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A horrid thought has been incubating for the last few days.

I don’t know how many of you know much about Vulture Funds, what they do and how they do it, but it forms the basis of my horrid thought.

Nations issue debt. After it is bought, it often gets re-sold on what is called the secondary market. The price of debt on the secondary market changes much as stock prices change. The market is big.

When a nation looks like it might default the price of its debt begins to sink. What was bought for full price is offered for sale at a reduced price – say 60 cents on the dollar. Buyers and sellers have to decide if they think the nation will proceed to default or avoid it. The decision is, sell now and accept a loss but avoid a potentially larger loss later, or buy now at a discount and if the nation avoids default, profit as the value of that cheaply bought debt recovers its original value.

But then there are the vulture funds. They follow a quite different path. They are creatures of the law not of finance and there are not many. One of the biggest, most notorious and best connected is Elliot Associates of Manhattan. They have very close links with the Republican Party and to Mitt Romney in particular ( They are large donors to his campaign). Another is FG Capital management. These companies are financial companies all founded and largely owned by Wall Street  lawyers. FG Capital Management was founded by a former Morgan Stanley consultant.

Vulture funds buy the bonds others have given up on. They buy what is often referred to as ‘distressed debt’. That is debt that has been defaulted upon and is, for the ordinary bond manager, worthless. The vulture buys it and then sues the defaulting nation. It is a very specialized area of the law and of finance. As an IMF study from 2003 said of vulture funds,

“Investors in this market posses specialized knowledge of bankruptcy law and international litigation and are willing to hold out for many years before seeing any recovery”

The study looked at Elliott Assciaites and others and found that those vulture funds trading in distressed sovereign debts who resorted to litigation to force repayment made profits of between 50-333% net of legal fees. Elliot Associates, for example, sued Peru.

You might wonder to what court you could take a whole nation? And what sanction could any court have over a sovereign nation? The answer is rather clever and like many clever things also simple. You sue a nation in the jurisdictions in which that nation does other sovereign business, such as transferring its sovereign funds in order, for example, to pay its debts. And where is that ?

Most nations have funds residing outside the nation most often in the global centres of finance, New York and London. All Nations have to move money around, albeit electronically, in order to conduct business, such as selling more debt to finance its on-going activities, or to pay debt. Central banks of all nations buy and sell on the foreign exchanges and debt markets in order to keep a balance of currencies  to facilitate the international trade of businesses in that nation. In all these examples the wealth of a nation is outside that nation under the jurisdiction of the place the business is being done. Vulture funds attack those points. The main one is the Southern District of New York – Wall Street’s Court.

For example, Elliott Associates sued Peru in the Southern Distric Court of Manhattan by filing to seize money Peru had in the vaults of Chase Manhattan Bank. Chase was acting as agent for Peru when Peru was paying certain other debts. Elliott argued that if Peru had money to pay other creditors then it – and more importantly Chase – had a legal duty to treat Elliott and its claim equally.  The suit held up payments and seemed to threaten Peru with financial paralysis. The threat worked. Peru paid. Elliott had bought the distressed debt for cents on the dollar and got the whole dollar plus interest. This is only one of several strategies used by Vulture funds.

Now to my horrid thought.

The ECB had been accepting lots and lots of dubious sovereign debt as collateral for ECB loans. This has been done direct from the ECB, via the ‘temporary’ bail-out fund (the EFSF), the larger temporary bail-out mechanism (the LTRO) and the other bail out mechanism (the ESM).

One way of interpreting this policy, as I and many others have done, is to say it’s a frontal attack on democracy and justice. The transferring of the private debts of private banks, to National Central Banks and then onwards to the ECB, is a multi layered scam run by the financial and political elite to transfer their private bank debts beyond the reach of our democratic accountability.

But what if a European nation did default? What then? Well what is to stop the ECB going vulture? It has ‘bought’ up assets from various European nations at a discount. If one of those nations were to default after,… oh I don’t know – a referendum (think Greece’s disallowed attempt at democracy) or elections that might derail imposed austerity measures (think Spain’s forthcoming elections)? What is to stop the ECB or better yet one of it’s arm’s length funds turning vulture and suing the defaulting nation? Who says the major creditor nations, France and Germany, or those who are themselves hanging by a thread, like Italy, have to accept default?

Of course for Germany or France to actually pursue Greece or Spain and their people, in order to squeeze more blood from the open wounds would be ugly. Granted. But then I ask myself why was so much effort put in to creating the complicated and seemingly nonsensical funding structures of the EFSF. ESM and the LTRO? They seemed typically Eurocratic, designed just to hide and confuse the real extent of the bail-outs, the lack of actual cash underlying those bail-outs and thus the frightening extent of the empty leverage involved. BUT they did create legal entities which are arm’s length from the funding nations and the EU itself. How much less ugly if something called the EFSF were to sue the Greek or Spanish people should the default. And of course it is the threat that it could be done, rather than actually doing it, that is the main weapon.

I wonder, in the run up to the massively important elections in Spain, when the Spanish people might want to reject the slash and burn edicts of the ECB and IMF, if certain unelected financial eurocrats might not mention in passing to the leaders of the main Spanish parties what nasty creatures vultures can be.

Far fetched? Look at what our rulers have been happy to do so far. The Greek Prime Minister suggests a referndum to ask ask the Greek people for authority and legitimacy. He is removed. The referendum is killed. In Italy a wholly unelected government and new ruler – a Prime Minister in name only since he was not elected – is intalled at the head of what is called a ‘government of national unity’. Except that ‘the nation’ had no say whatsoever in its imposition. In Portugal critical and far reaching measures were pushed through by the interim government before elections took place.

Does anyoe think a result in Spain, which might reject the latest round of austerity measures, will be allowed? Unlike Ireland or Greece, a default in Spain, or an election result which would lead to one through a rejection of more austerity. could not be survived. An election result in Spain which set in motion a rejection of austerity would signal a terminal crisis for european bank debt and those nations currently hiding it. Do you really think they will allow such a result.

Our political and moral landscape has already altered. Those who rule over us have accepted without discussion, on our behalf, that some banks are  too big to fail and that inconvenient laws that threaten them can and must be routinely set aside. I see no reason why our leaders won’t also decide that certain nations whose debts are considered too big and too important for other nations, shouldn’t be seen as too big to be allowed to vote.

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327 Responses to Vulturecrats

  1. Wirplit April 3, 2012 at 7:05 pm #

    I dont think this is far fetched. The way commercial “law” is used is pretty amazing but strikes me that while Peru is one thing Spain might be quite another. I wonder if that vulture fund would have got so far with Spain say as it did with Peru. There are a lot of Hispanic voters in America.

    For the EU or its subsidaries to do this …well a faster way to destroy international trade I could not envisage… of course as a threat in the ear of those who might need a bit of restraining it might be rather persuasive…

    It could also… if got to the real hardball… be an open invitation to seize all German or French property in Spain. A kind of economic state of war. The results of which would be catastrophic.

    Polls have already shown a majority of the French, often thought as the most pro EU do not actually support it.

  2. bill40 April 3, 2012 at 7:45 pm #

    Corporate lawsuits are all the rage. Just about every big company is getting sued ior are suing each other over patent infringements. Seems a great time to be a lawyer or a banker. This seems to combine the very nastiest the two professions can muster.

    As I said on the last post we are all guessing. The one thing that is certain is that taxpayers will get the bill. Money will be printed for the banks and auserity is the price paid.

    The money supply has been privatised.

  3. richgb April 3, 2012 at 8:13 pm #

    It all seems too coordinated. How can so many financial institutions in so many nations move consistently in the same direction? Is there a larger, more international version of the Mayfair Set that regularly meets to determine how to further their dominance over the muppets?

    • Phil April 4, 2012 at 12:05 am #

      Could be richgb,

      I prefer to avoid conspiracy theories but what actually IS discussed at the Trilateral Commission, the Council on Foreign Relations, Bilderberg?

      • Charles Wheeler April 4, 2012 at 3:45 pm #

        ‘Conspiracy: any concurrence in action; combination in bringing about a given result.’

        Of course the term ‘conspiracy’ is contaminated (JFK/Apollo 11/911) – and yet the those that deride ‘conspiracy theorists’ are often the same people that warn of the dangers of those conspiring against their own interests. History is littered with conspiracies. Even so, as Dan Alpert of Westwood Capital has it: “had there been a conspiracy, the outcome wouldn’t look much different.” http://goo.gl/jdMer

        However you want to define it, when people with wealth and power get together to discuss strategy you can be fairly sure whose interests it will be designed to serve.

  4. Pat Flannery April 3, 2012 at 11:06 pm #

    A little off topic but I went to a visiting lecture by George Brown at UCSD a university here in San Diego this morning. He covered a wide range of topics and was even funny at times.

    Some of you may be interested, as I was, that he talked eagerly about how the BRICS are now out-producing the west in goods and services. He warned that they will demand and will obtain more control of global finances. He warned Americans that their hegemonic days may be coming to an end.

    I thought his best quote was of JFK who apparently said some fifty years ago that what America needs now is a new Declaration, this time a “Declaration of Inter-Dependence”.

    His main theme was the urgent need for global co-operation on many fronts. He thinks that the current ongoing financial crisis can no more be managed by individual nations, or regions, any more than can global climate change.

    • Martin Carter April 9, 2012 at 10:31 am #

      Please don’t encourage the psychologically challenged, Nokia-throwing, former British PM. He is a control freak who wrecked the UK economy almost single-handedly over a thirteen year period.

      The ruinous debt in the UK was run up partly as a result of Brown’s disastrous banking deregulation and tripartite agreement (1998) that took bank regulation away from the Bank of England. The collapse and nationalisation of RBS in 2008 is a direct consequence. His government spent and borrowed on a vast scale, leaving debt to be repaid for the next generation.

      He is still paid as a Member of Parliament in the UK, but is rarely seen in Parliament: he is too busy galloping around the world lining his pockets, like Bliar and many of the other so-called socialists.

      Nothing would suit him more than to find a world-stage on which to set up global government, of which he would claim a prime part. These people are as dangerous as any dictator of the past and are just as likely to bring about suffering on a massive scale.

      If he thinks that the financial crisis cannot be managed by individual nations, then his alternative is one-world government and slavery for people who, unlike him, had little or no role in creating the crisis in the first place. In fact, the only way out of the crisis without triggering ‘spring’ in every country in the world, is for individual countries to follow Iceland’s example and take back control of their own destiny.

      In the big picture, the battle lines are now drawn: on one side the global financial and political players; on the other, the serfs who are expected to do the work and pay the taxes.

      • Graeme Scott April 9, 2012 at 6:30 pm #

        I think he says it was GEORGE Brown – not our ex-PM ?

        • Martin Carter April 9, 2012 at 11:07 pm #

          Well spotted – yes, he did say GEORGE Brown.

          Unfortunately, he mustn’t have been paying attention at the lecture – it was indeed GORDON !!


          • Pat Flannery April 11, 2012 at 6:47 pm #

            Just spotted my stupid error. It was of course GORDON Brown. I must be getting old. I lived in London when Harold Wilson was PM and well remember his wild-man colleague George Brown. Ah them were the days, when we had Oxford educated socialists. BTW I don’t think old ‘Arold’s academic record at Oxford has yet been equaled. Anybody know?

  5. Gregory April 4, 2012 at 3:10 am #

    What would the ECB do with the Euros it reclaims? Doesn’t the ECB have as many Euros as it wants/needs?

    For a central bank to add to the tax burden of defaulted nations’ citizens & institutions would be counter to its mission.

    Private funds based in NYC, of course, don’t give a rat’s ass about the tax burdens, level of aggregate demand, etc of Peruvians.


    • Charles Wheeler April 4, 2012 at 3:51 pm #

      Is the ECB acting in the interests of its citizens, or the banks from which its ‘technocrats’ are drawn?

  6. Patrick Donnelly April 4, 2012 at 5:37 am #

    You are late to this party, but kudos for having the testes to admit to it publicly.

    Icelandic mortgage debt has been bought up for c. ten cents on the $.

    I predicted this two years ago, regarding Irish debt, on Irisheconomics.ie They wiped all my comments, though, as I also predicted the cost: 200,000,000,000 Euro. Too close to the bone? I also mentioned some rather foul facts about a now judge and an ex Garda Commissioner ….. the truth hurts?

    • Wirplit April 4, 2012 at 10:04 am #

      Will Iceland suffer later for its bought up defaulted debt? I wonder who bought it?

      Not all defaults pay off for those who try to buy them up.
      An historical example: Victor Serge tells a story of how in 1919 in Russia during the civil war the embattled Bolsheviks were buying rifles from Finland paying for them with huge bundles of Tsarist money. The rifle sellers were betting the money would create a huge profit for them once the Revolutionaries were defeated. The rifles were of course the means by which the revolutionaries could ensure that would not happen.

    • Maria das Santos April 4, 2012 at 10:17 am #

      As for the judge and garda please tell me more.

    • Joe R April 4, 2012 at 1:46 pm #

      So do libel procedings….

    • Golem XIV April 5, 2012 at 9:49 am #

      Hello Patrick,

      I find I am nearly always late to the party. But I hope I contribute something when I do eventually get there.

  7. Maria das Santos April 4, 2012 at 10:23 am #

    So just exactly what does irate the citizenry any more?We,here in the UK,have removed the most basic subsistent payments to unable people and nothing!Spain has an agonising convulsion and nothing really,Greece burns a few buildings and no revolution for the people.
    I fear that unless the right people are held to public hate,no resolution outside a French revolution will be the result.But who are they,not the institutions they hide behind,but the actual individuals initiating the theft?

  8. John Souter April 4, 2012 at 10:56 am #

    The fundamental answer to the vulture dilemma is to change the basic structure of Admiralty Law from caveat emptor (let the buyer beware) to caveat vendor.

    This one act would change the entire emphasis of law in relation to the sale of products in all markets.

  9. bill40 April 4, 2012 at 10:59 am #

    The numbers involved can be found here http://soberlook.com/2012/04/bundesbank-tries-to-cap-periphery.html. This explains german expose to LTRO debt.Up to date LTRO figures are provided here. http://www.iew.uni-osnabrueck.de/8955.htm.

    there is an awful lot of debt to be bought up cheaply here if the EZ or even just one country falls out of the euro. Trying to juggle the target2 liabilities in the event of even an orderly EZ breakup is a nightmare.

    In the event of a disorderly break up old debt could be used as a weapon for generations.

  10. Wirplit April 4, 2012 at 12:16 pm #

    A little news of the consequences of corrupt political class and the Eurozone punishment squads:
    The news coincided with the release of a report by the United Nations Children’s Fund (UNICEF) which estimates that some 439,000 children now live under the poverty line in Greece – the equivalent of 23% of the total population compared to an average 20.5% in other European countries.

    The report cited the growing number of cases of underfed children fainting in schools, saying poverty was more pronounced in single-parent families.

    The poverty levels are more stunning given Greece’s dramatically declining population. Children as a proportion of the country’s population have dwindled from 32% in 1961 to 17.4% in 2011, according to the report. More than a third of Greece’s entire population
    are living under the poverty line compared to a fifth before the outbreak of the crisis

    cited by Helena Smith in the Guardian

  11. StevieFinn April 4, 2012 at 12:33 pm #

    I had heard a little while ago that Argentina was involved in court battles a decade after default with certain creditors. According to this article, 2 of these creditors are vulture funds.

    The article also states that the European Stability Mechanism will have attached to it a “collective action clause” which would force all potential creditors to participate in. This, if I understand correctly would mean creditors would not be able to sue for perceived funds still owing at a later date, this would include vulture funds, but would it include the ECB ?


    Meanwhile, an old man blows his brains out in Syntagma square. There is a lot of blood that is not showing on exquisitely manicured hands.


  12. Joe R April 4, 2012 at 2:21 pm #


    Firstly – slightly off point but much closer to home – here is where you too, the average Golem, can cash in on the very profitable vulture nature of litigation! Simply get your local wealth manager to hook your wads of cash with this http://www.theaxiomfund.com/. Unsurprisingly it has a great performance! Much better returns than an investing in a useful product! Go banks!

    Now back to your piece.

    I’m a bit lost for why you think the Spanish might throw off the shackles of austerity. That boat has long sailed I believe. As far as I can see they have just readjusted their footing on account of the delieberately bad book keeping that the mainly PSOE ( socialist ) regional governments were engaged in, until they were found out for sure last year. The Spanish state still cut spending and raised taxes to the tune of 27 billion last week. There was a 60/40 split in cuts vs raised taxes. Another half a million jobs are likely to go as a result, but it is through.

    The Spanish general elections were held last year .The majority of the regions had their elections beforehand. Some of the regions have elections in odd years but most elections aren’t slated again until 2015 so, short of a total disintegration of the PP ( conservatives ) there should be no upheavals there for a few years at least. Actually the socialists have discredited themselves badly and ‘los indignados’ have not materialised as a political movement I can see the PP getting back in next time around.

    In Spain I think the real story there is the sickly nature of politics, from people to parties, like in Ireland or Italy. Or even the UK where left and right are increasingly indistingushable and real principles don’t exist. This blanding out of politics has blanded out the response too. The general irrelevance of the indignados there has been shocking.

    If it is a more general proposition that you are making about any deliquent country and the EU then I think ,as per the Greek case, the leaders will get together and do a deal and ugly scenes will be avoided in the main.

    Don’t get me wrong, I don’t mean the deals would be good. Just less ugly.

    Stevie Finn above is correct in what he said in the above about Argentina still being pursued in the courts in the US and vilified too generally in right wing American press, I presume to heighten pressure on them to give in.

    Thats it.


  13. Betty April 4, 2012 at 3:34 pm #

    Please correct me if I’m wrong but hasn’t the ECB already shifted the goalpoasts in relation to Soverign debt?

    If i remember correctly the ECB didn’t take the debt haircut that private investors/institutions took “voluntarily” took on Greek bonds thus creating, in effect, a 2 tier soverign bond market.

    Bonds on ECB books > all other bonds.

    Instead the ECB said it would use the money paid on the bonds to re-invest or reloan to Greece. I’ll have to try and dig up where I read this as I’m not certain.

    Overall looks like vulture behaviour to me anyway.

    • bill40 April 4, 2012 at 11:59 pm #


      You are quite correct but as I read it, the money is indeed reloaned to Greece et al and that money is used to pay….. errrr… the loans.

      Good work if you can get it. I have seen no evidence at all anyone has taken a haircut

  14. Charles Wheeler April 6, 2012 at 11:56 am #

    Brilliant article on way the tentacles of corporate capitalism have co-opted a political and cultural elite while preserving a facade of pluralism:

    Arundhati Roy: http://goo.gl/OLHJf

    Killer fact: ‘in a nation of 1.2 billion, India’s 100 richest people own assets equivalent to one-fourth of the GDP’.

    • patma2003 April 7, 2012 at 7:04 pm #

      Looks like some people have been studying the corporate west, heeding their mistakes and streamlining their ill-gotten techniques.

    • Joe R April 7, 2012 at 9:54 pm #

      India has been like this since ( and during ) the Raj …this isn’t new at all.

      • Charles Wheeler April 11, 2012 at 5:00 pm #

        The article is not just about India – but about the way a resurgent corporatism is able to subvert not just govt., but a whole political and cultural elite. Of course, there’s nothing ‘new’ about it. You could find plenty of examples in classical history, through to the East India Co. But the point being made is precisely that we have reverted back to a time when it was never envisaged that economic development should be democratically accountable and of benefit to the whole population rather than a plutocratic elite. Indeed, many of the organisations cited as proselytising the neoliberal advance were established in the pre-WW1 ‘gilded age’ of Robber Barons. The extent of the power of these influences – and with it the level of inequality – has been largely restored to pre-war levels, discrediting the myth that – without state intervention – capitalism will bring riches to all.

        Thirty years ago many assumed that the gains from economic growth would be shared, leading to reduced levels of inequality – Piketty & Saez’s recent IMF report suggests that that prognosis has been reversed, as acclerating inequality becomes a feature of both developed and developing economies (with the possible exception of certain South American countries who have rejected the ‘Washington Consensus’ – more precisely the Chicago consensus). Instead we seem to be returning to a time when the prevailing belief was that: ‘…everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.’—Arthur Young: 1771 (http://goo.gl/5wXmr)

        To say ‘this isn’t new at all’ seems to miss the point.

        • Joe R April 17, 2012 at 3:21 am #


          I have a book recommendation for you – ’23 things they don’t tell you about capitalism’. It debunks right wing myths.It is succinct and has a calm balanced tone. It is written without visible anger but with a focused drive and lots of insight Sincerely, I think you would enjoy it!

          On your reply – I really don’t know what idealistic time you are refering to. Or if such is a feature of democracy for that matter. If anything commerce being responsive to government a feature of dictatorships/command economies which attempt to exert control over and direct economics. When and where are you talking about and how widespread was this socially responsible corporate era?

          As for the Indian subcontinent I don’t think it ever had any kind of balance regarding wealth. The Raj further distorted this.

          This is a very simple but central point. It would have required radical change for that whole mass of people and societies to redistribute wealth. This isn’t normal in small colonial or post-colonial societies not to mind the giant and hugely conservative India, Pakistan & Bangladesh.

          I think too your impressions of South America too are based on PR and wishful thinking – not so much on fact.
          That is another discussion!

  15. Phil April 6, 2012 at 11:47 pm #

    Happy Easter everyone.

    • John Souter April 7, 2012 at 10:20 am #

      Phil – well at least more and more people are beginning to feel the pain from the new technique of crucifixion.

      • patma2003 April 7, 2012 at 7:12 pm #

        Yeah Happy Easter to everybody. Glad I am not on the cros…erm… i mean in debt.

        Something to celebrate.

        * * * * * * * * * * * * * * * * *

        Very off topic, but seeing as it a time of reflection I would like to share something… I remember the day the Bank of Ireland first contacted me personally. October 2008. I had been with them for over 3 years, yet little did I realise it would be the first call of many. I didn’t feel offended during the first call as I was politely cajoled into raising my awareness about bonds. In turn I politely declined to act further.

        The puzzled feeling I had from their sudden interest in my savings was part of the unscratched itch of the psyche that has since brought me to places like these.

        The itch is still there, but, at least it is being scratched.

  16. patma2003 April 8, 2012 at 3:08 am #

    There was a girl. She was having trouble with her marriage. No spark, you see.

    And she took her man to the marriage counsellor.

    The answer was: ‘honey, can you pretend you are an Apple advert?’

  17. Phil April 8, 2012 at 2:34 pm #

    UK Uncut comes in for attack from Policy Exchange:


    • Synopticist April 8, 2012 at 5:43 pm #

      That tory MP is one nasty piece of work.

      • Phil April 8, 2012 at 11:27 pm #

        He is indeed. He also happens to be one of the 98 MPs who voted to keep their expenses secret. It was revealed that he had spent on £20k doing up his ‘second home’. He then sold it for £750k without paying capital gains on it because HMRC accepted that it was his first home.

        Paul Mercer meanwhile is a virulent Libertarian who spies on protest movements for big business.

        What gets me about these people is how they pose as ‘common sense’ and those who don’t see the world as they do are ‘extremists’. The Irish fella going on about UK Uncut occupying TopShop fails to understand (or probably doesn’t care) is that Philip Green is anti-social thief who takes all the benefits of doing business in this society without having the courtesy to pay for them.

        • Charles Wheeler April 11, 2012 at 5:06 pm #

          What gets me is that these organisations are routinely presented in the media (inc. the BBC) as ‘independent think-tanks’ with no reference to their political affiliations or sources of funding – in fact they are usually lobbyists run for and by neoliberal political elites.

  18. Patrick Donnelly April 9, 2012 at 4:41 am #

    These dreadful market distortions may well shake the foundations of capitalism. It is merely mercantilism writ large: allowing a few, bankers, to steal from many: pensioners and home owners.

    Doing God’s work is educating the ignorant while helping yourself to their money given to you in trust!

    The Garda was ex Commissioner #@$!$#^^^#$^ who bought his modest dwelling from a known crook, declaring half the market price for stamp duty. The proof was sequestered by @%&@&&&@% who subsequently became a Garda Commissioner! Was the full market price paid? Stamp duty evasion is an offence. Was it the true price? Corruption between both parties. We will never know, but I love pressing the button!

    The Judge was not a judge when he and his colleagues connived to advise a parliamentary committee on what questions not to ask and on what the main witness should say. An inspector of taxes decided off his own bat, after many years of increasing concern in Investigation Branch, in Ireland, to investigate a bank for evasion of tax due on non resident deposit interest. He was ordered to shut it down. At the subsequent Inquiry, he was asked what happened to the file: answer: it stayed on the floor! He was also asked was he transferred for the temerity to investigate? No. In fact, he was refused promotion for years after! No question on that. Neither was he asked was he ever told to shut down his investigation! The bank meanwhile was telling the media they had an agreement with his bosses that there was no liability! The officer got his promotion after the enquiry….

    Mild offence really. But the normal duty of an advocate is the the courts, not the Legislature, the body carrying out the investigation. However, everyone owes an obligation to honour the Constitution!

    Great work Golem!

  19. The Slog April 9, 2012 at 8:55 am #

    Whether thoughts like these are highlighting something the europrats may or may not do is not the point: informed speculation has a major role to play in a world where nothing is what it seems.
    This is the best piece about ruthless EU cynicism, and its myriad possibilities, that I’ve seen this year. Brilliant stuff.
    Far-fetched? Not at all: who would’ve thought that British cops would be reporting to the Russian security services? But they are, without doubt –

    • Golem XIV April 10, 2012 at 12:10 pm #

      Frist thanks and second what an important article (yours that is). Maybe one of these days we should even talk? Or is that too old fashioned? DO you have an email you wouldn’t mind me contacting you on?

  20. patrick powell April 9, 2012 at 10:05 am #

    First of all, it was the Greek Prime Minister who promised a referendum and was then removed, not the Greek President. I know slight errors like that can always creep in (on its travel pages the paper I work for had San Diego overlooking the Atlantic all day in the run-up to production but no one notice. The error was finally spotted and corrected in time, but … ) The trouble with such errors is that they give those who want to discredit us and our arguments, however, unjustly, ammunition to do so along the lines of ‘well, if he gets a small detail like that wrong…’

    But my main point is this: what you write on vulture funds is illuminating and doesn’t surprise me in the least. But I think you argument gradually goes awry. I agree that all the euro action to ‘bail out the banks’ is simply a device to shift private debt into the public, taxpayer, sphere, but I can’t agree with suggestion that it is primarily the rich cunts looking after their own. There might, and probably is, an element of that but there is always the danger of getting too cynical. Taking into account a previous piece about the debt black hole, I share your fear that it could well all end in disaster. But I think it is wrong to assume, as your piece seems to suggest, that all the bogeymen are simply intent on making hay while the sun shines and then hunker down when the shit hits the fan.

    You line up Greece, Ireland and Portugal with Spain and Italy, but they cannot be compared quite as simply as that. Greece is not a major export market for the rest of the EU, but Spain and Italy are, and I, reluctantly, accept the argument that we – Britain and the other bigger EU states – save themselves by trying to save them. Naturally, intent doesn’t guarantee success, and it can, and most probably will, all go pear-shaped. But I find I can’t accept your allegation – your ‘horrid thought’ – thought at the end of the day the various EU bailout bodies will simply behave like vulture funds and squeeze the pips out of the PIGS, for the simple reason that they would also be cutting their own throats.

    Incidentally, on Radio 4 recently there several programmes comparing the philosophies of Hayek and Keynes. I have become a convert to Hayek’s way of thinking. Its drawback, of course, is that what he always proposes is far less politically acceptable than Keynes proposals.

    • Golem XIV April 10, 2012 at 12:15 pm #

      Hello Patrick,

      Thank you for picking up the error! Sorry about that. Corrected now.

      As for the conclusion – you might well be correct. But I think the threat might still be the main and effective weapon. I think the Eurocrats just have to convince the troubled nations that the EU and its various parts would do it because the alternative would be worse for the EU.

      But I hope I am wrong.

  21. patrick powell April 9, 2012 at 10:06 am #

    Readers: please ignore several rogue commas in the above. I blame Brussels (or something)

  22. johnm33 April 9, 2012 at 10:12 am #

    On the plus side if this really took off the beast would devour itself.
    more on spain found on max kieser http://gonzalolira.blogspot.fr/2012/04/spain-will-exit-eurozone-firstthis-year.html
    OT. scuse me plug for http://charleshughsmith.blogspot.co.uk/
    new book :-Here is Part 2: INTRODUCTION (Part 2)

    We will cover a great many ideas in the chapters ahead, and one that helps us understand our reluctance to embrace positive change is the social control myth. These myths are propagated and marketed by the Status Quo to maintain control of the social order so that it serves the interests of those in power at the expense of the non-Elites. If you control an individual’s beliefs, you control his actions, habits and responses.
    The key social control myth is that the system serves your self-interest. If you believe this, then you will defend an oppressive, exploitive, parasitical Status Quo in the misplaced belief it serves your personal interests.

    The chief purpose of propaganda is to establish and renew various social control myths. Central States have long deployed powerful myths to solidify their control: “we are being threatened by outside forces, so rally round” remains popular due to its enduring success.
    Another key social control myth is that individuals are powerless in the vast systems that dominate our society and economy. This is a very useful myth to the Status Quo, as it leads individuals to surrender their autonomy and liberty without coercion.
    there’s more

  23. Thisismadness April 9, 2012 at 11:11 am #

    It’s worth clarifying that vulture funds are popular investment vehicles for many more people than just an elite sharp suited few and it would be wrong not to blame the wider society who have an interest in seeing the returns from their mutual fund and pension managers to have skin in that particular game.

    Vultures is an appropriate term for many in the society we live in, suited or not, totally focused on their own self serving, oblivious once the air is gone, zero is the house winner.

    The people usually get what they thought they wanted, or at least what was implied, where even clear and unambiguous intentions regurgitate into an unrecognisable solution once its been through the thinking peoples process, compensating those who dont from the chattals of those that do.

    This is progress, where progress means forward not upward.

    There is no solution, we cannot out-think thinkers who can deploy armies of unthinkers at the stroke of a pen on a benefit cheque.

    Embrace the ‘D’ and learn to smile again. Depression is not just a state of mind, it’s where the world needs to go to purge itself from this abomination.

    • Patrick Donnelly April 11, 2012 at 8:24 am #

      To thisismadness

      Quite right! Some folks even bought up the underlying investments that supported masses of derivatives that said the investments, loans to dead beats, would default. They then paid off the debt and collected on their massive winnings! Market correction! The market, the real one, called black by the narrow minded, always wins, EVENTUALLY!

  24. Wirplit April 9, 2012 at 12:38 pm #

    Best detailed analysis of the Spanish Debt situation I have read so far is Edward Hugh’s HERE

    Its stuff that Golem was highlighting in outline way back but with the detailed figures and it does not look good.

  25. Gary April 9, 2012 at 1:14 pm #

    More vulture financing through cdo derivatives being tested.
    This time on trade financing


    These people blew up the world using this type of financing on mortgages, now they descend onto the much larger trade financing market. They are criminally insane. The govts will facilitate this, watch and see. MMT won’t prevent it. Only gold backed bills and market liquidation of insolvent banks can stop this.

    • Gary April 9, 2012 at 1:28 pm #

      Ps: the reason why govt and mmt will not prevent this is because govts are flat broke and the tax revenues will be impossible to resist. The problem is that this scheme, like the others requires unlimited ability to create new loans, even for the most dodgy borrowers. Money creation in the hands of the govt will be as enticing as it is j for banks. The only way to stop this is to use money that cannot be counterfeited in unlimited amounts to create unlimited loans, and to ensure that the risk if bank failure and personal liability of the lender is allowed to become reality.If you open the market to accept all means of payment outside of that decreed by legal tender laws, creditors will demand sound money as payment. That means they will shun counterfeited paper by govt and bank inflators. I bet they will demand gold. This will naturally put a brake on the Ponzi financing proposed.

      • bill40 April 10, 2012 at 12:34 pm #


        In what way shape or form can a government that is the monopoly issuer of its’ currrencey be considered broke or have any insolvency risk other than a political decision to refuse tto honour its’ debt?

        I will tell you exactly how much money any governement as described above has at any point in history or the future. In the UK it is infinity minus one penny.

        that is a fact of accountancy, not my opinion.

  26. Synopticist April 9, 2012 at 9:20 pm #

    Off topic, but Steve Keen deems to be winning the econoic arguments in the blogosphere.
    If you subscribe to his theories, what are you?
    A Keenite?, a Keenian?

    • Gary April 9, 2012 at 10:29 pm #

      Keen advocates printing money(govt money) to monetize the debt bubble which the economy under any growth scenario has no chance of paying off. What he is essentially saying is steal from the savers and pensioners(current and future) by inflating the money supply(inflation is a theft on savings) and give this money to the feckless debtors to reward them for reckless , unsustainable borrowing.

      Krugman says there is no problem at all. For every debtor there is a creditor. It all balances out. What he fails to tell us is that the creditors in this case conjured up the credit from thin air , at no cost to themselves and loaned the money as debt. The credit side of the equation is a chimera. It is all debt.

      So, this is a false dichotomy. A false debate. One is not right and the other wrong.They are both wrong. We have two problems. 1. unsustainable debt and 2. how do we prevent a recurrence ?

      We are already in a bad position and there are no easy options. The correct way to wring out unsustainable debt is to write it off, or default on it and the creditors collect whatever collateral there is left. That brings the debt back into sustainable levels for the current economy. That punishes the people who engaged in the loans and preserves savings and pensions of the prudent. As it should be.

