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The New Normal

There seem to be to be two broad narratives of our present situation. The dominant, official narrative, is that there was a technical crisis of money flow, precipitated by a bolus of bad debts which then caused a collapse of confidence in the value of several large asset classes. What was required was to show that such assets would always retain their ability to find a buyer and thus their value, even if the buyer had to be, in the immediate term, the public purse. The public purse was duly opened to steady nerves and sales, and massive purchases of whatever could not find any other buyer were duly made. The plan was and is that the purchased assets would be sold by our governments, back to the market, once other buyers returned.

The dissident narrative is that this was never a technical crisis of money flow – liquidity – but one of insolvency due to the troubled asset classes being, in fact, vastly over valued. The collapse in value and the lack of buyers was not a temporary lack of confidence in an otherwise sound financial system, but a rational shunning of paper assets whose previous value was almost entirely due to the press of gullible buyers who were keen to partake in the buy, flip and buy some more ponzi scheme of speculation.

As long as the paper value was never questioned by all the players then no one feared reality intruding. Even those holding the worthless paper were happy as long as everybody else was signed up to the same grand fiction. Banks held the paper assets and used them as cheap ‘capital assets’ just so long as the lies they were based on remained wholly accepted. But of course as soon as someone defected from the grand lie, then the rational thing for everyone to do was to defect as quickly as possible. This is what every insider tried to do as quickly as they could which is why the collapse was as fast as it was and was led by the banks themselves.

The end game of such a scenario would have been the ruination of those left holding the worthless paper. And if those holding the paper had been you and me then this is what Wall Street and The City of London would have been happy to see happen. But in this case the collapse was so shockingly rapid and, in the preceding euphoria of the bubble, so much of the paper had been retained by the banks and super-wealthy that this was NOT going to be permitted to happen. Instead actions were taken to ensure that the worthless paper assets were transferred to the public purse. If it looked like they were going to recover their value the banks would re-purchase them in time to make a profit, but if not then, the ‘assets’ would be left where the loss would fall on people who were more accustomed to being poor and whose prior poverty has often been seen by the wealthy as an indication that they deserved to be poor.

The official narrative today is that the plan of recovery is working. The narrative focuses on the rise of the stock markets to almost pre-crash heights. The failure of housing or commercial property markets to recover and the fact that unemployment is hideously high is simply no longer part of the recovery narrative. These things have been dropped. What has been added has been the ‘shocking’ level of public, national debt. In the new narrative the cause of the ballooning of public debt has been steered away from facts about the cost of the bail outs or how the disintegration of the speculative bubble caused a subsequent collapse of real economic activity. The new story is that the debts we have now are nothing to do with the banks and their temporary difficulties. They are due to a deeper incontinence in public spending.

The narrative is being re-written so that the ‘debt crisis’ is seen as something that is under control and being solved, whereas the present and pressing problem in need of controlling is the cost of public services and the unreasonable expectations that underlie them. Public expectation of a free lunch for their children at school or a pension for their life’s work or a health service paid for through taxes – these socialist weapons of fiscal destruction are to blame for the vast public debt.  That is the narrative we are being fed. The bankers are being air brushed out of the story and certainly any mention of blame being attached to them is being described as backward looking if not downright suspect and dangerous. Not far, I suspect, from being vaguely alluded to as financial terrorism or a ‘financial hate crime’.

What we are left with in the official narrative is that our betters have one crisis under control – the cash flow/liquidity crisis and are now taking heroic steps to deal with the recently uncovered, deeper, systemic crisis – the ‘true’ crisis – of out-of-control public spending which is responsible for sovereign debt levels that are injurious to the efficient workings of the markets. Markets whose fearless leaders are trying, despite pubic profligacy and obstinate stupidity, to help us out of debt and back on to the true path of prosperity via necessary austerity and more ‘realisitic’ expectations of what we are worth and what we deserve.

The question for me is if the dissident narrative can hold its ground and find something more say. Or have we been been swept aside?

Certainly we are outgunned and alone. The press are supine collaborators, the rule of law has been bought and whored, and academia is either captured by the dominant ideology and too dimwitted to escape  or just too concerned with grovelling for tenure and a city sinecure.

The dissident narrative I advance says that what we are told are ‘temporary and extraordinary measures’ are nothing of the sort. The measures taken to ‘deal’ with the ‘crisis’ have in fact created, whether by accident design,  a new and very much more reliable system for ensuring that the super rich stay that way. The new system horrifies me because it has put finance above democracy, markets over governments. But it also appals free-marketeers, because it sets up an untouchable aristocracy within the markets who are not allowed to lose and who can therefore take what they want, when they want, from whomever they want and the law will not touch them. Neither the law of the land nor the law of the markets. Free marketeers and those on the left like me find ourselves in the unlikely position of sharing an abhorrence for what a global super elite are doing.

What we have in place now is a system of permanent and institutionalized acceptance that the largest accumulations of wealth and those who own, manage and serve them can never be imperilled or threatened either by the democratic rule of law nor even the workings of the markets themselves. Both perils have been removed for the super rich and their banks because it is now established that the purpose of government is to make sure the system and the hierarchy of wealth and power at its peak, remains untouchable and unchangeable.

With this accepted, the rules of sovereign democratic government and global finance have mutated beyond recognition. Today when banks need more of their assets purchased by the public purse in order to relieve them of possible losses, the public purse is opened without discussion.  What this means is that you and I are NO LONGER simply buying up, as a temporary, emergency measure, mistakes made in the bubble of three years ago. We are there to buy up the results of any greedy speculations made in the last two years.  Government purchases and the QE which fund them are no longer part of dealing with any ‘crisis’ at all. They are now part of how the banks do business. They are the new normal.

This isn’t a crisis. This is the new business of profit without risk.  It isn’t even really a ‘bail out’. The new normal is a no risk machine for expropriating public wealth. The banks can now buy what ever they want, the higher the risk the better, because the new system guarantees that there is no risk for them. The banks can speculate on sovereign debt, currencies and commodities knowing that if they are in the elite, they will be bailed out. Not in the spectacularly embarrassing fashion of 07-08 but in the low key ways dreamt up in the last two years.  A plethora of ‘exceptional’ funding measures, bond purchases and  abrogations of the rule of law in favour of bank profit, which are all, in fact, bank bail outs at public expense.

