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Save the Euro? Who for?

This piece was written as part of a debate currently being run by Open Democracy called “Writing on the wall for the Eurozone”. You can read the other pieces written for the debate at the Open Democracy site.



The strongest force holding the Euro together is the political force of creditors. Were the currency to collapse, much of the debt would collapse with it. So the question is, who are we saving the Euro for?

Once again, George Soros exhorts European leaders to save the Euro.  But what does this curious phrase ‘Save the Euro’ actually mean?

The Euro is not like the Giant Panda: a cuddly creature that ornaments our world. The Euro is not one thing. It is different things to different groups. It’s a currency used in day to day transactions by people who live in a group of semi-sovereign nations. It is part of the underpinning of the European political experiment we call the EU. It is a settlement currency which rivals the Dollar. As such it is part of Europe’s challenge to American hegemony both financial and political. It is the currency in which a huge amount of wealth is denominated. And last but by absolutely no means least it is one of the global currencies in which a truly titanic amount of private and sovereign debt is denominated.

So when George Soros and various politicians and bankers insist on exhorting us to ‘Save the Euro’ might it not be helpful if they could at least be clear what exactly they have in mind to be saved, who will benefit if it is, who will lose if it isn’t and who will pay either way?

One question we could ask about the Euro is what exactly will be lost if the Euro were not ‘saved’? Funnily enough, given all the Chicken Little hyperventilating and shrieking of our political class about the end of civilization should the Euro collapse, nations do not depend on the euro. Certainly they would be disrupted and there would be widespread suffering if their currency collapsed. One look at Germany between the wars makes that clear. But it also makes rather clear that nations and their people continue on.

It’s an interesting thing about currencies, that because we use them to buy things day to day and get paid in them, we equate currencies with wealth. But when talking about a nation of people, a political and cultural entity,

it turns out that the wealth of nations will not be lost if the euro dies. But their debts could well be. And this, I think, is a clue to the panic that emerges – in certain quarters – when default or collapse of the euro is mentioned. It is also one fairly simple thing amidst all the confusion and intimations of doom.

Currencies do not create wealth they merely denote it and allow its exchange. On the other hand, debt actually depends on the currency in which the debt contract is written. Wealth comes from productive activities. Debt comes from honouring an agreement to pay someone an agreed amount. Wealth creation carries on after a currency collapses and soon enough a new currency takes over the job of conveying arbitrary units of the wealth created. Again please see Germany or any other nation – and there are many – who have defaulted or whose currency has collapsed. Debt, however, either does not survive the death of the currency in which it was agreed or does so as a fragment of its former worth.

It is a troubling aspect of our present financial and political situation that there has been a tendency, I would say a deliberate desire, to confuse wealth with debt; to present them as flip sides of each other when they are, in fact, entirely different. Why should this be? Well it might be because much of Mr Soros’ wealth, the wealth of the institutions he owns shares in, the wealth of banks and other financial institutions and the wealth of those who own and run them, is tied up in debt agreements of one kind or another. Your wealth and mine is probably in sovereign issued ‘money’. Most of us don’t have investments. Many don’t have savings to speak of. The wealth of the top 10%, on the other hand, is tied up in debt of one kind or another.

Since the advent of securitization, that process whereby debts can circulate as a form of currency, which can be used as collateral for issuing loans and can be counted as capital, debt has become a larger repository of wealth than sovereign currencies.  Why do you think no one talks about the money supply the way they did in the 80’s?  Governments do not control the money supply. The issuers of private debt control it.

This may seem an odd claim, but the amount of debt issued by private banks denominated in euros, dollars, yen and Yuan, is far greater than the amount of those currencies issued by the sovereign nations. Derivative agreements denominated in sovereign currencies run to the tens if not hundreds of trillions.

Were the debt backed currency in which those private debt agreements are denominated to collapse, then those agreements would be worth very little, if anything. They would be like finding a parchment of a debt owed in golden pazoozas from a long lost kingdom. Good luck cashing it.

I suggest that it is not a concern for the people of Greece, Spain or indeed any of the people’s of Europe that fuels concerns among the banks and the super wealthy about the Euro and its future. If the Euro were to evaporate what would happen to all of their wealth that is tied to debt agreements denominated in Euros?

Now of course people will argue that were the euro to collapse then Greece or Spain would be thrown into the street, so to speak, with nothing in their pockets and no one would lend them a dime for their daily bread. On a larger scale it is argued that civilization would become paralyzed were the Euro to go bust.

Let’s get a few things straight. First, Europe is one of the three largest economic entities in the world. If we think JP Morgan is too big to fail, what do you think that makes Europe?

If any nation were to be ejected from the Euro it would survive. The fate of the Euro and the wider European Political experiment would be more drawn out. The country involved would issue its own currency and yes it would find it difficult to borrow. But then again as a sovereign nation with its own currency it would, once again, be able to do what neither Greece nor Spain nor Ireland can currently do: print.  Would its newly minted currency become instantly worthless? No, of course not. Would it be worth less than the Euro? Yes.

The nation with its new currency would find it was less able to borrow and that imports would be expensive. On the other hand exports would be cheaper by far. And the currency it would print would allow its citizens to continue to carry tokens of their productive labour around with them and exchange them with other citizens. Greece should take a look at Iceland.

I think the fall out would be more profound for the remaining Euro zone than it would be for the ejected country. For a start if one country goes it is quite likely others would follow. If any of them had any sense they would make common cause and find themselves part of another grouping who would not be as powerless as our present leaders would have us and them believe.

Although that is a large statement to make I feel it justified because the nation involved would still be able to produce wealth. What is more it would do so without the crushing burden of its debts. Many of those would have gone much like a fart does in a healthy breeze.

It is worth remembering that there is international precedent for debt commissions to look at a nation’s debts and dismiss those found to be odious. The idea of a debt commission was in fact discussed by the US government as a way of helping in the ‘liberation’ of Iraq. The discussions only stalled, it is said, when it was pointed out that many of the odious debts were held by US banks.

But what about the remaining Euro countries and the European Union project?  Could it survive the exit of one or more of its members?

According to John Mauldin in his article, “The Bang! Moment is now”,

Europe is down to two choices. Either allow the eurozone to break up or go for a full fiscal union with central budget controls.

I agree those are two possible choices, but I think he is wrong to declare they are the only two.

This crisis is not about which countries leave the Euro or which countries default on their debt, it is about which countries remain in the Euro but continue to bail out the bad private debts of their banks.  If our leaders insist on saving the private debts in the private banks within the Euro system then it will break apart.

It is too easy to become transfixed by Greece and its public debts. Spain is far larger and its problems are private debts not public ones. The same is true for Belgium, Ireland and Cyprus. Sure the private debts have been made public but such debts can and should be repudiated and thereby thrown back on to the private parties who were stupid and feckless enough to make the bad loan agreements in the first place.

On the charade of national agency, Tony Crurzon Price, Argues that,

The game is up not because Europe has won, but because the powerlessness of the nation is being revealed. Watch Rajoy, Hollande, Merkel, Holande, Tsipras and more trip form crisis to crisis as they try to wear the myth of power to the very end.

I agree this crisis has shown the powerlessness of the nation. But for me it is powerlessness not in the face of Europe but in the face of international finance. And the powerlessness is not so much financial as political.

There is simply no political will to force the losses to be taken by those who made them. But this, we are told, we cannot do. We can. We put men on the moon and brought them home again. It is not beyond us to close insolvent banks and open new ones. We need a banking system. But it does not have to be made up of the banks, the insolvent banks, that we currently are crippling ourselves trying to ‘save’.

Would this destroy the Euro? It might. It would certainly destroy much debt backed wealth that is currently held by the wealthiest 1% and is on the balance sheets of Europe’s largest banks. And of course if any nation did leave the Euro then those banks holding their sovereign euro debts might have a hard time collecting those too.

The Bundesbank could find itself holding agreements under Europe’s Target2 agreement, whereby central banks hold IOU’s from other central banks and nations, amounting to over €600 billion in a currency that no longer existed.  That alone is reason to expect that the Euro will survive in some form.

Of course this is just one aspect of a complicated situation. I understand that. But I think in a world where it suits some to have as much confusion as possible and for economic matters, especially concerning their wealth and our debts, to be presented as being too complicated for us ‘little people’ to follow, let alone have an opinion about, it is important to sometimes hold on to certain simple facts. Like a torch on a dark night, even though they leave most things still shrouded in darkness, they do at least illuminate a way forward.

Our present crisis is one of democracy even more than it is of finance. It is about a lack of honesty as much as it is a lack of growth. Debt and dishonesty are together strangling European democracy.

We should rid ourselves of both.







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152 Responses to Save the Euro? Who for?

  1. BobRocket June 27, 2012 at 2:24 pm #

    Excellent article as usual, many things to prompt debate.

    ‘The nation with its new currency would find it was less able to borrow..’

    I’m not sure this is strictly true, a nation that is up to its eyeballs or deeper in debt has a hard time borrowing as it is, some are having to go to the lender of last resort.
    If that nation defaults and wipes the slate clean then it will have less problems borrowing as the chances of the new lender getting their money back is greatly improved as the nation can service this new debt more easily.

    The new lenders (who didn’t get burned in the previous default) see an opportunity to make money at the expense of their competitors.

  2. Golem XIV June 27, 2012 at 2:51 pm #

    Actually BobRocket,

    I agree with you. There would be a short period in the naughty corner but then, as you say, slightly longer term the country would be seen as a less debt ridden and therefore better borrower.

    Not to mention that as a currency issuer they would have some ability to print. If any of the MMT crew were here they could no doubt expand on that.

    • Mike Hall June 27, 2012 at 8:54 pm #

      Hi Golem, haven’t been around a while, I’ve read your blogs but skipped the comments largely. I’ve no interest in the faux economics & feudal slavery advocacy of the Austrian/Libertarian brigade.

      Anyhow, I’ll try & clarify the MMT position – on this topic merely an accurate ‘descriptive’ of the fiat free floating money we all already have – with the distinction that the Euro countries cannot themselves issue Euros, but there is an entity which can – the ECB. (Pretty much the only ‘prescriptive’ element of MMT is the Job Guarantee aspect, both as an obvious humanitarian measure but also as a price stability & powerful automatic stabiliser of the economic cycles.)

      Any (fiat, free floating) currency issuing country has no need whatever to borrow in order to spend, in any quantity, providing it is to buy available goods or services for sale in it’s own currency.

      The only limit is inflation. But inflation requires scarcity of supply. Whilst there is capacity to supply, there is little or no inflation risk whilst there resources, material & labour to be purchased in the currency of issue.

      Imported goods & services, for which the currency must 1st be exchanged for a foreign currency is a different matter. As most major currencies are free floating, exchange rates will automatically tend to bring balance in value of imports to exports. In a situation of say, a country leaving the Euro with a lot of underused capacity (high unemployment), there may be some need to borrow temporarliy in a foreign currency to maintain essential inputs to the economy. Eg. oil products, purchased in dollars. Until the FX market settles for the new currency, it’s possible the cost, & lack of foreign currency credit could hold back growth somewhat. However, the ability of a savvy government to design stimulus spending in its own currency would likely very quickly move the new currency upward to true value providing the country already had a reasonably healthy export/import balance. In the case of Ireland, there would be no difficulty in this. Greece, after the GDP slashing vandalism of the last few years would face greater & longer short term difficulty, but it could quickly stop buying vastly expensive & unnecesary armaments from Germany, & thus use it’s (new) scarcer Fx funds to buy more essential inputs to maintain the pace of it’s GDP growth.

      To come back to sovereign currency borrowing. In reality, in non-Eurozone countries, it amounts to nothing less than corporate/bank welfare – an interest bearing, risk-free deposit facility that the government has no need to provide. It can issue new money to spend as desired (up to the inflation limit, roughly equating with (near) full employment) & use taxation (besides for distributive reasons) to ‘extinguish’ money as appropriate as inflation appears. (This is the ‘functional finance’ element that ‘positivemoney.org’ also proposes.)

      Whilst the government has no need for ‘loans’ from banks (bond issues), it may still be desireable for them to offer such a risk-free deposit facility to some extent. The financial sector does have some need for this (whilst likely at a much reduced level than now), but the terms would be entirely set by government & its a separate function from spending..