      The second part involves how to prevent this runaway debt bubble from ever occurring again. There has to be a way to make the lender forgo the amount loaned for the duration of the loan. If I lend money I should no longer have access to that money until the loan is repaid. If I don’t do due diligence then I run the risk of making a bad loan and then i LOSE THAT MONEY. That is how it should be. This means you only make loans out of savings and you don’t create money out of thin air. That means the end of fractional reserve banking. This 100% reserve banking then re-establishes the link between savings and loans by the interest rate and a rising interest rate as more loans are demanded causes savings to become more attractive and this throttles off the loans , and vice versa. The economy is then stable and sustainable.

      There are nuances to this virtuous cycle, and I am willing to debate it any time,especially with the MMT crowd.

      • bill40 April 10, 2012 at 12:28 pm #


        i found it very hard to follow your train of logic. We have a debt based fiat system and MMT merely explains how it actually works. You talk of debt owners as if they are ordinary individuals but they aren’t. They are corporates and banks. They have bought the politicians that run the system.

        Can you please explain to me where money, especially currency, comes from other than thin air? Banks create their own seperate digital money and have corresponding liabilities, normally with the BoE, that back up their currency.

        A government can, if it wishes, create money with no liability, that is the difference between the public and private sector. A government can spend, without constraint, anything that is for sale in its’ currency. As monopoly issuer it can be no other way.

        What we have witnessed is banks trying to behave as a state. The banks are in denial that only the state can produce liability free currency if it so chooses. the banks wish to usurp the state.

        Banks would not exist as they are today without their BoE reserve accounts which allows them to make loans with no financial reserves necessary. Krugman has only recently lost this very arguement badly. Bill Mitchell has covered many times the fact that a 100% reserve onbank loans would make no difference at all to the amount banks can lend. Banks lend first then balance at the end of the day using the interbank loan system or the discount window.

        Your ideas represent a total system change but have no empirical grounding at all. Economics does not describe a system that will actually work and has no basis on current realites.

        Game,set and match MMT.

        • Gary April 10, 2012 at 1:56 pm #


          Making money debt free in and of itself is only one aspect of solving the problem we currently have in the monetary system. But that is not even the biggest problem. The bigger problem is controlling inflation. What we mean by “unbacked money” is that money which is inflationary. ie. that money which is created that does not create proportionally new economic growth. Inflation is a killer. It is a theft from savers and pensioners and rewards debtors. Rewarding debtors leads to credit bubbles.

          Let us assume, for argument, that government CAN accurately gauge that there is inflation ,MMT still cannot control the inflation through tax because the govt cannot know where the money it printed ended up in the economy. And if it cannot know where the money finally went, how does it know whom to tax to reduce this inflation ? It may be taxing the wrong people. People who never received the printed windfall. This has got MMT proponents into a frightful tangle. They try to explain what they will do and end up tying themselves in knots. They bump up against the impossibility of solving the Problem of Economic Calculation outside of the market.

          The govt cannot discern what is inflation(they currently even have more than one definition CPI and RPI) and they cannot control it. The bankers patently also can’t.

          If you cannot control inflation and as the inflation starts raising prices how do you know the difference between a price rise caused by shortages of goods(demand and supply from econ 101) or a price rise caused by the inflation(cheapening) of the money ? You cannot. And because investors use price as their guide and when prices rise due to inflation, investors are be fooled into wrongly investing thinking prices are rising are due to shortages of goods. This leads to MALINVESTMENT or bad investment. This malinvestment only can survive as long as the inflation remains. This causes investment bubbles. The bubbles crash when the inflation is stopped. MMT has no way of preventing this cycle.

          MMT will not solve our problems. They will make them worse, because Govt is even a worse judge of economic matters than the corrupt bankers. Never mind that they cannot control inflation, how do we stop the govt from simply giving themselves and their cronies the new money they create , just as the bankers do ? They have form on doing just that. It will be a disaster.

          • bill40 April 10, 2012 at 2:22 pm #


            What inflation? Should there be any at all in your opinion? I don’t know to waht inflation you are referring to. japan has proved that the money supply is irrelevant to inflation.

            At the moment we have inflation of essentials such as food and fuel and deflation of other goods and assets. This is not new and is backed by falling wages. This is stagflation.

            Inflation, like a government budget outcome, is what it is. Money supply is what it is. Neither governments or banks wish to acknowledge this, it would dilute their power.

            We are in a balance sheet recession and only counter cyclical and demand solutions will help. A more radical solution would be one of capitalisms favourites from history, a Debt jubilee.

            Wehter govenments are worse judges of economics is a matter of opinion. Someone has to be the judge and I would say that they seem as bad as each other quite frankly. The question is which one people can most realistically control via democracy. QED, Governments.

            MMT just describes the system we have and how it can best work. It will not solve everything and does not claim to. Your ideas have no basis in the real world and the scenarios you describe either do not exist and’or make no prediction.

            I repeat, game set and match MMT.

          • Gary April 10, 2012 at 4:35 pm #


            Japan already had the inflation and that was the original problem. It peaked in 1989, when the property bubble was so vast that Tokyo real estate was worth more than the whole of California real estate combined ! They issued so much credit money that the bubble was vast. It collapsed.

            They have been fighting the collapse ever since, and are proof that printing money cannot stop an inflation from turning to bust. It can only prolong the bubble. Instead now Japan now has debt of 500% of GDP and their savings which were the largest in the world are gone. Decimated. It is a disaster. They should have let the entire bubble collapse by default without doing anything , there would have been pain, but the debt would have been cleared out and been back in line with the ability of the economy to sustain it.

            It is not good enough for MMT just to describe the system , they must have a solution, but they don’t. That is why I don’t trust their intentions. I think it is the same bubble merchants dressing this up as a new economics and selling it with a few bogus climate feel-good hooks, when it is just more of the same, perhaps worse.

            Look around you. Many Austrian School economists described and understood this boom and bust and predicted it years before it happened.

            Here is one, an eminent one. He predicted so many events correctly , the details may bore you :


            Not one MMT merchant saw this coming. Name me one. BTW : Hayek predicted 1929. Keynes got wiped out in the market. It is not rocket science , if you print money and cause inflation(usually , but not always, asset inflation) these bubbles inevitably burst and cause recession/depression.

            MMT does not understand inflation, like you say they believe “money supply is irrelevant to inflation”. If they cannot understand the premise they won’t have any solutions to the effects.

    • bill40 April 10, 2012 at 12:12 pm #

      Steve Keen advocates Minsky. I have no idea what you should call yourself other than enlighten.

  27. johnm33 April 10, 2012 at 1:54 pm #

    Gary you may be right, but what i thought Keen was suggesting was to distribute new money evenly across the population, with the proviso that those with debt use it to pay them down, others could do as they please with it.
    The banks are at their usual game of reducing the money supply to deflate the price of the prols assets [who’s value(?) was inflated by their reckless lending] and to reduce demand leading to unemployment-default/foreclosure at fire sale prices. The unique problem they have this time is that they have monetised/securitised all this debt into derivatives which they have used as collateral [to borrow and lend again] to the power of x, to blow the biggest debt bubble ever, completetly divorced from the real economy.$700trillion of these derivatives exist and they represent the magnitude of the amount of wealth to be destroyed as soon as they figure out how to get away with it. Meanwhile the banks are collecting millions at .5% and depositing it at 2% getting ready for their feeding frenzy.
    Personally I prefer Keens way, but I’d have the money credited to our bank accounts at £1000 a month and have us pay .5% interest on it , with his proviso about paying down debts, and keep it going until the economy reinflates the bubble.

    • Gary April 10, 2012 at 2:09 pm #


      How would they be able to achieve giving everyone the same amount of money ? How much would an indebted corporation get ? A small business ? They already gave the banking corporations more than $25 trillion from the FED alone in 2008, and that money got swallowed without doing a thing about the problem. And if a business got nothing and went bust what about those who lost their jobs because of it ? Would their handout be adequate recompense ? I think we again bump up against the Problem of Economic Calculation, a problem that MMT refuses to believe even exists, but they keep running into it.

      • bill40 April 10, 2012 at 2:29 pm #


        What John and Steve Keen refer to is not MMT. Keen advocates QE for the people that would help debtors and reward the thrifty. I have no wish to sound belittling but you do not understand MMT, you do not understand Keen which makes me question what you understand at all.

        You come accross as a parrot or a troll, I apologise if I am mistaken.

  28. johnm33 April 10, 2012 at 5:59 pm #

    Gary as I understand it MMT are suggesting job guarantee schemes and government printing/conjuring new money into existence to cover the cost, and not to concern themselves with defecits, but to concentrate on bringing about full employment through infrastructure and development. They anticipate this growth will lead to balancing the budget in the long term, and if the pols showed any sign of not being mindbogglingly incompetent, or corrupt, I would probably think that better than Keens idea. In any event it is far superior to giving the degenerate gamblers in the city more credit to game profits from what’s left of the worlds real economy, inflating the price of neccesities for everyone and beyond the reach of some.
    Not that it’s going to happen but I’d choose to credit the accounts of all uk citzens over 18yo who have normally been resident for tax purposes over the last 4 years, thats it. Corporations/businesses would benefit from increased spending banks from their assets ‘filling out’. I think it should go on for 3 or 4 years until the bubble is refilled and then interest on the debt [.5%remember] should be raised to the bank rate plus 1-2 %

  29. bill40 April 10, 2012 at 6:18 pm #


    Sorry the reply fuction has vanished. Bill Mitchell and Wradall Ray were but two economists that predicted the crash. The others were Posy keynes or Austrians. This includes, needless to say, the peerless Mr Keen.

    MMT cites Japan not for doing things right but what it proves. High debt and increase in money supply do not cause inflation by themselves. Japan does not practise MMT.

    MMT supports a Job Guarantee (as so well explained by John) that for the UK would help the regions and end underemployment. There is no known greater waste of resources than that of the labour market, that represents output lost forever.

    You sound like a Friedmanite or libartarian but claim to be Austrian which confuses me. Once the JG kicks in capitalists will compete for that spending power. As the private sector recovers, the JG is wound down.

    Niether inflation, debt or deficit is the main problem in the UK. Unemployment, tax evasion and rampant corruption is. Credit to you though, at least you know, as we all do, something is very wrong.

    Please keep reading and posting here.

    • Charles Wheeler April 11, 2012 at 5:38 pm #

      MMT is simply a way of describing the monetary system under a fiat currency with a sovereign issuer of that currency – their main argument is that many mainstream economists make policy prescriptions as if the gold standard had never been abolished. They do not suggest that there are no limits on the growth of the money supply – they argue that in a system running at full capacity inflationary pressures would be a threat, but that when there is mass unemployment and a falling off of demand in a deflationary debt spiral those pressures recede.

      Goldbugs seem to argue that economic crises began with the creation of the Fed – yet the Fed was created in response to a major economic crisis. The era of the gold standard is littered with such crises – it’s more accurate to say that periods when the gold exchange standard persisted were an effect of economic stability rather than a cause.

      Would we really be any better off if Goldman Sachs/JPM/Cit/etc. were manipulating gold than manipulating fiat currency? There is no panacea – crises are built into economic systems – the latest crash was a consequence of an exaggerated belief in the power of deregulated markets. That’s the real problem – not the issue of fiat currency.

  30. Enrico April 10, 2012 at 10:18 pm #

    Hi guys,
    It’s the second time I post on this blog and for the second time I’ll be driving the discussion down to basics, so please bare with me. A few weeks ago I asked for some links that could better explain the process of money creation and I received quite a few useful links. I’ve got all the Keens, the Hudsons, the Grignons and the whole MMT crew whirling round my head and I’m sure that in time they will all settle in an orderly way. While I’m waiting for this to happen I have a few questions for you (again):

    1) I have often read that the bailout of private banks in the USA has occured “at taxpayers’expense”. What does this exactly mean? What effect does it have on the taxpayer if the FED decides to prop up banks deemed too big to fail ?

    2) I live in Italy. Would I be right in assuming that being a currency user, not issuer, Italy is basically no different from a private firm? It needs to raise money from private investors (at the bond market) and show that is credit-worthy and has a good business plan.

    3) It seems to me ( but I might be dead wrong) that MMTers are not that much concerned about the way money is created in the US, while many reformers push for the government to bypass the FED and create interest-free money. From my very limited understanding MMTers insist that US public debt is not a problem, that it can be rolled over indefinitely ( since it’s a debt the nation owes itself) and that spending is at present only misused while other reformers see all this debt as really being in the hands of a private cartel. This point is very confusing for me.

    Again, I’m sorry for asking these really basic questions, maybe David should create an “Economic Illiterate FAQ” somewhere. This blog and all people who contribute to it make me feel very at ease, I look forward to reading your comments. THANK YOU

    • bill40 April 10, 2012 at 11:34 pm #

      Hi Enrico,

      I do not speak for anyone but myself on here but I’m happy to answer your questions form an MMT point of view.

      1.The taxes you or anyone else pays do not fund anything at all, especially government spending which occurs first. The governemnt does not tax to spend, it spends to tax. The currency issuer must spend first or there is no money for taxes. It could be argued that the bail outs will push up future tax bills for ordinary opeople, but that would be a political choice.

      2.What Italy cannot raise in tax it must raise from markets. This is a fundamental flaw in the design of the euro that cannot withstand an aggregate demand collapse. This is the price you have to pay for the folly of surrendering your sovereign currency. The ECB could deal the bond markets out of the equation right now, but that is illegal according to those nice Germans.

      3.US debt can indeed be rolled over foreveras can any sovereign state. The US is the monopoly issuer of dollars and therefore cannot be in any risk of default of any debt issued in dollars. The accountancy statement is that the US can spend infinity minus one cent. MMT does not advocate this it’s just a fact.

      Hope that helped and you continue to enjoy this wonderful site.

      • Gary April 11, 2012 at 1:44 pm #

        “3.US debt can indeed be rolled over foreveras can any sovereign state. The US is the monopoly issuer of dollars and therefore cannot be in any risk of default of any debt issued in dollars. The accountancy statement is that the US can spend infinity minus one cent. MMT does not advocate this it’s just a fact.”

        But this is where MMT is so obscene, and it is because they don’t understand , or don’t want to acknowledge inflation of the money supply. This perpetual govt debt rollover does not come without cost, it comes from the pockets of savers and pensioners. It is a tax on the prudent to give to the reckless borrowers. It is a recipe for asset bubbles and the resulting boom and bust. It is an insane non-solution.

        Even those MMT’ers who acknowledge inflation get themselves in hopeless knots trying to come up with a system to reduce the inflation they will spawn. They say taxing people will reduce inflation. But tax who ? It is impossible to know where the money they created ends up, and if they don’t know who has the money in the end who do they apply these taxes to ? Because if you tax the prudent you will end up with a revolution.

        • Mike Hall April 12, 2012 at 10:30 am #


          Again here, you argue by blatant misrepresentation of the MMT position.

          It’s quite clear in all the source material that MMT states (correctly) that the government of a sovereign, free-floating currency (US, UK, Japan & most other major currencies) can spend into the real economy without incurring any ‘debt’ whatever. So there is no ‘cost’ to savers, pensioners or anyone else.

          Then you imply that ‘MMTers’, some, perhaps most, do not ‘aknowledge inflation’.

          Again, inflation risk, which +can+ arise regardless of whether money enters the real economy (by spending, only by spending!) as debt, or debt free, is discussed & explained extensively on the source material blogs, principally that of Bill Mitchell (linked on this blog site) & co-founders Prof Randall Wray & colleagues at University of Missouri Kansas City.

          Nor are these minor points, buried in the literature.

          Only two conclusions from your (continual) posting of such misrepresentation are possible.

          Either you are deliberately choosing to misrepresent MMT or you have not bothered with even a cursory study of the source material.

    • Mike Hall April 11, 2012 at 12:48 am #

      Hi Enrico & greetings from Ireland. I’ll attempt to answer your questions as follows.

      1) There has been some bailing of banks which have caused some real costs to taxpayers in the US, but a lot of the bail out was lending of ‘keyboard’ money by the Fed. By far the greatest cost & damage done was thru’ the financial sector’s fraudulent behaviour in creating a sub prime property bubble which crashed the housing market & subsequently caused economic contraction & general loss of employment. Michael Hudson & William K Black are very good on these issues.

      2) Yes, you are right, Italy is a currency +user+ and like a business or corporation in most respects of its financing. Generally, this means that money is borrowed from the commercial bond markets. In general, whereas citizens endeavour to repay a loan principal as well as the interest, business & governments usually roll over prior debt & take on more as the economy grows. The important aspect is the ability then to ‘service’ – pay interest – on the debt. It will therefore be obvious that the requirement of, say, Italy to pay 5% vs Germany at 2.5% makes a very significant difference in their governments’ ability to finance public investment, or finance a current speding deficit.

      3) Currency issuing governments, like UK or US, effectively control their own interest rates when borrowing, but, also contrary to the mainstream view, do not in fact need to borrow at all to finance debt/deficit. As currency issuers they cannot go bankrupt. But in common with any means of increasing money in circulation, if there is insufficient capacity to deliver goods and services demanded from an increase in spending power, inflation is likely. This is the real constraint. MMT explains that in such fiat, free floating currency regimes, gov spending can be regarded as a separate function to taxation. Spending creates money, enabling economic growth. Taxation ‘extinguishes’ money to slow or regulate growth such that money growth cannot exceed productive capacity growth. (This is all MMT)

      Essentially, MMT’s primary role for government fiscal/monetary policy is that of a compensating function to step in when the non-government (private) sector is unwilling (or unable) to maintain sufficient investment or aggregate demand spending to ensure (near) full employment & maximisation of productive capacity. – the goods & services of the real economy. It follows then that the accumulated spending surplus (or deficit) on the gov balance sheet – not required to be ‘borrowed from anyone for a currency +issuer+ – is an utterly irrelevant figure or ‘target’ at any time. This is the ‘functional finance’ concept adopted from Abba Lerner & developed by MMT scholars. Running an economy for optimal public purpose of all citizens.

      What a government thereafter chooses to do, to the exclusion of private business, or otherwise, then becomes a separate issue to be decided by democratic process. But thus can be decided in a much clearer framework which eliminates the (often false) financial ‘constraint’ so beloved of neo liberal politicians. That is to say, if there are resources available to be purchased (in the denominated currency), a currency issuing government can always buy them – eg unemployed labour can always be hired (hence among other reasons, the job Guarantee of MMT).

      This applies to the UK & US (& many others) monetary systems, but not to Eurozone countries who are, effectively, users of a foreign currency. However, there is no reason whatever why a re-mandated ECB could not finance, debt-free to anyone, an appropriately configured (non private or public competing occupation & strictly voluntary) Job Guarantee for every unemployed Eurozone worker who wishes to avail of it. Thus restoring growth & prosperity rapidly at no ‘cost’ to anyone, & greatly improving our ability to deal with the debt crisis & all the other structural problems of a failed currency union.

      This is no more inflatonary than growth produced from investment of money ‘created’ as a debt obligation to private banks. But of course, those banks do not get their debt service ‘tribute’ for the money that the ECB issued direct to the economy to pay JG workers. As you can can imagine, the banks will do all in their power to deny the reality that money creation, debt free, for public purpose is perfectly possible & can be highly beneficial to the majority of citizens. Guess why the Euro system was constructed as it was?

      Finally MMT is a macro economic system. As such it does not address the detail of private banking regulation. That is not within it’s scope, rather a quite separate subject. Suffice to say that MMT economists believe that some 95% of what the financial sector does has no useful purpose whatever to the real economy & should be made illegal (to paraphrase Prof Randall Wray). Simple enough to do this for any government not ‘captured’ by the interests of the top few percent.

      Hope this helps? I recommend thorough study of Prof Bill Mitchell’s extensive blog for futher details:


    • Gary April 11, 2012 at 1:58 pm #


      “From my very limited understanding MMTers insist that US public debt is not a problem, that it can be rolled over indefinitely ( since it’s a debt the nation owes itself) and that spending is at present only misused while other reformers see all this debt as really being in the hands of a private cartel. This point is very confusing for me.”

      It is confusing to everyone, because what MMT is proposing is bunk. They think they have found a perpetual motion money machine. They think have the equivalent of the money tree, and there are no consequences. The govt debt, as with all debt, comes at a cost to the savers.

      This is why :
      If money is created out of thin air by the govt and spent into the economy, and that new money results in some enterprise that grows the economy, then that money is not inflationary. it is backed by economic growth. However, if the money is spent and the prospective enterprise that receives it fails, then the economy has not grown, and now you have unbacked money and therefore inflation. Inflation is just more money growth than there is real economic growth. When you have inflation of the money you raise prices, by devaluing the money(supply and demand), this devaluation is a cost to the savers and the pensioners. The money they had saved now has less value, more is required to buy the same amount of goods and services. They, the prudent, are worse off.

      Now, of the money loaned to new enterprises in ANY economy, only about 10% results in economic growth. 9 out of ten new start-up businesses fail. Therefore 90% will be inflationary. So to reduce this excess money you must tax someone, but who ? We are back to the Problem of Economic Calculation. It is not possible to solve this fairly.

      MMT has no answer to this. The Austrian School does have an answer and it is in Bills of Exchange as money.

      • Mike Hall April 11, 2012 at 3:57 pm #

        Pure nonsense, complete gobblydigook. Typical of Austrian school acolyte mysticism. devoid of any logical train of thought.

        There is absolutely no reason whatever that new money entering an economy via private banks as debt or free issuance from gov (both arise from thin air) effects businesses, new or otherwise, any differently in their viability.

        You’ve excelled yourself again Gary, your comment is complete cr@p.

        History is littered with financial bubbles & crashes that occurred under gold standard (convertible) currency regimes. It made no difference whatever to the ability of a corrupt & greedy financial sector to game the system absent very robust & vigilant regulation. Regulation which has, & only ever will, come from one place – a democratic government that actually represents the interests of ordinary citizens not just the top few percent of wealthy & financial elites.

        There are two distinct issues, global economic problems currently destroying the livelyhoods & prospects for a generation or longer of 100s of millions of citizens around the world.

        One is the fact that a feral financial class has succeeded again in rolling back even the limited regulations governing their casino & crashed most developed countries economies. This has not even begun to be addressed & looks at present that it will not be. The major players having dumped their monumental losses on the wider public are now even bigger, more powerful & corrupting than before.

        There is not the slightest possibility that the extent of leverage, debt overhang & worthless asset driven insolvency & ‘weapons of mass financial destruction’ could be converted, in any scale less than decades (if at all), to a gold convertible system, anywhere. Even if ithe idea had any merit at all – which it doesn’t. It would be kinder, literally, to just press the nuclear armageddon big red button. Nobody, including pseudo-mystic nitwits like yourself have ‘any answer to this’.

        The second issue, having had our (real) economies crashed by the financial thieves, is how to reverse the downward, devastating, self-reinforcing spiral of depression inducing economic contraction caused by massive debt overhang & pro-cyclical ‘austerity’. Most especially in the Eurozone where countries stupidly adopted something more in common with a gold standard than fiat – a common foreign currency.

        To say that Austrian/Goldbug/Mystic claptrap has not one iota of a gnat’s cock of a notion of an idea to tackle this second issue is a massive understatement.

        So Gary, sorry, but your poor fear deranged little soul, so terrified of losing more ‘value’ on that nest egg you managed to skim off the system thus far, are as much in danger as the rest of us plebs who must sell our labour to a deliberately dwindling market to survive. I suggest you get out beyond mesmerising gaze of shiny metal, wake up & smell the coffee. Let your ‘thinking’ brain, if not too atrophied, do a little work. (Keep off the religeous texts.)

        • Gary April 11, 2012 at 4:26 pm #

          “Pure nonsense, complete gobblydigook. Typical of Austrian school acolyte mysticism. devoid of any logical train of thought.”

          Wow ! Such fact-free venom. I must be doing something right. I don’t think you understood what I wrote, but I will give you the benefit of the doubt and deduce that you instead have an agenda for dishonest money.

          ” Regulation which has, &only ever will, come from one place – a democratic government that actually represents the interests of ordinary citizens not just the top few percent of wealthy & financial elites.”

          You mean like your beloved Irish govt that you did not even know was stacking the courts with judges who are cronies and party donors , or the FSA stuffed with City Boys ? Good luck with that.

          Can’t have a sane debate with a shill. Your hysterical disposition juxtaposes sound money. It is an oxymoron.

          I repeat. I can assure you 100% that if you print money you will absolutely cause inflation , by defintion, because not every enterprise that receives the money will contribute linearly to GDP wrt the amount of money printed. And neither you, nor any other MMT proponent, will even be able to measure that inflation accurately and nobody has the fist clue how to deal with it, other than “we will tax them”. Hopeless.

          BTW : when you talk about “gold standard” you are referring to the fractional reserve paper system originating from the Goldsmiths in the middle ages where they issued multiple claims of paper against the same ounce of gold. That NOT a gold standard in anything but label.

        • Golem XIV April 11, 2012 at 4:27 pm #

          OK THAT’s ENOUGH

          I have said this once before I won’t say it again Mike.

          Either you keep your tone civil or you will be asked to leave and not come back.

          You have plenty of points to make. I enjoy and learn from the substance of what you have to say. As do others. BUT if you can’t make them without pointless and witless rudeness then you need to find a different forum.

          Same goes for anyoe else who starts down the “Let’s insult people who’s arguments we dislike’ route.

          And for the record EVERYONE, even you Mike, have ideological assumptions and biases. EVERYONE uses short cuts in their arguments which can mislead or overstate

          I do it. You do it. Gary does it.

          Stop shouting at each other stop arguing past each other. You both have points to make and if you make them civilly you both enrich this blog. If you degenrate into insults you add nothing.

  31. Gary April 11, 2012 at 6:05 pm #

    In the interests of trying to make a concrete contribution, I will finish off by making two Austrian school proposals for sound money, that is more sophisticated than just “gold standard”.

    1. Have a fixed pool of sound money , it could be gold it could be bitcoins, or anything else that cannot be counterfeited and is in monetary demand.

    When a loan is made, people with savings of the sound money make the loan. They forfeit access to the money for the duration of the loan in exchange for earning some interest or capital gain. ( compare with fractional resreve banking or money printing where both the lender and borrower have full access to the loaned money at all times[unless the demand breaches the reserve ratio , in which case there is a bank run]). No new money is created.

    If the loaned money is successfully deployed and grows the economy, then the priciple plus interest/profit is returned to the lender. Now that the economy has grown there is an increase demand in the market for money, there is an increase in goods and services but the money supply has not grown at this point. By the iron laws of demand and supply the VALUE/PRICE of the existing money pool grows. eg. an ounce of gold now lays claim to more goods and services than it did previously. Let’s say the demand for money doubled, then the value of an ounce of gold will double. What will happen spontaneously , from the market, will be a demand for SMALLER denominations of gold. eg. 1/2 ounce couns will be demand because they now have the same value as the old 1 oz coins, which in turn are valued at the old 2 ounce coins. THE MONEY SUPPLY HAS INCREASED in a non-inflationary way by DIVIDING THE UNITS DOWN as 1/2 coins are demanded. A saver who had 1 ounce of savings prior to the increased demand, and did not loan it out, will still have 1 ounce, but that will now have increased in value to 2 ounces. Not only is the saver spared theft by inflation, he sees his savings GROW with the economic growth. This monetary increase by division is practically infinite(eg. anything can be divided in half an infinite amount of times). There is no shortage of gold, under such a system, gold is rationed only by value and that is infinite.

    If you think gold is clunky or inconvenient, use bitcoins or similar. The idea is exactly the same.

    2. For the most liquid consumer transactions, not the big capital projects, use Bills of Exchange. These serve as money and circulate as money ONLY AFTER GOODS ARE ORDERED, AND THE BILLS ARE DESTROYED AFTER THE GOODS ARE DELIVERED. This has the advantage of not being inflationary and supply is linked in lock step with the demand for consumer goods. For a more detailed explanation see here :


    I might add, as a footnote for now, that these Bills of Exchange will end up being cleared for(finally paid for) gold or some such sound money deemed to be so by the market. We can discuss the reasons why if you want……

    These systems are not theoretical , they have existed and do work well. Bankers always destroyed them out of greed.

  32. johnm33 April 11, 2012 at 6:07 pm #

    I agree that printing money is inflationary, but what we need right now to reflate the bubble is a prolonged period of inflation, with safeguards in place to ameliorate the consequences. The fiat money already created [for instance http://www.zerohedge.com/article/tax-payers-tab-cool-9-trillion-and-then-some ] has to work its way through the system and it’s only going to do this in essentials currently, which will drive down asset prices as most people will not be competing for them, but instead defaulting on the loans they took out to pay for them.
    What could be more democratic than a wide distribution of fiat, attributed electornically so costing almost nothing, at .5% interest and a whole lot more likely to be recovered/repaid than the money wasted buying worthless assets from banks. Again with the stipulation that those with debts use it to pay down their debts, the rest do as they please with it. Pretty soon all the money would end up where it always does anyway. Of course people might just start local banks to lend out the money for local enterprises to grow and get more in interest than .5%.

  33. MacB April 11, 2012 at 6:20 pm #

    Firstly, excellent blog Golem and one of the better comments sections as well.

    Secondly, Gary I don’t think people are failing to grasp your points and repeating them really won’t make a difference. People just don’t believe what you do, personally it falls into the category of looks great on paper but disintegrates in the face of reality. Markets and systems will always be gamed we just need to correct the balance a bit, deregulation will never do that.

    Thirdly, as detailed as the commentary analysis above is, and as wonderful as some of the analogies are, I am getting the feeling of the blog, and comments, becoming bogged down in their own cleverness and excessive detail. I’ve seen this a lot across the web and it seems to me like it’s a reaction to the inaction around any real changes. We keep trying to come up with more inventive ways of saying the same things in the hope of getting through. I would propose a back to basics:-

    1. there is no natural order to the socio economic systems, they are man made and can be altered

    2. the pot is always divided by time/labour-talent/skills-wealth/resource, the %age split between these three needs to be rebalanced back towards time/labour.

    3. the rent is too damned high – rent seeking in every form is a destructive force

    • Gary April 11, 2012 at 8:38 pm #


      apologies if i get too detailed. I suppose i was responding to critiques such as” Gary,
      i found it very hard to follow your train of logic.”

      I do agree that men are always fallible, or worse, but we should at least try to proceed along a workable path. It is senseless to start with something that cannot work.

      Believe me Bills of exchange are working every day, they just are currently being swamped by the fractional reserve derivative orgy of the bankers, facilitated by the govt.

      These are extremely important matters, I don’t think anything is more important right now. We have to remember that the last time the monetarists got us into this level of debt, we had a systemic breakdown so bad that half the population of Europe was wiped out in the resulting societal disintegration. That was in circa 1435 , when the Venetian empire collapsed.

      What i propose can always be corrupted, any system can, buy at least those systems can and do work. You absolutely cannot prevent inflation in a Fiat system. That is a bad start.

      At least blogs like these hopefully help educate people, and they will learn to spot the crooks and throw them out promptly in future.

  34. Enrico April 11, 2012 at 8:07 pm #

    @ Mike Hall

    You say some bailing out of banks has been a real cost to tax payers in the US, could you give me more details on this?

    @ Everybody

    I have noticed that the debate, here and in other sites, shifts back and forth from MMT’s to Austrians’ point of view. I have found Paul Grignon’s works ( MONEY AS DEBT 1,2) very informative and he makes quite a few radical statements. I would hardly consider him an Austrian or even less a MMTer. Do you find his work valuable?

    • Mike Hall April 12, 2012 at 1:09 am #

      Enrico, it’s quite a complex subject in the US situation, much more so than for example Ireland’s bank bailout where the losses dumped on the government/people were readily calculable. That’s why I pointed you in the direction of Bill Black & Michael Hudson who you will find mainly at:


      I looked briefly at this stuff a year or two ago, but have moved on to what I see as the more fundamental priority of how to recover the real economy that actually provides peoples’ wellbeing. And not just maintain it, but reverse the decades long trend & impending opportunistic avalanche of inequality & poverty that now threatens, globally, but especially in Europe.

      I haven’t watched all Paul Grignon’s films, but have just watched Money as Debt 1 again & remember much of its content.

      Whilst there’s some interesting, historic & largely accurate, but +basic+ information about the nature of Money & banking, for me it misses both considerable complexity & the reality of what modern Money has become.

      Regardless of whether one agrees or not with Government’s role, Job Guarantee etc. advocated by MMT proponents, almost no mainstream economists dare to openly challenge the fact that MMT offers an entirely correct description of what modern money +is+ & how banking & central banking actually functions. Paul Krugman tried recently & lost miserably.

      However, the discussion, whilst it lasted, before Krugman took his ball & walked off the field, was a godsend to me, & i’m sure many other students of MMT’s blogs. I now feel I understand at a far deeper level the fundamentals of modern money.

      Specifically, I now fully grasp what MMT means when it says modern money is better thought of as an electronic ‘scorecard’ of claims, assets & liabilities, rather than some ‘commodity’ in its own right. Believe me, that statement is profound in a way that I think very few truly understand. Highly complex & extremely subtle. I couldn’t begin to explain it here, but suggest you read this paper by Scott Fulwiler if you want to try & ‘get it’.


      However, this leads me on to something I would like to offer you as regards Paul Grignon’s work (& that of many similar efforts put out on the internet).

