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A new Reserve currency to challenge the dollar – What’s really going on in The Straits of Hormuz.

A little over a year ago on 1st November 2010 I wrote what I called “…a little bit of scurrilous speculation.”  In it I speculated that an unintended consequence of QE had been to spur several countries to think very seriously of how they could replace the dollar as their settlement currency for international deals. The Settlement Currency just means the currency both parties agree is stable, internationally trusted and accepted, and in plentiful supply. Which may not be the case for their own currencies . I wondered if doubts about the longer term stability of the dollar and of US debt levels, was combining with a political desire in China and perhaps other countries as well to challenge the US via the dollar with the eventual goal of creating an alternative reserve currency backed by gold rather than, as the dollar now is, by debt.

Various countries have been buying gold.  Russia, China, India have all bought a lot….Which brings me to my speculation.  The list of countries accumulating gold is similar to the list of countries that were reported to be talking about the need for a new reserve currency to replace the dollar.

I wonder if those who are seriously thinking of trying to unseat the dollar and create a currency which is backed by something other than debt and is not under the control of America’s corrupt banks and even more corrupt government, are investing in gold as a precursor to making a real bid for a new currency.

Later, in Making the New Sub Prime Part 2 I looked at the growing network of bilateral agreements in major trade deals gradually replacing the dollar as a settlement currency.

Being a ‘Settlement’ currency is not quite the same as being a ‘Reserve Currency’ like the dollar, but it a major step in that direction. It is, in fact, a very large step.  Which currency large international trades are done in matters. It is a fact that in 2000, Iraq signed an agreement to sell its oil, all its oil, in Euros. Iran was contemplating doing the same at around the same time. The Iraq decision involved the large French bank PNB-Paribas. France was not one of those who supported the war and Washington led a hate campaign vilifying the French.  The worry was that a switch from dollar to Euro settlement might gain momentum. Any major move away from dollar settlement would cripple the US.

In January of this year the India Times reported that India was talking to Iran about moving out of dollar settlements so as to be able to buy Iranian oil despite a US embargo.  India said it was discussing settling in Gold. Remember, India has just signed a settlement agreement with China to use the Yuan.

A very good summary of recent news by ZeroHedge suggests I may have been on the right track. And recently the pace has picked up.

China and Russia have been trading directly in their own currencies and using them both interchangeably for settlement for over a year. As the The China Daily article reports,

China is allowing greater use of its currency for cross-border transactions to reduce reliance on the US dollar, after Premier Wen Jiabao said in March he was “worried” about holdings of assets denominated in the greenback.

Then on 26th December 2011 Bloomberg reported,

Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

China is Japan’s largest trading partner. Japan will also start in 2012 buying Chinese debts. How much Dollar debt will either of them buy? They have both already been buying less.

Two days later (Dec.28th) the Iranain news service reported,

 Iran and China on Wednesday signed two agreements on expansion of trade ties and joint investments. 

These trades too will not be settled in Dollars or in Euros.

Three days after that The China Post reported that on the last day of 2011, US President Obama had signed a new law in which

U.S. imposes sanctions on banks dealing with Iran….Sanctioned institutions would be frozen out of U.S. financial markets.

Sounds tough. A bit like sending an aircraft carrier to the Straits of Hormuz. But as the article went on to report, with only barely concealed delight, the threat may be as hollow as the dollar itself. The law comes with exemptions which may eventually highlight America’s plight rather than its might.

The sanctions target both private and government-controlled banks – including central banks – and would take hold after a two- to six-month warning period, depending on the transactions, a senior Obama administration official said.

Under the law, the president can move to exempt institutions in a country that has significantly reduced its dealings with Iran and in situations where a waiver is in the U.S. national security interest or otherwise necessary for energy market stability. He would need to notify Congress and waivers would be temporary, but could be extended.

And as if to make the point, only a couple of days after this on Jan 7th, came the news that,

Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow.

So now almost none of Iran’s oil will be traded in Dollars.

India and Japan have also recently agreed  a 15 billion dollar currency exchange. This will tie their two currencies closer together.

The list of countries and trades no longer using the dollar for settlement for their trade is now considerable. How close are we to reaching the tipping-point where it no longer makes sense for nations to use dollars and makes more sense for them, both economically and politically,  to use the network of currencies tied to the Yuan? When we reach that point the Yuan becomes in reserve currency in all but name.

China, India, Russia and Iran are all large holders of physical gold and most of them are also large producers of it. None of them are firm allies of the US. They all have long term relations with each other.  All of them have expressed oncercern over US debts and printing. None of them will like QE3, nor Euro printing, when they both arrive later this year.

I think the stand-off with Iran in the Straits of Hormuz over sanctions is as much to do with the moves to replace the dollar as anything else.  The stand off is as much with China and its allies as it is specifically with Iran. The US is testing China’s nerve and the solidity of its network of bilateral currency settlement agreements.  We are seeing military power deployed to counter economic power. I think the US will lose.  Depending on the nature of its loss we could see a precipitate decline in the standing of the dollar as global reserve currency.

2012 could see the beginning of large scale defections from the dollar settlement currency. Which would in turn have massive, perhaps even catastrophic consequences for how the world perceives what is an acceptable level of debt for the US. What is acceptable when you have the global reserve currency is quite different from what is acceptable when you don’t.

And the reverse is also true. If  China can transform the netwrok of bilateral agreements which centre upon China and the Yuan, in to becoming accepted as a de facto reserve currency, then for those, like me, who wonder how China can possibly avoid a hard landing as its bad bank and property bubble deflates faster and faster, look no further.

There is no denying China has an absolutely massive bad debt crisis fermenting. Every one of its banks is gagging on bad loans made to every one of China’s regional governments. Trillions of Yuan worth of loans which will not be repaid, on property and land valued at hugely inflated but now defaulting prices. But if China can become a rival and rising reserve currency at the centre of a new and growing collection of  trading partners then  China can and will bury the debts in a a mass unmarked grave somewhere in its hinterland.

At the moment when America is seen as being no longer the pre-eminant reserve currency and its debt load is re-considered accordingly, China and its debt load will go the other way. America and its currency risk being seen as too rotted by debt to be trusted and it’s claims of economic growth seen as fake, empty, paper-based, accountancy-conjured growth. The Dollar and America itself risk being seen as the fiat currency and fiat nation par excellence .While China and the Yuan will be seen as backed by sold gold and real growth.

One more question to ask in all this is – how far have the big banks and brokerages managed to turn even gold and silver (at least gold and silver  held in the West) in to another fiat currency? Gold and bullion bugs amoung you might argue the question makes no sense. But consider re-hypothecation. How much gold and silver has been pledged and re-pledged, hypothecated and re-hypothecated? How many more paper contracts for and claims upon gold and silver exist above and beyond the amount of actual physical gold and silver?  After all gold and silver are the ultimate in ‘good’ assets which counterparties will happily accept. So it seems likely to me that gold and silver (or contracts for them) will have been in demand in those repo and hypothecation markets. If so then I wonder how many conflicting and contesting claims will surround every ounce of gold and silver in the West when investors start demanding to see their ‘investment’.

I think the big old sterling silver coin may already have dropped for some investors. That is why prices for physical silver are surging above the price for paper claims on silver. I think some traders are getting nervous about buying paper claims on silver and now want only the metal itself. They suspect that in the end, if you have only a paper claim  or contract for, silver that is exaclty all you will ever have – the paper. Only those with the actual metal in their hands, will get what they paid for. I think there is a fiat, paper currency version of gold and silver floating around and parasitising the metals themselves. Those who own that paper stuff may get…well … stuffed.

Where Europe goes in all this is another story which I will try to say something about when I get back from filming. I am away for this week, back on Saturday and away again filming till the 20th.


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227 Responses to A new Reserve currency to challenge the dollar – What’s really going on in The Straits of Hormuz.

  1. redracam January 9, 2012 at 1:47 pm #

    “One more question to ask in all this is – how far have the big banks and brokerages managed to turn even gold and silver (at least gold and silver held in the West) in to another fiat currency?”

    Which country has (had?) more gold than China or Russia?
    Which country after Iraq and Iran no longer wanted to use the dollar as a settlement currency?
    Who had a meeting with Dominique Strauss-Khan scheduled for March (?) 2011.
    Libya ! They wanted to replace the dollar with a gold dinar (they had enough gold to do this approx. 144 tons) to settle all trade of African natural resources. At the same time they were organizing an African central banking system so that the developing countries in Africa would no longer have to sell their souls to the IMF.

    Since the invasion by France, UK, USA and Qatar the Libyan government are no longer talking about any of these truly wondrous, colossal projects. (Also 20 to 30 tons of the gold is missing whilst approx. $30 billion of sovereign wealth invested abroad have been confiscated by banks and foreign governments.)

    Libya is certainly no longer a threat to the status of the dollar in any way shape or form.

    • richard in norway January 9, 2012 at 1:53 pm #

      And where is that gold now!!

      • redracam January 9, 2012 at 2:15 pm #

        I don’t know.
        HSBC was “nominated” to act as the central bank for Libya during the reconstruction. So I assume they are “managing” it.
        How much of this the Libyans will see in the future is in great doubt.
        The 20 – 30 tons of gold mentioned were purportedly sold by the Libyan government to the West but there are lots of question marks around this.

        • OpenThePodBayDoorHAL January 21, 2013 at 10:38 pm #

          My French brother-in-law lived in Tripoli for the last five years and operated at the highest levels of the Libyan economy. He says it is common knowledge that Gaddafi buried his massive gold hoard in shipping containers in the desert, then machine gunned the people who buried it.
          And don’t forget the Italy/Libya connection. Gaddafi bailed out UniCredito with several billions after 2008. Rumor is they didn’t want to pay Gaddafi back.

          • Golem XIV January 21, 2013 at 11:05 pm #

            I am pretty sire Unicredit could not pay back or divest themselves of the Libyan investment.

  2. richard in norway January 9, 2012 at 1:51 pm #

    I’m reminded of the first oil shock, apparently the shah of Iran said that Mr kissinger wanted a high oil price and when asked how long the oil price would stay high, he replied “ask Mr kissinger”. The theory is that because oil is priced in dollars a high price increases demand for dollars and all those dollars eventually must end up in the states, further it has been suggested that the high oil prices hurt European countries badly just when they were starting to pull ahead of the states in per capita GDP.

    • Phil January 10, 2012 at 1:36 am #

      Richard, are we talking about the oil-shock of 1973? Didn’t that have the by-product of wrecking the economic basis upon which the post-war domestic settlement rested?

      • richard in norway January 10, 2012 at 1:05 pm #

        Yes, it did and the death of keynesism. The us had come off the gold standard shortly before, with the rise in oil prices the dollar was unofficially put on the oil standard. I don’t know how much truth there is to this story about kissinger wanting a high oil price but it is true that the us has done well out of it in some respects, and it could be argued that without the high oil prices driving demand for us dollars, its value would have collapsed meaning the end of reserve status

      • richard in norway January 10, 2012 at 1:24 pm #

        See this link


        And there are many others like it

        The truth is out there, prehaps

        • Robert LeRoy Parker January 25, 2012 at 10:03 pm #

          Hi Richard,

          The 1973 bilderberg minutes which are available online somewhat confirm this. They also confirm the arab preference for gold reserves. They are quite interesting, focusing almost entirely on the world energy situation and the balance of payment issues arising from arab oil domination. Near the end a US speaker talks about anticipating oil near $12.00/brl within the next few years while everybody else is talking about ~$4/brl.

          Sheikh Yamani has also confirmed the Henry Kissinger/Shah agreement in interviews several times. US oil could no compete with the Saudis and the price had to be raised to make offshore, oil sands, etc competitive.

        • Phil January 15, 2012 at 1:11 pm #

          just come back to this, thanks Richard.

    • Gary January 12, 2012 at 9:17 pm #

      This is correct , and is documented in the book PetroDollar Warfare


      This explains all the current geopolitical wars and posturing. The USA loses its dollar reserve status, it is finished economically. The big stick ie the most powerful military in the world, is used to beat those who wish to stray. However, the world is becoming much too difficult to police and things are unravelling at pace. There are some who say that the EU is being targeted by US ratings agencies and hedge funds to destroy the Euro, once thought of as a credible alternative to the dollar. The Euro is so flawed that it may implode on its own. The more serious threat is coming from the China-Russia-India-Iran axis.

      I expect all out war, maybe WWII, in a last ditch attempted to staunch the dollar renegades. Never underestimate the resolve of those involved to defend the dollar at ANY cost. The dollar relationship also explains the UK-USA “special” relationship. It is a banking relationship between London and Wall st. Hence the UK fighting side-by-side in the “war on terror”

      • richard in norway January 12, 2012 at 10:50 pm #

        Thanks, but its still only a theory, admittedly its a theory that fits the facts and makes the world easier to understand. My own personal feeling is that this is correct but we are unlikely to ever have conclusive proof. I need to get hold of that book, does it start at the creation of the petrodollar or with the Iraq war?

  3. richard in norway January 9, 2012 at 2:02 pm #

    It occurs to me that the failure of the euro is a necessary step in the defence of dollar reserve status because the idea of many countries using the same currency is destroyed and Russia, China and others are thinking about a gold backed multinational currency, I think. I can’t imagine Russia trading a us controlled reserve currency for a Chinese controlled one and the same would apply to all the other countries, would it not?

  4. Godfree January 9, 2012 at 2:29 pm #

    The Economist has predicted a hard landing or, more lip-smackingly, a “crash and burn” for China’s economy 51 times in the past 30 years. That is unlikely for many reasons, the first of which is our tendency to see China in our own image. But is so different that it is difficult to know where to begin.
    China is a unitary state: its people trust and respect its government to an extraordinary degree (86% according to Edelman, Pew, et al.) and are willing to cooperate with it.
    The national Government is extremely honest, competent, flexible, decisive, and even nimble (as we saw during the Great Crash). It also possesses immense foreign reserves in addition to a sovereign currency.
    The Chinese pay for most things, including real estate, in cash. They also save enormous amounts of money (relative to income) and have done for centuries. Their corporations do the same.
    Perhaps most important of all, their economy continues to grow at an otherwise unheard-of rate, and will continue to do so for familiar, internal reasons, for the foreseeable future. And a rising tide does indeed lift all ships, even those which are temporarily stranded on a sandbar.
    The Chinese know these things, too, and that’s half the battle.

    • Synopticist January 9, 2012 at 5:14 pm #

      This is a fascinating question, and we will see how it works out. I’m in the Golem camp, in that a credit driven, speculative over-building boom is still a credit driven over-building boom, wherever it may be.

      I saw a graph recently ( can’t find it i’m afraid) of property prices in China compared to the US in August 2011. The average apartment in Beijing cost only slightly less than in New York, (so more than in, say, Chicago), while the cost represented 35 times the average Chinese salary, compared to 11 years in New York and 18 years in Singapore. These prices are clearly insane, and have obviously fallen since then. Furthermore, most of the buyers of property in China DO borrow to pay for them.
      The Chinese economy is wildly dependant on the construction industry, which is itself dependant on local government funding, most of which seems to come from taxes on property sales and more borrowing.

      All this will impact the murky world of Chinese banking and shadow banking in some form, and it’s hard (for me at least) to see a happy ending.

  5. The Dork of Cork January 9, 2012 at 2:45 pm #

    A comment made by FOFOA back in 2010 rings through…………

    “The US exorbitant privilege began at the International Monetary Conference of 1922 when for the first time international banks were allowed to accept not only physical gold, but also US dollars (paper gold) as reserves. But all US dollars held by foreign banks were put on deposit back in New York City banks. And there they were counted as local US deposits, the same as if you and I put our gold into the bank, in addition to being counted abroad.

    These deposits were used as the basis for credit expansion in both the US and in the foreign countries claiming them as reserves. This process doubled the money supply paid out through the US balance-of-payments deficit for the last 88 years (except that money which France demanded in gold). US deficits never contracted the aggregate purchasing power of the US after 1922, the way deficit settlement is supposed to. It also exported US inflation outward. And it continues today.

    The only solution to this problem is the explosive expansion of the gold base (volume x price). Volume can be expanded through mining, but not fast enough to suffice in a crisis. Therefore price will take the brunt of this reset. The price of gold will explode.

    1971 was the first step toward Freegold. The final step is today”.

    This was the birth of the petro dollar in my opinion – the credit is the BTUs they can rip out of the ground and not record as depletion.

    • Charles Wheeler January 9, 2012 at 9:21 pm #

      The ‘gold standard/straitjacket’ is no panacea. Indeed, there never has been a ‘gold standard’ – in times of relative stability the relationship of currency to gold might hold – but as soon as some volatility returned (which is inevitable with dynamic, competing economies) the ‘standard’ was revised or ‘suspended’. So there’s a reason why currencies broke with gold.

      ‘Libertarians’ use the ‘gold standard’ as a trojan horse for further neutering govt. action, but as Simon Johnson comments: ‘. . . would [abolishing the Fed] just concentrate even more power in the hands of the largest financial players? It is hard to find a moment of greater inequality of power than that of the Gilded Age of the late 1800s – with the gold standard and the associated credit system firmly working to the advantage of J.P. Morgan and his colleagues.’ http://goo.gl/BnL2I

      J.K. Galbraith’s Money: Whence it Came, Where it Went also offers a slightly different perspective on what Keynes termed a ‘barbarous relic’ so beloved of James Rickards.

      There’s an arresting passage in The Lords of Finance when FDR suspends the gold standard, signalling ‘the end of western civilization’ according to Lewis Douglas. As the economy recovered: ‘Even the Morgan bankers, historically among the most staunch defenders of the gold standard, could not resist cheering. “Your action in going off gold saved the country from complete collapse,” wrote Russell Leffingwell to the president.’

      Roosevelt announced that: “Our dollar is altogether too greatly influenced by the accidents of international trade, by the internal policies of other nations and by political disturbances in other continents. Therefore the United States must take firmly in its own hands the control of the gold value of the dollar.” As Liquiat Ahamed comments: ‘Whereas the first fireside chat had brought clarity to a complex issue, this one was a masterpiece of obfuscation.’

      Subsequently Roosevelt would meet with his advisers to determine the price of gold over a soft-boiled egg: ‘They began at $31.36 an ounce. The next morning this increased to $31.54, then $31.76 and $31.82. No one had a clue how they went about setting the price, although everyone presumed that some subtle analyses of the world bullion and foreign exchange markets went into their calculations. In fact, the choice of price was completely random. All they were trying to do was push the price a little higher than the day before. The exercise brought out the juvenile in Roosevelt. One day he picked an increase of 21 cents, and when asked why, replied that it was a lucky number, three times seven.’ By 1934, after a period which Keynes described as ‘the gold standard on the booze’ the dollar had depreciated by 40%.

      Looking back one finds similar periods in the history of the ‘gold standard’ which suggest that any economic stability coinciding with its operation was as likely to be cause rather than effect.

      So, the fact remains: on a return to the ‘gold standard’ who determines the price? Governments making it up as they go along, or ‘the markets’ – i.e. Goldman Sachs, JP Morgan, Citi through speculative frenzies dependent on the manufactured headlines of the day?

      And how would that help the rest of us?

      • Gary_UK January 14, 2012 at 4:28 pm #

        It would be a physical only market, the price being determined by the whole market, every participant, including central banks.

        The key thing is it will be physical only, as the paper/electronic gold markets will have disappeared in a puff of smoke as everyone realised what the MF Global customers have just realised!

  6. Nell January 9, 2012 at 3:00 pm #

    On the topic of currency value – last week I read a peice in zerohedge on the balance sheets of 3 central banks (Fed, BOJ and ECB). The claim is that the central banks now implicitly account for up to 25% of developed world GDP.
    Does anyone here have thoughts on the implications of these developments? I am not sure what to make of it.


    • BHomes January 9, 2012 at 4:36 pm #

      Gavyn Davies of FT has started a blog into this


      • Nell January 9, 2012 at 6:43 pm #


        • Nell January 9, 2012 at 7:12 pm #

          Just read some of Gavyn Davies comments and they seem to be a little circular or contradictory.
          For example, he makes the claim

          ‘the central banks have purchased enormous quantities of government bonds outright. In this earlier blog, I calculated that around one half of the bonds issued to fund the budget deficits of the US, UK and eurozone since 2008 have been acquired by the Fed, BoE and ECB.’