      In fact, even now, the provision of government bonds is far more to do with maintaining its interest (base) rate target than ‘lending’ or ‘borrowing’. ‘Functional finance’ does away with the need for ‘base’ interest rate setting/maintenance as a (neanderthally) crude means of inflation control.

      Randall Wray wrote a really good piece on ‘money’ (an ‘Alt History’) recently. Longish but a must read to get an understanding of money, esp from an MMT perspecitve.


      Whilst obviously trickier, with 17 countries, I think an MMT Eurozone could be made to work well enough for citizens. I realise it’s not likely anytime soon, so inevitably, matters will continue to get worse for the time being. But is any sort of debt jubilee any more likely? I think not. Rock & a hard place. One way or another, the Eurozone system will have to change – it is not viable long term. (Unless even what remains of democracy is junked altogether & police states are adopted wholesale to suppress the growing underclass, now heading firmly into the ‘middle’ class.)

      I wrote an MMT – based solution for the Eurozone in a Telegraph comment today:

      “More of the tired old ‘TINA mantra from Merkel – the same thinking that created the mess & has continued to make it worse for the last 5 yrs.

      There is absolutely a ‘quick easy fix’ if Euro authorities stop pandering to obscenely rich banksters.

      The ECB, as +issuer+ of debt-free, cost-free Euros is the key.

      Using the principles of MMT economics that correctly describes the fundamental operation of the fiat, free-floating monetary system we have:

      1. Instigate MMT’s Job Guarantee program of minimum wage non-substitutive, non-competing (voluntary/charity/community sector) jobs for any & all unemployed who want them.

      2. With growth returning & well on the way to recovery via the (cost free) stimulus of item 1. consider the sovereign debt sustainability position & consider ECB monetisation of a proportion of countries’ debts on a per capita basis.

      3. With the urgency of the present crisis resolved, get the Eurozone countries to agree measures to transfer a suitable portion of fiscal authority to a central Eurozone wide authority in order to apply the pronciples of ‘functional finance’ across the whole currency area, with (near) full employment & price stability as a dual mandate.

      4. Make illegal 90% of what the financial sector does presently – ie the part that is simply gambling & has no productive (rather purely extractive) purpose whatever in the real economy. As a guiding principle, put the onus on the financial sector to demonstrate by evidence review & trial period that any new product, service or activity on their part must demonstrate its usefulness & value to the real economy, or it will not be allowed.

      If these measures cannot be adopted on a Eurozone basis, then individual countries’, especially in the periphery should vote in ‘non-captured’ leaders to instigate them in their own country following reversion to their own sovereign currency.

      These measures are of course readily implemented in countries that already have theirown currency. There is no shortage of fiat, free floating money, debt free, available to bring these countries back to (& even greater) prosperity & stability.

      The last 30 years of neo-liberal, neo-classical economics that has lied or completely misrepresented the monetary system (& much else) is an abject failure, as demonstrated by the crisis itself, lack of any foresight of it, and the failed ‘solutions’ of the last 5 years. (Failed for the ‘99%’ that is – it works just fine for the banksters & top few percent.) ”

      Btw David, you really should get stuck in & study MMT – it’s the paradigm changing piece you are missing. Sitting on the fence & listening to Austrians etc. pretending there’s some ‘common ground’ with such views is no position at all, esp for someone with your professed views. I’m afraid your EU politicking idea won’t get anywhere. A waste of your time & skills. You are a skilled communicator in the most powerful medium we have – film/video. I suggest you get behind something you can believe in, developed far more extensively & rigorously than your own researches, and help them get the message past the mainstream blockade. Doubtless whatever you do will have some positive effect, but we really need to break out of blogland.

      Bill Mitchell expresses much of my own feelings of incredulity that the neo liberal ‘authorities’ responsible for the crisis & ongoing mess are still in charge & relatively unchallenged.


      • jag37777 June 28, 2012 at 4:37 am #

        Shouldn’t that job gaurantee scheme be at a living wage rather than a minimum? Unless you set the minimum wage as a living wage as well.

      • Gary June 28, 2012 at 10:01 am #

        If you set a minimum price on anything ie. a price above which the market can bear, including wages , then you ration that which has been overpriced and in this case you simply price the labor out of the market and cause unemployment.

        You really should get a grasp of economics 101.

        “I’ve no interest in the faux economics & feudal slavery advocacy of the Austrian/Libertarian brigade.”

        Maybe you should read other points of view to expand your insight ?

        • jag37777 June 28, 2012 at 8:42 pm #

          And paying subsistance or less than subsistance wages does what for “the economy”? A large percentage of the population then has no means (money) to purchase consumer goods. Which then causes unemployment.
          Demand is the driver, and that is what the Austrians ignore.

      • Andrea June 28, 2012 at 10:08 pm #

        somewhat along the same lines:


    • PG June 28, 2012 at 11:44 am #

      Reform the Eurosystem to:

      – become a system of multi-national currencies, each being a full-fledged currency
      – keep the Euro as a fixed value reference currency to settle debts intra and out EZ.

      Of course the process of debt settling would be a long one


      – immediate economic recovery in all nations could proceed along the usual lines advocated by MMT


      – inter-national tensions in EZ would be softened down immediately

      It seems me that with this respect most people in MMT (and outside) do not understand the national and political reality of EZ as they keep advocating “federalist” solutions.

      A state of EZ is not as a “state” of US or Australia. It is a full-fledged nation-state as the US and Australia are. A “united states of Europe” would not be something like the USA. It would be something like the “united states of all Americas” or the “united states of Oceania”. Check the logic of such constructs and then ask which is the logic of advocating such construct for the countries in EZ.

      • Golem XIV June 28, 2012 at 12:09 pm #

        Hello PG,

        Like you I too wonder about a possible two currency solution. It is the option I have thought is the most likely long term fix for the Euro. You allow different countries to have their own currency giving them the flexibility of printing and deficit spending when their notional circumstances argue for that, but still be part of a larger ‘pact’.

        The local currencies would float relative to each other and to the Euro. Thus a country which got itself into a pickle would find its currency weakening versus teh euro which would effectively shield teh euro from actions taken or not taken inside each nation. But it would still preserve a strong economic and political connection.

        All Eu countries could reveert to their national currencies for internal use OR, as I think more likely, we might find a Euro fudge solution whereby the self styled CORE countries continue to use the Euro for both internal and external use while the so called periphery only use it as a settlement currency. The complication would come in pricing expoertts and imports but I don’t think this would be an insurmountable problem.

        The reason I wonder seriously if this sort of solution might not be being considered in Berlin and Paris is because it would allow the European experiment to hold together even while loosening ties to the euro. It would lessen the ‘one size fits all’ , or as it would actually be the ‘Franco/German size must be forced on all’ weakness of the euro under tighter fiscal union.

        Anyway, thanks for sharing your thoughts on this. They helped me with mine.

        • PG June 28, 2012 at 12:54 pm #

          Actually in the above proposal to reform the Eurosystem, the Euro would only be kept as a fixed reference value to settle existing debts ans would disappear when the last debt was settled.

          As the Euro can be seen as a peg of the 17 national currencies with nominal value 1 for all of them, after the D (decouple) – Day its value could always be maintained as 1 being a function of the reinstated national currencies ( Euronationals) exchange rate values.

          It seems me the most equilibrated solution to the creditors vs debtors opposition as creditors would not benefit from reevaluations nor would be damaged by devaluations. And vice-versa for debtors.

          The move would be seen not as retrogress but as an advancement – change for the better the actual Eurosystem rather than scrap it.

          The ECB would go on as a bank for Eurozone settlements. Furthermore it could add functions of economic statistics and advice for the EZ countries.

          Other EU institutions could go on unchanged as well. And give a positive contribute to the long term problems that Europe faces as:

          – energetic self-sufficiency
          – common security
          – keeping advanced and cooperative R&D

        • Jason June 28, 2012 at 3:07 pm #

          The issue is France would be in the second tier and they (the French) cannot allow that to happen.

          Personally if they carry on Germany and her satellites will walk and then where the EU be without its principle backer?

        • SASmule July 2, 2012 at 9:23 am #

          This solution sounds almost exactly like the ECU (1979-1999, and which became the Euro at 1 for 1) and the concomitant Exchange Rate Mechanism. Can’t really remember how well it worked, but apparently ‘ecu’ means arse in Portuguese, which perhaps gives some indication.

        • kunjani July 2, 2012 at 5:39 pm #

          Wouldn’t lenders then ask for the loans they make to be denominated in Euros AT THE PRESENT GIVEN RATE, rather than any other currency?
          How would the Euro rate be set- against a basket of other euro currencies or against the external market valuation?

  3. Foppe June 27, 2012 at 3:09 pm #

    Pension funds, for one.. Neoliberals like those a. because they’re easy to loot, and b. because it sustains the myth that governments should not print money to keep the elderly alive.
    Anyway, are you familiar with Steve Keen’s Universal Bailout proposal?

    • Golem XIV June 27, 2012 at 4:35 pm #

      No I’m not I’m afraid. Obviously I should be. Can you tell us a bit about it?

      • Foppe June 27, 2012 at 7:03 pm #

        Sorry, was a bit rushed. Basically, Keen is trying to find a one-time solution that would allow the (shadow) banking system to unwind properly, and which would not bankrupt (or allow neoliberal politicians to argue bankruptcy of) large institutional investors such as pension funds (and Landesbanken, etc.). (It is intended as a kind of modern-day alternative to a debt jubilee (such as argued for by e.g. David Graeber in Debt: The First 5000 years).) Once unwound, the idea would be to keep the banking sector much smaller.
        His basic idea is to credit all EU (or other) citizens with the same amount of money, which they would then be legally required to use to pay off any outstanding debts with, with the advantage that this solution would not favor ‘spendthrift’ citizens over ‘frugal’ ones. Questions remains as to how inflationary this would be (though it seems to me that this can be fixed by allowing only limited withdrawals per year or somesuch), and which institutions would be eligible and which wouldn’t be.
        You can find a nice BBC Hardtalk interview with Keen here; the manifesto itself can be found here (Warning, longish).

        • Foppe June 27, 2012 at 7:38 pm #

          (BTW, since I can’t find any mentions of Graeber using the search, here’s a nice two-part (interview-style) introduction to his book. “What is Debt?”, “On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics”.)

        • princesschipchops June 27, 2012 at 11:38 pm #

          I’ve been reading about Keens ideas and think there’s a lot to them.

          Or of course governments could just keep blowing billions on failed institutions and hollowing out the real economy until societies start to collapse!

        • Gary June 28, 2012 at 10:17 am #

          There are so many problems with Keen’s Debt Jubilee idea, among them :

          1. If everyone go the same amount of bailout some would have their debts covered and some would not, and would this be fair and would this solve the debt problem. ?
          2. This would be inflationary. More money chasing the same amount of goods and services
          3. The feckless debtors would get all their indebted assets for nothing, the price of those assets would be driven up by the resulting inflation, and the prudent saver would be have his savings reduced by that inflation while probably still not being able to afford the assets , as they are increasingly priced out of reach.
          4. Given the bank derivative debt is conservatively $600 trillion , which is 10 times (1000%) global GDP, if this debt was monetized the value of the money would go to zero. So, it is not possible and the big debts would still remain.

          There is no way out of this other than default in one way or another, either sooner or later. No amount of voodoo money printing will help, on the contrary, it will make it worse.

          “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.” – Mises

          • Foppe June 28, 2012 at 12:07 pm #

            2. Already suggested there may be ways to get out of or minimize the inflationary effect from this. All the lending that has gone on in the past 15 years has been just as inflationary, and we survived that too. So why do you assume that we wouldn’t survive another bout to come out in better shape than we would if we were to continue on the current path?
            3. Depressions and world wars are a better solution? Economic policy should not be a morality play.
            4. Non-issue. You net derivatives out, you don’t pay them; and if you push everything through the system they won’t even be triggered, since there will be no defaults.. That’s thrice you hammer on ‘ohmigodnoinflation’.

            You seem to be ideologically driven in your worry about inflation. Money is just a unit of account that does not in the same way as other commodities; but price stability should not be seen as an important goal regardless of all other considerations.