      It needs to be realised that the present globally, instantly interconnected & integrated banking/money system is so complex & at present so massively loaded with toxic & fragile derivative financial ‘products’ of ‘investment’, private equity, hedge & other ‘shadow’ operations* that there is not the slightest chance that any fundamental changes to the nature of money could be introduced on any foreseeable timescale – think decades. To try would be to, literally, cause the equivalent of a global nuclear war.

      *Collectively, around $700 trillion, or about 12 times global annual GDP. Much of which, in percent of said GDP, is barely 15 years in the making. This is what deregulation & modern computing & global instant datacoms networks have produced with the feral bankers at the helm.

      So, to get hung up or obsessed with some new system of ‘money’ is an utterly futile exercise. It is possible to get back to what was previously banking & a financial sector that, rather than dwarfing & bleeding the real economy dry, performs a function limited to its useful purpose & proper scale. But that can only be done gradually over at least a decade, probably two or three.

      So from this perspective, what we really need to focus on now is what people in the real economy actually need. Not just from a perspective of fairness, ensuring everybody gets essential food & shelter & healthcare etc., or rebalancing a hugely economically unstable position of wealth & income inequality, but to be able to properly address all the imminent & existentially threatening challenges for humanity. I refer here to all the resource depletion challenges, waste & pollution issues, plummeting biodiversity, monoculture, population growth, climate change & all the rest. We do not have the time for all the distraction, division & conflict that 20 yrs of economic depression will bring under present policy trajectories.

      While I think of it, this UK paper offers some context regarding banking reform:


      Fortunately, whilst progressively unwinding, outlawing & regulating the financialised casino ‘vampire squid’, MMT offers the understanding & points to the existing tools within the current fiat money (scorecard!) systems that can quickly restore balance, stability & the necessary growth. Growth that must be de-coupled from unsustainable use of natural materials as quickly as possible. It tells us that, so long as the labour & materials capacity is present, the public sector can buy & invest without financial limit & without any debt burden or new issuance of debt based money in order to do this. (Such policies must still be fought for under a democratic system that must also be reformed to actually represent the majority of citizens. But MMT exposes the lie that such policies ‘cannot be afforded’ whilst we have the enforced unemplyment of 1 in 5 available workers – bullshit.)

      • Gary April 12, 2012 at 10:26 am #

        Mike Hall

        “It needs to be realised that the present globally, instantly interconnected & integrated banking/money system is so complex & at present so massively loaded with toxic & fragile derivative financial ‘products’ of ‘investment’, private equity, hedge & other ‘shadow’ operations* that there is not the slightest chance that any fundamental changes to the nature of money could be introduced on any foreseeable timescale – think decades. To try would be to, literally, cause the equivalent of a global nuclear war.”

        Translation : the heroin is destroying the addict , but if we withdraw the heroin the patient will become convulsive, so we have no option we must keep the guy addicted for decades.

        It is this nonsense that makes me , and should make everyone, very suspicious of these monetarists motives. It is my contention that these people, who are all unreconstructed monetarists, that if they can’t have the bankers dosing out the poison , they will gladly damn the bankers loudly publicly , and instead let the govt controlled by the bankers behind the scenes to dose it out.

        These guys have used Machiavellian dark arts for centuries, they ran the Venetian Empire, and when that collapsed they morphed it into the monetarism of the corporate East India Company and the Bank of England, and now their latest “banking on derivative steroids” has run its course, they are shifting their movement to “democratic” govt controlled monetarism. Same wolf new clothes. But, we all know that govt is controlled by the bankers, Cameron himself said so. He pulled out of EU negotiations “to protect the City” because of a mooted financial transaction tax. There is not one politician from any party that will go on record to neuter the City. Whoever you vote for you will get the City in the current incarnation. Some democracy.

        These people are hand-wringers who tut-tut about the awful financial problems, but then solemnly say “alas, it pains my heart, but there is nothing that can be done about it”

        The Austrian School knows exactly what to do about it, and that is the real reason why they react with such hatred and venom to the Austrians.

        • Mike Hall April 12, 2012 at 4:53 pm #

          “…the heroin is destroying the addict , but if we withdraw the heroin the patient will become convulsive, so we have no option we must keep the guy addicted for decades….”

          Translation: I don’t know what I’m talking about but I’ll throw up a simple minded, emotive analogy that sounds plausible to an ameoba, but isn’t.

          More blatant misrepresentation (or just ignorance).

          The term ‘monetarist’ is universaly recognised to refer to the neo liberal (neo classical) market fundamentalism of followers of Milton Friedman & the like. It is what developed over the last 30 years into the current global crisis. MMT is profoundly not ‘monetarism’ in any accepted sense of the word.

          ‘Venetian empire’…’East India Company’ blah blah blah. Seems you’ll talk about anything but something with relevance to the modern money system. (Hard for you, I know.)

          “…Whoever you vote for you will get the City in the current incarnation. Some democracy….”

          And your plans to achieve a functioning democracy are what exactly? Or are we simply to give up on the idea along with governments as you seem to advocate?

          “..The Austrian School knows exactly what to do about it,….”

          No, you have simply stated the +end point+ you desire, which seems to be some kind of ‘gold standard’ commodity currency, minimal government, no public services or welfare (in fact no statement of concern or means of alleviation for poverty, unemployment or any other vulnerable sections of society)

          But not a single statement concerning the means, policies or mechanisms of how the world gets to your utopia from where we are with a financial sector & economy in a fragile state, approching ‘depression’ for some countries & mass unemployment in most others.

          Besides the practical difficulties I’ve mentioned, how do you propose to persuade the world’s ruling financial elites off the present fiat currencies?

          Do you intend to make any retraction or apology regarding your previous blantent misrepresentations made earlier & referred to in my earlier post?

          • Gary April 13, 2012 at 10:35 am #

            “But not a single statement concerning the means, policies or mechanisms of how the world gets to your utopia from where we are with a financial sector & economy in a fragile state, approching ‘depression’ for some countries & mass unemployment in most others.

            Besides the practical difficulties I’ve mentioned, how do you propose to persuade the world’s ruling financial elites off the present fiat currencies?”

            Your premise is wrong. Why are you waiting to PERSUADE the elites ? This is more resignation and tut-tutting. The changes are going to come from the people. The elites will never change , this system keeps them rich and in control.

            There are no good, painless options left, we are where we are. We are going to have to detox and withdraw the poison.

            You have to default the debt down to the capacity of the economy, and the bankers and the govt will bear the brunt. If MMT prints money up to the level of the debt , to monetise the debt, and hand out wages , they will simultaneously destroy the currency they issue and the result will be hyperinflation. Because the debt is so vast. Out of the frying pan into the fire.

            This is one method of how you can implement the changes as recommended by the Austrian system :


          • Mike Hall April 13, 2012 at 1:06 pm #

            “This is one method of how you can implement the changes as recommended by the Austrian system :”

            You just keep proving my point there with that link. There is not one shred of macro economic or monetary/banking analysis in that dross that addresses anything, let alone the complexities of the question asked – to whit ‘how’ (from fiat to ‘Austrian school’).

            Just more pseudo religious mumbo jumbo repeating how wonderful everything would be & all manna fall from heaven if we had gold coins or some such.

            Exactly the same as you have done here throughout. ‘Arguments’ that are merely statements (repeated over & over), simply plucked out of thin air, with not a shred of logic or reasoned analysis.

            Considering your rate of posting in the mere two weeks you’ve been here, peddling a single very narrow agenda & blatently misrepresenting other positions, I call your behaviour what it is. That of a Troll.

          • Gary April 13, 2012 at 2:22 pm #

            Mike Hall

            “You just keep proving my point there with that link. There is not one shred of macro economic or monetary/banking analysis in that dross that addresses anything, let alone the complexities of the question asked – to whit ‘how’ (from fiat to ‘Austrian school’).”

            Well then you failed to understand the implications of what was proposed. Let me help you :

            1. Introducing gold as a competing currency implies that the Legal Tender laws have been repealed. These laws are there to ensure that the fiat currency is a monopoly. Repealing these laws also suspends Gresham’s Law, which states that “bad money drives out good money UNDER LEGAL TENDER LAWS”. This means that now instead GOOD MONEY WILL DRIVE OUT BAD. Because people who have the free choice to accept money that holds its value or money that will be debased, will choose the former. Gold will drive out the fiat paper.Gold is cryptonite to the fiat paper pushers.

            2. When the fiat paper gets rejected as the legal tender laws are repealed, that implies that the monopoly central bank fractional reserve banking system will die. This system can only exist under legal tender laws and under a fiat system , ie a system where there is inflation. Because they play the yield curve, borrowing short and lending long. Take that away, flatten the yield curve, or gently invert it, and they are out of business.

            3. Issuing long dated gold back bonds will force the fiat backed bonds to be marked-to-market. They will be forced to be accurately valued as people make arbitrage choices between the gold bonds and the fiat bonds. This will unmask the fraudulent valuations that the fiat backed bonds currently have. They are currently marked-to-model , or in other words, whatever the banks say that their value is. Accurate debt assessments can now be made and bad debt can be liquidated and restructured accordingly. This will unblock the system that they currently refuse to let clear because they know they are insolvent but prefer to perpetuate the lie. By issuing long term gold backed bonds you also give the system some time to transition.

            4. As the sound money drives out the bad, rates will stabilize, inflation will disappear, all fiat based debt will be marked to market and bad debt will be liquidated and restructured accordingly. These are the exact market conditions that businesses require for long term investment. New business investments will flow in. The country will stabilize and the crisis will abate.

            Get your head out of the fiat tangle. That is where they want you to be. It is currently infinitely complicated only because it does not work, and it does not work because it is infinitely complicated. Instead, use the principle of Occam’s Razor. Get a new perspective, an elegant workable solution. Hack away the thicket, wipe the slate clean and ask what it could be , not what it is. That is real innovative science.

            PS : Bitcoins can be used instead of gold if you have some irrational fear of gold.

          • Mike Hall April 13, 2012 at 2:57 pm #

            This is your problem Gary, you think you inhabit some simplistic banking world of ‘Crusoe Island’.

            Go peddle this fantasy island stuff at one of the more technical blogs & you will be laughed at. Or maybe you’ve tried & that’s why you’re here?

            (Randall Wray asked this same question ‘how’, at his UMKC blog recently. Not surprisingly, no takers.)

            You really are wasting your time.

          • Gary April 13, 2012 at 3:07 pm #

            Another fact free non-response. It speaks volumes.

            Yes, Mike Hall. With you I am wasting my time. You are unable to join the debate either for cognitive or ideological reasons.

            You do your idealism a disservice.

            Not my problem. Others will be the judge.

          • Gary April 13, 2012 at 6:49 pm #

            Mike Hall

            Btw. The reason you guys get tangled up in complexity, is because you are trying to do economic calculation. Far from that being a virtue, it is because you are trying to do the impossible. The Austrians know that economic calculation is impossible, and the complexity must be left to the market itself.

            You are on a hiding to nothing with your tangled web, which you think is so clever but in fact is ignorant.

  35. MacB April 12, 2012 at 12:30 am #

    I’m not so sure Gary I think there are two elements to consider here, what can work in the short term and what we might want to work towards longer term. Much as I’d love to see an immediate tear down and rebuild the only circumstances I can see that being viable are those I’d rather avoid.

    In the short term a debt jubilee or paydown as proposed by Keen makes more sense and works within existing structures – this could be done as easily across the Eurozone as within the UK. It just requires the central banks to work with governments to produce without interest, and distribute, the necessary funding. Yes some rules would need to be torn up but the weight of popular support would be behind it.

    In the medium term mass simplification around existing structures, with extensive house cleaning, would be beneficial. Seperating out banking, making multinationals properly accountable for the privilege they enjoy and tackling tax havens.

    In the long term, well the world’s your oyster but I would favour a mix of the isms as I always feel that trying to follow one just leads to totalitarianism. Taking an idea like Keens a step further and implementing a full liveable basic income. Payable from birth to death and replacing all other forms of benefit. That would be my core long term goal, actually giving people real freedom and real choices.

    What I can’t accept is some sort of austerity package and debt servitude, it’s total pish. All this stuff about borrowing from the future is, unless Dr Who and time travel are real, total balderdash. We have enough challenges around global unrest, peak oil, food and water shortages, population growth, etc, without using fairy tales as a stick to beat people with. We invented the systems, we can see how the systems have been gamed, we can see that they are seriously broken. Yet we seem content to sit back and let the same sort of people that brought us here pretend change while tinkering around the edges and steadily capturing wealth/resource. The ‘rent’ keeps going up and they keep building their financial ramparts against what they know will come. I’d rather avoid us getting to that point, though it may be too late, and take our inflationary licks(if they really exist) via a quick fix now.

    • Mike Hall April 12, 2012 at 1:17 am #


      Economist Peter Cooper has hosted some interesting discussions around the possibility of providing a ‘basic income’ (as you mention above?) in preference to a Job Guarantee under MMT macro economics. His blog is here: (You’ll need to track back a bit to find them)


    • Jim M. April 12, 2012 at 4:26 pm #

      Excellent post, Mac.

      We have enough challenges around global unrest, peak oil, food and water shortages, population growth, etc, without using fairy tales as a stick to beat people with. We invented the systems, we can see how the systems have been gamed, we can see that they are seriously broken.Yet we seem content to sit back and let the same sort of people that brought us here pretend change while tinkering around the edges and steadily capturing wealth/resource.

      TPTB seem to rely heavily on our capacity to knuckle down and keep digging!

      Their clarion call for fortitude, steadfastness and pluck will doubtless see us through much as it has historically in times of war. We can only hope the body-count is less substantial this time around.

  36. johnm33 April 12, 2012 at 7:22 pm #

    Well said MacB, we need a reset button, and a new better system. Back to vultures I wonder what this is about http://blogs.reuters.com/alison-frankel/2012/04/09/u-s-walks-dangerous-line-to-support-argentina-in-bond-cases/

  37. simoncz April 12, 2012 at 8:19 pm #

    Some good news from Greece. Local currency.


  38. pilibi April 13, 2012 at 9:37 am #

    Can you indulge me – if I digress from the present discussion.

    I would appreciate if someone could reply to the arguments made by Dan o’ Brien (follow link) or point me in the right direction to where these issues have been dealt with before on this forum.

    I fear that we are losing the battle in the realm of public opinion.


    • John Souter April 13, 2012 at 12:48 pm #

      Pilibi – The vulture funds base their strategy on parri pussi (equal footing) in an effort to fundamentally blackmail distressed bonds to pay out full whack on face value, when in fact the vulture funds have full knowledge of the risks attached to their investment which is amply exposed by the discounted price they bought them at.

      The question in Law is the interpretation which forms into the foundation of a sensible equal footing?

      For instance -if an antique dealer told a seller the article he wanted to sell was only worth five dollars when with his knowledge of the articles provenance and the market the dealer knew it was worth five thousand dollars where would the foundation of equal footing lie in this instance?

      In essence the vulture funds know this and they know they’re taking a massive gamble. But in doing so, they utilise the arrogance of the law in order to choke the distressed nation or issuer into submission by legalised attrition that threatens the recovery of a nation.

      Using the same argument you could apply the ‘vulture’ pejorative to the entire financial chaos we as a society are being blackmailed by today.

      This is at best ridiculous and at worst sad. As far as sovereign bonds are concerned the inclusion of a straight forward clause stating something along the lines of bonds sold at discount will for the purpose of settlement only have the value of the discounted price plus average bond interest from the date of purchase to the date of settlement calculated on simple interest.

      Stick that in the bonds and the vulture funds will go out of business overnight.

      • Pat April 14, 2012 at 9:57 am #

        John, I think ‘pari passu’ is the phrase you have in mind.

    • MacB April 13, 2012 at 1:28 pm #

      It’s spin and propaganda and no-one really believes that all pain could have been avoided if only we hadn’t bailed out the banks. There is too much inter connectedness and there would have been a period of adjustment. It’s the direction and content of that adjustment period that has been grossly distorted.

      For example I thought that Gordon Brown showed genuine inspiration at the point of crisis. But it was wasted, I reckon there was a 3 month window of opportunity for serious reform and positive action. It was blown and this pattern was repeated everywhere. Bailout should have been to support the essential service aspect of banking and allow for a more orderly collapse of failed banks. Instead we were creating zombified money pits backed by public money…that was never my idea of a bailout.

      Public debt and deficits are a reflection of tax revenues, that they would increase in tough times is patently obvious. That any part of that increase should be propping up banks, beyond the essential service level, is ludicrous. I think a medical analogy serves us best here:-

      Consider the financial sector as the heart of the global economy and, following a checkup, we find it is cancerous, diseased, throwing off all sorts of nasties and in danger of imminent collapse. First reaction, entirely sensible, stabilise the heart, we can’t have the patient dying on the table. Keep the blood pumping around the body and keep the patient as calm as possible.

      Then you have the medical conference and you wonder at the state of modern medicine and where all these Victorian quacks have come from and why the conference includes so many non medical people. A few surgeons suggest keeping the body stable while the heart is either replaced or extensively operated on. But the majority come out with a long list of alternative remedies, applying leeches to suck out the bad blood, limiting blood supply to the extremities to keep the core stronger. Put the patient on a diet so that they have to fight harder, on less, and thus making them stronger. I could go on but I think the gist is clear.

      I suppose rounding off the analogy requires an awareness that these quacks and laymen don’t have the patients best interests at heart!!! We are finding that they feed on, or work for those that feed on, the sort of bad blood a diseased heart will pump. They’re also partial to the odd body part/extremity that can be snipped off and they panic others into signing the consent forms. In fact they hope to keep this patient going, without ever tackling the core disease.

      • Synopticist April 13, 2012 at 8:15 pm #

        “For example I thought that Gordon Brown showed genuine inspiration at the point of crisis. But it was wasted, I reckon there was a 3 month window of opportunity for serious reform and positive action”

        I totally agree. Gordon Brown then declared his intention to get to grips with tax havens. Then the expenses scandal hit, and it all ground to a halt. Well done the Barclay twins.

      • John Souter April 13, 2012 at 9:06 pm #

        MacB – I agree the bank bail out could not have been achieved without some pain to the general populace. But I disagree on Gordon Brown gaining any kudos from his handling of the crises.

        Substantially he joined the panic and opened the public purse as a floodgate when he should have used it in a far more effective and precise manner.

        The response at the time should have been limited to supporting the retail service of banking while placing all the investment merde in moratorium until such time as their ownership and true values could be identified. Instead by giving all and demanding nothing in return other than for them to continue doing business, he was blind-sided by their sleight of hand and wit and panicked by the amount of public money invested by local authorities etc in the alchemy markets.

        Why didn’t he adopt this stance? I suspect the major reason was his lack of wit and/or backbone to stand alone as the catalyst. But there’s another factor which is rarely mentioned, if at all in the ensuing idiocy and that is the degradation of work and employment as the foundation of wealth in western economies.

        The relationship of work, earnings and taxes that has been the bedrock of society’s values and a nations wealth since the industrial revolution has been undermined by a concept raised as a surreal commodity of infinite elasticity that can distort the arithmetic’s of productivity beyond the wildest wet dreams. of Midas.

        Even the advances of technology usurped and exploited by the privateers of finance have been accepted as Manna by the politicians, No longer is a nation measured by the balance of its trade in imports and exports now it’s euphemistically measured as Gross Domestic Product where in fact only around 8% is product, the rest is limited to financial jiggery-pokery and the servicing of the ‘industry’ that support it.

        This was the ideological cash cow that ticked all the political boxes, that made booms inevitable and eradicated busts. The lottery where everyone was a winner and for those who weren’t could find a niche in Macdonald’s or Starbucks. One where the promise of technology to transform the conditions of those who worked towards shorter hours with increased productivity rewarded by increased remuneration was exported by global conglomerates in order to maximise their profits with barely a shrug of resistance from semi comatose politicians.

        I believe this was the fundamental cause behind the funk of the political classes. The stupor of their brain and its failure to acknowledge or accept the futility and flaws in an ideology that promised them nothing but solutions and further seduced them by offering solutions from nothing.

        Times change and in the last half century, through the advances of technology, the change has been exponential in its acceleration and is probably beyond the scope that society world wise can comfortably cope with.
        The result is we’re being corralled into globalisation where the ‘global intent’ is to exert a race to the bottom for the bewildered herd of humanity instead of an aspirational ambition for life values to be fairly evenly matched throughout the globe.

        We cannot afford this, nor can we afford our politicians or their global autocrat masters the luxury of believing we will go along with their ambitions. Quite simply, at the present stage of our evolution it’s a step too soon and too far.

    • Mike Hall April 13, 2012 at 2:42 pm #

      O’Brien is a complete establishment shill and very arrogant, the latter to cover his poor grasp of macro economics imo.

      Dr Constantin Gurdjiev estimates net losses from the banks will be €62 to €75 billion, 50% or so higher than O’Brien states. See gurdjiev here:


      But of course these are estimates (I’m sure I’ve seen an estimate as high as €95B, but can’t recall where). O’Brien has deliberately chosen the low end & tried to give it some credibility. However, the Dept of Finance have consistently peddled an over optimistic view throughout, so I take their ‘estimates’ with a big pinch of salt. They are also considerably responsible for Ireland’s mess. Naturally, no accountability has been forthcoming.

      ‘Namawinelake’ seems to agree broadly with Gurdjiev here:


      So, we’re probably looking a +direct+ costs of 40 to 50% of GDP. But whilst Ireland was going to have a property crash, regardless, & some economic contraction from that, the fact that budget cuts to pay for the extra borrowing costs incurred is highly significant. This has resulted in the double whammy of both higher unemployment (less tax take, higher welfare bills) and economic contraction being far greater than would have been the case. Over 4 years & counting these costs have accumulated & continue to do so. These large ‘knock on’ are completely ignored by O’Brien, as they are with most of Ireland’s pathetic excuse for mainstream economics media commentary.

      Also, the +type+ of borrowing in the €30 of ‘prommisary notes’ relating specifically to Anglo Irish losses, is particularly damaging. Normally government debt principal is never repaid, merely rolled over indefinitely. Relying on economic growth & the ‘natural’ rate of inflation to allow further borrowing & interest payments to be manageable in terms of what is the key determinant – debt to GDP +ratio+.

      What is different about the prommissary notes, is that we are obliged to repay the principal in annual instalments of some €3 billion – or about 75% of the net cuts to the gov budget last year. (Because the debt is with our consolidated ECB/ICB, the interest is not a real cost, merely recycled back to the Irish Treasury.)

      However, the €3 billion is real money out of Irish pockets & the economy. But note, it was created from ‘thin air’ at the ICB. There is no ‘real’ creditor’ in the normal sense. It is accurate to say that we citizens hand over real money for it effectively to be dumped in a skip & torched.

      Add the (likely elevated, ‘risk’ premium) interest costs of Ireland’s borrowing to the burden of the promissary notes, plus the considerable knock on costs of higher unemployment & you have a very different picture of what Ireland’s economy would have looked like at this point (& its prospects) without gov taking on the bank/bondholder losses.

      In short O’Brien is trying to justify the rip off of Irish people to prop up a variously fraudulant & rapacious EU banking system. Ignoring the very serious flaws in the common currency & using equally flawed neo liberal economics to do so.

      • Pat Flannery April 13, 2012 at 6:39 pm #

        O’Brien is perfectly capable of defending himself (if he reads this blog) but I am interested in what you think of his basic point, that even if the bank bailout never happened Ireland has a primary deficit of almost 7% of GDP compared to those of Greece and Portugal of around 2%.

        I know he is plugging the Fiscal Treaty but O’Brien seems to be asking a fair question, whether the Irish people can trust their politicians any more than they can their bankers:

        “The lesson is that politicians should be constrained in how they manage the public finances. Stronger domestic and EU rules – including the fiscal treaty – help to achieve that.”

        My thanks to pilibi for posting the O’Brien Irish Times link.

        I look forward to reading your thoughts Mike.

      • Mike Hall April 14, 2012 at 12:34 pm #


        Your questions there go to the heart of what is fundamentally wrong about the Euro structure & the neo liberal justification for denying anything’s wrong despite 4 years of serious contraction & lurching from one crisis to the next. In reality it’s all one crisis – the system, & it’s neo liberal/neo classical underpinnings that are utterly flawed. (Unless you are one of the top few percent of wealthy & financial elites.)

        First point. Trusting bankers vs politicians. Well, O’Brien seems to think that we should trust the Euro bankers & economists who designed a f&*^d up system in the first place & have heaped misery on damage since the crisis began. The Eurozone is demonstrably worse & getting worse again after 4 years of so called ‘fixes’.

        Still, O’Brien’s basis for this is that they know better than the politicians. (Irish or otherwise.) so it’s ok to hand over government fiscal control to them. But what about democracy? If we have useless politicians, as regards economics nous (& we have, universally), then surely the answer is to kick them out & get better ones? Not hand over control, lock, stock to a bunch of rich self interested kleptocrats, whether residing in Ireland or elsewhere.

        Essentially O’Brien is arguing that there’s nothing wrong with the Euro system that some ‘fiscal responsibility’ won’t sort out. And that Ireland created its own problems, by the way. On the latter, Ireland did have a land asset bubble & rely too heavily on tax income from the associated financial & construction sectors. But up to the point of the property crash Ireland’s gov debt position was not a problem. And it would not have been half the problem since, had the gov not taken on all the losses of the banks (most of those relating to commercial and overseas property, note, not domestic housing) and persued austerity policies that were massively contractionary for the domestic economy.

        There is some argument that public sector wages (especially at the higher grades) are too high. But we should realise that those wages are an important part of GDP & domestic spending that is preventing the domestic economy crashing further. Really, the question is one of fair distribution of available resources, which I agree is a debate worth having, but is not the priority right now. Rather, restoring growth is. Sure, we could slash public wages, welfare too, & create another 100,000 unemployed when that income is no longer spent into the economy. How does that help anything?

        In terms of whether a fiscal straightjacket is the great idea O’Brien thinks, to enshrine legally in our constitution (it isn’t), let me point you to a Journal.ie article by economist Ronan Lyons a few weeks ago discussing the proposed fiscal compact.

        “Fiscal compact? Time to send Merkozy back to Economics 101.”

        (He could have included all ignorant a*&*hole bankers & economists who peddled the idea to Merkozy too, imo.)


        There are some comments from me in the section below too. Interestingly, counter to all Lyons’ criticisms of the basis for the compact, he states at the end that proposes to vote in favour of it. Saying that he will explain why in a column the following week. Said column, some 6 wks later has not materialised….

        Perhaps such an article was just too hard to write on the same basis of economics clarity he offered in his first piece & he has declined to outline the purely power politics/ideological positions driving it that are not supposed to be spoken of publicly? (It’s always the topics excluded from discussion by the mainstream that really stifles public debate. That’s why we’re here, eh? Lyons works in the private sector in property finance in London. Maybe he’s chosen to keep his head down now. He is also doing a lot of (paid?) work on the property tax system to be introduced next year – see Smart Taxes Network for info)

        Bill Mitchell has penned some great (as ever) blogs about Ireland & the Eurozone, well worth taking time to read:




        Hope this is of interest?

        • Mike Hall April 14, 2012 at 5:16 pm #

          Here you go.

          Some data graphs of Irish (& some other) Euro gov debt & deficit figures running up to the crisis, by Ben Chu at the UK Independent.


          Ireland in budget surplus & a lowly total debt of >30% of GDP in the run up to the crisis & bursting land asset bubble.

          Contrary to the lie told by German Finance Minister Schauble & repeated by O’Brien.

          Is this just cr@p journalism by O’Brien or a blinkered ideological disposition or both? Either way, not an economics commentator worth a sh1t.

          • Pat Flannery April 14, 2012 at 7:36 pm #

            Thanks Mike for the Ben Chu’s article. I have saved it as a PDF in my “economics” file.

            It is amazing that O’Brien and the Irish Times would repeat such a deliberate lie by the German Finance Minister.

            The reason I questioned O’Brien’s assertion that Ireland had a primary deficit of almost 7% of GDP before the bank bailout, was that I had previously understood from various sources, which Ben Chu has now confirmed, that Ireland had in fact a budget surplus going into the 2008 meltdown. I had repeated that a number of times here in the U.S. and believed in its accuracy.

            I can see why you are frustrated with O’Brien, who seems to be just another “academic economist bankrolled by Wall Street”, as described by Jason Hickel in his article.

            I am also shocked to learn that the so-called Nobel Prize in Economics is in fact the “Sveriges Riksbank Prize”, an award granted by Swedish bankers!

            One thing is clear: we can no longer trust the main stream media. We must rely on blogs like this one that is not bankrolled by any established interest.

            Thanks to all who share valuable links that I for one would never have found on my own.

  39. pilibi April 13, 2012 at 9:30 pm #

    Yes, thank you, all points taken in so far as I understand the arguments – which may not be very well.

    It just strikes me that the popular understanding of the situation in Ireland goes something like this – it was the greed of public sector workers and their unions’ unreasonable wage demands that created the crisis. It was reckless government spending and high social welfare costs that created the crisis. I hear this all the time.

    There seems to be a certain resignation that, okay the banks didn’t behave very well, but we have no option but to pay their debts, because if we don’t, we will not be able to return to the ‘markets’ next year and there won’t be any money to pay nurses, teachers etc.

    Another point I hear all the time is tax revenue is €30 billion and government spending is €50 billion – so we must cut spending by €20 billion.

    What is the response to what seems to be a reasonable position.

    Government debt to GDP ratio is key – does government debt now include all the debts of the banks?

    Is it that governments are always in debt, it’s just that the debt/GDP ratio is much worse because government debt now includes the debts of the banks and is unsustainable?

    Two days ago €1.5Billion was paid to AIB bondholders – is this part of AIB bank losses that we have to pay over the next number of years?

    Are these the regular payments that must be paid to the bondholders of all the banks that make up the total of all bank losses?

    When Dan meets other economists – like say Professor Morgan Kelly , an academic how does that conversation go?

    When The Irish Times is looking for an economics editor how does that interview go – Excellent Dan – the job’s yours – that’s just the perspective we’d like our readers to have.

    Is there any embarrassment among economists when they meet – is there some kind of understanding between them on these things – “I can’t say what I really want to say” – they have the data – all the mainstream economists told us that the boom was sustainable, that house prices would plateau, that growth would continue albeit at a lower level etc.

    Payments to Anglo Irish Bank will total €89 billion by 2015 (Economist Magazine I think) when you include interest payments, does that mean there would no need for any cuts or tax increases if we refused to pay it’s debts?

    Is it true to say that in Ireland it was the private debts of the banks that crashed the economy through reckless lending that fueled a property bubble that was unsustainable.

    Did the government use the revenues from the property boom to pay excessive pay demands of public sectors workers?

    According to Professor Morgan Kelly – the average price of a house in Dublin at the height of the boom in 2006 was 15 times average wages.

    He also says the total cost of bank losses will be €240 Billion.

    • Mike Hall April 14, 2012 at 1:31 pm #


      Again, those are important questions.

      Please see my response to Pat above, & in particular read carefully the pieces by Bill Mitchell.

      Which reminds me that one of those pieces is Bill strongly arguing for the break up of the Euro & return to sovereign currences. I agree with all the reasons & logical argument he states on this.

      And if we can’t fundamentally reform the Euro system, I have no doubt whatever that some temporary uncertainty, trauma & possibly even chaos would be worth the price to ensure the future well being of citizens. (if we let it continue, I fear the worst debt slavery neo liberal nightmare will inexorably come to fruition.) However, with concern for the latter potential trauma, I am proposing a different tactical approach to anything considered by Bill, or other MMT advocates, whilst still firmly agreeing that MMT is the way to go, either inside a suitably structured currency zone, or for Ireland on its own.

      I am proposing that as a first step, we demand that the currency issuance powers of the ECB be re-mandated to finance an MMT Job Guarantee for every unemployed citizen across the Eurozone. (With the usual important conditions – purely voluntary for participants, non-competing JG jobs only in the community/voluntary/charity sectors, minimum wage only etc. For people in ireland, think CE schemes but full time plus a few tweaks.)

      There are no ‘costs’ or incurred debt to be concerned about. Governments get to keep (spend/save otherwise) the savings in welfare expenditure, adding further to the stimulus effect of the extra income/spending available to the JG workers. The JG is always counter-cyclical – as the private sector responds to increased demand, JG workers will migrate naturally to the higher waged jobs newly created. With such high levels of unemployment at present, there is skant chance of inflation risk, likely for 3 or 4 years at least (I suggest that is the likely timescale for strong recovery to be apparent) before inflation risk might materialise. Remember, we’re really only getting back to the levels of economic activity & money in circulation that we had 5/6 years ago. Ergo, we know that essentially the +capacity+ of the economy still exists whilst presently idle/not in use thru’ lack of aggregate demand spending. We should not get to the point where demand tries to buy resources that aren’t there for some years at least. It is only this that causes inflation, +not+ simply & solely some ‘quantity of money’ on its own – neo liberal paranoia bullsh1t.

      The tactic here with just this one simple (MMT) no cost measure we can quickly restore growth & jobs. But it will till take a few years to get near full employment & productive capacity. This gives time to press for the fundamental reforms & other key elements required by MMT to be put in place for when they will be needed. For example, a Eurozone wide means of controlling aggregate demand to stop rising inflation at full capacity will be needed. This will need to be some collective & fairly distributed means of curbing currency issuance and/or extinguishing money (taxing) to rebalance overall activity/inflation with some fine tuning for individual member countries.