Crisis? What crisis?

The only crisis for the elite and their banks will be if the next round of QE in America and of ECB bail outs for German and French Banks via Greece, Portugal and Ireland somehow do not happen. If there is a minor miracle and our leaders remember we exist – THEN there will be a crisis for the banks and the financial elite and some small hope for us.


62 Responses to The New Normal

  1. Mark Wadsworth May 15, 2011 at 10:57 pm #

    Well yes, agreed. Land Value Tax and a bank asset tax will sort them out, the rest is down to debt for equity swaps and decent bookkeeping.

  2. Golem XIV - Thoughts May 16, 2011 at 6:59 am #


    I agree with you that the most appaling thing about what is being done to us, is that workable, real solutions, measures which would properly regulate the banks and make them serve the greater good are at our hands and yet are studiously ignored.

    The measures you advocate would address so many short-comings of our present system as would other equally straight forward and achievable options. We do have to ask why not one of them is being discussed let alone proposed and put in to action.

    • camiranga February 13, 2012 at 7:40 pm #

      @golem xiv..on the new normal…agree with most of it…although I think your view there on the reason of the bankrupcy being only the too big government progs. falls short…a small look towards the defence budget tells me that there you ll find most of the problems….besides there are some market related technicalities that have to go too…whats your view on that digital speed trading thing going 134 times per second? …greetings

  3. Pat Flannery May 16, 2011 at 8:11 am #

    Wow! Never was somebody with your communication skills needed more. You are the new Occam bisecting the new normal.

    Now, how do we set about freeing ourselves from the new tyranny you so deftly expose? Is our bondage less real than the serfs of old?

    If this financial crisis is fundamentally about democracy as you say, should we not be forming alliances with the Middle East democracy rebels?

    If these apparently local financial wars l in the EU and in the US are really part of a world war between an emerging global elite and the rest of us, will we not need to organize a global response? We now have the means – the Internet.

    Maybe democracy will win out in the end. Maybe this is its chance to prove itself. Maybe the current power grab by the world markets will turn out to be just another market bubble showing the fundamental weakness of all narrowly based elitist institutions.

    But we will all have to put our heads together. Hopefully that is what is happening right here on your blog.

    In any case thanks for the huge mental effort you are putting in Golam. You are indeed a man of your time. I look forward to the new crop of responses this posting will bring.

  4. gyg3s May 16, 2011 at 8:29 am #

    "the rule of law has been bought and whored,"

    I take issue with the above sweeping statement. The rule of law hasn't been bought, instead it is predicated upon laws of exploitation brought by invaders. In support of this contention I give two pieces of evidence. Firstly, fiat currency comes from Common Law where cases such as Tresedor Griffin are traced back to 'the case of mixed money 1601' from Davies's Law reports. This case derives its ratio decedendi from Roman Law, that is, imperialist invaders. Hence, the same mechanism of exploitation and wealth transfer is still used, as was used by the Roman invaders. Secondly, our land law although based upon the Property Act 1925 etc is still based upon laws brought by the Normans; again a mechanism of exploitation.

    Hence, the law hasn't been bought, it is just applying the thinking of generations of invaders.

  5. Nicholas Shaxson May 16, 2011 at 8:44 am #

    The dissident narrative I think is shared quite widely, even if it's only gut-level. Here is one that I was just reading a few minutes before turning to this . . . http://www.creditwritedowns.com/2011/05/the-myth-that-the-banks-are-solvent.html

  6. Golem XIV - Thoughts May 16, 2011 at 9:12 am #


    I take your point entirely. Perhaps I should have more properly said the ideals and philospohical purpose of the law has been bought and whored?


    I hope you are right. Thank you for the link. I will read it this afternoon. I hope to have a post centering on your book and our long talk written and posted soon.


    Thank you. I am of your mind that we must somehow reach out across linguistic barriers and make contact with those in North Africa and the Middle East who are striving for what we are letting slip away. To see the global nature of what is being done instead of limiting ourselves to what is happening to us in our separate countries, we would all be stronger and all benefit. It is without doubt a global fight and one in which we all need allies.

  7. thrawn pop May 16, 2011 at 9:27 am #

    Good post Golem.

    Do you have any explanation why this narrative isn't being given more prominence in say, the Guardian?
    It's a serious question. I wouldn't like to venture into conspiracy theories, so am left with the possible responses :
    -most economics editors think you are wrong
    -most economics editors have not thought about all this yet

    Do you have any evidence of either? What happens when you talk about this to journos? I'd love to know.

  8. myopia May 16, 2011 at 11:12 am #

    Clearly of the the two narratives you highlight, liquidity crisis versus
    solvency crisis, the establishment and main stream media have as a whole
    pushed the former.

    In the first instance I find this understandable. It's the narrative that
    in the short term is the least likely to force hard choices. It's the
    one with the "easiest" solutions – bank bailouts followed by easy money.

    The fact that this solution just happens to preserve the status quo of
    both the financial "elite" and the corrupt corpacracy we'd become is
    obviously only partly a coincidence.

    The problem of course is that the liquidity crisis narrative is just an
    elaborate facade. True one that is constructed with all the might and
    resources the politico financial class can muster – but a facade all
    the same.

    Unfortunately behind this facade lie massively inflated national debts,
    banks worldwide allowed to continue the non mark to market accounting
    fantasy that they're solvent, and economies forced into "austerity"
    based contraction to offset the failure to recognise the fundamental
    reality that debts that can't be paid back won't be paid back.

    Now although I do share your frustration with the credulity, laziness and
    seemingly conspiritorial nature of the main stream press in generally
    playing along with this establishment narrative, it's my view that the
    underlying reality – solvency – is just too big to keep hidden.

    So although at present we're in limbo – occasionally getting a glimpse
    of reality as cracks in the facade appear and are then quickly papered
    over – I don't see this lasting.

    And to be completely honest I'm not sure I look forward to that because
    I don't think it's going to be pretty for anyone. I'm still trying to
    distill my thoughts on that. It's probably just me but I find it too
    easy to get into a pessimistic rut when thinking these things through.