          When you go the earlier blog, all he says is that the rise of the central bank balances is equivalent to 50% of cumulative budget deficits. This is interpretation, not evidence that the balance sheets of the central banks have been used to fund deficits.
          This claim is also contradicted by his own analysis, where he argues that the purpose of the balance sheet increase is to rescue the banking system by providing liquidity. Central banks buy collateral (usually the crap stuff) which banks can’t sell on the open monetary market to fund their operations and prevent bankruptcy or futher taxpayer bailouts.
          What bothers me is that he seems to be trying to make the case that government overspending is a significant cause of the massive rise in the central bank balance sheets.
          For example

          ‘Accordingly, central banks have engaged in outright purchases of government debt from the secondary market. Although this has enabled them to claim that they are not “directly” financing governments through monetisation, that is in fact exactly what they are doing, albeit at one remove.’

          Now, I can see that central banks might be buying Eurozone bonds, to prevent the collapse of the Euro, but why would they do this for the UK and the US, as Davies claims?

          • Phil January 10, 2012 at 12:11 pm #

            Gavyn Davies, ”was the head of the global economics department at Goldman Sachs from 1987-2001, and was chairman of the BBC from 2001-2004.”

  7. steviefinn January 9, 2012 at 3:26 pm #

    Some good stuff on the 2nd half of the Keiser show. David Morgan from silver-investor.com, mentions something about certain people finding that on paper their silver bullion was now, If I remember rightly, only worth 72%.


    I somehow don’t think the US is going to give up it’s empire without a fight.

    • Charles Wheeler January 9, 2012 at 4:05 pm #

      Gerald Celente found that out the hard way!: http://youtu.be/GCo2q4gsbNI

    • John Souter January 9, 2012 at 4:21 pm #

      Ach Stevie – half my life is spent following up the leads and referrals on this blog.

      David – another sound article, my headline choice would have been – 2012 AND ALL THAT GLITTERS DOESN’T EXIST?

      Reserve currencies are only another trader scam – producers who sell only need to contract for payment in the currency of their home nation.

      I’m disclosing my antiquity here, but I remember arguing in the late 60s early 70s when the £ having fallen like a stone against the dollar, yen . franc. and just about every other currency, other than those based on Yak dung; why the UK wasn’t simply investing the income from NI (that’s insurance not Ireland) in them, thereby insuring the UK had the best pension pots and health care relative to living standards in the world?

  8. richard in norway January 9, 2012 at 4:08 pm #

    Unicredit is down 43% today. Price is just over two and half euros today, back in June it was over 15 euros. Bailout before the end of the week? Or just a blowup?

    • richard in norway January 9, 2012 at 4:17 pm #

      Sorry, price today is €2.28

  9. bill40 January 9, 2012 at 4:41 pm #


    What is the difference between a currency backed with gold and one backed with debt? Fiat sovereign currency is just that, the monetisation of a nations wealth, a means of exchange. That is the true backing of any currency. The gold bugs will lose “on a long enough timescale”.

    In the end the same people who owned the debt will own the gold. Nothing will change.

  10. The Dork of Cork January 9, 2012 at 5:08 pm #

    @Bill 40
    Gold is about final settlement between nations , we are not merely talking about national currencies & their effects withen their borders – the use of a pseudo national currency as the global reserve currency or a IMF SDR is the road to malinvestment.

  11. Hawkeye January 9, 2012 at 5:28 pm #

    All empires have their time in the sun:


    Certainly stacks up with Obama’s recent statement that the focus for the US military is now Asia. So let me see (Russia, India, China, and at a pinch Iran) are all in the Asian sphere.

    The big test is whether the BRIC+ Bloc will stick up for Iran. They didn’t do much when the US tried to make an example of Iraq. Maybe this time the combined might of the BRIC+ Bloc will hold together.

    It could still get very ugly though. The US will not go down without a fight.

    Rob Newman was pretty early in on this angle by the way in his superb “History of Oil”:


    • steviefinn January 9, 2012 at 6:48 pm #

      Good to see ya Hawkeye.

      I wonder who would line up for the US, after all Iran has or will have WMD’s, unlike Blair & Bushes pretend Iraqi ones, Israel would join up of course, Britain, Europe the UN ?. Goering was right in saying that all you need in order to control the population is to invent a threat, an enemy. Nothing like a threat to Western faux democracy to pull everybody together, & to act as a gigantic scapegoat.

      • Hawkeye January 9, 2012 at 7:26 pm #

        Cheers Stevie

        Nice of you to say so! Been a bit busy lately hence a low profile.

        Who would line up behind the US is THE crunch question!

        Britain is a definite yes. As would Israel and a few other of the US’s puppet states (e.g. Saudi). The UN is a definite No. Remember they didn’t really sanction the Iraq invasion, and this time Russia & China will almost certainly veto an aggressive attack on Iran.

        Europe is the main swing voter here. Remember how tentative they were with Iraq. Hence the Azores summit was used to raise the stakes against the waivering Europeans:


        I don’t think many of the European countries will tow the US line next time.

        Attacking Iran will be a pretty much unilateral US event, with a few smatterings of false flag events to go around to at least partly justify their actions.

  12. Piano Racer January 9, 2012 at 6:32 pm #

    When this game ends, it all ends for the US. Any time they do something that doesn’t make sense on its face, like the NDAA or SOPA or PIPA or even the executive’s unilateral invasion of Libya and the subsequent sodomization / murder of their admittedly despotic but for decades US-supported ruler who was in the process of creating a hard currency union to trade oil in, its because that was what they thought they had to do to keep the music playing.

    The reams of documentation of the crimes of the bankers and the governments, much of it diligently put forward by our wonderful Golem XIV, do you think all of that was/is solely motivated by greed? Certainly some, but from my view much can be explained as the desperate, panicked, terrified moves of a cornered regime.

    Think of it this way: the US dollar isn’t really a fiat currency, it is? Its backed by oil. 100 of our cotton/linen doodads that we can create out of thin air will get you a barrel of oil, and in the past its been much cheaper than even that. The energy contained in a barrel of oil is something like the equivalent of… well, its a lot by historical standards. Chris Martenson makes a good analogy here:


    “And how much ‘work’ is embodied in a gallon of gasoline, our most favorite substance of them all? Well, if you put a single gallon in a car, drove it until it ran out, and then turned around and pushed the car home, you’d find out. It turns out that a gallon of gas has the equivalent energy of 500 hours of hard human labor, or 12-1/2 forty-hour work weeks.

    So how much is a gallon of gas worth? $4? $10? If you wanted to pay this poor man $15 an hour to push your car home, then we might value a gallon of gas at $7,500.”

    Now multiply that by 42.

    So the group who has the power to print the cotton/linen rectangles that are the only objects on the planet that can (until recently) be traded for this magical substance… well, they’d probably have a lot of power, wouldn’t they? You might say they had more power than those that were actually pulling the magic goo out of the ground, since they have to expend zero effort to acquire it.

    Its like this: The banks/fed print the dollars, the people borrow / work hard / steal to earn the dollars, the government taxes the people and the businesses for the dollars, the government uses the dollars to buy the oil and raise the army to threaten those who produce the oil into accepting only their dollars for it. The US government also trades the dollars to other countries for all their neato-toys and whizgadgets because the other countries want the dollars so they can buy oil too.

    Neat trick, eh? But it looks like the game is finally coming to an end…

    Also, QE is just the process of the government going directly to the banks for the dollars instead of making the people earn them first. Very thoughtful of them! Only problem is that that can result in more dollars running around the system, which tends to drive the price of the magic goo up due to laws of supply and demand. Takes time though…

    The obvious and ongoing manipulation in the precious metals paper markets (see http://gata.org) are one of MANY extremely compelling reasons to hold in your personal possession precious metals. The price discovery mechanism is very obviously broken, and if/when the currency panic commences, does anyone really believe that the value of physical metals, rather than a tenuous claim to same, will not greatly increase in value? Camels and eyes of needles come to mind.

    Buy and hold physical, and wait. You’re going to need a time horizon of more than a couple of months, but in the medium/long term you will be well rewarded when bits and bytes and cotton and linen are re-evaluated as concepts of any value whatever.


    Taking the first step outside the “mainstream” can be frightening, but holding those wonderful, rare, beautiful and historically significant metals in your hands will make you a believer in short order. You can gamble with paper and electrons if you wish, but in my view tangible items of real value with no counter-party risk are an EXTREMELY important component to any investment strategy, especially given recent global economic events and present circumstances.

  13. Roger Glyndwr Lewis January 9, 2012 at 7:12 pm #

    From last April, Ellen Brown is very good on this too, one of my other favourites.


  14. John Souter January 9, 2012 at 8:10 pm #

    Will the people of the US line up with their government and its neo masters -that is the question?

    Britain is not a definite, unless they want to lose Scotland by default.

    For my money the Iran question is a diversion primarily to ease the financial quagmire out of the news.

    As to the UN, I don’t think it would get as far as the Security Council.

  15. Pat Flannery January 9, 2012 at 8:56 pm #


    1. Who owns the Fed?
    2. What happens to its profits/surpluses?
    3. When did it last publish accounts?

    Seems to me we should start by demanding transparency from the world’s central banks.

    • StevieFinn January 9, 2012 at 9:13 pm #


      The Fed is , surprise surprise, owned by private banks, according to that woman again, Ellen Brown. Apparently they don’t make a profit either.


      I’m not sure about accounts, last I heard they had kind of mislaid a trillion or so. You might like this vid.


    • John Souter January 9, 2012 at 9:39 pm #

      Pat F

      Supposedly the big five private banks – but in fact the Fed owns the Fed and prints the funds to keep the privater banks afloat.

      It doesn’t need to make profits or be concerned over surpluses – since it prints money it can burn them or perhaps sneak them out in expenses or bonuses.

      If you could print and burn money would you bother with accounts?

      Transparency! Is it possible to extract DNA from a fart?

  16. richgb January 9, 2012 at 10:21 pm #

    The propaganda machine in the US is oozing out of bed and starting to play Bernays’ tune – see this article from Aljazeera:


    Are there any students out there willing to write a report on the status of Iranian arms?

    • Charles Wheeler January 9, 2012 at 10:57 pm #

      Cue references to ‘elite revolutionary guard’.

      Apparently: ‘Iran might become so fearful of an overt war that it starts one itself.’

      It’s Iran that’s on the warpath, intent on picking a fight with the nation that spends as much on defence as the rest of the world combined: ‘it is only a matter of time – and not much time – until Iran’s neighbors and the international community will confront a fateful choice: either accept Iran as a nuclear power, or decide that the mere prospect, as it becomes more realistic, is leading to war.’

      As a footnote: http://goo.gl/AcLvk

      “And all the while, lest one should be in any doubt as to the reality which Goldstein’s specious claptrap covered, behind his head on the telescreen there marched the endless columns of the Eurasian army — row after row of solid-looking men with expressionless Asiatic faces, who swam up to the surface of the screen and vanished, to be replaced by others exactly similar.

      In its second minute the Hate rose to a frenzy. People were leaping up and down in their places and shouting at the tops of their voices in an effort to drown the maddening bleating voice that came from the screen. The little sandy-haired woman had turned bright pink, and her mouth was opening and shutting like that of a landed fish. Even O’Brien’s heavy face was flushed. He was sitting very straight in his chair, his powerful chest swelling and quivering as though he were standing up to the assault of a wave. The dark-haired girl behind Winston had begun crying out ‘Swine! Swine! Swine!’ and suddenly she picked up a heavy Newspeak dictionary and flung it at the screen. It struck Goldstein’s nose and bounced off; the voice continued inexorably. In a lucid moment Winston found that he was shouting with the others and kicking his heel violently against the rung of his chair. The horrible thing about the Two Minutes Hate was not that one was obliged to act a part, but, on the contrary, that it was impossible to avoid joining in. Within thirty seconds any pretence was always unnecessary. A hideous ecstasy of fear and vindictiveness, a desire to kill, to torture, to smash faces in with a sledge-hammer, seemed to flow through the whole group of people like an electric current, turning one even against one’s will into a grimacing, screaming lunatic. And yet the rage that one felt was an abstract, undirected emotion which could be switched from one object to another like the flame of a blowlamp … And yet the very next instant he was at one with the people about him, and all that was said of Goldstein seemed to him to be true. At those moments his secret loathing of Big Brother changed into adoration, and Big Brother seemed to tower up, an invincible, fearless protector, standing like a rock against the hordes of Asia, and Goldstein, in spite of his isolation, his helplessness, and the doubt that hung about his very existence, seemed like some sinister enchanter, capable by the mere power of his voice of wrecking the structure of civilization.

      The Hate rose to its climax. The voice of Goldstein had become an actual sheep’s bleat, and for an instant the face changed into that of a sheep. Then the sheep-face melted into the figure of a Eurasian soldier who seemed to be advancing, huge and terrible, his sub-machine gun roaring, and seeming to spring out of the surface of the screen, so that some of the people in the front row actually flinched backwards in their seats. But in the same moment, drawing a deep sigh of relief from everybody, the hostile figure melted into the face of Big Brother, black-haired, black-moustachio’d, full of power and mysterious calm, and so vast that it almost filled up the screen. Nobody heard what Big Brother was saying. It was merely a few words of encouragement, the sort of words that are uttered in the din of battle, not distinguishable individually but restoring confidence by the fact of being spoken. Then the face of Big Brother faded away again, and instead the three slogans of the Party stood out in bold capitals:




  17. Charles Wheeler January 9, 2012 at 10:31 pm #

    “Sixty-five years late, let’s break up the Wall Street cartel and re-establish the integrity of the capital markets.”
    William Cohan: http://goo.gl/8cwDs

  18. johnm33 January 9, 2012 at 10:38 pm #

    Is this a first, well deserved anyhow http://www.informationclearinghouse.info/article30190.htm

  19. Pat Flannery January 9, 2012 at 11:17 pm #

    My intention was to start a debate as to why any country should accept the US dollar as the world reserve currency particulalry as to why any country should entrust the health of its economy to a secretive private banking cartel based in the US outside the control of the US Government.

    Surely the whole concept of central banks must be examined worldwide. It seems to me that they are all franchises of that private banking cartel called the Federal Reserve, which is neither federal nor a reserve.

    Independence from this “Fed” should therefore be the primary concern of all Europeans. Indeed it should be the primary concern of all Americans.

    • steviefinn January 10, 2012 at 11:38 am #

      Good luck with that Pat.

      This site concentrates on Fed corruption, lots of stuff on Paulson, Bernanke & Geithner.


    • John Souter January 10, 2012 at 2:18 pm #

      Pat F. Richards link Jan 10th is worth a read especially since it deals directly with the concept that probably created the problem.

  20. Synopticist January 10, 2012 at 12:36 am #

    Jon Corzine still hasn’t been arrested.

    If anyone had told me 3 years ago that the former head of Goldman Sachs could lose over a billion dollars of broker’s clients money, doing things that were clearly illegal, and get away scot free, I would never have believed them.

    I’m 40 years old and deeply opinionated, but the MF Global saga has forcerd me to re-evaluate the way I view the world. It just doesn’t work the way I thought it did.

    • Clarence January 10, 2012 at 4:39 am #

      Welcome aboard.
      I’m about 60 so it took me a bit longer to learn, or maybe things have just become so corrupt now that it can no longer be hidden.

  21. 24K January 10, 2012 at 3:46 am #

    First I’d like to say Charles Wheeler TV.


    America reminds me of an alcoholic that gets nasty on spirits. His mates try to calm him but everybody is their own boss so let him shout and wail and smash stuff up but eventually after years of abuse while watching him lose his health, eventually, they hold him down and if they’re lucky talk sense into him and he gets help. But if they’re not he dies. Or if the town is unlucky he gets his shotgun out and goes driving round in his pickup truck wasting folk.

    Third. Charles, have you seen this dude? The Artist Taxi Driver? He’s a jem.


    Forth. Imagine G making a documentary in the style of TATD. That would be worth a watch.

    Fifth. Yes John, if it’s a wet one.

    Sixth. Government = Product

    User experience relies on quality of product.


    If you like raising the suicide rate in China pushed aside, the iphone has a good user experience.

    This is because the designers of said product were there to push boundaries and make the best phone. (With rubbish battery and rubbish signal but Like button)

    Good experience.

    Now the original Motorola Dynatec is a whole different story.

    But still the Dynatec didn’t beat ya ’bout da head, extrodinarily rendition you, id check etc. But still, the experience was clunky in todays standards.

    Humans made the Dynatec and learnt from it. Today you suckers have got the iphone4s and the experience is pretty good thanks to humans.

    If the iphone4s is all shiney and slim now. Why after a ludicrous amount of upgrades is the experience of government still a joke? The whole country is paying for them to design it better. WTF?

    So I say m’lud that the reason that everything else apart from the iphone4s is shite is because the humans that designed it, designed it to be.

    I thankemyou. Know that I’m doing it for the ladies and I’m out.

    (I’m available for births, deaths, weddings and bar mitzvahs)

    • Charles Wheeler January 10, 2012 at 11:24 pm #


      The Artist Taxi Driver – brilliant, a voice of sanity 🙂

      • 24K January 11, 2012 at 7:39 pm #

        I wish more people watched him bro.

    • richgb January 10, 2012 at 11:25 pm #

      That’s a brilliant analogy 24K. It reminds me of the time that I rescued a young fella who’d fallen in to some indoor plants in a bar. I helped him up (he was clearly very drunk) and pointed him in the right direction for home; but his friends were shaking their heads in dismay, indicating that this was a common occurrence. The landlord was not best pleased when he hear what had happened. He said, “You shouldn’t have done that. I know his Dad who is a wealthy businessman. I would have given him a lift home!”

      Incidentally, iPhones are not very good with chips … greasy hands and shiny phones invite a meeting with the hard substance pushing back at our feet.

      What I would like to know about the iPhone4 is, will it blend?


      • 24K January 11, 2012 at 7:53 pm #


        Gravity tries to catch me out all the time, mostly I play (or from a laymans point of view stumble) with it.

        Will it blend? Of course it will, don’t even have to watch (I did :))

  22. Patrick Donnelly January 10, 2012 at 6:11 am #

    Reality has an ugly way of crushing economic theories …….

    US is the reserve currency not because it was elected to the position, or was it? Who votes? Who records the votes or am I getting too Stalinesque? Resources and the will to use them?

    The US has used nuclear weapons hundreds of times. They publicly, proudly, acknowledge two cities destroyed. They have submarines that are specially made and adapted to exit special forces. They take out Libya, Poland, etc after many years of effort that escapes their Khazar media, which put it down to democracy! They are currently taking down Syria and may yet do the same to Egypt. China is thinking of establishing a base in the Seychelles ….. Even if they used Project Seal and the example of Aceh in the Fukushima tsunami, China has to continue clandestinely for decades to come, as a soft power. Money does not matter when Singapore becomes the new Ground Zero?

    Even if the Han dominated empire of China succeeds in maintaining the 100% dominance over the conquered lands of Tibet and Sinkiang, they are clearly open to internal revolts based upon the many nations and religions and languages that actually separate the peoples of their Empire.

    The world’s most successful military machine is not based in Russia nor China. That machine plans and games constantly for successful destruction of all military and civil opposition.

    We are all, some of the above commentators are phenomenally so, economically literate. We know what usually comes after depression! Unless Ron Paul survives his first four years as an active NWO tool in the USA, there will be no NWO, just the OWO, with the $ even more dominant.

    We should revisit this after the 2013 Inauguration?

    • Jim M. January 10, 2012 at 10:02 pm #

      As ever, 24K rocks!

      Nice to see u here, fella!

      • 24K January 11, 2012 at 7:59 pm #

        Thanks Jim!