          • Gary June 28, 2012 at 1:06 pm #


            ” All the
            lending that has gone on in
            the past 15 years has been
            just as inflationary, and we
            survived that too.”

            No we have not yet survived the past inflation. Why do you think that we are in this intractable mess ? All busts are preceded by an inflationary boom, no exceptions. Just sometimes the inflation is not seen in consumer goods, but rather in the bond market.

            If you print money, all else equal, you WILL get inflation, and down the road you will get a correction, and if the inflation is large enough, a bust.

            We have not yet liquidated the last inflation, adding to it is suicidal.

          • Foppe June 28, 2012 at 2:10 pm #

            We’re in the current mess in large part because a bunch of neoliberals and Austerians are using the mess as an excuse to kill off the welfare state, not because the problems are insurmountable.

            Lastly, the ‘correction’ is only guaranteed if you create money via loans (such as the ones now being ‘given’ to the Spanish government). If you simply print, there need be no correction; all you will see is some inflation. But there are other ways to counter that. For instance, by putting a 99.9% tax on bank and other corporate (pre-bonus-payment) profits realized in that year, and you’re set.

          • Gary June 28, 2012 at 2:33 pm #


            “We’re in the current mess in large part because a bunch of neoliberals and Austerians are using the mess as an excuse to kill off the welfare state”

            The Austrians don’t want innocent people having their money confiscated by the state to bail out criminals. And you have a problem with that ?!

            Is this some kind of joke ? The biggest recipients of welfare of the state are the banks ! To the point that the state is now also bankrupt. That is why the banks got too big too fail, because it was IMPOSSIBLE for them to fail when the state welfare stands as their guarantors. You cannot make it up. Can’t you see the irony ? Unbelievable.

            The Austrians want the banks to go bust, not now but 20 years ago, when they first became bust. That is what bad businesses deserve. They don’t deserve state welfare.

            I don’t know how many times I must point out this error of the statists, but I will continue to do so as long as they keep misrepresenting the situation, which may be forever.

          • Foppe June 28, 2012 at 3:02 pm #

            1. I do, yes, because by now the Austrian ‘solution’ (which is extremely utopian anyway, because of how it ignores/denies the relationship between wealth and political power) is no longer possible without causing immense harm to ordinary citizens.. I’m sure you find it exciting to fantasize about how their rights need to be respected, but doing so now would result in the worst of both worlds.

            2. Please stop conflating the ‘State’ and the ‘Welfare State’. They are entirely different things, and the ‘welfare state’ isn’t what ‘allowed’ the banks to grow this much; deregulation and the creation of the EZ did that.

            Lastly, I think that you need to face up to the fact that the ECB practices something extremely close to austrian monetary policy, and that this has been a major cause of the crisis. And that, prior to the creation of the CBs, bank failures could cause huge problems just as well as they can nowadays, and that ‘statism’ isn’t the problem, but elite/corporate corruption/collusion is.

          • Gary June 28, 2012 at 3:52 pm #

            You are keen to criticize the Austrian School, yet you patently know nothing about it.

            The ECB and all central banks are viewed by the Austrian School as prime reasons for boom and bust. The Austrian School will abolish all central banks. So, there is no way on earth the ECB can be doing Austrian School business, except to abolish itself.

          • Foppe June 28, 2012 at 4:07 pm #

            Ugh. As I said before, boom/bust cycles precede the creation of CBs, so that bit of ‘wisdom’ doesn’t fly.
            But since you don’t have anything substantive (“you don’t know anything” doesn’t count, sorry) to say, I’ll just stop here.

          • Gary June 28, 2012 at 5:24 pm #

            please distinguish between “prime” and “only” reason for boom and bust. I never said central banks are the only reason. Inflation is the only reason for boom and bust, central banks as underwriters of bank credit contribute to this.

          • Andrea June 28, 2012 at 10:24 pm #

            “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.” – Mises

            No – because when everyone owes everybody else and v. v. the debts can be swapped, cancelled out, or ‘restructured’ or defaulted on, for the remainder.

            The Euro crisis is a debt crisis, and the Euro (EZ) certainly played a role, but that is not the crux. The crux is debt and the out of control finance ‘industry.’

            Greece is bailed out (oh those lazy bums, say) only so that its creditors can be paid.

            So the ‘crisis’ is not financial at heart (I didn’t read Keen’s proposal), it is political. It is a manifestation of using power to garner financial advantages and clout, in the present and for the future.

          • Ahimsa June 29, 2012 at 10:40 am #

            @ Gary,

            Re: #1 “If everyone go[t] the same amount of bailout some would have their debts covered and some would not, and would this be fair and would this solve the debt problem. ?”

            It would certainly be equitable and impartial. Whether this would be fair or not is an rather different matter. (Is social ‘fairness’ a concept with which Austrian style economics is concerned??)

            Whether this ‘deficit easing’ proposal would solve the debt problem or not is an absolutist line of enquiry. Whether it would ease or improve the debt problem is surely a more useful question to ask?

          • Gary June 29, 2012 at 1:53 pm #


            How about we rephrase the question to this : has giving money to the banks solved or even alleviated their debt problems ?

            If the answer is yes, then why do we still have this crises , and if the answer is no , then why bother handing out money to ANY debtor ?

            The problem is that this is not a crisis of liquidity, but a crisis of solvency. In other words throwing money at any concern that has no means to operate in this environment is counterproductive. This is precisely what the Austrian School understands, because when you print money you lower the rate(price) of money and that makes existing business liability more onerous( the net present value of future payments on existing debt/equity rises as the rate falls) and this in turn reduces the capital of the businesses which in turn degrades their balance sheets and eventually puts them out of business.

            When businesses fail then people lose their jobs and no amount of debt payments to them will solve their problem on an ongoing basis. Ie they are insolvent, not illiquid.

            The welfare statists cannot seem to begin to understand this. They just want to chuck money about.

    • Fred Goldsmith June 27, 2012 at 6:37 pm #


      Essential reading…

      • Ahimsa June 30, 2012 at 9:11 am #

        You have not addressed the point at hand. Keen’s idea (and Richard Douthwaite’s before him – note the use of the term ‘deficit easing’ and not ‘quantitative easing’) suggests giving money to citizens, not banks. The money would primarily be intended for paying down debt (not inflationary).
        I contested your claim that this would not be ‘fair’, I contended that this would certainly be equitable and impartial.

        • Gary June 30, 2012 at 10:20 am #

          Debt is a future claim on money, which in turn is a claim on goods and services. Debt must be worked off, where possible and where not possible, either because insufficient new viable enterprises were created with the debt(always true), or the length of time required to work off the debt is longer than the term of the debt(currently almost always true), then debt must be written off.

          Monetising(printing new money) debt that cannot be worked off is always inflationary.

          That is the definition of inflation.

          The amount of debt, of which only the derivative debt is 10x global GDP , can NEVER be worked off at any realistic growth rate at any realistic terms of repayment.

          Whether you give money to the banks or give it to people , you are monetising debt. Why is one fair but the other is not ?

          If printing money was the simple solution, why does it never work ? QE1,2,3….and still no solution. If printing money was the economic salvation, then all we need to do is devote all our time to printing money. Forget about work, just print.

          There is only one solution to this irredeemable debt and that is write it off, default, and restructure. Everything else is just moving money around and delaying the default, which will come sooner or later in any case.

          There is no free lunch. There is no money tree.

          • Ahimsa July 2, 2012 at 2:23 pm #


            Re: “Whether you give money to the banks or give it to people , you are monetising debt. Why is one fair but the other is not ?”

            That you discern no difference suggest there is quite a difference in how we understand ‘fairness’.

            To repeat myself, one is equitable and impartial, perhaps even democratic, – giving money equally to all citizens or spending money on public services; while the other is not – giving money to banks(to the exclusion of others) and allowing those private banks rule how to use it.

            I get the impression you are only interested in a static ‘material’ amount of money and that the dynamics and functions of money such as how it is created, distributed, flows, controlled, etc. irrelevant.

            Note: It may be that we are simply talking at cross purposes having decided upon mutually exclusive definitions to work with. For example, I do not understand money as existing in and of itself (as a nugget of gold does), but rather as a societal creation to facilitate economic activity.

        • Gary June 30, 2012 at 10:34 am #

          BTW : what exactly is the difference between QE and deficit easing ?

          QE is printing money to monetise debt(already issued govt debt in the secondary market). So is “deficit easing”. There is no material difference.

          • Ahimsa July 2, 2012 at 1:51 pm #

            What is the difference between quantitative- easing and deficit- easing?

            I understand there to be quite a functional difference:

            – from Richard Douthwaite’s paper,
            “Deficit easing – an alternative to severe austerity programmes in the eurozone”

            “Both approaches involve central banks creating money. With quantitative easing, the new money is generally used to buy securities from the banking system, thus providing the banks with more money to lend. Unfortunately that is where problems have been arising in the US and the UK. Because the public has been unwilling to borrow, or the banks have been unwilling to lend, quantitative easing has not increased the supply of money in circulation in the US, where M3 began to decline in the second half of 2009 and was still falling a year later. In the UK, M4 (a version of M3 but with additional categories of money) increased by only 0.9% in the same
            period and actually fell by 0.3% during September 2010.

            Deficit-easing avoids this ‘won’t-borrow-won’t-lend’ bottleneck by giving the new money to governments to spend into use, or to pass on to their citizens to reduce their own debts or to invest in approved ways.

            But quantitative easing has not failed to work completely in Britain and America. It has lowered interest rates and weakened both currencies, thus improving the countries’ international competitiveness. The relative strength of the euro as a result
            of the ECB’s refusal to run a quantitative easing programme along similar lines is handicapping the eurozone’s recovery. (The ECB launched an asset purchase scheme called the Securities Market Programme in May 2010 but denied that this was quantitative easing because it promised to use other programmes to remove the liquidity this injected.)”

  4. Phil T. June 27, 2012 at 3:15 pm #

    Excellent title ! The same title (2-questions) could/should have been asked/answered in the US Congress & Media in 2008/9 with “TBTF US Banks et al” subsitituted for “Euro.”

    In case anyone might have missed Ieffrey D. Sachs’s tribute to the late Václav Havel (The Power of Living in Truth), I provide the link here ==> http://www.project-syndicate.org/commentary/the-power-of-living-in-truth

    Thank you Golem XIV for asking/answering the questions in your title. I hope that your article becomes as widely disseminated as possible.

    Best wishes Sir …

    • Foppe June 27, 2012 at 4:09 pm #

      Sachs knows his way around a keyboard, but given his own role in the neoliberal sell-out of lots of state property in a lot of countries in the former eastern bloc, I am having trouble ‘hearing’ him. He’s a little too good at revisionist-historicizing his own past, so to say, to be talking about the ‘importance of speaking truth to power’ and whatnot.

      • Phil T. June 28, 2012 at 1:33 am #

        Quite right Foppe ~ Bono and what not …

        But I rise above it at this juncture and hope for Prof. Sachs’s sake that personal honesty has prevailed in the domain of his own psyche.

        I cited his article here because – as I read it – the essence of what Sachs articulates in tribute format to Havel (whom I doubt you would cast in the same category as Sachs) is reflected in David Malone’s exquisite post above.

        Best wishes Sir ~

  5. Pat Flannery June 27, 2012 at 7:53 pm #

    I think the most likely outcome is a devalued Euro. Market devaluation against the dollar will autocorrect the European economy. Airbus for example will become more competitive with Boeing. Those who invested in European bonds like Greece or Ireland will get a haircut whether they like it or not. The debt holders not the debtors are the ones who will suffer the biggest losses.

    Economics is a bit like physics: it is entirely predictable if one sticks to the basics. As sure as water flows downhill the value of this debt will simply devalue itself using the same machinery that created it – the market itself. All governments can do is sit back and watch the show.

    • Foppe June 27, 2012 at 7:57 pm #

      Devaluation is irrelevant so long as the membership list doesn’t change. Writeoffs are needed. Governments can do much more than ‘watch the show’; the point is they don’t want to, because local parties like how the eurocrisis can be used to further their agendas.

