the planned economy and a corrupt Soviet society, the open-market principle of capitalism appeared to possess moral authority.'

This so called 'freedom' was an open-market in ideas allowing Germans and those they controlled to mix and match between Protestantism and Paganism. These cultural skirmishes formed the basis for the post sixties Germanic left and right. Hardening finally into

' ...what would turn out to be an interminable Culture War.'

In this new landscape:

### "What distinguished the New Left, noted Kristol, is its representatives 'refusal to think economically."

In fact, the new right was also distinguished by it's refusal to think economically. for which it blames the left by means of twisted logic: i.e. It was Karl Marx who spoilt the liberal Garden of Eden by providing the forbidden fruit, not the Serpent Friedman for persuading Liberal Eve to eat it! And if the new German left no longer thinks about economics, what does it think about? From now on, in the name of Universalism it would be their quest to convert all the rest of humanity to German pagan beliefs.

And this 'Universalist' crusade reveals ultimate and true allegiance to the Germanic cause. The Saxon/Germanic left will never betray its Germanic Universalist 'heritage' in favour of some vague non-specific global 'class struggle'. The very idea is preposterous. And now it is the turn of Kristol speaking for the new right to elide two distinct historical groupings; the 'old right' and the 'new left':

### 'He presented their critique of capitalism not as progressive but as 'utterly regressive',

observing that the New Left adopted the approach of the Old Right, which:

### 'never did accept the liberal-bourgeois revolutions of the eighteenth and nineteenth centuries.'

In other words did not accept the rise of Germanic protestant culture expressed in the capitalist revolutions of the 1800's. This means in essence the Germanic 'left' does not accept German Protestantism.

The key here is the characterisation of opposition to the German protestant takeover as regressive. After all, according to Germanic universal truth both sides try to appropriate, this is the story of global human progress- the story of humanity.

This universalism serves to hide the truth that in reality the new Germanic left is only opposed to Protestantism and very much in favour of German pagan domination.

During the Cold War, to rehabilitate the tattered and filthy remnants Germanic culture, and in fear for their very lives, Germanic left and right conspired to present to the world a choice between Soviet Communism and Germanic protestant or pagan freedom. When the Soviet 'threat' ended, they again conspired together to offer the world a choice between Protestantism and paganism.

This is the choice they now offer to the post Credit Crunch world in the marketplace of ideas. The Germanic left not only let this happen, they promoted it with absolute commitment to the interests of Germanic supremacy. It is of all consuming importance for Germans whether on left or right to make as much of the world as possible believe that their story is the story of humanity. Their survival depends upon it.

Thus, Germanic wars are world wars- the Credit Crunch is a global economic meltdown. The day this strategy fails, marks the beginning of the final collapse of the Germanic global empire.

It is not the dedication and genius of Germanic liberals holding up the corpse of the free market Herr Furedi, it is the Germanic 'left'. Or to give them their true name, German pagans.

# 5 March 2013

#  the-great-printer-rip-off-it-costs-more-than-vintage-champers-and-devious-new-tricks-mean-you-constantly-have-to-buy-refills-

# mail-online

Check out this great article on the future of Democratised Money! First they give you free grass to get you into the paddock and then milk you. That's how we domesticated cattle. That's how the new system is going to domesticate you. Discount mortgage and then car finance and then medical insurance and then.... before you know it they have got you for life. Coming soon, the £3000 car, but you have to buy petrol where we say. David Connett, editor of The Recycler magazine, said:

'Imagine if you bought a new car and you were low on fuel but you weren't allowed to stop at an Esso or Texaco garage because your manufacturer insists you can only use Shell. You would be furious. Yet that's what is happening with printers and ink.'

and next with money. Imagine

# March 13, 2013

# How Big Is Big?

'When the Attorney General of the United States admits some banks are simply too big to prosecute, it might be time to admit we have a problem — and that goes for both the financial and justice systems. Eric Holder made this rather startling confession in testimony before the Senate Judiciary Committee on Wednesday..... It could be a key moment in the debate over whether to do something about the size and complexity of our biggest banks, which have only gotten bigger and more systemically important since the financial crisis'.

Corporations live and die in law. Corporations live and die in national law. The word is made flesh by means of articles of incorporation and despatched by means of legal dissolution. The body of national law is the womb that gives birth to the capitalist corporation and it is its grave. Imagine for a moment, the passing away of a corporation without the amenity of a decent burial.

For example, the collective creditors of Fallowfield Fashions Ltd become aware something is wrong. Perhaps a bill has not been paid on time. Perhaps a rumour is circulating that the company is having trouble completing an order or getting a loan from the bank. Worried creditors descend en masse upon the premises; ripping out sewing machines from the floor, carrying away computers. Chairs and even the tea kettle are seized in recompense for what they are owed, like wolves tearing at a crippled deer in the forest.

Of course, from the German point of view this is hardly civilised. Given that passing away has become inevitable, whatever assets of Fallowfield Fashions remain must be distributed among creditors in proportion to precedence and the amount that is owed. And so it is done. This is the one and true Germanic Sacrament; as holy to every Capitalist as the Last Rites are to a Catholic. But how precisely is it done?

The court appointed receiver cannot simply hand out a computer to this creditor as recompense for cloth, or a sewing machine to that one in return for accounting services, as he sees fit. There has to be a way of generalising the value of assets and of course there is: selling the assets and converting them into money.

Now there is a means of relating liabilities to assets in monetary proportion and distributing them 'fairly' under the law. There could be no equitable matching of assets and liabilities without the facility of state issued money.

Amen.

What would happen however, should a nation, especially a capitalist nation, go bankrupt? Are capitalist nations subject to the same rites as capitalist corporations at the moment of their passing?

Certainly nations can be said to have assets, arable land, water, wildlife and mineral resources. Even the people themselves could conceivably be considered assets of a nation. In the same way, nations are thought of as having collective liabilities; usually referred to as the national debt. Which gives rise to the question: Is there some means of making a nation bankrupt and dividing its assets among creditors?

Imagine representatives of creditor nations arriving at a national border, to carry away machinery, raw material and even people. This sometimes does happen; it is called 'war'. These days 'war' is usually avoided wherever possible especially by Germans, especially when there is a possibility of the victim fighting back.

But perhaps there could be some way to achieve something like a 'legal' bankruptcy? It would require the conversion of national assets into currency notes; just like traditional bankruptcy. But the currency notes in question are national as well so creditors have a big problem. Italian debts are paid in Lira, or used to be. This means all the bankrupt nation has to do is simply print as many notes as are necessary to pay off the debt! All the creditor will get is an enormous pile of paper. At which point the creditors will not accept any more of this national currency, (as famously in Weimar Germany), leading to no more foreign imports and what is called 'hyper inflation'.

When creditors no longer want a nation's paper money they only accept hard assets in payment for trade. This arrangement might work in a few limited cases, but when it came to losing rivers, fields and oil to creditors, citizens of a nation would not stand for it. More importantly they could not be made to stand for it except by force. This brings us back to war. Government simply does not have the authority to give assets like this away.

This means essentially that governments can go bankrupt but nations cannot which means that any 'purchase' creditors have on national assets is indirect. Creditors make deals with the legal/political/economic system of a nation but not the stuff of the nation itself.

We can characterise this national or sovereign debt as intractable. The single most important characteristic of intractable debt is that it cannot be assigned to creditors proportionately. Sovereign debt is intractable and different from all other kinds of debt because of its legal character.

National debtors have their own bankruptcy courts and an independent legal system, one that can be overthrown only by force or by will of the people. The link between people and assets is sovereign.

From the point of view of a liquidator, nation states are 'too big to fail' Now where have we heard that phrase before? The phrase 'too big to fail' cannot refer to the actual size of a given enterprise. Up until now, even though the largest corporations have greater nominal value in trade and assets than many developing countries, these corporations can still be made bankrupt in their country of origin and liquidated along traditional lines. No nation, no matter how small can be liquidated.

So what does 'big' mean in this context? Corporations no matter what size, fall under the authority of national currency. Their assets can be collectively sold- converted into national currency. National assets cannot be converted into any other national currency.

In light of this we can consider the finance industry as it is now constituted. It is not a co-incidence that much of world finance is now conducted under 'off-shore' banking institutions. It is not a co-incidence that that the phrase 'off-shore' is used to describe these institutions. They are in fact, sovereign financial islands. Financial instruments such as derivatives function as sovereign currency because the relationship between assets and liabilities embodied in them is intractable in the same way that sovereign debt is.

A derivative is not a claim against an asset. It does not have a direct relationship to an asset. A derivative issued by Morgan Stanley has the same relationship to an asset as a dollar bill has to the Grand Canyon.

You cannot go to the American government and cash in a dollar bill for a piece of the Grand Canyon. You cannot cash in a derivative and get a piece of the house the mortgage it is derived from refers to. Intractable debt like this can only be issued by a sovereign entity, an entity that does not stand under anyone. By issuing debt like this an entity declares itself sovereign. Sovereign intractable debt is money.

Derivatives are sovereign intractable debt. Derivatives are privately issued money. All governments in the Germanic empire violated the fundamental principle of capitalism en masse by allowing finance corporations to reorganise themselves in a way which meant they could not be legally liquidated!

These governments at the same time fundamentally violated their legal obligation to protect the civil benefits conferred by their respective national currencies. Is this simply an interesting legal point? Hardly.