        Nice to be here 🙂

  23. Patrick Donnelly January 10, 2012 at 6:15 am #

    To be more relevant and respectful of Golem’s post, Iran is run by USA friendly agents, as was and still is Iraq, etc. Colourful escapades to entrap an unwary foe into loss are par for the course ……

    We all live in a cave, watching the shadows on the wall, but now we may share our perceptions……

    • John Souter January 10, 2012 at 2:40 pm #

      The more you read, watch and listen to the vacuous arguments and positions adopted by the players in this idiotic financial scam you begin to realise the only hope for capitalism to be saved from its own lunacy is for real democracy to take charge.

      Democracy where the people are sovereign and governments are accountable to the people.

      • steviefinn January 12, 2012 at 6:50 pm #

        John, I agree, I think that’s the crux of the matter, until government is cleaned up & made accountable, we’re screwed.

  24. JP06 January 10, 2012 at 2:38 pm #

    Before placing too much trust in the content of the ZH article “Physical Silver Surges To Record 30%

    Premium Over Spot, In Backwardation”, I recommend the following:

    Is someone paying Zero Hedge to post propaganda?

    And for those not already familar with the Durdens background, I recommend the following comments:
    January 7, 2012 2:18 AM & January 7, 2012 9:51 AM.

    I’m a fan of ZH for shining a light on some important issues. But when it comes to gold or silver, I usually pass – there is a usually a “self-interest” motive.

    • richard in norway January 10, 2012 at 3:33 pm #

      It is noticeable that ZH is very keen on silver and gold, but they are Austrians. Even so its overdone and its strange they never have a negative slant on metals. Even regulars have started to complain that there is a dearth of original stories recently but I put it down to burnout

  25. Phil January 10, 2012 at 5:12 pm #

    An interesting blog I happened upon, written by a former Scotland Yard Fraud Squad officer. It is his contention that, ‘the whole financial sector is a carefully-managed and well-controlled organised criminal enterprise, which employs armies of lawyers, accountants and PR agencies to deflect popular attention from their activities.’


  26. Pat Flannery January 10, 2012 at 6:57 pm #


    Good site http://dailybail.com/ but its credibility slipped a little with “his $12 million beach house in La Jolla, California”.

    La Jolla is a ritzy area of San Diego city. I know Romney’s house. We all do here. It is a relatively modest house, worth maybe $2.5 million at best, its value mainly in the site.

    I must say, you are a very well-read Irishman. Hope to meet you some day. Keep reading.

    • steviefinn January 10, 2012 at 8:09 pm #

      I know what you mean, he was all for occupy, now they don’t get a mention. He is like a terrier going after the Fed & it’s creatures though.

      I hate to disappoint you, but I am not an Irishman although I have lived in Ireland for 14 yrs, I was born a mongrel in England, to parents with English, Irish, Scottish, Welsh & Italian blood. I have no roots, due to having moved house constantly when I was a child. This might sound pretentious, but like Socrates, I consider myself a citizen of the world.

      I would also like to meet up one day.

      • John Souter January 10, 2012 at 9:19 pm #

        Hi Stevie -no need to mention the lack of roots!

        • steviefinn January 11, 2012 at 12:12 am #

          Not sure I understand, I only mentioned it because, I think it is the reason why, I don’t feel that I have any national identity,

          Anyway, it seems that the Straits of Hormuz are not the only potential flashpoint, or chokepoint. The South China sea & the Caspian basin can be added. Also there is the matter of oil reserves off the Falklands, ( discredited Tory governments & task forces come to mind )

          Just a thought, there must be some worried major & not so major importers of Chinese products in the US & elsewhere, in the event of South China seas blockades or worse. Imagine all that stuff not getting through, but probably the least of our worries.

          According to this article the big boys are shuffling into position at all the 3 major locations.


          • John Souter January 11, 2012 at 9:45 am #

            Hi Stevie -one of my new year resolutions is to try to retain my sense of humour.

            The roots referred to, was a quip along the lines of follicle challenged; nothing else and absolutely no intent to offend.

          • steviefinn January 11, 2012 at 11:29 am #

            Oh right, I see, duhh !!, I never thought you meant to offend. I suppose it is better to be laughing, when your backs against the wall.

          • Richard T. January 17, 2012 at 7:29 pm #

            Aircraft Carrier Locations


  27. Joe Taylor January 10, 2012 at 7:13 pm #

    One of you guys recommended kindly the Renaissance 2.00 series,which I’ve watched through a few times. The bit about 8 minutes into Lesson 5 part 1, where he talks about a Third World War bothered me a quite bit. Then a couple of days ago I came across this article http://whataboutmarx.blogspot.com/2012/01/oil-wars-stakes-are-higher-than-just.html which starts with the words: As we all know the West is on the verge of launching an attack against Iran. Then I saw that Real News video about Obama and Netanyahu’s Push for Attack on Iran – and now this!!

    I suppose we all learn things one way or other but there is so much to learn that they are really just dots of knowledge. Then we try to join the dots up in a way that the picture makes some sense to us. The picture I get by joining these dots up isn’t a pretty one, that’s for sure!

    • Charles Wheeler January 10, 2012 at 11:06 pm #

      Naomi Klein joins up the dots in The Shock Doctrine

      As I dug deeper into the history of how this market model had swept the globe, I discovered that the idea of exploiting crisis and disaster has been the modus operandi of Friedman’s movement from the very beginning – this fundamentalist form of capitalism has always needed disasters to advance. What was happening in Iraq and New Orleans was not a post-September 11 invention. Rather, these bold experiments in crisis exploitation were the culmination of three decades of strict adherence to the shock doctrine.

      The bottom line is that, for economic shock therapy to be applied without restraint, some sort of additional collective trauma has always been required. Friedman’s economic model is capable of being partially imposed under democracy – the US under Reagan being the best example – but for the vision to be implemented in its complete form, authoritarian or quasi-authoritarian conditions are required.

      Until recently, these conditions did not exist in the US. What happened on September 11 2001 is that an ideology hatched in American universities and fortified in Washington institutions finally had its chance to come home. The Bush administration, packed with Friedman’s disciples, including his close friend Donald Rumsfeld, seized upon the fear generated to launch the “war on terror” and to ensure that it is an almost completely for-profit venture, a booming new industry that has breathed new life into the faltering US economy. Best understood as a “disaster capitalism complex”, it is a global war fought on every level by private companies whose involvement is paid for with public money, with the unending mandate of protecting the US homeland in perpetuity while eliminating all “evil” abroad.

      In a few short years, the complex has already expanded its market reach from fighting terrorism to international peacekeeping, to municipal policing, to responding to increasingly frequent natural disasters. The ultimate goal for the corporations at the centre of the complex is to bring the model of for-profit government, which advances so rapidly in extraordinary circumstances, into the ordinary functioning of the state – in effect, to privatise the government.

      In the torrent of words written in eulogy to Milton Friedman, the role of shocks and crises to advance his world view received barely a mention. Instead, the economist’s passing, in November 2006, provided an occasion for a retelling of the official story of how his brand of radical capitalism became government orthodoxy in almost every corner of the globe. It is a fairytale history, scrubbed clean of the violence so intimately entwined with this crusade.

      I am not arguing that all forms of market systems require large-scale violence. It is eminently possible to have a market-based economy that demands no such brutality or ideological purity. A free market in consumer products can coexist with free public health care, with public schools, with a large segment of the economy – such as a national oil company – held in state hands. It’s equally possible to require corporations to pay decent wages, to respect the right of workers to form unions, and for governments to tax and redistribute wealth so that the sharp inequalities that mark the corporatist state are reduced. Markets need not be fundamentalist.

      John Maynard Keynes proposed just that kind of mixed, regulated economy after the Great Depression. It was that system of compromises, checks and balances that Friedman’s counter-revolution was launched to dismantle in country after country. Seen in that light, Chicago School capitalism has something in common with other fundamentalist ideologies: the signature desire for unattainable purity.

      For 35 years, what has animated Friedman’s counter-revolution is an attraction to a kind of freedom available only in times of cataclysmic change – when people, with their stubborn habits and insistent demands, are blasted out of the way – moments when democracy seems a practical impossibility. Believers in the shock doctrine are convinced that only a great rupture – a flood, a war, a terrorist attack – can generate the kind of vast, clean canvases they crave. It is in these malleable moments, when we are psychologically unmoored and physically uprooted, that these artists of the real plunge in their hands and begin their work of remaking the world.

  28. John Souter January 10, 2012 at 9:33 pm #

    This is the link put up by Richard in Norway.

    I think it’s a crucial insight into the development of the financial shamanism we’re struggling under today.

    The text from here on in has been copied from the site:-

    I noticed an earlier thread this dicussed the issue of increasing the dollar monetary supply, but some history was ommited that still has a great effect on demand of dollars and its liquidity value – oil prices. What follows are some misc exerts that discuss how the dollar/OPEC/banking/IMF nexus created additional money supply through debt creation in 1973-1974…(fyi: According to the BIS, in 1973 OPEC held surplus dollars totaling $12 billion, but by 1974 their surplus swelled to $50 billion. That’s a lot of increased liquidity)

    …Curious as to why the US dollar money supply went wild about 33 years ago? Well, it all started during the height of the Vietnam war in the late-1960s and Nixon’s forced abandoment of the “gold standard” in August 1971 that led to a free floating dollar. The combined forces of a free floating dollar, a growing U.S. trade deficit, and massive debt associated with the ongoing Vietnam War, collectively contributed to both volatility and devaluation of the dollar in the 1970s.

    Note: Please see the first graph for the effects of an unhinged monetary policy – as discusssed during an interview with Richard Duncan, author of ‘The Dollar Crisis'(2003)

    ..getting back to black gold…

    According to research outlined in Dr. David Spiro’s book, The Hidden Hand of American Hegemony (1999), it was during this time OPEC began discussions on the viability of pricing oil trades in several currencies. This unpublished proposal involved a “basket of currencies” from the Group of Ten nations, or “G-10.” These 10 members of the Bank of International Settlements (plus Austria and Switzerland) included the major European countries and their currencies such as Germany (Mark), France (Franc), and the U.K. (Sterling), as well other industrialized nations such as Japan (yen), Canada (Canadian dollar), and of course the Unites States (U.S. dollar). 35 It should be noted the powerful G-10/BIS Group of Ten also has one unofficial member, the governor of the Saudi Arabian Monetary Authority, or SAMA.

    In order to prevent this monetary transition to a basket of currencies, the Nixon administration began high-level talks with Saudi Arabia to unilaterally price international oil sales in dollars only – despite U.S. assurances to its European and Japanese allies that such a unique monetary/geopolitical arrangement would not transpire. In 1974 an agreement was reached with New York and London banking interests which established what became known as “petrodollar recycling.”

    That year the Saudi government secretly purchased $2.5 billion in U.S. Treasury bills with their oil surplus funds, and a few years later Treasury Secretary Michael Blumenthal cut a secret deal with the Saudis to ensure that OPEC would continue to price oil in dollars only. 36

    In typical understatement Dr. Spiro noted, “…clearly something more than the laws of supply and demand…resulted in 70 percent of all Saudi assets in the United States being held in a New York Fed account.” 37 Naturally, this arrangement with the Saudi government prevented a market-based adjustment, and was the basis for the second phase of the American Century, the Petrodollar phase. What follows is the extraordinary history in which petrodollar recycling was vigorously implemented during the 1970s.

    Recycling Petrodollars

    “In May 1973, with the dramatic fall of the dollar still vivid, a group of 84 of the world’s top financial and political insiders met at Saltsjobaden, Sweden, the secluded island resort of the Swedish Wallenberg banking family. This gathering of Bilderberg group heard an American participant, Walter Levy, outline a ‘scenario’ for an imminent 400 percent increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting was not to prevent the expected oil price shock, but rather to plan how to manage the about-to-be-created flood of oil dollars, a process U.S. Secretary of State Kissinger later called ‘recycling the petrodollar flows.’”

    – F. William Engdahl, A Century of War (2004) 38

    Beginning in the mid-1970’s the American Century system of global economic dominance underwent a dramatic change. The oil price shocks of 1973-1974 and 1979 suddenly created enormous demand for the floating dollar. Oil importing countries from Germany to Argentina to Japan, all were faced with how to acquire export-based dollars to pay their expensive new oil import bills. The rise in the price of oil flooded OPEC with dollars that far exceeded domestic investment needs, and were therefore categorized as “surplus petrodollars.” A major share of these oil dollars came to London and New York banks where the new process of monetary petrodollar recycling was initiated.

    Engdahl’s remarkable book, A Century of War (2004), chronicles how certain geopolitical events mirrored a “scenario” discussed during a May 1973 Bilderberg meeting. Apparently powerful banking interests sought to “manage” the monetary dollar flows that were premised upon what the group envisioned as “huge increases” in the price of oil from the Middle East. The minutes of this Bilderberg meeting included projections regarding the price of “OPEC oil of some 400 per cent.” 39

    In 1974 U.S Assistant Treasury Secretary Jack F. Bennett and David Mulford of the London-based Eurobond firm of White Weld & Co set about the mechanism to handle the surplus OPEC petrodollars. 40 Kissinger, Bennett and Mulford helped orchestrate the secret financial arrangement with the Saudi Arabia Monetary Agency (SAMA) that creatively transformed the high oil prices of 1973-1974 to the direct benefit of the U.S. Federal Reserve banks and the Bank of England.

    Despite the financial windfall enjoyed by the U.S./U.K banking and petroleum conglomerates who “managed the recycling of petrodollar flows,” most Americans regard the 1973-74 oil shocks as a particularly painful time period of high inflation and long lines at every gas station. In the Third World these high oil prices created huge loans from the International Monetary Fund – debts to be re-paid entirely in dollars.

    …now let’s fastforward to more recent events…

    On September 24, 2000 Saddam Hussein emerged from a meeting of his government and proclaimed that Iraq would soon transition its oil export transactions to the euro currency. 52 Saddam referred to the U.S. dollar as currency of the ‘enemy state.’ Why would Saddam’s currency switch be such a strategic threat to the bankers in London and New York? Why would the United States President risk fifty years of carefully crafted global alliances with various European allies, and advocate a military attack whose justification could not be proved to the world community?

    The answer is simple – the dollar’s unique role of a petrodollar has been the foundation of the dollar hegemony since the mid 1970’s. The process of petrodollar recycling underpins American economic hegemony, which funds American military supremacy.

    Dollar/petrodollar supremacy allows the U.S. a unique ability to sustain yearly current account deficits; pass huge tax cuts, build a massive military Empire of Bases around the globe, and still have others accept our currency as medium of exchange for their imported good and services. The origins of this history are not found in textbooks on International Economics, but rather in the minutes of meetings held by various banking and petroleum elites who have quietly sought unhindered power.

    U.S. Dollar: Fiat Currency or Oil-Backed Currency?

    “What the powerful men grouped around the Bilderberg had evidently decided that May was to launch a colossal assault against industrial growth in the world, in order to tilt the balance of power back to the advantage of Anglo-American financial interests and the dollar. In order to do this, they determined to use their most prized weapon – control of the world’s oil flows. Bilderberg policy was to trigger a global oil embargo in order to force a dramatic increase in world oil prices. Since 1945, world oil had by international custom been priced in dollars…A sudden sharp increase in the world price of oil, therefore, meant an equally dramatic increase in world demand for U.S. dollars to pay for that necessary oil.

    Never in history had such a small circle of interests, centered in London and New York, controlled so much of the entire world’s economic destiny. The Anglo-American financial establishment had resolved to use their oil power in a manner no one could have imagined possible. The very outrageousness of their scheme was to their advantage, they clearly reckoned.”

    – F. William Engdahl, A Century of War (2004)

    At this point he makes an extraordinary claim: “I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.”

    ‘He says he was convinced of this by the attitude of the Shah of Iran, who in one crucial day in 1974 moved from the Saudi view’…’to advocating higher prices.’

    ‘King Faisal sent me to the Shah of Iran, who said: Why are you against the increase in the price of oil? That is what they want? Ask Henry Kissinger – he is the one who wants a higher price”.’

    Yamani contends that proof of his long-held belief has recently emerged in the minutes of a secret meeting on a Swedish island, where UK and US officials determined to orchestrate a 400 per cent increase in the oil price.

    – UK Observer interview with Sheikh Yaki Yamani (Saudi Arabian Oil Minister from 1962-1986) at the Royal Institute of International Affairs, January 14, 2001 54

    As previously noted, the crucial shift to an oil-backed currency took place in the early 1970s when President Nixon closed the so-called “gold window” at the Federal Treasury. This removed the dollar’s redemption value from a fixed amount of gold to a fiat currency that floated against other currencies. This was done so the Federal Government would have no restraints on printing new dollars, thereby able to pursue undisciplined fiscal policies to maintain the U.S.’s Superpower status. The only limit was how many dollars the rest of the world would be willing to accept on the “full faith and credit” of the U.S. government. The result was rapid inflation and a falling dollar.

    Although rarely discussed outside arcane discussions of the “global political economy,” it is easy to grasp that if oil can be purchased on the international markets only with U.S. dollars, the demand and liquidity value will be solidified given that oil is the essential natural resources required for every industrialized nation. Oil trades are the basic enablers for a manufacturing infrastructure, the basis of global transportation, and the primary energy source for 40% of the industrial economy.

    During the 1970s a two-pronged strategy was pursued by the U.S./U.K. banking elites to exploit the unique role of oil in an effort to maintain dollar hegemony. One component was the requirement that OPEC agree to price and conduct all of its oil transactions in the dollar only, and two was to use these surplus petrodollars as the instrument to dramatically reverse the dollar’s falling liquidity value via high oil prices. The net effect solidified industrialized and developing nations under the sphere of the dollar. No longer backed by gold, the dollar became backed by black gold.

    This brilliant if somewhat nefarious act of monetary jujitsu enormously benefited not only the U.S./U.K. banking interests, but also the “Seven Sisters” of the U.S./U.K. petroleum conglomerate (Exxon, Texaco, Mobil, Chevron, Gulf, British Petroleum, and Royal Dutch/Shell). These major oil interests had incurred tremendous debts from the capital requirements in their large new oil platforms in the inhospitable areas of the North Sea and in Prudhoe Bay, Alaska.

    However, following the 1974 oil price shocks, their profitability was secure. Engdahl candidly noted “while Kissinger’s 1973 oil shock had a devastating impact on world industrial growth, it had an enormous benefit for certain established interests – the major New York and London banks, and the Seven Sisters oil multinational of the United States and Britain.” 57

    The unique monetary arrangement was formalized in June 1974 by Secretary of State Henry Kissinger, establishing the U.S.-Saudi Arabian Joint Commission on Economic Cooperation. The U.S. Treasury and the New York Federal Reserve would ‘allow’ the Saudi central bank to buy U.S. Treasury bonds with Saudi petrodollars. 58
    Likewise, London banks would handle eurozone-based international oil transactions, loan these revenue via “Eurobonds” to oil importing countries. The debt and interest from these loans would then flow to the dollar denominated payments to the International Monetary Fund (IMF), thereby completing the recycling of surplus petrodollars back to the Federal Reserve.

    ..as for Saddam’s switch that led to “regime change”…

    Although this little-noted Iraq move to defy the dollar in favor of the euro in itself did not have a huge impact, the ramifications regarding further OPEC momentum towards a petroeuro are quite profound. If invoicing oil in euros were to spread, especially against an already weak dollar, it could create a panic sell-off of dollars by foreign central banks and OPEC oil producers. In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela. There are indicators that the Iraq war was a forceful way to deliver a message to OPEC and others oil producers, ‘Do not transition from the petrodollar to a petroeuro system.’ Engdahl’s conversation with a forthright London-based banker is rather enlightening:

    Informed banking circles in the City of London and elsewhere in Europe privately confirm the significance of that little-noted Iraq move from petrodollar to petroeuro. ‘The Iraq move was a declaration of war against the dollar’, one senior London banker told me recently. ‘As soon as it was clear that Britain and the U.S. had taken Iraq, a great sigh of relief was heard in London City banks. They said privately, “now we don’t have to worry about that damn euro threat.”63

    Petrodollar recycling works quite simply because oil is an essential commodity for every nation, and the petrodollar system demands the buildup of huge trade surpluses in order to accumulate dollar surpluses. This is the case for every country but the United States, which controls the dollar and prints it at will or fiat. Because today the majority of all international trade is done in dollars, other countries must engage in active trade relations with the U.S. to get the means of payment they cannot themselves issue. The entire global trade structure today has formed around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Every nation aims to maximize dollar surpluses from their export trade as almost every nation needs to import oil.