      That may well prove politically impossible. BUT, in the time taken to get to that point, we will have recovered all our economies to such productive prosperity that one or more countries choosing to leave the Euro, may do so with a minimum of trauma & disruption to themselves or other countries. (Obviously, having already seen the transformative power of MMT/JG in action, I would hope such countries then adopt their own sovereign currency full MMT systems.)

      Importantly, I suggest that such a plan/tactic has the massive advantage of its simplicity. Enabling it to be promoted easily for the wider public to get behind in serious numbers.

      Growth which hugely diminishes all the other economic problems (most simply disapear within a few years), no costs or further debt, great simplicity & potentially wide public appeal.

      What’s not to like?

  40. Pat Flannery April 14, 2012 at 12:52 am #


    Thanks for the response.

    So many questions. So few facts. How do we get hard facts? As you say, all the economists are hirelings and shilling for somebody.

    As bloggers we must only rely on hard economic data. We cannot rely on what we “read in the papers”.

    Can you or somebody tell us all where we can find unfiltered government data for the various countries we are discussing e.g. Ireland? Perhaps we can start compiling a list of official sites and ask Golem to post them here.

    I hate arguing “he said she said”. I suppose that first we need to get Golem to agree to an “official link” section above. I would be happy to do my share of the “digging for data”.

    • Mike Hall April 14, 2012 at 5:27 pm #

      Ben Chu again of the UK Independent yesterday;

      “….this week the German European Central Bank policymaker, Joerg Asumussen (pictured), came to Dublin and told Ireland not to even think about refusing to honour the debts of its bust banking sector….”


      “….This is breathtaking. Asmussen is saying that because a previous Irish government failed to curb the monumental idiocies and multiple corruptions of its banking sector, it is right that the liabilities of those institutions should become public debt and that the Irish people, the vast majority of whom gained nothing from the bubble, should commit to paying off the sector’s creditors indefinitely. It doesn’t seem to have occurred to Asmussen that, in an ideal world, those reckless banks would have been allowed to go bust…..”


      Compare & contrast with Irish MSM coverage.

      Another fascinating snippet here from an Irisheconomy.ie comment on a ‘slip of tongue’ by Asmussen concerning ECB motives on insisting Ireland make good all potential banking debt losses, subsequently edited in the ‘official’ transcript of his Dublin speech.

      “John Kennedy Says:
      April 13th, 2012 at 7:22 pm

      @ Aisling

      I think what was even more interesting is that there were disparities between officially published speech, and spoken speech of Jörg Asmussen on 12th April 2012.

      This is the first time since the onset of the crisis where anyone from the ECB has officially publicly stated that the reason senior bondholders in Anglo were honoured in full, was in part to prevent spill over effects to banks in other European Countries. It is at the very least noteworthy that in the officially published speech by the European Central Bank, there is no reference to other European Banks, however in the spoken speech Jorg Asmussen recorded in the above link, he clearly states that the reasoning behind forcing Irish government to honour Anglo Senior Bondholders in full related to concerns of spill over effects to banks in other European Countries.

      “The decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy, decisions taken by the Irish authorities such as these are not lightly taken and the consequences of subsequent actions are weighted carefully, it is true that the ECB viewed it as the least damaging cost to fully honour the outstanding senior debt of Anglo however unpopular that may now seem, the assessment was made at a time of extraordinary stress in financial markets and great uncertainty, and protecting the hard won gains and credibility from the early successes in 2011 was also a key consideration and the main reasoning was to ensure that no negative spillover effects would be created to other Irish banks or to banks in other European Countries.”

      http://www.iiea.com/event/download_podcast_file/223 @ 27.30

      “I know that the decisions concerning the repayment of bondholders in the former Anglo Irish Bank have been a source of controversy. Decisions taken by the Irish authorities such as these are not taken lightly. And the consequences of subsequent actions are weighed carefully. It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled-over to other Irish banks.”


      • patma2003 April 15, 2012 at 12:36 am #

        That is an outrage.

        Slip of the tongue? That’s rich.

        Stalin edited history in a similar fashion.

  41. Charles Wheeler April 14, 2012 at 12:43 pm #

    A useful primer on neoliberalism: http://goo.gl/ao11y

    • Pat Flannery April 14, 2012 at 6:58 pm #

      A wonderful article. Thank you Charles.

  42. Charles Wheeler April 14, 2012 at 6:22 pm #

    ”The real parasites are not the looting masses but the Objectivist elites. So much for the triumph of individualism.’ http://goo.gl/8L6Mp

    • CArratiaM April 17, 2012 at 3:40 pm #

      What a great link Charles, the fact that such wicked ideas can actually get into power is frightening… not to talk about the consequences.

      I think that a big problem with objectivism is that it is so basic that it actually seems very simple and logically consistent. It therefore provides a perfect alibi to libertarians, and I guess it actually deceives some. They are actually trapped in a tautological nonsense whereby, in their fantasy world, (1) the smarter ‘man’ gets money and power which he deserves because he is smarter, and (2) the ‘man’ that actually has more money and power does deserve it because he is smarter… completely circular argument, in practice defining ‘smart man’ by the fact of ‘having money’.

      Its a little like Aristotelian physics (with all due respect to Aristotle, which wouldn’t be happy at all knowing he is the only influence that Ayn Rand acknowledges…), whereby heavy things fall because down is “their natural place to be” and light things go up cause up is “their natural place to be”…. is also consistent: what is light? that which goes up; what goes up? that which is light. Perfectly consistent too but doesn’t provide an explanation.. at least provides a rather accurate description, in opposition to Objectivist absurd reductionism.

      Here is a link discussing some issues with objetivism:


      • Charles Wheeler April 20, 2012 at 5:04 pm #


        Thanks in return – excellent link, well worth a read.

  43. Gary April 15, 2012 at 12:14 pm #

    Govt has promised trillions in promises of payments to the citizens, but we are at the same time asking govt to set the value of our money. In America this unfunded promise of payment is over $100 Trillion. This irreconcilable dichotomy is the fraud that is at the heart of the MMT proposal for govt to take full control of the issuing of money. It will be a disaster. It already is a disaster.

    The founders of the American Constitution understood this , and that is why they stipulated sound money in gold and silver. They knew that sound money could not be created by the govt or the bankers.

    Now with cryto-currencies such as bitcoins , which operate on the same principle as gold and silver, where the base is expanded by dividing the unit down spontaneously as demanded by economic activity, we have a new choice for sound money.

  44. Gary April 15, 2012 at 1:28 pm #

    Sound Money. This 45 min video with Judy Shelton on sound money. A walk through that touches all bases , from the history to the concepts to the politics of sound money. She even goes into some depth talking about the implications a possible transition to sound money by issuing long-term gold backed bonds. She gives examples of the Problem of Economic Calculation. She shows what the problems of the EURO are, and how these problems can be corrected,
    MMT proponents will get all their questions answered , even though she never mentions MMT once. I saw this for the first time this morning, and it would have saved me a lot of words if I had known about it before :


    • Synopticist April 15, 2012 at 2:26 pm #

      This Gary guy is like an outbreak of boils in your otherwise commendable and brilliant website.
      I know it’s hard, but ignoring idiots until they go away doesn’t really work on the internet.

    • richgb April 15, 2012 at 7:18 pm #

      Interesting video Gary. I’ve enjoyed the heated idealogical arguments that have appeared on this blog. Even the parts where you’re calling each other “nit wits” provides a perverse form of entertainment. Sorry Golem.

      More seriously though, regardless of the technical details of MMT or “gold standards”, unless the lack of accountability by the big banks or the inability to sentence fraudsters is overcome, it does not matter what system is used. Even the deceptively simple gold standard is open to abuse because it depends critically on how the commodity is priced.

      With JP Morgan having a position on silver that is equivalent to 10 times its annual production, how can you ensure that gold isn’t manipulated in a similar fashion in future?

      • Gary April 15, 2012 at 10:09 pm #


        You make a good point. ALL systems can be corrupted. But there are some systems that start out corrupted , and I would place systems that are inherently inflationary as examples of those, and some systems that are fundamentally sound but are targeted by those who do not wish to have sound money , for reasons of their own greed. I would put a classical gold standard in the latter.

        All we can do IMO is :

        1. start with a sound system
        2. legislate for its protection
        3. educate people to understand and recognise when this system is being targeted , and put the people who are targeting it through the courts.

        Education is the key to vigilence. For the first time in human history , everyone has access to all the facts. That is a great start.

    • MacB April 16, 2012 at 2:30 pm #

      Sorry Gary you must have been viewing that through a hefty confirmation bias filter. I watched the whole thing and if that really does encapsulate your view, then we’re further apart than I previously thought. There are smatterings of truth and insight but the tapestry it is woven into is just plain wrong. In many ways it reminds me of the intellectual contortions of others at the extremes. Constant reference to ‘the founders’ like some sort of olympian ideal and the cherry picking of convenient data. It came across like something from the likes of UKIP.

      My main critique would be this idea that getting government out of things, especially money, would be such a good thing. Though I note that they want to retain government to ‘protect’ property rights. As for going in to detail about a transition to a gold standard and showing what the problems of the Euro are…me thinks thine ears doth deceive thee. There’s no detail there, nothing concrete, just more business as usual, with less regulation and a toe in the water of the beginnings of a gold standard. The main thrust was, as always, about getting the monkey of big government off the peoples back. Only then can these altruistic private interests flourish and all will be well and all manner of things will be well.

      I have some sympathy and appreciation of the views and stances taken by Ron Paul but overall he’s batshit crazy. Though he’s getting a bit too doddery now he could, at least, string an argument together and talk directly. But it’s only really his ideas on foreign policy that have had mass appeal. Once you get him on home turf the appeal starts and stops with his dislike of drug laws and the Fed. Get under the surface of that and the detail is all nasty, squirmy and rotten.

      Hating government waste is not the same thing as hating government, disliking privately created debt bearing money is not the same thing as liking the gold standard. Identifying regulatory capture doesn’t mean destroying the regulatory system is the only fix. Look at all the aspects of government and what they control that you dislike. Then look at where the ideas originated and who funded the lobbying to make them a reality. But you’d have us believe that ‘the markets’ would fix all of this if only they were allowed to be free. They’ve never been free, are not free and never will be free…it’s delusional to think otherwise. Oh I grant you it’s a seductive idea and, on paper, the modelling works really well….but that’s it, there is no survival rate for these models after real world exposure.

      That said the models currently in use aren’t much better, any model that requires that level of tweaking isn’t a model it’s a work in progress. What the likes of Keen argue is that a lot of that tweaking, or failure to model accurately, only exists because certain variables, via a weird zero sum assumption, have been excluded entirely. His idea of a debt jubilee, or money give away, is the most plausible concept of a system reset, working within existing structures, that I’ve come across. Forget all this garbage about whether we can afford to borrow more from the ‘future’ or not, or whether a national debt/deficit level is sustainable. We don’t borrow from the future we borrow in the here and now. Keens idea would be truly removing the ‘monkey from our backs’ and forcing the rentiers into actual creation.

  45. 24K April 15, 2012 at 3:50 pm #

    GARY 2012

    What we need is a poll to finally see who is right. Clear this up for good. Stop this handbags at dawn URL slinging madness. Find out the truth. A no holds barred simple vote.

    A button you can press on the top of the page.

    Then it will all become clear for everybody to see. No more lurking. Cards on the table. We will know where we stand. How to move on as one and we can then be assured that we, together, once and for all will finally know.

    Which why would you vote?

    How many times would you vote?

    Because it’s not clear to me what we are dealing with here. It’s hard to tell, not easy for the layman like myself without such knowledge but if we had a poll we could all find out who is stupid enough to press the button.

    Geek on.

  46. StevieFinn April 15, 2012 at 4:38 pm #

    I’m not sure about any of these economic theories. I am considering the merits of bartering as an option, & perhaps developing a portfolio investing in things like string, batteries, rice etc. Seed potatoes will be my next foray into the investment world, planted in tyres that I found in a field.

    I honestly think that we are in for an almighty bang & I also think that the big economic theories will have to be sidelined in favour of survival. Personally I don’t care what form of capitalism is used as long as it is not the crony version. Breaking up the cosy kissy arse corrupt relationships of too big to fail or jail, lobbying, political donations, fractional reserve banking, speculation in commodities, especially food, would suit me.

    I hope I am proved wrong, but I will stick to my investments, it’s something I am enjoying. It’s good to feel the warmth from the woodburner as it burns the fallen branches that I have collected from the woods, branches that would have rotted anyway, releasing the same gases as is released from burning them. Maybe a longbow next, or in my case a middle sized bow, it would be good feeling to repeat the gesture of sticking two fingers up to the so called elite, if they ever dared venture into what would soon become bandit country.

    I have been down to Jesse’s cafe today, there are some good vids featuring Stiglitz, Hudson & a fella called Michael Greenberger talking about the evils of food speculation.


  47. Gary April 15, 2012 at 5:14 pm #

    StevieFinn and 24K

    We all know that we are living in epochal times. There is no more important debate than the debate on the nature of and the solution to our monetary crisis. It is beyond unbelievable that one side refuses any criticism or any debate. Why are they so afraid of this ?

    In 1345 1/2 the population of Europe was wiped out when society collapsed because of problems of debt and a banking implosion of the Venetian banking empire. The monetary conditions then are almost exactly like we now have. I am not for a minute saying the outcome will be the same, but we ignore the extreme danger now posed, at our peril.

    While I admire and support protests such as Occupy and think they have identified the problems, It concerns me greatly to see what I regard as the completely wrong prescription they are being asked to adopt for the solution. It is critical that whatever we do next is correct. We don’t have any time left to make more mistakes.

    We have to purge the debt and get the control of money out of the hands of both the bankers and the politicians. They cannot be trusted, they both got us into this awful mess. I see them as the same entity, this can be seen both from their actions and their statements.

    We need an alternative solution. I believe that Sound Money is that solution that gets the money out of the bankers and politicians hands and puts us on a stable footing. If people don’t know what I am talking about, maybe because you think I cannot put the point across, then start with the link I posted this morning(I think this is the 3rd different link I have posted since this debate began). MMT posts links all the time, please afford me the opportunity to do the same.

    • 24K April 15, 2012 at 6:49 pm #

      My point was your last point. I hope that came across.

    • Charles Wheeler April 16, 2012 at 5:57 pm #

      You’ve exonerated the Black Death from the wiping out of European populations in the 1340s then?

      • Synopticist April 16, 2012 at 9:53 pm #

        He’s a retarded libertarian, and he saw a link once about the fourteen century crisis.
        So yeah.

  48. Pat Flannery April 15, 2012 at 6:21 pm #

    We in the U.S. were this morning treated to an appearance by Tim Geithner on ABC’s “This Week”. Nothing new but listening to him I was reminded that it is not what these guys say that matters but what they do not say and the questions the media never ask.

    I am sure the question we are all still struggling with is how can “too big to fail” still work. Not only does too big to “fail” work, but too big to “write-down” works. Surely the source of the “too big to fail” banks’ power is more than payoffs to politicians. There seems to be something else, some dark matter at work here.

    I think it is still the Derivatives, that vast overhanging cloud of Credit Default Swaps.

    If so, then the Harvard financial scientists have succeeded. They have successfully tied the hands of all governments worldwide. Nobody dares awaken the Derivative Monster. Like Ireland, we are all forced to pretend it does not exist, that somehow it was our own entire fault. If we dare mark our “investments” to market the Derivative Monster will eat the entire market.

    I am not a proponent of “tear-down and rebuild”, as in a new world order based on MMT. Somehow we have to isolate the Monster created by the Harvard Frankensteins.
    The media is not much help. On ABC Tim Geithner is a mere celebrity between commercials on a lucrative Sunday Morning Talk Show. The heavy lifting is going to have to be done by people like us.

    Somehow we have to slay the CDS Dragon without tearing down our entire civilization.

    • Mike Hall April 15, 2012 at 8:16 pm #

      “I am not a proponent of “tear-down and rebuild”, as in a new world order based on MMT. ”

      Pat, you have it completely arse about face, I’m afraid.

      MMT requires no ‘tear down’ whatever, apart, of course, for the need for a functioning democracy that actually represents the interests of the majority – and without that no reform of any kind is going to happen.

      MMT uses the fiat system as it is, with some minor operational tweaks & adding in the existing ability of sovereign currency issuers (governments) to issue +some+ currency, debt free, in +defined+ circumstances, for public purpose – the maintenance of employment & economic stability in counter cyclical fashion.

      Really it’s piss simple. Most of what the financial sector does beyond required services for the real economy needs to be made illegal. Not rocket science – just that functioning democracy I mentioned earlier.

      MMT simplicity & ease of introduction & clear benefit to the majority of citizens is it’s strength.

      This is why I take issue with all the ‘goldbugs’, ‘barterers’, and all the rest who peddle completely radical substitution of what we have now with something they spent maybe 1/2 reading about on the internet.

      The globally interconnected financial system is complex, leveraged to shit & loaded with trillions in unknown & unknowable counter party risks & potential domino effects.

      Get real (everybody), these ‘pie in the sky’ approaches, however worthy (or not), are just not going to happen. Period. End of mental masturbation.

      MMT +stands a chance+ by it’s simplicity, relative lack of ideological baggage (unless you really hate the unemployed & could care less about the lost wealth production they also represent – like ‘goldbugs’ from my exp.), wide appeal & ease of introduction.

      A Job Guarantee (as MMT specified), cost free, for every unemployed citizen in the eurozone. WTF is not to like? (Unless you are utterly selfish, are paranoid to the point of mental illness about money ‘value’ and/or otherwise one of the top few percent, or a ‘wannabee’.)

      • Gary April 15, 2012 at 8:52 pm #

        Mike Hall

        You really are obnoxiously patronising. The Austrian School were ideas lifted from ideas first mooted in the 1500’s in Spain. Looong before the MMT johnny-cum-latelys or the Keynsians even knew about economics.


        My own interest in them is over ten years ago when I read this paper written in 2001 by an Austrian School economist that prophesized exactly what was going to come to pass in the USA when the credit bubble collapsed(it collapsed in 2007 before the FED threw the kitchen sink at it and resurrected it). Paul Kasriel is no “internet economist” :


        The properties of Gold as money became clear to me when I read this paper in 2001 where it related how Keynes , who studied 200 years of empirical data relating to the gold standard, gave the name “Gibson’s paradox” to the correlation between interest rates and the general price level observed during the period of the classical gold standard. It was, he said, “one of the most completely established empirical facts in the whole field of quantitative economics.”


        And finally this paper where Larry Summers(Ex-U Treasury Secretary) and Barskey wrote in 1988 proving that the price of gold moved in lockstep(inversely) with the Real rate of interest. This has all sorts of implications for gold as inflation-free money


        You MMT chartalists are the New Kids on the Block(G. F. Knapp in 1895). Unlike the Austrian Schools , who have hundreds of years of empirical examples of application, your theories have not even been tested. They are just that : theories.

        You guys are experimenting with our future.

        • Mike Hall April 16, 2012 at 11:30 am #

          Well, again Gary, ignoring the ad homs, you’re coming out with the most rediculous assertions.

          Let’s just take a couple.

          “….gold as inflation free money…”

          The clear implication being that having some quantity of gold ‘convertible’ to a fixed amount of currency, in & of itself prevents the price of any other commodity from moving around (upwards, in the case of inflation) in relation to said money/gold.

          An unbelievably ignorant thing to imply.

          The fact is that any gold standard monetary system requires a whole bunch of ‘add ons’ or operational rules, fiscal & monetary (as does ‘fiat’) to attempt to obtain price/economic stability.

          This is where things get very murky & contentious, +fast+.. For a start, modern economies are highly complex, vast & +very+ fast changing +dynamic+ systems. (In fact, think ‘chaotic’ in the mathematical sense in many aspects.)

          That means that it is completely impossible to predict price outcomes with any degree of useful accuracy any better than with a fiat system.

          Austrian schoolers capitulate to the the same rubbish models that neo classicals use, falsely assuming points of ‘equilibria’ rather the (fundamentally different) behaviour of a ‘dynamic’ system.

          (This is essentially what Steve Keen’s work & ‘Debunking Economics’ is +all+ about. Note the difference between Keen’s predictions of the crisis & Austrians, is that he had a methodology. Austrians don’t, rather make the same ‘predictions’ continuously. In the long run, they’ll get a hit, just like Mystic Meg. Even a stopped clock is right twice a day. )

          Which brings me to the point where you go from unbelievably rediculous to certifiably insane.

          Where you assert that MMT is ‘experimenting’ & state elsewhere that some gold standard system (ignoring also the variety of those all important add on ‘rules’ without which it doesn’t mean sh1t to a goose) has some verifiable & applicable history to be applied simply & directly to the present day.

          In essence this is more of the ‘Crusoe Island’ claptrap false logic.

          You mention some period of ‘1500s’ (16th century) Spain. Their economy & monetary activity was somehow comparable to today? Really? A period where it took weeks for goods and money and even simple letters of communication to move more than a few miles. Months to years for any larger national or international trade transactions.

          Then there’s our newly massively bloated ‘financialised’ economy – those €700 trillion of often rapidly & computer algorithm automatically traded casino bets. All the derivative positions, toxic & complex financial ‘products’ of unknown & unknowable real or market ‘value’. All of it interconnected such that the annual GPD of many countries can change hands across the world, in & out of numerous legal jurisdictions, in a matter of minutes.

          (Do forgive my ignorance, Gary, but I seem to have missed all the 16th century (or even 19th century, or even early 20th century) learned papers that dealt with all that sh1t. You know, CDOs, CDSs & al the rest? Perhaps you could enlighten us as to how the Conquistadors got on with that stuff alongside their ‘gold’ adventures?)

          So, you want to turn all that upside down with a new set of money ‘rules’? With no clue whatever offered as to the ‘how’ it might be done?

          In the teeth of a massive crisis, ongoing & even worsening after 5 years, both in the financialised sector & (more importantly) in the ‘real’ economy suffereing mass unemployment, decimation of public services & social upheaval?

          Of course, judging by your input here, so typical of the peddlers of your religion, you could care less & have zip to offer the suffering ‘real’ economy. All you seem to care about, to the point of obsession, is ‘inflation’ & value of (your?) money.

          Inflation, which not surprisingly in a situation of global stagnation/depression, is not a problem & not likely to be for some years. A fact aknowledged by all except the usual nutjobs who always say inflation is ’round the corner’.

          By contrast, approx 90% of MMT is, is merely an accurate statement of the system of monetary operations & banking AS IT EXISTS RIGHT NOW.

          (How many more times do I have to tell you this? Go read the literature. Virtually no one – even ‘real’ Austrian scholars! – disputes this beyond trivial points of detail.)

          Experimenters? What planet are you on? Look in the mirror.

          • Gary April 16, 2012 at 1:06 pm #

            @The clear implication being that having some quantity of gold ‘convertible’ to a fixed amount of currency, in & of itself prevents the price of any other commodity from moving around (upwards, in the case of inflation) in relation to said money/gold.@

            Of course the price of a commodity can move upward(or downward) wrt gold, but it won’t do that due to the inflation of gold it will do that if the supply/demand of the commodity changes, this is nothing to do with gold. Because you cannot debase/inflate the value of gold.

            @”The fact is that any gold standard monetary system requires a whole bunch of ‘add ons’ or operational rules, fiscal & monetary (as does ‘fiat’) to attempt to obtain price/economic stability…..Where you assert that MMT is ‘experimenting’ & state elsewhere that some gold standard system (ignoring also the variety of those all important add on ‘rules’ without which it doesn’t mean sh1t to a goose) has some verifiable & applicable history to be applied simply & directly to the present day. “@

            No. All that is required is that gold be in a free market. ie left alone from govt meddling. Gold when left alone will be an inflation free currency. Summers and Barskey proved that. Keynes studied 200 years of ACTUAL gold standard data and showed that. This is not theory it is fact.

            @This is where things get very murky & contentious, +fast+.. For a start, modern economies are highly complex, vast & +very+ fast changing +dynamic+ systems. (In fact, think ‘chaotic’ in the mathematical sense in many aspects.)

            That means that it is completely impossible to predict price outcomes with any degree of useful accuracy any better than with a fiat system.@

            Now you are beginning to describe the impossibility of Economic Calculation. It cannot be done, except by the billions people involved in transactions ie. the market. Austrians understand this and leave the market alone. The rest try and “model” the impossible and end up completely confused.

            @Then there’s our newly massively bloated ‘financialised’ economy – those €700 trillion of often rapidly & computer algorithm automatically traded casino bets. All the derivative positions, toxic & complex financial ‘products’ of unknown & unknowable real or market ‘value’. All of it interconnected such that the annual GPD of many countries can change hands across the world, in & out of numerous legal jurisdictions, in a matter of minutes.@

            ALL of this is just fractioning reserves. If you go to Sound Money you get rid of all of this with one sweep. You don’t have to get bogged down in the minutae, it is all gone with sound money.

            @So, you want to turn all that upside down with a new set of money ‘rules’? With no clue whatever offered as to the ‘how’ it might be done?@

            Go back and read what I have written. It is all there. Or, better still spend 45 minutes watching this video, it is also all in here :


            @(Do forgive my ignorance, Gary, but I seem to have missed all the 16th century (or even 19th century, or even early 20th century) learned papers that dealt with all that sh1t. You know, CDOs, CDSs & al the rest? Perhaps you could enlighten us as to how the Conquistadors got on with that stuff alongside their ‘gold’ adventures?)@

            ALL derivatives are multiple future claims made on the underlying done by fractioning of the underlying. The value is derived by using inflated paper promises to make multiple claims of the same underlying. If you deal with the inflation by using Sound Money , you solve all of these problems whether it is done on an abacus or on a supercomputer.

            @Inflation, which not surprisingly in a situation of global stagnation/depression, is not a problem & not likely to be for some years. A fact aknowledged by all except the usual nutjobs who always say inflation is ’round the corner’.@

            And that in a nutshell(pun intended) , is the reason why you guys are unable to understand Sound Money. Until you understand and accept the reality of inflation, you won’t make any progress and will keep making dangerous assumptions. This is what most frightens me about MMT.

            Here is the definition of inflation that we use :

            “Inflation is the debasing of the value of money by increasing the money supply at a greater rate that the economy is growing.”

            Simple demand and supply. Econ 101. Believe me, it is real and it is a cancer.

  49. Pat Flannery April 15, 2012 at 8:50 pm #

    Mike Hall,

    Let’s do a mind experiment.

    You and Enda Kenny (or any other elected leader with power) is alone in a locked room. What are your proposals?

    Are you going to start by telling him that he is not part of a functioning democracy? If so, how are you going to democratically replace him?

    Once you get that sorted out are you going to try to sell him or his replacement on the idea of a Job Guarantee for every unemployed citizen in the Eurozone? What do you think he is going to tell you? Is it practical? Politicians are nothing if they are not practical.

    This mind experiment may make a great video game but it is unlikely to contribute solutions to our present problems.

    Solving any problem requires one to go with what they’ve got. One cannot invent a different set of facts if one doesn’t like the ones they’ve got.

    Our current leaders are part of the facts we’ve got. We must start by influencing them towards the direction we believe they need to go.

    It is like trying to regain control of a stricken aircraft in flight. You can only use the controls you’ve got, not the ones you wish you had.

    This is not personal, which is why I am using a mind experiment. Please don’t take any of this as aimed personally at you. It is not. I know you are striving for answers as we all are.

    • Joe Taylor April 15, 2012 at 9:22 pm #

      Just finished reading Occupy World Street (published March 22) thanks to backwardsevolution’s referral in golem’s previous blog post

      He has some pretty concrete ideas about what we could do.

      Anybody read it and got opinions about his suggestions?

      All the detail in the book – brief video here http://www.occupyworldstreet.org/

      Cheers, Joe

      • Pat Flannery April 16, 2012 at 2:01 am #


        I just read “Occupy World Street”. Thanks for the link.

        Maybe we all manage to find the part that suits us but I found this piece fits well with my current thinking:

        “I believe that the global economy that reemerges after the disintegration of the old economy is complete will be a radically different kind of economy. It will be a highly localized, decentralized economy.”

        I agree. Whether the old economy disentegrates or not we need to be moving towards “a highly localized, decentralized economy”. Small is beautiful. Local economies are the best defense againt the highly centralized powers that control us today.

        We could start by setting up neighborhood LANs. We rely too much on ISPs.

        We could form lots of wired “gated communities”. Fiber optic cable is very inexpensive. Any small housing estate could easily afford to string fiber optic cable from house to house. Anybody familiar with file sharing software like BitTorrent can easily imagine how a powerful local network can be organized without central servers. Everybody on the network is a server. It’s how much of the Internet works today e.g. Skype and Twitter.

        That is just one example of how we can sow the seeds of “highly localized, decentralized economies”. There are things we could be doing right now.


        • Gary April 16, 2012 at 8:14 am #


          You have put your finger on the most important safeguard against tyranny, political or financial, the decentralization of power.

          Lobbyists and megalomaniacs find it much harder to deal with thousands of local leaders than the one stop Westminster shop.

          • Mike Hall April 16, 2012 at 2:19 pm #

            Post in wrong place! See below.

        • Mike Hall April 16, 2012 at 12:37 pm #

          Pat, I know this ‘decentralisation’ things sounds more manageable & ‘human scale’, but looking at the purely economics aspects (as opposed to political), we are so incredibly far from anything workable in a timescale less than many decades.

          Over the last 40 years or so, centralisation of production has grown enormously. It’s partly a profit & control motivated evolution, but also a function of economies of scale combined with the level of technological sophistication of many products.

          I’m not saying it’s been a good thing, rather there’s a balance to be struck somewhere.

          I don’t find the ‘it’s all going to disintegrate anyway’ meme very persuasive either. The elites seem to me ever more capable of keeping the lid on things while dumping more & more people into poverty/wage slavery. Look at Greece, & Spain. Even Egypt – they are right back where they started. The strategy is media domination, sow confusion, divide (& rule), incrementalise – pick off the vulnerable, by stealth, one enslavement or encouraged suicide at a time.

          Even if it does disintegrate, there is not remotely the level of social cohesion that would be needed to structure anything beyond tiny numbers in a small rural setting (which is not where 99% of people live).

          As to be expected our ‘friend’ Gary loves to make simplistic statements, especially ones that offer some superficial resonance with his ideological hatred of anything spelt ‘government’.

          One big problem we get in the political sphere is where citizens & businesses desire a significant level of trade between regions. (Which is always generally the case, often for the very basic reasons of variation in raw material resource availability.)

          The question then arises – what terms of trade? It’s inevitable (as it was even in a pre industrial age) that some key trade enterprises will become vastly larger & more financially powerful than most ‘regions’. So there inevitably comes a point at which regions need to decide, well, what the best ‘scale’ for regions to collaborate to enable ‘civic’ power to balance trans regional commercial power? Without getting shafted by divide & rule, race to the bottom type tactics? Long story short, it all goes down hill from there…

          So, by all means let’s break up the global domination & scale of the multi national corporations (& banks etc.) Then we might be able to manage with less centralised civic/democratic power.

          But Gary seems to be only in favour of the latter not the former. Or if he is in favour of the latter, seems to be determined to remove power from any civic entity capable of actually achieving it in the interests of ordinary (non pot of gold owning?) citizens..

          • Mike Hall April 16, 2012 at 2:22 pm #

            As an addendum to the above, by way of offering some hope for ordinary citizens’ real representation by government, I would like recount some family history passed on to me concerning one of the few occasions when political leaders showed themselves capable of transforming the lives of otherwise powerless citizens.

            The period I refer to is the first post war Labour government of the UK. (Not to imply in any way that the current Labour party bear any resemblance to those of 1945.)

            My ex-partner’s father recounted that brief moment of revolutionary history to me in great detail.

            Like many of his generation, he had been one of the millions of the enlisted ranks conscritpted to fight in armed forces against the axis powers.

            Like many of those who survived & ‘de-mobbed’ in 1945, much time was spent joining together with others in conversations of celebration, relief & rememberance, often over a leisurely couple of pints at the local pub.

            But he also told me that a common & passionately debated theme nearly always came to the fore. This burning question of the moment might be phrased thus:

            “Ok, so by our heroism & struggle (so we’re told) & the deep & painful scarifice of our friends & families (many not able to join is in debate, god rest their souls), we’ve defeated this thing called ‘fascism’. So recalling the almost equal deprivations of our own lives, still in vivid memory from the dreadful depression era just prior to the war, what do we want this ‘country fit fit for heroes’ to be like +now+ ? Surely not one characterised by the deep division & inequality of opportunity & outcome of the different classes?”

            What was meant was the lack of free education beyond age 14 (or younger as families needed children to earn as soon as possible to put food on the table). No health care if you were ill as it was not then affordable to even most working people. No unemployment benefits if there was no work available. Which meant little to eat & often nowhere to live, if it persisted, as it did, in the 1930s.

            My father recalled mealtimes, as a boy, where there was only one small piece of meat & few vegetables for the whole family They went to his father, as he needed his strength to go out & try to find work, any work, for any pittance. My father, his brother & mother, had to sit there & watch their father/husband eat, whilst they had nothing.

            In a remarkable moment in history, up against the charasmatic Tory, Churchill, who had just galvanised the the country & scraped them all to victory in the war, the Labour party campaigned on what must then have seemed an utterly impossible pipedream of radical, revolutionary measures to transform society.