      • Pat Flannery June 27, 2012 at 8:30 pm #

        Devaluation of the Euro is relevant to investors from non-Euro countries like the UK and the US, while both writeoffs and effective government actions are very unlikely. This thing will right itself as it has done throughout history.

  6. steviefinn June 27, 2012 at 8:08 pm #

    In a nutshell as usual. I suppose what further complicates the situation is the influence of the IMF, the Goldman boys & the unelected Eurocrats on all levels, who stand to lose out bigtime if the EZ disintegrates. I personally find it disgusting that, amongst others, two failed politicians Barosa & Van Rompuy have used threats to influence sovereign nations into voting for more poverty, further increases in the suicide rate. a situation where extremists thrive & of course more sleight of hand bank bailouts.

    They are succeeding in sowing the seeds of all the things that were supposed to be avoided by setting up the EZ in the first place. Does anybody out there know any MEPS out there who are saying or doing anything about the situation,? I don’t, but I do remember Joe Higgins having a go at Barosa, & of course there is Farage. It’s obvious that most of these EZ clowns have been found out as firstly being incompetent, & secondly, basically not giving a shit about the ordinary people of Europe.

    Here’s a vid on MEP’S expenses fiddling which was blocked in Germany :


    PS: It’s not supposed to encourage recruitment to David’s “Modest Proposal”.

    • StevieFinn June 27, 2012 at 10:16 pm #

      Hmmm, the end bit didn’t sound right, I meant in the sense that the gravy train aspect should not be an incentive to becoming an MEP.

    • Gary June 28, 2012 at 10:27 am #


      What you say is spot on. That is the nub of problem. This is a banking crisis. The bailouts are bank bailouts in an effort to transfer the debt to the sovereigns.

      If we don’t let the banks go bust , the sovereigns will go bust. If they are not already bust.

      The latest banking crime on a massive is the rigging of LIBOR where :

      “More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans, including auto and home loans, according to the CFTC. Even small movements – or inaccuracies – in the Libor affect investment returns and borrowing costs, for individuals, companies and professional investors.” – wsj


      And not a peep out of our govt or MPs. We are living in an out-of-control Kleptocracy. The euro, pound, dollar and all the rest are going to zero if we don’t cut this bank albatross from off our necks.

  7. johnm33 June 27, 2012 at 10:18 pm #

    I wonder if there’d be any takers for german ten year bonds at -5% if that was all they offered, they’d still look good compared to anything from southern europe, or ireland. They could then lend it to their own taxpayers at say .5% on condition they pay down their debts, take holidays and buy property in the piigs. They could tell the bankers thats it there is no alternative. They could roll it out by lending up to 5000 euro a month to any taxpayer who can afford the debt, and since it’s their taxpayers who will have to foot the bill if they decide to save the euro it would seem an equitable solution. Of course debt free fiat would be better still.
    I was beginning to think that debt based money creation was a taboo subject, but it’s at the heart of the corruption that appears epidemic amonst the ‘elite’ [we really need a new word], without exception they serve the money masters, some blithely some cynically and some true believers.
    We do need new banks never mind about the rules just take away the deposit guarantee from any bank that puts a toe out of high street banking, and the only democracy we have is the pound we spend next.
    What about e-lite short for ethics light and its got a hyphen.

    • Gary June 28, 2012 at 10:31 am #

      A return of -5% , is a price for the guarantee of the eventual return OF funds, rather than the price for the return ON funds and then default.

  8. bob June 27, 2012 at 11:50 pm #

    See the article here:
    regarding former University of Chicago economist Robert Mundell’s view that the Euro was meant to fail….

    • docG June 28, 2012 at 2:08 am #

      Yes, this article is extremely important. I’ve been discussing it today on my blog.

    • jag37777 June 28, 2012 at 4:48 am #

      There’s a fair bit of solid evidence around that the EC and the Euro were both Anglo-US projects with the aim of subjugating Europe in general, and Germany in particular to the London-New York banking axis.

      As it has played out, it certainly would be foolish to discount the possibility. The Great Game never finished.

      • Gary June 28, 2012 at 10:49 am #


        I certainly believe that there is more than a grain of truth in this. I see too many self professed “Atlanticist” ie US alligned British politicians beating a 24×7 anti-EURO drumbeat to think that there is not an ulterior motive in this crisis that may greatly benefit the dollar.

  9. docG June 28, 2012 at 2:05 am #

    Excellent post. I agree, but would go farther. In my view, it is necessary for the Euro to fail. There is literally no other recourse. It is destined to fail and the longer it takes the worse the effects will be. As you suggest, this would not be a disaster for the countries involved, because all these countries would still have access to valuable resources, not the least of which are their workers. Just as the denizens of Alice’s Wonderland were “only a deck of cards” so is the Euro only a medium of exchange. It’s importance has been greatly exaggerated by those who continue to pull the wool over the eyes of the real victims of this farce, the workers.

    It is, in fact, the workers who concern me most. We hear little or nothing about them, but imo they are the key to both the problem and its solution. I’ve been discussing this issue on my blog for the last few days and invite you to take a look (see URL above).

  10. Pat Flannery June 28, 2012 at 9:53 am #

    It continues to amaze me that politicians and the media continue to talk as if people had “borrowed” money from a “bond market” that was the trustee of other people’s hard-earned savings.

    The bond market didn’t “lend” money to anybody. It created it out of thin air. I was part of it as a mortgage broker. How can we now be discussing this smoke and mirror creation by “securitization” as if it were real money?

    The answer is simple: value all securitized debt at the current value of its underlying asset e.g. the value of each securitized bundle of mortgages is exactly the combined value of the properties it financed. Securitized debt is not money. It was not lent by banks as part of the fractional reserve banking system. It certainly is not government debt.

    This is not a Euro crisis or a Dollar crises, it is an understanding crisis.

    • John Souter June 28, 2012 at 10:35 am #

      Pat -you’re on the nail when you say -“It is a confusion crises”.

      Sad thing is, that’s exactly why and how it was engineered in order to create ‘wealth’ from Monopoly concepts and figures.

      Mug an individual and the law will jail you – mug a nation and you’re lauded as a wealth creator and the nation has to pay interest for the privilege.

    • Gary June 28, 2012 at 10:47 am #

      This is a banking crisis, that is taking everything else down with it.

      • Pat Flannery June 28, 2012 at 2:08 pm #

        At best this is a bond market crisis. Governments no longer borrow from banks. They borrow from the bond market.

        If the bond market was a real market, the value of its products (bonds) would be subject to market forces. Instead, the valuation of these bonds is divorced from market forces. Their creators are allowed to use threats of financial Armageddon to maintain these artificial values.

        I hope Merkel stands firm against Euro Bonds which would provide these rentiers with another “market” level to ensalve use.

    • Ahimsa June 29, 2012 at 11:27 am #

      speaking of bonds..


      not so surprising really, is it?

      • Hawkeye June 29, 2012 at 12:52 pm #


        Great chart !

        Just goes to show that the 1998 – 2008 era was unusually “optimistic” in terms of Gvt finances.

        The “market” believed that these were “safe” investments and that must have presumed that Gvt finances were ship-shape. The yields prior to 1998 clearly demonstrate that this was a completely false premise.

        – Did Gvts suddenly become saints in the 2000’s?

        – Was the market completely confident that it could ignore historical rates (and in Greece’s case a severe banking crisis in the early 1990s)?

        – Did Gvts have legitimate reasons to be complacent about borrowing levels, given that the market was confidently lending to them at historically low costs?

        Clearly Bond yields are only going to move in one direction. At least back to early 1990s levels, if not higher.

        Is this a clear-cut case of Trojan Horse “Teaser Rates”, used to take-out European economies?


  11. backwardsevolution June 28, 2012 at 10:44 am #

    Frank Zappa:

    “The illusion of freedom will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.”

    From George Carlin:

    “Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear. They’ve got you by the balls.

    They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. You know something, they don’t want people that are smart enough to sit around their kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago. They don’t want that, you know what they want?

    They want obedient workers, obedient workers. People who are just smart enough to run the machines and do the paperwork and just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it. The table is tilted folks, the game is rigged. Nobody seems to notice, nobody seems to care. Good honest hard working people, white collar, blue collar, it doesn’t matter what color shirt you have on. Because the owners of this country know the truth, it’s called the American Dream, because you have to be asleep to believe it.”

    • Hawkeye June 29, 2012 at 5:16 pm #

      I can’t believe that I only just discovered George Carlin a few months ago, but boy does he hit the nail on the head.

      I think that quote is from:


    • patma2003 June 30, 2012 at 1:48 am #

      Carlin said some inspiring shit. Depressing when you understand the truth of our reality, but inspiring in that you know people have figured out the battle lines in seasons long past. The very same battle lines. Identical.

  12. ArtSmith June 28, 2012 at 12:02 pm #

    Golemn says ” But when talking about a nation of people, a political and cultural entity,

    it turns out that the wealth of nations will not be lost if the euro dies. But their debts could well be”.

    Sorry to be a party pooper but didn’t the creditors for greek bonds get their contracts re-drawn under english law with a stipulation that they be paid in euros or euro equivalents not a devalued new currency like the ‘new drachma’? I might have that wrong?

    Are we sure debtors won’t be persecuted? I thought we had all agreed the rule of law has been suspended. That being the case what stops government/corporations changing the goalposts again and again?

    • Golem XIV June 28, 2012 at 12:59 pm #

      Hello Art Smith,

      That’s not party pooping it s a good point. You are right to draw the distinction between Engilsh law bonds and non-English law. It isn’t taht they changed the bonds the contract of teh bonds is what it is. But many sold the non-English law bonds in favour of those with ‘better’ creditor protection.

      And it is also true that now bond boyers want those with English type contracts.

      BUT none of that prevents a sovereign nation from simply saying we will not pay. Sovereign decisions are above contract law. At that point the creditors will either settle for a small payment, sell to a vulture fund or try to sue the nation themselves. That means suing in the Southern Distrtict court of NYC.

      But again this ia all seprate from claims between nations written in euros. Those claims would be far harder to enforce if the euro itself ceases to exist or if a nation no longer suses it.

      At that point it becomes a political not an economic nor even legal problem. Once a nation ceases to use a currency and has taken teh plinge it can simply say ‘No’. If several nations do it then the game is up for the euro in anything like its present form. And certainly the private debts denominated in Euros would have a very far from clear future no matter what clauses were written in to bond contracts. And capital or ‘assets’ held in any form of debt backed instrument no matter who or what held them, would be a very unstable and unreliable. That uncertainty alone would tend to wipe a vast amount off their value.

      That’s what I think at least.

  13. garry evans June 28, 2012 at 12:39 pm #

    Easy fix all banks if go bankrupt , all debts owed by people are now debt free.So any bank failure will have little impact on people & economy .

  14. Nell June 28, 2012 at 5:47 pm #

    Keen’s debt jubilee is not necessarily inflationary. In fact it could be more deflationary than inflationary as paying off debt removes money from the total money supply of an economy (ie deflationary). The inflationary component would only occur in relation to payment to people who have no debts. I think the biggest sector that might have no debts are pensioners, who are mostly on low incomes, and therefore would spend the money, increasing demand and supporting job creation. Therefore the inflationary component would be beneficial to us, normal, working mortals.

    • John Souter June 28, 2012 at 6:14 pm #

      Nell -remove all the financial gimmickry and what part would inflation/deflation have to play?

      • Nell June 28, 2012 at 6:42 pm #

        Sorry John, I am not sure I understand what you mean by financial gimmickry. As I understand it, inflation and deflation are just terms for changes in price levels. You could have an economy without currency and still experience inflation/deflation. I agree, however, that in our current monetary system, inflation is very much affected by how the banking system works and the price fixing and speculation of the financial sector.

        • John Souter June 28, 2012 at 9:24 pm #

          Nell -in real terms the only condition which would effect inflation or deflation would be whether real commodities and products got out of kilter (balance) with supply, demand and sustainability.

          My argument is not that inflation or deflation wouldn’t exist -for instance, a nation which relied heavily on the export of a commodity such as oil and doesn’t invest in replacement industries would suffer catastrophically when the oil runs out – but hopefully that would be seen as a given and measures adopted to offset the loss of income.