Just in the same way that the currency notes issued by the Weimar Republic could became worthless because they had no purchase on the national assets of Germany, so derivatives are intrinsically worthless. They rest entirely on the faith of the person who uses them, just like a national currency.'

Too big to fail' also means is that nothing legally stands behind the derivative or currency note. If derivatives fail to maintain confidence they are worthless. There are hundreds of TRILLIONS in Dollar denominated derivatives existing in the world economy. If they lose the confidence of their owners they are totally and utterly worthless. But more importantly if they lose the confidence of people who do not own them they are totally worthless.

Currency is uniquely vulnerable in this respect. A private cheque rests on confidence in the individual writing the cheque and confidence on the currency it is issued in. The currency stands behind the cheque. it guarantees the cheque. Nothing stands behind a derivative, nothing guarantees it.

## The New Augean Stables

Imagine for a moment that an agency were given the Herculean task of cleaning some of this mess up. (Just that bit which is derived from sub-prime mortgages for example). All the derivatives that have been issued (trillions of them!) are gathered up and put in a pile. Then all the properties that these derivatives refer to are put in another pile.

Our hero would soon realise there is no direct relationship of any kind between the paper liabilities in one pile and the assets they refer to in the other pile. To return to the classical analogy it would be like asking Hercules not only to clean out the stables but to force the manure back up the animal's backsides and have them spit it out as grass! The receiver would be reduced to giving one creditor an apartment for this bit of paper and another creditor an Edwardian terrace for that bit of paper, as he saw fit. Just like the chaos I described at the beginning of this piece.

This shows conclusively that derivatives are bullshit on a very big scale.

But I am afraid the situation is worse even than that. Derivatives are sovereign. This means that although they can be denominated in Dollars or Euros or Yen in actual fact they have anything to do with any of these national currencies any more than they have anything to do with actual mortgages or houses. A derivative valued at 100.000 is actually worth 100.000 'I don't know what's'!

I suggest the following annotation for derivatives: ?100,000 or ?1.5 trillion etc. as a means of quantifying their value.

This is a serious proposal.

In real terms derivatives do not actually have a legal unit of accounting. They are the currency of an invisible nation. The legal and financial relationships they represent can never be disentangled.

From a practical point of view for bankers and politicians in the Germanic empire there is no legal way back, only forward. Here in broad form are the legal definitions of Money Democratisation.

## The Legal Framework of Money Democratisation.

In capitalist states, all legal entities are forced by the constituted national authority to relate debt instruments issued to assets owned.

In capitalist states legal entities are not allowed to issue debt in relation to assets they do not own. These are matters of criminal, not civil law.

An entity which is able to issue debt instruments without relation to assets owned is sovereign.

Any restrictions on debt instruments issued by a sovereign entity are voluntary. Debt instruments issued by a sovereign authority are money unless they are voluntarily restricted by that authority.

Debt instruments issued by any sovereign entity cannot legally be brought under the jurisdiction of any other sovereign authority except voluntarily.

And what about making a nation bankrupt?

### 'Despite Greece's extensive privatisation programme, it has been suggested that Greece should be prepared to sell off even more of its assets to help reduce its debt obligations to other countries'.

Josef Schlarmann, a member of Merkel's Christian Democrats party, has warned Greece that, as with insolvent individuals, it should expect to sell everything it has to repay its creditors'2

I am afraid even that is becoming possible. A country like Greece could not be liquidated while it had the Drachma. There would have to be a currency standing above the government of Greece to allow this to happen- and now there is: Greece can now have its assets sold and converted into Euros! Greeks together with all the other nations that stand under the Euro have effectively allowed themselves to be open to liquidation under the rules of capitalism. Or rather their governments have.

This is treason.

Greece's lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal. Greece has 111 tonnes of gold. In other words Greece has given up on its "money in extremis", gold. If they default they will have nowhere else to go. Its international assets will be seized and it will not be able to trade internationally at all'.3 '

### Treason doth never prosper, what's the reason?

### For if it prosper, none dare call it Treason.'

John Harington

1Huffington Post US Edition 9 Mar 2013

2Telegraph 9 march 2013

3Silver Doctors February 22 2012

# 23 March 2013

# Cyprus crisis: MPs approve bank restructuring and solidarity fund – as it happened

#  guardian.co.uk

We now have details of the 'capital controls' which Cyprus intends to vote into law (sometime) today, thanks to star blogger "https://twitter.com/YiannisMouzakis" YiannisMouzakis : It's a remarkable set of restrictions on the usual nuts and bolts of the financial system – particularly given the final point:

Restrictions in daily withdrawals. Ban on premature termination of time savings deposits. Compulsory renewal of all time savings deposits upon maturity. Conversion of current accounts to time deposits. Ban or restrictions on non cash transactions. Restrictions on use of debit, credit or prepaid debit cards. Ban or restriction on cashing in checks. Restrictions on domestic interbank transfers or transfers within the same bank. Restrictions on the interactions/transactions of the public with credit institutions. Restrictions on movements of capital, payments, transfers. Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety.

You are watching a series of restrictions of the functions that money can perform being carried out in a limited defined territory. This is an attack on a state issued currency. If it succeeds these restrictions will become semi permanent.

# 31 March 2013

# How Bitcoin could destroy the state and perhaps make me a bit of money

# The Spectator.

Now BITCOIN, the Democratised money of the moment has made it to the pages of the SPECTATOR. Hugo Rifkind is here to tell the Saxon Burghers all about it. It is hard to believe that a couple of years ago when I first started writing about BITCOIN and identified it as a DEMOCRATISED CURRENCY no-one outside of MAX KEISER and a few NERDS had any idea what it was. And here it is, going mainstream. You can guarantee that soon every pleb from here to Lands End will be getting on board. It is important at this historic juncture to describe exactly what Rifkind and those like him understand about BITCOIN and DEMOCRATISED MONEY in general.

1. The beginnings of mythology: Here is an apocryphal story you will here over and over again.

### 'in 2010 somebody spend 10000 of them on a pizza, a sum which today would make that pizza worth £465,3682.

2. It is something new.

### 'it is not quite like any other currency we have ever used. It doesn't have a central bank. Nobody is in charge. A Bitcoin is a thing that simply exists like gold.'

3. It is digital.

### 'You don't hold a Bitcoin in your hand. It's a string of code.'

4. It is essentially political in nature:

### 'The whole thrust behind Bitcoin is that it removes the need for trust in currency; trust in bankers, trust in governments, trust that the two won't collude to do you over, like they did with everybody in Cyprus.'

5. It is 'Democratic'.

'most of us can't begin to understand the maths that all these very clever programmer types insist is at the heart of the whole project, I suspect the true alternative is just outsourcing your trust to them. Still, there are apparently a lot of programmer types, and everything they do is being scrutinised by other programmer types, because none of them have anything better to do, because they don't have girlfriends. So I'm not sure that's necessarily unwise. You might call it the morality of crowds. I think it's the future.

### 'at heart, this was always a political project, rather than an economic one.'

6. It is a private commodity and can therefore fail:

### 'the truly fascinating aspect of Bitcoin is not the thing itself (which may well get hacked one day, or otherwise collapse and fall apart) but the concept behind it'.

7. Most importantly right now, governments are bringing it into existence.

'Soon, whether via Bitcoin or whatever comes next, it will be possible to strip banking away from bankers, and money away from governments'. '

8. Anecdotally, many suggest that the recent surges in Bitcoin value have had a lot to do with the seizing of bank accounts in Cyprus.

### 'There's a whole emerging political philosophy here, similar to the crypto-anarchism of the likes of Julian Assange'

### 'It's about individuals having the power of governments; having their own secrets (the crypto part) that governments can't crack. It's appealing for any hardcore libertarian, but it's going to have its costs. When democracy stops being about the group and becomes about the individual, and when you are literally empowered to pay and get paid without anybody knowing but you, what happens to the state that needs your taxes to survive?'

# 5 April 2013

# Keiser Shovels on the Trojan Horseshit.

Bitcoin has reached over one billion Thaler in total value this week and is expected to continue to rise. It's all over the mainstream press, soon even the brain dead BBC will have to admit that it exists.

But there was a flash crash in the price of Bitcoin a couple of days ago, caused by a denial of service attack on a Japanese exchange site.

It is widely believed that this was the result of a market manipulation whereby a group of investors sold their Bitcoin at the market high, crashed the exchange which led to panic and a sell off, and then re-bought at the new lower price. So the next step is screamingly obvious.

'Bitcoin is a great idea!' the cry will go up. 'But how can we guarantee the system against manipulation?' carefully selected pundits will plaintively ask. 'Why. the only possible answer is that a major financial institution will issue the digital currency' comes back the chorus. 'Introducing New Corporate Bitcoin..' etc blah blah. and the trap is sprung.

Dummy Max Keiser and all the Bitcoin minions will realise that they have simply provided a Trojan Horse for corporations to produce privately issued currency. Of course they will continue to bullshit for the next couple of years that it is a battle between the plucky individualist capitalists and the mighty corporations but this is simply to cover their embarrassment that they are again outfoxed by their moral and intellectual superiors in the capitalist world.

There is more chance of the Trojan horse jumping over a six foot fence than a citizen democratised currency taking off.

You bunch of suckers.