  9. Ben Gabel May 16, 2011 at 12:30 pm #

    thanks for another excellent post. You just have to keep repeating this in the hope that eventually the message gets out.

    ps: para 3 EDIT: sued -> used

  10. bill May 16, 2011 at 1:55 pm #

    There was a quite excellent debate with 700 comments on this article in the Telegraph. http://www.telegraph.co.uk/finance/economics/8511649/Eurozones-growth-surprises-as-UK-lags-behind.html#comment-203334299

    The problem the Guardian or any other media outlet has they are either owned by or dependant on the revenue stream from the banks.

    The Telegraphs favourite, of course, is that ir was that arch socialist Gordon Brown who not only spent all our money, he caused the banks to crash worldwide. In the article above the banks, as you observe were simply airbrushed out. But the lemmings who would impoverish us all got a sound kicking.

    The poster Sweetness_light was so good I will post it in full below.

    Is that you Golem?

  11. bill May 16, 2011 at 2:05 pm #

    2 days agoIts a an ol favourite—–

    Governments pay banks usurious interest on future borrowing for no readily apparent reason. Ban fractional serve banking and regulate the banks properly. The following is just one example of how our banking system causes recessions, inflation and public sector debt.
    The Mint is the only bit of Government that can create money. The notes and coins it makes comprise only 3% of the "money" in circulation.The other 97% is created by spivs/banksters who take money they've either robbed from the real economy with usurious interest charges (e.g. ten times the rate they borrow at due to the UK governments guarantee) or been given for free from a bailout/QE operation (again taxpayer money).For example, say SirGreedy of Chinless-Shonky Bank gets his greedy mits on £1,000,000 from the real economy. He then borrows £30,000,000 from his friend Piers Bigend at RSWipe bank using the £1,000,000 as collateral.He is able to borrow the £30,000,000 at a ridiculously low rate of interest as the money he is holding is 100% guaranteed by the UK Government. So he is likely to only to have to pay 1% or less interest on the loan (LIBOR or Euromarket rates).SirGreedy takes the £30,000,000 and he might choose to gamble the money by speculating on food futures or shorting a European currency if he can persuade enough friends to join in on the pillaging. The UN recently pinned the blame for rising World food costs on bank speculation and it is undoubtedly the cause behind the food riots we are seeing in Africa and the Middle East.But if SirGreedy is feeling cautious or has no friends a good safe bet is to buy a UK bond. It is 100% guaranteed by the UK Government and will pay him a return of nearly 4%. He keeps this for a year and then sells it back to Bigend.Sir Greedy repays his loan to Bigend (who makes £300,000K "profit") for his bank RSWipe.Sir Greedy takes home the 3% profit (£900K) he has made. He books it as a 90% profit on the £1,000,000 initial capital he had.It's now bonus time and both traders point to the hundreds of thousands pounds of profit they have made and its trebles all round and fat bonuses for both of them.Notice there was no risk in any of these transactions as they are all underpinned by cast iron guarantees from the UK Government.The UK taxpayer has lost £900K and gained nothing from the transactions.In terms of inflation and effect on the real economy. £1,000,000 has disappeared from savers/house buyers somewhere and has reappeared as Government debt to the banks (£400K).The £1,000,000 has turned into £1,400,000 causing inflation eventually.In all likelihood it is very unlikely that exchanges would be this one sided. Much more likely that BigEnd will lend Sir Greedy £30M to play the game and Sir Greedy will in turn lend £30M to Bigend. This is why commentators refers to this as "interbank lending" or "Euromarket".Essentially its spivs both writing IOU's for £30M on a napkin, swapping the napkins and magically creating profit for themselves by pillaging the UK taxpayer who as underwritten the whole deal.Doesn't look socially useful to me. Doesn't look too intellectually demanding.Why are we letting these people pay themselves salaries of 100s of time average wage for things that damage the well being of everyone else?"

  12. Ashwin May 16, 2011 at 2:52 pm #

    David – well said. I especially agree that the current state of affairs is one that is abhorrent to both free-marketers and those on the radical Left. I wish more people on both sides understood this rather than spending their time squabbling with each other. For example, I'm an ex-banker turned entrepreneur based in London and I tend to have reasonably pro-market views but I find myself agreeing with Marxist critics more than I find myself agreeing with the status quo (I've written a few posts on a "moral hazard" explanation of the crisis, why depending on regulations is futile because of regulatory arbitrage and why allowing banks to fail is critical – Inequality and Moral Hazard Rents The Cause and Impact of Crony Capitalism: the Great Stagnation and the Great Recession )

    The problem is not corporate power or state power, but the coalition of corporate AND state power that the centrist and elitist consensus stands for. The problem is crony capitalism, not "free markets" or "socialism". The dissident view is not only a minority, but more crucially it is divided whereas the status quo corporatist-statist coalition is united.

  13. myopia May 16, 2011 at 3:08 pm #


    "The problem is not corporate power or state power, but the coalition of corporate AND state power that the centrist and elitist consensus stands for. The problem is crony capitalism, not "free markets" or "socialism"."

    Exactly. There's nothing free about our currently rigged markets – we really do live in a corpocracy.

  14. MrShigemitsu May 16, 2011 at 3:39 pm #

    Superb post and contributions – thanks Golem + others.

  15. bill May 16, 2011 at 4:16 pm #


    Off topic zerohedge are reporting that the Fed is about to plunder US pensions to avoid breaching their debt cieling. Surely this is outright theft a la Ireland?

  16. Golem XIV - Thoughts May 16, 2011 at 4:26 pm #


    If that is true then prepare for some serious fireworks. The Libertarian right will go bananas. They have been talking about this possiblity in teh darkest terms for nearly a year now. If it happens it will stir up a hornet's nest.

  17. Hawkeye May 16, 2011 at 4:54 pm #


    Well said. Bank bailouts are not Free Market solutions. In fact quite the opposite. They are protecting the lending class at the expense of the public at large.

    The consequence has been Austerity and Inflation. Measures that assure that the lender bears no responsibilty whatsoever for their faulty judgement in lending out in the first place. It is debt maintenance by any means necessary.

    We are led to believe that we have a mixed economy with the best that Capitalism & Socialism can offer.

    Yes we have a mixed economy, but one that is instead the worst of both worlds; privatised profits and yet socialised losses.