    This insures the dollar’s liquidity value, and helps explain why almost 70% of world trade is conducted in dollars, even though U.S. exports are about one third of that total. The dollar is the currency which central banks accumulate as reserves, but whether it is China, Japan, Brazil or Russia, they simply do not stack all these dollars in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the United States. Most countries around the world are forced to control trade deficits or face currency collapse.

    Such is not the case in the United States, whose number one export product is the dollar itself. This unique arrangement is largely due to the dollar’s World Reserve currency role, which is underpinned by its petrodollar role. Every nation needs to get dollars to purchase oil, some more than others. This means their trade targets are countries that utilize the dollar, with the U.S. consumer as the main target for export products of the nation seeking to build dollar reserves.

  29. Joe R January 10, 2012 at 10:06 pm #

    In a parallel development to this the US announced a shift in strategic direction recently to Asia/Pacific. I don’t know if people picked up on it.


    Putting on my miltary geek hat for a minute – the only countries attempting to rival the US in its stealth warfare capacity are China http://www.bbc.co.uk/news/world-asia-pacific-12125566 and Russia/India http://www.bbc.co.uk/news/world-europe-14564311

    Russia apparently got its hands, with serbian help, on the carcass of a downed F-117A ( the original american stealth fighter ) in the old Yugoslavia and China is rumoured to have got something similar in Iraq I believe.

    India is helping to finance Russias fighter and will buy or build it too. Its in the air already. Chinas is at a earlier stage of development.

    Stealth fighters are described as 5th generation; to give an idea the original F-15/16/18 were regarded as 4th. Improved versions of these E /F versions are regarded as 4.5 .The new Typhoon of the RAF is regarded as 4.5. as is France’s Rafale.

    However stealth fighters are viewed as totally superior to the prior generations of fighters 4.0,4.5, and almost render them obselete because you can’t see them!This like still having sluggish biplanes when the opposition have speedy monoplanes back in the 1930s…

    China is modernising at an incredible rate, up to 2000 it had essentially slightly 40 year old fighter types in its airforce but now it is leapfrogging France, Britain, etc and developing a 5th generation fighter to be able to go toe to toe with the American Air Force.

    So to are India and Russia – jointly as I pointed out.

    ( Small note ;Japan has just agreed to buy the F-35 american Stealth fighter too.)

    • Joe R January 10, 2012 at 10:22 pm #

      * slightly upgraded 40 year old fighter types

  30. Andy Williams January 10, 2012 at 10:39 pm #

    The difference being that the population of Beijing in comparison to the population of cChina is not very much, whereas the population of New Yor in comparison the the USA is significantly more.

  31. Pat Flannery January 10, 2012 at 11:57 pm #


    Socrates was the wisest man in Athens because he was the only man who knew the extent of his own ignorance.

    You may have noticed that I tend to prefer the Socratic or dialectical method of discussion rather than partisan argument based less on factual accuracy than on emotions.

    If you share the fate of Socrates I will write your Phaedo (even though you are a mere mongrel Englishman).


    • steviefinn January 11, 2012 at 12:46 am #

      Nuff said.

  32. bert January 11, 2012 at 3:16 am #

    John Souter,

    Thanks for the Engdahl quotes/analysis; I always thought that Engdahl is a journalist/analyst witha good eye on the ball.

    • John Souter January 11, 2012 at 12:17 pm #

      bert -your welcome; but thank the author and Richard for spotting it.

      It seemed to me to work in very well in the context of Golems post and Charles post with reference the Kliens ‘Shock Doctrine’.

  33. John Souter January 11, 2012 at 4:23 pm #

    No man is an Island – unless the island in which he stands is a toxic dump; then he becomes a victim.

  34. Charles Wheeler January 11, 2012 at 7:22 pm #

    Gettysburg Address Update:
    … government of the banks, by the banks, for the banks, shall not perish from the earth.

    On the issue of a reserve currency:

    Amato and Fantacci’s The End of Finance (not quite as apocalyptic as it sounds – the title referring to the ‘purpose’ of finance), attempts to examine the nuts and bolts of the monetary system by walking back through history to discover the roots of problems we are facing.

    In a fascinating review of the post-war ‘consensus’ they argue that, far from reining back the interests of capital, the Bretton Woods agreement actually consolidated the interests of those who profited from an emphasis on liquidity.

    A common view is that the final terms favoured the U.S. government’s delegate Harry Dexter White’s proposals over those of Keynes. In fact, Amato and Finacci argue, White’s plan, while differing from Keynes’s idea of an international Clearing Union with a bancor unit of account, had much more in common with Keynes’s objectives than often acknowledged, particularly in his view that some international unit of currency would be preferable to the use of an existing currency, as this would give one country an advantage over others – i.e. seignorage.

    White recognised that the controls proposed would ‘constitute another restriction on the property rights’ of the 5%-10% wealthy enough to invest abroad. Which is why many of his initial recommendations were excised.

    A&F contend that both Keynes’s and White’s plans were aimed at encouraging the holding of commodities rather than the accumulation of money and the circulation of goods rather than capital. Instead, what emerged was a much more Wall Street-friendly system (which Keynes had been expected to sign before he’d had a chance to read it!).

    They argue that the ‘demands of finance prevailed over the needs of trade’, and that Bretton Woods resulted in the ultimate ‘victory of capitalism over the market economy’. They hold that: ‘The existence of an international unit of account makes capital movements useless, while its non-existence makes them indispensable. It takes no great effort of the imagination therefore, to guess which of the two options was preferable for that ‘5 or 10 percent of persons’ who lived on international capital movements.’

    ‘An article published in the New York Times on 1 July 1944, the day of the inauguration of the Bretton Woods Conference, made very clear what the financial community of Wall Street expected from the agreement: the introduction of an exchange system firmly anchored on gold, which would thereby drive the countries concerned in the direction of fiscal rigour and open up the movement of capital.’ As the (anonymous) contributor put it: ‘Each nation should abandon the fallacious idea that it is to its own advantage to … forbid its own citizens to export gold, capital or credit.’

    The proposal for an international unit of payment was removed from the agreement: ‘Thus the interests that each of the countries had in the liberalization of trade gave way to the interests of the respective financial lobbies.’ Keynes’s hopes of controlling short-term movements of speculative capital were dashed.

    Even the watered-down Bretton Woods system never came fully into force with its ostensible capital controls ‘effectively bypassed’ by the emergence of the Eurodollar market: ‘‘Historians concur … in attributing the economic growth of the [post-war] period to the financial flows running outside the Bretton Woods System’ which led to growth ‘at the expense of the other objectives’.

    ‘Despite the fact that they lay down explicit limitations on capital movements, the Bretton Woods agreements delineated an international monetary system that, in practice, made these movements indispensable. At this point we can see how the Bretton Woods agreements opened the way to the post-war ‘dollar gap’ and to the subsequent international ‘dollar glut’ the consequences of which we are still paying for.’

    • richgb January 11, 2012 at 10:42 pm #

      It all makes sense Charles. I wonder what sort of system the Nazis would have given us.

      For those people who don’t own such an erudite book as “The End of Finance”, you cam find a lot of related information at http://en.wikipedia.org/wiki/Gold_standard

      There is also a fascinating write-up on mercantilism, a long defunct method of trading which is eerily reminiscent of the penis-waving taking place in the Gulf.


    • Gordon Donald January 12, 2012 at 12:58 pm #

      In their book ‘Modern Political Economics’, Varoufarkis, Halevi and Theocarakis give a detailed account of how the Bretton Woods agreement came about, and how it became part of what they cll America’s ‘Global Plan’ to shape the post war global economy. Of Keynes’ plan for an International Currency Union to prevent crashes and systematic trade imbalances they say:
      “Alas, it was not to be. The ICU did not come in to being for the simple reason that the United States was neither ready to share world hegemony nor, more importantly, to accept that, in the post-war era, its trade with the rest of the world should be balanced. The New Dealers, however respectful they might have been of John Maynard Keynes, had another plan: a global Plan according to which the dollar would become the effective world currency and the United States would export goods and capital to Europe and Japan in return for direct investment and political patronage; a hegemony based on the direct financing of foreign capitalist centres in return for an American trade surplus with them.
      For this reason, the US representative, Harry Dexter White, vetoed Keynes’ plan and, in its stead, proposed a simpler alternative: a system of fixed exchange rates with the dollar at its heart.”
      The Global Plan, according to the authors, endured until the 1970s when, faced with economic crisis, the US devalued the dollar by leaving the gold standard and floating the currency. This in turn led to what they call the Global Minataur:
      “The United States had neither wanted nor resigned easily to the collapse of the global Plan. However, once its collapse became inevitable, US policy makers moved on very rapidly, unwilling to countenance the prospect of jeopardising global hegemony in a futile attempt to mend a broken design. By the end of the 1970s a new global order was in place. Far less stable then the Global Plan, without the institutionalised multilateralism of the Bretton Woods system and its paraphernalia, the new order transformed global capitalism and further enriched American hegemony. From a system of regulated and planned international flows of trade and capital, the world was suddenly flung into chaotic flux.
      … the United States succeeded in eliminating its problem with the twin deficits (balance of payments and government deficits) without having to eliminate the deficits themselves. Indeed the deficits rose as if without bounds. Soon they started absorbing other nations’ capital at tremendous rates… It was as if the whole world was sending tributes to Wall Street daily in order to keep a latter day Minotaur satiated. For that was the New Deal: as long as the Minotaur’s voracious appetite was satisfied, aggregate demand for the manufactures and raw materials of the rest of the world would be maintained.
      … Throughout the Global Minotaur years, the United States paid for its deficit (to the rest of the world) by issuing bonds and treasury bills or by attracting capital through its stock exchanges. this is the way in which the economists’ traditional concern (of what to do with the deficit) was dispensed with. Low US inflation and low US wages were pivotal to this strategy. Similarly, low wages translated into high corporate profitability which, in turn, made the stocks traded in Wall Street even more attractive to foreign investors.”

  35. Pat Flannery January 11, 2012 at 8:55 pm #

    Could we try to keep our comments to maybe three short paragraphs? I love to visit this site but do not have time to read long polemics. Just a polite suggestion.

  36. Pat Flannery January 11, 2012 at 11:26 pm #

    Charles Wheeler,

    I didn’t mean to detract from your many fine posts, particularly your last regarding Keynes’ “bancor”. It was excellent. I just wanted to make sure that we all stay together here as a group because in the days of the “Twitter 140” our attention span is getting shorter and shorter while the available information is growing exponentially.

    With humblest apologies for sticking my nose into his business, I remain a devout Golemite.

    • Charles Wheeler January 11, 2012 at 11:33 pm #


      I am apt to overstay my welcome. Imagine being stuck in a lift with me. 🙂

      • Pat Flannery January 12, 2012 at 1:12 am #

        I wouldn’t mind being stuck in a lift with you at all Charles.

          • Pat Flannery January 12, 2012 at 4:49 am #

            Ooops. I hardly know the man. I didn’t realize it was a proposition. Sorry Charles, nothing personal but I think I’ll just take the stairs.

        • steviefinn January 12, 2012 at 2:55 am #

          I wouldn’t mind being stuck in a lift with any of the contributors, perhaps we need a troll to pick on.

          • Pat Flannery January 12, 2012 at 4:50 am #

            Speak for yourself Stevie.

          • steviefinn January 12, 2012 at 6:42 pm #

            I must get out of the mountains more often

  37. steviefinn January 12, 2012 at 2:49 am #

    Today I re-visited 2 of my recent favourite documentaries, the 1st that David Malone fella’s ” Dangerous Knowledge” followed later by ” All watched over by machines of loving grace” by Adam Curtis.( The Ayn Rand episode ). It struck me that the lovely Ann had given the world a philosophy based on the power of logic as a system for living life & sorting out all it’s problems.

    From ” For the new intellectual ”

    All thinking is a process of identification and integration. Man perceives a blob of color; by integrating the evidence of his sight and his touch, he learns to identify it as a solid object; he learns to identify the object as a table; he learns that the table is made of wood; he learns that the wood consists of cells, that the cells consist of molecules, that the molecules consist of atoms. All through this process, the work of his mind consists of answers to a single question: What is it? His means to establish the truth of his answers is logic, and logic rests on the axiom that existence exists. Logic is the art of non-contradictory identification. A contradiction cannot exist. An atom is itself, and so is the universe; neither can contradict its own identity; nor can a part contradict the whole. No concept man forms is valid unless he integrates it without contradiction into the total sum of his knowledge. To arrive at a contradiction is to confess an error in one’s thinking; to maintain a contradiction is to abdicate one’s mind and to evict oneself from the realm of reality.
    ( Seems very robotic & rigid to me ) All thinking ?

    One of her followers Greenspan later used the ultimate logic of computers to basically run the World’s economy, to disastrous effect.

    ” Dangerous Knowledge” partly tells of Kurt Godel & Alan Turing struggling with the limitations of logic, because there are problems logic cannot solve. It seemed to me, & I could well be wrong about all of this, that their findings showed that computers although far better calculators, are not as well equipped as us in running systems that affect us. It seems as though human intuition & values are just as important qualifications in making those decisions. Ayn Rand didn’t think much of intuition, & her values were purely selfish.

    It appears to me that Rand’s influence appealed to those who think like machines, creatures of cold logic, very different from Godel & the very human & tragic Turing, who unlike Rand were both possessed with genius.

    I struggled to get my head around the science, but I think these things are important to try & understand so that we can, if given the chance, try to avoid making the same mistakes again.

    • Hawkeye January 12, 2012 at 10:17 am #


      You make an interesting constrast. It reminds me of a small passage in David Graeber’s “Debt: first 5000 years” which I’m part way through at the moment.

      The very essence of humanity is NOT to keep score, run tallies, truck & trade, barter etc. To be human is to show compassion, to share out the lucky acquisition of wealth etc.

      We have become so wedded to the notion of reciprocity and the primacy of exchange (the behaviourist notion of punish & reward) that we are in fact de-humanising ourselves from within:

      “By gifts one makes slaves, and by whips one makes dogs”.

      Debt is the weapon of choice. The framework of logic and the “scientific” method is the religion that provides the moral justification for the social control & exploitation.

      P.S. A bit cheeky of me but I’d recommend a revist to the “Sell freedom, buy control” posting of mine from nearly a year ago which touches on the behaviouristic (stimulus/response) control of Western Man:


      • Gordon Donald January 12, 2012 at 12:10 pm #

        David Graeber made an appearance on Radio 4’s Thinking Allowed programme yesterday. It is available on the BBC’s iPlayer, but only for a week I think.
        At the end Laurie Taylor asks him what should be done. His answer is cancellation of debt.

      • Charles Wheeler January 13, 2012 at 6:15 pm #

        Keynes stressed the symbiotic nature of the relationship between creditor and debtor – which is why he was so critical of the debt burden placed on Germany post-WW1. Creating a situation where debts can never be repaid undermines the whole system. He also saw the danger of overemphasis on liquidity, which is why Amato & Fantacci characterise his clearance union (which they describe as a monetary system without money) as an attempt to improve the liquidity of commodities through a more streamlined settlement of credit. He saw that the tension between the role of money as a means of exchange and store of wealth could be in conflict leading to recurrent liquidity crises.

        Many, including myself, have seen Bretton Woods as a watershed moment, when government reined in the power of capital in the interest of greater stability. But A&F argue that the watered-down version which ditched White’s preference for an international currency along with Keynes’s ‘International Clearing Union’ was effectively the result of a Wall Street inspired hijack, opening the (back) door to capital flows, allowing the sidestepping of controls and securing the role of the dollar as reserve currency. In that light, the monetary system was rewound and set back on the tracks – leading to further recurrent crises – which are ‘baked in’.

        As they trace developments back through BW to the (so-called) ‘gold standard’ and beyond you realise how much the monetary ‘system’ has been the product of a series of botched reactions to events – part pragmatism, part deliberate obfuscation (have you ever seen anyone in authority on TV actually explaining how it works in practice – rather than how it is described in Econ 101)?

        p.s. I’d highly recommend Amato and Fantacci’s The End of Finance – described as: ‘…the best short account of the historical evolution of the capitalist financial system that I have encountered’ (Geoffrey Ingham). Contrary to some of the reviews, it’s a pretty accessible and myth-busting history of finance.


    • Nell January 12, 2012 at 12:02 pm #

      ‘appears to me that Rand’s influence appealed to those who think like machines, creatures of cold logic’
      I think Rand’s ideas appeal to those who feel that they are superior and separate to others in society, the ubermensch mentality. The types that attributes all of their successes to personal endeavour and never acknowledge the role of fate (ie the circumstances of birth) or society (infrastructure created to support education, health etc). I think it also appeals to people who think ’emotions’ detract from ‘reason’, which quite frankly is stupid. For example, research in the field of neuropsychology demonstrates that people with brain damage that impairs emotional processing, have difficulty making decisions, even quite simple ones, like making tea.

      • steviefinn January 13, 2012 at 7:24 pm #


        I agree. I think the psychopaths have taken over the asylum. They have managed to make their debt public & have also succeeded in passing on, or exposing the equivalent of their behaviour in sovereign states, as in Europe which has become, like the US & other countries a psychopathic state. TPTB acting together to protect their own interests & those of their paymasters. However, where their respective constituencies are concerned, they for the most part, act without empathy, or remorse, but with deception & egocentricity, classic signs of psychopathy.

        That is what scares me, it’s obvious that to them, we, the too many are unter-menschen, or as Kissinger put it ” Useless feeders “.

        • BobRocket January 14, 2012 at 12:32 am #

          Have a read of the first article by William Clark in issue 62 of Lobster Magazine (the magazine is a bit of an aquired taste but every now and then it comes up with some interesting stuff)

          It does explain why the modern PTB behave the way they do.


        • Les January 14, 2012 at 3:03 am #

          You might be interested in a short theoretical paper, written by a London academic, titled ‘The Corporate Psychopaths: Theory of the Global Financial Crisis’,


          which posits the theory that the cause of the problem in the financial industry is

          “Psychopaths, rising to key senior positions within modern financial corporations, where they are able to influence the moral climate of the whole organisation and yield considerable power.”

          This is echoed in Jon Ronson’s book ‘The Psychopath Test’, in which Professor Robert Hare told the author:

          “I should have spent some time inside the Stock Exchange as well. Serial killer psychopaths ruin families. Corporate and political and religious psychopaths ruin economies. They ruin societies.”

          I think it is equally true in most areas of society where people wield power and influence. It would seem an inevitable consequence that the encroachment of ‘free market’ principles in the corridors of power would wreak havoc on the concept of public service and duty.

    • John Souter January 16, 2012 at 12:37 pm #

      Stevie – you are right to query this type of mechanical logic and its application to humans.

      For instance, who decided a flat piece of wood elevated on four legs would be a table?

      And who decided the purpose this ‘table’ would serve? Was it a work bench or merely an elevated platform to store food out of reach from animals.

      All are logical through reason, the logic of the science that turns the atoms into wood are irrelevant to the reasoning that give it purpose.