          The gimmickry as I see it not only distorts the supply and demand rates, it also ignores the sustainability and adds considerably to the on-costs in order to gain the middleman’s profits. In essence we have handed the real world over to casino finance and lost any real say or control in what the stake, odds and payouts are.

          • nell June 28, 2012 at 9:37 pm #

            Can’t argue with that.

        • Gary June 29, 2012 at 9:18 am #

          ” As I understand it, inflation and deflation are just terms for changes in price levels. ”

          Inflation is the increase in money supply above the demand for money to buy goods and services.

          Inflation :

          “there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur.” – mises

  15. steviefinn June 28, 2012 at 8:19 pm #

    OT but it seems as though Diamond is on the back foot, ( even got a mention on radio 1 ) possibly other members of the UK’s banking glitterati will be found to have been playing the same tricks – Ian Fraser doing his best to push for an independent enquiry :


    Link to a petition started by Ann Petifor for the same :


    Go on, what the hell, you never know, acorns & oak trees.

    • Paulie June 29, 2012 at 11:38 am #

      A bit more on that yesterday Stevie from the Slog Here In case you missed it.

    • John Souter June 29, 2012 at 1:29 pm #

      Stevie -it seems Barclay’s Bob is more Diamanti than Diamond.

      Though, in the interest of fairness the same observation could be applied to many others in the financial and political world.

  16. Pat Flannery June 29, 2012 at 11:00 am #

    I was expecting a flurry of posts on this blog this morning about the EU heads of government agreeing to use the ESM to directly fund the banks thus breaking the link between sovereign and bank debt. Where are our deep thinkers when we need them? I would like to hear what you all make of it.

    • Paulie June 29, 2012 at 11:43 am #

      Same here Pat but I think everybody is waiting a few hours to see how markets and Merkel react to this, In my opinion its just more kicking of the can to save the Euro another few days and maybe it is to suit the closing Q2 financials.

      • Pat Flannery June 29, 2012 at 1:17 pm #

        Agreed Paulie. The markets operate on a second-by-second basis looking for a quick profit. They smell money like a scavenger animal smells a recent-kill for an easy meal.

        So come on you guys, is this good or bad for we the people?

        • John Souter June 29, 2012 at 1:39 pm #

          It’s good for the markets short term and bad for the people and their democracies in the immediate and longer term.

          The kleptocrats of the EU -the Barrosa’s. Von Rumpoy’s and unknown faceless other are using it to force the creation of the EU Superstate.

          Power without responsibility and democratic audit is by definition tyranny. It is not a solution it is a trap which consolidates the superiority of the financial shamans and devalues every human soul in Europe.

          • Pat Flannery June 29, 2012 at 1:56 pm #

            Thanks for that John. The state media here in Ireland is putting it out exactly as handed to them by the government’s spin maestros, that this is a major breakthrough and gives the Irish people massive debt relief. I think they are lying to us.

            The Irish government sold the recent “Stability” referendum on the availabilty of bailout money from the ESM, now the entire ESM fund will go directly to the banks. How will the Irish government or any other government requiring help, balance its budget when all the available bailout money is gone to the banks?

  17. John Souter June 29, 2012 at 2:35 pm #

    Pat -it offers no debt relief to Ireland. Ireland was fobbed off by a promise of maybe if they were good and behaved themselves they might,maybe, could or perhaps get a slight amelioration to their debt interest burden provided the eurozone agrees to buy the debts using junk money disguised as fiat bonds while paying out real money to the banks and institution that caused and manipulated Ireland’s problems in the first place.

    If these were the rules adopted by the game of Monopoly it would never have reached the market.

    • Pat Flannery June 29, 2012 at 3:14 pm #

      Here is what RTE reported today http://bit.ly/NIu0Y4:

      “Speaking as he left the European Council building, Mr Kenny described the new deal as a seismic shift in EU policy, and said it would allow Ireland to re-engineer its overall debt level, which would reduce the burden on Irish taxpayers.

      “What was deemed to be unachievable has now become a reality and that principle has been established, decided and agreed upon by the council and heads of government,” he said.”

      How will this reduce the burden on Irish taxpayers? How will breaking the link between sovereign and bank debt improve things when Irish taxpayers are fully responsible for bank debts?

      • steviefinn June 29, 2012 at 4:35 pm #

        RTE & Dame Enda, you would be as well trying to get the truth from a leprachaun in a fairy field.


        Thanks, I did see it although am due to work pressures finding it hard to keep up at the moment.


        Are we still in the period in which Diamond Bob insisted we should get off the bankers backs – are derivatives starting to come to roost ?

        • John Souter June 29, 2012 at 10:02 pm #

          “What was deemed to be unachievable has now become a reality and that principle has been established, decided and agreed upon by the council and heads of government,” he said.”

          Pat – that’s what they call a euphemism -it means they’ve juggled the figures, modified the schedule and changed the loan sharks.

          I take no pleasure in saying this but my reading is the people of Ireland were given a “Yeh, we hear you, just don’t fog the issue for Spain and Italy.”

        • John Souter June 29, 2012 at 10:04 pm #

          Stevie -that’s the problem with diamanti’s -unlike diamonds they chip easily.

  18. ArtSmith June 29, 2012 at 4:01 pm #


    Thanks for your answer to my muddle. So if we want to be free of paying back funny money the european people don’t owe we should crash the Euro? That makes debt obligations denominated in euros go away? Really?
    I thought the game was to crash the currency and then asset strip any rent yielding industries/utilities or materials from a bankrupt population.
    I don’t see how we can win this one.

    • Golem XIV June 29, 2012 at 4:18 pm #

      Hello again ArtSmith,

      No I’m sorry I didn;t mean to meak it sound so simple. And the point you rsaise is a valid one.

      As long as we leave corrupted politicians in charge they will always tell us we must pay their friends and benefactors.

      But if the Euro was to crash and dissapear – then those countries that had the political will could make their debts disappear. Creditors would, I think stil try to sue in the Southern District Court.

      If the currency doesn’t disappear but a nation or nations leave it they can still repudiate their debts.

      The goal of asset stripping nations, I think, is far better done by keeping the Euro crisis going and insisting that all debts – public and private must be paid for on a schedule that ensures the nations involved will resort to selling sovereign assets at fire sale prices.

      The Euro crisis is a perfect way of asset stripping nations and of forcing through draconian, anti democratic and anti-welfare measures in teh name of tackling a ‘crisis’. Shock doctrine in action.

  19. Pat Flannery June 29, 2012 at 7:38 pm #

    I am beginning to think that what happened last night in Brussels was recognition that a default is inevitable and that the EU leaders decided that it is better it be a bank default than a sovereign default. It doesn’t matters in which currency the default occurs. Therefore the Euro is not the issue, bank debt is the sole issue. Unsustainable bank debt transcends currency considerations.

    There just isn’t enough money in all Europe to bail out the European banks. I think that’s the point the Irish politicians have been making all along. They were just waiting for the rest of Europe to catch up. Pushing that debt onto sovereign balance sheets was doomed to fail because sovereigns would then be forced to default and any sovereign default, even a small country like Ireland, would be worse than ten Lehman Bros.

    No doubt there are some who believe that the Germans will now be forced to accept Eurobonds to save the banks. I don’t think the Germans will blink on Eurobonds. By that analysis last night was a big victory for the Germans because when the crunch comes their intransigence on Eurobonds will not be the cause of a sovereign default, just a default of insolvent banks which everybody will applaud.

    Meanwhile the Euro will emerge unscathed, even stronger.

    • Paulie June 29, 2012 at 9:21 pm #

      Pat – I’m not sure that I would credit our finest with that much intelligence to be honest. The idea of Edna Kenny and good idea in the same sentence just isn’t right but as for your thoughts on the banks being let fail, that got me thinking it a step further. Could it be that the plan is not just to let the banks fail but to have the ECB pick off their assets as firesale prices and essentially have sub divisions of central banks in each EU country taking care of banking. Basically just one main banking institution in control of all European banking. I know it’s a bit of a stretch but these nutters have pretty crazy plans at the best of times or maybe I should go make myself a tinfoil hat 🙂

    • John Souter June 29, 2012 at 10:10 pm #

      Pat -your concern would be warranted if the money was there in the first instance.

      It wasn’t and now they’re trying to give it legitimacy as sovereign debt issued by a ponzi institution called the EU.

  20. Pat Flannery June 29, 2012 at 11:16 pm #


    Just because you’re paranoid doesn’t mean they’re not following you.

    It would make perfect sense from their point of view to consolidate all the EU banks into one giant squid. That is already the reality anyway. I think you are onto something there.

    But how are they going to get the money, either way, as John correctly points out? The only way they could get the money is by creating Eurobonds and I just don’t see that happening so long as Angela is alive. I think she really meant it and so does the German people. And we presumably are not going to go to war to force them.

    So all I can see ahead is a controlled collapse of the entire European banking system (including the British system!) to be replaced, as you so insightfully suggest, by an all-European Bank probably called “The Bank of Europe”.

    The Americans would love that because they could then control Europe through it. They are the only ones committed to issuing phony money. The Federal Reserve would then be, what it already is in everything but name, “The World Reserve”.

    Do I qualify for a tinfoil hat too?

  21. Mark Wadsworth June 29, 2012 at 11:18 pm #

    That is such a genius post title, you didn’t really need an article underneath it.

  22. patma2003 June 30, 2012 at 1:15 am #

    Steve Keen posted this link the other day, mentioning that this guy was really clever.

    And, he was…

    Genuine prophecy from 1992:


  23. Jim M. June 30, 2012 at 3:34 am #

    This seems along the right lines to me… see what you all think.


    • nell June 30, 2012 at 10:57 am #

      Manifesto is Ok as it goes. However, I was struck by the fact that the economists who put it together are mainstream economists who support, research and teach neoclassical theory. This is the the main theory that underpins government policy on macroeconomics and banking/market regulations. There is a deep contradiction here between the manifesto and the economic theory peddled by the economists who signed it.

      • Jim M. June 30, 2012 at 7:14 pm #

        Ok as far as it goes…. that seems about right to me too, nell.

        I’m just looking for signs of hope at this stage,and I am encouraged by the movement of the “Overton Window” vis-a-vis what does and does not get openly discussed

        A few years ago heterodoxical economists were rarer than hens’ teeth/rocking -horse shit (insert the simile of your choice here!). Contradictions aside, I do believe this represents a movement in the right direction.

        I hope so anyway! 🙂

        Chin still up?

  24. Roger June 30, 2012 at 7:56 am #

    Just posted this at the Economist group on linked in discussion I have been following.

    Remember there is still no new made up money and the made up money was made up anyway. More made up money to pay back made up money that is stealing the real bread off real working peoples tables and taking the food off their childrens plates and the shoes off their feet and clothes off their backs so that more made up money can be thrown at fraudulent banks who have created mountains of made up money to gamble in ficticous ponzi schemes. You couldn’t make it up.


    It seems that a lot of the people busily rowing against the obvious tide of lies believing them to be true are in denial, anything is believable if it can patch up a fraying world view.

    I know from my own experience that I checked double checked and went arouund again and again one doesn’t easily accept that ones cherished perceptions are founded upon a Lie. As a former useful idiot in the system myself its a big ask to accept ones status as ”useful idiot” how ever high one thought one had risen?

    For useful idiot think George Bush, Donald Trump any number of billionaires and captains of industry and political leaders. Not to mentionpeople genuinely working within a system they believe is something quite different to that which it really is. Smoke and mirrors has nothing on this artifice.

    Pass me a tin foil hat too.

  25. Roger June 30, 2012 at 10:01 am #

    I cobbled together my responses to the discussion in Linked in and put them in my blog its a sort of Praxis of the Socratic method. A distillation of all I have learned and can express from Davidś Blog here the other contributors and my own auto-didactic study programme.


  26. Gary June 30, 2012 at 12:42 pm #

    Printing money does not solve economic problems

    “Adherents to the Austrian School maintain that creation of new money ex nihilo (out of nothing) benefits the creators and early recipients of the new money relative to late recipients. Money creation is not wealth creation; it merely allows early money recipients to outbid late recipients for resources, goods, and services. Since the actual producers of wealth are typically late recipients, increasing the money supply weakens wealth formation and undermines the rate of economic growth.”