    It is as you say Crony Capitalism. James K Galbraith calls it a
    Predator State. The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector. This is not the free market vision of Adam Smith:

    “What did the new class… set out to do in political terms? The experience of the past decade permits a very simple summary explanation: they set out to take over the state and to run it — not for any ideological project but simply in the way that would bring to them, individually and as a group, the most money, the least disturbed power, and the greatest chance of rescue should something go wrong. That is, they set out to prey on the existing institutions of the American regulatory and welfare system.”

  18. mikehall May 16, 2011 at 5:31 pm #

    Another brilliant post Golem.

    The financial fraud and, most importantly, the response to it, of political power, media and academe, has laid bare the utter lie that some kind of meaningful 'democracy' – representation of majority interests – exists much anywhere. It does not, period. It has not existed for many decades, and even then, only partially and fleetingly.

    The fellow, Nyberg, who has just produced the absurdly tame report on the causes of the Irish banking 'crisis', used the term 'group think'. And that's pretty much what has happened, incrementally, over time – complete capture of every public intellectual area.

    At the root of all of it is greed and the power of wealth.

    A power that knows that bad things are coming and soon. Infinite growth on a finite planet cannot continue. So the end game is being ratcheted up.

    But, really, how many people know this? Very, very few. So many have so much of their own psyche invested in the established order, they will carry their denial down the cliff face & still be looking askance as they smash into the rocks below. How many of the democracy campaigners in the middle east truly understand how meaningless a vote in a supposedly 'free & fair' election is in the 'west'?

    So what to do? Well, 1st thing is what Golem (& others) are doing. Communicate the truth. If a problem is not properly understood by most of those who would seek & demand a solution, then it won't be a solution worthy of the effort. As the Tobacco Co. executive famously said – '..just sow the seeds of doubt.' As in, all the existing powers need do is continue to create confusion.

    Beyond that, I'll offer my solution, or rather a guiding principle by which solutions may be determined.

    Firstly, let's recognise that the kind of 'devil take the hindmost' plunder what you will approach to human 'economic' (& other) development cannot continue. As Ghandi said, '..there's enough for everyone's need, but not everyone's greed.'

    We have to come to terms with this new, emerging & stark reality. The open ended process – plunder, consume, dump (repeat) cannot continue. Instead, the ends must be joined to make sustainable cycles. And those exist in virtually nothing we do, most definitely in industrialised countries, so it's a big challenge.

    Of course, if we did but realise it, the investment & and work inherent in the huge transformation needed is also our economic & social salvation.

    One further important principle.

    Corruption of the public, majority interest cannot be allowed. ie the present situation requires complete reversal.

    There's only one way to achieve this reliably.

    No one who occupies a vocation which has a significant element of the public, majority interest as it's basis, can aquire, over their whole life, greater financial means than some reasonable average of the majority. Same goes for their spouses & immediate family.

    When the motivation of personal wealth is removed, you never know, we might actually get some proper representation from, politicians, media & senior public servants. If it remains dominant, as now, well…good luck with that.

  19. 24K May 16, 2011 at 6:25 pm #

    I can't think of the film title. I like…


    But maybe that's not James Bond enough?

    Back To Gold

    Now that's more like it!


    I thought that then, it made me smile, if stuff makes me smile it goes in the film. BTG, that's badass. Not set on a gold standard, could be cokin filters, whatever,it's faith surely? But that's not my area of expertise. I'll look stupid if I carry on.

    When Back To Gold (tbc) is finished and given out free, pitchforks will sell out in B&Q as fast as you can say F%^& me! (fiat people fiat)

    But there is a catch, seen all the names at the end of a film? There will come a day when all a y'alls varacity will be tested.

    I hope you all pass with flying colours. Otherwise you've only got yourselves to blame.

    This Fall The System Will Fall

    Back To Gold cert18

  20. Golem XIV - Thoughts May 16, 2011 at 6:27 pm #

    Haweye and Mikehall,

    what a wonderful place you make this blog!

  21. princesschipchops May 16, 2011 at 7:04 pm #

    Great article as per usual. The thing is Golem, a lot of people do feel in their gut that the official narrative is wrong when you speak to them but they haven't framed it in the way you do here. SO they know it is wrong but they're not sure why it i wrong. I know a lot of people still working in finance and they all think there is something deeply wrong at the heart of the system. They all know that many financial institutions are to all intents and purposes broke.

    We need blogs like this to keep putting the alternative narrative out there for people to read and for the word to spread.

    The other evening I saw Mr. Osborne and the French finance minister having a cosy chat on Newsnight. No dissenting voices, just these two discussing their vision of the new Europe.

    Greeces problem? Oh it's not the terms of the bailout itself, silly. No, it's that they're not going deep and fast enough with the cuts, austerity – and interestingly mentioned – the programme of privatisation.

    Now maybe I am dense but can someone please explain to me how privatisation helps with the deficit? PFI has hardly been cheap!

    There was complete agreement that there would be no alternative, none. Greece would not defaul no matter what.

    Before this cosy little stitch up however they had an economist speak. His response was that the politicos were no longer living in the real world. Greece would default that was a dead cert. The only question was if that default would be a structured and controlled one now, or a catastrophic one some way down the line. Which is what I believe will now almost definitely happen.

    Then of course no one will help or care about the people of Greece and it will be every nations banks for themselves as they fight for survival.

    Democracy within a nation is almost irrelevant. Europe has decided what course Greece must take, Greece and her people have no say in the matter. The same will apply to Portugal and Ireland and even us at some point.

    Meanwhile today the US reached its debt limit and promptly raided the civil service pension fund! Happy, happy times. Taxes are now not for services, pension and healthcare but to funnel up to the elite in an ever more dangerous game.

    My ultimate fear is that there actually will be an end to this. I don't envisage decades of slow decent and servitude at some point a tipping point will be reached and people will recognise the ugly truth. But the end won't be good for any of us. Times like these, when rampant greed take hold and a tiny few profit from the majority, often end in social breakdown, violence, barbarism and war.

    I hope to god we come to our senses before then and stop what is happening.