# 6 April 2013

# Cordoned Economy

# Labour must draw the sting from welfare, or lose in 2015 |

# The Guardian.

# Jonathan Freedland

A couple of years ago I wrote a number of pieces explaining the re-alignment of political forces that took place in England in the aftermath of Gordon Brown becoming leader and Labours subsequent defeat. One of these pieces is reproduced below.

I explained these developments from a party political perspective- showing how Conservatives were going to pursue a strategy of pinning Labour to its territorial heartlands through a systematic attack on the Welfare state.

In the subsequent period it has become clear that this strategy is metastasising into something far more pernicious- an all out attack on what might be called National Welfarism.

National Welfarism is comprehensive system of taxes and benefits that operates within a national boundary e.g. it is meant to encompass everyone within that territory to the same extent. The new structures that are emerging are clearly meant to make the system more regional in character like the states based system of benefits that exists in America. All of this under the aegis of 'Localism'.

I predicted that as the Conservatives failed to make headway on the economy they would be forced to step up attacks on Labour through the welfare system and this has proved to be so, The response of the public is something I touched on in passing.

This now requires a closer look. A new theme has emerged in the past year or so: the unwillingness of a large section; possibly the majority of the public, to support welfare payments.

Part of this is simply hidden racism, (note the emphasis on 'big' families receiving welfare targeting immigrants and white trash). But underpinning this is a change in the real economy brought about through a change in the function of money. It is this change that is having a profound effect on the way that people see National Welfarism.

I have explained in the past that Democratised Money is in part the process by which people are drawn into a complex privatised web of financial relationships as a consequence of the state resiling from its previous relationship to national currency. The interaction between income and wealth is permanently altered by this process.

Since taxation and redistribution are key to the way that modern capitalist states relate to the economy it is inevitable that Democratised Money will have an effect on these governmental functions.

Welfare payments were modelled on weekly wages, they have been designed to provide a weekly income equivalent. However, the recent moves to pay welfare monthly (to bring them into line with the 'world of work') shows Conservatives are intent on 'modernising' this traditional approach.

The wage model is becoming obsolete. As income becomes less linked to a weekly and then a monthly wage so welfare will become more irregular. The working public will not see the justification for weekly payments. They are being portrayed as an unreasonable privilege.

It is this that underpins this present attack on welfare. As the democratisation of money develops there will be an atomisation of financial experience. A parallel financial evolution has begun that separates out the affairs of different groups in society.

At some stage within the next ten years it will no longer possible to sustain the financial arrangements of certain groups with welfare. When this group becomes large enough, or the majority monthly regular welfare payments will end.

## ARTICLE REPRODUCED FROM: October 2010 Ruthless People: Cameron Applies The Thumbscrews While Milliband Sticks His Fingers In His Ears.

You might remember the 1980's film 'Ruthless People'. A housewife is kidnapped to extract a ransom from her husband. Only the husband won't pay, no matter what the kidnappers threaten to do to his wife. This comedy is a grimly appropriate metaphor for the past five months of British politics.

Recent cuts in student grants, unemployment provision and housing benefit are part of massive reductions in entitlements for the majority of users of the welfare state. Students have responded with a bit of a shindig at Tory campaign headquarters in London. Reaction in the rest of the country is muted so far, the unemployed and welfare recipients are less likely to make much of a fuss than students.

Yet there is always the possibility of trouble breaking out if things get bad enough. So you have to ask yourself, why the ConDem coalition, trying to claim the centre ground in politics, would risk the fall out from this right wing posturing? The answer is that the coalition is trying to force Labour off the political centre ground and is prepared to risk much to do it. The Coalition is desperate to establish credibility, by which I mean economic credibility. They are desperate to get the economy on some kind of acceptable growth track. If ConDem can do this then the entire Labour 'alternative' approach to dealing with the crisis is dead in the water and ConDem is established as the ongoing German style CDU for England.(see previous 'Left Overs'. However, if growth were to falter, the coalition will inevitably be characterised in the media and elsewhere, as a failed political and economic experiment. Labour can simply wait five years to be returned as the sensible mainstream centre of British politics. Recognising this, the objective of ConDem is to make Labour pay as hefty a ransom as possible for standing on the sidelines, and that is where the students and welfare recipients mentioned at the top of this piece come in.

They are the hostages who will be used to extract the ransom from Labour. The political calculation goes like this: Launch a hard line right wing attack on the payments and services essential to the Labour core vote. If the LP fails to speak out against spending cuts, it is weakened among its core activists, especially in the North, Wales and Scotland. If it does defend the 'feckless poor' from the left, it cuts itself off from Blair Tories it lost so resoundingly in the Southern constituencies, which leaves the way clear for a continued ConDem clean up of those votes.

In all classic kidnap thrillers, sooner or later the victim receives a telephone call demanding money for the return of a loved one. In the event that the victim of this extortion will not co-operate, the kidnapper usually applies some form of pain to the victim, whose screams, relayed down the telephone, produce the desired effect.

ConDem is applying painful pressure to the soft tissues of Labours constituency in the expectation that howls of agony brought on by the cuts will force Labour to speak out in defence of its 'loved ones' moving to the left and leaving the centre ground clear for the coalition to colonise. Only so far, not a peep from Ed Milliband.

The first three or four months unfolding of the coalitions' evil plan were taken up with Labours leadership challenge; a convenient excuse for hiding from the press. Since then we have seen backbench backbiting over the disgraced Phil Woolas, and Ed Milliband taking two weeks off to be with his new baby. What we do not see is any real attempt to speak out against the cuts.

Labour, at this stage in the game is determined to hang on to the 'centre ground' and the possibility of re-emerging again as the CDU of British politics, despite the astounding incompetence of Gordon Brown in throwing away all the things that Bush's Bitch achieved in this respect.

The Labour Party leadership see their core constituency as nothing more than a stage army led into the line of fire in order for the leadership to achieve its goals. The truth is that like the Danny DeVito husband character in the film, Milliband and Co. would not be overly upset if the entire remnants of the organised working class in Britain were done in by the coalition and the bodies dumped in a river somewhere. He has made it crystal clear to the press, the country and Labour Party stooges everywhere, he has his own baby to look after. This is where his priorities lie.

In a new low in cynical manipulation, both 'sides' of mainstream politics see the poor as a powerless tide of human flotsam they can use for their own ends, in any way they see fit. Despite the possibility of some small-scale inconsequential disorder, no one sees the danger of any real fight back from the poor. After all, they way they see it, the politicians are the main characters; the Saxon Poor are only bit players in this film.

In 'Ruthless People', the betrayed housewife Bette Midler decides to wreak a terrible revenge on the treacherous husband who knew she was suffering but chose to do nothing about it. It is a shame that Bette Midler in the film has a lot more fight, zest and vitality than the Saxon poor in real life.

# CRACKERNOMICS 2.0: The Curse of Crackernomics

#

# April 10

# Ellen Brown The Deal

# The case against favored treatment of derivatives

# May 10, 2011

# Robert Teitelman

# Derivatives Market's Payment Priorities in Bankruptcy

# Thursday May 5, 2011

# Mark Roe, Harvard Law School,

I have avoided focusing on the mechanics of derivatives, bankruptcy and regulation by government. This would lead away from the political argument and understanding derivatives in the broader context of the democratisation of money.

There is a real problem in relating the action at ground zero in derivatives to the broader public debate around the Credit Crunch:

'The case against favoured treatment of derivatives' Robert Teitelman

### ', there are very few signs ... that anyone with any clout is suddenly about to ..... simplify bankruptcy treatment.

'Why?.....because, derivatives remain(s) a mysterious black box to most Americans, ...'

The way that derivatives relate to insolvency and what this means for the broader economy is:

### '... a situation of technical interest to only a few, most of whom have their own particular self-interest in mind'

This is the 'Money Aboriginal Problem'.

But the arrival of a more sophisticated and insidious form of Crackernomics (Crackernomics 2.0) makes it necessary to go into the mechanics of democratised money in more detail.

The fundamental reason that Crackernomics prevents a useful and effective understanding of the Credit Crunch is that it obscures the political context in which the collapse took place. This is because adherents of Crackernomics confuse actors with objects, that is, try to explain the Credit Crunch in terms of individuals and institutions instead of functions and instruments.

In 'Winner Takes All: The Super-priority Status of Derivatives: Why Derivatives Threaten Your Bank Account', Ellen Brown takes on the privileged position accorded to derivatives counterparties by the Dodd Frank Act. (The Dodd Frank Act if you don't know was the main USA government response to the Credit Crunch).

Brown explains that as a result of Dodd Frank and the Bankruptcy Act (2005):

### 'Derivatives have "super-priority" status in bankruptcy.....In a big derivatives bust, there may be no collateral left for the creditors who are next in line'.

### 'Under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.'

What this means in practical terms is that:

### 'Rather than banks being put into bankruptcy to salvage the deposits of their customers, the customers will be put into bankruptcy to save the banks.'

So the next time TSHTF:

### 'derivative claimants could well grab all the collateral, leaving other claimants, public and private, holding the bag.'

Why has this subject suddenly become so important? Because of the recent high profile confiscation of deposits in Cyprus and the increasing hints that regulatory authorities are going to replicate what the Cyprus government did all over the world. Brown suggests that confiscations like this will become more and more likely because:

### 'Derivatives are sold as a kind of insurance for managing profits and risk; but as Satyajit Das points out in Extreme Money, they actually increase risk to the system as a whole.'