            Recall, Britain had had to borrow massively to pay for the war effort. The debt was huge, prinipally to the US who supplied (almost) everything. (Churchill was privately enraged when the US presented the bill, not just without any ‘friendly’ terms, but with every appearance of some serious price gouging. It would take beyond the new millenium to fully repay at all subsequent US Presidents’ absolute insistence.)

            How could this ‘madness’ proposed by the Labour party be ‘afforded’? On top of the mountain of war debt? The media near universally branded the Labour leaders as clinically insane. The country would be ruined. ‘Austerity’ was needed to repay the debt. (Sound familiar, that one?)

            Yet such was the mood of the citizens that Labour won the election – with a landslide, utterly shocking the complacent establishment. (Note that Edward Bernays’ chums & followers had not had much ‘PR’ industry operating in the UK at this time.)

            Peter (my ex partner’s father) told me that people had had a ‘bellyful’ of the ‘professional’ & ‘officer’ classes’ attitudes during the war, not to mention noting the comfortable lives that these classes had maintained in the face of mass misery & hunger before the war. The close proximity of the classes during military service in the war, had caused many to realise that the middle & upper classes were no better than themselves, except as far arrogant self interest, at which the privileged classes excelled. The ‘Stockholm Syndrome’ (my expression, not Peter’s) was clearly, for a time broken!

            The working classes weren’t such fools as to believe that all the benefits of a welfare state could come instantly or without hard work. But they had faith that the leaders could deliver the needed policies. And there was no going back – at any price – to the 30s poverty & inequality.

            The rest, as they say is history. It was, of course, all ‘affordable’, as government spending created growth & investment in the private sector just as the leaders said it would. Even whilst rationing of food & fuel continued for some years.

            I would likely not have had sufficient education to be writing this if my father’s generation had not put aside for a brief moment the lesser (but still discussed!) trivia of the footy scores, or other such circuses of distraction for the masses (multiplied a 1000 fold today), and seriously talked politics & macro economics down the pubs & cafes of 1945.

            So history shows that real democracy +can+ assert itself over the power of the elites.

            I don’t know what, if any, similar circumstances could galvanise ordinary citizens to demand again & achieve political leadership that actually represents our interests.

            But I hope it comes soon, & I, for one, will be continuing to give less priority to the footy scores, to kicki it into to life as much as I can.

            It’s the least I can do, at least I didn’t have to fight a fucking war.

        • Jim M. April 16, 2012 at 2:46 pm #

          Whether the old economy disentegrates or not we need to be moving towards “a highly localized, decentralized economy”. Small is beautiful. Local economies are the best defense againt the highly centralized powers that control us today.

          That old favourite E.F.Schumacher has much to say on this very point in his easy-to-read style:


          The second link takes us outside the narrow confines of economics, but Schumacher himself regarded it as his most important work, and that’s good enough for me!

          A more current view that may interest you is to be found here, Pat. Kevin Carson seems to be the go-to guy for Modern Mutualism!

          On a local level this all works for me, but how this effectively interfaces with a global economy and vampire squids is, I fear, beyond me.

          And in response to Mike’s piece above, Edward Louis Bloody Bernays has much to answer for, imo!

          • Jim M. April 16, 2012 at 3:11 pm #

            Oops: Here’s the missing link! Mea Culpa again!


            And anyone unfamiliar with the work of Mr Bernays might like to look here:


          • Mike Hall April 16, 2012 at 4:10 pm #

            Linked here before Jim, but Century of Self is a must watch, so well linked again! 🙂

            Well….by some mega must watch filmic coincidence, I ‘ve just watched another film that everyone really must watch. It’s a film about all the cover ups of ‘9/11’ complete with masses of public domain evidence that I’ve not (mostly) seen before. Trust me, I’ve seen many 9/11 films, but this one +is+ special, not just about the event & all we don’t know, but about the people who are really running things in the Military Industrial complex. Do not miss it – it may not be around for long….enjoy (if that’s the right word..)


          • Pat Flannery April 17, 2012 at 12:26 am #

            It is nice that you recognized the phrase. I had the pleasure of hearing Schumacher speak at an Irish Management Institute event in 1973. Looking back now he probably was on a book tour.

            Much of what he said at the time both surprised and thrilled me.
            I was a hard-charging newly-qualified accountant with Tony O’Reilly and his side-kicks Nicholas Leonard, Vincent Ferguson and Martin Raftery as my idols.

            Schumacher was a pioneer in what later became known here in California as “high touch”, a counterbalance to “high tech”. I still believe in the priority of humans in an economy and in building it from the bottom up. Whenever something goes wrong you always go back to the foundation and fix it from there.

          • Pat Flannery April 17, 2012 at 12:29 am #

            Jim M,

            It is nice that you recognized the phrase. I had the pleasure of hearing Schumacher speak at an Irish Management Institute event in 1973. Looking back now he probably was on a book tour.

            Much of what he said at the time both surprised and thrilled me.
            I was a hard-charging newly-qualified accountant with Tony O’Reilly and his side-kicks Nicholas Leonard, Vincent Ferguson and Martin Raftery as my idols.

            Schumacher was a pioneer in what later became known here in California as “high touch”, a counterbalance to “high tech”. I still believe in the priority of humans in an economy and in building it from the bottom up. Whenever something goes wrong you always go back to the foundation and fix it from there.

    • Mike Hall April 16, 2012 at 12:25 am #

      Pat, nothing personal taken at all 🙂

      All the current ‘leaders’ seem to be very much part of the problem, so I don’t think I’d get very far with Enda.

      But there’s another little Orwellian doublespeak trap we all fall for to some extent. The word ‘leaders’. The present reality is that very few are ‘leaders’ of anything. They are merely the PR department’s salespeople du jour who get their electoral candidacy & backing from their ability to best sell what the elites/dominant establishment want. In return, in an overt or unspoken quid-pro-quo they get to join the financial security of the ‘rentier’ top few percent club.

      In all likelyhood, things will have to get a lot worse in Ireland/Europe generally before we get a big enough consensus of not just public outrage, but real determination to change things. One can only hope that there will be some potentially ‘real’ leaders biding there time, waiting to emerge.

      As otherwise insignificant individuals all we can do in the meantime is kick up in whatever fora we have. Debate, discuss, learn share, get active, protest – all of the above.

      Of course, at some point, some sort of consensus will need to emerge. It will need to be simple (how many people are ever going to get stuck into macro economics of different money systems??) & practical. And in my opinion it needs to address the fundamental problem. Which is that our ‘real’ economies have shrunk massively and are continuing to do so. The no 1 priority has to be growth, restoring the real living standards of the majority. Providing opportunities for the current generation of young people facing idleness & despair for the foreseeable future. Start with that & all the other problems get easier.

      To get growth there has to be increased spending from somewhere. The private sector is showing zero inclination to do so. That only leaves one sector left – the government sector. And to do so, it needs to realise that in a fiat money system it can do this without incurring debt. It already has this facility but for various political & vested interest reasons, as yet refuses to aknowledge this fact.

      The Job Guarantee creates the needed spending at the most effective point – the bottom. If the past 30 years have shown us anything it is that the ‘trickle down’ theory – relying on the the rich at the top to spend to creates jobs was complete cr@p, a vicious lie. They variously hoard their money in assets of little productive value (or bid up commodities that increase productive costs) and gamble in an equally unproductive casino. Spending to create growth came only from the ‘little people’ with money from increasing levels of debt they were persuaded to take on, incrementally as their real wages fell, & the rich extracted ever more ‘rent’. It had to crash, & it has.

      Yet the economics establishment will not even talk about growth – as in any actual policies to stimulate it. (I recall a Newsnight interview with some apparatchic economist from the IMF or OECD or some such a few months ago, where Paxman asked the straight question – “What are your organisation’s policies for growth?” The answer was +literally+ “…um…er…um…er…um”. Paxman’s expression was one of utter incredulity ) They barely aknowledge that the current policies have demonstrably worked against growth & then express puzzlement that the debt burdens are getting worse. Quickly moving on to the only narrative that is approved – getting ‘confidence’ back in the financial markets & fixing the oh so wonderful banking sector that has served us so well (not). (And this, note, is the only narrative coming from Austrian school goldbugs etc. too. They +never+ talk about growth or unemployment or the real economy. Why? They could care less so as +their+ wealth pile can retain some guaranteed value. Tho’ a ‘gold standard can only do that without a pile of other conditions they don’t want to tell you about that creates even more instability in the real economy than neo liberalist monetarism.)

      I’m not sure that’s entirely the question you asked Pat (lol), but the present state of economics & politics is rotten. There isn’t any alternative if we keep the present limitations. In terms of recovering the real economy MMT keeps most of the current retail banking +operational+ features (makes it harder for bankers to argue/lobby against) and modifies somewhat those of the government sector. It enables recovery whilst leaving the issue of dealing with the casino sector separate. To be be resolved in due course, in the knowledge that the ‘horse’ has already bolted & won’t be back for some time in any case.

  50. pilibi April 15, 2012 at 8:59 pm #

    Thank you Mike Hall – Ben Chu and Bill Mitchell made things clearer.

    The seeming plausibility of mainstream media comment is difficult to fight. Lots of people in Ireland read The Irish TImes, The Irish Independent etc – like me, they’ve probably never heard of BIll Mitchell or Ben Chu.

    Within the context of this article I would have taken from it that that 20-27% of all debts are due to the banks, the 70-80% are public debts. Then i would conclude, yes, it was in the main, government spending that created the crisis.

    Dan O’ Brien’s piece

    “Claims that bank debt is source of all woes untrue”

    this headline is actually true – bank debt is not the source of all our woes.

    So we had a surplus (3%) running up to the crisis in 2008 and the debt/GDP ratio was manageable at 40% in 2008.

    Lay people , like myself won’t know what’s reasonable and what’s not in terms of GDP – is 40% manageable? What is it today – it appears to be the same as Germany’s 80% going by the graph.

    “That gap has been, and continues to be, the largest of any of the 27 members of the EU. The outsized primary deficit – which excludes interest payments on all public debt, including socialised bank debt – is just as extreme, if not more so. It stood at almost 7 per cent of GDP last year. By comparison, the primary deficits of Greece and Portugal were, respectively, just over and just under 2 per in 2011.’

    Reading the above I would say, Christ! day-to-day spending in Ireland is 3.5 times (if GDP is the same) greater than Greece or Portugal – is this why we’re not seeing pitched battles around Merrion Square yet?

    Thank you again for supplying all those information sources.

    • Mike Hall April 16, 2012 at 2:01 am #

      “Lay people , like myself won’t know what’s reasonable and what’s not in terms of GDP – is 40% manageable? What is it today – it appears to be the same as Germany’s 80% going by the graph.”

      The real answer to this is that the budget should not really be considered a ‘target’ but an ‘outcome’.

      What do we want an economy to do? Surely it’s to provide prosperity? (In real goods & services.)

      What’s the optimum? Surely it’s when the economy is operating at maximum capacity? When as many people as possible are working & making maximal use of our physical resources (in an ecologically sustainable, of course, but still ‘maximal’).

      Economies are +never+ in equilibrium. They are inherently ‘dynamic’ systems – always changing. One major aspect of this is recognised as the ‘natural business cycle’, where activity in production. investment etc. naturally ebbs & flows in +magnitude+.

      The problem this causes is ‘ebbs’ happen very quickly & always cause relatively rapid shedding of workers into idleness. Whereas, getting the productive activity of those workers back is +always+ a slow process, if left to the ‘market’. Private business has to be cautious. The circumstances of downturn in the economy (without significant non ‘market’ ‘stabilisers’) are +always+ self-reinforcing – ‘pro cyclical’. That is, as workers lose jobs, their spending power is lost, which leads to more firms shedding jobs to maintain profits as demand for their products decreases. Private sector firms must make some ‘guess’, or more cautiously wait, to see, as to whether future demand may return, so they can rehire workers to have the goods ready to supply that increased demand. Who’s going to ‘jump’ first & risk increasing costs & their competitive position if, in fact, sales demand does not materialise? The answer is, pretty much, none. It’s always safer for individual firms to wait until there are definite signs of recovery. But, of course, in the aggregate ‘macro’ situation, this creates a chicken & egg situation.

      So, what we always see is that recovering productive capacity, hiring back workers takes very much longer.

      But what if there’s another ‘actor’ in the economy who +can+ spend to kick things off, speed up transition, for the next ‘flow’ phase of the business cycle? One who isn’t constrained by competitive risk?

      Well, there is – the government sector. Gov spending is part of the economy & GDP just the same. It’s spending is just as useful.

      So, back to the original question then.

      The optimal gov debt/deficit (to maximise prosperity, recall) is that which is required to perfectly counter the private sector spending gap during downturns.

      And during the upturns (in reverse direction, & possibly even in ‘surplus’) that amount which prevents +over+ spending by the private sector (trying to buy more ‘real’ goods than existing productive capacity can supply) which will cause inflation (prices getting ‘bid up’).

      MMT shows us that, in fact, governments who are monopoly issuers of sovereign, ‘free floating’ currencies (US, UK, Japan, most except the Euro), do not need to ‘borrow’ from any existing ‘source’ of funds in order to spend. They are +issuers+ of currency & can simply credit, thru’ their wholly owned & mandated central bank, any quantity of funds required, at the stroke of a keyboard, to the private bank thru’ whom the spending is to be transmitted.

      In operational terms, the system that does this is already in place.

      However, even when an essentially political/ideological choice is made to ‘borrow’, debt is normally never repaid, but rolled over, merely paying interest to the lender. Importantly, at an interest rate that the government/central bank controls – always – not the ‘markets’ (except in the Eurozone), because a +currency issuing+ authority can +never+ default (unwillingly).

      There is always +some+ price inflation, & together with growth, +in the long run+, in nominal terms, the ‘borrowing’ can be, & is, allowed to increase in step, without any great problem. Government spending, at any level below that which causes inflation can always (& has always) been accomodated by future growth. (So long as some massive productive capacity destroying event such as world war (on the losing side – Weimar Germany), nuclear bombs, or some such doesn’t happen. Or the banks don’t run a massive ‘vampire squid’ casino on the back of the real economy, ensuring at the same time that it cannot be shut down easily without destroying the entire global economy… ..you know, just the everyday stuff our psychopathic ‘elites’ get up to every once in a while.)

      However, the Eurozone countries, being +users+ of a ‘foreign’ currency are in a different situation. Private ‘markets’ control their interest rate on borrowing. They cannot issue currency (only the ECB can do that), so are at risk of default. So the amount of sustainable debt has limits that do not apply to countries like the US, UK, Japan etc.

      (As an aside, you might wonder why such significant extra costs to Euro countries, due to this fact of higher borrowing costs, are never mentioned when economists compare the ‘competitiveness’ ? Is it perhaps because ‘costs’ where the financial elites are on the receiving end, are not to be discussed?)

      But, of course, the ECB mandate was enacted by the Eurozone governments, ‘elected’ (nominally) by +us+. So, it can be re-mandated, ultimately, by us, and told to operate in our interests, not solely the 1%’s. Told to start typing numbers on a keyboard to pay for the MMT style Job Guarantee program that will restore growth & maximal prosperity 5 times (10 times ? 20 times? Infinity times?) faster than waiting for the only people with money otherwise – the rich *&^holes – to spend on anything that employs people.

      So we can also, from a position of strength, prosperity, & crisis free calm deliberation, debate whether to keep this poxy neo liberal ‘rent’ extraction slavery currency. And if so, work out the radical changes to the ‘rules’ to make it work for the majority citizens’ interests.

      With apologies for the long answer 🙂

      • patma2003 April 16, 2012 at 3:49 am #

        That was a good read.

  51. Patrick Donnelly April 16, 2012 at 6:24 am #


    Taking money is easiest when gullible people are involved. This will be difficult to repeat, so the Kondratieff cycle requires two+ generations to pass and irrational exuberance to exist before the tricksters demonstrate that: no, it is NOT different this time.

    All the talk about who did what and will do to prevent the repeat seems to forget history! You folk are part of the problem!

    The sums to be made, make it worthwhile to ensure that the debts, created out of nothing, are paid to those with capital to buy them. Simple business and 9/11 was a signal to get ready for this!

    John Law was a weapon used against the French. They too have forgotten, in the main, the K cycle.

    The best wars are those where the opponent is not aware that they are fighting ………………………………….. and losing!

    The finance, FIRE, sector will shrink again and hard work will readjust incomes to the degree that the sheep will be ready to be shorn in 70 years or so. O’Brien and the rest are paid to peddle what advertizers want and now, the truth is the last thing anyone wants!

  52. CArratiaM April 16, 2012 at 2:09 pm #

    Thanks a lot Golem for the work you make in unveiling all this financial scam and bringing some clarity and common sense. I’ve been reading your blog for a few months now and I’ve been eager to contribute several times but, being usually too hesitant and slow in writing, I had failed to find the determination.

    But here I come with a question for Gary.

    Quote:` Here is the definition of inflation that we use :

    “Inflation is the debasing of the value of money by increasing the money supply
    at a greater rate that the economy is growing.” ‘


    On a gold standard, wouldn’t that definition imply that there is inflation if the rate of gold extraction exceeds the economy’s growth rate?

    Anyway, what is the rate at which an economy grows? I dont even think there can be an absolute (even in principle) measure for that… whenever I see a measure of GDP it is in dollars, which is arbitrary.


    • Gary April 16, 2012 at 5:02 pm #

      Hello CArratiaM ,

      You have highlighted an important fact of gold.

      The short answer to your question is no.

      Because almost all the gold that has ever been mined is still around. So, new supply of gold that is mined is tiny compared to existing above ground gold, and this has almost no impact on the total supply of gold and hence no impact to the price of gold(for demand being equal). This is exactly one of the reasons why gold is such a good monetary metal, it is demand sensitive not supply sensitive.

      This is a major reason why metals such as platinum are less good monetary metals, because industry consumes almost the entire supply and newly mined supply has a big impact on price.

      The growth of the economy is the year-on-year increase in the total goods and services in the economy. The demand for money will increase when the economy grows.When the supply of money increases(multiplies) faster than the demand for money IOW when money supply increases faster than the growth of the economy, then there is inflation. Gold cannot be inflated, because the supply cannot be increased materially. You can divide the unit of gold down almost infinitely into smaller units, and “grow” the supply of ever smaller sub-units, but the total supply remains materially the same.

      Fiat money is always inflationary, because you print new money upfront, make the loan and not all loans will grow the economy, but the money will remain in circulation.

      • CArratiaM April 16, 2012 at 5:56 pm #

        So what about when there is no more gold to mine? If the economy keeps growing, or they keep increasing the amount of money with interest, shouldn’t the amount of gold reserve grow concomittantly?

        • Gary April 16, 2012 at 7:01 pm #

          If the total gold supply stops growing, no problem. If the economy grows and more money is demanded all the existing gold units/coins/tokens will be more valuable and can be divided into smaller units/coins/tokens. Same total gold supply, more smaller coins. No inflation.

        • Gary April 16, 2012 at 7:31 pm #

          Btw. Bitcoins work just like gold. You cannot counterfeit them and there will only ever be a maximum fixed supply, in this case 21 million bitcoins. But each bitcoin can be divided into 10^8 sub coins(fractions to 8 decimal places), and as demand for money increases , smaller fractions of bitcoins will spontaneously circulate.

          • CArratiaM April 17, 2012 at 3:22 pm #

            I see, thanks for your answers Gary. I guess that that situation would correspond to deflation as given by a definition equivalent to the one you give for inflation.

            It seems to me that any misfit in the growth rate of the gold reserve with respect to the ‘growth rate of the economy’ would lead to either inflation or deflation.

            Would you say that the gold reserve is a better indicator of the size of the economy than a fiat currency?
            Or, would you rather say that you prefer the gold standard because the money supply cant be as easily controlled as a fiat?

            I’ve seen that your main argument is about controlling inflation. We would have deflation then but I guess you’d say that that’s OK and that the rice of the price of gold for using as a commodity is a minor side effect (not that I say the contrary, I don’t have a determined position about the issue)

          • Gary April 17, 2012 at 8:04 pm #


            “It seems to me that any misfit in the growth rate of the gold reserve with respect to the ‘growth rate of the economy’ would lead to either inflation or deflation.”

            Not exactly. The VALUE of the gold pool or any unit of that gold pool reflects if there is growth/contraction in the economy. The value/price of gold in a free market always moves in lockstep with the economy ie. in a non-inflationary and non-deflationary relationship. It has nothing to do with the amount of gold, as this is seen as practically fixed.

            In a free market economy on a gold standard , prices of goods and services will gradually fall, because of innovation and economising(that is what “economics means). This fall of prices is not caused by monetary deflation, it is caused by increasing manufacturing efficiencies and innovations. The total amount of gold will stay the same, no inflation, but the total value of the gold pool and hence the value of each unit , in terms of what it will purchase, will rise. This is why a gold saver will see his gold savings VALUE grow as the economy grows.

            Because the value of gold moves in lock step with the growth/contraction of the economy , it will pay no interest unless it is loaned out. Saved gold’s value will grow and shrink, but not because of interest payments. This is also why that if you want try to make outsized profits on your gold savings you must lend your gold to the most productive projects that you can find. The gold will soon leave the hands of the people who may have been lucky enough to inherit or have mined reserves, and the gold will flow to those who are the most productive. Just as it should be.

  53. Pat Flannery April 16, 2012 at 4:41 pm #

    We are much honored here in San Diego to have the Dalai Lama visit our town this Thursday. As you all know he is the ultimate internationalist and humanist. Unfortunately I won’t get to ask him what he thinks about monetary unions vs. national fiat currencies.

    The question being debated here is: should Ireland and Greece have their own fiat currencies like those of the U.S. and the U.K.?

    As I think understand Mike Hall’s MMT argument, the advantages of a national fiat currency is that it enables governments to spend without incurring debt. The focus of such debtless spending would be a universal job guarantee for all citizens. That would disenfranchise the “rent takers” who inevitably control monetary unions. Therefore the European Monetary Union is bad for both Ireland and Greece.

    This brings me back to the Dalai Lama. He believes in a universal human ethic. He teaches that selfishness is the root of all evil. He is the polar opposite of Ayn Rand and Alan Greenspan.

    Who are we to believe? Should we go back to a sort of financial tribalism or explore the possibilities of bigger and better monetary unions until eventually they all merge into one global monetary union? Would monetary unions be the building blocks of ethical unions? It is a tough question for all of us, including our “leaders”.

    It may be that the already-created overhanging financial dark matter known as “Credit Default Swaps” is a de facto universal global monetary union. The Wall Street and City of London financial engineers may have succeeded in interlacing the world’s economies so securely that the existence of fiat economies, even that of the United States, is an illusion.

    It is becoming clearer that nobody is a able to escape the gravitational pull of this dark financial matter that binds us all together in a sort of Mutual Assured Destruction (MAD).

    Viewed from outside, the U.S. may seem like a super independent state. It is not. Washington with all its military might must take into account the reality of global financial interdependency. CDSs have replaced nuclear weapons as the ultimate MAD deterrent.

    Everybody on the planet is now the counterparty of everybody else in one great Credit Default Swap. There are no lifeboats. Like the Scorpion and the Frog, we are all in this together. I hope the frogs convince the scorpions not to bite.

  54. Charles Wheeler April 16, 2012 at 6:35 pm #

    N.B. Keynes viewed the gold standard as a ‘barbarous relic’. Invoking his name in its defence will have him rolling in his grave.

    • Gary April 16, 2012 at 7:05 pm #

      Keynes knew exactly what gold represented, but when you are trying to rig a govt controlled fiat monetary system you will swear at gold, because gold is the biggest that to your system. Larry Summers was the same.

      • Gary April 16, 2012 at 7:07 pm #

        Make that “biggest threat to your system”
        Can’t edit on a mobile phone.

  55. Pat Flannery April 17, 2012 at 3:47 am #

    How would you like to live in a city with this kind of recession-proof economy

  56. Gary April 17, 2012 at 8:26 am #

    Inflation is a monetary cancer.The Maddoffs of
    this world are only exposed
    when the tide goes out ie. when the inflation drops. Pyramid schemes require inflation to sustain themselves. Inflation is a cancer that leads to mis-
    allocation of investment by masking commodity supply
    and demand pricing, discourages industrial
    innovation and efficiency,encourages ponzi gambling,
    steals from the prudent, rewards the profligate , and
    enriches the owners of the money presses.

    It is a fraudulent policy.

  57. Joe Taylor April 17, 2012 at 10:09 am #

    That post by Mike Hall April 16, 2012 at 2:22 pm is the most inspirational thing I’ve come across in a real long time. Thanks Mike.

    • Phil April 17, 2012 at 1:26 pm #

      Hear hear

    • Pat Flannery April 17, 2012 at 3:18 pm #

      I agree. I think we all understand Mike Hall better now. It takes passion to move mountains. Thanks for the reminder Mike.

    • richgb April 17, 2012 at 8:05 pm #

      Absolutely Joe, it was very impressive.

    • Labled April 18, 2012 at 6:41 pm #

      Agreed. Truly inspirational for us keyboard warriors. 🙂

  58. Phil April 17, 2012 at 1:29 pm #

    I’ve always wondered how libertarians justify the rampant poverty which existed before 1945 and the steps taken to oppose it which were fiercely resisted by the likes of Hayek and Von Mises.

    • Gary April 17, 2012 at 2:45 pm #

      Hayek and Von Mises would have been well pleased with the monetary progress made after 1945 when the effective Bretton Woods Gold Standard was introduced. The system lasted until 1971 at which time America defaulted on the gold standard and proceeded to inflate the now unbacked fiat money supply to the point that has now taken us to the edge of the biggest monetary breakdown in the history of the world.

      • Penny Bloater April 17, 2012 at 9:02 pm #

        ‘Hayek and Von Mises would have been well pleased with the monetary progress made after 1945 when the effective Bretton Woods Gold Standard was introduced’.

        I always thought that the Austrians hated the Bretton Woods system, particularly because it institutionalised Keynesianism and introduced capital controls. Also, the IMF and World Bank were then geared toward encouraging social development and social democracy in countries requiring their economic assistance. Marxist thinker Karl Polanyi who wanted to ‘deconstruct the stark utopia of the unfettered market’ also maintained that the BW system ‘meant the end of self regulating markets’.

        Didn’t they form the Mount Pelerin Society in 1947 for these reasons in opposition to Bretton Woods and the post-war ‘Gold Standard’?

        • Gary April 18, 2012 at 9:53 am #

          There are some Sound money advocates who were upset because they only want a hard money gold standard, physical gold and silver. But many others accept that a system like Bretton Woods was a good practical Gold Standard, if not perfect. Pity that the politicians in the USA wanted to inflate their currency and print money to wage the Vietnam war, so they just absconded and nobody had the power to stop them. They even in effect tore up their own constitution.

          No system can survive the will of a bunch of corrupt politicians. Perhaps it is time to decentralise to neuter them ?

    • CArratiaM April 17, 2012 at 3:45 pm #

      Using Objectivism one can justify any barbarity… see the link in the comment by
      Charles Wheeler April 14, 2012 at 6:22 pm # and my reply to it.

      • Gary April 17, 2012 at 4:38 pm #

        The irony is that the Austrian School, which also gets lumped in with this catch-all label called “objectivism”, believes that it is impossible to objectively rationalize the market with algorithms. They say leave the market alone, it is impossible to model. But instead it is the the “liberal” left who insist on trying to objectively plan everything , without seemingly realising that it is impossible. It may have something to do with the social sciences from whence they mainly spring is essentially a maths free zone, but they are simultaneously enchanted by it and under-equipped to judge its shortcomings. Austrians regard as the ultimate tyranny the arrogance of an elite group of social planners who regard themselves as having greater insight than the rest of us, doing all the planning on behalf of the rest of us, and inevitably failing.

        • Phil April 17, 2012 at 9:28 pm #

          What I’d like to know is what good those good ol’ free markets did for the majority of humanity prior to the 1945 triumph of social democracy. Mike Hall’s post about the condition of the working classes in this country and elsewhere is absolutely true.

          • Gary April 18, 2012 at 10:21 am #

            The “roaring twenties” were named because the monetary inflation was rampant(although prices were relatively stable) , credit was being doled out, and the economic party was in full swing. Very similar to our last decade. In the 1920’s the so-called “gold standard” was a non-gold standard. The govt just issued bonds without restraint. The depression in the 1930’s came as a result of the bust or inevitable contraction of credit, just as Hayek predicted. Social conditions prior to the war may have been bad because The Empire was built on slave labour , including it can be argued , that of some of our own people. What else could a workhouse be ? Indentured slavery is not a feature of free markets. The USA did not have dire social conditions, except in the 1930’s because of the monetary bust. People are free to choose, start a business and move in a free market.

        • CArratiaM April 19, 2012 at 9:05 pm #

          I see what you say Gary but there is some room between leaving the market alone and trying to plan everything…

          Those who defend more the economical modelling are the neoliberals currently in power. For way to long it has been them trying to make the people believe that what they do is hard science (“technical”) and that there is no room to political discussion about the economy.

      • richgb April 17, 2012 at 9:13 pm #


        The first time I came across the term “objectivism” I thought it was one of those arcane subjects confined to conversations amongst tight huddles of philosophers, or useful to remember for difficult crosswords. Then I watched “Century of the Self” and the penny dropped.

        Partly due to that documentary, I threw the TV out months ago and find myself very content in visiting enlightened blogs like this one. Now I make the effort to seek out the “real news” on line and I feel less brainwashed. It’s hard work though, with so many different opinions out there, but the bullshit detector is a muscle and it needs exercising.

        After the fattening comes the feeding frenzy, but these vampires will get a very bad bout of indigestion. A wafer-thin mint Mr Oligarch?

        • Joe Taylor April 18, 2012 at 4:59 pm #

          By ‘effort to seek out the “real news” on line’ I hope you mean this Real News http://therealnews.com/t2/
          It’s the best source of real news I’ve come across so far. Wish to f*** they could get established here.

          • Mike Hall April 18, 2012 at 6:30 pm #


        • CArratiaM April 19, 2012 at 9:31 pm #

          Haven’t seen that one richgb, it’s on my to-watch list now…

          Actually Charles Wheeler’s link was my first encounter with objectivism. Very horrifying I must say, specially after browsing about it and finding so many extreme libertarians who actually buy the whole crap of the objectivist morality… gives me a better understanding of the origin of many wicked argumentations I’ve heard.

  59. Pat Flannery April 17, 2012 at 6:25 pm #


    On centralization vs. decentralization you say: “Even if it does disintegrate, there is not remotely the level of social cohesion that would be needed to structure anything beyond tiny numbers in a small rural setting (which is not where 99% of people live).”

    So the question is: how can the ordinary people living anonymously in the micro world whether in an apartment in Los Angeles or London or on a farm in the North of England or Kentucky, wring control of the macro economy from the political lackeys of Wall Street and the City of London, as the British workers did in 1945.

    An encouraging thought is that the 1945 miracle was performed at the ballot box. We don’t need to tear down the existing political party system; we just need to control it. That is a tall order but 1945 proves that it can be done.

    Somehow we have to find the political choke point. Is it discovering that we do in fact have the social cohesion that existed in Britain after the War? If we don’t we know that it is a necessary precurser.

    We can’t all meet down at the pub like your in-laws did in 1945. Maybe today’s version of the 1945 pub is Golem’s blog. If we can reach a concensus here it might be a good sign.

    • Mike Hall April 17, 2012 at 11:28 pm #


      I think you frame the question well there.

      It seems to me that all the institutions & structures of power, in politics, media & academe have become such narrow monocultures living entirely within the paradigm of the status quo. There are a tiny number of people, exceptions to the rule, but thus far, they’ve gained very little influence. Despite the evidence all around us that so much is deeply flawed & unfit for purpose in humanity’s existentially challenging future (getting nearer).

      And the major political parties are part of the problem, really near everywhere. The last 30/40 years feels like it’s all been an incremental filtering & homogenising process to create a single monolithic ‘approved’ formula. I find it extraordinary, for example, that in the US, public opinion of the two main parties is more polarised than ever, yet the policies of each have probably never been more alike. The media & politicians collude to create some illusion of opposing ideologies, but in the substance of actual policies, nothing much different emerges. It’s the same in Ireland, UK, everywhere. Tweedle dum & tweedle dee, the great illusion of ‘democracy’. The ‘no alternative’ mantra.

      I’m friends with the former (Irish) Labour party mayor of the nearby small town. He’s widely known & respected. Cares about the people of the community. He resigned some months ago in protest at the disgraceful U-turns of the national party after they went into coalition government. I’m sure he’s not the only one. Do the party care? Seemingly not. There’s just been another party annual conference (of stage managed PR) telling us all how well things are going & if they can’t quite spin that, it’s ‘there is no alternative’ to the policies of the previous government that they vehemently opposed before getting elected.

      Problem is all the major parties behave the same way. Despite considerable anger among citizens, it’s hobson’s choice at the moment.

      Some ‘independents’ do get elected, but not many succeed against the organisation, media coverage & funding of a major party’s support. And even fewer on any kind of radical platform.

      My current feeling is, if real change is going to come, there has to be some ‘100th monkey’ moment among the general population. The nature of the ‘idea’ that forces that tipping point, therefore, imo, must have some clear characteristics.

      1. It must be simple, one of the ‘why didn’t I think of that?’ things. And simply communicated.

      2. Practical. Not threaten to turn everything upside down or take a decade to show results.

      3. Address the basic needs & offer clear benefit to the largest majority, whatever illusory advantage they think the status quo might have for them personally.