  38. cynicalHighlander January 12, 2012 at 10:37 am #

    Naked Oil

    All is not as it appears in the global oil markets, which have become entirely dysfunctional and no longer fit for its purpose, in my view. I believe that the market price is about to collapse as it did in 2008, and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries

    • richard in norway January 12, 2012 at 1:20 pm #

      I saw that one too, it links in very nicely with the discussion here, it occurs to me that if the price of oil can be manipulated by banks and oil companys, then it can also be manipulated by govts and or central banks in the same way. Nothing is as it seems, common sense tells us that a low oil price is desirable for the American economy but because of the flows of money this might not be so, and also one thing that the us is concerned about is the relative strength of their economy rather than the absolute strength. What I mean is that policy makers in the US may be willing to accept 2% negative growth rather than 1% positive growth if for example Europe had 3% negative growth rather than 2% positive growth. To some extent this is human nature, I think that the middle classes will be prepared to accept some reduction in their standard of living as long as the working class suffer more and they don’t notice the upper class pulling away, this sounds awful, I’m sure that many would disagree with me here, I want to disagree with me but I pretty sure this is what happens at a subconscious level and I’m sure TPTB use this against “us”

      • Hawkeye January 12, 2012 at 2:08 pm #

        I propose three assetions here (some people may contest them, but given enough time, I’m sure most could be demonstrated through hard evidence):

        1) Global Energy production capability is peaking out in true economic terms (EROEI)
        2) Energy is required to drive the global economy (See the “Useful Work Growth Theory” by Ayres & Warr)
        3) Energy is also extremely essential for running a major military force
        4) Economic Growth is required to “pay-back” the enormous debts undertaken by individuals, corporations and Gvts

        Therefore Supply (point 1) is unlikey to be able to meet Demand (points 2, 3 & 4). The price of oil (in dollar terms), and the viability of the dollar the means of payment (international settlement) is merely the means for mediating the balance of Supply & Demand.

        I can’t myself see a scenario where we get demand destruction to follow the supply reductions. This goes against all current political efforts for economic growth (2), military sabre rattling (3) and debt contract enforcements (4).

        However, only a fool would try and predict the future price of oil. A safer prediction is to expect an enormous increase in volatility of (dollar) price, as the world tries to hold the impossible tensions together, and something major snaps (such as warfare or dollar collapse).

  39. Hawkeye January 12, 2012 at 1:39 pm #

    Little Timmy grovels to China for support in sanctions on Iran but gets the brush-back:


    The fact that a Treasury Secretary has been tasked to lead a negotiation on a defence / foreign relations matter (Iran’s nuclear ambitions) tells us that this must be a currency based matter.

    Watch carefully what China does with Iran. There is every chance that China will both step in to support Iran militarily as well as financially / economically. A true test of China’s capabilities is if they are able to step in to help stem Iran’s growing currency troubles. The more the USA precipitates Iran’s economic problem the more pressure for the BRIC+ to form an alternate currency bloc.

  40. keekster January 12, 2012 at 2:14 pm #

    Some good analysis by Chris Martenson, particular the oil supply angle.

  41. keekster January 12, 2012 at 3:12 pm #

    Hawkeye January 12, 2012 at 2:08 pm
    Think you sum it up nicely. What we have is a situation where the economic growth model is hitting the limits of our natural resources, but in particular energy. It’s inevitable that this will lead to business interests or governments on their behalf, to try and seize the remaining resources available. The US in particular, as Dimtry Orlov demonstrates in his book, is dependent on huge amounts of oil being imported. Without it, their economy and society will not be able to function as is, and will collapse. Sustainable, the US is not. (although the Amish may cope!) Although resources are far from the point of running out, growth is no longer a tenable option, and limits force decisions about how resources are distributed. But this sits at odds with capitalism, which is all about accumulating wealth/resources. This is a situation that has been a long time coming. The last 200 years of economic growth, is not necessarily a proxy for what the future holds. A future of getting by on less is more likely, and the tenions that creates with regard to food, transport, and population. In my mind this suggests that governments will be required to take the lead role, from corporations, which would be a change from the last 30 years. However, looking at the likes of the Transition Network and other such initiatives, decentralisation (finding our own solutions), rather than centralisation, may well be the best approach to adapting to a new reality by improving food security, reduce carbon dependency and improving resilience to change. I have no crystal ball, but I do find myself wondering if we are entering a new age, where governments and corporations loose their power obtained through accumulation/decentralisation. Or will the existing ‘institutions’ be able to adapt to the new ‘norm’.

  42. Anandi Sharan January 12, 2012 at 5:46 pm #

    What we need is the emission backed currency unit (EBCU) to replace the United States Dollar which as the global reserve currency today is causing terrible problems for the world two of which are enumerated here.

    1. The present global reserve currency is a de facto global reserve currency, in the sense that it is actually the national currency of the United States of America that has emerged as the de facto global reserve currency after the gold standard was abandoned in the United States of America in 1972. This has resulted in the geo-political ambitions of the United States of America being synonymous with the expansion of the United States dollar as the global trading currency. It has meant that the United States of America which is the second largest greenhouse gas emitter in the world has not considered it politically possible to withdraw from global capitalism and let others develop. Instead it is engaging in military aggression around the world as a kind of global policeman in order to defend the free flow of the United States dollar which it considers the global reserve currency.

    2. The International Energy Agency has said that to avoid irreversible climate change and the end of life on earth as we know it; we need to have a declining trend in hydrocarbon use and the emission of Greenhouse Gases before 2017.

    3. Thus the EBCU is designed to achieve the end of the geo-political and monetary hegemony of the United States of America dollar and usher in a period of G77 and China rule through the emission backed currency unit as the chosen global reserve currency to reverse anthropogenic climate change and managew the process of relocalisation of all economies.

    4. Today greenhouse gas emissions – i.e. oil and coal consumption globally – is still rising. To achieve a global reversal of this genocidal trend, the United States dollar, which is currently managed in an unscientific way, must be replaced with an emission backed currency unit or EBCU for short. The policy control of the de facto global reserve currency by a single national reserve bank and a single sovereign government over which other countries have no control viz. the United States of America Federal Reserve and the United States Congress will be replaced by a new global currency that will be managed by a Trust whose job it will be to issue emission backed currency units every year. These permits will be the value against which a certain quantity of EBCU will be issued every year for companies and countries to buy and sell hydrocarbons.

    5 Companies whether private or public who are currently extracting fossil fuels from the ground – whether petroleum or coal hydrocarbons – shall only be allowed to do so if their government has the permits available and the EBCUs available to buy the permits and thus the hydrocarbons.

    6 In other words, the new Trust which can be administered by 5 wise men and 5 wise women appointed by OPEC, OIC, IEA, IPCC, and IRENA will issue a declining number of EBCUs into circulation every year on the basis of population to each country, and thus globally there will be an orderly management of and decline in hydrocarbon extraction, processing, production and consumption till by say 2040 the world is at net zero emissions, i.e. the global number of permits issued will be no more than what the earth’s oceans and forests can absorb.

    7 OPEC, IEA, OIC, IPCC and IRENA with the support of the rest of G77&China shall set up this group of 10 people to set the global emission budget and generally set up the scheme, and the Trust shall issue the permits on the basis of a sustainable and equitable per person allocation for each adult every year. And each government shall receive these permits and the Trust shall issue only so many EBCUs to each government as they have permits and governments shall use these EBCUs according to the new internaitonal rules.

    8 The United States dollar and the Euro as well as other national currencies shall no longer be used for international trade, and the extraction of petroleum and other hydrocarbons including coal shall cease once no more permits are issued by 2040.

    9 From 2040 onwards the new ‘open capitalism’ of the trading agencies of the world will probably use the national currencies of their home currencies to trade, but global trade will be much less because most renewable energy will be deployed for livelihood and local and domestic consumption and production needs of 1.5 billion Indians, 1 billion West Asians, 1.3 billion Chinese, 1 billion Africans, 1 billion Europeans, and 1 billion people in the North and South Americas and 2 billion people in the rest of the world.

    10 Currency reforms of sovereign nations will be done as quickly as possible after the introduction of the EBCU to allow the renewable energy based domestic economy of agriculture, trees, forests and water outside of the global trading imperatives to flourish. This will involve abandoning the borrowing and lending form of currency issuance domestically and instead it will involve the spending of the national currency into circulation for a universal income grant for all adults in every country to be used through consensus bodies of adults organised in village committees and town ward committees for local management of land and trade and society and culture.

    • John Souter January 12, 2012 at 9:21 pm #

      Anandi -for your concept to have any chance of success within the time frame you posit we would need to hyper accelerate evolution or induce an even deeper semi comatose state on humanity than it’s in now.

      As Charles paraphrased the Irishman -Few, if we had the choice, would want to start off from where we are, but it is where we are and the few are quite happy and want more of it. So who are to be chosen as the 10 – 20 -100 pillars of wisdom that will decide the value of the Ethiopian coffee subsistence farmer, or the Mumbai slum dweller or their South American – Siberian – Chinese counterparts. Then within all the diversities of cultures hard wired through centuries of use, abuse and exploitation mainly by nurture but at time dictated by nature who decides the value of the carpenter in relation to the neuro-surgeon and the surgeon to the physicist?

      The combination of science and the technology has certainly increased our understanding and probably heightened our expectations but our conscience and wisdom is still puttering along at the hunter gatherer stage. In truth while we applaud Darwins principles where they apply to every other species we have the arrogance to believe they don’t apply to ours.

      In my opinion we have to acknowledge where we are, what we feel is wrong and expend our wit and grit on how to correct as many of the faults that we can without destroying the core. For that purpose and for the now, it’s my belief and conviction the most pragmatic approach is the clear the temples of democracy of false priests and shamans and re-establish democracy for the people by the people.

      That in itself will prove a Herculean task but the solution you propose is beyond capability and if attempted may in fact tilt the balance even more in favour of the Bilderberg templars.

    • Roger Glyndwr Lewis January 14, 2012 at 10:24 am #


      I linked to this in my Blog Back last September and it was a conclusion I had been coming to back in may last year when I wrote this


      On Science I recently put this up is Mathmatics Science or Language and indeed are Statistics either?


      On Anandis Post I welcome the debate and opening of the question but of course what we need is money issued on behalf of the common wealth not controlled by private central banks that privatise the profits and socialise the Losses. Basing the Credit of the world upon something or other is a much longer post than I have time to do right now if Al Gore is for it then I’m against it? ( Just Kiddin, but in the tradition of the Irish Rebel washed up on a beach ( Is there a government , Good then I’m against it.)

  43. therooster January 14, 2012 at 8:42 pm #

    The dollar’s ultimate role is not that of a currency. The currency role has been part of the dollar’s evolution but its 21st century role will be far more transaction related than debt related. The whole “script” has been about gold-as-money but also about attempting to get to a state of real-time distribution for gold because gold’s underlying distribution problems have created a lack of economic liquidity on the basis of looking back through history. This was a logistical problem associated with gold but was really about distribution, not gold in of itself. Entering gold into a real-time paradigm would prove to be superlative but tricky.

    When Bretton Woods was established and then “closed” in 1971 , it got several participating countries on the same chess board with the gold being the standard and the dollar being the central medium of exchange via the FIXED peg. When BW and the gold convertibility window closed in 1971 ($35/oz), it was the most desirable real-time genie that the market lusted after, but in the process of severing the FIXED peg by allowing the dollar and gold to float (a reflection of real-time fundamentals was now possible), the undesired evil debt genie escaped the same bottle at the same time.

    The irony of this is that it’s the real-time genie that holds the key on how to get the debt genie back into the bottle.

    Support the bullion market , monetize personal gold/silver ….. CIRCULATE IT ….. purge debt back to nothingness by way of the added debt free liquidity that allows fiat debt to find the hands that need it to return it to its nothingness. THIS MUST BE MARKET DRIVEN and cannot come as an impetus from the elite. The top-down paradigm is slowly closing.

    • Charles Wheeler January 15, 2012 at 2:55 pm #

      THIS MUST BE MARKET DRIVEN and cannot come as an impetus from the elite.

      The elite control the market.

  44. Duncan Maykior January 15, 2012 at 4:19 pm #

    Reserve currency ……
    You must always remember, the special interest groups and shadow governments who determine the world’s money are not nice people. They aren’t fair or reasonable. They are not generous or equitable. They are not balanced or objective. They will fight with every weapon, foot-soldier, or media outlet they have at their disposal.

    So don’t wait for all this to settle out into a beautiful new world. Cost it won’t, unless you make it happen and enforce it yourselves. There is no-one to complain to about the goalposts being moved, the coups being stage, the money being printed, the taxes being raised, or the gold and pensions about to be stolen.

    I thought they would run out of steam, the markets would collapse, the TBTF would suffocate, the Germans would take their northern friends out of the Euro, OPEC would trade in the EuroNord, and the precious metals would hit the roof. But that hasn’t happened yet, and although you would think they have run out of tricks, they most certainly have not.
    Who would have said they could replace the heads of IMF, ECB, Italy, Greece (and maybe Spain, Belgium, Ireland) with captive puppets all within a 6 month period. Well they did, and it didn’t seem that difficult to organise.

    Words and sentiments won’t do it.
    Ron Paul and a praetorian guard might just about get something started, but watch out if that battle gets started.

  45. Charles Wheeler January 15, 2012 at 4:40 pm #

    Nice work if you can get it (Pt. 356):


  46. Charles Wheeler January 15, 2012 at 6:31 pm #

    FDR revisited:
    “Roosevelt was not a progressive. He ran on a balanced budget platform, and initially attempted to fulfill his campaign promise of reducing the federal budget by slashing military spending from $752 million in 1932 to $531 million in 1934, including a 40% reduction in spending for veteran’s benefits which eliminated the pensions of half-a-million veterans and widows and reduced the benefits for those remaining on the rolls. As well, federal spending on research and education was slashed and salaries of federal employees were reduced. Such programs were reversed after 1935. And one might recall that Roosevelt attempted to return to a balanced budget program in 1937, just as the economy appeared to be slowly recovering. The result was a renewed depression that began in the fall of that year and ran through 1938. Thus, the Roosevelt Administration was forced into progressive activism because of massive—and organized—popular discontent based mainly in working class and small farmer organizations.”
    John Henry: http://goo.gl/J6C0G

  47. Phil January 16, 2012 at 3:55 pm #

    This is an interesting development by Avaaz – the online activists’ site. Instead of waiting for them to launch a major campaign, you can start your own petitions. I don’t expect things like this to shake the earth but I do think they are good at raising consciousness.

    Remember a while back a few of us put a motion on 38degrees about an audit of the banks…


    Have a think about it…

  48. richard in norway January 17, 2012 at 4:27 pm #

    Hi all

    I know this isn’t the right thread but I’ve just seen this while going through Michael Hudson’s archives

    ” This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process. …”

    It was written in Sep 2008

    Here is the link http://michael-hudson.com/2008/09/the-paulson-bernanke-bank-bailout-will-the-cure-be-worse-than-the-disease/

    • Pat Flannery January 17, 2012 at 7:01 pm #

      Good link Richard.

      Michael Hudson foresaw in September 2008 what I wrote about in September 2009: the Obama administration is controlled by the Wall Street bankers.


      • Charles Wheeler January 17, 2012 at 8:31 pm #

        Obama’s election cost c. $760m – with 2012 estimates at $1bn.

        Who pays the piper calls the tune?

        If not Congress is pretty well looked after by Wall Street and K-Street



  49. steviefinn January 17, 2012 at 8:17 pm #

    Documentary on the so called ” War on terror ” showing the real reasons for invading Iraq & Afghanistan, which surprise, surprise was all about oil reserves.

    I am shamed at being of the same species as the likes of Bush, Cheney, Rumsfeld, Blair & many others.


    • Charles Wheeler January 17, 2012 at 9:01 pm #

      There was me thinking it was simply coincidence that Iraq sat on some of world’s largest oil reserves. Thought it was the insane ravings of those conspiracy theorists. But, just to play Devil’s advocate:

      Turner: Jesus — What is it with you people? You think not getting caught in a lie is the same as telling the truth.

      Higgins: It’s simple economics, Turner… There’s no argument. Oil now, 10 or 15 years it’ll be food, or plutonium. Maybe sooner than that. What do you think the people will want us to do then?

      Turner: Ask them!

      Higgins: Now? Huh-uh. Ask them when they’re running out. When it’s cold at home and the engines stop and people who aren’t used to hunger… go hungry! They won’t want us to ask… They’ll want us to GET it for them.
      3 Days of the Condor

      Iran is selling more oil to China . . .

  50. Hawkeye January 17, 2012 at 10:47 pm #

    Jim Willie on the intersection of economics, currency warfare and geopolitics:

    “The USDollar is due for some extreme shocks. Some might not think so, given the Euro depression in sentiment and the rattling of big European banks. Word has come that in late February and late March, some important adjustment events are due to kick in, enough to knock over the tables in the temple. Conjecture is wide open and ripe for imagination. For the USDollar to continue its catbird post in global trade is inconceivable. The elite controllers will do their best to keep the USDollar in its dominant post. But the rest of the world, especially on its Eastern locales, is working in the other direction.”


    • steviefinn January 18, 2012 at 12:13 am #


      Obviously a whole different kettle of fish than the last 2 US invasions. It put me in mind of the Falklands & how the exocet missile so nearly turned the tide for the Argentinians. So I looked up the Sunburst missile, which makes the exocet look like something used for fun, on bonfire night. An intelligent article on the military possibilities:


      • Synopticist January 18, 2012 at 11:05 am #


        The Iranians would win a naval war in the Hormuz straights. Swarms of fast boats and anti-ship misslies would sink the carrier groups.
        Scary, but true.

        • Hawkeye January 18, 2012 at 12:40 pm #


          The US would be foolish not to expect that Iran is capable of seriously challenging them in such a confined space.

          A combination of swarms of suicide speed boats to pick off the smaller & weaker US vessels (frigates and supply ships) also creating chaos and distraction, electric submarines to take out the Cruisers, meanwhile a handful of Sunburst (Exocet-squared) supersonic missiles targetted at the flagship Carriers. A three pronged assault like this could be intense and devastating.

          Quite ironic then, that in this particular battleground, the Iranians may be able to deliver a true “Shock and Awe” assault on the formidable US Carrier Group model.

  51. Pat Flannery January 18, 2012 at 12:54 am #

    Guess where Obama will give his Democratic Party nomination acceptance speech: Bank of America Stadium, Charlotte NC.

    • steviefinn January 18, 2012 at 2:29 am #

      More on the pipelineistans, the not so isolated Iran & the should be worried dollar.


      • Hawkeye January 18, 2012 at 11:35 am #

        A couple of excellent links there, Stevie!

        Beware the “Sunburst” missile then. Iran is not to be laughed at, if this missile is as deadly as they say.

        In sum then, Iran is actually holding some strong cards:
        – geographic location overseeing the Straights of Hormuz
        – supersonic anti-ship missiles
        – powerful allies with a shared desire to end Dollar hegemony

        As with all prior world reserve currencies on the brink, the Dollar wont go down without a fight. But this could be a fight where the US meets its match.

        • Charles Wheeler January 19, 2012 at 1:09 pm #

          Isn’t part of the propaganda campaign to exaggerate the threat of the enemy. We were warned that Iraq had the fourth largest army in the world complete with a ‘crack’ Republican Guard, a stock of WMDs capable of striking allied targets ‘in 45 minutes’ and so on – it was a turkey shoot.

          US military spending @ $700bn compared to Iran’s $7bn suggests a certain imbalance. The ‘Sunburst’ silos could probably be taken out along with a bit of ‘collateral’ damage. It’s occupying and maintaining control that poses the real problem.

          • steviefinn January 19, 2012 at 3:45 pm #


            The US & UK failed to stop Saddams crappy scuds, these type of missiles can be launched from well hidden mobile launchers, they would have to all knocked out at once, it would only take one hit to sink a big juicy carrier. These type of arms are relatively cheap to buy from Russia.

          • Charles Wheeler January 19, 2012 at 10:35 pm #

            Drat. I’ve already put my money on the US.

          • steviefinn January 20, 2012 at 2:00 am #

            Charles, sorry about that.

            Take a look at this map, lots of hidey holes & there wouldn’t be much likelihood of the 7th cavalry charging across the desert as in Iraq, unless they came from Afghanistan & even then there are big rivers & nasty looking bottlenecks. The build up necessary over the border would give the Iranians plenty of time to prepare for this eventuality, they have a similar topography as the taliban, but there is no comparison in terms of weaponry.
            I suppose the US would start with a ” Shock & Awe ” bombing campaign & perhaps they would win in the end, but personally I think it would be a long drawn out nightmare, & that’s without Russian or Chinese intervention, & as you say, the policing needed afterwards in a country 3 times the size of Iraq, full of mountains would be nightmarish too.
            Cameron has refused to rule out war with Iran, could they justify it ? I hope not.
            Modern day Iran covers roughly the same area as ancient Parthia, the one foe that always gave the Romans a bloody nose.