Brown points out that

### 'The tab for the 2008 bailout was $700 billion in taxpayer funds, and that was just to start. Another $700 billion disaster could easily wipe out all the money in the FDIC insurance fund, which has only about $25 billion in it.'

Which is not going to go very far when:

### 'the cash calculated to be at risk from derivatives from all sources is at least $12 trillion'

(The FDIC is the Federal Deposit Insurance Corporation, which is a payout fund set up by the USA government to pay out depositors in the event of bank collapse)

To make it clear

### Section 716 (of Dodd Frank), does not in any way limit the swaps activities which banks or other financial institutions may engage in. It simply prohibits public support for such activities.'

The USA government is not going to restrict the production of derivatives but it is not going to underwrite them either. So

where will the banks get the money in the next crisis?

The answer is:

### 'The bail-in policy for the US and UK....set forth in a document put out jointly by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) in December 2012, titled Resolving Globally Active, Systemically Important, Financial Institutions.

Brown explains that what this means is

### 'Under the guise of protecting taxpayers, depositors of failing institutions are to be arbitrarily, de-facto subordinated to interbank claims, when in fact they are legally senior to those claims!'

because

### .Derivatives counterparties, . . . unlike most other secured creditors, can seize and immediately liquidate (my emphasis) collateral, readily net out gains and losses in their dealings with the bankrupt, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances they obtained from the debtor, all in ways that favor(sic) them over the bankrupt's other creditors.'

Essentially Brown is arguing that the holders of derivatives, financial institutions enjoy a privilege over ordinary depositors when it comes to getting paid out from insolvent banks. Brown spends some indignation pointing out the:

### '..brutal, unjust irony of the entire proposal '

But in case anyone should think this position too partisan she casts around for a more widely acceptable argument against derivatives. In an effort to raise the tone a little Brown enlists Harvard Law professor Mark Row:

### '(W]hen we subsidize(sic) derivatives and similar financial activity via bankruptcy benefits unavailable to other creditors, we get more of the activity than we otherwise would. Repeal would induce these burgeoning financial markets to better recognize the risks of counterparty financial failure, which in turn should dampen the possibility of another AIG-, Bear Stearns-, or Lehman Brothers-style financial meltdown, thereby helping to maintain systemic financial stability'.

and further:

### 'The derivatives and repo players' right to jump to the head of the bankruptcy repayment line, in ways that even ordinary secured creditors cannot, weakens their incentives for market discipline in managing their dealings with the debtor because the rules reduce their concern for the risk of counterparty failure and bankruptcy'

### 'More generally, when we subsidize derivatives and similar financial activity via bankruptcy benefits unavailable to other creditors, we get more of the activity than we otherwise would'

So the argument is that when government protects derivatives holders from the consequences of their decisions it encourages them to be reckless and it encourages more of them to be reckless than would otherwise be the case, Roe then goes on to make a slightly more sophisticated point.

### 'Chapter 11 bars bankrupt debtors from immediately repaying their creditors, so that the bankrupt firm can reorganize without creditors' cash demands shredding the bankrupt's business. Not so for the bankrupt's derivatives counterparties'

This asserts that allowing derivatives counterparties to dip into a bankrupted company straight away prejudices the chances of that company being rescued under Chapter 11 bankruptcy and so causes bank collapses that could otherwise be avoided.

So here are two core arguments for Crackernomics 2.0 plainly designed to garner maximum support among 'middle of the road' stakeholders in the Great Credit Crunch debate:

1. The bankruptcy privileges Dodd Frank gives to derivatives holders discourages due diligence.

2. The bankruptcy privileges Dodd Frank gives to derivatives holders confers may actually cause more collapses.

This high economic tone does not last for long and soon Brown is soon drawn to more familiar Crackernomics territory:

### "the Lehman myth," (which) blames the 2008 banking collapse on the decision to allow Lehman Brothers to fail. .... the Lehman bankruptcy was actually orderly, and the derivatives were unwound relatively quickly. Rather than preventing the Lehman collapse, the bankruptcy exemption for derivatives may have helped precipitate it'.

The 'Lehman myth' is rapidly becoming to Crackernomics what 9/11 is to 'Libertarians'- a definitive divergence in the way that recent history is understood. Depending on what side you are on, Lehman either means that the regulatory authorities tried a standard insolvency but drew back in panic when they looked over the abyss or it was a bankers coup that allowed 'banksters' to take over the bail out.

But what both side hold in common is the belief that it is the fate of institutions that determined what happened. The corporates believe the whole financial and governmental system was at stake, the insurgents believe it was the fate of corporate fat cats at the top that was in the balance.

Underpinning Crackernomics is the assumption that banks and financial institutions are preserved or privileged by legislation such as the Dodd Frank Act and more importantly, this is the purpose of the legislation.

Based on this assumption, Crackernomicists are now making arguments against what they see as unfair preference given to the bankers and other derivatives counterparties in insolvency, characterising it as evidence of general preferential treatment. In fact, post Credit Crunch legislation such as Dodd-Frank is there to preserve derivatives as a class of financial instruments not the organisations that issue them.

Why do governments want to preserve the act of issuing derivatives?

Because they have no choice, or rather they have gone past the point where choice was an option- the point of no return.

What is, or rather was, the point of no return?

The point at which governments in the Germanic empire were willing and able to countenance the derivatives market collapsing. And this is not hyperbole. Derivatives are a zero sum game- it's all or nothing. Once derivatives have been issued they are intractable, which is to say they cannot be liquidated in the traditional manner.

Derivatives cannot be directly compared to other classes of debt because all derivatives are abstracted and dependent on conditions. Therefore they form a separate class of liability. They cannot be lumped in with other claims whether secured or unsecured, against an insolvent company. There is no acceptable way to assign derivatives to assets. There is no acceptable way to compare the claims of derivatives to other claims. Effectively, derivatives are worth face value or they are worth nothing. Or to put it another way either derivatives trump other claims or other claims trump derivatives. Derivatives go to the very top of the list for payment or fall off the very bottom.

No matter what happens derivatives and other claims cannot co-exist together in insolvency. In dealing with derivative counterparty claims Dodd Frank explicitly recognises that derivatives cannot be collectively assigned to assets in the same way other instruments of credit are. There was no legal framework that would have allowed the USA government to do anything other than what it did.

The history of the post credit crunch period is the story of governments trying to create this legal framework on the fly while dealing at the same time with the fallout from the credit crunch.

All of which seems to suggest that I am implying that this process has become inevitable. Well, what if it is not? What would happen if derivatives were legally abolished or allowed to collapse as Crackernomics advocates?

Let us go to the mountain and ask the Moses of Crackernomics:

### 'As noted by Paul Craig Roberts, "the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system."

So most, if not all of these pesky derivatives will simply vanish in a puff of smoke if only we have the courage to close our eyes very tightly and say:

'I BELIEVE, I BELIEVE IN FREE ENTERPRISE!'

And who is to say? It might even have a chance of working if it were not for the political and economic history of the past century or so. There is a reason that the Commodities Exchange Act and Glass-Steagall Act came into existence. The enactment of these laws represents a political victory for one group of people and a political defeat for another. There is a reason these laws were repealed fifty years on. Repeal represents a political victory for one group of people and a political defeat for their opponents. These historical events are not just enacted on some kind of political whim or a meaningless experiment; they represent conflict between real social forces over the recent past.

But any serious attempt to examine and understand who these social forces are and what their purpose is, would prove too uncomfortable not only for the 'fat-cat banksters' but for the so called 'progressives' and libertarians on the other side as well!

Consider the role that Paul Craig Roberts played in creating Reganomics-the political wing of the Monetarist takeover. Do you really think he is prepared to undertake any historical examination of the Credit Crunch that would expose his role in bringing the disaster about?

The idea is laughable and yet Crackernomics simply ignores this glaring contradiction right at its heart. This is the Curse of Crackernomics; it does not, it cannot, really examine the forces that were in play leading up to the credit crunch and beyond it.

There is no way to wish derivatives and the democratisation of money away. There is no way to persuade Democratisers to abandon their project of NGM (Non Governmental Money), by complaining it is 'not fair' or 'too risky'. They have calculated the risks; risk is what this is all about. They don't give a damn if you or anyone else does not think it is fair.

Crackernomics and New! Improved! Crackernomics 2.0 wants to fight the Corporates with one hand tied behind your back. It must lose.

'One might think of favored (sic) treatment of derivatives in bankruptcy as a kind of litmus test of our seriousness to wrestle with these issues. As long as we just let this one rest, we're really not very serious at all. ' – Robert Teitelman

Back To Contents

# 2023 SCRIPT

About a year ago I made a short film called 'The Great Money Train Hijack' illustrating how money is being transformed from a common good issued by the state into a privately issued 'democratised' resource.

For thousands of years, states have issued and controlled the supply of currency.

But the future of money in Anglo Saxon societies will increasingly be one of private organisations controlling this key function of money. This is unprecedented in human history.

Think of the way that common land rights were taken from communities and replaced with private ownership two hundred years ago and you will begin to get some idea of the size and the significance of the change taking place.

You might suppose that something called 'democratisation' will be a good thing for the majority of people, but it won't.

