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Debt or Taxes – the battle of our time

Debt is to the free market and its political agenda as taxes are to democracy.

Both are THE ultimate source of power for their respective worlds. Taxes are what gives governments their power. Debt is what gives banks and the financial system its power. It has no other.

The power to tax your future work and wealth is what gives the government a guarantee of income and therefore of power stretching away in to the future. Debt does exactly the same for the world of private finance and ‘free markets’. Debt and taxes are in direct competition. They are both claims on the future, our future.  

The competition is not just financial it is crucially political. Paying taxes supports the workings and power of nation states and ties us all to the nation state and to the politics of  democratically electing governments. Taking on private debts whether personally or collectively, replaces loyalty to and concern for the nation state with concern for the banks and the private financial system they make up. Whichever of the two claims we are persuaded is the  most important, takes hold of the reigns of power and has the final say in what we do today and where we are headed tomorrow. The system of private finance and debt is right now claiming that precedence and our politicians are helping them. We are being betrayed.

We are no longer making financial decisions within the context of a democratic system based upon nation states. We are choosing between that 19th century system and a new private-debt based system in which neither the nation state nor its democratic  traditions have any standing nor power. The decisions that are being made for us and around us, often in spite of our voiced concerns, are transferring power from the nation state system to the private global financial system. From governance to management. From democracy to oligarchic technocracy.

Bailing out the banks and the wider system of private debt finance is a directly political act. Though that is not being made clear. Perhaps it is even being deliberately disguised. We are told bailing out the banks is purely a matter of practical and expedient necessity. A temporary financial matter. It is not. It is a fundamental shift in power.

Just look at the latest iteration of Dexia bank and its bail out by Belgium, Luxembourg and France. Today Dexia has said it needs yet another bail out and wants France and its tax payers to take on an even larger proportion of the cost.  And this when France’s sovereign AAA rating is being questioned. Strengthen the bank, weaken the State. Divert taxes from the State and put them instead at the service of private finance. One system gains a claim on our future earnings the other relinquishes it. The system relinquishing it, losing its source of power, potency and agency, is the only system in which we have a democratic say. The system which is taking hold of that income and the power it confers is a system in which we have no say at all. Why are we letting this happen?

In the Nation State we are citizens. As such we not only have rights guaranteed by law and custom, but more critically all power resides in us and flows from us and is merely lent temporarily to those who we allow to rule.  But this fine sounding form of words is hollow and meaningless without the  flow of tax which gives nations their power. Power is, to steal a phrase, ‘measured by the pound or the fist’. Once we allow private finance to divert the flow of pounds to serve their private ends we are left with only the power of the fist. That is a road we do not want to find ourselves travelling.

The dynamic of the new politics is that the more private debt we have to pay the less tax our governments can raise. Already this tension is familiar. Neo-liberal parties of both right and left crowd the ‘centre ground’ of our debased and hollow politics to out shout each other about how they can keep taxes low and work with the private sector. As private debt increases so the state shrivels. Efficiency triumphs over fairness. One group of insiders (government and its various corruptions) is replaced by another from the private sector. It has become a touch stone of those on the political right that the danger of self serving corruption and inefficiency is a disease of government and the public sector. They are wrong. Both systems, public and private can be corrupted so that those running them make sure that the system serves their personal power and wealth in preference to doing the job it was originally designed to do. Just look at Enron or the banking system today.

The only difference is that when the state and its systems become rotted and corrupt I can vote out out the corrupt and seek to purge the rotten. I have no such power over global finance and the banks who animate it. There is no voting. There is no representation.

There is no tax without representation. BUT there is always debt collection without it. Think about how huge a difference that is.

Debt and taxes are the battle ground of two inimical political systems. One recognizes us as the source of its power and legitimacy. The other does not. One takes the welfare of all the people in its care as its reason for being. The other sees its job as enriching those who by accident of birth, happen to own it.  Which system will care for you when misfortune strikes you or your children down?  Which system will look to the future and which will damn the future for a stellar quarterly report and the bonus that brings?

The key is this – by bailing out the banks and the private financial system we are diverting tax and the power it confers from the Nation State and its system of democratic accountability, and instead empowering a system where debt not democracy reigns supreme. As more and more of our as yet un-earned wealth is already pledged to support the system of private debts and private debt-based wealth we find ourselves less and less able to control it or enforce even its own laws upon it. The financial system and those whose power comes from it are increasingly able to disregard any restraining laws. They can incur debts and ignore them, forcing others, us, to pay them for them. How? because we have tied our selves to their system and weakened the old system which used to protect us and work for us. 

The danger we face is not Recession it is Repression.



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137 Responses to Debt or Taxes – the battle of our time

  1. Chris L November 23, 2011 at 1:59 pm #

    Very eloquently written (again) David. What I don’t get is why so few people see this? Are they blind or do they just not understand it? More to the point I guess is what can we do about it?

    • Joe Taylor November 23, 2011 at 5:55 pm #

      To Chris L

      More and more people are beginning to see it and the more we who do see it, thanks to people like David, the more we need to spread the word. Please consider putting your opinions in online discussions like thise one http://bit.ly/uMrSpg so we can do that.

      • cynicalHighlander November 23, 2011 at 6:32 pm #

        Your link goes to sign in page. NatCAN

        • Joe Taylor November 23, 2011 at 8:56 pm #

          It should take you to the second page of the discussion? You would need to sign up (not sign in) to comment or browse around if you weren’t already signed up.

      • Nicholas Dyson November 24, 2011 at 5:30 pm #

        I too try to spread such thoughts, and also draw attention to GolemXIV, on my own blog, http://nicholasdyson.blogspot.com/

        In my own small pond I recently gave a talk (http://nicholasdyson.blogspot.com/p/talks-articles.html) ironically titled ‘Every Crisis has a Silver Lining’ to the Northern Contemporary Furniture Makers’ group. In it I also pointed out how in recent decades debt had been used to boost stagnant or declining incomes and thus keep the consumer bus on the road, with the consequence that the new orthodoxy becomes the political impossibility of raising taxes, and the opposition hunts to identify and denounce ‘stealth taxes’. Now of course we need taxes, or state asset sales, to pay back the private debt that our governments have assumed.

  2. Mike Hall November 23, 2011 at 2:03 pm #

    Very much along the lines of Michael Hudson’s analysis.

    What we have is a financial oligarchy making ever greater claims to the +real resources & labour+ of the majority of citizens through their capture of government & its ability to tax.

    We seem to have a new Orwellian term, repeated ad nauseam by the mainstream media assholes – ‘technocrats’.

    In reality they are the direct representatives of the financial oligarchy.

    Rather depressing that the people of Spain, despite the efforts of the ‘indignados’ have just held another ritual of democratic illusion, and voted as turkeys for christmas.

  3. Charles Wheeler November 23, 2011 at 2:16 pm #

    “Don’t question the market” Hamish McRae, Independent, 23.11.11
    “Move to Cuba” Heather MacGregor 22.11.11

    • Neil (the original one) November 23, 2011 at 3:57 pm #

      Yes, I heard that McGregor woman (director of headhunting firm Taylor Bennett, salary £108,000 I think she said) say that on the Today programme.

      Hear the extract and read comments at http://www.leftfootforward.org/2011/11/workers-are-children-and-if-you-dont-like-high-pay-move-to-cuba/ .

      The arrogance of these people is sickening. The Loadsamoney mindset is back with a vengeance, if it ever went away.

      • Wirplit November 23, 2011 at 4:32 pm #

        Is this extraordinary arrogance fueled by the fact as a Property analyst said talking about the future of UK property prices?:

        “James F: Maybe they can’t afford it outside London. The latest batch of quantitative easing (QE) comes to £75bn. For the sake of easy maths, let’s say there are 75,000 dealers and bond traders in the City. They will each get £1m of this QE coming through their hands. Also, £75bn is about 5% of UK GDP, so that’s going to have a dilutive effect on sterling over the next 12 months, which will benefit foreign buyers as sterling weakens. So if you’re a foreign buyer or you work in the banking system, QE directly channels money into your pocket. Outside of London, that’s not the case, so that’s where you’re getting a fairer reflection of the economic reality.

        Is this casual revelation true?

  4. Ian November 23, 2011 at 2:18 pm #

    A great post. How to wake up the masses? Or don’t they care as long as they have football, beer, celebrity news and consumer goods?

  5. Roger Lewis November 23, 2011 at 2:32 pm #

    The failed German Bond Auction seems to be turning the screw, Twisting the Knife and so on.Had a read of this.


    followed from This.


    I asked the Author this question.

    Edward when you refer to needed systemic changes( full monetisation and union or break up) how far would you go? Do you have a position on MMT?
    would you bring the money issuing Power back in house so to speak for the benefit of society as a whole or do you think that a World Super central Bank and Currency is desirable.

    • SidFinster November 23, 2011 at 5:38 pm #

      What the auction means is quite simply: buyers of Bunds are pricing in the increasing likelihood of Eurobonds and/or ECB printing.

      In the first case, bond buyers are concerned that German will soon be taking on some new and exciting credit risks, meaning bondholders might not get paid. In the second case, they are concerned that they will get paid in a debased Euro.

  6. Neil (the original one) November 23, 2011 at 3:44 pm #

    David, you’ve hit the nail on the head.

    Meanwhile from the Telegraph:

    “another take on the UK’s finances – the Centre for Economics and Business Research (CEBR [ http://www.cebr.com/ – founded by the former Chief Economic Adviser to the CBI and Chief Economist for IBM UK), ED.] has published a report saying the 50p tax rate is likely to cost the Treasury money rather than bring in new revenues – to the tune of £1bn less a year by the middle of this decade.

    Why is that? Because modern technology makes it easy for the wealthy to keep their money offshore, and levels of tax which are seen as punitive make these wealthy people feel less loyal to the country where they live and ought to pay tax.

    The CEBR said:

    “A new generation of wealth creators have new legal choices because of digital banking and a creative wealth management industry which can mean that while their money is abroad, they can remain working in the UK.

    “The higher rate 50p tax pushes Britain’s wealth creators past a psychological threshold that makes them more likely to explore and make use of these methods.

    “In the long term this could have devastating consequences for Government revenue as more money is likely to be lost rather than gained by the higher-rate tax.”

    13.35 The latest ONS figures on pay are out, and show only a 1.4pc rise in average annual earnings for full-time workers to £26,200.

    When measured against inflation running at around 5pc, that indicates a fall of around 3.5pc in pay in real terms.”

    So the CEBR argues for a tax-cut for the rich, while average pay suffers a 3.5% fall…

    • Nell November 23, 2011 at 5:02 pm #

      I liked Michael Hudson’s answer to the problem of offshoring wealth. He suggested

      ‘ I would close down tax avoidance in offshore banking centers by treating offshore deposits by Americans as “earned but hoarded” income and tax it at 90%.’

    • Wirplit November 23, 2011 at 7:20 pm #

      The weasel logic of the CEBR only goes to show how vital it is to get control over the Offshore industry the heart of which is the City. So many of them are British Protectorates like the British Virgin Islands and the Cayman Islands not to speak of our our dear Channel Islands.

      • Neil (the original one) November 24, 2011 at 1:23 pm #

        From Jon Snow’s blog, Tuesday 22 November:

        “I am indebted to the Sunday Times for their introduction, last Sunday, to the contents of Number One Hyde Park – London’s most expensive and unoccupied address.

        The paper concludes that in effect the apartments inside are either unsold or sold to people who don’t live there. In other words the paper reckons that building is, in effect, unoccupied.

        But what gripped my attention was not its emptiness – it is a truly vast blob of an address at the top of Sloane Street in London’s Knightsbridge – but the registered addresses of those who have actually bought one of the £25m plus apiece pads.

        According to the UK land registry, four owners are registered in Guernsey; four in the Isle of Man; 19 in the British Virgin Islands (BVI); two in Liechtenstein; two in the Cayman Islands; One each in St Vincent’s, and Monaco.

        What do all these locations have in common? Yes, you guessed it – in one way and another, they are tax havens. What else? Twenty eight of these addresses are in locations over which the British have some sort of governing involvement.

        Yesterday’s FT led with an extraordinary report detailing the ‘jumbo directors’ who are piling up directorships in the Cayman Islands. Each of these directorships is worth up to £19,000 a year, the FT tells us. It is all part of the demand for independent directors for companies seeking to lodge their doings in the Cayman Islands. One man now holds 567 of these directorships in companies almost all of which are hedge funds. Four people hold over a hundred of these things. Fourteen people have over seventy of them.

        Yesterday’s Snowblog questioned whether “socially useless” financial transactions should be banned rather than taxed.

        Today I find myself asking what is being done in our globalised world to sort the parking of vast quantities of cash off-shore in tax havens over which the British, in particular, have so much influence? Is it a coincidence that Britain also hosts one of the three biggest financial trading centres in the world?

        Can capitalism survive without opaque, sometimes criminal, activity? Can it survive without allowing the very richest to avoid tax in such a way that the gulf with the poor grows ever wider?”