  22. john May 16, 2011 at 8:36 pm #

    Couple of very illustrative graphs here http://greenerblog.blogspot.com/2011/02/uk-national-debt-22-of-increase-due-to.html .. personally I dont think there's anything 'our' politicians can do about it, all the party leaders and most senior players are groupthinked bilderbergers and since that like so many other issues crucial to breaking out of this trap is forbidden 'news' or in the realms of conspiracy theory we all have to carry on in the two dimensional flatland mainstream media reality, watching as lucid bubbles [like this blog] emerge and pass through without trace.
    With very few happy exceptions most places I've worked have had socially stunted idiots scheming and plotting mostly just for the sheer joy of the stirring, and if the people at the top dont do this I want to see their halos or have them replaced by some people who can raise a plan, or conspire

  23. john May 16, 2011 at 8:42 pm #

    What I meant to say was it's particularly galling having to borrow the money to buy all these dodgy assets from the banks that own them

  24. mikehall May 16, 2011 at 10:19 pm #

    One of the things I find most astonishing in the 'New Normal' is the way political leaders can smoothly spout complete contradictions to agendas & actions they actually follow.

    It demonstrates an amazing ability in humans to be so self unaware, and self deceiving that they can do this.

    The absolute master of this in recent times has to be one Barak Obama. To get elected on such stirring rhetoric of 'change', then continue everything Bush was doing. In fact it's been even worse than that. Besides keeping the wars and military-industrial scams going, he's probably been even more accomodating to Wall St. than the Republicans might have been! (Or at least 'sell' easily to some sections of their party.)

    On top of that, a significant number of Americans think Obama's some kind of 'socialist'!! (I'd say he's the perfect modern politician – an ideology free zone.)

    Anyhow, the reason I'm mentioning this, is this piece reporting the views of Prof Cornel West, who campaigned for Obama & has known him many years.

    "The Obama Deception"


  25. Pascal May 17, 2011 at 8:01 am #

    I'm just reading this at the moment…

    A very good read indeed.

    In it is a quote that I thought particularly apt:

    "When bad men combine, the good must associate; else they will fall, one by one, an unpitied sacrifice in a contemptible struggle" – Edmund Burke

    This is a great place to associate, a great place to gain knowledge. Long may it continue.

  26. twilkinson May 17, 2011 at 11:01 am #


    If nothing comes of the investigation described above, then some banks aren't just too big too fail, they are too powerful for the US Congress to prosecute.

  27. guidoromero May 17, 2011 at 12:29 pm #

    "What we have in place now is a system of permanent and institutionalized acceptance that the largest accumulations of wealth and those who own, manage and serve them can never be imperilled or threatened either by democratic rule of law nor even the workings of the markets themselves."

    Incorrect. This is not something we have now. This is the defining characteristic of Debt Based Fiat Money. One entity produces something at no cost and the rest of society is forced under penalty of incarceration not only to make use of this something but also to pay it back plus more. The minute DBFM was adopted, risk was removed from the sponsors of the system i.e. members of the Federal Reserve.

    […] This is the new business of profit without risk.[…]

    As above. It is not new. It started in 1913 in the USA and then was gradually introduced globally first through Bretton Woods, then via closing the gold window and finally by making the US$ the global reserve currency.

  28. gorgeous cleo May 17, 2011 at 12:35 pm #

    David – do you suppose the arraignment of DSK in the USA might be the start of a minor miracle? Your posts are enlightening as ever. Wonderful stuff.

  29. guidoromero May 17, 2011 at 12:36 pm #

    "If there is a minor miracle and our leaders remember we exist – THEN there will be a crisis for the banks and the financial elite and some small hope for us."

    A politician is a politician because he wants to lead people. Ergo, a politician is inherently and necessarily someone that manipulates information. This being the case, it is not a matter of politicians remembering that we exist as much as the fact that if a politician wishes to stay in power he/she has to pander to those entities that provide financing. Failing that, a politician in power would very quickly no longer be. Enda Kenny comes to mind as the most glaring example of what is widely considered a text book example of realpolitik.

  30. Golem XIV - Thoughts May 17, 2011 at 1:19 pm #


    I can't help but feel that the arrest of DSK hass interesting in common with the way Mr WIkkileaks was also pursued. The IMF starts to make strident noises about America's debt and what it 'must' do to convince the IMF that it won't default and what do you know allegations one of which goes back years are suddenly considered worthy of action. Hmm.


    I take your point about the roots of debt backed fiat money and the foundational role it plays in all this BUT is it not still worth noting that though the power of debt has been there and been growing for decades, that the gradual growth of its power has recently caused a dramatic step change down, in our political inability to deal with it? Or do you feel democratic power has always been a chimerical illusion?

  31. guidoromero May 17, 2011 at 1:40 pm #

    Democracy is the worse system of government except all the others… or some such.

    Democracy is inherently and mathematically self destructive. It cannot be otherwise. By always attempting to garner the votes of the majority, you inevitably create powerful interest groups that will draw ever greater funds from the treasury.

    Now. Democracy coupled with DBFM is the express train to self destruction.

    Once again. There is little we can do to alter the political dynamic and the natural inclination of man. But we have the power to alter the nature of money. And this simple act will ensure a much greater degree of fiduciary duty. Much greater but not absolute of course.

  32. Golem XIV - Thoughts May 17, 2011 at 1:47 pm #


    I am generally with you in wishing to curb fiat money. I am not decided yet if we should have no fractional lending or if limits are workable of defendable.

    Where I am in disagreement with you, though friendly disagreement, about the nature of people let alone its unchageableness. I think we have a distorted and innaccurate notion of what is human nature. And what about it, is unchangeable. I also do not share you pessimism about democracy and the ability to effect radical change via it.

    I have thought to write something about our notions of human nature and how they were distorted not least since teh 1950's but haven't not wishing to intrude one side of my life's interests into the other.

  33. guidoromero May 17, 2011 at 1:47 pm #

    The dramatic step change down in our political inability to deal with debt is due to the diminishing marginal utility of debt.

    It is like fire in a building. The fire burns along nicely till it reaches a certain temperature at which point you have a flashover.

    If you notice the progression of Federal debt since 1980 it has gone from about US$2Trillion to around US$14Trillion today. During the same period GDP has gone from about US$6Trillion to about US$14Trillion.

    Debt progressed by over 1000% whilst GDP merely doubled.

    It is the beauty of debt.

  34. Golem XIV - Thoughts May 17, 2011 at 1:53 pm #


    we are agreed on the centrality of debt. All I am diong is exploring, helpfully I hope, the ramaifications and consequences of debt in its various forms and how those forms interact with other forms of power (democracy for example).