          • Charles Wheeler January 20, 2012 at 6:44 pm #


            I’m sure you’re right about an outright ‘conquest’ – I was thinking more in terms of a ‘Mission Accomplished’ shock-and-awe assault aimed at taking out anything resembling ‘nuclear’ facilities.

            My point was that it serves US interests to exaggerate the threat.

          • steviefinn January 20, 2012 at 8:12 pm #

            I agree, however the US might have to be careful in publicising the dangers, I read the other day that they are having difficulty recruiting cannon fodder, even in this economic climate. I suppose at the end of the day a lot will depend on the Iranian peoples reaction to an invasion. On that brilliant programme you provided the link for, Chris Hedges stated that he had never been made to feel more welcome as an American, whilst visiting Iran.

            Vincent Browne asking the only worthwhile question at a Troika bollocks conference.


  52. KingofthePaupers January 18, 2012 at 1:49 pm #

    to challenge the US via the dollar with the eventual goal of creating an alternative reserve currency backed by gold rather than, as the dollar now is, by debt.
    Jct: The banksters love the yellow-rock enthusiasts since the bankers have most of the yellow rock. The Gold Standard of Money is dead. Long live the Time Standard of Money!

    • Hawkeye January 18, 2012 at 2:12 pm #


      Well I’m not so sure the banksters love the yellow-rock enthusiasts that much. I don’t see many of them lining up to cheer on the Goldbugs on the Keiser Report ! (Except maybe a few of the Austrian persuasion, e.g. Peter Schiff).

      Also, I’m not so sure that the banks “own” the gold. What with Repos, Hypothecation, Swaps and Loans etc. I’m not sure even they know who ultimately “owns” any of it. In a way any ownership issues can easily be trampled over by Gvt confiscation, and Jim Rickards offers an excellent scenario involving the US ennacting confiscation of all US held gold, whether in private hands, banks or even foreign owned (which the US has been “looking after on their behalf” since 1945).

      The Time Standard of Money, may well be a better solution, but it’s going to be bumpy ride before we get there!

  53. Greg Lemieux January 18, 2012 at 7:10 pm #


    I ran into this article a while back. Seems like Israel is also interested
    in their own gas, water & mineral prospects. What a mess.




  54. John Souter January 18, 2012 at 8:08 pm #

    Interesting to note our MSM (UK) have removed the financial apocalypse from the headline news.

    Is this I wonder by editorial decree! Some discretionary view of the common herd becoming bored with ruminating on such toxic fodder and, for peace to reign we need a dessert of glitz and bling consisting of Olympic Pud, Jubilee Trifle, Hi Speed Rail Soufle, HRH’s Jubilee Yacht or Miracle Moments.

    Is it an indication of a solution in the process of formulation? That all’s well and, while the announcements at hand discretion dictates it better to keep quiet until the i’s are all dotted and t’s crossed?

    Or is it the panacea of censorship spun in obfuscation and sprinkled with propaganda by sweaty chefs in a hellish kitchen?

    • steviefinn January 18, 2012 at 8:58 pm #

      Imagine if we didn’t have the web, MSM BS would be all we have. Now there is SOPA PIPA & NDAA. A thin edge of the wedge to also turn the net into the elites mouthpiece. I read somewhere that there was some talk of there being set up pirate internet. It would be a bit like listening to radio Luxemborg under your bedding on a transistor radio, hoping your parents didn’t notice.
      Seriously though, if in the future they start to succeed with censoring the net, we will perhaps have to consider making hard copies of what is valuable.

      Thanks Greg.

      It gets messier the closer the inspection.

      • Roger Glyndwr Lewis January 19, 2012 at 10:10 am #

        Part of the reason I have been getting into Linux and open source software is with a mind to operating outside of the corporate cosh. The black out on Wikipedia in protest at SOPA was very worthwhile in my view.


      • John Souter January 20, 2012 at 1:38 pm #

        Hi Stevie – “Imagine if we didn’t have the web?”

        Well I might get some work done instead of trying to absorb the links you clever buggers keep posting.

        As it is I have some sympathy for creative artists and writers et al having their creations downloaded without recompense. For me the answer is quite simple; the search engine (if that’s what they’re called) – ie Google and such like should negotiate part of the remuneration from their advertising revenue as a fee for each download.

        As to the Iran scenario – the facts are the neo cons have never won in any of the conflicts they initiated. From Vietnam to Afghanistan their claimed superiority of culture and deed has been overwhelmed by their hypocrisy on each and every occasion.

        However frustrated we as individuals feel at the lack of mea culpa from the neo-cons and neo – liberals they are well aware the world has changed since the melt down their joint idiocy has thrust upon us.

        To the extent while they might test the waters by posturing and hope by doing so give themselves more time to regain the high ground afforded by populace apathy, they will not, in the Iran situation, put it to the action test.

        Of course all of the above assumes they have gained the wit to recognise the subtleties between the frying pan and the fire!

      • Joe Taylor January 21, 2012 at 4:40 am #


        SOPA, PIPA Interenet censorship, Wikipedia 24 hours blackout in retaliation, following day this happens. Ofcom revokes Press TV license with immediate effect claiming they haven’t conformed with UK law.

        Broadcast from Iran and only licensed in the UK by Ofcom which has been toothless for years.

        I wonder why the sudden escalation of media and online censorship in the UK and US ?

        Suggests to me somebody is getting mighty nervous about something.

        Any suggestions what is spooking them?

        • steviefinn January 21, 2012 at 11:39 am #

          The truth ?

    • Charles Wheeler January 19, 2012 at 1:12 pm #

      “One might think that a corporate media system would act independently of the state – there is no formal mechanism of control. But as the ingrained bias sampled above indicates, this often turns out not to be the case. With regard to human rights, for example, corporate media typically do not simply pick a subject and lavish it with attention. Rather, political power selects an issue, frames the coverage, and media corporations jump on the bandwagon.

      Commentators sometimes lament the fact that the ‘mainstream’ media system is ‘controlled’ by profit-seeking corporations. It is not; it is made up of corporations. But that doesn’t tell the whole story. Media companies are key elements of a corporate system that utterly dominates politics. In reality, US-UK military interventions are state-corporate military interventions. It ought to come as no surprise that the corporate media propagandises on behalf of its own interventions and works hard to hide the ugly consequences from a public with the power to resist.”

  55. Charles Wheeler January 19, 2012 at 3:05 pm #

    Economics in crisis:

    “… we must acknowledge the intimate, inseparable relationship between politics and economics. Modern debates about who caused the financial crisis—­government or the private financial sector—are almost ­nonsensical. We are living in an era of money politics and large powerful interests that influence the laws and regulations and their enforcement. In order to catalyze the evolution of economics, research teams would benefit from multidisciplinary interaction with politics, psychology, anthropology, sociology and history.”
    Robert Johnson: http://goo.gl/BeWcz

    • John Souter January 19, 2012 at 5:46 pm #

      Conversely – Or a short sharp lesson on common sense and the meaning of honesty,

      • Charles Wheeler January 19, 2012 at 10:45 pm #

        Ultimately, the problem reflects a break-down of morality. It is clear to me that if everything was guided by a moral compass then no-one would seek to profit on food speculation at the cost of someone not being able to eat enough or feed their children adequately. The logic of capitalism is amoral in that sense so regulation has to be introduced.
        Bill Mitchell: http://goo.gl/jxlND

    • Roger Lewis January 20, 2012 at 4:17 pm #

      Last Fair Deal Gone down

      Robert Johnson

      If you cry about a nickel, you’ll die ’bout a dime
      She wouldn’t cry, but the money won’t2 mine

      This’ the last fair deal goin’ down, good Lord,
      on this Gulfport Island Road1


  56. cynicalHighlander January 19, 2012 at 9:40 pm #

    Reason for Watered Down Merkozy Treaty Comes to Light; The Answer is Ireland

    Sinn Féin, the fourth largest party in Ireland’s parliament, told The Financial Times on Thursday that the party had sought legal advice on the issue and was “seriously and actively considering” making a challenge to the Irish Supreme Court.

    The incredible shrinking UK economy

    Gauged by decline in GDP, using a common international purchasing measure, dollars, no other economy in the world has shrunk even remotely as much as the UK

    • Mike Hall January 21, 2012 at 7:03 pm #

      That Mish Shedlock (your 1st link) is a very confused person. He seems to think the Merkozy fiscal pact proposal is a “….socialist, nanny state…” one. Then praises Irish party Sinn Fein for opposing it….who are one of the most left/socialist in Europe !! What an idiot, and really what a stupid comment to make anyway, as Europe’s financial policy has been firmly in the grip of neo liberals & right/far right for decades.

      He makes a valid point that Ireland will need, constitutionally, to hold a referendum for any Euro treaty changes, and, naturally, the last thing our ‘leaders’ want is meaningful democracy, so will do all they can to avoid any pesky voting. But that’s hardly a revelation.

      • cynicalHighlander January 21, 2012 at 9:08 pm #

        Thanks for the heads up on Mish.

      • Roger Lewis January 22, 2012 at 4:21 pm #

        Hi Mike
        I read Mish Shedlock regularly a big part of his achilles heal is shoehorning extreme libertarian dogma into advancing arguments for Gold and a Free market in Property sometimes with some very convenient glossing over of the facts which might be a little inconvenient.( Max Keiser occasionally does a similar thing) both I think are with the good guys which I think is what we are here)
        He wrote the day before yesterday about the Un-real estate market suggesting that a crash should be induced by bailing out no one and allowing investors to determine the natural level of the market, kind of reminds me of the comment of the Irish Farmer at the gate ( well I wouldn’t start from here.
        I don’t think Mish is an idiot far from it his market analysis is very good his politics and mine are rather different, and I am very much against his prescription for the real estate disaster.
        My Views on this are here ( still have to go back to this but presently awaiting the obudsman to pronounce before going to Law.)
        I’m glad Mish writes prolifically and if we are to get back to democracy that involves a realisation that there will rarely be a universal agreement of the various shades of any particular color of policy. and we will all have our own particular blind spots where pet theories are concerned.

        • Charles Wheeler January 22, 2012 at 6:17 pm #

          Yes. It gets very confusing when you have right-wing libertarians in charge that caused the crisis (Greenspan), and lots of right-wing libertarians – many eulogising the halcyon days of the ‘gold standard’ which produced a land of milk and honey – coming out of the woodwork to offer libertarian solutions to the crisis; the anti-government Tea Party movement funded by the super-rich to blame it all on taxes; those on the left blaming the Fed for propping up the ‘market’; those on the right blaming the Fed for undermining the market; ceos of TBTF banks extolling the virtues of ‘free markets’; anti-corporate Paulites blaming the government-corporate nexus; lefists who want to see a return to interventionist government to protect the poor; leftists who want to get rid of governments that act in the interests of the rich; free marketeers who see government action as an interference in the market; opponents of laissez-faire who argue that markets collapse into oligarchy when not properly regulated; etc., etc.

          Certainly, Max Keiser seems to have a handle on the kleptocrats running the show in their interests, but also seems to attract a ragbag army of libertarians, goldbugs, democrats, MMTers, and anarchists who all come with their own agendas.

          Perhaps that’s where the strength of those defending the status quo lies – anything that suits their self-interest goes, irrespective of any political philosophy. So, ‘free markets’ are great … until you start to fail, then government action is necessary … until your balance sheets start to improve … then government is a burden that needs cutting down to size … it’s a moveable feast!

          • Hawkeye January 23, 2012 at 1:17 pm #


            Another excleent summary of the deckchair shuffling.

            Certainly my first couple of years reading intensely about this crisis got me wound up in knots.

            It all became a lot clearer after reading David Harvey’s Rise of Neoliberalism and James Galbraith’s Predator State.

            We actually have a mixed economy, but one that is instead the worst bits of Capitalism and Socialism. A kleptocractic neo-feudalism.

            So after much soul searching I have settled on the single guiding principle to comprehend this crisis.

            It’s not about Left v Right. Old v Young. Big Gvt v small Gvt.

            It is a battle between Creditors & Debtors. Nothing more, nothing less.

          • Charles Wheeler January 23, 2012 at 2:32 pm #

            rentiers v. debt-slaves – or, as Michael Hudson describes it: ‘neo-feudalism’

  57. Pat Flannery January 20, 2012 at 7:34 pm #


    It’s been almost two weeks! We’re starving out here!

  58. Charles Wheeler January 20, 2012 at 9:34 pm #

    Not content with sanitising home-grown coverage of the meltdown by neutering the BBC govt quangos seem intent on putting up Chinese walls to block external criticism: http://goo.gl/V28BK

    See also: http://goo.gl/pqZXn on SOPA/PIPA

  59. davem January 21, 2012 at 9:55 am #

    Vincent Browne v The ECB

    • Mike Hall January 21, 2012 at 7:17 pm #

      Thanks for linking Dave.

      Vincent asked a question (& persisted, good man!) that a lot of Irish people want answered by the ECB and our own politicians.

      No acceptable answer has thus far been forthcoming. Disgusting.

      In noting what the ECB representative had to say….
      As a rule of thumb, I find whenever an economist or politician starts using the word ‘confidence’, particularly repetitively, it’s a sure indication they are speaking from their rear orifice. Seems to apply 100% so far.

      • old dog January 21, 2012 at 7:59 pm #

        A brit ex oil regulator chris Cook on keiser report reckons oil should drop to around $60 or less, surely we’re not sabre rattling just to keep it up ?

        • richard in norway January 21, 2012 at 8:20 pm #


        • Phil January 22, 2012 at 5:24 pm #

          i saw that episode and i was wondering when Keiser was going to challenge that low price – on a recent show Max had claimed that the oil price was much LOWER than it should be and was kept there by the machinations of the big banks. he reckoned it should be around $250.

          it left me with a headache anyway!

      • steviefinn January 21, 2012 at 8:41 pm #

        Mike here’s an answer that I’m sure you will enjoy.


        • richard in norway January 21, 2012 at 8:56 pm #

          Interesting that there were no comments on that editorial, not allowed?

  60. John Souter January 22, 2012 at 3:06 pm #

    The Present Paradigm of “Democracy’ Exposed.

    Food for thought and sustenance for Pat F.