    • richard in norway November 23, 2011 at 7:55 pm #

      The use of the term “wealth creators” betrays the prejudices of this supposedly impartial adjudicater.

    • Golem XIV November 23, 2011 at 7:55 pm #

      “…they can remain working in the UK.” There is the rub. Make that NOT possible and we start to reassert sovereign control. It twould, I think, be possible to draft laws which required a minimum percentage of income to be taxed in the country of residence.

      Those who refuse to, or arrange not to pay taxes here should not be allowed to reside or even have citizenship here. No exceptions regardless of where you were born.

      • Joe R November 23, 2011 at 11:36 pm #

        Here’s an example of a company – a large global shipping company called JF Hillebrande which make money of the back of UK employees but don’t pay corporation tax there in the UK.

        The bulk of their staff and operations are based in the UK. Their “head office” with about 3 minor and irrelevant staff ( I know it says eight on the site ) is based in Ireland and so it pays taxes in Ireland.

        All Hillebrandes have to do is fly in some directors / chief executive types once a year to Dublin have a short meeting and thats it, its their company HQ, for EU taxation purposes!

        They have to fly some of the not so busy staff out of Dublin to Southhampton just to find some work to do.

        They save lots of tax on profits and I’m guessing the executives probably pay themselves well for such ‘wealth creation’ and their shareholders too, naturally. Maybe they are shareholders too? The the Irish government takes a cut all this on the back of on the hard work and real wealth creation of its other many hundreds of non-Irish based employees – mainly based in the UK as I pointed out at the start.

        But according to the news today 10 years of auserity is required for the UK – at least some think tank says.http://uk.reuters.com/article/2011/11/22/uk-austerity-recover-idUKTRE7AL0DL20111122

        Theres a whole lot of sovereignity all over the EU to be reclaimed or asserted. All these financial games are making a total balls of democracy and decency for that matter all over.

        Links to Hillebrandes Irish office webpage as follows;


        Main UK office addresses for elements of the JF Hillebrande Group;

        Todbulk ltd., Trans Ocean House/Tollbar Way
        Southampton SO30 2UH, United Kingdom.

        JF Hillebrand UK & also trading as Porter & Laker at Dissegna House, Weston Avenue, West Thurrock, Grays,RM20 3ZP, United Kingdom.

        • Patrick Donnelly November 24, 2011 at 5:42 pm #

          I worked in International Taxation, Dublin 16 District, before Investigation Branch.

          What you say is not uncommon. But all the profits from the UK ‘Branch’, (which you say is 100% of the profits?) will be taxed in ….. the UK! Then there will be credit according to the UK/Ireland DTA in Ireland for the tax paid.

          There may be intellectual property etc in Ireland which generates income and that will not be taxed in the UK.

          • Joe R December 2, 2011 at 3:11 am #

            100% is not mentioned in my piece, Mr Civil Servant. Tell me did you fail English in the Leaving or something and ended up where you are at?

            You say you work for revenue investigation in Ireland ( department of taxation ) and you are reading and commenting on what looks pretty close to OFFICE HOURS to me on a blog which speaks of the off-shore or tax haven nature of Irelands corporate tax make-up?

            Curious that. In what capacity. To spread disinformation?

            Well if so Sun Tzu would have approved! One of his five types of espionage and vital to successful warfare!

            Ireland is a tax haven. More international organisations and commentators and for that matter company accountants who work the system inside of Ireland than you can shake a large stick at , openly admit that.

            As did this blog make it clear its a respectable tax haven with a population of debt serfs attached…

            25 billion ponds is lost to the UK economy each year and another 75 through avoidance, such as this. Why they tolerate this next door I don’t know.

            The information on Hillebrande Todbulk came first hand to me from aloud-mouthed insulting overweight accountant inside JF Hillebrande in Dublin. I have his company emails on my mail account.

            And the branch is loss making on Irish business they have f**k all. Its there to book profits from elsewhere.

            I had an invite to dinner with these types a few years back during on of their super short annual visits, which I couldn’t attend though as a fly on the wall I would have enjoyed it.

            Tell me, please Patrick will you, why don’t investigations go and poke around at Pocket Kings ( also know as Full Tilt Poker ) the poker company that had 800 employees up the road from Hillebrands whose founding professional player was arrested in the US for money laundering amongst other charges this year…


            ….instead of spending taxpayers money reading and monitoring my comments?

            BTW the version that appeared in Ireland on this story was watered down a bit;


            But the Irish taxation authorities, which you have admitted you are a part of, have a see no evil, speak no evil, see no evil policy don’t they to all this stuff?

    • Jonahsdad73 November 24, 2011 at 1:11 pm #

      This use of the term ‘wealth creators’ in that context should not go unchallenged (glad to see Richard in Norway challenging it in fact), and I think we should all challenge it at every opportunity. That is not to say that the efforts of entrepreneurs do nothing to create wealth; it’s just that they wouldn’t create a great deal without the real wealth creators, their employees.

      Several people seem to hold to the CEBR definition, but I do wonder whether they’ve ever considered why companies employ staff (for charitable reasons perhaps) and whether they really think those companies would be that successful without staff (I can’t see Tesco thriving without employees).

      Given that the employees are as much wealth creators as the entrepreneur or the captain of industry, but are obviously not paid fairly for the wealth they create (the shareholders and senior management get that bit), surely it is fair to argue that the shareholders and senior management are not paying enough.

  7. b.copeland November 23, 2011 at 3:44 pm #

    In spite of a world-wide anti-capitalist movement due to the increasing understanding that we have been tricked and conned into surrendering both our democracies and our childrens future wealth, there is no organised opposition, because there is no coherent political alternative. Given that most people(?) now seem to reject socialism…then what?

    • Toby November 23, 2011 at 4:58 pm #

      This is what David Graeber refers to as a failure of nerve and imagination. At root there is a failure too to recognise that the distinction between capitalism and socialism is bogus, because the economic system which rules us is, I believe, the price system. I’ve written at length about this in the following post at my blog:


      but ought to briefly outline the price system I guess. Price is information generated by buying and selling, supply and demand. Price is supposed to be accurate because it is set ‘organically’ and ‘moment to moment’ (more or less) by a phenomenon call the market. The market is, in the myth we all know and love, a pretty anarchic place where, almost democratically and with no one power in charge, all the profit maximising actions of the market participants lead, with the help of The Invisible Hand, to optimal outcomes for all. This being asserted (though unproven) it follows that price information is accurate because it is not corrupted by monopolies or The State.

      Price is denoted in currency, and is a measure of value. But value is far more complex a thing than can be described by, e.g, $250,000. What is that value, without further information? Is it, e.g., the president of the United States? Is the president’s salary his yearly value? Of course not. Is the value of an iPad 600 quid (or whatever)? I would say value, like beauty, lies in the eye of the beholder, so cannot ever be objectively measured. And besides that we have what economists call externalities. That is, the full costs of shipping oranges from South Africa to Asda are not reflected in the market price. The cost of building roads is not reflected in the price of cars, and so on. So price is very misleading. And, as we all know by now, the market is rigged by cartels, oligopolies, monopolies and outright fraud. Even before we talk about ‘government interference.’

      So, capitalism or socialism, the price system cannot work as advertised. The price system should be, in my opinion, the object of our analysis, our criticism, our energies, our desire to get to the heart of the problem. Forget the window dressing, and go for the beast’s heart.

      Alternatives? I am for the long, hard slog towards what’s called resource based economics, which, in my mind, includes things like a negative interest money (to prevent hoarding and encourage flow), a guaranteed income (to sever the association between money and value, and weaken money’s grip on society), and multiple money types for various economic activities. A resource based economics has as its foundation wisely and sustainably managing resources, environment, society, education, etc. Because money is a very poor measure of value it should not be the arbiter of what we can and cannot afford. Our skills, know-how and resources should. Money should only enable us, where we need money at all, to do what resources and know-how allow.

      My 2 cents.

      • Roger Lewis November 23, 2011 at 6:55 pm #

        Toby you have my shoulder fully at yours to progress this sort of enlightened analysis of what really counts and in the encouragement of imagination creativity and the common good. Was it one of Oscar Wildes put downs Knowing the price of everything and the value of nothing?

        • Toby November 23, 2011 at 7:29 pm #

          Thanks, Roger. Support most welcome in these crazy times!

          I just want to quote Charles Eisenstein here in the hope more people will listen to and assess the man’s message, which I feel to be hopeful and inclusive, rather than doom-laden and exclusive:

          “This movement isn’t about the 99% defeating or toppling the 1%. You know the next chapter of that story, which is that the 99% create a new 1%. That’s not what it’s about. What we want to create is the more beautiful world our hearts tell us is possible.”

          The quote begins a well filmed and edited video promoting a film still being made, called “Occupy Love”. Here’s a link to the short video for all and any to watch:


        • David Thompson November 24, 2011 at 11:18 am #

          It was his defintion of a cynic. And we live in very cynical times.

    • Charles Wheeler November 23, 2011 at 7:14 pm #

      In The Great Transformation Karl Polanyi argues that when the ‘promise’ of a self-regulating market threatened to destroy human society the first time round, there was no organized or ideologically based reaction, but rather a spontaneous counter-movement which checked the more rapacious aspects of ‘free markets’ in certain specific areas – and that this process occurred pretty consistently across nations with very different cultural, ideological and religious backgrounds ‘undirected by opinion, and actuated by a purely pragmatic spirit’ – in the teeth of market fundamentalists like Herbert Spencer who bemoaned the introduction of the factory acts, child labour laws, the health interventionism of vaccination programmes, food inspection, public drainage and irrigation works, the Contagious Diseases Act, public libraries, etc., etc – all of which were regarded as interferences with the market.

      “The great variety of forms in which the ‘collectivist’ countermovement appeared was not due to any preference for socialism or nationalism on the part of concerted interests, but exclusively to the broader range of the vital social interests affected by expanding market mechanisms . . . it is incorrect to say that the change to social and national protectionism was due to any other cause than the manifestation of the weakness and perils inherent in a self-regulating market system.”

      “Thus under the most varied slogans, with very different motivations a multitude of parties and social strata put into effect almost exactly the same measures in a series of countries in respect to a large number of complicated subjects . . . everything seems to support the assumption that objective reasons of a stringent nature forced the hands of the legislators.”

      “To sum up. The countermove against economic liberalism and laissez-faire possessed all the unmistakeable characteristics of a spontaneous reaction. At innumerable disconnected points it set in without any traceable links between the interests directly affected or any ideological conformity between them.”

      “The liberal myth of the ‘collectivist’ conspiracy of the 1870s and 1880s is contrary to all the facts . . . the universal ‘collectivist’ reaction . . . [is] conclusive proof of the peril to society inherent in the Utopian principle of a self-regulating market.”
      Of course, the reaction only set in after a lot of suffering had been borne by the lower classes with the repeal of the Poor Law, based on the belief that the threat of starvation was the most effective guarantor of a self-regulating labour market.

      As yet, the austerity measures implemented/to be implemented by the coalition have yet to feed through to the general population – with cuts in disability benefits and housing benefit still in the pipeline, tens of thousands of public sector jobs on the chopping block – with the indirect effect on the private sector to follow – and this is before the next round of austerity to be imposed by the technocrats (which must follow if the government is to hold its present course).

      When these measures hit the shrinking middle-class – particularly their children’s prospects – and the aspiring working class (who are already working out what ‘internships’ mean for their children), when places at the best universities once again become the preserve of a small elite, and the chances of anything other than low-paid, short-term, unprotected labour with no pension or healthcare for those under 70 is the promise for the majority, while a tiny minority enjoy all the proceeds of any growth, it may be that a spontaneous reaction will set in.

      There’s a reason why many seven year olds have an instinctive sense of fairness. It’s because they’ve been told from birth not to be greedy, not to snatch, not to bully or show off, to take turns, to be respectful of others, and to treat them as they would wish to be treated. That’s why, when we grow up and find this regimen has put us at a disadvantage to those born with a sense of entitlement and a belief in their own superiority, it begins to grate! That’s why we need to start treating bankers like toddlers who haven’t learnt those lessons – and say NO.

      • Toby November 23, 2011 at 8:10 pm #

        Nature and everything in it is self-regulating, because no one is right at the top pulling all the strings. We are not following orders from God, we are dynamically reacting to the environment and change. Whatever laws and regulations we introduce to ‘get it right’ we ‘self-organise’ into existence. We’re not receiving explicit instructions, therefore we are self-organising. This is of course a very broad point, but I think it’s important none the less.