      4. It must address the ‘real’ economy as it’s no.1 priority.

      5. Open a pathway to break out of the intellectual/ideological straightjacket of the present & preceding decades.

      6. Have theoretical underpinnings that clearly state & recognise the opposing forces in society that will always be present & seek balance. (For example, there are two fundamentally opposing economic interests – the few ‘rentiers’ & the majority interests of ‘labour’. We need both, but a democracy of the majority must always have ‘labour’ as its first priority, or it won’t be democracy.)

      Well, just a few thoughts, but this what I measure my own favoured solutions against.

    • StevieFinn April 17, 2012 at 11:32 pm #


      I think you are right in saying we need to control the political system, otherwise whatever economic system is used it will end up being corrupted. Might also help if somebody with some vision turned up, like Aneurin Bevan for instance, somebody at least who is not willing to sell his/her soul just to get their grubby hands on some power.

      The Irish Greens & Labour party, the UK Lib-dems have all thrown any principles they might have had out of the window in order to keep in power larger parties that become increasingly more unpopular with time. These people once they get their heads stuck in the power trough seem to lose all sense of reality, any damned fool should know that these idiots will end up as pig in the middle, but they can’t see this.

      They just can’t resist the lure of power, some of the statements made by Irish Labour politicians prior to & after gaining power could only lead to the conclusion that they are schizophrenic, or are just not capable of feeling or meaning anything that passes through their brains or their mouths.

      What do we do ? How long have we got ?. When I first got into this stuff I could have more or less instantly ran down the road like Chicken Licken, shouting ” the sky is falling”. I thought that everything would fall apart quickly, which it obviously didn’t. Now after watching the EU crowd & the Fed propping it all up & reading reports today which predict Spain could last a year & the EU 2yr or more, I don’t know where I am.

      The media is a huge part of the problem, how would we overcome that ? Where is the dissenting voice, where are the stand ups? the satire, ” Have I got news for you” seemed to lose any edge a while back, ” Spitting Image” at least took the piss. Why no equivalent of ” That was the week that was ” ? How about a banker sitcom ?

      JW on the Slog recently suggested some sort of online magazine which could serve as a focus & a collection point for news & info that could be made available, but wouldn’t it be just a focus for the already converted & perhaps some new recruits who due to circumstance change had decided to try & find out why bad things had happened to them.

      How then would you get other people’s attention, page 3, Footie pages ?, I have no idea, all I could come up with is some cartoons. Something like, for example: ” Truthdig ” would take a lot of work & would probably require a team effort & good regular contributions, a tough ask for people trying to survive in an ever worsening scenario.

      Any ideas anybody ? I am willing to give a hand, but unless it’s something that gets noticed, it would be pretty pointless. Then circumstances would have to do the job for us, & eventually enough people will have their eyes opened & then we might altogether make a difference, assuming that in the meantime, TPTB havn’t closed down the parts of the internet, that they don’t happen to like.

      • John Souter April 18, 2012 at 10:18 am #

        Stevie – start with two questions.

        What is democracy? And can it work?

        Allow no restrictions to your analysis through either existing systems or positions other than logic based on human nature v nurture – are we governable, capable of the taking responsibility for our governance or require, perhaps prefer, to be governed?

        Then, once you have formed some sort of fluxing conclusion based on your thoughts and experiences join the voices crying in the wilderness, then wonder why it is they who are in the wilderness.

        There are plenty of messiah’s but no magic bullets and no gods; just trial by error. Which is why, if error is the most likely outcome, we desperately need the democratic process to be one of shared responsibility.

  60. Mike Hall April 18, 2012 at 12:35 am #

    Bill Black of MMT’s US home UMKC & former regulator responsible for jailing hundreds of bankers for fraud in the US ‘Savings & Loans’ crisis, is always worth listening to.

    But his hard hitting clarity in this audio & transcript from the MMT weekend in Italy (attended by 2,000 people) is really exceptional – a must listen/read. It’s a superb summary of how the bankers did it & the ‘system’ allowed them to do it.

    “Formula For Fraud: How to become a billionaire.”


  61. Pat Flannery April 18, 2012 at 1:16 am #

    Mike & Stevie,

    Great and sincere thoughts from both of you. I cannot find one word I disagree with.

    As I read your thoughts I feel your helplessness. But maybe, to paraphrase FDR the source of our feeling of helplessness may be only just that – a feeling. Let’s look at what we’ve going for us.

    1. The 1945 pub crowd would kill for the Internet. Here we are talking about all this like we were in a country pub while thousands of miles away from each other. We have a Virtual Pub. And we feel helpless?

    2. Things “go viral” every day on the Internet! All we have to do is craft a simple enough idea and make it “go viral”. And we feel helpless?

    3. We can start with what we all agree upon.

    4. The last few elections on both sides of the Atlantic prove beyond a shadow of doubt that the present party system will always bring just more of the same. The Irish Labor Party for example as you both point out did exactly the same as the Greens did before them; the British Labor Party became more Tory than the Tories themselves; Obama, the apostle of change, did exaclty what he was told by Wall Street.

    5. If the definition of insanity is doing the same thing over and over again and hoping for a different result then we the voters are nearing electoral insanity.

    6. This universal realization may be our starting point. Only the “hackiest” of political hacks would argue that anything will change at the next election or the one after that, anywhere in the Western World. The political parties have used up their credibility vouchers.

    7. We just need to condense the ideas expressed here into a simple message that everybody can understand and get David to make it into a simple YouTube video. That is what David does. It is in his DNA. But first we need to reach a consensus as to what the viral message will be.

    What will we call it when we find it? The Democracy Virus? The Virtual Pub?

    BTW whose round is it?

    • Mike Hall April 18, 2012 at 12:28 pm #

      All great points Pat. Point 5 esp, noted!

      Speaking of Youtube presentations, I came across a really excellent one last night explaining the futility of austerity & fallacy of composition, particularly relating to Europe just now. Quite a professional job with nice graphics. It’s by Mark Blyth.


      Further musing on the (non violent) revolution….

      When I read/hear the kind of presentation by Bill Black (I linked above), I can’t help feeling frustration that it’s something that should be appearing on prime time television – globally.

      But, I wonder, is some of the issue as to why TV execs/producers won’t show such stark realities that there is some deep fear of unknown consequences? Fear of what the justifiably enraged masses might be capable of? (This goes back to the content of Adam Curtis’ Century of Self.) You know, loss of ‘control’, genie out of bottle, no putting it back?

      Personally, I think we’ve reached the point where humanity cannot continue being kept in the dark ‘for our own good’ by a fearful media elite. And as a corollary to the statement I made above regarding the interests of the (inherently) minority ‘rentiers’, by definition not being democracy, I would suggest a system where truth is withheld by the media elite, equally by definition, is not democracy. (Whether from fear driven benign intent or otherwise.)

      But it needs consideration. There needs to be some consensus on at least a methodology of resolution that allows calm to be retained in what could be a very traumatic & emotional period. There is a long history of revolutions that descended (or required) violence, & the only one I can think of that wasn’t completely ruined by power struggles of vested interests was the removal of Apartheid from S Africa. Probably down, in large measure, to the integrity of leaders like Mandela &, equally, if not more important, Desmond Tutu & his policies of reconciliation. So leadership of similar integrity is also probably a vital requirement too. Clearly, that is none of the incumbents, or even any of the major political parties presently in (faux) ‘opposition’. How will they come to the fore?

      Not withstanding all that, is there also a tactic which could be seen as a relatively minor change to the staus quo, but which in reality has revolutionary potential because of its ability to ‘break’ the programming, mass brainwashing, of ‘TINA’? A new stealth ‘genie’ that begins an irreversible period of debate & realisation?

      Well, I know I’m repeating myself & plugging my favoured approach. But surely promoting the idea of an MMT style Job Guarantee, Eurozone wide, funded at no cost with ECB created money is one such possibility?

      It would be massively effective in restoring growth. General price inflation will not be an issue – for the first 2/3 years we’ll just be getting back to the levels of money in circulation, use of available resources & employment we had 5 years ago. But it breaks the artificial, vested interest driven ‘taboo’ of money creation for public purpose. Powerfully effective & powerfully mold breaking in the political economy.

      Lastly, for now…

      @ John Souter above

      Re. ‘democracy’ – I can’t see anything else that has or will ever have legitimacy to optimally offer ‘freedom’ to the majority. Ultimately, democracy +could+ produce results abhorrent to me, but I’ll worry about that when we get it. (We’ve never had anything beyond brief glimpses. And also, true democracy will always appear, broadly, ‘left’ wing (tho’ I hate the ‘false dichotomy’ as much as anyone), as by definition it must operate in the interests of the majority – who will always derive their livelyhood from ‘labour’.)

      • John Souter April 18, 2012 at 2:55 pm #

        Mike – I see no other option either practical or ideological. Nor do I see or contemplate any ‘wing’, or inherent threat in a true practice of democracy; though I would submit ‘commitment’ as the more profound and comprehensive foundation.

        That said – and here I write from my own experience – it is only in the last 25 years that technology and commerce has, generally for mostly the wrong reasons and purpose, given us the tools to be educated on the myths used by the inner temples in our exploitation.

        Before these inner temples could obscure or scoff by contempt their critics. Now they cannot and while the stable door is as yet not quite fully open and the stable as yet hasn’t been torched the horses are sensing the green grasses and wondering why they’re still being fed on dry hay.

        It will and is happening, though I admit to having no clue as to how or when; and expectation is sorely tried by despair as to whether or not as a species we have the right to rule all without being responsible for ourselves.

        The Chomsky’s, Klien’s, Hudson’s, Black’s and Keen’s et al have all let the cat out of the bag that, whether it’s shoved back in or not, far more people know now what it looked like than did before. But please if nothing else think on this – whatever system can be devised by man, man has the wit, if not the wisdom, to distort and exploit it.

        • Mike Hall April 18, 2012 at 7:01 pm #

          Nicely summarised John.

          “But please if nothing else think on this – whatever system can be devised by man, man has the wit, if not the wisdom, to distort and exploit it.”

          Agreed. Society has not taken this seriously enough at any time & particularly the reason why those ‘brief glimpses’ of democracy have, well, been brief.

          When the UK Labour party continued to represent the interests of the most powerful trades unions to the exclusion of others, it sowed the sedds of its demise. (Whilst aknowledging the beneficial transformation from 19th C exploitation that the TU movement achieved.)

          To address this issue I suggest 2 fundamental principles encompassing reform of every vocation that has a significant responaibility in representation of the majority public interest. (Such vocations including politicians, senior public service/advsory roles & news & factual media content providers.)

          1. No-one in such vocations to have any allegiances or memberships to any organisation active in influencing any of the vocational areas. (So no ‘party’, union memberships, business ownership, directorships, ‘consultancies’ etc etc allowed.)

          2. No one in such vocations to be allowed to have or aquire income & wealth beyond some near average position of the majority. (And I suggest that level also be linked by formula to the prevailing minimum wage or unemployment benefit rate.) Applicable for life & to immediate family members also. (Remove the aspiration to wealth from the motivation for public representation vocations.)

          It will never be perfect, of course, but I think application of such principles would create a society so much better that few of us would recognise any similarity with todays neo-feudal M.A.D. nightmare.

          But, really, why not?

          • John Souter April 18, 2012 at 8:00 pm #

            Mike – little reason other than power.

            And uncovering who holds that power we may find is not the governors or governments but those who manipulate and control them.

            In this respect we need perhaps to look no further than the Anglo American club and its association with the City of London and the Crown.

            Have you ever considered why the crises of 2008 was allowed exposure. After all, taking the infinite flexibility of money, why would any amount of default covered by medium to long term asset be a reason to create recession except for those who retained the asset or profited by the increase of usury. Perhaps we are only ducking and diving from the lava and taking our eyes off the volcano?

            All of which, makes the case for democracy even more crucial.

  62. Pat Flannery April 18, 2012 at 6:10 am #

    Just a little suggestion for David’s YouTube tell-all video about we are going to save the world. It worked for San Diego: http://cart.mn/IpDTgm

    • StevieFinn April 19, 2012 at 2:05 pm #

      Enjoyed seeing Mr. Cartman doing his thing, unfortunately the site wouldn’t let me watch the whole episode & It’s a bit too cold for that kind of behaviour up here. I think you are right about the fact that more people are becoming enlightened about the situation. Perhaps that’s why the vampire squid is further mobilising it’s forces, & the priesthood thing makes sense especially as what they are up to is after all a kind of alchemy.

      When I get a minute I am thinking of getting the old pencil out & doing some cartoons, I will have to force myself, I hate drawing, much prefer 3D work, photoshop is much easier but there is a limit to what can be done, due to having to work with photos that are available. I was thinking of trying some pretty extreme shock type things. Could get me arrested though, like the fella in the Republic who painted a realistic but obviously not very flattering nude portrait of Brian Cowen, for which he was soon dragged away by the Garda.

      Will see how it goes, I suppose they could be anonymous. Hopefully as things develop & unfortunately more people become entangled in the squid’s & their allies tentacles, an opportunity for hitting back where it hurts might present it self.

  63. Gary April 18, 2012 at 8:15 am #


    How do we change the political system ?

    If this book is only one tenth correct, neither we nor the politicians have any chance. No chance.

    Empire of the City – Knuth

    How the City holds all the power.


  64. backwardsevolution April 18, 2012 at 5:10 pm #

    “The banks are doing this because they can borrow from the ECB at 1% and then “buy” Spanish 10 year debt at 6%.

    What could possibly go wrong with this, especially when you can count the sovereign debt as all “money good” and thus factor it via a repo and do it again, and again, and again.

    That is, it’s not a 5% profit being sought, it’s a 50% profit — by engaging in 10 “turns” of this crank.

    Let’s illustrate the problem with this “theory.”

    You start with €1 billion in capital. You buy €1 billion in Spanish bonds. On these you expect to earn a 5% profit, because you paid 1% interest but will receive 6%. That is, you will get €50 million in net profit on this transaction.

    But that’s not enough. So you pledge the bonds you own into a repo transaction (say, with the ECB) and use that to borrow another €1 billion, with which you do it again.

    And again.

    And again.

    Soon you have €10 billion in bonds. And you have €500 million in annual interest profits!

    That’s damn good on €1 billion in capital — it’s a return of 50% annually on your “investment.”

    But what happens if you suffer just a 1.5% loss on the capital value of those bonds?

    You got a problem don’t you? You lose €150 million which is 15% of your capital. You say “oh but the interest is still ok” and it initially is, except that the impairment will eventually result in a margin call. Now what happens? More selling shows up. And when the decline in the capital value reaches 10%? Oh gee, there’s a billion euro hole which just happens to equal your capital, and now you’re broke.

    This is the problem facing Europe. The entire system is levered like this and now, in a desperate attempt to keep the game going the banks are “eating their own tails” by buying up sovereign debt with loans from the ECB. This is a desperate attempt to cover the losses on their property lending and yet all it winds up being is a sop to the governments which are deficit spending like mad to “prop up” their consumption.

    This is a mathematical impossibility and everyone knows it, but the market is sticking its fingers in its ears and doing the “la la la la la la” game.

    For now.”


  65. backwardsevolution April 18, 2012 at 6:01 pm #

    “For years, many high-level economists and financial experts have said that – unless we break up the giant banks – our economy will never recover, real reform will be blocked, and democracy and the rule of law will be corrupted.

    So how did the government respond to the financial crisis which started in 2007?

    Let the giant banks get even bigger.

    As Bloomberg notes, the five banks that held assets equal to 43% of the US economy in 2007 before the financial crisis and the bank bailout now control assets that equal 56% of the US economy.”


  66. backwardsevolution April 18, 2012 at 6:08 pm #

    Great 9 minute video entitled, “Speculation and Criminal Manipulation of Food and Commodities Prices”. A partial transcript:

    “MICHAEL GREENBERGER, UNIVERSITY OF MARYLAND SCHOOL OF LAW: But there’s another problem here, and that is some of these participants—and I’m not saying who they are, but I’m sure there are enough there doing this that they are adversely affecting the price—are actually not just swamping the markets with investments, but they’re working with each other to drive the price up. That is a criminal problem. That is called criminal manipulation of the price. And that is why the president of the United States has now twice asked the Justice Department, once in April 2011 and once in March 2012, to please, please investigate these markets to see if there is criminal wrongdoing.

    We had one remedial process fail by Wall Street lobbying, and that is limiting speculation to a reasonable part of the market. And the second part is failing because of prosecutorial laxity, which is going after people who are criminally working with each other to drive the price up. And the quickest way—within a matter of weeks, if there were a serious investigation undertaken, if the FBI was called in, if records were subpoenaed, if market participants were interviewed and the Justice Department at least gave an indication, as they did when they went after the Enron conspirators in the early 2000s, that they were serious about this, just the appearance of a serious investigation would cause the criminal speculators to scatter like cockroaches scatter when lights are turned on.”


  67. Pat Flannery April 18, 2012 at 6:45 pm #

    “How do we change the political system?” – Gary

    “What is democracy? And can it work?” – John Souter

    The old maxim says: if you are going to take the castle you have to kill the king. So, who or what is the king that needs to be killed in our present battle?

    Where do we get our information from? The Main Stream Media (MSM). Like the Pharos of old and rulers ever since, our present masters control us by controlling information.

    Today’s media are analogous to the bishops and priests before the invention of the printing press and before Luther harnessed it. They are a privileged class. Up until a short time ago, instead of peaked hats people like Robin Day wore bow ties on TV. Walter Cronkite was the high priest in America.

    Before the printing press and Luther all Christians had to accept what the priests said was in the Bible. As an Irish Catholic I can say that those of us who have discovered our voice on the Internet are the modern Lutherans. That may get me excommunicated.

    I believe that the citizens of today want access to all information for themselves. They don’t want to take a “reporter’s” word for what is happening any more than the people of the 15th and 16th Centuries wanted to take a priest’s word for what was in the Bible, which according to widespread belief was the very Word of God.

    Smart phones with video are the modern equivalent of the printing press. Now everybody is a reporter. Everybody can be their own priest. What does that remind you of? The Reformation.

    What will this new reformed democracy look like? I believe it will look much as it looks today – without the media (priests) pulling the strings on behalf of their (and our) masters.

    I think it can be done. I think we can have a new Reformation. I think we are well on our way to getting it done. We just have to organize more. And I think we will. There are more of us than there are of them.

  68. backwardsevolution April 18, 2012 at 9:50 pm #

    “News that Mark Carney, governor of Canada’s central bank, has been informally approached to be a candidate to replace Sir Mervyn King at the Bank of England will unsettle those of the old school. Save for Stanley Fischer, a US citizen who has been the Israeli central bank governor for the past seven years, central banks have rarely been run by foreign nationals.

    What is incontestable is that the BoE should cast its net widely, given the momentousness of the choice facing George Osborne when the chancellor decides who should replace Sir Mervyn next year. It is very different from the compact academic hothouse the governor inherited in 2003.”


    *****These Goldman Sachs’ fellows (Mark Carney) surely do get around! In fact, they’re everywhere, puppets performing the work of their masters. If you like Ben Bernanke, then choose Mark Carney. What a joke!

    • John Souter April 19, 2012 at 8:53 am #

      Does Osborne influence the decision -or does he merely announce it?

      • Hawkeye April 19, 2012 at 9:29 am #

        The State-Side GS inflitration of the BoE appears to have begun already :


        Could Mr Cohrs’ recent appointment be in anyway related to the desire to tap up Mr Carney?

        And what prospects for some of the more forthright directors at the BoE (I’m thinking especially of Andy Haldane who has written some pretty explosive pieces in the past)?

        • Gary April 19, 2012 at 11:09 am #

          This is Fascism. And Fascism , by definition, requires govt to facilitate corporations. A GS takeover of the central banks , or worse, cannot happen unless govt allows it to happen. The state of our democracy is such that no matter who you vote for , you will get the same outcome.

          Unless we get the creation money out of the hands of govt and the bankers, we have no chance.

        • StevieFinn April 19, 2012 at 1:36 pm #

          Don’t forget Ben Broadbent who has the ear of Stephanie Flanders & therefore the BBC ministry of propaganda.


          A reminder of the truth, but not as we know it:


          • Gary April 19, 2012 at 2:44 pm #


            From your Flanders BBC link.

            So, we are seeing the likes of ex-GS (and other City/Wall St) types being stuffed into the financial decision making parts of the govts of most of the major western countries. Now we see the drip-drip of trial balloons being floated by the bankers themselves about the dire state of the banks, and how the taxpayers are not so badly off. We see Mervyn King saying that this is the worst way to do banking. etc. That BBC Flanders link being just the latest.

            What if these people are priming the public to accept that control of the banks must be moved into govt ? To appease the people’s wrath against the bankers and give the banks full access to tap the taxpayers by quasi-nationalizing the banks, ostensibly moving them into govt control but actually into the hands of the waiting bankers who are now control the key economic(and other) levers of govt ? The banks problems are intractable, they may believe that full unfettered access to the taxpayers will be their last (vain)hope.

            We hear yesterday from the Head of Matterhorn Asset management that :

            “Banks are supposed to come down to 20 times leverage. There is only one bank of the top twenty-five banks in the world today that is below 20 times leverage. Every other bank is above. 20 times leverage means that if they only lose 5% on their loan book, they have lost their capital.

            I will bet you that virtually every bank in the world has a bad debt position which is worse than 5% of their assets. And if you look at an entity such as Deutsche Bank, do you know what their leverage is? 62 times. It means that if they have a bad debt position of 1.5%, the bank is bust. Deutsche Bank is bigger than German GDP. So, if something happens to Deutsche Bank, Germany goes under.

            Credit Agricole, the largest French bank, has 63 times leverage. This is absolutely frightening. This situation is untenable. Some of these banks will not survive. Of course, central banks are aware of this, governments are aware of this, and they will print money. Will they print in time? Maybe for some banks, but some banks will not survive, I’m sure.

            The two big Swiss banks combined total 7 times Swiss GDP. The banks have a leverage which is unsustainable, and in many cases are bigger than the countries themselves.”

          • Pat Flannery April 19, 2012 at 4:06 pm #

            You are right to put the spotlight on the economic editors. They are the disease carriers.

            In this case Flanders is peddling Broadbent’s lie that it was price pressure that drove borrowing up not borrowing that drove prices up. She is paid to lie.

            The Vietcong used to pick off the American medics first. We must pick off the lying economic editors first.

  69. Gary April 19, 2012 at 9:48 am #

    @Charles Wheeler April 16, 2012 at 5:57 pm #

    You’ve exonerated the Black Death from the wiping out of European populations(From the financial crash) in the 1340s then?@

    Of course the Black Death did it. But when society breaks down, when people cannot pay for any services , then the black death invites itself in. Even in relatively unsophisticated societies that cease to function.. Try going without rubbish collection, fuel or fresh food for a few months.

    • Charles Wheeler April 20, 2012 at 2:13 pm #

      Ah, so all this time I’ve had it arse about face.

  70. Roger April 19, 2012 at 10:40 am #

    James Robinsons new book Fuutrue money available as free PDF download for subcribers to his news letter. Excited at prospect of reading it this evening and will post a review.


  71. Pat Flannery April 19, 2012 at 4:14 pm #

    The Dalai Lama in San Diego:

    “The world belongs to humanity, and each country belongs to its own people – not religious leaders, kings, or queens, or emperors or political parties.”

    Or Political Parties. I like that.

  72. Joe Taylor April 19, 2012 at 4:30 pm #

    Steve Keen’s latest talk, given at the INET (Institute for New Economic Thinking) conference in Germany over this last weekend:

    • Gary April 19, 2012 at 5:33 pm #

      Steve Keen is 100% correct when he says that in this (fiat) system, loans are first made from freshly printed money out of thin air, interest is collected regardless, and THEN reserves are created. Not the other way around, as claimed by the neo-classical economists. Once the new money is out into the economy it goes where nobody can predict and stays out there. Then Keen goes on to say that some of these loans fail and he calls this ponzi financing, and the ponzi is SUSTAINED by constant demand for fresh financing. The money supply keeps growing, asset prices keep growing. So far so good.

      The question becomes : How do you dampen the growth of the ponzi financing ? And this is where the Austrians and Keen(MMT) part ways. Keen says issue jubilee shares that expire after 7 trades or 50 years, AND/OR , have a limit to the size mortgage that one could get relative to the house rental income per annum, AND/OR just dole out freshly govt printed money to the public that they must use to pay down debt.

      The Austrians say you don’t have to tie yourself in impractical knots to MAYBE get the job done, after the monetary horse has bolted and you cannot track it down again, you must prevent ponzi loans from growing in the first place.

      Under Austrian Sound Money eg. gold standard, the lender lends their own gold(ie reserves are already in place) and forgoes access to the gold for the duration of the loan. No new money is created. If the borrower succeeds in his enterprise and the economy grows, at the end of the loan term, he repays the loan with interest/profit and the demand for new money in the growing economy makes each unit of gold more valuable and THEN you can divide the units down into sub-units. You see the sequence of events ? You loan the money out of savings, only if the loan succeeds does the lender get paid principle and interest/profit, the loan grows the economy , THEN new money is demanded by the market in the form of more valuable smaller gold units. No money created upfront out of thin air, No inflation. If the loan fails , what Keen calls a ponzi investment, then the lender loses his loaned money, gets no interest/profit, the borrower’s collateral will have to be liquidated, and other lenders would be extremely reluctant to make him further loans of their gold , given hi strack record and the fact they can only get their loan back and make a profit on the loan if he succeeds , at best, and lose their all loaned money , at worst, if he fails. The fuel for ponzi loans for this borrower dries up. No new money has been created. No Inflation. That is the correct way to deal with ponzi schemes, according to the Austrians.

      This is Sound Money

      • bill40 April 19, 2012 at 9:36 pm #


        I echo Jim below, you stick to your guns if that is what you believe, I believe that history has tayught us that a Gold Standard is anything but sound money. The Gold Standard suggests that there is only so much money which gives an unfair advantage to the moneylenders and capital owners. There is no competion in such a scenario.

        There is nothing wrong with fiat money if its’ advantages were used correctly. The inherent problem in all money systems is that the interest is never created with the loan. Without inflation of money supply it is a mathematicl impossibility to create the interest. Such a system would doom us to permenant deflation locked in forever.

        Sounds great but it doesn’t work.

    • Dave April 19, 2012 at 6:21 pm #

      Joe – 4.30PM – I was going to give that INET link too !

      The others on the same Youtube section include Haldane of the BoE…


  73. Jim M. April 19, 2012 at 5:50 pm #

    First up; props to Gary for sticking around and putting his case.

    Props also to Mike for his earlier post (April 16, 2012 at 2:22 pm). It appears I am not alone in finding it singularly moving.

    Whether one agrees with Gary or not, it must be clear by now that these old arguments are going to be had again & again, and the sooner we all learn to conduct these arguments in a proper manner, the sooner we can hope to reach agreement. The generally-respected Norm noted this discussing another topic that polarises opinion (I/P):

    Academic discourse implies in-depth analysis of issues, even loaded ones, theorizing and making well-based arguments. Reasoned criticism is a first-degree instrument for the advancement of academic knowledge. Ad-hominem offence and the silencing of unpopular views are its antithesis. If one has good arguments, one doesn’t need to resort to such tactics…

    (my emphasis)


    Regardless of one’s position vis-a-vis I/P, Objectivism / Marxism or MMT / Gold Standard I would suggest that the discipline of remaining courteous makes a positive contribution to progress.

    Talking of progress, I have long contended that any resolution of the current crises (Political/Social/Economic) must address the changing demographic with regard to unemployment. I suspect that this is where the paradigm shift must come; as the numbers increase, so does the ridiculousness of regarding them all as feckless or as a feral underclass.

    I believe the relationship between the employed and the unemployed may prove to be the straw that breaks the camel’s back, and the more proper discussion this receives, the sooner we may reach a new beginning.
    I was, therefore, pleased to see this being discussed over at Stumbling & Mumbling by some “proper” economic types! 😉


  74. Gordon Donald April 19, 2012 at 6:32 pm #

    There is a Just Banking event on in Edinburgh this evening (6-7.45pm) and tomorrow (9.30am-5.30pm).
    How can we handle banking crises without burdening the taxpayer, or better still, avoid them altogether?
    How can we increase the bank finance available for the real economy, and decrease the amount pumped into asset price bubbles?
    How can we make high street banks responsive to local needs, including financially excluded groups and small businesses?


    Speakers include:
    Ann Pettifor, Policy Research in Macro Economics, activist and author of “The Coming First World Debt Crisis”
    Tony Greenham, head of Finance and Business at the new economics foundation
    Prof Richard Werner, Director of the Centre for Banking, Finance and Sustainable Development, University of Southampton

    and (tomorrow):
    Ben Dyson, Founder of Positive Money
    Prof Steve Keen, author of “Debunking Economics”

    For a live feed from the venues:

  75. Dave April 19, 2012 at 6:32 pm #

    ” Call me old school, but I thought, when I was a regulator, if the banks I was regulating were engaged in fraud, first, my job was to stop it. Second, my job was to remove the CEO from office. Third, my job was to help prosecute him and put him in prison. And, fourth, my job was to sue him, so that he walked away with not a lira or a euro or a dollar. But all of that is gone. [Applause]”


    That’s William K Black who was lead investigator in the US Savings and Loans Crisis thirty years ago. The transcript is worth a look, many of the big names still ‘operating’ are still around, in high places …

    Steve Keen at INET BERLIN last weekend ,Joe’s link again —


    One paper at the Conference —

    Dirk J Bezemer, University Groningen –‘‘When Credit Helps, and When it Hinders’ ”


  76. Pat Flannery April 19, 2012 at 9:41 pm #

    I think I’ve got it!

    We can make every day polling day. We can organize our citizen information system by polling district. The voter list of our polling area is our charter to freedom.

    We can create voter list VPNs. Each polling district a separate VPN all networked together by city, county, country as high as we want to go.

    This way we can let the politicians know exactly what we think all of the time, not just once every five years. Will they ignore us? Not likely.

    This is a marriage of traditional voting methods with the electronic area. One thing for sure, the politicians and the media will oppose it.

    The days of voting once every five years and suffering the lies of the politicians told to get elected, are over if we orgainze ourselves electronically, village by village, polling station by polling station.

    Is that simple or what?

    • Labled April 20, 2012 at 12:59 pm #

      This is an idea i have been thinking about for some time. I initially wondered if it was possible to put forward independent candidates who would have websites whereby the daily lists of their votes in Parliament were put their site. The candidate would have to put the bill up in full and then the for and against arguments. Each voter in the constituency would have the chance to vote or add comments to the various arguments, and if they wanted, the opportunity to change their vote up until the deadline. The independent candidate would then have to vote on the majority of his electorate. Im glad im not the only one thinking this way.

      I think it is simple.

      If the electorate doesnt want to vote on a particular bill then they dont.

      Whats the downside? Surely this is transparency and democracy at its best, and we are continually educating the electorate rather than them being spoonfed MSM?

      Your thoughts?

      • Pat Flannery April 20, 2012 at 11:46 pm #


        I am sure there are a lot of people out there who are thinking this way.

        I think the secret of getting it up and running would be to organize it based on the polling register. The politicians pay particular attention to registered voters who have a history of voting.

        I have managed a number of campaigns here in California, state, local and national, and we always target what we call the “high propensity voters” who decide each election.

        Every person who has ever got elected to office anywhere in the world learns this and carries it with them throughout their career. If high propensity voters are enabled to have every day two-way communication with the representative they elected, it would change the world of politics.

        In this two-way flow of information the representative would have to share everything with his/her constituents. The Internet makes that possible. There is no excuse not to do this. The current system was devised for the horse-ride era.

        This system would favor independents as political parties would abhor it as would the MSM because like the priests in the Reformation they will lose their power.

        If you are not already familiar with VPN technology I suggest you read up on it. I think it could be easily adapted to this purpose.

        Well, at least there are two of us. I have no doubt there will be more. It’s inevitable.

  77. Mike Hall April 19, 2012 at 10:10 pm #

    A ‘Gold Standard’.

    Why it’s a bad idea & irrelevant to the financial crisis.

    1. Point to note. Fixing a quantity of gold (or similar ‘valuable’ resource) to a quantity of money has few inherent properties in & of itself. It requires a detailed set of ‘add on’ rules applied to monetary & banking operations to even try to attempt what proponents say they want. For any given proposal, these need to be fully stated or discussion is more pointless. Historically, such rule sets have varied. None have been successful in preventing asset price bubbles or financial crises.

    2. All variants have one fundamental approach. To try to control (usually limit) the quantity of money (QoM) in circulation in the ‘real’ economy’. But, inherently, to allow economic growth, the quantity must be allowed to grow. (Note, bank reserves do not necessarily have any relationship to money in circulation.) Such control also depends on the accuracy, consistency & non-fraudulent accounting in systems of all private institutions in banking & the financial sector. That hasn’t been achieved yet for any period in history.

    3. Another basic problem is that either control of the quantity of money can be attempted, or control of the price (interest rate) BUT NOT BOTH. Whatever means to control the QoM is used, the interest rate cannot be controlled & will fluctuate significantly over very short time periods. This creates considerable uncertainty & instability in borrowing costs for the users of the currency, creating havoc in the economy. It was attempted briefly in the 1980s & quickly abandoned for these reasons. However, some pretence was continued that it remained under some control, principally to perpetuate the myth that inflation is always and everywhere concerned with the Quantity of Money.