    So it's not that I disagree about fiat money it's just I don't want to just say "It's all down to fiat money" and leave it there. I think it serves a real purpose to explore debt as it is mutating and infecting the modern world.

    It seems to me you must agree with this on some level as you continue to read here and make thoroughy valuable contributions.

  35. guidoromero May 17, 2011 at 2:07 pm #

    Apologies Golem. I do tend to be monotonous. I do wholeheartedly agree with your observations.

    What concerns me is the most efficient manner to tackle the observable effects of our system because I can see a bleak near future of bloodshed at home, followed by conscription and then great bloodshed in far away lands.

  36. Golem XIV - Thoughts May 17, 2011 at 4:17 pm #

    No apology needed Guido. None at all.

    I share your worries but am perhaps a little less pessimistic. I do not think the global financial class can hold this present course and will also not quite be able to coerce enough nations into war.

    I think there is enough of an intellectual dissent to make a difference for the good.

  37. shtove May 17, 2011 at 7:32 pm #

    Hi Golem. Great post. You're a compelling writer – subject a bit depressing!

    Someone mentioned the case of mixed money from Ireland – monarchs have been using debasement and fiat for aaaages. Here's the case (any irony in Elizabeth II's visit this week to Ireland?):


  38. wirplit May 17, 2011 at 8:08 pm #

    The Spanish demonstrators are chanting
    Por Que manda el mercado
    si no hemos votado

    which scans nicely in Spanish and means
    Why are we ruled by markets
    for which we have not voted

    and Esta mierda no es democracia
    which i think translates itself

    The dissident narrative is being challenged but these large demonstrations in Madrid, Barcelona and elsewhere are not being covered by mainstream news!

  39. Golem XIV - Thoughts May 17, 2011 at 8:23 pm #


    Re: reddit. Thank you.

    Very few of the demonstartions that go on around Europe seem to get covered. Can't imagine why not.

  40. guidoromero May 18, 2011 at 4:26 am #

    "[…] I do not think the global financial class can hold this present course and will also not quite be able to coerce enough nations into war."

    Exactly. They won't. And that is precisely why we'll have our Pearl Harbor. The efficiency of the currency is dead in the water. Credit markets have stalled and government spending has so far failed to reignite expansion. Ergo, the profit machine is broken for the banks. Right now, banks' profits are coming exclusively from two sources: the Fed paying interest on reserves (meager) and their artificial AAA investment rating which in a landscape of declining incomes, thus declining revenues and profits acts as a beacon for institutional funds – and remember here that bonuses are paid out of total turnover rather than profits.

    So far, social unrest in the West is a local affair. When the masses in Ireland, Greece, Portugal or France realize the common denominator of their affliction, social unrest will become more organized and coordinated across borders. That's when we'll have our Pearl Harbor.

    Have you noticed how easily the masses can be whipped into a frenzy? Did you happen to see the ground zero celebrations triggered by Osama Bin Laden's declared execution?

    Wars are easy affairs to start when needed.

  41. RogerGLewis May 18, 2011 at 5:16 am #

    Hi Golem and hello to all the other excellent contributors of comments to this blog, there is a lot of reading to do here with the links which are also posted and I will get through it "one grain of sand at a time".
    I was directed here by a comment posted in Sturdy Blog http://sturdyblog.wordpress.com/2011/04/08/to-whom-do-we-owe-this-money-exactly/#comment-610
    There are more and more people seeking answers to unasked let alone unanswered questions my comment is directed more to those who like me agree that there absolutely is a very bad problem and it is what Roy Madron calls the Global Monetocracy its a coporate Oligarchy that has hijaked the Agenda in pursuit of its own narrow interests.

    My suggestion is to suggest a simple but effective direct action we can all take to force the hand of Governement where we can vote with the economic power we do still have.

    All private Business owners and Individuals should Close bank accounts and trasfer all deposits out of the Banks in private hands and open accounts with the sate owned Banks RBS and Llyods and so forth
    THose banks should then be kept in Public ownership and there should be a return to a credit based Honest Money system If any of the other Private Banks survive without Public Assistance them good for them but more regulation and very strict regulation regarding the usefullness of the funn money merry go round needs to follow.

    By forcing the issue this way the actions of politicians would be very accountable how would they be able to repeat the current change in Narrative.
    Just a quick post and basic idea I'd happily throw all my effort into a joint effort to initiate such a campaign if upon full discussion and reasoning a caucus of opinion felt it was a worthwhile plan.

  42. Golem XIV - Thoughts May 18, 2011 at 8:21 am #

    Hello RogerGLewis,

    and welcome. I think a lot of people here including me have been thinking along the same sort of line as you outline. Like you we are keen to explore the feasability of achieving what you outline.

    One of the first things I wrote here was a follow up to something I wrote a year or so earlier which was about closing and moving bank accounts. Like you the point then become how to spread the idea.

    I suspect GuidoRomero's comments might also interest you.

    It is great to hear from you and to read your thoughts. I hope you will write more and find here like minds to work with.

  43. Hawkeye May 18, 2011 at 3:41 pm #


    Perhaps the best anti reductionist rail against modern scientific myopia is Jack Cohen and Ian Stewart’s “Collapse of Choas”.

    I read this about 5 years ago and was taken aback. It covers all of science’s great achievements, but balances this with a weighty view on its limitations. I echo Terry Pratchett’s comment on the book:

    “I was pleased to learn that most of the things I thought I knew were wrong”

    Here are a few comments from the Amazon site:

    “the first half of the book is a guided tour of biology, chemisty and physics. Covering how these great sciences got where they are today, from Newton to Darwin, DNA to the lattice structure of diamonds. The second half then presents a new way to look at science.”

    “This book is from what I call the 'anti-reductionist' school of scientific thinking. Its aim is apparently to break the link between what happens at the atomic level and the higher level, i.e. the more visible world of plants, animals, planets etc. If this break could be achieved, the world could then be claimed as free from determinism. This is a key area for philosophers and physicists, and it is linked to the existence of free will.”