        So from my perspective, the reason a ‘self-regulating’ market produces the obscene effects you list is not self-regulation per se, but the principles out of which the ‘free’ market emerged; competition, greed, scarcity (what I think of as the Evil Triumvirate). That these core assumptions are projections by us onto nature is evidenced in the beautifully simple observation you make about children’s sense of fairness, and the bleedin’ obvious fact that the vast majority of us were brought up not to be greedy, just as I bring up my children. But telling the bankers No won’t be enough. They’ve been told No many, many times, yet the system keeps producing them in their current form. Obviously it’s not this or that banker, it’s the system. It is the hierarchically extractive dynamic, generated by humanity’s self-regulating attempts to ‘get it right’ over and over and over again, that happened to become the state/market Siamese Twin of this era, which is the deeper problem. Deeper still is the sense of separation we have, coined by Descartes’ cogito ergo sum and ‘mind trapped in the body-machine’ image, that drove humanity to give birth to this elitist, fear-based system, our sense of being somehow above nature, controlling it from afar, Lords and Masters of it.

        But my goodness this is an enormous topic! I fear that what I want to get across does not come across in these comments of mine here. I am not for the Law of the Jungle in the “red in tooth and claw” sense, not at all. But neither am I for a patronizing nanny state that looks after the ‘useless’ among us as it wisely rewards the ‘valuable.’ How are such judgments to be made from on high? Because we currently use money to assess value, and because money is an appalling measure of value, I reject orthodox economics’ or market-based value judgments that arise from the price system. From what I understand, however, the state uses precisely the price system to decide what to do, to send how much money here and how much there. Huge hierarchies are notoriously poor deliverers of good, helpful information too, at least while they form in conditions of greed, scarcity and competition. And I reject too the hope that Better Elites or some Beneficent King can ride to our rescue and do anything lasting within this system. This system can only deliver terribly misleading information about value, and is incapable of encouraging the cooperation, abundance and sharing we crave. It is at its core elitist control and extortion of the non-elite, or rather a dynamic producing that pattern over and over again. To change it, we have to grow up.

    • Andrew November 23, 2011 at 11:26 pm #

      The media have tagged Occupy and other activities as ‘anti-capitalist’: To some extent this may be a convenient ‘tag line’ but probably doesn’t really do it.

      It seems to me that there are several strands of preception at work:

      First, the notion that ‘fairness’ has been violated since those responsible for the crisis are not those paying the price. This is as much about the adverse consequences to others as it is moral indignation.

      Second, the idea of multiple systems failure: there is both widespread perception and evidence that the several systems have completely broken down – (i) the banking system itself [what the banks do], (ii) the system of financial regulation [the governance of the banks], and (iii) the political system [political oversight of the financial industry].

      Third, the perception and reality of individual greed and self-interest and the high profile nature of bonuses and high-end salaries whilst for most families disposable income has continued to decline.

      Fourth, the concern that government and finance has merged to become a single entity, meaning that government activities are treated with increasing suspicion and for many the working assumption has become that ‘whatever government does, it will be in someone’s interest – but not ours’.

      Fifth, the idea that everything is too big, too big to fail, too big to influence, too big to stand up to. Government, banks, the financial crisis. There is a sense of powerlessness and perhaps despair that we are all being dragged down.

      You don’t need to be anti-capitalist or left-wing or an anarchist to feel that almost everything is twisted and out of control.

      It probably shouldn’t surprise us that there is no ‘political’ opposition. Not just because ALL politicians seem so remote and entangled with the current system – so party politics appears part of the problem – but also because so many of the initial assumptions about our present society seem incorrect.

      Because things seem so completely wrong – no one knows where to start to put things right. There seems to be an unspoken agreement that EVERYTHING on the table (even proposed by truly radical thinkers) amount to ‘tinkering’. That the issues are so deeply fundamental and everything is so inter-connected – where could one possibly start?

      It seems that the age of ‘-isms’ has come to a close. Few believe that any particular ideology can work. As others have commented, its not about communism, socialism, capitalism, neo-liberalism. They have all been tried and found fundamentally wanting. The problem, it seems, is at an altogether deeper level.

      Part of the problem is that any system seems to become quickly twisted. Communism by powerful elites, neo-Liberalism by self-interested individuals, Markets by monopolists, Socialism by people that cheat the system and so on.

      Trust seems to be a central issue too. If we are to buy-into a our society we need to have a reasonable of confidence that we are all playing by the same rules. That means returning to a system of win-win rather than ‘winner takes all’. I would argue that boom-and-bust is a direct result of non-win-win games being played out in our societies.

      By belief is that it is the social and political system that is fundamental broken – the financial and economic crisis is a symptom of this and fixing the banks, currencies and level of economic activity should not be the focus of our attention – that – will sort itself out once we get the rules of the game sorted out.

      • Roger Lewis November 25, 2011 at 9:37 am #

        Hi Andrew, in your last Paragraph you hit upon the classic Chicken or the Egg Catch 22. I quote Mish Medlock below,

        Central banks, governments, fiat currencies, and fractional reserve lending are responsible for every major economic bust in history and fools come back begging for more.

        Money is the blood in the veins the oil in the engine As banks create 97% of the money and are interfering with our ability to use money to facilitate our social exchanges and debasing our trust in money which represents our trust in others from the smallest to the biggest transactions.

        The Love of Money is the root of all evil. I think we could start in lots of different places but the money thing and banks is really the way to cut top the chase in my own opinion.

        I am very fond of Unto this last John Ruskins series of four essays very relevant to now and wirtten in 1865. I also read this encyclical from the late 1890’s prompted by a discussion elewhere on the web.


        Hi Bettina I have set myself Rerum Novarum as this mornings study reading, thank you so much for the recommendation it looks fascinating at first blush and is wholly relevant to this discussion and the wider debate perhaps His Holiness Pope John Paul 11 might dust it off and give it a re-working?
        2 hours ago

        Follow Veroushka “Bettina”
        Veroushka “Bettina” Benedicto • Good Afternoon Mr. Lewis. I do not think Mr. Frawley missed a point. However we have different points of view. Culture probably and thank you for bringing up Credo. In SANSKRIT crad. The credit system! Its a model I often use. It means trust. Its kind of an old model. The credit system. I was a credit executive and most of the time use the open book account as tool for loans.

        Also I am happy you find Rerum Novarum interesting! We have discussed Rerum Novarum in full in 1991 as a model for economics and the winner was culture.Its a very interesting encyclical. also there was Centisimus anus. I’m so happy you find it fascinating.

        I hope we can discuss it soon.
        1 hour ago• Like

        Roger Lewis • Paragraph 22 gets to the meat of it the preamble is very good between those two points it seems very concerned with refutation of Socialism, this is quite disappointing but not altogether surprising the Patriarchal dictats re enforced in this stage of the document I rail against. I admire the Feminist struggle and its successes they were up against much more than the socialists based on their Father owns the son stuff. Re enforcing dogma, it seems, is always a sticky wicket and one on which I would decline to ever bat first.
        para 22.

        “(16) To sum up, then, what has been said: Whoever has received from the divine bounty a large share of temporal blessings, whether they be external and material, or gifts of the mind, has received them for the purpose of using them for the perfecting of his own nature, and, at the same time, that he may employ them, as the steward of God’s providence, for the benefit of others. “He that hath a talent,” said St. Gregory the Great, “let him see that he hide it not; he that hath abundance, let him quicken himself to mercy and generosity; he that hath art and skill, let him do his best to share the use and the utility hereof with his neighbor.”(17)

        Para 33.
        To cite the wise words of St. Thomas Aquinas: “As the part and the whole are in a certain sense identical, so that which belongs to the whole in a sense belongs to the part.”(27) Among the many and grave duties of rulers who would do their best for the people, the first and chief is to act with strict justice – with that justice which is called distributive – toward each and every class alike.

        at para 39 it seems to be saying trust in God and the state and everyone do as your told
        and it will all be good. There is a sort of covenant implied as well as explicit which it seems is denied by modern free market ideology and also the hijacking of the state. On private property I find the arguments slightly tenuous and very much couched in an apologia for the status quo in a conservative sense Throwing the baby out with the Bath water is a sensible way to progress but
        apologia are never easy readiing.

        On private property I like this view,

        The earth belongs in usufruct to the living.
        Thomas Jefferson (1743-1826)

        I have quoted this sentiment quite widely and it is fairly well known in ecological circles.

        Paragraph 42 is a really mixed bag perhaps its the mores of the time ?

        I googled this search. Christ as one of and with the poor . and Got this lent Message from The present pope.


        In the Gospel, Jesus explicitly admonishes the one who possesses and uses earthly riches only for self. In the face of the multitudes, who, lacking everything, suffer hunger, the words of Saint John acquire the tone of a ringing rebuke: “How does God’s love abide in anyone who has the world’s goods and sees a brother or sister in need and yet refuses to help?” (1 Jn 3,17).

        I seem to recall this raising a few eyebrows in the corporate media at the time , more incisive reporting no doubt?

  8. Nell November 23, 2011 at 5:05 pm #

    Really interesting take on taxes. One usually, (incorrectly), thinks of taxes as giving money to the government to redistribute and spend on public necessities. The link between taxes and the power of people through democracy is lost. Thanks for reminding me, David.

  9. John Souter November 23, 2011 at 5:29 pm #

    David – In my (humble) opinion your best post to date.

    The choice is stark -but when faced with two corrupted options the solution doesn’t lie in tinkering with either of them.

  10. Toby November 23, 2011 at 5:35 pm #

    I no longer see the distinction between market and state that you see, David, and I’ve argued that here before. The nation state is a relatively new form of the state, which is a social form stretching back into pre-history. Its dynamic is hierarchical and extractive. The reciprocity you see in taxation and welfare isn’t what the state is about at root, and that, surely, is being played out before our eyes here and now. Things like equal rights, no child labour, no slavery, minimum wage, etc., have to be fought for, every step of the way, and against the state. Why? Because the state is just as hierarchical and extractive as the market. Both are competition-based, elitist, and big fish eat little fish. In fact they are parts of the same process of elitist extraction that goes back for millennia. (I’m not offering up a wacky theory here, I’ve gleaned this from scholarly works like “The Art of Not Being Governed”, “Debt, The First 5,000 Years”, “Nationalism and Culture”, “The Early State” and others.)

    The world of the 1900s our generation (Gen X) emerged from is unusual in human history, not normal. A combination of easy oil, advanced medicine, manufacturing and hygiene, led to an exceptional period of growth, which together permitted shorter working weeks, equal rights, public libraries, state education and health care, social security, etc. That is, growth, economic and population, allowed these things to happen, not to mention that they had to be fought for anyway. Not voted for, fought for. Reciprocity is always minimal, just enough to keep the non-elites happy enough to prevent revolution.

    Now those conditions are no longer with us. Easy oil is gone, population growth is slowing, soil is eroding, fish stocks are falling, forests declining. We cannot afford, within this system of usury-based debt-money, the world we have so recently come to think of as normal. We can afford plenty in a different system, just not this wasteful, rapacious, no tomorrow rush to madness we see exploding all around us.

    Usury is the ultimate tax. Government tax is irrelevant in comparison, and besides, as MMT points out, tax is not about reciprocity, it is merely draining money out of the system into nothingness, then adding freshly created money where government feels it’s necessary. And yet still governments borrow money into existence at interest. Even though the mechanics and rules of central bank fractional reserve banking do not require it. So why do governments borrow money into existence? Because they are part of the price system, which is about perpetual growth (having usury as its driving fuel). Without growth this system collapses, which is what we are seeing now.

    The state is not separate from the market. They are twins, or twinned processes, joined by the money system, for extracting labour and other wealth up from the non-elite to the owners of money, the owners of the money system. If we can change that key building block of this totally criminal and corrupt system, we can begin the work of building the sort of society you yearn for, David. But if we don’t attack this system at its root, what’s happening in Egypt will happen everywhere else. The elites, whether by army or politicians, will stay in ‘control’ of the ‘masses’ and mine us till we drop. But we all have to earn that new system, be mature enough to go out there and build it. We should need no permission to do good, together, democratically. We should need no permission to fund ourselves in pursuit of a better world, if we do so democratically, sustainably, intelligently. Easier said than done of course, but the other option–asking politicians, via votes, to Do Something–will not get us anywhere.

    The broader system is the problem. The way it is now defending itself across the world should be clear evidence of that. Money first, humans second. That’s got to change, but such is impossible without a fight and a lot of hard work.

    • Golem XIV November 23, 2011 at 8:22 pm #


      thank you for your very considered replies. I’m not quite sure where we disagree. I wonder if its more in terminology than in desire.

      I separate teh market from teh state only on the basis that democracy is recgnized in one but not the other. That the state has been a tool for controlling the desires of teh non-elites is obviously true. On teh other hand that control has, on occassion actually yeilded conrete benefits for the many and without violence. Think of the creation of the National Health Serivce.

      You may ocunter that this was due to the exceptionally benevolent circumstances of teh cheap energy era. But it was not just those benevolent circumstances. Idealism and teh energy and belief of a group of visionary and noble people like Aneurin Bevan should not be denigrated.

      I suppose where I am puzzled is when you write,

      “We should need no permission to fund ourselves in pursuit of a better world, if we do so democratically, sustainably, intelligently. Easier said than done of course, but the other option–asking politicians, via votes, to Do Something–will not get us anywhere.”