    4. Were any means of controlling QoM, on the dynamic basis required of a complex micro economy system, the level of central control implied would mean that such control could not happen under something recognisable as ‘democracy’.

    5. No method of money system control. ‘gold standard’ or otherwise, can, of itself, distinguish between borrowing for the purpose of inflating an asset bubble or for productive investment taking place in a growing economy.

    6. No gold standard (or other system of money) can prevent ‘cost push’ inflation driven by scarcity, monopoly control or other manipulation of key commodity resources. In the modern era, this element often makes up the largest part of measured inflation. A situation which, as humanity approaches many limits to sustainable use of resources, absent credible policies for reuse/recycling, is only going to get worse. (A correct, comprehensive, explanation of inflation, distinguishing between ‘cost push’ & ‘demand pull’, never appears in mainstream media.)

    7. In the real economy, that matters to ordinary citizens, a gold standard offers no enhancement potential in adoption of counter cyclical policy to combat recessions & unemployment. In fact, it’s more likely to make such situations worse – see point 3. Probably what Keynes had in mind when he called it a ‘barbarous relic’. (Notably, gold standard proponents rarely if ever express any concern for the suffering of the unemployed or general population under recessions. Rather, one is led to the conclusion that their sole motivation is obsession with the value of +their money+, regardless of any conditions prevailing or caused in the economy.)

    8. In the present situation of a massively bloated & fragile financialised economy, equally fragile real economy, devastated by years of recession & pro cyclical ‘austerity’, any attempt to fundamentally rewrite the basis & rules of the money system is likely to invite catastrophe.

    9. In view of 8. , no-one in banking or the financial sector will countenance such changes. They have zero chance of adoption.

    10. In the light of 9. , given the prevalence, repetition & persistence of advocates in internet blogs & comment for a (when present at all), and in the knowledge that such organised, sometimes paid campaigns of ‘sowing confusion’ are used by those resisting change in other policy areas, one has to wonder if +some+ advocates are not the voices of ordinary concerned citizens that they might want us to believe. Note that whilst concern is expressed on the behaviour of the financial sector, enhanced regulation or governance by democratic authorities is rarely, if ever, proposed as the solution. If ever there was a perfect PR strategy to dilute an effective public response to the financial crisis, following in the stated tactics (on record, at board level) of ‘big tobacco’ (‘…sow confusion…’), the ‘gold standard’ effort is it.

  78. Mike Hall April 20, 2012 at 12:10 am #

    The system that every human on the planet is paying ‘rent’ to. The one that our illusory ‘democracies’ & similarly ‘captured’ mainstream economists & media providers show no interest in addressing more than 4 years after the global crisis where we were forced to bail out there losses.

    Derivatives: The Unregulated Global Casino for Banks


  79. Gary April 20, 2012 at 11:08 am #

    Bill40 and Mike Hall

    As long as you guys don’t understand what I am talking about, I will keep trying to explain.

    First we can all agree that any system can be corrupted. However, fiat systems start out as corrupted because they create monetary inflation. Let us rather start with what is a fair system and try and have the courts protect it.

    Here is a trivial example.

    4 people in an economy, 4 goods in the economy. 4 tokens used as money. each person has one token. Each token can purchase one good/service(total tokens/total goods=1). One person wants a loan for 1 token to start a business that if successful will add 1 good to the total amount of goods.

    In a fiat system :
    Call each token 1 dollar.
    The borrower will go to a bank and they will print 1 more 1 dollar token and lend it. Now, at this point, there are 5 dollars in the system and still only 4 goods(5 dollars/4 goods=1.25 dollars per good). On average 1.25 dollars are now required to purchase each good. Each dollar has depreciated(inflated) by 25%. But the person who borrowed the money now has 2 dollars, while the others each still have one dollar. Those with one dollar saved have seen their savings cut by 1/4 and yet they did nothing except save. They can now only buy 3/4 good with their 1 dollar each.

    So, If the borrower then fails in his project and no new goods are produced, then the money he has spent will not go equally to all people in the economy and those that it does not reach, specifically savers/pensioners, still only have one dollar and their savings have still been cut by 1/4. Those who receive money will be ahead of the game. This is unfair to the savers or those out of the investment loop. This is monetary Inflation.

    If he succeeds in his project then there are now 5 goods in the economy and 5 tokens (5 dollars/5 goods=1 dollar per good) and the saver is OK he can still buy 1 good for his 1 dollar, as before. No monetary inflation.

    In a gold system :
    call each token 1 oz gold coin.

    Label the 4 people in the economy A,B,C,D. Borrower B goes to saver A and borrows 1 oz coin to produce 1 more good in the economy. Saver/lender A hands his coin over to borrower B. At this point , there are still 4 coins and 4 goods, no inflation.

    If Borrower B fails in his new enterprise then A loses his coin/loan , B loses his coin/loan because he spent it to C building his failed venture. C will gain the coin and saver D still has his coin and it still buys 1 good. Still 4 coins , 4 goods(4coins/4goods=1 coin per good). No inflation. A saver/pensioner would be untouched by this he would suffer no debasing of his savings.

    If the venture succeeds, now there are 5 goods and 4 coins in the economy. (4 coins/5 goods=4/5 coins per good), now it only takes 4/5 of a coin to buy 1 good, or IOW 1 coin buys 1.20 goods. The VALUE of each coin has increased by 20%. Saver D has seen his savings increase by 20% just by the economy growing. There is still no monetary inflation, there is a slight monetary deflation. But wait, and this is the trick, the market will now demand that the 4 coins be re-minted(not all at once , but over time) and create 1 new coin and now we have 5 coins of 4/5 oz each. The money “supply” has grown , but the total gold oz are still the same. The slight deflation has vanished , we are back to 1 coin per 1 good, albeit each coin now weighs 4/5 oz. No monetary inflation. This is fair to everyone.

    And for Mike hall this is important – “No gold standard (or other system of money) can prevent ‘cost push’ inflation driven by scarcity” : Cost push inflation is NOT monetary inflation. Prices of goods changing by changes in scarcity or surplus, ie. in the demand/supply of the goods, is desirable because those price changes signal where investment must take place or be withdrawn. If you rig prices by debasing the value of the money then demand/supply prices are suppressed or masked by monetary inflation and investment is impaired.

    The gold system is fair,because there is no monetary inflation, and monetary inflation is the financial cancer. In summary monetary inflation :

    Pyramid schemes require monetary inflation to sustain themselves. Monetary Inflation is a cancer that leads to mis-allocation of investment by masking commodity supply and demand pricing, discourages industrial innovation and efficiency,encourages ponzi gambling,steals from the prudent, rewards the profligate , and enriches the owners, or those close to the owners, of the money presses. The latter especially since they charge interest on EVERY loan whether it succeeds ort fails !

    Fiat money is a fraudulent policy. It starts out fraudulent. It starts out with monetary inflation. Gold has no monetary inflation. Gold is a fair system.

    Finally I would like to once and for all quash this notion that “all the gold ends up concentrated in rich hands”

    ANY money can end up in rich hands(that is the definition of rich!), especially the fraudulent fiat money, where aLL the money has ended up with the least productive middlemen called bankers. At least gold has a chance of going to the most productive enterprises , because gold pays no return/profit ABOVE THAT OF THE RATE OF GROWTH OF THE ECONOMY, UNLESS YOU LOAN IT SUCCESSFULLY !! That means you must loan it to the most productive projects that you can find. As it should be.

    • Mike Hall April 20, 2012 at 12:42 pm #

      “Here is a trivial example.”

      And this is all you offer, unfortunately, ‘trivia’. It’s more ‘Crusoe Island’ stuff, completely meaningless to aggregation in the real, modern world of monetary operations.

      None of what you have written is any way intelligible in the context of the scale & complexity of the modern macro economy & banking & finance.

      Have you read any of the blogs of those expert in these matters? Do you honestly believe what you write would make any sense whatever to them? Really, it’s like someone talking creationism to scientists. Nothing mentioned about macro effects, banking/central banking or credit operations, foreign exchange or trade balances, other financial markets.

      Where I talk about the global food system, you talk about how to make a loaf of bread.

      You have addressed none of the points I made?

      The real issue remains two fold. Getting the crooks out of the driving seat of the financial system (and passing laws to make much of what they do illegal) & getting the system to operate in the interests of the real economy of ordinary citizens which must include a full role for government driven by democratic decisions. Once you understand MMT (how the system actually opertates) neither of these is rocket science.

      • Gary April 20, 2012 at 1:33 pm #

        “None of what you have written is any way intelligible in the context of the scale & complexity of the modern macro economy & banking & finance.+”

        Stop thinking of the status quo !!!! Get it out of your head ! The system is fraudulent. You want to preserve a fraud ? I cannot believe it !

        Start think about abolishing this system. That is how you get the crooks out , you abolish the fraudulent system.

        For God’s sake. I am talking to a brick wall. ! You want fraud ? You like fraud ? This system is fraud ! Why do you want to preserve it ?

        Damn !

    • ahimsa April 20, 2012 at 1:54 pm #

      @ Gary

      Choosing analogies & examples to help explain complex systems is not a simple deal.

      Your example seems unhelpfully trivial. And your math seems awry.

      In your fiat system calculations..

      “On average 1.25 dollars are now required to purchase each good. Each dollar has depreciated(inflated) by 25%.”

      before, 4dollars:4goods, so 1 dollar buys 1 good
      if project fails, 5dollars:4goods, so 1.25dollars : 1 good (potential 25% price inflation)
      which means, 1 dollar : 0.8 goods
      Each dollar has in fact depreciated by 20%

      In your gold system calculations..

      “..now it only takes 4/5 of a coin to buy 1 good, or IOW 1 coin buys 1.20 goods. The VALUE of each coin has increased by 20%.”

      before, 4goldcoins:4goods, so 1 goldcoin buys 1 good
      if project successful, 4goldcoins:5goods, so 0.8goldcoin : 1 good (potentially 20% price deflation)
      which means 1 goldcoin : 1.25 goods
      Each goldcoin has in fact appreciated by 25%

      Why is there no mention of interest?
      In the fiat system, does the borrowers debt not balance the increased money supply?
      Are you suggesting the borrower does not have to repay the bank? Or forfeit something eg. house?
      Do Sound Moneyists demand interest only if projects are successful?
      Where would gold interest come from?
      In transitioning to a gold based system how do you propose to distribute the gold?
      And as there isn’t enough physical gold to go around wouldn’t that necessarily result in gold-backed paper/electonic currency operated by banking-like entities anyway?
      Wouldn’t whose with gold to spare simply become the equivalent of bankers or bank shareholders?
      What sort of oversight would prevent said bankers leveraging their gold á la present fiat system?

      Have you read any of the links to Steve Keen’s (insightful) stuff?

      • Gary April 20, 2012 at 2:11 pm #


        If I have made a maths mistake , I apologise. Please point it out to me.

        I left interest out because it is not required to show the concepts of monetary inflation in a fiat system, if anything it makes fiat worse. Fiat money will be inflated even if not one cent of interest is charged. Interest is one problem but it is not the core problem. Creating new money units out of thin air is the main problem. ie MMT will NOT solve the problem.

        See my example. If you absolutely must see how the interest works I can include that for you.

      • Gary April 20, 2012 at 2:27 pm #

        “5 dollars in the system and still only 4 goods”

        each good costs 5/4 dollars = 1.25 (or 1 1/4)

        “now there are 5 goods and 4 coins”

        each good costs 4/5 coin or 0.8 ie. 1 coins buys 1.20 (or 1 1/5)goods.

        That is correct , No ?

        • ahimsa April 20, 2012 at 3:07 pm #

          “now there are 5 goods and 4 coins”
          each good costs 4/5 coin or 0.8 ie. 1 coins buys 1.20 (or 1 1/5)goods.

          That is correct , No ?

          No! 4coins x 1 1/5goods ≠ 5goods !
          1 coin buys 1.25goods! (1 1/4)

          coins : goods
          4 : 5
          0.8 : 1
          1 : 1.25

          “5 dollars in the system and still only 4 goods”
          each good costs 5/4 dollars = 1.25 (or 1 1/4)

          That is correct.

          dollars : goods
          5 : 4
          1.25 : 1
          1 : 0.8

          1 Dollar buys 20% less goods than before.
          I understand that as dollar has depreciated by 20%. Not 25%.

          • Gary April 20, 2012 at 3:17 pm #


            You are correct. The dollar inflation is 20% not 25%. The coin appreciation is 25% . Thanks.

        • ahimsa April 20, 2012 at 3:23 pm #

          Devil is in the details 😉

          Might be a cue to review the accuracy of some of your other claims?

          • Gary April 20, 2012 at 3:39 pm #

            Oh don’t start…. 🙂 20% inflation instead of 25% ? Your point changed nothing about the principle 🙂 I got an arithmetic lesson , not an economics lesson

          • ahimsa April 20, 2012 at 4:03 pm #

            I hope you are being very ironic in suggesting economics lessons are independent of arithmetics!?

            Arithmetics is the most elementary branch of mathematics. You were convinced that 0.8coin:1good was equivalent to 1coin:1.2goods. Probably because you didn’t give it much thought and assumed it was a simple case of addition and subtraction.

            My other points?
            Do Sound Moneyists demand interest only if projects are successful?
            Where would gold interest come from?
            In transitioning to a gold based system how do you propose to distribute the gold?
            And as there isn’t enough physical gold to go around wouldn’t that necessarily result in gold-backed paper/electonic currency operated by banking-like entities anyway?
            Wouldn’t whose with gold to spare simply become the equivalent of bankers or bank shareholders?
            What sort of oversight would prevent said bankers leveraging their gold á la present fiat system?

          • Gary April 20, 2012 at 4:11 pm #

            Yes , arithmetic mistakes can cause big economics problems. Ask the govt 🙂 This one changed nothing. I do apologise. I will never make another damn arithmetic error 🙂

            My other points?
            Do Sound Moneyists demand interest only if projects are successful?

            yes. Actually that is Muslim banking. They call it profit participation, not interest and it comes at the end if the project is successful. Big project can also be divided into sub projects with sub-targets and sub-payments.

            Where would gold interest come from?

            From other parts of the economy. eg. people buying the new product would spend some of their gold savings.

            In transitioning to a gold based system how do you propose to distribute the gold?

            Start with gold backed long term bonds, let them trade freely in the market with fiat backed bonds and repeal legal tender laws. Open the mint to accept all gold and silver for coining.

            And as there isn’t enough physical gold to go around wouldn’t that necessarily result in gold-backed paper/electonic currency operated by banking-like entities anyway?

            there is always enough gold to go around. it is rationed only by value. each unit can be divided down practically infinitely. Each unit can have unlimited value.

            Wouldn’t whose with gold to spare simply become the equivalent of bankers or bank shareholders?

            No they cannot print new gold money, like the bankers today can with fiat. see my example.

            What sort of oversight would prevent said bankers leveraging their gold á la present fiat system?

            Nothing, except the rule of law and the reluctance of people to deal with those who fraudulently fraction gold reserves with paper chits. Why would anyone willingly accept devaluing paper when there is a choice not to ?

          • ahimsa April 20, 2012 at 4:57 pm #

            Thanks for your answers.

            Though I really don’t think you’ve thought it through, how to actually transition a functioning complex economy from fiat to gold backed.

            Charles Wheeler posts some nice links about gift economies and such from Charles Einstein’s, “Sacred Economies”.

            By the way, gold backed bonds sounds like paper/electronic money to me. I imagine goldmen would leverage it every chance they had.

            I liked the idea that only successful investments would offer a return of interest on the principal.

            P.S. have you actually read any of the Steve Keen stuff others linked for you???

          • Gary April 20, 2012 at 5:08 pm #

            The key is actually the repeal of the legal tenders laws. These laws are the only thing that keeps fiat circulating. Get rid of those and the economy automatically transitions to sound money. People only use debasing money when the govt forces them to, and the govt’s legal tender laws ensure this. Gresham’s Law, a cornerstone law of economics states this. When the govt repeals legal tender laws people dump the debasing fiat paper and move completely to sound money. Nobody in their right mind would want to be paid in paper that lost value over time. If the govt fiat money was so good why do they need a law to force you to use it ?

            I started reading Keen about two years ago. I like much of what he says, but I think he is completely wrong about debt jubilee. We need to shrink the debt down to the level of the economy, not grow the money supply to the level of the debt. The hyperinflation will kill the economy off and kill the currency. Savers and the prudent would be toast. Only the feckless debtors would benefit. How fair is that ?

            I have read and like Bill Black, going back to his Bill Moyers interview in 2009. I like him for going after and prosecuting fraud, I like much of what Michael Hudson says, but they all make the same mistake, and that is they don’t see the inherent monetary inflationary fraud in fiat money. They cannot see how printing fiat money will cause monetary inflation and make things worse, even if it is debt free fiat money.

  80. Charles Wheeler April 20, 2012 at 1:34 pm #

    An insight into the Austrian School, Ubermensch mentality that so enthralls libertarians – and which even many ‘moochers’ (i.e. grasping workers) find inexplicably attractive.

    Ludwig von Mises to Ayn Rand in praise of Atlas Shrugged:
    ‘You have the courage to tell the masses what no politician told them: “You are inferior and all the improvements in your conditions which you simply take for granted you owe to the efforts of men who are better than you.”’
    Jan 23rd 1958 [see: Thomas Frank, Pity the Billionaire, p.147]

    • Gary April 20, 2012 at 2:15 pm #

      Charles you do not understand the quote. What he was saying was that is a socialist system ! In a socialist system “You are inferior and all the improvements in your conditions which you simply take for granted you owe to the efforts of men who are better than you.”’

      In a socialist system not all men are equal , some are chosen as planners(oxymoron) who know how to spend your own money better than you do(oxymoron). ie you are inferior to them. They are better than you.

      • Gary April 20, 2012 at 2:33 pm #

        He was talking about big govt meddling in the economy.

        He qualified it thus : “the
        truth that had to be said in this age of the Welfare State.

  81. Gary April 20, 2012 at 2:01 pm #

    Mike Hall

    “You have addressed none of the points I made?”

    You just don’t think so , because you absolutely cannot get your head around what I write.

    I will try once more, point for point , paint by numbers:

    @1. Point to note. Fixing a quantity of gold (or similar ‘valuable’ resource) to a quantity of money has few inherent properties in & of itself. It requires a detailed set of ‘add on’ rules applied to monetary & banking operations to even try to attempt what proponents say they want.@

    It needs no “add-ons”, it needs “taking-aways”, as in take away the fraudulent system and replace it with an honest , fair gold based system. No “add-ons”

    @2. To try to control (usually limit) the quantity of money (QoM) in circulation in the ‘real’ economy’. But, inherently, to allow economic growth, the quantity must be allowed to grow.@

    Yes, and there is no way on God’s earth that you can control the amount of money in a fiat system and avoid monetary inflation in a fair way. With gold in a free market you DON’T HAVE ANY MONETARY INFLATION ! Nothing, nada, zilch, niks…

    @3. Another basic problem is that either control of the quantity of money can be attempted, or control of the price (interest rate) BUT NOT BOTH. @

    Why on earth would you want to control price ? If you control monetary inflation then prices moves with supply and demand of the goods. This is desirable. Econ 101

    @4. Were any means of controlling QoM, on the dynamic basis required of a complex micro economy system, the level of central control implied would mean that such control could not happen under something recognisable as ‘democracy’.@

    You are hopelessly confused. Get a gold system in a free market and you automatically control the QoM. Stop getting bogged down irrelevent crap that is confusing you !

    @5. No method of money system control. ‘gold standard’ or otherwise, can, of itself, distinguish between borrowing for the purpose of inflating an asset bubble or for productive investment taking place in a growing economy.@

    Nonesense. A gold system can and does. Keynes showed it and Summers and barskey proved. You quite obviously don’t understand a jot of what they wrote.

    @6. No gold standard (or other system of money) can prevent ‘cost push’ inflation driven by scarcity, monopoly control or other manipulation of key commodity resources. @

    I have addressed this. You are confusing “cost-push” inflation with monetary inflation. You don’t understand the difference. Confused again.

    @7. In the real economy, that matters to ordinary citizens, a gold standard offers no enhancement potential in adoption of counter cyclical policy to combat recessions & unemployment.@

    On a gold standard you don’t want govt “counter-cyclical policy”. There is no monetary inflation under a gold standard,there is nothing to correct. Sure banks and businesses will go bust, some sections of the economy will die if they are not productive or no longer demanded eg . horse buggy whip manufacturers, and jobs will be lost. But why would you want to preserve a buggy whip company ? So that it becomes too big to fail ? Rather move on and get people redeployed into new innovative industries.

    @8. In the present situation of a massively bloated & fragile financialised economy, equally fragile real economy, devastated by years of recession & pro cyclical ‘austerity’, any attempt to fundamentally rewrite the basis & rules of the money system is likely to invite catastrophe.@

    I can assure you that if you attempt to preserve this fraudulent system you will end up with a bigger catastrophe. Read some history. Mises said : “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

    You want the “final and total catastrophe of the currency system” ?

    @9. In view of 8. , no-one in banking or the financial sector will countenance such changes. They have zero chance of adoption.@

    So the fraudsters are now running the rules? The crooks are in charge. And you are OK with that ? We have just got to get on and accept that ? You have a dismal outlook on life.

    @10. In the light of 9. , given the prevalence, repetition & persistence of advocates in internet blogs & comment for a (when present at all), and in the knowledge that such organised, sometimes paid campaigns of ‘sowing confusion’ are used by those resisting change in other policy areas, one has to wonder if +some+ advocates are not the voices of ordinary concerned citizens that they might want us to believe. Note that whilst concern is expressed on the behaviour of the financial sector, enhanced regulation or governance by democratic authorities is rarely, if ever, proposed as the solution. If ever there was a perfect PR strategy to dilute an effective public response to the financial crisis, following in the stated tactics (on record, at board level) of ‘big tobacco’ (‘…sow confusion…’), the ‘gold standard’ effort is it.@

    The gold standard is only confusing to you(and some others). Because you cannot get your head around it. The gold standard has come and gone for 6000s years. I can assure you that many people do understand it or it would not have lasted that long and millions would not still be talking about it. . We don’t talk about sea shells or salt money any more, but we still talk of gold and fraudulent fiat money, because we still have honest men and crooks.

  82. Charles Wheeler April 20, 2012 at 2:10 pm #

    ‘There is no such thing as a bank loan’ bombshell: http://youtu.be/wDHSUgA29Ls

  83. Mike Hall April 20, 2012 at 2:12 pm #

    Ok, have I got a treat for everbody 🙂

    Steve Keen & Irish economist Constantin Gurdjiev firing in perfect stereophonic harmony on the the European & Irish (unsustanable) ‘debt’ issue & Euro straightjacket (with the correct MMT style understanding of the monetary system & the framework it offers for solutions)….

    ….on Ireland’s (superb) Vincent Browne’s TV3 show, 2 nights ago


    Also featuring surely-you-can’t-do-this-but -I’ve-not-the-whit-to-know-why-but-will-try-to-look-‘authoritative’-in-my-nice-suit-anyway Dan O’Brien (Irish Times)


    Laura whatever-her-name-is-but-utterly-out-of-her-depth of the Irisn Independent, near hysterically shouting “….but where does money (any money) come from (if not from ‘taxpayers’….(I’m soooo confused….h..e..l..l..l..ppp)

    This is a must watch!

    Golem, if you ever consider putting some ‘special’ links up in a ‘watch this’ section on your front page, please consider this one.

    Keen even quotes Michael Hudson “…debts that can’t be repaid, won’t be repaid…”

    Sublime! This is real progress on something approaching mainstream media (albeit on our tiny island).

    • ahimsa April 20, 2012 at 4:20 pm #

      Enjoyable link.

      I am surprised Richard Douthwaite’s proposal for Deficit Easing didn’t receive more coverage. Steve Keen’s Debt Jubilee is along the same lines.

      • Gary April 20, 2012 at 4:30 pm #

        Debt jubilee compounds the inflation that already exists when new money was originally created for the now non-performing loan. If you print another round of money to clear(monetise) the debt , you run the risk of creating hyperinflation and then you will simultaneously kill the currency and kill the economy. I think you will guarantee hyperinflation.

        • bill40 April 20, 2012 at 10:21 pm #


          You seem obscessed with a non existent bogeyman called hyperinflation. Such an event is highly unusal and even then the money printing is a consequence of previous flawed policy.

          I really don’t understand such a fear of what is not happening.

        • Penny Bloater April 22, 2012 at 8:57 pm #

          ‘Debt jubilee compounds the inflation that already exists when new money was originally created for the now non-performing loan. If you print another round of money to clear(monetise) the debt , you run the risk of creating hyperinflation and then you will simultaneously kill the currency and kill the economy’

          How is this the case? China has been cancelling non-performing state loans made by The China Investment Corporation in the way described since 1980, with no instances of capital flight or hyperinflation. Infact, this economic policy is thought to have have contributed significantly to their exceptionally high GDP growth rates!

      • Mike Hall April 20, 2012 at 7:25 pm #

        Yes, if Richard were still with us, I think he would have very been pleased to see effectively what he proposed getting airtime in a well presented MSM piece.

        • patma2003 April 21, 2012 at 1:21 am #

          Thanks for the link above Mike Hall.

          During that Vincent Browne show, Keen mentioned he received an email before he went on air. This is it.


          I kind of wished he’d not gone into it too much, and more time was used to explain his own theory – I feel he was just about to cause a few brain haemorrhages due to extreme clarity. Great support from Gurdjiev too – like that guy after seeing him a few times with Browne and a very solid interview on RT. Lucky he was there actually.

          • patma2003 April 21, 2012 at 1:54 am #

            Actually, after re-reading that email I can clearly see why Keen said was feasible. Well put together in it’s simplicity.

          • Mike Hall April 21, 2012 at 11:56 am #

            Thanks for the link on this. Sounds interesting doesn’t it?

  84. Charles Wheeler April 20, 2012 at 6:50 pm #

    The positive feedback loop of Objectivism:

    “… the greediest people in the world are the ones controlling all the money, then they bleed the system dry, having neither the foresight nor temperament to evaluate the long term results of their almost compulsive avarice. It isn’t that they are bad people. It is that they have been consistently and heartily rewarded for thinking of the rules as being the disadvantage under which the suckers get played. At every turn, they have been shown by society that the only way you get what you want is by taking it from someone else who was ‘too stupid’ to understand how far you would go to get it from them. They have been informed by the adoration of the common man that their utter lack of even the most basic ethics was admirable and a sign of their clearly superior intelligence.”
    HT CArratiaM

  85. patma2003 April 21, 2012 at 12:49 am #

    Ok, so this thread has swayed me. I have declined to make comment, because of the way this particular thread was unfolding. Really good stuff. So much food for thought.

    I have a lot of time for any capitalist monetary theory that has principles of fairness and proper reward. A gold backed currency I really do not have an issue with and can see it being used effectively.

    I’m not university educated in the field of economics, and that may be a good thing in knowing what has been broadly preached in such institutions in order to allow such a creature to grow.

    So with those eyes, I would make a comment that now is not the time for such a radical shift to a gold standard. It simply does not address the knot that has been tied.

    Keen’s Debt Jubilee does address the problem. Not only addresses, but systematically identifies the step by step of how we got here. It appears to me, that until you can accurately know what the root of problem is, you are powerless.

    The capitalisation of the people idea is so simple. But, then again, if the problem is well understood, is there any surprise that it should be so simple?

    And, the biggest irony is that this idea is something that would sit well with my favourite – wait for it – Libertarian and proud fiat man Bill Still: ‘It does not matter what backs your currency, it is who controls it’s quantity.’ Call me imaginative, but empowering each and every individual via Keen’s Debt Jubilee with an even, fair hand is a very Libertarian principle indeed. No?

    Because, right now, I am at a loss to explain what empowering the banks has done so far.

    Beyond the implementation of Keen’s Jubilee, and the disarming-at-large of bank’s society crushing loans, I don’t really mind which way the global financial world is structured – but, for this time right now, there appears to be one solution head and shoulders above the rest.

    I’m won.

    • Joe Taylor April 21, 2012 at 8:49 am #

      video from the Just Banking conference yesterday http://bit.ly/I8yMgR

      • Mike Hall April 21, 2012 at 3:50 pm #


        Thanks for posting the link. Some very interesting speakers besides those better known to many of us. People I wouldn’t otherwise have found had you not linked it for us 🙂

        The whole stream is around 4hrs long (!) but I really would recomend watching as much as you can, as nearly all of it is aimed at a ‘lay’ audience & well explained & very varied covering a lot of aspects of concern especially to the majority of us ordinary citizens. .

        A particular stand out for me is Professor Werner of Southampton University (UK). Although Werner is now in academe, most of his career has been spent in banking & finance.

        He explains how banking (‘credit creation’) can be, & is still, largely, in places like Germany, structured by regulation to avoid excessive creation of credit for asset price bubbles, as opposed to useful credit for ‘real’ economy activity, producing jobs, goods & services for us all. Although he doesn’t go into much detail (due to speaking time constraints), he also confirms the value of some money entering the economy via state debt-free creation. His piece is about 24 mins long & you can jump to its start at about 2hrs 23min into the stream.

        You can then continue with Ann Petifor & following her Steve Keen & a very good Q&A seesion at the end. All excellent & getting to the heart of the issues of finance & banking in the interests of the general public, rather than the interests of the sector’s executives & fellow wealthy elites.

    • Gordon Donald April 21, 2012 at 1:34 pm #

      I think you will find that “capitalism of the people”, like “responsible capitalism”, is an oxymoron.

      • Mike Hall April 21, 2012 at 5:27 pm #

        ‘Capitalism’ is such an ill defined term in modern usage that it’s very hard to know precisely what you have in mind there?

        If what you mean is any system based on private ownership of capital, then I have to wonder the ‘what’ & most especially the ‘how’, in the present situation, you have in mind as a replacement?

        I’m firmly in the camp that a +radical+ restructure & rebalance is not just a reasonable compromise, but probably the only practical approach we could hope might succeed from where we are now.

        In the Just Banking conference session, linked above, this question of ‘capitalism’ arises in a question put to the last three speakers (Werner, Petifor & Keen from 2hrs 23min).

        Interestingly, Keen offers a quote from Karl Marx where Marx explicitly identifies the extractive layer of ‘financialised capital’ (& power) which works against both the interests of ‘Industrial’ (‘real’ economy productive) Capital & Labour alike. Sound familiar? (It should!)

        From a personal perspective, I will also add this.

        I’ve had a long & very varied career, which in amongst everything else involves some years as a founder member of a workers’ co-operative & later as a co-operativer development adviser funded by a local authority (Bristol & Avon jointly).

        I have also had the pleasure to work for two small business owners directly, in a supporting role. One in fact the owner of 3 businesses where i was the manager of one of them.

        Two things that I learnt over all these years is that:

        1. C-operative structures are tricky to manage in practice, most especially from the reason that different people in them have different needs & expectations from their working life at different periods in their lives. They are not easy options & do not suit everybody, good, enjoyable & rewarding as they can be for some.

        2. I am not a natural ‘entrepreneur’. I proved myself useful as a valuable ‘lieutenant’ to people who were. But realised that they had something extra in drive, ways of thinking & ability. They also worked extremely hard. (Not that I didn’t.)

        So what I’ve concluded is some people have the ability & need to play on a ‘bigger stage’, & with more money at their disposal which they would not have if the financial rewards were also not present to allow them to continue. I am entirely content with relatively low income & wealth (well, doesn’t really qualify as ‘wealth’!) I have. I have what I ‘need’.

        The trick as I see it, is for society as a whole to +broadly+ channel entrepreneurs toward socially useful activities. In many cases, across the ‘SME’ sector, I feel this is often the case.

        As a practical expression of ‘from each according to their abilities, to each according to their needs’ I don’t see many problems that can’t be resolved by removing distortions & getting a better balance between, private, public & commons.

        It goes without saying that the biggest ‘imbalance’ (by say 95% too much) is represented by the size the ‘financialised’ economy has become, mostly over the last two decades. Fixing this, as well as restoring the devastation caused to ordinary citizens must be our priorities. The latter perhaps the more urgent imo.

        Issues, smaller ones, remain in the corporate dominance of the real economy also. But I believe the same ‘tools’ can address both of these problems alike.

        So I do hope you’ll take a look, preferably the 1hr 40min section I’m suggesting, to see what kind of radical direction many* of us here would like to see capitalism take.

        *Except the ‘gold’ obssessive(s) recently so vociferous, which by your comment will not be (rightly) of any interest anyway.

        • Gordon Donald April 21, 2012 at 6:57 pm #

          Thanks. I suspect we probably share a lot of common ground over what are the failings of the current system and the priorities in tackling them. I am slowly catching up with all the discussion at the Just Banking event (unfortunately, although I live in Edinburgh, I was not able to go.). I am very interested in what Steve Keen has to say and have just started to read his book Debunking Economics. I have to say though that while his no-nonsense, iconoclastic approach is stimulating and entertaining, I have some reservations. When I got his book I went straight to the chapter on Marxian economics to see what he had to say and found that he appears to misunderstand or misrepresent much of what he criticises, essentially creating a straw man that is then easy to knock over. It’s a minor quibble but it just makes me wonder if it also applies to his assessment of other schools of thought/theories about which I know even less?
          I suppose what lay behind my facetious comment earlier is my growing conviction that the crises we are experiencing or expecting (financial, political, ecological) cannot simply be put down to a conspiracy of bankers; that there is in fact a direct connection to the ‘laws of motion’ of capital (production for production sake, accumulation for accumulation sake); that the power of Wall Street is directly linked to the stagnation (lack of profitability) in Main Street. I part company with the neo-Keynesians over their belief that, with the right regulations and institutions, capitalism can be saved from itself and deliver a sustainable and (roughly) just system. Simply in terms of our resources, David Harvey has noted that without around 3% growth capital experiences crisis. But how can a finite planet support unlimited compound growth?
          At least here we can discuss these issues and disagree with relative civility.