    Not to mention many other reasons.

    • Roger June 30, 2012 at 12:58 pm #

      Strangling aggregate demand by collapsing the money supply in the real economy does not solve Economic problems either Gary. Any solution to any problem must start with an honest appraisal of where one is exactly.
      Instead of trying to win an argument why do you not apply your mind to seeking some solutions whcih can be put in place in a structured way. There is no Magic Bullet that proceeds to an immediate solution.

      • Gary June 30, 2012 at 1:27 pm #


        You don’t collapse the money supply. No Austrian School economist advocates that. You collapse the unpayable debt. You write it off. That is vastly different from collapsing the money supply. Debt/credit is a future claim on money.

        There are no painfree options once you have a debt/credit bubble, you must extinguish the debt and get new economic growth without printing money, because as I wrote above , printing money won’t get you new economic growth but it will get you inflation and compound the problem.

        • Roger June 30, 2012 at 1:48 pm #

          Gary, by extinguishing the debt you remove the money it is that simple? Money is debt under the current system so the starting pioint has to be a planned transition. Steve Keen and others have addressed this point.

          There are systems approaches to understanding the variables. Slogans and such do not serve an understanding of the Problem firstly and do not contribute to suggesting canditates for solutions to the problem.

          WIth respect to the inflation question most people I have read recently tend to agree that we have a huge Debt Deflation at present in the real economy. Mish Medlock , who I think is a Gold Bugger like your self believes so and the funny money is mainly being poured into the casino that is awash with Chips the rest of us have no access to.

          By the way are you holding physical gold or paper claims to gold?

          • Gary June 30, 2012 at 2:14 pm #

            Debt is not money. Debt is a future claim on money. Just because they print up the money out of thin air at the time the debt is signed for, does not make debt money. The debt principal must be repaid with interest. What Keen is saying is just print another wodge of money to repay the debt on top of the wodge that was already printed when the debt was originated. That is two lots of principal plus one lot of interest printed for each debt. That is inflation defined and it will destroy any chances of growth.

            If it was so easy to get growth by printing money , there would never be any economic problems. No growth ? You just print money. Not enough growth ? Just print more money. Too much debt ? Just print money. Too much debt and not enough growth ? Just print money. A five year old will laugh at that.

            There is no free lunch.

          • Gary June 30, 2012 at 2:32 pm #

            I do agree that there is massive debt contraction in some areas, and Mish Shedlock is correct, but I am not sure that new debt is not being created just as fast ,or faster in other areas .eg sovereign created bailout debt. The gross picture is cloudy. Irrespective, there is an ongoing demand for money(MZM, money with zero time maturity) to repay this debt, and especially in the US dollar where the debt is mostly denominated.

            The definition of inflation that the Austrian School uses, and the only one that makes any rational sense, is the expansion of money(MZM) supply faster than the demand for goods and services. If we just print money to extinguish debt , then the amount of money will quickly surpass the demand for goods and services and that will be inflationary. If we monetise all the debt the value of the money will tend to zero, because the debt is many times greater than the global gdp, and you will have a repudiation of the nearly worthless money and hence hyperinflation.

            At what point we cross from devaluation of the value of the money to repudiation of the money and hyperinflation is anyones guess, and that is what Keen is flirting with in calling for a a Debt Jubilee printathon.

  27. Roger June 30, 2012 at 3:58 pm #

    Gary at some point there has to be Praxis in all of this not just platitudes and theory.
    Have you seen these debt annihilation videos I have posted here before but in case you or anyoone else has not seen them they are worht a look.




    I believe the inflation quewstion is amply covered in these videos ands I believe Steve Keen covers it too.

    Do you dispuute that when the debt is repaid to banks the money dissappears? in which case which part of that process denies the proposition that all debt is money ( 97% of it at any rate, ) until it is repaid at which point it ceases to exist.

    • Gary June 30, 2012 at 4:18 pm #

      The debt (IOU) gets destroyed when the debt is repaid. The money(MZM) that was created out of thin air at the same time the debt was made, does not get destroyed. How can you destroy money that has now become other people’s deposits due to the loaned money being spent ? The clue is in the name for money ,MZM : Money with Zero Maturity, it never matures or expires.

      This guy explains it quite well :


      • Roger June 30, 2012 at 4:46 pm #

        Cash money never expires but that is 3% of whats going around the system Gary, peoples deposits are as illusory as any other form of debt money they are book entries all you can really trust is what you can put your hand on and touch, whats under your mattress in your warehouse or growing in your fields or forests. The idea that the money becomes other peoples deposits does not
        satisfy the qualification that all money is debt, for the deposit to exist in the other persons bank account it must be represented by a debt in some else’s account hence 97% of all money is Debt by definition.
        Money created in a steady state economy can be produced that is neither inflationary or created with the requirement of some one else’s indebtedness.
        I am of the school that usury is wrong and I object to money founded on usury and the practice of usury this is not a religious stance but a philosophical one and also an ecological one.

        As to Zero Maturity of money that doesn’t expire Coleridge expresses it better than I could in Table Talk.

        this from 27th April 1823.

        The national debt has, in fact, made more men rich than have a right to be so, or, rather, any ultimate power, in case of a struggle, of actualizing their riches. It is, in effect, like an ordinary, where three hundred tickets have been distributed, but where there is, in truth, room only for one hundred. So long as you can amuse the company with any thing else, or make them come in successively, all is well, and the whole three hundred fancy themselves sure of a dinner; but if any suspicion of a hoax should arise, and they were all to rush into the room at once, there would be two hundred without a potato for their money; and the table would be occupied by the landholders, who live on the spot.


        • Gary June 30, 2012 at 5:40 pm #

          I agree with this, except that all not money is debt. MZM is created alongside the debt , but is not in and of itself a debt, because it does not ever expire and can be saved as a store of value(albeit a poor one). We have cloud cuckoo-land debt claims.

          Debt is a claim on MZM, MZM is a claim on goods and services. If growth of any of the former two is relatively faster than the growth in demand for goods and services(and wrt each other) you have boom and that will lead to bust.

          And that is precisely why this system is going to hell. The level of debt has risen to the stratosphere, far divorced from growth of MZM(because no new money was created for derivative debt) which in turn is growing faster than real economic growth of goods and services. MZM is being pumped out by monetizing existing debt in the secondary market by QE, and this has the effect of reducing debt while increasing MZM and now there is a risk of hyperinflation of the MZM.

          Everything about economics is how far the growth in claims on goods and services are divorced(or not) from the actual growth of goods and services. All the sound money crowd(I include myself among them) are advocating is that these claims must remain in line with the demand for goods and services, ie non-inflationary growth in claims( I don’t know what the exact relationship should be , probably linear?).

          By empirical proof(of over 200 years of data) the value of gold(ie its per weight unit claim on goods and services) moves in lockstep in this non-inflationary relationship. Politicians and bankers cannot determine what the non-inflationary supply of money should be because it is empirically impossible to calculate, the economy is too complex. So they should leave it to the value of gold to act as the yardstick. Conversely , if the non-inflationary money supply was possible to calculate, and we could trust the politicians and bankers(those are 3 hurdles with a very high bar, the first hurdle is impossibly high), then we will have no use for gold.

          If they don’t shrink the supply of debt(by restructuring/default) and MZM back down to the level that is in line with the real growth rate, and I see no signs that they will, then the MZM price of gold will rocket. IMO

      • Roger July 15, 2012 at 2:02 pm #


        Gary this is an excellent talk on this point it explains the double entry book keeping and shows how money in the hands of everyday conumers when used to repay bank debts effectively destroys the money from the system.
        When Banks sttle their interbank accounts with cerntasl reserve bank money that is a different question.

        The point on debt annihilation by a debt jubillee and thew contention that it would not be inflationary can only be understood once this simple explaination is firt internalised.

        I would be interested to hear what your impressions and take away views are from watching the talk it is 30 minutes well spent in my opinion.

  28. Gary June 30, 2012 at 4:53 pm #

    This discussion should persuade people that printing money is a fraudulent, inflationary mess. When a loan is made new money should not be created, old existing money should be TRANSFERRED from the lender to the borrower. That is what happens in the real world when anything is loaned. That which is loaned is transferred between the parties. If I lend you my car, I don’t create a new car I lend you my old existing car.

    If the economy grows, in a fully transferred monetary loan system, ALL the money units becomes more valuable , and then the units can be divided down into smaller sub-units. That is how the money supply should “grow”. This preserves savings(actually increases the value of savings), and is non-inflationary because the total units remains the same(because all the sub-units add up to the total original units). Loans cannot be made without the money first existing. As it should be..

    This “new money from thin air” loan fraud is at the heart of our economic woes. This is also why MMT has no solution for the problem. They just transfer the “money printing from thin air” from the banks to the govt.

    • Roger June 30, 2012 at 5:44 pm #

      Hi Gary,

      Iḿ loosing the thread in your reasoning here I am afraid.

      There are two kinds of Money Broadly Speaking. Cash Money ( the stuff printed for the Government)

      and Debt Based Money The stuff digitally created by The Banks.

      We can get into the panopli of financial instruments and derivatives bonds and so forth later but Broadly speaking there are two types of money neither of which is backed by anything.

      What this money represents is trust in each other to provide a service or a thing.In effect the credit of society, this is a Common asset part of the commons, that which is made for the benefit of society and to which we all owe a duty of usufruct to foster and respect and preserve for each other.

      True it is that the usufruct has been abused by Governement and private banks in turn and together they are effectively two conspiritors in the same misappropriation of the system.

      Were The system husbanded for and on behalf of Civic society then it matters not if it is backed by old wooly socks, thin air or the yellow MMś in every fifth packet stamped with a smiley face. What is important is that enough oil is put in the engine to allow necessary exchanges to take place and commerce to function.

      That 97% of this power is now in Private banking hands is I think we agree dangerous and wrong, placing it in the hands of a centalised and corruptable government is equally wrong but If, as Positive money and the institute for public Banking advocate, it is in stake holder accountabe public trusts with democratic oversight then in the computer age we can have a system that does not function as a debt slave manufacturing machine that benefits only the wicked Wizard behind the controls.

      The Secrets of Oz is a wonderful film, the Red shoes were Silver in the book and the Yellow Brick road is a metaphor for the Gold Standard, all explained in that wonderful documentary film by Bill Still.


      Do take a look also at the videos I posted above I think they are well presented and state a sensible view of one solution. I read the link that you posted and I did not find that the Authors reasoning stood up to muster.

      • Gary June 30, 2012 at 6:45 pm #


        Thanks for the video link. I will definitely watch. I was supposed to work today , but as can be seen that did not pan out 🙂

        I think it is essential when discussing these matters to get some definitions nailed down. Half the confusion comes from speaking past each other.

        This article from the FED goes through the entire bank loan process.


        The main point for me is that money that is repaid to banks for loans made ends up as reserves in the banks and so is able to be lent out or used to make purchases again by the banks. The money does not vanish. Bank Reserves are soaring and many claim this is pent-up inflation waiting to be released as the economy recovers. The paper mitigates this on the premise that the central bank can mop up these excess reserves in a timely manner. Well, given their track record reacting to ANYTHING, I don’t for one moment believe it.

        • Roger June 30, 2012 at 7:37 pm #


          I will read the Fed paper in detail but I think you are confusing Base ‘money or reserves and the debt money that is created by the multiplier.
          the money that is multiplied by treating the same basic money over and over as new money is only in existence as long as the debt exists that is the essence of double entry book keeping, which is a complete nonsense.
          The Fed itself and the Bank of England are no less vested in perpetuating the myth Gary.

          The idea that Banks reserves at Central banks and deposits held from customers have anything to do with the debt money that banks creates is pretty comprehensively discredited now various papers linked to here and elsewhere show that to my own satisfaction but of course you would have to do the hard yards yourself to satisfy yourself. David has done a lot of the slog already but until one gets down to running some numbers oneself and challenging the faulty logic which you are re iterating on the back of your own fag packet or in a fancy spread sheet no doubt , one is always susceptible to the dismissive wave of the hand and charge that oh this stuff is to complicated for you non bankers and Non economists.