      I think I understand teh sentiment of not waiting around for system approved representative to ‘save’ us but to push forward to make conrete our own desires and own moral vision. BUT when you say – to fund ourselves” and do so democratically aren;t you saying – form some sort of collecitve plan and then appoint agents to carry it through ofr us. Someone will have to oversee teh roads being built. To conduct teh science that underpins teh energy generation etc. Isn’t that government?

      Won;t ther still be a need ofr representatives to do teh day to day business of governance?

      I have heard people suggest that we have the information technology to govern by constant direct democracy. I find that sounds very like ‘the perfect market’. Both imagine a perfect system of informed decisions. Direct perfect democracy sounds fine until you imagine how it is open to its own vices and corruption.

      I don’t think there is any perfect system. I think we do need to make a better world and push for it now. I do not think the market can ever produce it. I don’t think it would ever even try. This is where I part company with those who believe in the free market as a possible mechanism for governance.

      I do still believe, that imperfect as it is, as open to abuse as it is, the democratically elected government can still be a force for good and can help create a better world. But it requires that people engage with it and that they ruthlessly cull those political servants who forget that they are there to serve not profit.

      • Toby November 23, 2011 at 8:56 pm #

        I think the area of disagreement is that representative democracy can deliver the goods within this system, which you appear to believe. I suspect our desires are very similar. I would point out though, that the market is as democratic as the state is; one dollar one vote, one adult one vote. At least, that’s the idea behind the ‘perfect’ views of both. But of course reality doesn’t play out neatly, as you rightly point out. One adult one vote is as hard to make truly representative as one dollar one vote, though for different reasons.

        However, representative democracy is unavoidable, I agree with you. I’m very keen to pursue direct democracy, but like all sort of good ideas floating around right now, it cannot deliver much without other changes happening too. There’s no silver bullet. Direct democracy, from what I’ve read about it this far, scales up using representatives. The key is transparency of course. Which is another huge topic. As soon as we get to ‘sensitive matters of state’ we start needing secrets, deals done behind closed doors, etc. So, transparency of public politics is only possible in a broader atmosphere of trust, which can only be generated by, I would argue, a money system and broader paradigm/philosophy of cooperation and sharing, which can only arise from presumptions of abundance, not scarcity. Which is another huge topic. And so on. All threads are connected, pulling on one affects all others.

        And there is not one place one can start and think, ‘this is the beginning,’ except ‘out there’ by experimenting, failing and succeeding. Which is what direct democracy advocates are doing, in Spain, OWS, Egypt, and elsewhere. Part of that process is discussing money system ideas, and using direct democratic methodologies to select what is felt to be the strongest, then promote them, and put them into practice, experiment with them. This begins locally, necessarily, and, if successful, could scale up in a representative system. With some matters simple science would be the best decider, not democracy. There’s no point voting about how much the moon weighs, or how fast the earth spins, for example. Democratic procedures for arriving at decisions need only be used where appropriate.

        In the end though, even though pretty much everything has to be tackled at once, you have to start somewhere. For me, because state/market are fused by an exploitative and corrupting money system, we necessarily start locally. National and international structures and institutions can’t be trusted, until their members and experts start putting their shoulders to the new ideas and pushing with us, not against us. Once that starts, real change can occur, and perhaps much of what we have built together in local assemblies, much of the things we have tested, can be put to healthier use. The 99% prepare the ground for the 1% to join in when ready. I seek an inclusive process.

        Something like that, or we perish, I feel. We cannot pursue growth without risking environmental catastrophe this century (if it is not already upon us), yet this system requires economic growth if it is not to collapse. That simple fact alone condemns it in my eyes. I have heard no politician even breathe one word against Growth these last years, from either side of the phony left/right debate.

        I don’t want to throw the baby out with the bathwater, I only urge people to see clearly the enormity of the challenge. Wake up and smell the coffee, so to speak. Indeed, the ‘plan’ I most like seeks to preserve as much of what we have as possible. I take your point about Bevan, and there are great people from both political wings, as there are from rich and poor. Although, like value, greatness lies in the eye of the beholder. 😉

        • Golem XIV November 23, 2011 at 9:07 pm #

          I like this reply. This blog is, I hope, all about finding and building upon what unites us not what divides us. There will be plenty of time to split hairs later. But right now we need to find and make comon cause. Thanks for your thoughts Toby.

          • Charles Wheeler November 24, 2011 at 12:20 am #

            The point of my post re: Polanyi was that change can come about despite the absence of an agreed programme or consistent ideology – a trap that the right insist on laying for anyone concerned at the direction of our current system (if the trends of the last 30 years continue for another generation) – who must automatically be labelled ‘anti-capitalist’ (see: Ha-Joon Chang http://goo.gl/dGgVt). Indeed, Polanyi argues that the counter-movement away from laissez-faire or ‘free market’ ideas (and he makes a distinction between the two) – what I would loosely term as the social democratic impulse – was stronger for it. It’s unlikely that we’ll all agree on a common position but that doesn’t necessarily matter – what unites us outweighs those differences (I hope).

            There is a weird symmetry between libertarians on the right and left who both denigrate ‘the state’; I see it as, potentially, a benign conduit for the democratic process, and would argue that the post-war consensus was successful in taming the worst excesses of capitalism – though it’s true that in the last 30 years governments have managed to trample that ideal into the dust.

            Still, I don’t see how, for instance, a health service designed to provide treatment according to need rather than bank balance could be organised in any way other than through the state.

          • Toby November 24, 2011 at 8:12 am #

            David, you’re welcome, but I feel it is me who has to thank you. You do good work, and that has value beyond money’s measure.

            Charles, I agree with you, but always seek to resist left/right antagonisms. As for systems such as the national health service—whose principle I love—coming from anything other than the state, I agree too, but with a caveat. What you refer to as the state in this way is more generally a collective, an organisation of people working for the better of the whole as well as possible. ‘Free’ market ideology purports to be that too, courtesy of The Invisible Hand, but does not deliver (I’m sure you’ve heard the arguments that we’ve yet to have ‘genuine capitalism’ or a ‘really free’ market, so the jury is still out).

            The ‘state’ indeed delivered the national health service, but the groundwork to develop the philosophy that could first conceive of it emerged in opposition to the state. Those who believed in universal suffrage, rights, health as a right, etc., went against the grain of the state and paid in blood for their beliefs. For all sorts of historical reasons, a particular labour government came to power at a particular juncture in history, and performed this act of establishing the NHS. Huge potential for economic growth post-war meant the NHS worked and became the envy of the world. Now that we don’t have similar growth ahead of us, what the state believes it can afford is different. And, using money as a measure of value, and being at heart a monopoly of force and guarantor of private property, the state, in a crisis such as this, is systemically constrained to protect those elements of its makeup which generate so-called profit (since they have highest ‘value’), and impose ‘austerity’ on those which supposedly only ‘cost’ (welfare, education, health). Our insane money system determines what we feel to be ‘affordable’, and the state is as bound by this as the market, now as in 1945.

            That said, what you refer to as state I support too, but I prefer to call it direct democracy, and fear the tyranny of the majority. What all sane humans want is meaningful involvement in society, to feel that their contribution is valued, that they have a meaningful role to play. We are a social beast, happiest amongst friends, family and others of like mind (though adventure, entrepreneurial spirit and aggression are deeply in us too). To have as many humans as possible feeling as valued as possible requires a system that allows finely tuned value assessments on multiple levels. As I said to David, what is the money-value of this blog? My answer is, Who cares. I’m interested in other, more potent and flexible assessments of value. But what I experience when playing with such questions is a sense of having much to do in developing the types of measures of value a healthier ‘state’ or ‘democracy’ requires. That’s new in history, there’s no precedent, so we have to start small, local, and teach ourselves collectively what works best, then scale it up as necessary. But I passionately believe no political party within the current system is even remotely interested in such a process. And that makes me anti-state in that narrow, though important, sense.

  11. Chris L November 23, 2011 at 5:44 pm #

    Completely off topic David – but have you seen today’s Google Doodle? 🙂

    • Golem XIV November 23, 2011 at 8:02 pm #

      I have now you mentioned it. Rather splendid.

  12. Neil (the original one) November 23, 2011 at 6:23 pm #

    Telegraph’s Bruno Waterfield tweets on Barroso’s speech earlier today:

    “EC can override a country to call for it to be put in EU austerity programme

    5 priorities; 1) austerity 2) banks to free up credit 3) more services 4) remove ‘rigidities’ in lab mkt 5) growth friendly

    more EU powers to impose fiscal orthodoxy, a Brussels budget veto, more inspectors.”

    A massive transfer of power from EU national governments to Brussels all round, in other words.

    As for the 5 priorities, how on earth can Barroso reconcile austerity with growth (a strategically placed 1 and 5)?

    Presumably he sees the answer in 4. And we can guess who will be affected and how by removing “rigidities” in the labour market…

    At least James Murdoch has resigned from both the Sun and Times boards, paving the way for a sell-off. Funny how that should coincide with the McCanns having their say at the Leveson inquiry.

  13. Jamie Grififths November 23, 2011 at 6:38 pm #

    I agree with John – a wonderful post.

    At the moment it seems all the various and excellent protest movements like UKUncut, Occupy Wall Street and many others too numerous to mention here need one unifying concept to bring them all on to the same page.

    Maybe debt is the word.

  14. 24K November 23, 2011 at 6:53 pm #

    Pepper Spray Cop http://peppersprayingcop.tumblr.com/

  15. gaz November 23, 2011 at 7:01 pm #

    Sorry for commenting without reading the whole article but you are misunderstanding something very important…
    A sovereign as in sovereign currency is the power to create the medium of exchange in a society – coins/notes etc. Tax originally came about as a way to get a society to use a specific money – the creators didn’t actually need the tax revenue – and by requiring everyone to pay taxes in it they become forced to use it for their day to day transactions.
    Governments voluntarily gave up this privilege but the underlying mechanism still works the same. To understand how you need to understand the most important thing about a central bank.
    All digital transactions create two accounting entries, one on an asset side of a balance sheet (money someones got) and one on a liability side (money someones owes). A central bank is the only place where is is not true. A central bank can create a asset without a corresponding liability (create money) and create a liability without a corresponding asset (delete money).
    When a government spends they tell the central bank to create money and credit it to the appropriate bank account. They do not spend tax revenue. I’ll say it again, they do not spend tax revenue, honestly!
    Governments do however tell the central bank to sell bonds to balance this equation. Bonds are a form of borrowing where the terminology is reversed – the buyer is the lender, the seller is the borrower. The money received from these bonds is deleted. That’s right, it’s deleted – to compensate for the money created earlier.
    The tax the treasury collects goes toward paying the yields – a fancy word for interest – on these bonds. All taxes go to bond investors who are usually banks!
    I’m sure you understand that banks can create debt out of nothing? Well governments create money out of nothing, tax you and give it to banks!
    Good system isn’t it?

    • Neil (the original one) November 23, 2011 at 7:59 pm #

      I’m sure you’ll get some MMT responses if they think you’re wrong on any of this, but I will question one point: “Tax originally came about as a way to get a society to use a specific money”. Correct me if I’m wrong, but it’s my understanding that tax came about as a way to finance war (no doubt David Graeber has much to say on this in his book on 5000 Years of Debt).

      • Golem XIV November 23, 2011 at 8:51 pm #

        Gaz and Neil,

        Thank you Gaz for another (along with Toby’s) thoughtful comment.

        I do take the point you are making regarding the present way that money as a medium of exchange is ceated by the private banks on the one hand and sovereign governments on the other.

        The private banks, as you say, create an asset and a balancing liability, The trick they have pulled off its to keep the asset and force the liability on to the sovereign. THAT is a good trick.

        But I would disagree with some of what you say and imply – I think – if I have understood you correctly. If I haven’t then please just ignore what follows.

        First money was not, I don’t think, created just as the means of getting people to accept the use of a particular currency. At the time tax was introduced the currency, whatever its denomination, was gold or silver. Currencies were interchanged essentially by weight of precious metal content.

        Tax was introduced so that the state could get some of that metal. This was the era before fiat money. Or at its very dawn at least. Debt existed and was even then leading to speculatiuve bubbles and their innevitable crashes. But tax was to get hold of gold.

        As for creating money out of nothing – this is a point I feel strongly about. Though that said I am aware that it is often what you feel most strongly about that you latter find out you were also most wrong about.

        That said however… banks do create money out of nothing by extending credit and enshrine that credit in a tradable form which is now very often a security or an other form of agreement based upon a security.

        Sovereigns, as you say, create fiat money out of nothing as well. And they levy tax on it. I would add – as I did in the article itself – so do the banks but they call their tax – interest. Same function.

        What I want to add and is where we may diverge – is that creating ‘money’ as the medium of exchange is NOT the same as creating perceived and accepted ‘value’ or wealth. You said it yourself – money is the medium of exchange. Fine. Then what is it that money is the medium for? What is it that money is transfering from buyer to seller. It is not money itself because we agree money is just the medium.