The citizens of classical democracy enjoyed a number of rights and freedoms that the slaves they owned did not. Indeed the only way that citizens of Greece could enjoy these rights and privileges was because they were denied to so many. This is what the new world of democratised money will be like.

Although it will profoundly affect everyone, this democratisation of money will be felt sooner and more sharply the lower down you are on the social ladder. A young person, living in a town or city and relying on the state for provision of health and education will be guaranteed a front row seat for the central social drama of this century.

Let's focus on a ten year old girl who fits this description now in 2013:

This young person has been living through 4 years of an on-going economic depression. She has seen consistent price inflation in food, oil derivatives, (especially energy production and transport) and price deflation in manufactured goods.

Because of this inflation/deflation nexus her family has seen a real terms fall in the wages they bring home every month. In addition to this: Her grandparents and parents pensions, (if they have them), are crippled by volatility in the stock market. They are getting little or no interest on any state currency savings they have thanks to central bank policy of zero per cent interest.

Grandparent/grandchildren wars over access to state services are heating up. Intergenerational conflict will be a media buzzword in the next decade. Her parents might not be able to get a mortgage or remortgage and are stuck in their home.

If they are living in rented accommodation, prices are going up,up,up. There are massive cut backs in government provision: Her school is being privatised, the healthcare system she and her family rely on is being restructured and regionalised.

Our young person may or may not know that incomes for the top 5% are accelerating upwards and the gap between the richest in society and everyone else is continually getting greater. She will almost certainly not know that the primary purpose of economics and politics in western societies now and for the foreseeable future is to maintain political stability by hiding this increasing disparity as much as possible. This will become even more of an imperative in the next decade.

It is this, more than anything else that is driving the political changes along the road to 2023. It seems that every second week this young person is told the long awaited recovery from the Credit Crunch has begun. But very fourth week a fresh crisis occurs and we are right back where we started, or even worse.

In fact is there is no way things can return to the way they were before the Credit Crunch. Even if the economic situation is stabilised, economic and political relations in the Germanic dominated world are permanently altered.

Our young person might not know who Mario Draghi is, (he is president of the European central bank), but they have already experienced the reality that Draghi has made clear; that the post war European social model is over. German Chancellor Angela Merkel, has said the same thing.

All over the German dominated western world for the next decade our young person can count on a decade of political and economic restructuring. So what will the coming world look like? We can fast forward ten or so years to 2023 and see.

By 2023 the role of the state in western Europe will have changed beyond all recognition from the post Germanic War model that was put in place in the late 1940's. Since our young person depends upon the state for provision of basic needs let's start with these:

Education.

Housing.

Healthcare.

Title: 2023: Education.

Education is a special social commodity, even more so than health, because there are no limits to how much you need and therefore no limit on how much it will cost. It is entirely possible that in the future the need for training and on-going education will be required for your entire adult life! But by 2022 education will start to look very different from the way it has over the past four or five decades. Education will be split into control and function. What does this mean?

Title: 2023: CONTROL AND FUNCTION: Open timetables and Permeable schools.

Core or control education universally provided by the state will increasingly centre on enforcing social control. Control education, whose purpose is to 'socialise' children in openly political ways will be the core of a 3 day school week. Parents who can afford it will have the option of paying directly or indirectly for more elective days; increasingly these will be on different campuses from control based education.

An increasing number of key skills will be designated as elective: put in straightforward terms, 'A' level equivalence will be effectively privatised. High school holding pens described as technical clubs and vocational organisations run by charities and local government will begin to appear for those people who cannot afford supplemental education. They will be a place to warehouse children whose parents have to work radically longer hours.

To offset opposition and build a new social constituency to defend the changes, governments will start offering educational discounts on elective education (probably based on reduced interest rate loans) for: Military service reservists. Volunteers for public events such as the Olympics. Key sections of workers in health care, (mainly because will no longer have adequate occupational pensions or working conditions).

Title: SPECIAL FORECAST

These territorial paramilitaries will be the backbone of the emerging social order.

Title: 2023: HOUSING

In the area of housing, the central problem facing government in the Saxon world is: how can they stimulate the building of required housing while avoiding the destruction of the existing debt asset structure? One key solution is to break the belief in owning a house for new entrants by creating a generational split market. The national definition of housing will have to be redefined- not as a store of wealth for individuals but a store of wealth for institutions. The government will enable private organisations to build lots of new living spaces that are not worth buying for individuals! The result is that by 2023 we will have houses without walls or street life.

Title: 2023: Houses without walls-Living in the street.

Government will force private pension funds, mainly those dealing with workplace pensions to invest in housing, along with Government debt. Government will also encourage housing associations to invest in social housing along the German model. The trend for children living with parents for a longer proportion of their adulthood will continue. What is new is that offspring will also be moving into newly created half way houses- cross over provision funded in part by parents directly and in part by new commercial organisations.

The new young houses will offer an economically sheltered existence while allowing limited personal autonomy. Parents will use their financial input to control to some extent what their offspring are allowed to do. New living provision will continue to get smaller and smaller, forcing people to look to the public sphere for amenities that were previously considered to be private; things like storing stuff, having parties etc.

There will be a large regional variation in the quality and availability of housing; this will be promoted under the ethos of 'localism'. Housing will be used by Government as a bribe for key groups and to build a new constituency in the same way as education.

Title: 2023: HEALTH CARE.

Government provided health care defines the welfare state and is the big political prize for the new order because of the central importance it has for individuals and communities in society. It is the perfect tool for social coercion.

Title: 2023: Self diagnosis.

The key here for the elite is to redefine the idea of entitlement to health care in such a way as to prevent it becoming an openly political issue while at the same time enabling it to be used as a social commodity. This can be done by redefining the relationship between Elective and Necessary healthcare. Rather than have government sponsored agencies do this, which may prompt some kind of political backlash, it is better to persuade the public to do it for themselves.

This will be achieved by granting individual rebates on national insurance for lack of treatment.

Of course, like everything else special dispensations will be made for military reservists, volunteers etc. These changes in the provision of healthcare, housing and education all add up to a New state and a new relationship between the state and the public.

Title: 2023: THE NEW STATE: SELLING YOU GOVERNMENT.

By 2023 the political class no longer feels obligated even to pretend to provide the state funded amenities that populations in the post war populations expected. Housing will pass over to pension funds and individuals wealthy enough to invest.

Education that provides an employability advantage will increasingly be funded on an individual basis.

Health will become the responsibility of individuals.

Where the state has withdrawn a number of lucrative private solutions will be in place to cover the shortfall. As a result of this withdrawal by the state by the time our girl is twenty she can expect to be pinned down under a Pyramid of On-going

Debt Title: 2023: The New Pyramids.

The first tier of this debt will be derived from education; healthcare and housing that were previously supplied by the state but have now become the source of long term decision based debt. In the changed economy, these new expenses will take the place of commodities like cars, washing machines or home extensions as the central plank in the finances of individuals and households.

You can call them social commodities. They will form the basis for the new economy.

Social commodities will change the definition of social inclusion from owned rights: to education, to healthcare, and the right to housing, to contingent access rights. These are rights that are offered differently from citizen to citizen. The second tier of the pyramid will consist of: Transport, utilities and food. These will now become contingent access ownership or contingent ownership.

The key new concept here is: BUNDLING.

Bundling is a way of transforming hard assets that are bought and owned outright into access permissions that are leased and only owned contingently. For example, cars will no longer be traded as 'stand alone' commodities; The car itself will be part of a bundled group of accesses or services such as soft assets like insurance and maintenance. The purchase of many of these assets or services will be made compulsory by government.

The on going nature of these leased assets negates the concept of ownership as it has been commonly understood for two hundred years. Utilities such as communications and entertainment will be bundled in the same way as cars. Food will also increasingly be bundled with soft assets such as animal welfare, health properties and planned diets to tie consumers into long term deals. It will become very difficult to outright own in any meaningful sense the food you buy! Owned rights become contingent access rights. Ownership will become contingent ownership.

Changes in banking and finance that are being put into place right now will support this restructuring of owned commodities into access commodities, allowing big retail corporations to move into this area. Retail chains will increasingly take over domestic banking.

These services are not actually profitable and need cross subsidisation. This will be done by tying leased commodities to other financial arrangements such as loans and pensions.

Persuading you to enter into long complex on-going deals with banking retailers

will make it very difficult to disentangle your affairs from these combines. The third tier of the pyramid will be made up of what used to be called 'discretionary spending' that is spending on things like entertainment and fashion clothing etc.

This top layer of the economy will be the most radically transformed, at least on the surface. Because price will become less and less important as an indicator of volumes bought and sold. These products will have a fixed or falling price, but supply will become erratic. People will get used to certain things not being in the shops and then a limited supply appearing at a fixed price. When it's gone it's gone.

Title: BUT WHY WILL ALL THIS HAPPEN?

After listening to this description of a very altered world you might ask the question: But why do you think all this has to happen? There is going to be a fundamental change in the relationship between ordinary people and the financial and economic structure of the developed economies. This is because of the political effects of increasing disparities in income.

Remember, at the start of this film I said that hiding the expanding gulf between rich and poor will be the most important priority for the political system from now on. There is potential for massively destructive social consequences of the new economic realities the Germanic world finds itself in.

The past hundred years of capitalism required an army of academics and pundits to justify the massive gap in incomes that capitalism caused. The next hundred years will require an army of academics and pundits to hide these differences instead of justifying them.