    The Cuntocracy
    William Clark

    Why not call the present political system a ‘cuntocracy’? This is
    not, as it might seem, just a reaction to the advent of
    someone as painfully fraudulent as Nick Clegg. We need a
    new name for not just what the political class do to us
    because of greed and stupidity; we need a term that
    advances the idea of social organisation as something innate
    in people. It should combine a description of the reality of our
    place in such a society with an accurate discription of the
    nature of the society. Cuntocracy describes the reality.1
    By calling our society a cuntocracy we return power to
    the ordinary people; we give the people a voice, a simple way
    for them to talk back to those who pose as leaders but take
    us nowhere. And we offer a meaningful contribution to David
    Cameron’s ‘Big Society’.
    What are our base assumptions? Well, there is probably
    only one ‘law’ that we could say social science ‘discovered’ and
    this seems to have been engendered by sheer flippancy. This
    is Lord Acton’s statement (in a letter to a Bishop) that all
    power tends to corrupt and absolute power corrupts
    absolutely. No one has thought to extrapolate our one law to
    establish its social determinants. We can adapt Acton’s Law
    into: all power tends to create cunts and absolute power
    creates total cunts. If power and cunthood are thus implacably
    entwined they form a metaphysical pathos: an inescapable
    trap of cuntification awaits anyone seeking power. This trap
    1 To clarify: the use of it contains a critique which evinces a
    sublimated but key feature of society, in that we ‘innately’ order and
    structure society — character determines social structure. If we grasp
    this as a process and study it we can gain some sort of understanding
    of how society is shaped and how we are shaped by it, and it is bad
    news.gives rise to a functional rationality: the cuntocracy. Max
    Weber’s concept of the inescapable ‘Iron Shell of Bureaucracy,’
    or Marx’s ‘Barbarism’ as the incurable ‘leper of civilisation’ point
    to its social psychology.2
    If mention of ‘capitalism’ is always off the agenda, so
    that its effects on society can always be ignored or
    obfuscated, then we are being tacitly urged to switch to
    something else, something we can see everyday and
    everywhere: a cuntocracy. Who would need a lengthy
    theoretical excursus into the reality of a cuntocracy when they
    daily encounter the activities of every bureaucracy, or have
    recently spoken to their boss, or flicked through a few
    television channels and caught sight of George Osborne
    saying something? So, given our present system of rewarding
    the wealthy for robbing the poor, it is vital that its reality is
    reflected in a terminological exactitude open to every citizen:
    other terms lack cuntocracy’s profound poetic grace.3
    Most of them have come up with nothing particularly
    useful, but sociologists tell us that they have laboured away
    to arrive at an account of why our society is the way it is. Let
    us leave them to it, and, with one term, state who is in
    control, as much as it can be said anyone is in control, and
    how they pull off the con. The advantage of ‘cuntocracy’ is that
    it does all the sociological work for us. But there is a problem
    here: sociologists make a living sublimating the ways of the
    powerful, so that people comply with directives from ‘above’.
    We are reversing this process. For academics, ‘society’ has to
    remain something of a perpetual mystery, although we know
    that they know which side of their bread is buttered. Yes,
    there are writers who have uncovered the existence of a
    cuntocracy and the ways of the powerful, but they are
    2 See Arthur Mitzman, The Iron Cage: An Historical Interpretation of Max
    Weber, (New York: Alfred Knopf, 1970). In Hans Gerth and C. Wright
    Mills, From Max Weber (London: Routledge, 1946) pp. 41-42, after
    World War I, Weber basically called Ludendorff a useless fat cunt who
    should be hung.
    3 It should be pointed out that the term is drawn from the UK’s
    northern urban demotic and the linguistic properties thereof. Those
    offended by it could easily replace it with ‘cantocracy,’ given that this
    might be the way some pronounce it anyway.outcasts. Their work is totally unwanted because it reveals
    that the cuntocratic world has certainly been made by cunts,
    and its principles are therefore to be found within the
    modifications of these cunts’ mind. Universities are there to
    hide knowledge using a sophisticated form of administrative
    pedagogical cuntocracy that involves the selection and
    employment of ignorant, lazy cuntocrats to run a system
    reproducing the cunnus quo at the expense of any
    encouragement of an awareness of it. But a system based on
    bribery and compliance should be perfectly amenable for our
    purposes of selling the term, normalising it.
    If we have to convince the intellectuals so that they can aid
    us spread the word, we can start by examining the theorists
    on whom the principles of the cuntocracy are clearly
    dependent: those who advanced being a ‘total cunt’ as a
    desirable condition. In the rest of this essay we will draft this
    out. A good start would be Robert Michels’ the ‘iron law of
    oligarchy’, that explained how nature has determined that
    whatever the top cunts say goes. It might well be wayward
    gibberish, but the chances are that it, and the theorists he
    uses to back it up, will offer us a chance to find enough other
    cuntologists to provide the thing that proves things to
    intellectuals: the academic citation. For example, Vilfredo
    Pareto and Gaetano Mosca could be plundered to offer
    evidence of the ‘circulation of cunts’. Surely too, there must be
    reams of it in James Burnham; but here we are only talking
    about neo-Machiavellianism mixed with people’s desperate
    desire not to be thought of as a communist. We should go
    back to the timeless master, Niccolo Machiavelli here. Would
    not The Cunt have made a better title than The Prince?
    Some readers may be of the opinion that making up such
    a terms is meaningless. What idiot would fall for something as
    obtuse as this? What half-wit would take it seriously and start
    using it? Well the word ‘meritocracy’ was invented by Michael
    Young in his (1958) satirical book The Rise of the Meritocracy.
    Young’s joke was that the meritocratic class had gained a monopoly on ‘merit’ and got together with the symbols and
    designators of merit, to perpetuate its own power, status, and
    privilege. He wrote to the Guardian in 2001 pointing this out
    when Tony Blair started prominently using it as part of running
    the country — to define what our society should be like.4 So it
    should be relatively easy for someone to drop ‘cuntocracy’ into
    some dreary ramble once conference time comes round again.
    So what is the cuntocracy? Is it a class or an elite? Who
    are the cuntocrats? How does it work? Class, it should be
    remembered, is not real as such, it is something people do to
    one and other, it is an interaction, the way you are treated.
    We will all have a barrage of suggestions as to what the main
    cuntocratic institutions are, but the cuntocracy is not limited to
    bureaucracies: these are the reflection of the political
    institutions that empower them to act. This is why
    bureaucracies are run by cunts who find themselves saying: ‘I
    don’t make the rules.’ This bureaucratic adoption of a
    functional rationality also extends into a de facto code of
    silence that contributes to the practice of the cuntocracy hiding
    its actions: any crisis that threatens the cuntocracy or its
    important members triggers a closing of ranks to protect it
    from outside scrutiny, interference, and legal oversight. They
    form certain contours of the cuntocracy, but class and
    bureaucracy are not the cuntocracy. When the cunts who ‘do
    not make the rules’ go home they only enter into a wider
    cuntocratic realm of which they too are at the mercy of. Franz
    Kafka worked in an insurance company; this was where he got
    his ideas.5
    Books such as Amoral Politics, outline thousands of years
    of experience to support the idea that political institutions are
    fundamentally amoral and constitute a cuntocracy.6 This
    4 See .
    5 Fiction, such as Kafka’s The Trial, or Huxley’s Brave New World, have
    ran ahead of us, with characters who sense that they have no effective
    defence against the cuntocracy that runs the World. Both works could
    quite easily have been re-titled: Brave New Cuntocracy, or Brought before
    the Cunts. Jonathan Swift’s A Modest Proposal, could easily have been
    called Cuntocratic Cooking.
    6 Ben-Ami Scharfstein, Amoral Politics: The Persistent Truth of
    Machiavellism, (Albany: University of New York Press, 1995).‘bureaucratic amorality’ is basically the Nazis’ claim that they
    could not be held personally responsible because they had a
    legal duty to achieve politically empowered tasks to the
    exclusion of anything else: either they were following orders
    or the law, or did not know the consequences of their actions.
    But they were still total cunts.7 Possibly the Nazis were the
    cuntocracy par excellence, but we will have to play this down
    as just an example. We are going to need to put it on solid
    (i.e. more acceptable) theoretical grounds.
    The underlying meta-cuntocratic principle
    The difficulty of tracking the exact origin of something can be
    obviated quite simply: we simply provide our own mythology;
    people are a lot more willing to go along with myths rather
    than waste time finding out facts. If a trick works once it might
    just work again. One overlooked aspect of F. A. Hayek’s The
    Road to Serfdom (the book Margaret Thatcher slapped the
    table with saying that it had taken over her mind) is in a short
    section called ‘Why the Worst Get on Top’, where it is argued
    that the most amorally flexible people involved in a
    bureaucracy tend to rise to the top and become its leaders.8
    Hayek pretended he was writing on ‘totalitarianism’,
    something he largely invented to roll the Soviets, Nazis and
    socialists into one; but bureaucracies are much the same
    everywhere, and it is clear from the examples he uses that we
    are also talking about capitalism here, too. But in this mélange,
    does not Hayek accidentally point to the underlying metacuntocratic principle underlying most societies? He also points
    to bureaucracies as not integral to it, but just perfectly suited
    to helping the unprincipled attain positions of influence and
    power because a lack of scruples gives them an advantage in
    advancing their careers. As Hayek puts it:
    ‘…the probability of the people in power being individuals
    who would dislike the possession and exercise of power
    7 Hans Sherrer ‘The Inhumanity of Government Bureaucracies,’ The
    Independent Review, pp. 249-264, .
    8 Friedrich A. Hayek, The Road to Serfdom, (Chicago: University of
    Chicago Press, 1944) pp. 148–67.is on a level with the probability that an extremely
    tender-hearted person would get the job of whippingmaster in a slave plantation.’9
    So for Hayek, there is a gradient in society that makes it
    inclined towards certain proclivities. For those who have not
    read Hayek (and indeed for his followers) it should be clarified
    that this whipping-master job is, for our purposes, not so
    much an aspiration: it is being ambiguously presented as an
    analogy, rather than seen as the be-all-and-end-all, as it was
    taken in Enoch Powell’s famous speech on which race should
    have the ‘whip hand’ in the cuntocracy. Here Powell was
    advancing what we could term an ‘Athenian cuntocracy.’
    If we try to define our conception of ‘cuntocracy’ for the
    academics, we can also cite the belief that bureaucracies are
    forms of kakistocracy: government by the least qualified or
    most unprincipled citizens known to humanity. This is a cat’s
    whisker away from our conception of cuntocracy and even
    sounds worse.
    Beneath the mask
    For Hayek, government bureaucracies, as the agencies of the
    cuntocracy, depend on an unreflective wielding of the power
    made available to their administrators: a ‘truthless’ rather
    than a ‘ruthless’ willingness to wield an agency’s power is an
    occupational requirement for someone to rise to the upper
    echelons of the cuntocracy.1 0 But our argument is that it must
    be a bit of both since both seem components of a larger
    enduring system. The attraction of power-hungry people to
    positions of authority in a bureaucracy will have consequences
    for everyone affected. So the cuntocracy must wear a benign
    mask at times — in our present world the whipping-masters
    9 Hayek, ibid, p. 152. It escaped Hayek that it is possible that a
    tender-hearted person might have gained the job so as not to carry it
    out, operating under a pretence. Hayek’s assumption is that whippingmasters like their job, are thus dedicated and good at it and not
    mindlessly flailing: this is an uncharacteristically heroic vision of the
    working class.
    10 Ibid. pp. 159–67.must have a euphemistic job description. Power-oriented
    people mask their control via such entities as ‘indicative
    planning’ or ‘performativity’. Here bureaucracies can freely
    express inhumane prejudices, a bit like Tony Blair’s use of
    meritocracy and ‘God’. Government bureaucracies do not think,
    only individuals do that; but bureaucracies tell them not
    to. Thus some bureaucracies are said to be the institutional
    equivalent of a psychopathic individual.1 1 Our concept of the
    cuntocracy is a contribution to what Ashley Montagu called the
    last century’s ‘dehumanisation syndrome’.12
    In our mission to win over the intellectuals we will need
    to throw in some kind of an academic dichotomy, the perpetual
    discussion of which will keep them in business. Robert Merton
    noted the importance of discerning the difference between
    manifest and latent functions, and we can paraphrase the hell
    out of him here. A distinction between a manifest and latent
    cuntocracy could be devised to stop (and indeed start) the
    inadvertent confusion between conscious motivations for
    cuntocracy and its objective consequences. In other words: do
    cunts actually try to bring about a cuntocracy or does it just
    seem that way? Is it because we identify motives with
    functions and confuse the subjective categories of motivation
    with the objective categories of function?1 3 You get the idea.
    Hopefully that one can run as long as the Miliband-Poulantzas
    debate (still raging).
    One thing is for sure: any self-disrespecting cuntocrat
    will tell others what to do. There is no way we are getting
    bogged down in all that semiotic linguistic guff, so we will say
    that the cuntocracy uses what C. Wright Mills called a
    ‘vocabulary of motive.’1 4 Rather than expressing something
    11 Gilles Amado, ‘Why Psychoanalytical knowledge helps us
    understand organizations,’ Human Relations, No. 48, April 1995, p. 351.
    12 Ashley Montagu and Floyd Matson, The Dehumanization of Man,
    (New York: McGraw-Hill, 1983).
    13 Robert K. Merton, Social Theory and Social Structure, (New York:
    Free Press, 1957) p. 60.
    14 C. Wright Mills, ‘Situated Actions and Vocabularies of Motive,’
    Sociological Review, Vol. 5, No. 6, 1940. This is related to the earlier C.
    Wright Mills, ‘Language, Logic, and Culture,’ American Sociological
    Review, Vol. 4, No. 5, 1939.that is prior and in the person, language is taken by other
    persons as an indicator of future actions. Mills also gave us
    the mechanics of how a cuntocracy operates through his
    conviction that in the US an elite group had enormous power
    denied to everyone else; that they were increasingly
    becoming a self-perpetuating elite; that their power was
    becoming increasingly unchecked and irresponsible; and that
    their decision-making was based on an increasingly military
    definition of reality, a ‘military metaphysic,’ a crackpot realism,
    that was in fact oriented towards immoral ends. Surely any
    academically sanctioned cuntocracy would incorporate this —
    once spun as some glorious national security business
    rationale. Mills also believed the ‘Power Elite’ had ‘sold’ a
    believing world on themselves; and they had to play the chief
    fanatics in their delusional world.15 Perfect: there is a market
    for this; but we do not want our theory to appear radical —
    fraudulent yes, radical no: the academics must recognise us as
    one of their own. Once formulated, better to launch it in a
    think tank like Demos or the Society for Social Cohesion,
    perhaps with an article in Prospect by Michael Ignatieff.
    Impressing the gullible
    Possibly the greatest theorist of cuntocracy was Thorstein
    Veblen. Is not his ‘Leisure Class’ elegantly harmonious with
    our own? Veblen’s ability to gaze upon ‘industrial warfare’ and
    the ‘businessman as predator’ was with the ‘eyes of a
    stranger.’ He showed how the trained incapacity of
    businessmen, acting in accordance with entrepreneurial
    canons, resulted in an efficient sabotage of production and
    productivity. But, like Mills, he demonstrated entirely unwanted
    abilities in social science and is to be avoided like the
    plague.1 6 The ire of the academic detractors was prompted
    ‘Veblen may be said to have betrayed the betrayers by
    thinking unholy thoughts on holy ground and by using
    15 C. Wright Mills, ‘Introduction,’ p. vi-xix, in Thorstein Veblen, The
    Theory of the Leisure Class, (New Brunswick: Transaction, 1953).
    16 Thorstein Veblen: ‘The Main Drift,’ in C. Wright Mills, Images of
    Ma n, (New York: Harcourt Brace, 1960), pp. 336-369.the ritualistic paraphernalia of scholarship — ordinarily
    employed in buttressing the social order and impressing
    the gullible — for profoundly subversive purposes.’1 7
    Veblen died in 1929, but these people have memories like
    elephants and their very trade is in sets of grudges masked as
    scholarship that are passed on before they die. And here we
    allude to an interesting feature of this form of rule: while an
    aristocrat might feel happy with being called an aristocrat and
    can even point to noblesse oblige, the cunt will generally not like
    the cuntocracy delineated as such and is not disposed
    towards any connasse oblige. Or are they? Theoretically if the
    cuntocracy is as axiomatic as we might suppose, we should
    need to only listen to those at the elite of a cuntocracy to
    formulate our opinion that we indeed suffer under a
    cuntocracy they are dishonour bound to create. An audio
    archive such as this interchange between Nixon and Kissinger
    might suffice to convince us:
    Nixon: I still think we ought to take the dikes out now.
    Will that drown people?
    Kissinger: That will drown about 200,000 people.
    Nixon: Well, no, no, no, no, no, I’d rather use a nuclear
    bomb. Have you got that ready?
    Kissinger: That I think would just be too much, uh…
    Nixon: A nuclear bomb, does that bother you? I just
    want you to think big, Henry, for Christsakes.1 8
    You really have to listen to the savour of the tang of
    17 Daniel Aaron, Men of Good Hope, (Oxford University Press, 1951)
    pp. 208-245. Veblen’s conceptualisation of economic relations included
    his ideas of a ‘strategy of mutual defeat’ that governed the work of
    the industrial system. And surely utter futility is the hallmark of a
    cuntocracy. For Veblen, the business interests of the ‘Absentee
    Owners’ do not coincide with the underlying population’s in a tension
    between maximum output at low cost versus moderate output at an
    enhanced price. Here, too, the unions are described as habitually
    employing ‘the standard methods of the merchandising business,
    endeavouring to sell their vendible output at the best price obtainable;
    their chief recourse in these negotiations being a limitation of the
    18 cuntocracy in Nixon’s voice when he torments Kissinger with
    that ‘does that bother you?’ The printed page just does not
    convey it. But of course quite a bit of Nixon’s activities were
    supposedly secret. Surely a cuntocracy is dependent on a
    vast hidden propaganda apparatus? But such techniques of
    control are merely the basic methods by which an individual or
    a group asserts its cuntocratic orientation — its power and the
    ability to exploit this power. Even ‘secret’ techniques of control
    require channels, institutions, and structures by which the
    techniques and basic methods are implemented. To prevail,
    control techniques must form a cunto-methodology by which a
    cuntocratic potential is actualised and once actualised, is
    maintained. An established cuntocracy will presumably seek to
    maintain the pattern of structural and behavioural relations
    that it has developed in the system it tries to control (or
    indeed wreck): this maintenance pattern demands control
    devices — propaganda being one of them. So we will tell the
    academics that this is a form of ‘public diplomacy.’ We can
    entice them further and appeal to their vanity: promising that
    they can exploit another functional duality here. Because no
    cuntocracy is likely to adopt a single technique or restrict itself
    to some basic technique, certain sets of techniques tend to be
    required: the top cunts must appear as ruthless and/or
    truthless when it suits them — the good cunt/bad cunt
    routine. For example, if violence is the preferred technique,
    violent cunts will increase in importance and potential. Some
    concrete group of violent cunts – i.e. the police, the army, or
    parapolitical agencies – would subsequently increase their
    scope and intensity and rise to the top of the cuntocracy. But
    a cuntocracy might switch from violence to mass manipulation
    as its preferred technique. As a result manipulatory cunts
    might rise in importance and potential at the expense of
    violent cunts — if we take the two to be significantly
    unrelated. Violent cunts might lose their relative elite position
    in the cuntocracy and move to a lower level in the hierarchy,
    while manipulatory cunts using actors such as party
    organisers, mass organisation leaders, propagandists and
    covert operators — in short academics — would appear in the elite upper echelon gaining prestige and influence: taking on
    the appearance and vocabulary of top cunts. Here we need
    only drop hints that academic cuntologists, like Hayek, could
    be said to have invented the incredibly well-funded field of
    cuntology to accompany the vicissitudes of the process.19
    A problem exists in much sociological work involving the
    very identification of whatever it is that you are talking about
    — hence the subsequent ease of substituting one term for
    another. This suits us fine: we will say that some writers who
    are presumed to have been writing about elites, or
    bureaucracies (remember our task is to subsume both) were
    actually mistranslated or deliberately misunderstood by
    socialists. The task is merely one of reinstatement: we just slip
    it in. So, for example, we would say things like: according to
    Key (1961) a main characteristic of cuntocracies in
    constitutional systems of government is ‘absence of sufficient
    cohesion among the activists to unite them into a single group
    dedicated to the management of public affairs and public
    opinion.’ Our serious study of cuntology would use this to
    pretend we are objective the way the more Thespian
    Academics do. We will have to quote the right people, so we
    will say that Raymond Aron (1950) categorised cuntocracies in
    constitutional systems as divided cuntocracies; and we will say
    Ralf Dahrendorf (1959) extended this to argue that because of
    this division it was impossible to identify a cuntocracy because
    it ‘consists of two constants, bureaucracy and government;
    and one variable, the veto group whose claims are, in
    particular situations, incorporated in government policy.’ If
    required we can say that this forms the Burnhamesque view
    that government managers make decisions by processing the
    interests pressed on them by a variety of outside interests
    19 The academics might feel that they would become analogous to
    those who prepared the Brothers Grimm’s celebrated ‘Emperor’s new
    clothes.’ So they will be required to smother any small child who might
    later try to expose the racket — business as usual one might say.and ‘veto groups,’ but we will substitute ‘top cunts’ here.20
    If some outsider makes the derogatory assertion that
    our social science work here merely forms a type of satire and
    is incompatible with a ‘serious’ sociological analysis and is in
    effect some kind of conspiracy theory, we can say that it is at
    times difficult to be able to distinguish between the two when
    these things are made so; but we may have to play our ace
    here and bring in Machiavelli the maestro to show that the
    two are not mutually exclusive. Hit it Nicky:
    ‘I come now to the last branch in my charge: that I teach
    princes villainy, and how to enslave. If any man will read
    over my book [of the prince] with impartiality and
    ordinary charity, he will easily perceive that it is not my
    intention to recommend that government, or those men
    there described, to the world, much less to teach men
    how to trample upon good men, and all that is sacred
    and venerable upon earth, laws religion, honesty, and
    what not. If I have been a little too punctual in
    describing these monsters in all their lineaments and
    colours, I hope mankind will know them, the better to
    avoid them, my treatise being both a satire against
    them, and a true character of them…’ 21
    Here, in a letter, presumably to another Bishop, Machiavelli in
    explaining the basis of ‘The Prince’ only seems to think that we
    need managing in being cuntish towards each other, no initial
    impetus. And note too that this conveniently comes from the
    epigram of James Burnham’s The Managerial Revolution, that
    20 V.O. Key, Public Opinion and American Democracy, (New York: Alfred
    A. Knopf, 1961); Raymond Aron, ‘Politics and the French Intellectual,’
    Partisan Review, pp. 595-606, Vol. 17, July 1950; Ralf Dahrendorf,
    Class and Class Conflict in Industrial Society, (Stanford University Press,
    1959) p. 305.
    21 James Burnham, The Managerial Revolution, (Penguin, 1942), p. 13.
    There was a second part to the quote from Machiavelli that Burnham
    (for his own reasons) omitted: ‘Whoever, in his empire, is tied to no
    other rules than those of his will and lust, must either be a saint or
    else a very devil incarnate; or, if he be neither of these, both his life
    and his reign are like to be very short; for whosoever takes upon him
    so execrable an employment, must turn all topsy turvey, and never
    stick at anything; for if he once halt, he will fall and never rise again,
    etc.’said that an Athenian cuntocracy had been replaced with a
    more anonymous, but functionally indispensable, managerial
    What other great works should undergird our thesis?
    Well, those that no one has any intention of reading naturally
    offer themselves up, particularly ones steeped in the past that
    impart some gravitas to the term. We can trot out Alexander
    D’Entreves (1967) description of Plato’s ‘Argument of
    Thrasymachus,’ and note the early inclusion of the cuntocratic
    in Socrates’ response to Thrasymachus. D’Entreves study of
    the state quickly arrives at Plato’s theory of the ‘Noble Lie,’
    what we will adapt as the ‘Noble Cunt.’23 Here we will stress
    that only humans lie properly. A Nietzschean ‘higher morality’
    (yes: ‘higher cuntality’) could be trundled out that enables the
    ‘Überfotze’ (the super-cunt) to rise above the restrictions of
    ordinary morality. In its essence the Noble Lie establishes
    rigid divisions (an exploitative cuntocracy) by telling us that
    only certain people can be leaders: the ‘guardians of gold’. So,
    as a sop, we can always offer the possibility that only certain
    people can be cunts and that the chances are they will already
    be in, or want, control of things because they feel they should:
    let our watchword be apathy. For D’Entreves the Noble Lie
    was now variously termed ‘ideology,’ or ‘myth,’ or ‘political
    formula’, so we might as well feel free to add another name
    for it combining the lot. A powerful regime is surely one that
    succeeds in excluding from people’s minds the issues most
    dangerous for that regime: that we are ruled by rich cunts in
    our case.
    What creates the present cuntocracy?
    So, what are the conditions that create the cuntocracy that
    we presently inhabit? Let us just go back to C. Wright Mills: his
    22 Richard Gillam, White Collar from start to finish: C. Wright Mills in
    transition, (Stanford University, 1981) p. 4.
    23 Alexander Passerin D’Entreves, The Notion of the State, (Oxford:
    Clarendon Press, 1967). Our use of D’Entreves would maintain that
    Thrasymachus had it that to talk of justice in relation to the state is
    irrelevant: ‘If one is determined to do so at any cost, one must
    recognise that ‘Cuntocracy, when great enough, is mightier, freer, and
    more masterly than justice.’view was that the US had no nationally responsible political
    parties offering and standing upon alternative political
    orientations and programmes — well, we will need that but
    say it is a good thing: consensus. For Mills there was also no
    significant senior civil service composed of those whose
    careers were independent of private interests — that sounds
    perfect, we will make that sound like job creation. The political
    directorate was said to be composed of former generals,
    former corporation men or hangers-on of the highest business
    and legal circles — again: if they do not produce a cuntocracy
    no one can. The state, in its personnel and in its persistent
    outlook, appeared to Mills to be a committee of the ruling
    circles of corporation and high military.24
    Fine, but what drives
    it all? In Mills’ cuntocracy – and the US is now the only Supercuntocracy – a high-flying moral rhetoric was joined with an
    ‘opportunist crawling among a great scatter of unfocused
    fears and demands’— again perfect: there is our teleology.
    The main content of this form of ‘politics’ was a struggle
    among those equally expert in practical next steps in the
    thrust toward killing for sordid or for idealistic reasons — again
    a text book formulation.2 5
    One final problem with promoting the term is that the
    loony left will say that it will be useful to big business and
    dictators. Perfect: if that is the case we will be welcomed into
    academia with open arms. Once normalised, if there was big
    money behind it an academic managerial niche would be found
    for it instantly, or my name is Peter Drucker.