        I put it to you that money only works as ‘a medium of exchange’ if it is felt there is something which the medium of money is carrying. SO what is it. That is where future work comes in to my thinking. It is why I talk about our future work and wealth. Tax and the ability to tax is extractive of something both real and finite. WORK. Therefore while money is created out of nothing value or wealth is not. And what is more work is not infinite.

        Tax is an agreemtn between those who exchange the money that the issuer has a claim on the future work of those who use the currency or their citizens. Interest is the same. WIthout that implied ability to siphon off/tax/extract future work, currencies have no value at all.

        Governments can print as much of the medium of exchange as they like. BUT the value it carries is not open to arbitrary creation. It is limited. That is why it is possible to print too much and get hyperinflation.

        What governments and private debt creators covet and need is a claim on wealth creation – work and the resources work transforms in to useful energy and objects. This is where I am still a little wary of MMT. Though I suspect my warriness says more about my lack of understanding than a real weakness of the theory. But I will wait for Mike to tell me!

        Anyway as I said I agree with much of what you wrote.and I hope you will write more.

        • Neil (the original one) November 23, 2011 at 10:37 pm #

          What I (imperfectly) recalled David Graeber saying (in a piece written while he was working on Debt: the First 5000 Years) was passages like this:

          “The first and overwhelming conclusion of this project is that in studying economic history, we tend to systematically ignore the role of violence, the absolutely central role of war and slavery in creating and shaping the basic institutions of what we now call ‘the economy’.”

          “since kings usually controlled the gold and silver mines, what exactly was the point of stamping bits of the stuff with your face on it, dumping it on the civilian population, and then demanding they give it back to you again as taxes? It only makes sense if levying taxes was really a way to force everyone to acquire coins, so as to facilitate the rise of markets, since markets were convenient to have around. However, for our present purposes, the critical question is: how were these taxes justified? Why did subjects owe them, what debt were they discharging when they were paid? Here we return again to right of conquest.”

          “Coinage, certainly, was not invented to facilitate trade (the Phoenicians, consummate traders of the ancient world, were among the last to adopt it). It appears to have been first invented to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to pay their Greek mercenaries. Carthage, another great trading nation, only started minting coins very late, and then explicitly to pay its foreign soldiers.”

          On the displacement of credit systems by currency:

          “The credit systems of the Near East did not crumble under commercial competition; they were destroyed by Alexander’s armies – armies that required half a ton of silver bullion per day in wages. The mines where the bullion was produced were generally worked by slaves. Military campaigns in turn ensured an endless flow of new slaves. Imperial tax systems, as noted, were largely designed to force their subjects to create markets, so that soldiers (and also, of course, government officials) would be able to use that bullion to buy anything they wanted. The kind of impersonal markets that once tended to spring up between societies, or at the fringes of military operations, now began to permeate society as a whole.”


        • PG November 23, 2011 at 10:58 pm #

          It is very doubtful that money originated as “precious” metals. Most probably money originated as “fiat”. Aristotle: “money is law” (nomisma).


          One can google Graeber or Wray for the origin of money. An easy link is:


          • Neil (the original one) November 23, 2011 at 11:08 pm #

            In my post above, I confused taxes with coinage.

            Graeber (written while he was working on Debt: the First 5000 Years, http://www.metamute.org/en/content/debt_the_first_five_thousand_years ):

            “The first and overwhelming conclusion of this project is that in studying economic history, we tend to systematically ignore the role of violence, the absolutely central role of war and slavery in creating and shaping the basic institutions of what we now call ‘the economy’.”

            “since kings usually controlled the gold and silver mines, what exactly was the point of stamping bits of the stuff with your face on it, dumping it on the civilian population, and then demanding they give it back to you again as taxes? It only makes sense if levying taxes was really a way to force everyone to acquire coins, so as to facilitate the rise of markets, since markets were convenient to have around. However, for our present purposes, the critical question is: how were these taxes justified? Why did subjects owe them, what debt were they discharging when they were paid? Here we return again to right of conquest.”

            “Coinage, certainly, was not invented to facilitate trade (the Phoenicians, consummate traders of the ancient world, were among the last to adopt it). It appears to have been first invented to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to pay their Greek mercenaries. Carthage, another great trading nation, only started minting coins very late, and then explicitly to pay its foreign soldiers.”

            On the displacement of credit systems by coinage:

            “The credit systems of the Near East did not crumble under commercial competition; they were destroyed by Alexander’s armies – armies that required half a ton of silver bullion per day in wages. The mines where the bullion was produced were generally worked by slaves. Military campaigns in turn ensured an endless flow of new slaves. Imperial tax systems, as noted, were largely designed to force their subjects to create markets, so that soldiers (and also, of course, government officials) would be able to use that bullion to buy anything they wanted. The kind of impersonal markets that once tended to spring up between societies, or at the fringes of military operations, now began to permeate society as a whole.”

        • Hawkeye November 24, 2011 at 10:35 am #

          This quote from Martin Luther sums up the trickery and confusion between wealth and money:

          “The heathen were able by the light of reason to conclude that a usurer is a double-dyed thief and murderer. We Christians, however, hold them in such honour that we fairly worship them for the sake of their money… Usury is a great huge monster, like a were-wolf, who lays waste all, more than any Cacus… For Cacus means the villain that is a pious usurer and steals and robs and eats everything. And will not own that he has done it and thinks no one will find him out, because the oxen drawn backwards into his den make it seem from their footsteps that they have been let out. So the usurer would deceive the world as though he were of use and gave the world oxen while he however rends and eats all alone.”

          At least some of us “heathen” are not fooled by the direction of the oxen’s footsteps!

          Quoted in Frederick Soddy’s lecture on Cartesian Economics:


          • richard in norway November 24, 2011 at 9:59 pm #

            That is brilliant

          • Roger Lewis November 25, 2011 at 9:46 am #


      • gaz November 25, 2011 at 3:27 pm #

        “Correct me if I’m wrong, but it’s my understanding that tax came about as a way to finance war” – you are correct and David Graeber covers this – they need to pull money out of circulation to give to soldiers etc. non war times they still tax so that they can keep hold of this power.

    • gaz November 25, 2011 at 3:39 pm #

      Books I recommend –
      Debt: The First 5,000 Years – http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867 – understanding the history of finance.
      Political Ponerology – http://www.amazon.co.uk/Political-Ponerology-Science-Adjusted-Purposes/dp/1897244258 – understanding the role psychopathic personalities have in positions of power
      The Structure and Dynamics of Networks – http://www.amazon.co.uk/Structure-Dynamics-Networks-Princeton-Complexity/dp/0691113572/ref=ntt_at_ep_dpt_2 – understanding businesses, institutions, economies etc. from a network prospective.

  16. allcoppedout November 23, 2011 at 7:11 pm #

    I’m in complete agreement and believe we need a moral turn in economics. I wonder how many cops or squaddies watch Robin Hood and empathise with the Sheriff of Nottingham’s stooges? This is what they are on verge of becoming.
    Most reading this blog will have reasonable notions of behavioural economics (pace Steve Keen). I think we need a new moral dimension in the thinking too – and I mean a new dimension suited to the modern world.

  17. Masurian November 23, 2011 at 7:32 pm #

    Brilliant post David, succinct, erudite and accurate, with the caveat that I agree with @ Toby 5:35, which represents a deeper truth again. Everything has to be fought for if we want to keep it; no wonder civics isn’t taught in school, it’s probably the most dangerous subject.

  18. simoncz November 23, 2011 at 7:44 pm #

    I think this is one of the most succint analyses I’ve ever read. It goes right to the heart of the matter. Who’s running things? And what do they intend for our futures?

  19. Pat Flannery November 23, 2011 at 8:21 pm #

    Very thoughtful analysis David together with Toby’s counter analysis.

    Whatever the true relationship between debt and taxes one thing is for sure, neither is inexhaustible. I am wondering if they are both not currently reaching their upper limits. Ireland is a good example. What value is its bondholder debt if it is unrecoverable?

    Surely nobody expects the Irish people to pay back every penny of bank debt that has been imposed on them. The EFFECTIVE taxing power of the state is limited. Debt service that relies on that taxing power is therefore limited.

    Our democarcies may yet be saved by a built-in natural phenomenon: the law of diminishing returns. It may not be our rebellion the bondholders should fear most, but the inescapable laws of economics.

    • Charles Wheeler November 24, 2011 at 12:31 am #

      “What value is its bondholder debt if it is unrecoverable?”

      Michael Hudson’s mantra is: ‘Debt that cannot be repaid, won’t be repaid.’

      The bondholders are currently in the position of a creditor who has called in the bailiff’s – they’re taking the debtor’s TV and three-piece-suite, and have them out on the street, but they’re not going to get their money back.

  20. backwardsevolution November 23, 2011 at 9:06 pm #

    Golem – excellent, excellent writing. Thank you for your great insights. I agree wholeheartedly.

  21. backwardsevolution November 23, 2011 at 9:52 pm #

    Article from Global Reseach entitled, “Non-violence does not have to be passive.”

    “Non-violence can be passive, and does at times necessitate full passivity in the face of impending violence. But in other circumstances, especially where the overwhelming balance of force is on one side, a pro-active non violence can be very effective. The police/military are then forced into a decision: to either use violence against the protesters; or to stand down from the protesters.

    Included in this is the nature of social media and the ubiquitous presence of cameras, videos, cell phones, and their immediate input into the airwaves of the world. If the police are to choose violence, that will be seen globally, even if the mainstream corporate media do not pick up on it. If the police choose to stand down, that also will not be seen in corporate media. But everyone else will see it nevertheless.

    Historically, pacifism did not bring about significant changes to the social structures and politics of the world. The Magna Carta (1215) in England was not donated willingly by the King but forced upon him by his rebellious barons. Interestingly enough, this was not a rebellion to replace one monarch with another, but to limit the powers of the absolute monarchy. The unions that workers attempted to form were not aided and abetted by the corporations that were involved. Union development in the western world is the story of workers’ rights and better working conditions up against the forces used by the corporate elites, the militaries and hired police. Many workers’ strikes were settled by violence before unions began to have some recognition under law, unfortunately later many of them were co-opted by the union bosses to support one political position or another of the elites.

    The women’s suffragette movement was not a peaceful one, and involved violence against the women, with the women resorting to hunger strikes and chaining themselves to barricades in order to pronounce their determination.”


  22. John Souter November 23, 2011 at 10:50 pm #

    David -having already praised your article I would extend that to the quality of comments, with special mention of Toby’s and Gaz.

    There is however one glaring truth that has to be assessed, analysed and exposed to argument -it is in fact, to use the stupid vernacular, the elephant in the room.

    Essentially it is this – are we as a species, in our commonality and present state of evolution advanced enough to make common cause while, as individuals, taking responsibility and discipline inherent in advancing the commonality of the cause?

    In evolutionary terms I regard the last century as a technical glitch. A glitch caused by the acceleration of technological advancement that has most of us baffled and bewildered (with the exceptions of those who have the time, wit and education to observe, analyse and comment – but even they are usually limited to their specialised subjects and are mostly reactionary to current values)

    Are we as the 99%, a force or merely a mob. In the natural world of predator and prey we look on with smug confusion at lions picking out their prey from a sea of buffalo and wonder, with the advantage of our ‘higher intellect’, why the buffalo don’t attack the lions and probably wipe them out. And should this strategy be proven to work would it spread and become hard wired in the herd, to the extent the predators became extinct or adapt to the role of non threatening carrion clearers.

    In the present situation we are in the herd, but are we of it – are we the 1% or the 98%?

    • Hawkeye November 24, 2011 at 10:26 am #


      An interesting perspective. Mother Nature’s 99% is likely to bite back at the Homo Sapien 1% with it’s bloated hunger for energy and resources, and say “enough is enough”.

      Our current “model of the world” is upside down.

      The market should serve mankind, and mankind should serve nature. Currently nature is serving mankind, and mankind is serving the markets.

    • Toby November 24, 2011 at 11:29 am #

      “Death is mother nature’s best invention.” Steve Jobs.

      The buffalo need the lions to stay in a balanced relationship with their environment:

      “A haunting case of such an overshoot took place on St. Matthew Island in the Bering Sea in 1944 when 29 reindeer were imported. Specialists had calculated that the island could support 13 to 18 reindeer per square mile, or a total population of between 1,600 and 2,300 animals. By 1957, the population was 1,350; but by 1963, with no natural controls or predators, the population had exploded to 6,000. The original calculations had been correct; this number vastly exceeded carrying capacity and was soon decimated by disease and starvation. Such a drastic overshoot, however, did not lead to a restabilization at a lower level with the extraneous reindeer dying off. Instead, the entire habitat was damaged by the overshoot that the number of reindeer fell drastically below the original carrying capacity. By 1966 there were only 42 reindeer alive on St. Matthew Island.” Paul Hawken, from “The Ecology of Commerce”.

      But your question is a very important one, and we need to be asking it of ourselves and others. Who, or what, is controlling human population growth? Because we are not addressing this challenge cooperatively and wisely, the rest of nature will do the job for us, and it won’t be to our liking.