  44. RogerGLewis May 19, 2011 at 7:44 am #

    Hi Golem,
    I wonder whether Positivemoney.org or a combination of the established honest money organisations would be a good focus for a campaign to force a full and permanent nationalisation of the publicly owned banks.
    Rebecca a reading list would be great I use my blog as a notepad for areas into which I am seeking to focus my own reading I think out loud on the web, it works for me but my chaotic approach is not to most peoles tastes.
    I listen regularly to the web based Oregan Radio Station
    I listen to the archive on various subjects when I do the washing up it is a really positive experience and I find it comforting to know that there is a great deal of grass roots activism in the USA a growing body of opinion is being voiced and shows that more and more people are vocalising the feeling that something is deeply wrong.

    My own view is that We are seeing a Cult of Corporate Globalisation, searching that term on Google gave a large number of articles.

    I'm going to have a good look at the positive money site today and will report back here with my impressions.
    Good to be in touch and heres a big interweb smile from Sweden.

  45. Golem XIV - Thoughts May 19, 2011 at 8:14 am #

    Morning RogerGLewis,

    I think Positivemoney.org is a great place. They and UnCut are very positive organizations I think. I look forward to eharing your impressions.

  46. RogerGLewis May 19, 2011 at 9:31 am #

    Just a quick addendum this interview with Alex Zeigler is very interesting.

    Heres the Blurb from Sue Cipriano. I have listened to it 29mins very useful stuff.
    Alexis Zeigler
    The author of Culture Change: Civil Liberty, Peak Oil and the End of Empire, speaks on the economy, ecology, culture and politics, proposing a deeper truth about our current civilization
    Play Audio.
    TRT: 27:00
    Date: 2009-04-06
    Alexis Zeigler, author of Culture Change: Civil Liberty, Peak Oil and the End of Empire, takes a broad and integrated view of economy, ecology, culture and politics to propose a deeper truth about our current civilization. We have subscribed to a top-down “mental” view of societal change while for the most part ignoring the ecological and economic underpinnings that drive change from below. Zeigler uses the example of the women’s movement in this country, which has not been a linear trajectory towards liberation, but rather has had ups and downs which have been tied to the need for women’s economic contribution to society. He speaks about the efforts to control women’s sexuality by the anti-abortion movement as a symptom of increased restrictions.


    Also there are a number of free downloads including e books which I am currently downloading to read today.They are on Mr Zeiglers web site.
    My own reading is presently a mixture of the Academic and theoretical and the Practical and Activist.

  47. 24K May 19, 2011 at 11:07 pm #

    Hawkeye, Rebeecca, Have you heard of System of a Down?


    Making two possibilities a reality
    predicting the future of things we all know
    fighting off the diseased programming
    of centuries, centuries, centuries, centuries
    Science fails to recognise the single most
    potent element of human existence
    letting the reigns go to the unfolding
    is faith, faith, faith, faith
    Science has failed our world
    science has failed our mother earth
    Spirit-must rule all things

  48. Malagodi May 20, 2011 at 2:45 pm #

    Very good post. But let me ask you:
    "it is now established that the purpose of government is to make sure the system and the hierarchy of wealth and power at its peak, remains untouchable and unchangeable."
    Do you believe this is not the case? Can you show me an actual example of a state or national government that did not have this as its true function, regardless of its rhetoric?

  49. Golem XIV - Thoughts May 20, 2011 at 2:53 pm #


    No I can't. Sadly. But might you agree that there have been times when it has been markedly less blatant and complete than it is now?

  50. guidoromero May 20, 2011 at 4:18 pm #


    Iceland is showing promise…

  51. Glenn Condell May 21, 2011 at 4:04 am #

    Well said.

    Our new normal is that there is a fictional official narrative in virtually all matters of genuine importance, and a true (or at least truer) explanation that is suppressed.

    The GFC is naturally the most prominent of these at present, and the history of official lying does let's face it go back a long way, but to me there has been a real confluence, a co-ordinated centering of elite-friendly approved narrative globally since 911, certainly in the West.

    911 itself is emblematic of this trend, because even if your Occam-brand razor slices thru some of the more extreme Truther claims, which themselves may have been centrally psy-opped, it will be blunted by the thickets of bullshit that characterise most of the official report, or useless in the pockets of omission that round out the rest of it. Like the JFK hit, confusion reigns in the absence of reliable official information, and this is of course the desired outcome.

    Then we had Iraq and the millions of us worldwide who did enough legwork online to know we were being had, and marched down our high streets and inundated our local rags' letters pages and harrassed our craven, US-controlled politicians to prevent the catastrophe which duly occurred anyway, and then we had the dubious pleasure of watching them all squirm a few years later while admitting we were right. Most of them of course, being Teflon-coated real-politikkers, knew that this unpleasant task might well lie ahead while they were greasing the wheels of war, but were happy enough to assay contrition and bewilderment for a while, before moving on to the next dirty job, which someone has to do, right?

    New evidence has just cropped up re the death of David Kelly. Who seriously believes now that he killed himself? He was not the sort of man that could have been honey-trapped like Spitzer or DSK, and he was even more immediately dangerous to an elite which had decided on war. Of course, there will never be clarity on this, the issue will bubble away and this very confusion of he-said she-said official vs 'conspiracy' narratives is just what the doctor ordered for those who commission these acts.


  52. Glenn Condell May 21, 2011 at 4:08 am #

    As you say, the media have joined them and are therefore no longer interested in beating them, the professions ditto and regulatory agencies as well. I would only add the capture of the democratic party system itself. It's fairly comprehensive.

    And re the 'temporary' measures that somehow seem to morph into permanent features of the landscape, well again we have many precedents, going back to the Cold War's humidi-crib for the nascent MI complex, but more recently the Patriot Act and Homeland Security, the wire-tapping and data mining, et al. All such hardening of the body politic's arteries makes us less free, or poorer, or both.

    The next shoe to drop will be the removal of worker's rights under the cover of essential belt-tightening. Wisconsin is just the first volley. Next we will have a federal militarisation of police forces unable to be funded by local or state governments rendered slaves to Wall St via bankruptcy, often due to the sort of shenanigans Matt Taibbi has written about with regard to Jefferson County. More of the 'God's work' done by Mr Obama's 'savvy businessman' friends.

    They couldn't risk the return of the draft yet, it might backfire, but that is on the long-term agenda for sure, once the other hatches have been battened down. As a 'temporary measure', mind!