    • BobRocket January 23, 2012 at 12:08 am #

      Hi John,

      the article is more readable as a .pdf


      He references Michael Youngs book The Rise Of the Meritocracy


      This is Michael Youngs Guardian article


      • John Souter January 23, 2012 at 12:28 pm #

        Hi Bob – you are right about the PDF, I was a bit disappointed how it came up, but dancing round cyber-tech isn’t one of my fortes. And yes I did pick up the link from your previous post -so thanks for that.

        I’m still struggling as to whether the author is the same William Clark as the author of Petrodollar Warfare?

        As it is, I think it hits a fare few nails on the head by the use of a pejoritive to remove a cosmetic mask from comfortable vanity.

        • Southern Cross January 23, 2012 at 10:37 pm #

          It’s a perjorative all right. One that viciously attacks women by comparing their genitals to the vile behaviour of a bunch of well, cocks, and evil ones at that.

          I think John Souter and some of his cheer squad have ‘issues’.

          If power is to be returned to the ‘people’ do Cunts get to have any? Clearly not. Can we have a nigger-ocracy instead?

          Seriously – do we keep the discussions on this blog civil, or descend into the locker room?

          Dirty stinking Cunts everywhere would like to know!

          • BobRocket January 24, 2012 at 2:39 am #

            I’m pretty sure the author of that piece is English and the terminology used in the context of the article is not meant in any gender specific way.

            It is meant as a euphemism for psychopathy but the phrase ‘psychopathyocracy’ doesn’t really scan very well.

            ‘The Rise of the Meritocracy’ was written as a satire which was lost on a proportion of the population including one not particularly bright UK Prime Minister.

            William Clarke revisits the subject of group self-selection in a blunter and more obvious manner.

          • John Souter January 24, 2012 at 12:46 pm #

            Southern Cross – there are no gender implications in either the post nor in my reasons for posting it. Had I thought there were I wouldn’t have bothered reading it let alone posting it.

            No doubt I have ‘issues’ but i would submit they’re along the lines of a deficit in democracy and the underlying contempt by those who ‘govern’ towards those who are governed, whatever their gender on either side of the fence.

            Whether we use it or not, custom has broadened the use of the word beyond its initial definition to one encompassing the lowest (or highest?) level of contempt expressed by an expletive between individuals and/ or the values of societies institutions.

            In context I think the article is merely calling a spade a spade and not a piece of earthmoving equipment which leaves you expecting a damn great mechanical digger.

            But, by all means, if it offends, call it a cockocracy; I ‘d have no objections to that though, unfortunately, it may be interpreted as praise rather than revulsion by those who have earned our contempt.

  61. Pat Flannery January 22, 2012 at 11:45 pm #

    John Souter,

    Hilarious. I’m good now for a week.

  62. BobRocket January 23, 2012 at 12:17 am #


    Your site is attracting spammers, see the ‘Recent Comments’ link box.
    A Captcha or even a Re-Captcha will stop most of the spambots but yours look like ‘Amazon Turks’ (this is the future of ‘free market’ employment), the only way to stop them is to ban their IP address as they have unlimited email addresses.

    Whilst you are at it, get some adverts in the whitespace on the RHS to offset some of your costs.

  63. Hawkeye January 23, 2012 at 1:24 pm #

    India now seeming to take sides too. And it ain’t with the US Dollar:

    “Today we add the latest country to join the Asian dollar exclusion zone: “India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions.”


  64. Phil January 23, 2012 at 4:53 pm #

    I came across this on CiF – how close is it to reality?

    ”We all know our kleptocratic Government has an obsession with public sector debt. It is patently obvious the UK economy needs stimulating and the Tories only excuse for £120 billion of fiscal tightening in the teeth of a stalled economy is that There Is No Alternative. Same in the US and Eurozone.

    The crazy thing is that there obviously is an alternative. Sitting in a wholly publicly owned subsidiary of the Bank Of England called the Asset Purchase Facility (APF) is £200 billion – over a third – of the UK Governments outstanding debt.

    Cancelling the debts would be straightforward. The APF just retires the Government debts it is holding by communicating that the gilts no longer exists. Job done. No effect on the UK money supply. No raised inflation. No effect on investor confidence. You and I, the tax payer, just don’t have to suffer another £200 billion of “austerity”.

    The only way not to monetise the debt is for the APF to opt to sell the gilts it is sitting on back into the private sector at some point in the future. And here is the kicker – to then cancel the cash it receives for selling the debt by ripping up the money paid to it. This would nullify the £200 billion of QE lent to it from the Bank of England to buy the gilts in the first place but is obviously an act of treason and total insanity. What kind of people contemplate ripping up £200 billion of publicly owned money?

    The Bank of course emphasises that as a principle it will not monetise the gilts the APF owns. Again and again the Gov’nor pleads that he is not being forced to create money in order to cover the gap between the government’s tax income and its spending commitments. Very sensible of the Bank to emphasise this as if this was what was happening, it would be a violation of Article 123 of the Treaty on the Functioning of the European Union. Rather, the Bank promises us that it is undertaking quantitative easing in order to meet its inflation target and will sell the government debt back to the private sector once the economy recovers, thus unwinding the original increase in the money supply.

    Apart from this being treasonous and insane the flaw in this argument is that there is absolutely no prospect of the Bank selling the gilts in the APF in the future.

    Leaving aside that the Bank is currently trying to widen the money supply be BUYING gilts rather than narrow the money supply by SELLING them, how on earth could the Government fund its future normal gilt issues when the Bank was simultaneously dumping an additional £200 billion worth of gilts from the APF onto the market? Leaving aside the nonsense that Governments can run surpluses as a routine policy, the APF certainly won’t be able to dump its stock of bought up gilts whilst the UK Government is running a deficit.

    So if the unwinding of QE can’t happen whilst the UK Government will still need to borrow, can it happen in a hypothetical future when the deficit is paid off? In this impossible future the private banking sector will have to be creating enough lending to allow the money supply to widen at its normal rate. Dumping an additional £200 billion of interest bearing gilts out on the market is at best futile and at worst could be either inflationary or restrict growth if timed badly .

    So for now we are left with a ridiculous situation where the Tories are moaning about the huge and “unaffordable” government credit card bills. At the same time over a third of the debt they are moaning about is stuck in the Government owned Bank of England with no hope of it ever being anything other than cancelled and retired. To add to the hilarity the Treasury, through a wholly government owned agency called the Debt Management Office pays interest on the £200 billion in the APF to the wholly government owned APF. This money is just building up and will eventually (as all profits for the Bank are) be returned to the taxpayer. You couldn’t make this up.

    Is this the future you want – where the Bank sells Government debt back to the private sector at some point in the future, causing excess inflation, and then simply rips up any cash it receives in order to demonstrate a point of principle?

    It’s not as if anyone would advocate doing QE to allow higher Government spending as a matter of routine. But if, as we are being told, QE has been undertaken only in the extremis of a liquidity trap in order to ensure growth, shouldn’t the QE be used to some advantage – clearing government debt by “magic” and thereby allowing fiscal loosening to stimulate demand?

    I agree that the rational given for selling gilts in the APF back to the market as some hypothetical future date when the money supply is again expanding and the issuance isn’t competing with the DMO issuing new government debt (eg can’t be before 2017 due to the projected level of the PSNB requirement unroll then) will be to reduce inflation.

    This is spurious though as the easiest way to restrict the money supply if it is expanding too fast is to further restrict bank liquidity ratios. This is due to happen anyway in 2018 due to Basel 3 so it is entirely spurious to suggest the Uk will need to unwind QE in 2018 onwards to prevent the money supply widening too quickly.

    Increasing bank contingent capital ratios is a far better wY to restrict the money supply. It is a direct means of constricting the money supply , it makes banks safer and it would mean between a third and a half off all government debt was wiped out.

    This I suspect is all irrelevant though. Much of the gilts bought up by QE were short term issuances with maturity dates before 2018. A lot of the debt in the APF is going to be monetized by default when it expires naturally.

    It is however proof that the governments cuts and continous dire warnings about public sector debt levels are propoganda and lies. Uk government debt has been larger than now in 80 of the last 100 years. This is without taking into account over a third of the debt has been bought up by the government and effectively retired.”

    • richard in norway January 23, 2012 at 6:42 pm #

      Yes this is a pretty good analysis, this is what I realised a few years ago, that QE could never be reversed. That and super low interest rates made me think that something was seriously wrong and that’s when I started looking for answers, most of them I found here, thanks again to Dave

    • John Souter January 23, 2012 at 8:39 pm #

      Phil – Surely your hypothesis rest on the £200 bn held by APF being all UK bonds?

      If true then it is a case of left or right pocket in the same pair of trousers in perhaps, an effort to keep interest low on UK bond issues with the sidebar to back austerity as you note.

      On the other hand, if they are foriegn bonds, the argument maybe they don’t want to add to the de-stabilisation of a friendly nation/EU finances?

      • Phil January 25, 2012 at 8:56 pm #

        Thanks for those thoughts. To be honest a lot of that piece went over my head, hence my re-posting for your opinions here.

        I wondered if it had come from a Golem commentator…

        Oh for a Golem conference with lectures, seminars and break-out sessions!

  65. Charles Wheeler January 23, 2012 at 9:35 pm #

    We’ve seen very few alternatives to ‘business as usual’ – whether it’s by increasing debt or paying it off – but in the The End of Finance, Amato and Fantacci point to the contradictions in the system which preclude any long-term ‘solution’ – only a postponement to the next crisis, which is inherent in the ‘dilemma of liquidity’ born of ‘Triffin‘s Paradox’ (http://goo.gl/ZgLGN)

    They trace the haphazard development of monetary policy, through a continuous response to crises originating in the institution of money as a commodity – with the attributes of both a means of exchange and store of value – seeing monetary history as the ‘history of liquidity and its crises’, the recurrent response being to make conditions of liquidity less rigid but at the expense of making the system more fragile, producing an ‘indefinite sustainability of imbalances in the name of growth’ by incrementally freeing financial markets from the ‘limitation’ of repayment.

    The idea that the market could protect itself from the market, through the market lay at the heart of the Greenspan era – made manifest in the explosion of derivatives; the view that the market could act as ‘a bulwark against the instability … it generates’ paradoxically required an ever-stronger state to act as backstop – with the state and market in symbiosis. The lender of last resort role increased with the rise in instability (as seen in the role of the ‘Greenspan put’); when the bubble bursts the state is the only possible provider of the liquidity the system relies on – the lender of last resort being a debtor never called upon to repay.

    They argue that this ‘strategy of postponement’ must continue until an alternative is found, their own solution being the revival of a ‘clearing union’ of the type that operated successfully in the trade fairs of the 16th century, and the post-war European Payments Union – a system based on the ideas proposed by Keynes but ditched at Bretton Woods in favour of the ‘Wall Street’ approach with the $ as reserve currency. They reject the ‘gold standard’ as a failed experiment which stored up stresses in the system until the tectonic plates shifted.

    Arguing that Capitalism is ‘a market system with one market too many, namely the money market’, such a clearing union would remove the role of money as a commodity ‘without denying space for the exchange of goods’ – as envisaged by Keynes in his plan to ‘create credit, but without leverage; to create money, but without liquidity’. Ending ‘the illusion that an indefinitely produced commodity money can dissolve all risk and support all growth.’

    The pretence that redistribution through the market via the ‘democratisation of finance’ and the credo that ‘credit is good’ has been … er … discredited, laying bare Greenspan’s observation that debt offers a useful means of economic control by the rentier class.

    A&F argue that attempts to ‘solve’ the crisis pull in two different directions: stimulus requires increasing the liquidity of the market on the liabilities side; regulation is aimed at restoring banks on the asset side in terms of reserves and deposits, tightening constraints. One seeks liquidity in circulation, the other in reserve; one as liability, the other as assets; one wants more liquidity from central banks the other less; one to ensure debts not repayable, the other that banks will not lend; preventing crisis by not loaning, or by not calling in debt: ‘The regulation approach threatens to compromise the granting of credit in order to safeguard credibility, while the stimulus approach threatens to undermine the basis of credibility in order to ensure the granting of credit.’ Both approaches are born of the view of money and credit as interchangeable. Thus current solutions are in conflict, different approaches to restoring liquidity.

    A&F propose making a transition from ‘the principle of liquidity to the principle of clearing’, though they acknowledge the difficulties. First, it requires that those wedded to the current system – as managers and beneficiaries – start looking at alternatives rather than attempt to cling to the present ‘structure with no architect’.

  66. johnm33 January 24, 2012 at 11:25 am #

    Another good read here http://www.washingtonsblog.com/2012/01/paychecks-perception-propaganda-power.html
    worh looking at the previous article too.

    • Mike Hall January 24, 2012 at 3:17 pm #

      Thanks for posting John, a powerful piece.

      The only quibble I would have is that his macro economic thinking remains firmly inside the dominant neo liberal paradigm extensively imposed & controlled by the elites.

      I’ve pointed him in the direction of MMT & hope he takes a look 😉

    • BobRocket January 24, 2012 at 4:08 pm #

      Nice link John,

      I particularly like this quote from Bernays

      “If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays

      It immediately brought this front page article from the UK Daily Express 22/01/12 to mind

      The article is nothing special, just a fluff piece about meters being read incorrectly/over estimated (which the user can correct simply by ringing them up and giving the correct reading), it also goes on about OfGem being given powers over doorstep miss-selling, which should already be covered by Trading Standards (and the Police as it is fraud)

      So what is the Bernays link ?

      Conditioning the public to accept ‘Smart’ meters in their homes.

      • Charles Wheeler January 24, 2012 at 5:41 pm #

        The year in brief: http://goo.gl/WkcEA

        • StevieFinn January 24, 2012 at 6:30 pm #

          Hmmm, now you’ve got me worried about the hidden dangers in my fruit juice.

          • Charles Wheeler January 24, 2012 at 7:29 pm #

            If the fruit juice doesn’t kill you the deadly bug in your salad is sure to get you – better off sticking to MacDonalds now we know salt is safe (when it’s not banned).

            Liked this juxtaposition:
            OBESE WILL BANKRUPT NHS (Feb 13)
            UK BEGINS TO STARVE (Mar 20)

        • Phil January 26, 2012 at 12:52 am #

          I don’t know which I despise more – the Express or the Mail. Their shouting headlines are a source of daily irritation in the shop. Richard Desmond is a shit of the highest order. But then so is Dacre.

          Having grown up reading the Mail I can testify that its prejudices take a long time to shake off.

          Misinformation outlets both.

          Mind you they’ve both gone to town on the banks so… every cloud!

      • John Souter January 24, 2012 at 6:27 pm #

        Bob – conditioning is the operative word.

        Similar to the con of switching sites who quote ‘savings’ but refuse to publish unit costs that would allow comparison on a logical and contractual basis.

        The ‘bird’ of myth yields more than the ‘bird’ in sight?

      • johnm33 January 25, 2012 at 8:17 pm #

        I keep thinking i should read some derren brown to get an insight into this ‘conditioning’ [and common purpose] stuff
        This peice could almost pass as a follow-up to re-hypothecation http://londonbanker.blogspot.com/2012/01/survivor-bias-and-tbtf-tyranny.html seems he could be a lot more certain than he’s prepared to own.

  67. johnm33 January 24, 2012 at 11:46 am #

    I meant previous, just a heads up.
    TEPCO has just announced – Radiation being emitted from Fukushima is 70 million becquerels per hour – It is increasing – Up 12 million from last month .
    from http://sherriequestioningall.blogspot.com/ where there’s also advice about precautions

    • Hawkeye January 25, 2012 at 9:49 am #


      Trying to get a reliable read on what is really happening at Fukishima and its impact is never easy. I’m sympathetic with those who say that Gvt and TEPCO are not totally forthcoming, but then there are some voices declaring it akin to Armageddon.

      This website is thorough and inquisitive without going over the top:


      It is clear that TEPCO have not brought the reactor under control, some 10 months after the incident. It is also somewhat worrying about the increased radiation, and the possible hydrogen explosions on site.

      The real risks are clearly being underplayed by the Gvt, however it seems most likely that the major consequences of past radiation and any future events (e.g. meltdowns) would be most impacted locally.

    • cynicalHighlander January 25, 2012 at 7:59 pm #

      Have watched that video from 1.20 for a couple of mins a few times and the conclusion that I come up with is that the shaking appears to be the camera being knocked rather than an earthquake being the cause.

  68. cynicalHighlander January 24, 2012 at 11:55 pm #

    Appologies if this has already been posted UK Debt Infographic

  69. Phil January 26, 2012 at 12:56 am #

    My favourite the Daily Mail comes out in favour of the French National Front. No, really.


    • Charles Wheeler January 26, 2012 at 2:33 pm #

      Their ideological instincts have been a bit iffy at times:

  70. steviefinn January 26, 2012 at 3:39 pm #

    Well if those of us, who could be further down the line for the Markets, rating agencies & Troika treatment, need a demonstration of how far these forces will go in order to fill their bellies, look to Greece.

    How can anybody feel secure in a world controlled by such people , Safety in numbers maybe ?, hoping that when the predators get hungry, they will eat someone else, or better still, don’t even recognise that they are predators, keep your head stuck in the telly & the rest of the MSM. Surely, something has got to give.


    • John Souter January 26, 2012 at 8:45 pm #

      Stevie – When you cut to the chase – The financial shamans are still in control and the political hierarchies are all playing to their rules; the markets are dominant while nations and continents are reacting to their constantly shifting – you could say ‘hypothecating’ demands!


      • Charles Wheeler January 27, 2012 at 8:09 pm #

        regulatory capture, revolving doors, polarization of wealth, oligarchy?

  71. violin February 5, 2012 at 8:01 am #

    I have observed that over the course of constructing a relationship with real estate homeowners, you’ll be able to come to understand that, in every real estate transaction, a payment is paid. Eventually, FSBO sellers never “save” the commission rate. Rather, they fight to earn the commission by way of doing a good agent’s occupation. In doing this, they invest their money plus time to accomplish, as best they might, the tasks of an broker. Those duties include disclosing the home through marketing, offering the home to all buyers, constructing a sense of buyer emergency in order to make prompt an offer, preparing home inspections, handling qualification checks with the loan company, supervising maintenance tasks, and facilitating the closing.

  72. Hawkeye February 13, 2012 at 12:09 pm #

    Is the Telegraph playing catch up, on this story?


    “Iran has the third-largest oil reserves in the world and pricing oil in currencies other than dollars is a provocative move aimed at Washington. If Iran switches to the non-dollar terms for its oil payments, there could be a new oil price that would be denominated in euro, yen or even the yuan or rupee.”

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