      • John Souter November 24, 2011 at 12:59 pm #

        Hawkeye & Toby -the concerns you raise are relevant.

        However, probably due to my ill-defined analogy of predator and prey, I’ve confused my proposition.

        Allow me to repeat this paragraph – “Essentially it is this – are we as a species, in our commonality and present state of evolution advanced enough to make common cause while, as individuals, taking responsibility and discipline inherent in advancing the commonality of the cause?

        To paraphrase the Bard – Do we or do we not – as the 99 or even the 60% -have the commonality of purpose and the harness of direction to empower change.

        That is the question.

        • Hawkeye November 24, 2011 at 2:24 pm #


          In the fight for survival, living systems need cooperation just as individualism is needed from time to time too.

          Robert Axelrod has written much on the evolution of cooperation. Apparently the work of biologist Humberto Maturana covers this too.

          Certainly the recent trend of selfishness & individualism has been harmful and if continued could be very destructive.

          I hold out hope that there is still enough stock of instinctive co-operation in my fellow human beings – in spite of the social conditioning against it!

  23. Neil (the original one) November 23, 2011 at 11:55 pm #

    Telegraph: Ireland demands debt relief, warns on EU treaties

    Europe’s plans for treaty changes to enforce fiscal discipline in the eurozone may fall foul of popular anger in Ireland unless the EU creditor states agreee to share more of the pain.


  24. Neil (the original one) November 24, 2011 at 12:14 am #

    PS I tried to post something on Graeber 3 or 4 times: the first 3 didn’t work, and the 4th did but then disappeared. Is something else crashing apart from the global financial system?

    • Golem XIV November 24, 2011 at 12:33 am #

      Sorry. For reasons I cannot fathom they were spammed. I have approved them and they should appear now. Apologies

  25. Neil (the original one) November 24, 2011 at 1:38 am #

    Thanks. The post I was trying to make is at http://www.golemxiv.co.uk/2011/11/debt-or-taxes-the-battle-fo-our-time/#comment-8963 .

  26. Leon Wolfson November 24, 2011 at 8:04 am #

    You conflate free markets and capitalism.

    – A free-market anti-capitalist

  27. pilibi November 24, 2011 at 10:52 am #

    Excellent point Leon,

    Is Capitalism even a market in any sense.What is the best description of the nature of Capitalism.What would a free market look like and how would it operate?What would constitute a free market ? Is there such a thing as a free market or are all markets rigged? Can any market be free where profit is the motive? What does free mean? Can something like Capitalism which depends on exploitation of people and countries be a market or free.
    Do we want a market model for the exchange of goods and services? What other models can be used?

  28. Skip November 24, 2011 at 12:16 pm #

    I think the reason why people don’t “see” the truth of this is that they are ashamed. They have been convinced that they are on some level accountable for this debt–that they do OWE it. And so they believe it is wrong to fight it.

    Conversely, we might mistakenly vote in a political party we later realise is very, very bad for our society. We can admit our mistakes, and refuse to vote them in again, taking away their power.

    Why will we not allow ourselves to do this with oppressive debt?

  29. Hawkeye November 24, 2011 at 4:50 pm #

    KAPOWWW…. Another laser guided bullshit-busting missile from Andy Haldane of the BoE:

    “The upshot is a potentially significant over-estimation of the valued-added of the financial sector. The size of this effect is potentially very large. For example, Colangelo and Inklaar (2010) suggest that, for the Eurozone as a whole, adjusting for risk-taking would reduce the estimated output of the financial sector by about 25-40 % relative to the current methodology. If the same factor were applied in the UK, the measured contribution of the financial sector would suddenly drop to about 6-7.5% of GDP.

    “There is a second, equally important, reason why the measured value-added of the financial sector in the national accounts may be seriously over-stated. We now know that the risk being taken by banks was not in fact borne by them, fully or potentially even partially. Instead it has been borne by society. That is why GDP today lies below its pre-crisis level. And it is why government balance sheets, relative to GDP, are set to double as a result of the crisis in many countries.”


    Andy just better be careful out there. I just hope he doesn’t get himself Spitzered !

  30. Patrick Donnelly November 24, 2011 at 5:45 pm #

    Excellent points Golem and you should pursue them further?

    The Pyramid theory shows why the banks and governments end up real buddies at the top!

    Sadly, they get careless and this ‘crisis’ shows that. After selling some tasty morsels to Vulture Capitalists, the governments will do away with debt by inflation, one way or another, even if it takes decades!!! More mistakes!

  31. Charles Wheeler November 24, 2011 at 5:53 pm #

    It’s a good point about ‘free markets’. These terms get bandied about as a kind of short-hand without really pinning them down, and consequently mean different things to different people in HumptyDumpty fashion. ‘Free marets’ and ‘laissez-faire’ are often used as synonyms when (as Polanyi points out) they can often be in conflict and part of the function of ideology can be to iron out such inconsistencies.

    But I would argue that the greatest coup of the ‘neo-liberals’ (another slippery term) has been to patent the idea of capitalism – so that it becomes synonymous with market fundamentalism – hence the charge that anyone who questions this particular brand of capitalism, and the accelerating inequality it produces should ‘move to Cuba’, or ‘grow up’ because anything other than uncritical acceptance makes you ‘anti-capitalist’. It’s just another way of marginalizing dissent. As Chang has argued there are many varieties of ‘capitalism’, but that amounts to heresy.

  32. Charles Wheeler November 24, 2011 at 8:14 pm #

    Technocracy or bust?:
    “Eurozone leaders now face a choice between two unpalatable alternatives. Either they accept that the eurozone is institutionally flawed and do what is necessary to turn it into a more stable arrangement. This will require some of them to go beyond what their voters seem prepared to allow, and to accept that a certain amount of ‘rule-breaking’ is necessary in the short term if the eurozone is to survive intact. Or they can stick to the fiction that confidence can be restored by the adoption (and enforcement) of tougher rules. This option will condemn the eurozone to self-defeating policies that hasten defaults, contagion and eventual break-up.”

  33. Charles Wheeler November 24, 2011 at 8:21 pm #

    Maybe austerity isn’t so good for business?:
    “Arcadia, the owner of Top Shop and BhS, reported a 38% fall in annual profits to £133m and says it expects to close up to 260 stores in the next few years.”

    Or perhaps it’s just the weather?:
    Sir Philip said the warm weather had made trading difficult for many retailers: “It’s been the hottest October and November in history. Nobody can deal with that.”

    • steviefinn November 25, 2011 at 3:58 pm #

      It’s the middle ground that is being squeezed, the 2 extremes are doing well, luxury items as illustrated by the increase in high end property sales in London & the bottom end by the increasing presence of retail outlets like Poundland, who incidently benefit from the free use of young unemployed people, or is it Poundworld, i get mixed up. Poundland is owned by Advent International a private equity firm.

  34. Mike Hall November 24, 2011 at 8:50 pm #

    On BBC Hardtalk today:

    ‘Keen: (UK) Government should print money to pay off our debts’


    (Effectively MMT economics, which can also apply, as already proposed by Mosler, Auerback & others, to Eurozone using the ECB.)

    Actually, one of the very significant others who prosed this approach to Euro gov. debt was Richard Douthwaite of Feasta (Ireland).

    Very sadly indeed & a great loss of a wonderful human being & brilliant economist, Richard died last week following a period of illness. 🙁

    • Mike Hall November 25, 2011 at 2:05 am #

      Just watched the full ‘Hardtalk’ Keen interview.

      He was absolutely fantastic. Articulate, calm & fielded every incredulous interviewer reaction to his views with simple brilliance.

  35. Neil (the original one) November 25, 2011 at 12:17 am #


    “The number of youngsters with effectively nothing to do in England has soared by 137,000 – more than 12pc – in the third quarter of 2011 compared with the same period a year earlier.

    Official figures show almost 1.2 million people aged 16 to 24 are classed as “NEET” – not in education, employment or training – as school-leavers continue to bear the brunt of job shortages in the downturn.”

    – and:

    “Thousands of protesters took to the streets in Lisbon today in anger at the 2012 budget designed to help Portugal pay its debts.

    Flights were cancelled, many hospitals provided only emergency care and schools had to shut. The city’s metro also came to a standstill, causing massive traffic jams.”

  36. unstranger November 25, 2011 at 1:32 am #


  37. Patrick Donnelly November 25, 2011 at 6:37 am #

    Cheap credit…… makes a bubble economy and then the bubble bursts. Naturally, the economy has to reform and with markets that are shocked, altered by tax incentives that only work with profit, etc. Politicians are revealed as stupid, unaware and corrupt.

    A perfect time for regime change? But who was best prepared for this? Certainly not the victims, if the credit bubble was used as a weapon…..

  38. Roger Lewis November 25, 2011 at 9:05 am #

    Mish is on very good form today.


    Economies go through these massive boom-bust cycles because of inflation, fractional reserve lending, and rampant credit expansion. The cure cannot be the same as the disease no matter how one tries to distort the facts with untenable correlations.

    Central banks, governments, fiat currencies, and fractional reserve lending are responsible for every major economic bust in history and fools come back begging for more.

    Enough! Eurobonds are not going to happen (nor should they happen).

    • Mike Hall November 25, 2011 at 1:16 pm #

      One of the criticisms that MMT (& others) make is that whilst we’ve had fiat currencies for some decades we have been operating in some important aspects as if money were still pegged to something like gold. Not properly using the advantages that fiat offers.

      The other major failing is that all the ‘models’ of mainstream (neo-classical) economics completely ignored the effects of credit. Nor did it figure in those economists thinking either. It can hardly be an accident that this was highly beneficial to the owners of capital.

      One thing I found really interesting in Keen’s Hardtalk interview was his assertion that the debt problem had also been caused by the reduction over the last 20 years or so of debt free money issuance by government. Specifically, before the rise of electronic banking, some 15% of the money supply was issued (free of debt) in notes & coins. Compared with 3% now. The difference now being debt issuance, further adding to the debt bubble.

      This seems to support the (MMT) view that government net deficit spending should be debt free issuance.

      Obviously, Keen supports the view that banking & finance should revert to its ‘utility’ function & the casino shut down.

      Taking the two approaches together should restore the appropriate balance of credit in the economy & Keen has the correct methodolgy & models to ensure credit is properly supervised.

      Keen also mentioned ‘his colleague’ Michael Hudson in the interview, with the clear implication that they share very similar opinions. Sounds good to me!

      • Hawkeye November 25, 2011 at 3:35 pm #


        The implication from your comment is that the issuance of truly fiat money is that notes & coins are “free of debt”. Whilst it is correct to say that our current system involves private credit creation by banks (repayable at interest), it seems to ignore a still more fundamental concern about real money (notes & coins) even if issued “debt free” by Gvt.

        All money (even non-interest bearing debt free money) is still a form of liability. It is a claim by the holder of that money, against the goods & labour of society who are expected to honour that liability.

        Money is not so much an IOU but a socialised form of “We owe you”, from all of us who have our assets and the fruits of our labours to offer that lucky person who holds the notes or coins.

        Does MMT see it this way?

        • Mike Hall November 25, 2011 at 4:54 pm #

          It was Keen’s clear implication that notes & coins are issued debt free, which I believe to be correct. (Keen & MMT share the same correct view of monetary operations as I understand it.)

          Money only really has that liability when it actually flows & exchanges for goods & services. So what actually occurs depends on the net propensity of currency users to save/borrow vs spend.

          The fiat system allows for the quantity of money to be flexible. What really matters then is consumers’ desires on the one hand (to spend/borrow or save) & available resources to be purchased on the other. Balancing this is what MMT says the currency issuer (& destroyer) must do.

          The overlay with Keen is that Keen points out that debt can build up & get out of hand leading to a serious bust when it is realised that future claims of interest & repayment are unsustainable. This then kills the normal flow of spending which feeds back on itself in a nasty downward spiral. Debt free money issuance helps to counter balance the build up of debt.

          Does that help answer your query?

  39. James November 25, 2011 at 9:28 am #

    Excellent article David, and I agree that this is a major change, a transfer of power from democracy to oligarch finance. Its up to the rest of us (the 99%) to reign this in and reclaim our democracy. Unfortunately many people don’t realise their collective power. Here though I think as the 1% squeeze ever harder they will create the momentum for change themselves.

  40. keekster November 25, 2011 at 10:02 am #

    Watched an interesting programme about the Amish, and a bunch of UK teenagers that stayed with them last night. What struck me was the values of the Amish. Putting aside the religious aspect, their values of importance where family, community and respect for the environment. They use barely any electricity, or oil, they are almost self sufficient in terms of food, money seems to play little role in their lives as does greed, they look after each other, and most of their building materials are sustainable. In a post economic growth world, I doubt they will notice much difference. They seem remarkably resilient. Whereas the modern world will struggle to make the transition to a lower energy world and the disruption to exiting systems. Whilst I would not wish to be Amish, I think we have much to learn from them.