          • Mike Hall April 21, 2012 at 9:08 pm #


            I’m delighted you’ve come back with a thoughtful reply.

            From your comment, it sounds like there is very little difference regarding the future of humanity we’d both like to see & also much of the political principles that might achieve it.

            In the 2nd half of the Just Banking video I recommended, Ann Petifor raises the issue of ecological sustainability & effectively states my position on this (as a former member of the Irish Greens who felt no choice but to resign on foot of their economics record & ultimately empty rhetoric on social justice).

            That is to say that the policies for a sustainable future must include the wellbeing of everybody, which requires minimum standards of living & an economy that delivers near full employment, full education opportunities etc. Otherwise there’s little ‘buy in’ for many & all the distracting tensions of a highly unequal society, not just in incomes but education, health & all the rest.

            The other point she makes is that the private sector arguably has to take the lowest possible cost approach in energy & material inputs over long term ecological/sustainability concerns – or not survive against competition who do.

            So the answer has to be both public policy in steering the economic environment of the private sector in the right direction, but importantly providing the investment to bring the required transforming technologies to proper scale (at a minimum, but perhaps requiring public ownership in some sectors like energy).

            MMT, to which Ann is broadly aligned in understanding correctly the current fiat money system, recognises the true potential for using debt-free public money issuance for public purpose. The key point is that there is a constraint to how much a (sovereign, fiat currency) government may spend, but it is not a ‘number’, rather the consideration of available labour & material resources to be purchased.

            This is what determines the maximum that can be done at any one time, above which inflation occurs. There is no difference in the inflationary effect of debt increased money supply vs debt-free issue, one way or the other. The nature of how the money is spent is key. Pour it into ‘assets’ like property (land) which cannot keep pace with demand & the prices inflate. Even worse is when money is ‘invested’ in ever increasing prices of existing assets (eg built property, land) for zero productive activity that employs anyone or does anything useful.

            It is especially galling at the moment when there is so much idle capacity, represented by very high unemployment. Deliiberately forgoing the useful job those resources could be doing, if governments (like UK, US, or Eurozone collectively) did not pretend some artificial ‘money’ constraint.

            This is the point Ann makes. Government +can+ do the things we need doing, that the private sector cannot do, because it need not borrow & needs no ‘return’ in money terms. Hence the potential to do everything possible to transform our societies to sustainability, only constrained by having resources ‘in stock’ awaiting hiring /use at the point of purchase.

            MMT prescribes no particulary policies in this area (tho’ proponents often make clear their personal preferences in this direction). Merely explains fully the tools available to democracy to make its choices.

            Anyhow, that’s more than I intended to write. Suffice to say that there is something of huge importance to be discovered in the correct ‘macro’ economics description of the existing monetary system. Especially for those with the kind of politics I venture we share?

            It can take some time & hard thinking to grasp the full significance 9given the mountain of misinformation in the mainstream). i had the advantage of having studied basic economics & (more in depth) accountancy in an MBA program. But Bill Mitchell does a tremendous job of explaining the principles in a prolific blog in the context of current events & historical data.


            (Whilst not overtly part of the MMT project, there is a growing number of non-mainstream economists who are aligned with MMT’s description of the current monetary system & its possibilities. Keen, Werner, Petifor, & many others arguing for real political economy/finance reform, are in this group. More are appearing all the time.)

            Finally, I would recommend the writing of William K. Black, former US regulator credited with jailing hundreds of bank executives in the 80s/90s Savings & Loan scandal. He has no doubt appropriate regulation of the financial sector is possible, once the political/democratic/manstream economics can be ‘de-captured’ from near 3 decades of total domination by the vested interests of wealthy elites. (Beginning with the ‘monetarists’ of the Thatcher/Reagan era & culminating in the current logical, disastrous for the 90%, conclusion of the present day.)

            Black’s home blog is here:


            Two other excellent blogs ‘aggregate’ most of the interesting media content from this general perspective:



            I believe you’ll find these sources interesting, and there are occasionally forays into other areas (from economics) such as the history of philosophy, notably at naked capitalism.

            Best wishes

      • patma2003 April 21, 2012 at 10:40 pm #

        Hi Gordon,

        If that quoted ‘capitalism of the people’ was a reference to the phrase in my post ‘capitalisation of the people’, I would like to comment that I only used that turn of phrase in response to the excessive usage of the catchphrase ‘re-capitalising the banks’ in the MSM. Has been pretty much forced down our collective cakeholes. Not actually in debt myself, have just had enough.

  86. Gary April 21, 2012 at 9:39 am #

    You MMT guys don’t read history. You have no clue about monetary history. Read some history. Steve Keen does not understand monetary inflation.

    There is nothing that gives your game away more than your thinking that “there is no monetary inflation”. It shows you don’t understand money, it shows that you don’t know what you are talking about, it shows that your ideas are dangerous to society.

    “As the first user of fiat currency, China has had an early history of troubles caused by hyperinflation. The Yuan Dynasty printed huge amounts of fiat paper money to fund their wars, and the resulting hyperinflation, coupled with other factors, led to its demise at the hands of a revolution. The Republic of China went through the worst inflation 1948–49. In 1947, the highest denomination was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than a year, the highest denomination was 10,000,000 gold yuan. In the final days of the civil war, the Silver Yuan was briefly introduced at the rate of 500,000,000 Gold Yuan. Meanwhile the highest denomination issued by a regional bank was 6,000,000,000 yuan (issued by Xinjiang Provincial Bank in 1949). After the renminbi was instituted by the new communist government, hyperinflation ceased with a revaluation of 1:10,000 old Renminbi in 1955. The overall impact of inflation was 1 Renminbi = 15,000,000,000,000,000,000 pre-1948 yuan.”


    “Hyperinflation results from a rapid and continuing increase in the supply of money, which occurs when a government prints money or creates credits in bank accounts, instead of collecting taxes to fund government activities. The price increases that result from increased government spending create a vicious circle, requiring ever increasing amounts of money creation to fund government activities. Hence both monetary inflation and price inflation rapidly accelerate. Such rapidly increasing prices cause widespread unwillingness of the local population to hold the local currency as it rapidly loses its real value. Instead they quickly spend any money they receive, which rapidly increases the velocity of money flow which causes further acceleration in prices”

  87. Gary April 21, 2012 at 10:15 am #

    Inflation in One Page
    by Henry Hazlitt

    1. Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this the government’s monetary policies are entirely responsible.

    2. The most frequent reason for printing more money is the existence of an unbalanced budget. Unbalanced budgets are caused by extravagant expenditures which the government is unwilling or unable to pay for by raising corresponding tax revenues. The excessive expenditures are mainly the result of government efforts to redistribute wealth and income—in short, to force the productive to support the unproductive. This erodes the working incentives of both the productive and the unproductive.

    3. The causes of inflation are not, as so often said, “multiple and complex,” but simply the result of printing too much money. There is no such thing as “cost-push” inflation. If, without an increase in the stock of money, wages or other costs are forced up, and producers try to pass these costs along by raising their selling prices, most of them will merely sell fewer goods. The result will be reduced output and loss of jobs. Higher costs can only be passed along in higher selling prices when consumers have more money to pay the higher prices.

    4. Price controls cannot stop or slow down inflation. They always do harm. Price controls simply squeeze or wipe out profit margins, disrupt production, and lead to bottlenecks and shortages. All government price and wage control, or even “monitoring,” is merely an attempt by the politicians to shift the blame for inflation on to producers and sellers instead of their own monetary policies.

    5. Prolonged inflation never “stimulates” the economy. On the contrary, it unbalances, disrupts, and misdirects production and employment. Unemployment is mainly caused by excessive wage rates in some industries, brought about either by extortionate union demands, by minimum-wage laws (which keep teenagers and the unskilled out of jobs), or by prolonged and overgenerous unemployment insurance.

    6. To avoid irreparable damage, the budget must be balanced at the earliest possible moment, and not in some sweet by-and-by. Balance must be brought about by slashing reckless spending, and not by increasing the tax burden that is already undermining incentives and production.

    Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because it depreciates the value of the monetary unit, raises everybody’s cost of living, imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest, wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.

    Steve Keen’s Debt Jubilee would “increase in the volume of money and bank credit in relation to the volume of goods.” to such an extent because the debt is absolutely huge compared to the volume of goods, and printing money to that level would not just result in inflation , but hyperinflation.

    Steve Keen, like MMT, is clueless.

    • Mike Hall April 21, 2012 at 11:53 am #

      All nonsense Gary, you’re getting very tiresome here. All you do is repeat the same nonsense peddling the same one track religion.

      It’s also abundantly clear what your politics are, motivating all this, & it doesn’t have much to do with ordinary peoples interests.

      • Gary April 21, 2012 at 1:02 pm #

        As long as you clueless mmt types threaten society with you money printing non remedies and as long as you show such ignorance of the inflationary consequences, i will continue to point this out. You are a danger to society.

  88. Gary April 21, 2012 at 10:35 am #

    Debt Jubilee : give the feckless, reckless irresponsible borrowers free money to pay off their house/car/holiday or whatever they crazily splurged on credit without any hope of repaying, and in the process wipe out the prudent careful savers and pensioners.

    And these socialists call themselves fair !!! They are crooks and leeches. Animal Farm, some pigs are more equal than other pigs.

    • Charles Wheeler April 21, 2012 at 6:16 pm #

      Is anyone that doesn’t endorse a ‘gold standard’ a socialist?

    • Synopticist April 21, 2012 at 7:33 pm #

      Gary, you really are a contemptible prick. Why don’t you f*ck off and troll elsewhere?

      • Gary April 21, 2012 at 9:32 pm #

        Every time you lose it , and you swear like a drunk fool, i know where mmt comes from and you make my case for me.

  89. MacB April 21, 2012 at 12:17 pm #

    Sorry Gary it is you that is failing to understand and you are lumping national spending in with debt. A simple mental re-ordering from tax to spend to spend to tax should alleviate most of this misunderstanding. As for your ideas on inflation and a debt Jubilee, I really can’t think how else to explain it to you. There are so many analogies and links above that already do an excellent job.

    Unlike you the MMT proponents on here are concerned with the here and now and are fairly flexible in what would/could flow from corrective behaviour. In other words they are identifying the core of the problem and what immediate steps could be taken to alleviate it. Whereas you are starting with your end game and then trying to shoehorn in a methodology to reach it. I would go further and say it is an example of the practical versus the ideological.

    If we look at the whole shebang on a really basic level then there is a single unifying concept – the system is broken or malfunctioning. Everyone accepts that some form of repair, or system reset, is required. Though there are lots of shades in between I would split this into 3 main areas:-

    Status Quo – what we have – reset via tinkering around the edges of a broken system with the main goal being to preserve, or improve, the situation for TPTB. This will happily utilise any and all ideologies as it is, at heart, a plain old fashioned power struggle. Those that have the power want to keep hold of it and grow their share. Right now austerity is the path but that is merely a label of convenience and just another example of using fear as a control mechanism.

    MMT & Alternatives – reset via the most practical method followed by development of a more robust and democratic/fair system. The main difference being that the ideas are conceived on a beneficial weighting basis. Sort of what you’d expect if you removed powerful vested interests from the equation, or what will work best for the greatest number.

    Gold Bugs & Free Marketeers – reset any old way as long as the end goal is sound money and letting the markets do what they do best. This assumes that the end game is the best, accepts almost any level of current pain to reach it and believes that none of the problems could have happened if only we’d all ‘seen the light’ sooner.

    Gary, I keep an open mind about an end game moneywise, if it’s a gold standard I can live with that. What I can’t accept is the nonsense around what we can and can’t do to get to the end game. The whole thing is a make believe system, every part of it is man made, there is nothing natural and there is no time machine allowing borrowing from the future.

    • patma2003 April 21, 2012 at 10:59 pm #

      ‘…I would go further and say it is an example of the practical versus the ideological…’

      In the biggest debt sinkhole ever known, I think your choice of words here is bang on the money.

      ‘…Gary, I keep an open mind about an end game moneywise, if it’s a gold standard I can live with that. What I can’t accept is the nonsense around what we can and can’t do to get to the end game. The whole thing is a make believe system, every part of it is man made, there is nothing natural and there is no time machine allowing borrowing from the future…’

      Fully agree here. I don’t believe this is the time for blind allegiance to an ideology. Flexibility is what is required with anything associated with human error. Anything.

      And what an error.

  90. Alan UK April 21, 2012 at 5:33 pm #

    Regarding debt jubilee, I thought the idea was to write off the debts. If bank A owes 1 million to bank B and bank B owes 1 million to bank C and bank C owes 1 million to bank A then you just cancel the debts? No new money is required and in fact unsound money is extinguished.

    • Mike Hall April 21, 2012 at 9:26 pm #


      Keen’s debt jubilee is for the public. Essentially crediting some equal sum per capita which must be used to pay off debt first. Those with less or no debt (which won’t be many) may add the money to their savings. The money is ‘created’ debt free by the government as monopoly currency issuer. (ECB for the Eurozone.)

      Presumably businesses might also be included?

      The proposal is not +all+ debt, just +some+. Enough to get rid of the ‘bubble’ amount.

      The proposal you mention, which confusingly has the same title, is, as you say, about financial institutions ‘netting out’ all their cross party lending/debts. But there are real complexities involved in this. Keen’s proposal is much simpler.

      • Gary April 21, 2012 at 9:40 pm #

        Just enough PUBLIC handouts to get rid of the bubble?

        Don’t make me laugh ! The bubble is $600 trillion derivative debt and the banks practically hold it all. I can assure you keen’s idea won’t scratch the surface, and if he goes all the way, the currency will be hyperinflated and destroyed.

        These proposals are a joke !

        • Mike Hall April 21, 2012 at 10:02 pm #

          Had you bothered to listen to them, you would know the jubilee refers to non-financial sector debts only, so no derivative positions involved.

          At this stage Gary you are just a Troll here.

          We’ve heard your one track goldbug mantra. Poorly argued, full of misrepresentations, with little grasp of logical argument or even basic arithmetic. It’s obvious you have nothing else whatever to offer

          • Gary April 21, 2012 at 11:06 pm #

            Mike Hall
            “Had you bothered to listen to them, you would know the jubilee refers to non-financial sector debts only, so no derivative positions involved.”

            Precisely , that is what I said. So this Keen solution is a non-solution because the bubble that you say he is going to solve does not touch the derivatives and that IS the bubble. So what is he going to do about that and how is he going to allocate this money to individuals , we don’t each have the same level of debts ? Corporations , what about that debt ?

            It is a hare-brained non-solution.

      • Alan UK April 21, 2012 at 11:12 pm #

        Thanks for the explanation, I was begining to wonder if the many hours I’ve spent reading this blog and following the links had frazzled the old grey matter.

        I watched the clip of Keene on the Browne show. I wish we had more programmes like this over here in UK. I find myself watching Sky News more and more rather than the BBC News.

    • Gary April 22, 2012 at 9:31 am #

      Alan, i think in time you will be proved correct. There is no way to monetize this mountain of debt without destroying the currency , in time they will have only one option and that is default ie. write the debt off.

  91. Charles Wheeler April 21, 2012 at 6:14 pm #

    Interesting review of Johnson/Kwak’s White House Burning from an MMT perspective, and the orthodox ‘progressive’ view which frames a modern fiat currency system in terms pertaining to a gold standard’:

    “Despite their manifest intelligence and good will they have in crucial areas of their book dumbed-down money and the evolution of monetary systems into a narrative that is all-too-familiar and might be called “Goldbugism Lite”.

  92. Phil April 21, 2012 at 10:02 pm #

    I’ve avoided this blog since the Von Mises / Ayn Rand invasion. Sorry David.

    • Synopticist April 22, 2012 at 8:29 pm #


      • Jeff April 23, 2012 at 1:49 pm #

        So where do you suggest instead?

  93. Gary April 21, 2012 at 11:01 pm #

    The best contemporary potted history and nature of sound money, debt free fiat money, and debt based fractional reserve money that you may ever hear. IMO

    A one hour lecture by a world renowned monetary expert Edwin Vieira, on the history of US constitutional money , debt free govt issued Greeback Fiat , the history of the FED , the relation to Britain and the colonies, the historical problems and solutions, the implications and also the solutions that can be used today. :


  94. patma2003 April 21, 2012 at 11:44 pm #

    Straying back to a topic that has come up a few times in the past few threads – the issue of engaging and educating the general public.

    I came across this video a month ago. Perfect length for social media, and it has an eye catching format – engaging the general public by engaging the general public.

    My Oil and Gas – Ireland and Norway

    • John Souter April 22, 2012 at 9:16 am #

      patma 2003 – that’s what you get when democracy is sold out by the governments who are supposed to administer it choose to cash in on apathy to the benefit of their global masters.

      • patma2003 April 23, 2012 at 1:50 am #

        Apathy is a good word for it. Laziness another. Hopeless also fits.

  95. Roger April 22, 2012 at 11:08 am #

    This discussion has become an example of how easy it is to continue with a Divide and conquer approach. Its hard not to descend into cliched metaphor but those who issue the Money effectively hold the hill their job is much easier when squabbling is the order of the day between those who wish to hold the Hill and share the view.
    It seems to me that a lot of those for the status quo fear losing the ground which they feel they have made under the prevailing system any future system for most people begins with a whats in it for me rationalisation. Others take it a few steps further and take positions and then maneuver to gain further advantage by being on the prevailing side maybe even hedgeing both ways.
    What is really left out of so much consideration of the issues is the question of the Commons which is a very ancient concept founded in Roman Law doctrines and before based around Usufruct. In many senses a thorough going re think on the idea of Natural Law and what constitutes real wealth in society is needed. A pure ego free philosophical search for truth more ethics and less rhetoric you might say.
    Its sunday and the old welsh hym Calon Lan provides some deep insights going back down the ages these sentiments eventually come back into our sober and pure sentiments. Capitalism is a dirty business as is politics. Banking well who knows? I used to play a lot of rugby, I don’t think many of the banking crowd today would be trusted with the whip round?

    I don’t ask for a luxurious life,
    the world’s gold or its fine pearls,
    I ask for a happy heart,
    an honest heart, a pure heart.

    A pure heart full of goodness
    Is fairer than the pretty lily,
    None but a pure heart can sing,
    Sing in the day and sing in the night.
    If I wished for worldly wealth,
    It would swiftly go to seed;
    The riches of a virtuous, pure heart
    Will bear eternal profit.
    Evening and morning, my wish
    Rising to heaven on the wing of song
    For God, for the sake of my Saviour,
    To give me a pure heart.
    — English translation

    • Jim M. April 22, 2012 at 3:56 pm #

      Lovely sentiments, Roger.

      I shall call your Welsh hymn, and raise you two Welsh poems. (when I lived in Swansea card-playing in the pub on Sunday lunchtimes was the closest thing to a religious experience we godless ones had!)

      From the truly extraordinary W.H Davies, one well-known and the other one… less!


      WHAT is this life if, full of care,
      We have no time to stand and stare?—
      No time to stand beneath the boughs,
      And stare as long as sheep and cows:
      No time to see, when woods we pass,
      Where squirrels hide their nuts in grass:
      No time to see, in broad daylight,
      Streams full of stars, like skies at night:
      No time to turn at Beauty’s glance,
      And watch her feet, how they can dance:
      No time to wait till her mouth can
      Enrich that smile her eyes began?
      A poor life this if, full of care,
      We have no time to stand and stare.

      Money, O!

      When I had money, money, O!
      I knew no joy till I went poor;
      For many a false man as a friend
      Came knocking all day at my door.
      Then felt I like a child that holds
      A trumpet that he must not blow
      Because a man is dead; I dared
      Not speak to let this false world know.
      Much have I thought of life, and seen
      How poor men’s hearts are ever light;
      And how their wives do hum like bees
      About their work from morn till night.
      So, when I hear these poor ones laugh,
      And see the rich ones coldly frown
      Poor men, think I, need not go up
      So much as rich men should come down.
      When I had money, money, O!
      My many friends proved all untrue;
      But now I have no money, O!
      My friends are real, though very few.


      • StevieFinn April 22, 2012 at 5:25 pm #

        Fairplay Roger & Jim M.

        It’s not good to see G’s blog descend into a slanging match. I know people feel passionately about these things, but personal insults etc, don’t help when tyring to make your case. I would hate to see anyone getting banned as we would lose the very valuable parts of their contributions & I think it would pain G to have to resort to such measures.

        So come on fellas, state your case & let others judge, there is no point in using insults to try & hammer into the equivalent of an impervious rock your own point of view. In my younger days I used to do this, achieving nothing but becoming totally wound up. It’s also not fair on the man who has provided this great place where we can have a voice & the others who post contributions allowing people to judge their validity, rather than trying to force them down others throats.

        Steve Keen & Krugman didn’t use insults, so come on & have a virtual handshake. Our common ground & there is a lot of it, is what really matters.

        Some interesting thoughts from Charles Hugh Smith on resistance measures:


        • Synopticist April 22, 2012 at 8:41 pm #

          Thats all well and good Steve, but you’re not comparing like with like.

          One poster is f*cking retarded, the others aren’t.

          • Golem XIV April 22, 2012 at 9:21 pm #

            And what shall we do with all those hundreds of thousands of people whose opinions we regard as “retarded”?

        • Charles Wheeler April 23, 2012 at 3:25 pm #

          Well, Krugman called Keen a mystic, and Keen labelled Krugman a Ptolemian – it’s just more rarefied form of insult!

    • johnm33 April 23, 2012 at 11:55 am #

      Roger I love those welsh hymns that have nothing of the heavy handed brainwashing quality of so many C-of-E dirges.
      But “Commons which is a very ancient concept founded in Roman Law doctrines” we dont need to go to rome to look for the roots of our common law http://www.english.ox.ac.uk/holinshed/texts.php?text1=1587_0088
      we can look to our own from those histories not yet discarded, a process that seems to have begun after the arrival of “Dutch” “Venetian” or “Byzantine” [depending on your historical perspective] bankers

  96. Gary April 22, 2012 at 11:31 am #


    “This discussion has become an example of how easy it is to continue with a Divide and conquer approach. Its hard not to descend into cliched metaphor but those who issue the Money effectively hold the hill their job is much easier when squabbling is the order of the day between those who wish to hold the Hill and share the view.
    It seems to me that a lot of those for the status quo fear losing the ground which they feel they have made under the prevailing system any future system for most people begins with a whats in it for me rationalisation. Others take it a few steps further and take positions and then maneuver to gain further advantage by being on the prevailing side maybe even hedgeing both ways.
    What is really left out of so much consideration of the issues is the question of the Commons which is a very ancient concept founded in Roman Law doctrines and before based around Usufruct. In many senses a thorough going re think on the idea of Natural Law and what constitutes real wealth in society is needed. A pure ego free philosophical search for truth more ethics and less rhetoric you might say.”

    An eminently sensible summation. IMO.

    Edwin Vieira , in his lecture I link above, opens his talk with exactly that premise , that the control of the source of money enables great power to be controlled. And he ends the lecture saying that therefore to avoid tyranny of monetary control the people must decide on the monetary system , because under the constitution(or any democracy) the people hold the power, and the people operate in the market place.

  97. Joe Taylor April 22, 2012 at 4:33 pm #

    Some good points reasied in this discussion http://bit.ly/Ie5aw9

  98. Gary April 23, 2012 at 10:08 am #

    In a 5 Minute video, Edwin Vieira explains the fraud of money printing(not just bank money printing but ANY money printing including govt money printing) better than I could in 1000 words. MMT please note he also mentions briefly the monetisation of debt , which he calls literally tyrannous :


    • Mike Hall April 23, 2012 at 10:55 am #

      Pure pseudo religious crap.

      The only ‘tyranny’ evident is that of the de facto ‘gold standard’ being applied selectively to Eurozone governments, with deepening crisis & unemployment the result.

      Of course, the plight of the majority of ordinary citizens, or indeed a supportive role for democracy is not what your Ayn Rand inspired, selfish ideology is concerned with.

      • Gary April 23, 2012 at 11:40 am #

        Fact free crap. You have no facts , no knowledge, no clue. You are MMT personified. You are a monetary tyrant who does not acknowledge monetary inflation exists, yet who would inflate the money supply and rob the poor, the prudent and the unborn. You are a threat to society. Your system is unfair, undemocratic, and a fraud. You are a stealth inflationist, a debaser of money , a tyrant. You are a debt monetizer, you want to let the feckless , reckless debtors off scott-free. They could not afford their house, car or holiday and now you want to give it to them. You are an unfair and immoral monetary supremacist. You make Ayn Rand look like a saint. (BTW: I hold no brief to support Ayn Rand. I don’t like her brand of dogma) Some pigs are more equal than other pigs, especially if they own the money printing press, and are drowning in debts. They make the careful savers and the unborn pay for their immorality.

        The only people who could like your ideas are those up to their necks in debts with no hope of redemption. They would like to take money from others to pay for their folly. That is no surprise.

      • johnm33 April 23, 2012 at 12:31 pm #

        I disagree here Mike, the guy says quite clearly that using fractional reserve banking leads to an arrogation of wealth by the ‘bankers’ which I see as the strongest argument in favour of government issued fiat, backed only by the good faith of the people, and 100% reserve banking for the private banks, the second strongest argument being the blatant folly of having to 100% back a currency with a commodity even one with the value-density of gold.
        Inflation is a tool that should not be abandoned lightly, and is also the litmus that warns us of corruption and or stupidity taking hold in politics.

        • Mike Hall April 23, 2012 at 3:28 pm #

          “….using fractional reserve banking leads to an arrogation of wealth by the ‘bankers’…”

          I do not believe this is true, +in & of itself+. (assuming ‘abrogation’ is meant not ‘arrogation’)

          It is how the financial system generally is used & who controls it & how, as a complete structure, that matters most. Most especially in whose interests government policy is controlled also.

          As you have realised, such rigidities as a gold standard would inherently shackle government policy. (And far more than in the private, far more opaque banking/finance sector, which lacks any history of effectiveness.) This is the intention – to apply an ideological straightjacket, confining what voters may choose. It’s advocates are the next 5 or 10 percent down from the ‘big boys’ – the 1%. They are whinging because many of their bandwagon ‘rentier lite’ activities got shafted like the rest of us in the crisis. (Oh such cruel betrayal of the ‘wannabee, thought I was ‘there’ class, because they thought themselves better than the ‘feckless’ majority who actually accept the notion of working for a living.) But they have no interest whatever in what befalls the majority, hence the sole obsession with the value of (their) ‘money’. Democracy failed them just it has us, the majority, but their response is not to try & fix it, rather attempt to insulate their narrow interests from it’s future failures. But in a case of ‘my enemy’s enemy is my friend’ they promote the ideology of the 1% as regards minimising the distribution of fair return to the majority (in a functioning democracy)..

          Fundamentally, what MMT’s correct description of ‘fiat’ shows us. The present confinement is a political choice dressed as economic requirement. But importantly, it shows that the current system, if used to the extent it posseses already, can remove the question of ideology virtually entirely to the political arena. Virtually all answers to the question democracy should be about – what do you, citizens, wnat your government to do? – can be accomodated, ‘big’, ‘small’ or somewhere in between.

          Full reserve banking, if it could be rigidly enforced in a dynamic* system with inherent inter temporal complexities, could introduce considerable, somewhat random, ‘frictions’ into the growth capability of the real economy.

          The funnelling of ever increasing ‘rent’ to ‘rentiers’, & the creation of asset price bubbles, for no productive purpose is the real story throughout history, & it hasn’t mattered much what the ‘nominal’ basis of the money system has been.

          Our only hope lies in the achievement of a functioning democracy that actually represents the interests of the majority. One that has the ability to effectively regulate the behaviour of the financial sector & remain vigilant.

          It’s possible full reserve banking +might+ enhance that ability, but it’s not a guarantee.

          As I’ve said here before, if the ‘positivemoney.org’ combination of full reserve & (MMT aligned) ‘functional finance’ became the offer on the table, I’d vote for it. But it does require a lot more changes in the banking sector than MMT alone would require. Which, to me, makes it a more difficult choice to campaign for. I’m not convinced it’s full reserve position offers enough clear advantages +in practice+.. However, it’s introduction in future, if desired, would be far easier stepping from an MMT system, than all in one go.

          PS Viera’s example of ‘inflation’ arising in the ‘cement’ market is pure crap.

          He says that, purely based on the cement suppliers’ universal & perfect knowledge that the money supply +in circulation+ has increased (but as ever, the velocity of circulation is always magically constant), the cement suppliers’ are able to increase prices, also universally & make that stick. (Causing price inflation.)

          This has to assume the suppliers of the entire cement market act as one in perfect time synchronised unison in applying the identical price rise. And that no demand response occurs either.

          Stupid doesn’t begin to describe this. Yet ‘Gary’ thinks we should be listening to this ‘Harvard’ ideologue.

          You’ll get more sense tossing neo-classical textbooks & some gold/money obsessed diatribes up in the air & randomly putting together a sentence from each. This has been the tenor of ‘Gary’s’ rubbish here throughout.

          • Pat April 23, 2012 at 7:43 pm #

            Surely ‘arrogation’ is meant – i.e. taking or claiming for oneself without justification (etymologically, this is what arrogant people do).

  99. Patricia April 23, 2012 at 10:59 am #

    While i have enjoyed reading the comments – although i must admit i haven’t read the whole 296 – I must say I prefer Mike’s ideas of what a country can do for its people. But economics is politics and politics is economics. To say otherwise is an illusion. To have an independent Reserve Bank as we do in New Zealand and i understand in England too, is an affront to democracy. With such a situation the people have no ability to change the situation and become oppressed by a particular economic ideology. Who controls the money has all the power. You can see that in America where a Supreme Court Decision said that as a corporation is a legal person then it can give any amount of money to a political party. You can buy a Government in America. You then buy a particular economic theory and then use all the PR that money can buy to sell it to the people.

    Incidentally Mike, Gareth Morgan,an economist here, has proposed in his book “the big Kahuna” an income for all. I am simplifying his case but he argues that many people work hard, whether they are volunteers, mothers or caregivers and that work should be recognized. It is a good read.

    So what I am trying to say is all the ideas in the world are fine but as the major parties support the status quo and I have yet to see any party who says that it will end those Bank’s independence – nothing will change. Probably any repeal of those Acts would require a 75% majority anyway. It seems to me that for any change to happen blood will be shed and nobody would want that.

  100. Gary April 23, 2012 at 12:37 pm #

    This is how tied up in knots the so-called MMT gurus are :

    The uber-guru, Rodger Malcolm Mitchell(this one actually acknowledges inflation exists, unlike his disciples here):

    “MMT preaches that the way to fight inflation is to increase taxes and/or cut spending. Those are supply issues.

    However, I will say that one of the MMT reasons for having taxes to create demand for a currency. So, they would have taxes to create demand, but actually collect taxes to reduce supply. (ED: What ?! )

    Warren has argued with me on many occasions that increasing interest rates exacerbates inflation, because it increases business costs. IMHO, history doesn’t seem to back that up, partly because a change in borrowing rates constitutes such a minuscule part of most business’s costs. (ED: What ?! )

    Randy Wray also seems now to have downplayed the whole JG notion. That leaves Billy Mitchell (no relation) as the key JG guy. I suspect he’ll change, soon. Doing without JG is a problem for MMT, because of their focus on full employment. (ED:What ?! )

    My guess: They will evolve to the yellow highlighted paragraph in the previous post.

    My problem: I soon will be 77 years old. So will I live to see it? (ED : maybe he does not care. It is not his problem ?)

    Rodger Malcolm Mitchell”

  101. StevieFinn April 23, 2012 at 1:10 pm #

    Some fabulous graphics giving the brain a scale to base the numbers on, therefore fully illustrating the scale of the mess.http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html?source=patrick.net

    • John Souter April 23, 2012 at 2:18 pm #

      Stevie – good illustrations of capitalisms tomb stones.

  102. Joe Taylor May 1, 2012 at 11:18 am #

    I watched this video about he inevitable result of unfettered corporate capitalism – WOW!

  103. Joe Taylor May 1, 2012 at 9:18 pm #

    Positive Money are trying really hard to do something about the financial mess we are in a calm and dignified way. Nayone got a better idea?


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  106. Roberto Carrillo A. (@Rcarrill49) October 17, 2012 at 3:07 am #

    I’m Peruvian. Facts.

    I, and my 94 years old mother are suing the peruvian government for unpaid bonds.

    Land that had been her family property for over 100 year was taken over by a leftist government.

    She got -bonds-, but took 30 plus year to be delivered to us. She got no cash.

    A year later we began a suit against the peruvian government (thousands of families are in the same predicament).

    The peruvian government is no poor. The Central Bank sits on 60 billions of reserves and the central government on 30 billion additional.

    They don’t want to pay because they don’t want to pay. That is it. They have lost in all peruvian courts buy still they refuse to pay.

    So very good that Elliot got the peruvian government to pay. I hope we also win and get paid after almost 40 years.

    Vultures fund are good for the economy and the system. Keep everyone reasonably honest.

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