If you only understand this difference alone, you will have understood one of the most important changes that has taken place in the political system for a century. The entire post WWII economy in the German dominated world was based upon weekly income. From the income tax that you have to pay, to your credit score, weekly income from wages represented individual wealth. This was what credit agreements, mortgage payments, car payments and the like were based on. This was how you understood how wealthy you were as an individual and how rich the community you lived in was.

But this state of affairs is rapidly changing. The majority of people in the German dominated world are simply not able to earn enough money weekly to keep the economy, as it is presently organised, going.

Remember my description of the world that our young person will be living in.

Every problem that our young person is facing now will be two or three times as bad by 2023! Accelerating collapse of earning power does not just affect the wage earners themselves- if general purchasing is permanently and irrevocably reduced, it affects the producers of goods and services - the whole system will collapse unless it is stabilised at a new level.

By 2013, in the Germanic world, the traditional way of organising corporations to generate profits will have completely run out of steam as a way of growing the economy. The traditional manufactured commodities that have provided the staples of employment and consumption of the post WW II in the west will just be too cheap in real terms to support a reasonable standard of living for the fewer and fewer people that are actually required to make them.

At the same time, raw materials and resources will become relatively much more expensive. Those who plan and control the future of our societies know they cannot do anything about this but they can control income and spending patterns. The most important priority for planners in the next thirty years is to minimise the amount of disposable income that any individual has.

Planners and controllers believe that disposable income is unpredictable income and unpredictable is bad! What do I mean by 'unpredictable income'? Planners don't like being unable to predict how much work you are prepared to do.

Ask yourself this question: What is the best amount for me as an individual to earn? This seems like a stupid question on the surface.

The simple answer would appear to be, 'Earn as much as possible!' But it is not as straightforward as that.

Outside of the very poor, people have a certain amount of discretion over how much they earn based on the amount of time they spend working. You can think of the amount of time you spend working to obtain the necessities you need as 'necessary labour' and the amount of time you choose to spend on top of this to get things you want but do not need as 'disposable labour'.

The story you are taught from birth has it that you end up being richer or poorer based on the individual decision of how much you decide to work. The more you work, the richer you get. But most people in the west do not choose to, or would not accept being forced to work for say, sixteen hours a day.

But by 2013, when it becomes apparent that the majority of ordinary people are not able to pay even for essentials unless they do work for sixteen hours a day, the elite will have a political problem. How can you get everybody to work all the time and not revolt? The political solution is to fundamentally change the way that people understand the relationship between work and wealth so that the wealth you end up with is no longer based on how hard you worked and what you earned every week but on your long term planning and most importantly your enthusiasm for, and success at, gambling. This will be touted on so called 'left' and 'right' as a 'Democratic' free for all. You can think of this as a quantum economics.

Title: Quantum Economics.

Think of the new German economic system of earning and saving as a kind of sausage machine. You put work in one end and wealth comes out the other end. But this sausage machine is sealed. You are not able to open it up to see what is going on inside. So you can never just take a peek and see how close your sausages are to being finished. And you can't stop the sausage making process half way through. You just have to wait until the machine stops working to find out what kind of sausage you have got at the end. The only thing you can do is to keep putting stuff in the front end of the machine in the hope something good will come out of it.

By 2023, work will be like this. There will be no way of knowing if you have done enough work from day to day or week to week to guarantee a decent standard of living for your family in the future. Your only option will be to do as much work as you can possibly manage and then hope it will be enough.

This is a quantum economy; one in which the outcome can be known but the way you get there is hidden. Most people would not willingly agree to this new hidden quantum economy if they had a choice, by which I mean if they had an alternative. So the designers of this new quantum economy need to make sure there is no alternative to the new lottery economy, which really means no alternative way to store wealth. The only alternative to a private means of storing wealth is a collective means of storing wealth. The only collective means of storing wealth available at this time is state issued money.

In 2023, to guarantee that people will have to take part in the quantum economy, the state will have stopped defending state money from the free market. This undefended state money that has had its wealth storing function stripped away from it, is denuded money. In 2023 the system as a whole will be the equivalent of the workforce being paid in lottery tickets. How valuable your wages are to you will depend upon the financial decisions you made before receiving your wages.

To illustrate this idea, consider that ten litres of milk are worth more to a person with a refrigerator than to someone who has no means of storing them and must consume them immediately. You will no longer be able to deposit your state issued money in a bank and receive interest on it. More importantly, no one will. There will no longer be such a thing as a simple interest bearing deposit account in banking. This means there will no longer be a bench mark from which to judge competing investment opportunities. There will no longer be a banking equivalent of a repayment mortgage, every account will be the equivalent of an endowment mortgage. You will have the pick of the seats on the roller coaster and stick with it.

By 2023 in the Germanic world, it will no longer be possible to run the economy on the basis of manufacturing commodities and services and paying the people who produce them wages on a monthly basis. The economic system will have to be fundamentally changed. This change will mean some people will lose out more than others. The political objective of planners today is to make sure that those people who lose out are not able to challenge the changes that will be put in place. To do this, planners are changing the way we see the relationship between work and wealth. The main way of achieving this is to prevent the state from producing wealth storing money and instead allow private corporations to do it. This is the Democratisation of money.

From now on instead of people thinking that wealth is accumulated as a result of how much work they do, they will be trained to think that wealth is a result of the gambles they take. You and they will be forced to gamble with wages, savings and retirement. By 2023, you and your children will have no alternative but to play the Democratised money game.

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#  DEMOCRACY BLOGS.

# November 3, 2012

# THE DEMOCRACY BRAND.

# How to Predict Where and When Democracy Will Turn Up And When It will Disappear Again.

Historically, democracy seems to pop up at certain times and in certain places. In Europe, democracy appeared in Greece and Rome only to disappear for over a millennium. If democracy is self evidently a superior form of government, you would assume that once the ancients became aware of its existence they would hang on to it from then on but this is clearly not the case.

The truth is that the reason democracy appears and disappears again has got nothing to do with any supposed moral or organisational superiority it has, but rather who it benefits. If we understand who democracy benefits, we will better understand what it actually is and then it will be relatively simple to predict where and when it will appear and when it will disappear again! Democracy needs two conditions as a pre-requisite of its appearance:

1. A 'free' resource that can be exploited by a self defined group. (A 'free' resource is one which has no previous claim on it).

2. The technical means to systematically and continually exploit that resource. In other words, democracy is the means by which a self organised gang organises to hijack control of something that is a 'free' resource. There have been four major 'free' resources that have been hijacked in this way.

People hijacking.

Land Hijacking.

Knowledge Hijacking.

Money Hijacking.

People Hijacking.

This began in democratic Greece: A group of mediterranean bandits hijack control of the surrounding people, who had no established previous 'owner'. The technical advance that allowed this systematic hijacking to take place was the creation of military social structures (including cults and superstitions) that came to be known as 'classical' Greek Democracy. Greek democracy ended the moment hijacked peoples (most notably the forerunners of the Roman Empire) learned to how to fight back. The Romans went on to establish Roman democracy which lasted precisely as long as it took for their slaves (under Spartacus), to learn to fight back.

Land. Protestant Land Hi-Jack in North West Europe:

A group of Germans developed the social means to hi- jack control of what came to be known as 'national' territories, which required being able to systematically force people off the land and into urban areas. The 'industrial revolution' that resulted from this was an afterthought! This process reached its apotheosis in the Saxon slavery/land grab which gave birth to American democracy. This is what has been understood as classic capitalist democracy. The moment the newly created urban dwellers began to assert themselves, Protestant democracy began to end. Saxon/Protestant democracy will collapse completely in conflicts between the cities and the Saxon/Protestant democratic power structure.

Knowledge.

A group of Germans hijack control of the systematic recording of evidence and derived knowledge. The technical advance of the printing press was central to this. This hijacking has come to be known as the 'Enlightenment'. The technical method of control and ownership of knowledge is now called the 'scientific method'. Science is the democratic validation of knowledge which gives power to self defined scientists. Democratic knowledge or science will end when non scientists learn how to fight back. The struggle over Iranian nuclear power is an example of this. Sooner or later we will see the development of suitcase dirty nuclear bombs or genetically targeted biological weapons. When this happens a scientific dictatorship will be declared in the interests of public security and knowledge democracy, or science, will have ended.

Money.

A group of Germans hijack control of the issuance of currency. The technical advance of electronic currency credit is central to this. The organisational structure that results from this will achieve 'hyper exploitation' that has never been seen in human society before. Democratisation of Money will end when non Germanic peoples end German domination over the planet and institute a new post German economic and moral system.

# November 9, 2012 The Democracy Brand:2

One major area of democracy I forgot to include is free speech. From the 1800's onwards, a self defined group (journalists/the media). identified a 'free' resource; the collective opinions of society, and conspired together as a democratic group to own and exploit it. The technology that enabled this was, of course, the printing press.

All the protagonists within the media regarded their right to colonise and compete within the sphere of public opinion as equal and democratic. They invented a complete series of ethics and professional rules which codified this collective right to plunder public opinion. So far, so good.

Then the internet happened. The internet is not as many would have you believe, an extension or a development of an existing free speech system. It is the antithesis of this system. It is the equivalent of the Romans learning to fight back against the Greeks. It is the equivalent of Spartacus learning how to fight back against Rome.