  29. John Souter June 30, 2012 at 5:48 pm #

    I have copied the article below from the Glasgow Herald – its author, Ian Bell is one of the few columnists who challenge cause and effect other than the tinkering of lexiconic vanities adopted by most of his colleagues as a substitute for wisdom.

    While the article is aimed at the Barclay’s Libor scandal, the morality of his critique could apply just as well to the 2007 meltdown and on through to the EU and Euro crises.

    In essence nothing has changed since 2007 – a fatally flawed system is using coercion to paper over its flaws and using blackmail to pressurise nations into accepting debts in order to perpetuate and continue for it to profit from the fraudulent practices it initiated.

    In essence the only progress that has been achieved since 2007 is the bill for the system continuance has increased beyond the nightmares of sanity.

    Interest-rate fixing: A knife in the heart of capitalism

    Ian Bell

    If you fancy a free market economy, or a society based on such an economy, best take care that your markets are not rigged.

    If politics is the game, it helps if you can name a market that is – or ever has been – truly open, honest and free. Anything else is a fraud.

    Britain has been drifting away from the old, comfortable compromise of a mixed economy for the best part of 40 years. It has been the casualty – or the beneficiary, if that’s your taste – of a global ideological war. The state, the unfettered market, or some halfway house between the two? The scorecard says the neo-liberal version of the so-called Washington consensus emerged victorious, time and again.

    So here we are. The prospectus offered was personal liberty, wealth creation, rising global prosperity and the rolling back of the oppressive state. In practice, it meant privatisation, labour “flexibility”, minimal regulation, market fundamentalism and the toleration of inequality. Those, said mainstream politicians of every stripe on every continent, would do the trick.

    Nobody mentioned a bunch of crooks running riot, time and again. Nobody said they would abuse power and wealth at every turn in what amounted to a vast conspiracy to defraud. Nobody said that rigging the game for the sake of personal enrichment would become the point and purpose of the system. They preferred the old lecture explaining that vile Marxism “failed to understand human nature”.

    So who still believes that the cost of petrol, food or credit, for nations or individuals, rises or falls because of the pure, dispassionate action of market forces? Speculative attacks, such as “aggressive tax avoidance”, are hardly in the spirit of the thing; the fiddling of interest rates is another malignity entirely. It strikes at the heart of capitalism. When prices cannot be trusted – for such is the effect – there is no free market.

    In the case of Barclays, and perhaps 20 other household names trading on the public trust, that was the whole idea. The London interbank offered rate (Libor) and its European equivalent were supposed to act as guarantees that bankers’ claims matched reality, that they described accurately commerce between banks and, by extension, the wider world. For the sake of their bonuses and their bank, traders at Barclays decided to dispense with annoying, unhelpful reality. Time and again, for years, under the alleged instruction of “senior management”, they lied.

    You don’t need to understand how Libor is constructed as a global benchmark, with highest and lowest figures discarded and averages compiled, to grasp what was done. Bankers were taken at their word. Instead of regarding this as a solemn responsibility, they took it as an opportunity, offered by suckers. The simple analogy is discovering, after a day at the races, that every nag was doped. Forget the casino economy: these characters were controlling the roulette wheel.

    Financial journalists have been struggling to describe the fundamental nature of the fraud. In essence, it destroys their world. When Lehman Brothers went down in 2008 a few speculated, nervously, that capitalism itself was in deep trouble. Then the euphemisms began to flow: an excess of risk, recklessness, “complexity”, systemic failure, unpredicted consequences. Some could make it sound like just one of those things. Evidence that individuals were personally, knowingly culpable was soon overlooked.

    The Barclays affair nails every myth, every protective lie. At Westminster, Labour and Tories alike have regarded it as their duty to remove or avert financial sector regulation. They have taken the bankers at their word in claiming that the City is too big and too important to be governed by meaningful rules. Even when forced to rescue banks, these politicians have refused to recognise the logic of their actions. No rivals to the institutions, least of all in the shape of a state bank, could be tolerated. The bankers were very clear about that.

    The list of misdemeanours – crime is such an ugly word – has been growing since banks started to go bust and demand, with menaces, public money. State support to Britain’s financial sector, in cash real, printed or borrowed, now tops £1 trillion and the heart is being ripped from the welfare state to foot the bill. Earnings and employment for the commonality disappear while rewards for the oligarchy increase. Yet still they forge on, mendacious or incompetent by turn, serene in their self-regard, secure in their self-awarded wealth.

    First they are obliged to own up, though apologies are few, for the PPI scam. Then RBS fails to fulfil its basic function for days on end because, it is alleged, of a failure to invest in computer systems. Then Barclays is exposed for systematic tax avoidance worth half a billion pounds. Then the banks, the entire tribe which claims an essential role in British enterprise, are revealed by this newspaper to have been mis-selling – the euphemisms never end – protection against fluctuations in interest rates.

    The last of these, as we have reported and as the Financial Services Authority now accepts, was no mishap. Interest rate swaps were sold ruthlessly, knowingly, to thousands of small businesses who neither needed nor understood “the product”. The cost has put a lot of hard-working people out of business. Compensation, another billion or two, will follow in time, no doubt, supplied in the end by the customers who are never allowed to wonder about which “market forces” set the rate for a credit card or a home loan.

    In the case of Barclays, the forces described by Adam Smith – who knew greed when he saw it – were impersonated by a few flash traders calling in favours, and by the bank’s participation, so it is further alleged, in an industry-wide ring. Mervyn King, governor of the Bank of England, the institution that will shortly resume control of this circus, summons up the full force of his rhetoric and calls such behaviour “shoddy”.

    Barclays prefers to say its “standards” – it doesn’t say what those might be – have not been met. Bob Diamond, chief executive and former head of Barclays Capital, chief fixers of Libor, turns down one of his bonuses and counts that as an apology. He sees no reason to resign, cash in shares worth £22 million, or demand a year’s worth of salary and benefits just to leave the bank. Diamond’s total “package” of rewards for alleged success last year was £17.5m. The price of failure on his watch? Even after his bank is fined £290m, the CEO considers himself too important to quit.

    This is not the tale of a few rogue traders pushing their luck. That excuse has worn paper thin. Plainly, the system is rotten, but so too is the ideology that underpins it, the belief that markets cannot – and must not – be controlled, the idea that every political choice must be subordinated to market imperatives, the blind faith in economic theory, if it deserves the name theory, first and last.

    But let’s not complicate matters. We have been ripped off royally, whether as simple customers and taxpayers in the northern hemisphere, or as struggling nations in the developing world. The arguments for rational alternatives will go on. Meantime, don’t start believing a word about reform unless and until arrests are made.

    • Gary June 30, 2012 at 6:07 pm #


      This is organised crime. No less. A mafia economy without consequence for the perps.

      Regulation certainly did not work, not least because they promised MORE regulation after the crash in 2007, and we know that LIBOR rigging was taking place after that. We also have reason to believe allegations that Gordon Brown himself was screaming at the banks to force LIBOR lower. Mis-selling rate swaps was happening up until now.

      The only regulation that would work is to allow banks(and any other failed business) to go bust. Then they would not have been around in their present form and power to rig anything and those that survived may have been too petrified to rig anything.

    • Roger June 30, 2012 at 6:39 pm #

      What a cooincidence John I came across Ians work last week he quoted
      Cat Maclean in an article about Clydesdale Bank and independantly if that A freind and former head of Clydesdales agriculture unit also refeered me to him earkier today.
      Cat Macleans initiative to provide a vehicle to stand up to banking abuses is very interesting and I wrote to her last week but have yet to speak on the telephone.



      such a small world another freind told me the other day that his bass player from his band back Aberdeen in the 70s was living in Båstad which is about 10 km from our swedish cottage is it synchronicity or are the pieces falling into place and the pebbles we have all been casting into the abyss finally revealing our hosts, secret life of waves?

      • John Souter June 30, 2012 at 9:47 pm #

        Roger the world is a small space, and while I can assure you I wouldn’t know the difference between a crochet and a semi-quaver I know the music I like to listen too and the integrity of the quality that gives it value. Now that’s subjective and individualistic but for that to work at all it must evoke feelings and create pictures.

        This money charade fails on every point but mainly by the way it evades structure and to illustrate my point I’ll use the simplest question I can think of and it’s this -who exactly are the people or institutions who are claiming to lose their shirts in this money market?

        For example -if institution A claim to have £100million exposure in B bonds what’s to say B hasn’t got £100 million bonds invested in A bonds and both are claiming relief from a bailout?

        Is it not a possibility. Creating exponential relief on possibly neutral assets?

        • Roger July 1, 2012 at 3:56 am #

          the issue of double counting in banking I think is a serious one and its practitioners are like so many Air Guitarists amogst the real players of the Real economy and what the Americans call Main Street.

          On Crotchets and Semi quavers I prefer the American system of whole, Half Quater eighth and sixteenth notes and so forth which is an easier concept to follow as most of us understand fractions and division from basic maths and it avoids learning new names for the same abstract concepts. Funnily enough I have just started a concept study on developing some software to help as a learrning aid for creating strumming patterns for songs available in standard music notation or Tablature.

          Music and Counting, Crotchets or Semi Quavers quarter or Sixteenth notes, Pythagorus really has to be your man.

          Hermes. Step up, Pythagoreanism, and show yourself.

          Zeus. Go ahead.

          Hermes. Now here is a creed of the first water. Who bids for this handsome article? What gentleman says Superhumanity? Harmony of the Universe! Transmigration of souls! Who bids?

          First Dealer. He looks all right. And what can he do?

          Hermes. Magic, music, arithmetic, geometry, astronomy, jugglery. Prophecy in all its branches.

          First Dealer. Can I ask him some questions?

          Hermes. Ask away, and welcome.

          First Dealer. Where do you come from?

          Pythagoras. Samos.

          First Dealer. Where did you get your schooling?

          Pythagoras. From the sophists in Egypt.

          First Dealer. If I buy you, what will you teach me?

          Pythagoras. Nothing. I will remind you.

          First Dealer. Remind me?

          Pythagoras. But first I shall have to cleanse your soul of its filth.

          First Dealer. Well, suppose the cleansing process complete. How is the reminding done?

          Pythagoras. We shall begin with a long course of silent contemplation. Not a word to be spoken for five years.

          First Dealer. You would have been just the creed for Croesus’s son! But I have a tongue in my head; I have no ambition to be a statue. And after the five years’ silence?

          Pythagoras. You will study music and geometry.

          First Dealer. A charming recipe! The way to be wise: learn the guitar.

          Pythagoras. Next you will learn to count.

          First Dealer. I can do that already.

          Pythagoras. Let me hear you.

          First Dealer. One, two, three, four,—

          Pythagoras. There you are, you see. Four (as you call it) is ten. Four the perfect triangle. Four the oath of our school.

          First Dealer. Now by Four, most potent Four!—higher and holier mysteries than these I never heard.

          Pythagoras. Then you will learn of Earth, Air, Fire, and Water; their action, their movement, their shapes.

          First Dealer. Have Fire and Air and Water shapes?

          Pythagoras. Clearly. That cannot move which lacks shape and form You will also find that God is a number; an intelligence; a harmony.

          First Dealer. You surprise me.

          Pythagoras. More than this, you have to learn that you yourself are not the person you appear to be.

          First Dealer. What, I am some one else, not the I who am speaking to you?


          I couldn’t resit playing a couple of guitar parts over this Max Keiser Quist, STFU David Cameron Tune.
          ´Ýou are the product of an Elitist School of Banking Schmucks`´

          MAx Keiser.


    • backwardsevolution July 1, 2012 at 8:22 pm #

      John Souter – great article. Thanks for posting.

  30. backwardsevolution July 1, 2012 at 9:22 pm #

    “This is the truly destructive effect of Ponzi capitalism. It must feed off a constant supply of greater fools in order to continue to grow. It is not a creator but a destroyer of minds and ultimately bodies.”

    Greece, Spain, Italy, Ireland – how were they different from the sub-prime borrowers in the United States? The sub-prime borrowers should NEVER have been given loans, most especially at the rates they were given. Had the rates reflected risk at the very outset of the loan, they wouldn’t have taken the loan because they couldn’t have made the payments.