    Sorry to take up so much bandwidth on a blog I've never visited before, but I have to warn you that the quality of post and comment means I will return. I came from the excellent Naked Capitalism, which itself entered my field of vision via some other truth-telling finance or econ maven, maybe Steve Keen or Michael Hudson. This points up both the strength and the weakness inherent in this newfangled online habitat; good ideas abound – the Tobin tax, property taxes, TBTF limitations, the MMT approach to national accounts, Ellen Brown's centralised money creation via North Dakota style state banks, Bill Black's reminder that regulators in the US once had teeth sharp enough to put 1500 bankers and lawyers in prison, Mr Shaxson's ideas re the proliferation of tax havens, renewing Glass-Steagall and rescinding Gramm-Leach, redirecting government deficit spending to poorer people to jump start aggregate demand, the re-monetisation of silver, repudiating or even simply the idea of re-negotiating debts run up via fraud-induced bubbles.. there is no shortage of measures which may each fall short of the term 'solution', but which make more sense from any genuinely rational point of view than the 'more of the same for us and less of everything for you' mentality that currently obtains in all the corridors of power that matter.

    But while we may chatter about them here on this blog, or over at another, the juggernaut meanwhile plows serenely ahead in the knowledge that we are just a few sharks who might take a scrap of paint from the hull, below the waterline, while they sail through the waters of mass ignorance on the top deck with not a hair out of place.

  53. Golem XIV - Thoughts May 21, 2011 at 5:24 pm #

    Glenn Condell,

    Welcome. I don't think anyone here minds how much bandwidth somewone uses so long as gthey use iot politely and thoughtfully. From what you have written I think you might also enjoy Deep politics forum here in the UK. Look under Links.

    Mr kelly's death was truely awful and sordid and cynical to say nothing of cruel and sadistic. I have never found the suicide explanations to be even remotely believable.

  54. Glenn Condell May 22, 2011 at 4:05 am #

    Thanks Rebecca, don't worry, inveterate thread junkies like me can parse our way thru typos and snafus…

    And Golem, thanks for the welcome and the link, I will peruse when the children are in bed later; and I think you must have helped me post too, as I had all sorts of problems getting my Google account to work, so thanks for that as well.

  55. RogerGLewis May 25, 2011 at 2:53 pm #


    Positive Money have this new campaign and I have been doing the small amount I can to get it out into the wider web.

    Its a very good animation and there is a forum on the Positive money site
    I am hoping it will be something like a college ABr to which to return for refreshment between bouts of activism.

    My ex wife has introduced me to the work of Naseem Taleb he had a hit book called the Black swan a few year back, interesting chap haven't seen anything to suggest he is ready to put his shoulder to the cause of banking reform but he is certainly very critical of the competence levels of the teenaged scribblers of the square mile.

    Subscribed to follow the blog so I don't know if that sends e mail updates anyway nice to pop in Hi and see ya soon,


  56. Mike B) August 14, 2011 at 2:19 am #

    "I brought you another one just like it. And for the last ten years we have been paying for it. You realise it wasn't easy for us; we had no money. . . . Well, it's paid for at last, and I'm glad indeed."

    Madame Forestier had halted.

    "You say you bought a diamond necklace to replace mine?"

    "Yes. You hadn't noticed it? They were very much alike."

    And she smiled in proud and innocent happiness.

    Madame Forestier, deeply moved, took her two hands.

    "Oh, my poor Mathilde! But mine was imitation. It was worth at the very most five hundred francs! . . . "


    Guy de Maupassant's "Necklace" does have a contemporary ring to it. Workers slaving away all their lives thinking they've saved enough for retirement only to have the value of the currency they saved in cut in half when they start drawing their pensions. Not only the currency they saved in but the assets they put their currency into falling in price to levels they were at more than a decade ago e.g. the Dow was hitting the 11,000 mark in 2000. Look at it now. House prices plummeting to more correctly reflect their value. Pensions invested in CDOs blown out of the water. Fake pasty diamonds? As for the value of the currency they get their pensions in, just use the price of gold as a way of measuring. What's gold an ounce now…$1800? What was it back at the time the worker started saving? I can remember when it was $32 an ounce…shows my age.

    Alas and alack, who will audit the auditors? http://www.abc.net.au/rn/backgroundbriefing/stories/2011/3291026.htm

    I do think that when workers discover how the wage system works to give over all the wealth they create into the hands of the employing class (what is like 10% of the people own 88% of the wealth in the USA?) they begin to see the outline of it all–the totality, if you will. That's been my experience at the grassroots. Of course, with most of the left talking reformist trash when not guilt tripping the working class with talk of affluenza, it's a long process made longer and harder. And then, there's all that acculturation associated with obeying power structures to keep oneself safely on the road to approval by authority. (sigh)

  57. Golem XIV - Thoughts August 14, 2011 at 9:10 am #

    Hello Mike B,

    Have posted before? Forgive me if you have and I've forgotten. And if you haven't , then Welcome.

    Rather an aposite quote from de Maupassant. As for the length of the struggle – yes it is long indeed. But I feel we are now closer to the moment whgen a sufficient number of people are willing to question the official 'truths' and withdraw their passive support for the system they underpin, than we have been since my Grandfather's day. Maybe longer.

    I feel hopeful as I haven't before.

    Glad you've said hello. Hope you'll comment again.

  58. Neil August 14, 2011 at 10:05 am #

    An even more relevant French work in these times is Balzac's story La Maison Nucingen (The House of Nucingen), translated as the Firm of Nucingen.

    Quote from a review: "What The Firm of Nucingen reveals is the activities of powerful banker-speculators who manipulate the stock market, capitalising (literally) on a time of rapid industrialisation and changes in society after the revolution.

    Nucingen is able to convince investors to sell their stock cheaply because he uses Rastignac's respectable reputation to help induce panic selling. In this way he manages to improve his own unremarkable fortunes by acquiring shares in a German mining company called Worschin and other businesses."

    "What we see […] is Balzac railing against government intervention to ban petty gambling while allowing the finance sector to gamble with the lives and money of others."

    It's available on the Internet as well as in hard copy.

  59. Golem XIV - Thoughts August 14, 2011 at 8:54 pm #


    How little oppression changes its methods.


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