It means that the free resource of public opinion is now contested, no longer free. It follows from my argument that free speech democracy will be coming to a close.

# November 10, 2012

# THE DEMOCRACY BRAND: 3 AMERICA: Land, Slavery and Democracy.

Legendary Amerikaner film director Herr Spielberg has just finished a film on the life of President Lincoln. No doubt this will be an opportunity to regurgitate the Hollywood spiel about democracy and the 'Land of the Free'.

But the American Civil War can be better used as an illuminating example of the relationship between a 'free' resource, the means to exploit it and democracy. Democracy can most accurately be described as a self constituted gang that comes together for the exploitation of a 'free' resource that has no 'owner' or protector.

The moment that any resource (land, people, knowledge, free speech or money) incurs a price; which is to say the moment that 'free' access to it becomes contested, the particular episode of democracy it gave rise to, ends.

Post-colonial American democracy was constituted for the wholesale theft of the American continent. At the time of unhindered territorial expansion, all Saxon invaders enjoyed a democracy against the interests and wishes of the Native Americans. This state of affairs continued more or less undisturbed until a limit began to emerge on both the 'free' resource of land and of secondary importance, the 'free' resource of slaves.

At the time that a Civil War was becoming inevitable in America, land democracy questions had been settled in the North. Land was divided among an Anglo Saxon elite and inferiors and immigrants were forced into rapidly expanding conurbations.

The nature of these conurbations and the political, social and physical deprivations forced on their inhabitants meant that anyone, immigrant or other, who wanted a piece of America, was forced to look to the newly opening western territories.

By contrast, the South at this time had established their local branch of Saxon democracy with little or no urban centres, using slave power to run large plantations. These slave plantations were relatively highly efficient compared to the small holdings that prevailed elsewhere.

Slave owing states enjoyed a relatively powerful position within the freely associating American democracy. They wanted to expand and reproduce this relative strength in the newly opened up territories of the west. Slave ownership meant that Southern landowners enjoyed a massive advantage in terms of capital for land purchase and manpower to exploit the land in comparison with relatively small scale individual northern and immigrant farmers.

If things were allowed to develop along the political lines established after independence, the 'Southern Gang' could gain control of all the new western territories and thus the entirety of the American system. This directly conflicted with the interests of their Northern partners in crime.

The moment that this contest of interests emerged, Western territories could no longer be considered 'free'. If southern states gained then it was to the detriment of the northern model and visa versa.

The Northern Gang were against slavery because of the potential commercial advantage it offered to the South in the Western territory grab. This is the crucial point: The commercial and industrial superiority that the creation of cities had conferred on the Northern Gang was considered irrelevant by elites in both North and South! They were only concerned with the commercial advantages that slave owning had conferred on the South.

This is a precise insight into the American Saxon mind at this historical juncture. This conflict of interest resulted in the southern secession and the attempt by the South to leave their voluntary association with the North.

The North forcibly disagreed and that was the de facto end of a free association of equals constituting Saxon democracy on the American continent. Terms would be dictated by the winner of the forthcoming violent conflict;

In effect, a northern dictatorship. The irony is that it was productive power of the industrialised cities of the North that proved decisive in the first modern industrialised war. This productive power was not initially factored into political or military calculations by the elites of the North or South.

The South was considered stronger in agrarian commercial terms and this was all that mattered to North and South. It was considerations of land acquisition both personally and nationally that decided the collapse of American democracy. Slavery was only ever a secondary contributing factor in the minds of both North and South.

The hijacking and exploitation of humans was fundamental to the development and fall of Greek and Roman democracy. It was only ever of secondary importance to the rising and falling of American democracy.

In propaganda terms, the slavery question is used to define the Northern Dictatorship as a benevolent necessity for the advancement of America. Nevertheless the central fact remains: Democracy came into existence for the exploitation of a free resource. It ended when that resource became contested.

# 30 November 2012

# THE DEMOCRACY BRAND 4: NEWS CORPSE David Cameron accused of dismissing Leveson report too quickly | Media | guardian.co.uk.

The Levenson Enquiry is the prelude to the end of press democracy. There is no point complaining about it and definitely no point in trying to stop it happening. A new post democratic hierarchy is being introduced in anticipation of the emerging internet press reaching full maturity, When that day comes the fully formed Internet press will have a ready made straitjacket waiting for it.

We say that the press in this country is democratic, but what exactly does this mean? Is this only rhetoric; as in: 'we have a democratic press here in the west which makes us better than all those foreigners!'? Contrary to a lot of 'radical' hot air, the western press is genuinely democratic, but we have to define accurately what this democracy means.

It is meaningless to describe any entity, from a nation to a football club, as being 'democratic' in the abstract. This reduces our understanding of democracy to nothing more than an exercise in brand marketing. There is no such thing as absolute democracy that can be attained.

An entity can only be defined as democratic in terms of something else. i.e. this country is more or less democratic than that country. But this ends up as an exercise in relativism which must inevitably break down into nothing more than rhetoric.

The only way that the relative democracy of any given entity can be defined in a meaningful way is against the resource over which it has control. The members of a democracy are equal precisely to the extent and nature that they are equal in their opportunities to exploit and control that resource.

Greek citizens enjoyed 'people democracy' as opposed to the slaves they owned. Their democratic rights were defined precisely by the rights their slaves did not have. Anglo Saxon American 'Land democracy' was enjoyed by Anglo Saxons in contrast to the Native Americans. They enjoyed land rights defined in precise opposition to the land rights the Natives did not have.

Now that I have outlined a general argument with regards to what democracy actually is, I will move to the specific example of press democracy.

Up until now every component part of the press in England was equal and it is this sense that they are 'democratic'. The Redtops and the Broadsheets are generally regarded as having the same rights and obligations in society; they are in this sense, equal.

But as I explained above these rights and obligations can only be defined in relation to a resource. In the case of the press, the resource is public opinion. in the same way that the resource of America's land can be sub-divided into its constituent parts of arable land; forest; water etc. so the resource of public opinion can be broken down further into constituent parts.

One of these component parts is public reputation, as defined by Libel Laws here in England. Libel Law specifically states that the more important you are the more reputation you have and therefore the more you have to lose if that reputation is impugned- ordinary people have no reputation and therefore no basis for a civil remedy in law!

In practice this is shown in the fact that all libel cases have to be heard in the High Court in London at a prohibitively expensive cost which debars most people from taking part. And of course there has never been any Legal Aid for libel because the good name of the kind of people who rely on legal aid does not matter!!! But do not let this distract you from the main point: Even if you are some pleb who becomes rich enough to pursue a private prosecution using the libel laws (say you win the lottery or 'American Idol'), the damages you receive will be dependent upon your reputation and the damage it received.

The less reputation you had at the beginning, the less damage could have been done to it. A Rich Pleb receives less of a payout than rich people of high reputation, even if the offence against them is the same.

Here then is one part of the free resource that is the basis for press democracy: the reputation of 'ordinary' people which is free to be exploited by all of the press democratically. This worked reasonably well for a couple of hundred years.

Of course in a modern society, this state of affairs could not be expected to continue. A number of high profile controversies have emerged that have ended the uncontested or free nature of the public reputation of ordinary people.

The Hillsborough Disaster.

The Case of Madeleine McCann.

The Milly Dowler Case.

These three cases have much in common. They concern the reputations of 'ordinary' people. The reputations of these people were impugned by the press. The ordinary people fought back politically and through the media. They are all directly cited as contributing to the state of affairs that led to the Levenson Enquiry.

Since ordinary people are no longer willing to accept that their collective individual reputations are a free resource to be exploited by the press to sell the maximum number of papers they can, the democratic press is being cut off from its free unprotected resource. In order to forestall the day, the press attempted to voluntarily give up its free for all ethos and replace it with self regulation.

This is uncannily like those Roman senators who voluntarily acclaimed Caesar as emperor hoping that it was just a temporary measure which would be overturned by the returning Republic. See how that worked out.... And now we see the advent of enforced regulation. What exactly will this mean?

There will be a hierarchy with the Broadsheets at the top, the Redtops below them and at the bottom the internet mob. This state sponsored hierarchy will control access to the public reputation of the people. Broadsheets will given licence to attack certain reputations, responsibly and in the public interest of course.

But the redtops and the internet mob will be forbidden from doing this for the most part. The 'free for all' attitude to abusing the public reputation will have gone. It will have been replaced with a self enforcing regulatory system that is backed up by the state. And press democracy, press freedom as it has been constituted for two hundred years will be over.

The interesting question that now arises is: Should we give a damn?

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#  CONCLUSION

### 'Heaven and Earth are heartless; treating creatures like straw dogs'.

Tao Te Ching.

This book started with a question: 'What do you have to say about the Credit Crunch that is so different from everyone else?'

I answered with my description of Crackernomics and the Democratisation of money - a permanent and fundamental change in the economic and political relationship between the citizen and state issued currency in the Germanic empire. Contrary to Crackernomics I argue that this change is directed by the political class, not by bankers who are simply stooges of the political class.

The 'democratisation' of money and the Credit Crunch it created is a political project, not an economic 'accident'. I will bring Crackernomics to a close with another question: What, if anything, could and should be done about the Democratisation of money?