  41. Joe Taylor November 25, 2011 at 10:19 am #

    Most of you fellows here are a mile in front of me as far as understanding economics.
    I’m just about through reading Progress and Poverty – Henry George.
    He makes sense to me. Has anyone got any views about him please?

    • Hawkeye November 25, 2011 at 11:13 am #

      Hi Joe

      I’ve not read much of Henry George, but I understand that he has influenced groups such as the Land Tax movement (so Fred Harrison in the UK), and perhaps also Michael Hudson too.

      I would say that all Heterodox economists have something to offer, as the mainstream economic church is so narrow minded and self-serving. Henry George is probably considered as outside the mainstream so his critique should be reviewed (rather than ignored).

      Perhaps the key message that people like Hudson emphasise is that Gvt’s should tax “unearned” income. So land, rent, profits, Capital Gains, natural resource extraction etc. deserve to be taxed much more than wages (labour).

  42. John Souter November 25, 2011 at 1:04 pm #

    The Technical Glitch & Freezers.

    That’s the underlying problem. The cause of this crises that has sent the bandits of monetary spin into the spins within the spin they’re in.

    I don’t know if any of you have read or heard of “Big History” – you can Google or Wiki it and get an outline. Basically it gives the development and their stages through the World from the Big Bang to conception and on through to the present. In essence it gives you the perspective of the wood as opposed to the tree of modern history which, against the measure of world time, is a sapling struggling for space, light, tenure and now given the present crises, legitimacy.

    According to Big History our species has been on earth around 200,000 years, the vast majority of which we occupied our time as hunter gatherers – 10,000 years ago we switched to an agrarian lifestyle – recorded history covers the last 5,000 years of this, and 300 to 400 hundred ago (its sometimes called the enlightenment) we entered what they have labelled the modern era. Now, while there are still plots in this world where hunter gatherers still operate and farming has perhaps an even more significant role to play now and in the immediate future than it ever had in the past; the learning and development curve we as a species have had to innovate, refine and adapt to, has possibly accelerated so much in that relatively short time, our senses have been scrambled by the G force. So it’s perhaps not so surprising that a few moves or the odd slick spin should slip under the radar.

    After all our brain hasn’t evolved solely to match that accelerated pace. Its capability, to a great extent, has probably been there throughout our history and, while we are slowly uncovering its mechanics and re-assessing its potentials the one thing it, and consequently we, are being swamped with is information.

    Problem is some of this information doesn’t ‘do’ what it says on the tin. In fact some information is designed purely to disguise the fact of the information we have gleaned on the mis-information has reduced it to the level of ridicule so we blithely ignore it – which is why producers of soap commercials have been telling us their powder washes whiter year after year and while we ignore the claim with the contempt it deserves they keep using it because we keep buying it.

    Okay admittedly that’s a frivolous example. But it’s one of probably thousands of information bights our brains cope with classify and file or dump everyday – a subliminal white noise of information and one that this generation has seen accelerate, had to cope with and hasn’t managed very well.

    This model and the intellectual level of communication it demands has not only effected those it targeted it has also infected those who inflict it. They believe it works, as a consequence of which they believe the results it brings, which in turn makes the method adopted seem logical.

    An example of this can be seen in Europe. A huge organisation is created, part of which divides its time between two centres, creates nothing but another layer of bureaucracy and political oligarchy, passes a law which says dead fish must be thrown back into the sea!

    An organisation that spends a fortune from the money it extracts from its members to build a parliament for expensive representatives who haven’t the democratic power to hold or direct an unelected executive to account.

    In an age when clarity and level headed commitment is needed more than ever before, the politicians add another level to the morass that is politics. A self perpetuating growth industry for evangelical liars, tarts and tribunes spouting tripe, demands dead fish are dumped back into the sea in the name of conservation.

    Admittedly the above is only a slightly less frivolous example. But it’s one that is mirrored in one way or another in all the institutions, governments and power brokers that juggle for control of our business and the relationship and sustainability it has with the natural elements that makes it all possible.

    As I write, these ‘power brokers’ (our businesses executive) are claiming we need to review and revamp the policies and revalue the equity we hold in the business. They claim we have a liquidity problem?

    And they are right we do have a liquidity problem. We also have problems of population growth – energy resource and supply – ecology and contaminations – quality and sustainability – we have all sorts of problems that have to be addressed and solved. All are legitimate threats to the continuity and quality of our lives, but not the one they want us to waste our time, efforts and lives on – namely the money game. Continue to allow them to waste our time and lives on that and they’ll lead us into the swamp of oblivion.

    Money as an agreed rate of exchange has a minor purpose when it relates to the law of supply and demand of real products and services. Demand is controlled by the availability of resources –if it’s impossible to get a quart into a pint pot it’s asking for a miracle to get a quart out of it – money distorts this and claims it can and our leaders and politicos with all their free loading current account thinking have hitched on to it and pawned our futures by doing so.

    Whether we can redeem our future and get a chance to revise the values and objectives of our business depends very much on not only resolving the money issue but in resolving the technical glitch it has highlighted and led us into.

    (extract from The People Business) Part 1.

    John Souter 20/11/11

  43. Charles Wheeler November 25, 2011 at 1:18 pm #

    ‘Austerity breeds austerity’: from Bill Mitchell

    .”; . . the world is enduring the consequences of a generation of excessive (private) debt.

    Questions that arise include – What led to the credit binge? Were governments acting in our best interest when they allowed financial markets to virtually take over economies? What are we going to do about this power grab? And more questions along those lines.

    But these issues are silent in the daily and increasing maelstrom that has become the “crisis”. Somehow the neo-liberal elites that got us into this mess have contrived not only to stay out of prison but also to keep their positions of power – whether in corporations or governments – and continue on, virtually as before.

    Except now they have a different agenda. They have worked out that to advance the interests of the financial markets who reward them in various ways it is better to focus attention on blighting the capacity of governments to act according to their democratic remits rather than make deregulation the flavour of the month.

    Well they are proposing tightening regulations on government while refusing to re-regulate the financial sector in any coherent manner.

    The private debt crisis (which was real) has now become the sovereign debt crisis (which is largely a total fabrication or voluntary accession)
    .; . .

    They are blaming individual governments but those same governments were co-opted by the very same elites that are now criticising them. While neo-liberals were boasting and asserting that the the “business cycle was dead” and the only remaining policy agenda for governments was to free up markets and hand over more power to the financial sector – the EC bosses were making that agenda happen.

    Why else did they refuse to create a meaningful fiscal capacity at the federal level? The reason is that they thought by putting governments in a straitjacket (the Stability and Growth Pact) that they could control what they did.

    But no SGP could cope with the collapse of aggregate demand that hit the union in 2007-08. The cyclical swings in budget outcomes (via the automatic stabilisers) swamped the rules and rendered them meaningless and dangerous.

    The only response the elites have it to tighten the rules and enforce them more rigorously. What do you think would have happened if they really did start punishing governments at the onset of the crisis for overseeing cyclical budget deficits that went well beyond the 3 per cent of GDP?

    The only logic would have been to introduce austerity earlier. The outcomes now would have been much worse if they had have done that. They are bad enough already and will get worse given the austerity that is being enforced but under the new proposals the situation would be unthinkable now.”

  44. Charles Wheeler November 25, 2011 at 2:16 pm #

    Balancing the budget: Robert Skidelsky:

    “Prime Minister David Cameron and Chancellor George Osborne blame the eurozone crisis; in fact, their own economic illiteracy is to blame.

    Unfortunately for all of us, the explanation bears repeating nowadays. Depressions, recessions, contractions – call them what you will – occur because the private-sector spends less than it did previously. This means that its income falls, because spending by one firm or household is income for another.

    In this situation, government deficits rise naturally, as tax revenues decline and spending on unemployment insurance and other benefits rises. These “automatic stabilizers” plug part of the private-sector spending gap.

    But if the government starts reducing its own deficit before private-sector spending recovers, the net result will be a further decline in total spending, and hence in total income, causing the government’s deficit to widen, rather than narrow. True, if governments stop spending altogether, deficits will eventually fall to zero. People will starve to death in the interim, but the budget will be balanced.”

  45. Neil (the original one) November 25, 2011 at 3:48 pm #

    Telegraph (Benedict Brogan):

    “If you haven’t yet, Jeremy Warner’s column this morning is a must. His conclusion is that the failed bund auction this week was the last straw, the dead canary, the tipping point (chose your fave from a depleted stock of calamity mataphors). He says:

    “Contingency planning is in progress throughout Europe. From the UK Treasury on Whitehall to the architectural monstrosity of the Bundesbank in Frankfurt, everyone is desperately trying to figure out precisely how bad the consequences might be. What they are preparing for is the biggest mass default in history. There’s no orderly way of doing this. European finance and trade is too far integrated to allow for an easy unwinding of contracts. It’s going to be anarchy.”

    The Economist, with its cover of a euro coming down in flames, asks “Is this really the end?” and answers that, basically, yes it is. A senior minister explained to me a few days ago that contingency planning is now well under way, and takes in both preparations at home for a shock on the banks and work with consulates and embassies abroad, specifically in the eurozone, to anticipate social and banking disruption when it all goes wrong.

    The betting in Team Dave seems to be that the game is as good as up for the single currency. “It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told me. Anyone who has any kind of exposure to the euro – a euro mortgage for example, or a euro account, or euro contracts – should be taking advice now on how to mitigate the risk: politicians in the eurozone have their heads in the sand, and won’t admit that behind the scenes officials across europe are scrambling to fill the sandbags while there is still time.”

    The end is nigh, it would appear – for the eurozone as currently constituted, anyway.

    • Neil (the original one) November 25, 2011 at 4:42 pm #

      Yet stockmarkets are marginally up. Telegraph notes:

      “Bloomberg reports the eurozone nations are considering dropping private-sector involvement in the EU permanent bailout – meaning those with debts sunk in Greek won’t be forced to take a hair cut.”

      “Considering” means nothing – it could be just a way of buying time and placating the markets.

      • Neil (the original one) November 25, 2011 at 5:28 pm #

        It seems not – the Telegraph reports:

        “At present, the planned European Stability Mechanism, a permanent rescue fund, will have a requirement for banks to take losses on their holdings of government debt, just as banks have agreed to do in the case of Greece.

        Reuters is reporting that almost all the eurozone nations are against this forced private sector involvement – including Italy, France and Spain – with the exception of Germany, Holland and Finland. “

  46. steviefinn November 25, 2011 at 4:16 pm #

    Just catching up, phew !! As usual a great start by Mr. G, & then wonderfully added to.

    As to tax, the big boys obviously consider that paying it is only for suckers, us, here’s a new site about havens & the like.


  47. Hawkeye November 25, 2011 at 4:22 pm #


    Neither the UK nor the US should get any smug satisfaction from the demise of the Euro. It just means that the Currency War is ramping up, and that the scorecard is probably something like this:

    Europe: -2
    US: -1
    UK: -1
    China: +2
    Russia: +2

    The mainstream media is still completely missing the big picture here.

    Judged in relative terms to our European cousins we might not be losing as many points as them at the moment, but the BRIC bloc is probably gaining strength at the whole of the West’s expense, as it tightens the noose around the Dollar’s neck.

  48. Charles Wheeler November 25, 2011 at 4:48 pm #

    Why Credit Default Swaps create perverse incentives:

    As a letter to the FT explains, the Life Assurance Act of 1774 decreed that “if a party has no insurable interest to protect, then an insurance policy cannot be entered into.”

    Credit Default Swaps involve the payment of a premium against default – in effect an insurance policy, but without the ‘insurable interest’ element. Hence traders can buy insurance against corporate or sovereign debt – then short bonds they don’t own on a one-way bet.

    But the ‘insurers’ are not required to carry the sort of capital requirements involved in traditional insurance, which is why they could offer lower premiums, but also why the CDS aren’t worth the paper they’re written on. In effect it represents a legalised scam that has magnified the debt crisis.

    • Roger Lewis November 25, 2011 at 5:47 pm #

      In Capitalism a love affair there is a very moving section where a widow and a widower talk about thew life insurance policies paid out on to the spouses employers Walmart was One GE capital I think the other. Niether of the berieved saw any monetary support from the employers who had seem a very good return on their investment. It probably on You Tube somewhere.
      Another plug for this great Thomas Paimne article we have been here before at least our ancestors have.
      John’s post above about big history then this wasn’t the sort of thing we were given in history Class it was all AJP Taylor in my day.


      • John Souter November 25, 2011 at 8:18 pm #

        Roger – an earlier post on the ‘insurance scam’.

        Reward -Dead or Alive – $5 million.

        First let me say the core content of this post has been extracted from Micheal Moores film CAPITALISM: A LOVE STORY.

        I would recommend its viewing.

        According to the film several major American corporations have developed an entrepreneurial approach towards the values they place on their employees well being.

        From memory these include, but probably are not limited to, around ten of America’s biggest employers – Bank of America, Wall Mart, Proctor & Gamble etc. Seemingly, with thousands of employees, some management nerd in either the corporations or the insurance industry unearthed the statistics that some of those thousands would suffer premature deaths every year through natural or unnatural causes.