First, I should make clear why Crackernomics has nothing to offer by way of resistance. Money is a group of functions arrived at by public convention but guaranteed by the state. When these functions are violated by the state people seek alternatives to conventional ways of exercising money functions like saving and exchanging by:- Using alternative currencies. Barter. Using commodities as a store of wealth.

These methods were adopted in Argentina as the monetary system was repeatedly violated by the state at the turn of the century. The public used the North American dollar as an alternative currency, in some areas they even issued local currencies. Commodities were bartered and used to store wealth. These alternative ways of saving and exchanging have all been touted by Crackernomics Insurgents as possible routes for economic 'resistance' against the Corporates.

At best these alternatives to denuded state currency can be said to have had a very limited success in defending the living standards of ordinary people. They certainly had no long term effect in modifying the economic and political system; even now Argentina is returning to crisis.

But more importantly, in the monetary environment created by the Democratisation of money, these 'traditional' responses are worse than useless, as the following will show.

Alternative currencies.

Ordinary people cannot get access to alternative currency on a scale that would make any difference either to their personal well being or the economy as a whole. In Europe, national currencies have physically been removed and replaced with the Euro, removing the possibility that the public could 'play' one currency against the other. More pernicious than this, the alternative currency mirage hides the truth that all state issued currencies are being debased.

Barter.

There is evidence of the barter of goods and services appearing in Greece and across southern Europe. But barter effectively 'voluntarily' excludes users from the national economy since it excludes them from money. Since the purpose of Monetarism is to achieve exactly this aim, it is hard to see how this could form the basis for resistance.

Commodities as a store of wealth

Commodities are already beginning to be used as the basis for emerging Democratised money. In the Democratised money world ordinary citizens will be competing with corporate giants for access to and opportunities for exploiting commodities. This may offer some small scale possibilities for a few individuals, but the mass of people could never hope to engage in this kind of activity.

In the past traditional responses like those above worked to some extent because they put political pressure on the state to guard conventional money functions. They did this by threatening to split sections of the population from the mainstream economy; something national elites did not want. But things have changed in this key respect. Elites now want sections of the public to split away from the mainstream economy. The very purpose of the Democratisation of money is to promote a non collective response to the crisis. Since traditional responses are all essentially individual responses, they play into the hands of Democratisation. You can call this 'Titanic syndrome'.

# The Titanic Syndrome

# Final Scene: On the main deck of the Titanic

### (It is night and the last few lights on the deck are going out one by one. In the background the screams of increasingly desperate passengers can be heard)

First Officer: Head for the lifeboats man, there's no time to lose!

Bewildered Pleb: But there aren't enough lifeboats, Guv'nor

First Officer: Like I said; head for the lifeboats!

Insurgent Crackernomics advocates responses that are essentially piecemeal and individualistic in nature. They are like the lifeboats on the Titanic that offered salvation to the few by dooming the majority to a dark, watery grave.

Even more importantly, Crackernomics, like 'classic' economic liberalism refers to an idealised conception of economy. Money is not specifically gold, paper, sea shells or anything else. Wherever and whenever it is examined, money is always found to be a contemporaneous social convention.

Now Money functions as:

a general method of exchange,

a store of wealth,

a call on the productive power of the economy,

a signifier of value and,

a method of realising contracts.

By means of a combination of state issued money and the law, the modern state effectively underwrites every private and public transaction. The state guarantees access to the economy through paper currency- a money note is a state issued certificate of access.

But historically money functions were agreed in common, not implemented by statute. What money is used for was decided by people themselves through trade etc. The common benefits of money have come to be guaranteed by the state but they were not defined or created by the state.

And now these conventions are being systematically violated by states in the Germanic world by:

Prohibiting cash transactions above a certain amount,

Finding reasons for outlawing payment in cash of any amount for certain types of transaction.

Removing anonymity from cash transactions.

Re ordering International relations on an unprecedented scale, in particular exchange and trade relations.

This last is not as Crackernomicists would have it, evidence of an international currency war. It constitutes a war on all state issued currency as a whole by the Germanic political class, raising questions about the nation state as it now stands and its relationship to money.

## CHANGES IN THE STATE

The relationship between the state and money has changed because the state has changed. The state is no longer the vehicle of policy- it is the end purpose of policy. Tony Blair and Bill Clinton arrived in Saxon/Germanic politics in the 1980's.

Politicians like these are 'proto bureaucrats'- the forerunners to 'technocrat' governments recently appearing in Southern Europe. Political democracy as it has been understood in the post Second Germanic War period is already no longer an organisational principle in Europe as a whole.

Traditional policy as we have understood it no longer exists. The objective of western electoral politics has now become to prevent anyone outside of a small elite group gaining any access to the state.

As a consequence of this the role of the state in guaranteeing the conventional functions of money is being changed. Even the possibility of some democratic control of the economy through fiscal policy is no longer acceptable to the elite. At the heart of this lies the will and the means to control society.

In Germanic societies the political system rested on an economic settlement, one that is no longer valid. As a consequence of this, it is necessary for a new political dispensation. But what is the nature of this new dispensation to be?

New social conventions are emerging emphasising social obligation rather than individual freedom. Social identity is being replaced by corporate identity,(see 2023).

So how is this different from '1984', or the corporate dystopia depicted in films like 'Rollerball?' Dystopias like '1984' and 'Rollerball' were political satire based on the Democracy brand. This is more than that. This is Saxon capitalist 'democratic' politics evaporating before our eyes; thrown on the altar of democratised money.

The money conventions that predate capitalism were necessary for capitalism to come about. They were the means by which Burghers all over Northern Western Europe developed economic and then political power. But now these same conventions are barriers to the continued existence of the system they helped create.

We are watching four hundred years of accumulated money conventions thrown on the daily bonfire to keep the system, nominally capitalism, alive. What can be done about it?

## Straw Dogs

In order to develop a coherent response in direct opposition to Crackernomics we must accept that the relationship between state and individual in the Germanic world is undergoing irreversible change. Monetarists, (and we are all Monetarists now), have conceded that Karl Marx was right that the state is an all encompassing force in capitalist society. As a consequence elites are no longer willing to consider that anyone other than themselves can be allowed any access to the machinery of the state at all.

This is what poor old Marx did not count on- that Marxism would become the exclusive preserve of the elite.

Marx failed to understand that those with access to the best education (the wealthy) were always bound to be quicker than the average numb nuts citizen to figure out that he was right! The saddest thing is that he did not realise that those who accepted the empirical truth of his analysis would use it so devastatingly and with such contempt for his morality.

This change in the nature of the state implies a change in the relationship between the citizen and money, (which is the imprimatur of the state). It will prove impossible to defend state issued currency as it has existed by convention until now. Monetarists will relentlessly attack the conventions that underpin it until they are destroyed. In the next twenty years democratic money will subsume democratic politics and of course this will be done in the name of democracy itself.

This is perhaps the ultimate example of a straw dog.

For the first time in three hundred years we will be forced to uncover the true nature of democracy itself and to decide which is more important:

democracy or the people?

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#  CRACKERNOMICS IN A PAGE.

In the 1970's MILTON FRIEDMAN conceded a central argument to MARXISM; that nation states would ultimately subsume their respective capitalist economies; a process known as CREEPING SOCIALISM.

When fully developed, CREEPING SOCIALISM means that control of the state is control of the economy.

To the extent that any state is democratic it would be theoretically possible to legally gain control of that state and therefore the economy.

This would be a novel development in capitalism.

In order to prevent this possibility FRIEDMAN devised MONETARISM.

MONETARISM seeks to prevent anyone outside of a self defined elite gaining control of the state through legal political methods.

It does this in order to make it effectively impossible to legally replace capitalism with an alternative and to make it effectively impossible to legally implement policies which run contrary to the core interests of a self defined elite.

Under MONETARISM control of the state is no longer the means to achieve political policy, it is the end objective of political policy.

All mainstream Germanic political parties are MONETARIST actors and implement MONETARIST policy.

The outcome of MONETARIST political and economic policy is the DEMOCRATISATION OF MONEY.

The DEMOCRATISATION OF MONEY is the process by which a self defined elite gains effective control of specific MONEY FUNCTIONS

MONEY FUNCTIONS are social/economic benefits exercised through the ownership and exchange of money and derived activities.

Until now all MONEY FUNCTIONS have been embodied in STATE ISSUED CURRENCY.

Through the DEMOCRATISATION OF MONEY specific MONEY FUNCTIONS are stripped away from STATE ISSUED CURRENCY and transferred to NON GOVERNMENTAL CURRENCY issued by private organisations.

This is a political project.

THE ISSUING OF MONEY by private organisations allows these organisations to control MONEY FUNCTIONS for their own benefit in a way not possible before the DEMOCRATISATION OF MONEY.

MONETARISM and the DEMOCRATISATION OF MONEY led to the CREDIT CRUNCH.

MONETARISM makes it effectively impossible to discuss the CREDIT CRUNCH in terms of political or even traditional economy,(see above).

ECONOMICS has been replaced by CRACKERNOMICS.

CRACKERNOMICS has two wings: INSURGENTS and CORPORATES.

INSURGENTS and CORPORATES do not equate to LEFT and RIGHT or KEYNSIANISM and LIBERAL economics.

The DEMOCRATISATION OF MONEY is a permanent legal change in the relationship between citizens and the state expressed through money and CRACKERNOMICS is the framework under which it happens.

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