        The film gives two examples.

        The first is of a middle management husband and father who died of cancer in his late thirties. Shortly after his death, his wife received a cheque from a policy she knew nothing about for circa $1.5 million. The insurers had made a mistake in sending the cheque to her instead of his employers the Bank of America.

        She, nor her children were beneficiaries.

        Subsequently, her representative found out the Bank had another policy out on her late husband which covered them for another $3.5 million. in effect her husbands death benefited the Bank by $5 million; she got none?

        The second example was a young mother who worked as a pastry decorator in Wall Mart.
        She died in her early thirties of asthma. Her husband and family had medical bills around $100k plus a $6k funeral bill to meet. Wall Mart had her covered for an amount that would have covered most of that but Wall Mart believe that charity begins and ends at Head Office.

        Neither of the people referred to in these examples could be considered key executives of the corporations they worked for. As a middle administrator or a decorator of cakes the tragedy of their early deaths could not impose massive costs on their employers in filling the gaps they left in the corporate structure. This assumption would seem to be confirmed by less than pleasant name these policies are known under – Dead Peasant Policies – which makes the accusation of venality all the more tenable.

        In fact for employees of American corporations it should raise doubts as to whether the cavalier attitude of corporate America towards health care is, to a large extent, down the diabolical practices such as these, when, to the balance sheet, their worth is more dead than alive?

        In Britain it is supposedly illegal for a policy to be issued which gives an individual with no direct relationship connections a vested interest in the life, well being and property of another.

        If true, well and good, but does that apply to the corporates where the deals can be done globally from the inner temples of high finance?

        • Roger Lewis November 26, 2011 at 10:15 am #

          Thanks John, It is a very good film, Michale moore is very amusing. have you seen the young Moore Tackling Milton Freedman on You Tube.


          Whoops just read the updated description its not Michale Moore but a joke, Mind you its an interesting clip, Why are Americans so hung up on thei idea of Owning the other person in an argument? what do they mean by it the titles of suggested videos along this videos side panel is all so and so owns such and such, very sad.

  49. Hawkeye November 25, 2011 at 4:48 pm #

    Calling all MMT’ers and money reformers:

    “Petition for the Abolition of credit creation by private banks”


    • Mike Hall November 25, 2011 at 5:23 pm #

      I think this is more one for full reserve banking advocates, like positivemoney.org, which MMT is not. Rather MMT focuses more on the need to properly regulate the +purpose+ for which banks can create credit, on their own & customers’ behalf. Which is also Steve Keen’s position.

      I support positivemoney’s campaign because it includes the same important ‘functional finance’ aspects, available to a sovereign currency issuer, as MMT does.

      Almost certainly an overly simplistic opinion as yet, my take on full reserve is as follows.

      If it’s strictly a balanced money-in before money-out system, I see some problems there in appropriate & timely credit availability to the real economy.

      If it’s not that, & in fact operates as no (as MMT & others say), largely unconstrained by reserves (only capital), which are merely found later to ‘balance’ lending +after+ the fact, then how can ‘full reserve’ work anyway?

      Anyhow, with the ‘debt-free’ government spending clause in there, if I was eliglble to sign a UK Gov. petition, I’d probably sign it anyway as the basis of an important move in the right direction 🙂

  50. Charles Wheeler November 25, 2011 at 6:07 pm #

    This is before the cuts to housing benefit and time-limiting of disability benefits feeds in: http://goo.gl/iiCPH

  51. Mike Hall November 25, 2011 at 6:52 pm #

    On a more uplifting note, a great piece on DemocracyNow on the Occupy movement.

    Features Michael Moore, Naomi Klein & others. Video plus transcript.


  52. Charles Wheeler November 25, 2011 at 7:15 pm #

    “The good news is that if we get through 2012 without the financial collapse of a big bank or a eurozone government, our economy will probably muddle through, flatlining rather than falling back into acute recession.

    The bad news is that 2012 is the year of greatest risk that a bloated bank or over-extended government will be unable to repay its debts – because it is a year when a frightening volume of the loans that were taken out in the boom years fall due for repayment.”
    Robert Peston http://www.bbc.co.uk/news/business-15889136

    Peston uses the classic pincer gambit: the light at the end of the tunnel – if we get through 2012 – allows us to retain some belief in the system, things can get better without radical restructuring; but the ‘frightening volume of loans’ tells us things are going to be sticky in the meantime – justifying the shock treatment (see: Naomi Klein’s ‘Disaster Capitalism’). The problem is, this ‘good cop, bad cop’ approach is wearing a bit thin.

  53. Charles Wheeler November 25, 2011 at 9:04 pm #

    An alternative banking system?: http://goo.gl/qkU7L

  54. Neil (the original one) November 25, 2011 at 9:16 pm #

    Quote from the blurb for their book, Where does money come from?:

    “At the time of the financial crisis, […] banks held just £1.25 in reserves for every £100 issued as credit. ”



  55. Neil (the original one) November 25, 2011 at 10:33 pm #

    Not about banks, but worth pointing out.

    Egypt’s military-industrial complex: the military probably accounts for 10% to 15% of Egypt’s $210 billion economy (I wonder what the comparable figure for the US is).


    Rather like Iran’s Revolutionary Guards:


    Power corrupts.

    • Charles Wheeler November 25, 2011 at 10:51 pm #

      Wikipedia gives a figure of 4.7% of GDP for Dept. of Defence – but there are other costs not included (Homeland Security, veterans’ healthcare, ‘supplementary budget’, etc.) or 20% of federal spending, but this link gives comparative global figures:

      • Neil (the original one) November 26, 2011 at 12:41 am #

        Sorry, my point (obviously not expressed clearly) was not about military spending in Egypt, but the fact that the military there run various businesses.

        Quote: “military-run firms hold strong positions in a wide range of key industries, including food (olive oil, milk, bread and water); cement and gasoline; vehicle production (joint ventures with Jeep to produce Cherokees and Wranglers); and construction, in which it benefits being able to deploy conscripts during their last six months of service. Another source of the military’s untold wealth is its hold on one of this densely populated country’s most precious commodities: public land, which is increasingly being converted into gated communities and resorts. The military has other advantages: it does not pay taxes and does not have to deal with the bureaucratic red tape that strangles the private sector.”

        “The revenue streams from its various holdings help the military maintain the lifestyle its officers have grown accustomed to, including an extensive network of luxurious social clubs as well as comfortable retirements — all of which helps ensure officer loyalty. “

  56. 24K November 26, 2011 at 5:01 pm #

    Max Keiser @ The Kings Head http://www.youtube.com/watch?v=kskAaI-vymQ

    Alessio Rastani final question @ The Bank of Ideas http://www.youtube.com/watch?v=SOCVwb8BYmU

  57. Charles Wheeler November 26, 2011 at 6:12 pm #

    History repeats . . . http://goo.gl/OXGrM

  58. Charles Wheeler November 26, 2011 at 9:26 pm #

    “It is important to remember the basic facts about the budget and the economy. Contrary to the conventional wisdom in Washington, it is easy to show (by looking at the website of the Congressional Budget Office) that we do not have a chronic deficit problem. In 2007, prior to the collapse of the housing bubble and the resulting economic downturn, the deficit was just 1.2 percent of GDP. The deficit was projected to remain near this level for the immediate future, even if the Bush tax cuts did not expire as scheduled in 2011. If the tax cuts were allowed to expire than the budget was projected to turn to surplus.

    All this changed when the collapse of the housing bubble wrecked the economy. The story is simple, the housing bubble generated over $1 trillion in annual demand by stimulating record levels of construction and causing a home equity-driven consumption boom. This demand disappeared when the bubble burst. This is what created the large deficits that we are now seeing. The trillion-dollar-plus deficits are replacing lost private sector demand. Those who want lower deficits now, want higher unemployment. They may not know this, but that is the reality since employers are not going to hire people because the government has cuts its spending or fires government employees. The world does not work that way.”
    Dean Baker: http://goo.gl/OunKb

  59. Charles Wheeler November 27, 2011 at 12:14 pm #

    The mushroom defence:

    “WALL STREET loves to do business in the shadows. Sunshine, after all, is bad for profits.”

  60. Charles Wheeler November 27, 2011 at 5:14 pm #

    Couldn’t resist this description: ‘Kajagoogoo Nazi’

  61. Paulie Ire November 27, 2011 at 5:45 pm #

    Hope you don’t mind me doing this
    Slogger is looking for This to be passed around and since it’s not here yet I thought that I would do the deed.

  62. nell November 28, 2011 at 12:52 am #

    See Steve Keen on BBC’s hardtalk – in the interview he dicusses the current finacial crisis and tries to explain how he would advocate tackling it with debt write off – ie shift the balance from the current ‘protect the creditors at all cost stance of our governments, to favour the debtors.
    Unfortunately, the stupid interviewer keeps on interrupting him and she doesn’t seem to grasp the difference between taxes and debt.

    • Nell November 28, 2011 at 12:05 pm #

      Apologies – the interview had already been mentioned in previous posts – I did do a search before posting, but somehow missed the comments.

  63. Roger Lewis November 28, 2011 at 10:40 am #

    Some interesting Lincoln quotes

    Lincoln often spoke of the moral rightness of both Capital and Labor (“Workingmen”). Like Thomas Jefferson before him, he clearly saw the threat of capital empowered, working in conjunction with the “money power” against the general interests of the people.

    “These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.”

    (speech to Illinois legislature, Jan. 1837.
    See Vol. 1, p. 24 of Lincoln’s Complete Works,
    ed. by Nicolay and Hay, 1905)
    “We may congratulate ourselves that this cruel war is nearing its end. It has cost a vast amount of treasure and blood. . . . It has indeed been a trying hour for the Republic; but I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war. God grant that my suspicions may prove groundless.” (letter from Lincoln to Col. Wm. F. Elkins, Nov. 21, 1864. Essentially)

    Ref: The Lincoln Encyclopedia, by Archer H. Shaw (Macmillan, 1950, NY). That traces the quote’s lineage to p. 954 of Abraham Lincoln: A New Portrait, (Vol. 2) by Emanuel Hertz (Horace Liveright Inc, 1931, NY).

    The Lincoln taught us in school, of course, has been extensively sanitized for public consumption. The Hidden Lincoln; from the Letters and Papers of William H. Herndon, by Emanuel Hertz (Viking Press, 1938, NY), details how Herndon (Lincoln’s lifelong law partner) collected an extensive oral history and aggregated much of Lincoln’s writings into a collection that served as the basis for many “authoritative” books on Lincoln. Also, for further insight into Lincoln’s character, see Lincoln, The Man, by Edgar Lee Masters (Originally published 1931, and reprinted 1997 by The Foundation for American Education).

    Found these on an interesting site still reading through.


  64. Neil (the original one) November 28, 2011 at 3:33 pm #


    “Some chilling words on the euro debt crisis from the OECD (Organisation for Economic Co-operation and Development). Policy makers around the world must “be prepared to face the worst”, they say.

    The failure of EU leaders to stem the crisis could “massively escalate economic disruption” and end in “highly devastating outcomes”.

    “The euro area crisis represents the key risk to the world economy at present. A large negative event would… most likely send the OECD area as a whole into recession.”

    A significant worsening of the eurozone debt crisis would push the single currency area into recession of more than 2pc for the next two years. The US and Japanese economies would also be tipped into recession.

    There would be intense pressure for some countries to abandon the euro, which the OECD warned would amplify the crisis and trigger “massive wealth destruction, bankruptcies and a collapse in confidence in European integration.”

    – and:

    “Turmoil in Europe risks creating a new credit crunch. The funding hole for European banks is deepening as they struggle to sell bonds.

    European banks have sold £267bn worth of bonds this year – just two-thirds of what is due to be returned to investors in 2011 as debts mature, according to data compiled by Dealogic for the Financial Times.

    It leaves banks with a funding gap of £207bn – the first time European lenders have collectively been unable to replace their maturing debt with new bonds in at least five years. Investors are reluctant to touch bonds over uncertainty of the health of some banks, the fate of the euro and the impact of regulation – leaving the prospect of a funding freeze.”

    – but:

    “European markets have surged on reports of an IMF bailout for Italy and chatter of a German-led six-nation bond issuance to raise loans for Club Med.

    Paris CAC up 4.02pc to 2972.

    Frankfurt DAX up 3.63pc to 5691.

    Milan FTSE Mib up 3.79pc to 14464.

    London FTSE 100 up 2.29pc to 5282.

    Madrid IBEX 35 up 3.55pc to 8041.

    Talk about clutching at straws. Confirmation (if any were needed) of the madness of the markets.

  65. steviefinn November 28, 2011 at 10:02 pm #

    Seems as though there is something even worse in the new Greek government than technocrats, such as neo-nazis. From a guy named Mark Ames, he also gives details on the recent arms deals that the Greek military secured from the US & France, seemingly to keep them sweet. I suppose at times of crisis extremists will come crawling from under stones to take advantage of the chaos.



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