    When you lend at ridiculous rates to sub-prime borrowers, don’t be surprised when you DON’T get your money back!

    There was NO growth, and this ISN’T really deflation because without growth, what’s to deflate?

    What appeared to be growth was only DEBT, and that debt needs to be retired by everyone who took it on.

    Everything else is just a game, a game the banks are trying to win. Austerity for the people; big bonuses for the banks.

    The Ponzi is over, it’s run its course, it needs to end. To try to re-inflate it would be unfair to those who did not play.

    I agree with Gary that Steve Keen’s debt jubilee would not only be inflationary, but UNNECESSARY.

    David, this is a great piece you’ve written. I agree with you. “Who For” indeed!

    • Roger July 2, 2012 at 8:28 am #

      Hi Backwards Evolution.

      I am not sure how retiring debt would be inflationary? that element of a debt jubilee could not be inflationary and of course as the new money creation process will not be designed to inflate and deflate asset bubbles for private bank profit going forward, there would not be a problem there either.
      The MMT analogy to a Tap filling up a bath and the plughole drawing water out is helpful in that respect, of course there is the velocity of circulation to consider as well.

      I came here to post this Mish Medlock piece regarding the question, can the Fed continue to inflate? limits to inflation idea, and the question of Debt Deflation which is very important to consider I think.



      • Gary July 2, 2012 at 10:17 am #


        Swapping a claim on money (debt), that is many multiples of the amount of good and services in the economy, for money, must be inflationary. The price/value of money falls as you print more of it to monetise the debt. That is supply and demand, economics 101.

        If you write off the debt(claims on money) or default on it , then you have not increased the money supply and your money retains its value. That is not inflationary.

        We not only have to default on the unpayable debt by writing it off, we will eventually have no option. Because if we don’t default on the debt we will certainly default via hyperinflation of the money as we attempt to monetise the debt.

        Note the term “monetise the debt”. The understanding of this term is that debt is distinct from the money. Money is swapped for a claim on money(debt). The debt is extinguished , the new money used to extinguish the debt remains. That is inflation, by defintion.

        • Gary July 2, 2012 at 10:38 am #

          “That is inflation, by defintion.”

          I should add the rider “all else equal”, to protect myself from the pedantic. 🙂

        • Roger July 2, 2012 at 11:14 am #

          Gary if the money created is used to extinguish the debt then it can not be used then for something else? This is true if in the hands of an individual or non bank business and would also be true if the fractional reserve artifice was denied to the banks.

          Ergo if the money is used to extinguish the debt and not buy other things it can not be inflationary.

          • Gary July 2, 2012 at 1:06 pm #

            The money can certainly be used in exchange for goods and services, Roger. After all, money is the universal medium of exchange, for if it were not it would not be money.

        • Roger July 2, 2012 at 1:39 pm #

          Before delving into those, kudos should be given to the band that are said to have started it all – Van Halen! The case that remains in most people’s minds is the time when the band would ask for a bowl of M&Ms with the request that all of the brown ones be removed by hand. The rider specified, “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.” This may seem like a strange request but there was a very valid reason behind it. Because the band would travel with a very complex set of equipment, their rider needed to spell out in intricate detail the specifications of setting up this equipment for safety and liability reasons. So their logic was that if they had found brown M&Ms backstage, the promoter obviously didn’t read every line of the contract meaning that there could be some major problems if the show went ahead. Little did Van Halen know just how much of an influence this simple request would have on the artists of today – many of whom choose to indulge to the extreme with their eccentric requests. Welcome to the real world of Spinal Tap!


          I was once shown the rider from Fun Living criminals we had to supply 10 pairs of black cotton socks in original wrapping? go figure.along with a bunch of other stuff but Van Halens mand mś remains my favourite.

      • Gary July 2, 2012 at 10:35 am #

        There is no inflation ?

        Look at the price of gold since 1999. Gold cannot be inflated. Practically ,the total amount of gold is fixed. The new supply of mined gold is negligible to the already existing supply of already mined gold. Most all gold ever mined since the first mine is still around.

        The value of a weighted unit of gold , quoted in the currency/money that is being devalued(inflated) must rise. That is what is happening.

        No amount of esoteric, contorted debate on the whys and the wherefores of money can refute that.

        Gold is the one indicator that refutes the monetary lies of men.

        • Roger July 2, 2012 at 1:15 pm #

          Gary when debt based money is used to extinguish bank debt it disappears, Think the African blue Parrot sketch and Monty Python, It ceases to Exist, it expires, it goes to meet its maker.
          Banks create new bank money only when there is a corresponding promise to pay it back I.E debt thats why its called debt based money and why the interest element isn’t created and so forth leading for the need for perpetual expansion narder nadda nadda ..Have you ever had double entry book keeping explained to you and understood its underlying absurdity also?
          Your comment re Gold being the only real money is absurd, I think yellow m and mms left over from the rider in Van Halen concerts would do just as well.?

          • Gary July 2, 2012 at 1:47 pm #


            Bookkeeping entries are an attempt to rationalize this fraud. They are not worth the paper they are written on. Not even the MMT people, that you claim to agree with ,are taken in by this fraud. The new money is printed at the same time that the debt is written, it is the debt that gets extinguished, not the money when debt is paid off. The money becomes reserves for more new money printing :

            “The repayment of loans does not “destroy” money [like many economists, including Paul Krugman believe], but transfers it out of income accounts—where it can be used for expenditure—to a reserve account. Once there, it is an unencumbered asset of the banks which can then be re-lent—though not spent directly on commodities or services. This adds an important additional insight to the concept of endogenous money: not only do “loans create deposits”, but “the repayment of loans creates reserves.”

            p. 18, Keen, Steve. in Keyne’s ‘Revolving Fund of Finance’ and Transactions in the Circuit.

            AND :

            “According to this argument [that repayment of loans destroys deposits] banks were able to claim that, yes, they did create money, but not for themselves. This bank credit was, in principle, temporary. Bank credit only lasted for the duration of the loan, and upon repayment was cancelled out of existence.

            But this is not what actually happens at all! As any bank manager will confirm, when money is repaid into an overdrawn account, the bank cancels the debt, but the money is not cancelled or destroyed. The money is regarded as being every bit as real as a deposit; it is regarded by the bank as the repayment of money that they have lent. And that money is held and accounted an asset of the bank.

            “The fact that upon repayment, money that they have created is not destroyed, but is accounted as an asset of the bank, proves beyond dispute that when banks create money and issue it as a debt, they ultimately account that money as their own… The point about repayments is that money is not destroyed but is withdrawn from circulation. Thus the total of deposits has been decreased, but not the money… Therefore it is true to say that loans are temporary but the money created by banks is permanent. Once created it belongs to them, constantly returning to their ownership and control, with repayment of each debt.” – Mike Rowbotham, chapter 2 of The Grip of Death:

          • Roger July 2, 2012 at 2:31 pm #

            Gary I think you are getting your apples and oranges mixed up by over complicating a fairly simple principal.

          • Gary July 2, 2012 at 2:41 pm #


            The mechanism of the fraud , and its bookkeeping obsfucation, may be complicated or misleading, but aside from the mechanism, the question of whether the money gets extinguished when the loan is repaid is simple. It either does or it does not. You say it does, I say it does not.

          • Roger July 2, 2012 at 3:58 pm #

            Indeed Gary, either it is or it isn’t.

            Any other views on this simple question?

          • Roger July 2, 2012 at 4:22 pm #

            apart from the barter bit this explains the debt money creation process quit well.


            The way the process works is as follows: A commercial bank, savings and loan, or credit union can, within limits of reserves set by the Federal Reserve Bank, accept assets (goods or property) pledged by a trader as collateral, set up an account which represents a portion of the value of the assets pledged, create a sum in the trader’s account (the wave of the wand, mentioned previously), and give the money so created to the trader or the trader’s payee. This is how the process of converting wealth to assets works in our present money system. The trader pledges assets, and the bank permits the creation of money, which must be returned to the bank (the mediator), with interest, to free the asset pledge. If in the meantime the borrower cannot make payments, the bank takes the assets pledged.

            While banks are generally credited with the creation of money, it is still the traders who go to the bank to borrow who are making the commitment to place goods or services on the market to repay their debt. So, as mentioned above, traders are still the functional creators of money, rather than the bank. As these traders place their goods and services on the market, and repay their loans, the money they issued (borrowed) is extinguished.

            Gary I am very much against private banks having this power due to the obvious moral hazard and the numerous breaches of usufruct proven time and again.

            money should be neutral and not privatised in this way contrary to your view I do not think Gold the only answer, if indeed it is any answer at all.

          • Roger July 2, 2012 at 4:27 pm #


            this description here makes the same confusion between bank created money and the printing of currency or the Folding lucre beloved of spivs ever where.
            loadsa money, harry enfields plasteringb spiv known to the brits here of a certain age i’m sure.


    • Joe Taylor July 2, 2012 at 8:29 am #

      http://www.ianfraser.org/youre-telling-me-that-ben-bernanke-is-full-of-st-how-securitizations-work/ reat

      Here is a great cartoon that describes the sub-prime crisis in simple, if crude terms. Substitute Mervyn King for Bernanke and QE for sub-prime and it applies to the UK situation.

  31. johnm33 July 2, 2012 at 8:34 am #

    Apart from HSBC, Nationwide and possibly the Co-op bank all of our banks are bankrupt and fighting for their lives. Whilst i’d love to see them all collapse and take their stakeholders down with them, the intergenerational stupidity of our political class gives me no confidence in their ability to cope with such a situation. The reason we’ve had QE is because the banks no longer trust each others ability to honour their ‘bookeeping entries’ debts and credits and all the money shovelled down the drain of the banking system was merely to oil the works. I mean anyone can honour their debts when they have access to money at the equivalent of -2.5%. Still as the article above posted by John Souter points out maintaining the status quo has only cost us a trillion so far.[£17000 each]
    Steve Keens debt jubilee or something like it is merely the recapitalisation of the public as opposed to the banks [and corporations] and offers a route back to the type of capitalism that served so well in the fifties, without the trauma which a general collapse of the economy would impose on society. The inflation that would result would be a small price to pay, alternatively a temporary universal turnover tax could be imposed to pay for it.

  32. Pat Flannery July 2, 2012 at 9:24 am #

    We hardly ever hear of Credit Default Swaps anymore. Why? They have not gone away you know. When are we going to talk about decommissioning these weapons of mass destruction? Are they so terrifying that we have developed mass amnesia rather than confront them?

  33. Roger July 2, 2012 at 9:30 am #

    AT Last anothe web site calling the foreclosure business a nice little earner for the banks and their henchmen.


    I did a blog note on my own research into this last year.



    • Roger July 8, 2012 at 8:45 am #

      Mish writes on the debt jubilee and steve keen today. He puts the same inflation point as you Gary. I think he is wrong and you have both not thought it through.


      I placed a comment with a link to a blog I read yesterday, I have been reading Lucian and was interested in his mention of Solon and the money lenders which lea<ad me to Plutarch and this Greek Scholars Blog.

      Roger Lewis
      Unusually for you Mish your rebuttal of Keens Debt Jubilee proposal is wholly rhetorical, wheres the Beef mate?
      David Greiber in Debt the fist 5000 years also describes the debt jubilees of the ancients.
      The ancients show that the bankers can not be trusted read about Solons Reforms and a great guide is this blog form a Greek Scholar from yesterday.



      • Roger July 9, 2012 at 8:29 am #

        Mish is off on one of his union bashing rants again this morning happily there are quite a few dissenting views expressed.
        Heres one response I made.

        Brother could you spare a dime, a great anthem of the 30’s depression era is very apt today.
        I have in songs and poetry and through the study of philosophy tried to express one view point as to where the roots to this current problem lie. I do not believe it is the unions or a broad group of organised labour, these organisations are for the smaller people the little people the Plebs. The big swinging dick in all of this is the Fed and the banking cartel followed by the large corporate industrial and financial fascist complex ( an extension of and innovation of IKE’s industrial military complex.)

        Sixteen Tons.
        Intro and background
        The Song, covered by me.


        Let Them Eat Cake.

        Illuminati and Gliteratti.

        Lifes Energy Force.


        Baards of Wales.


        Democracy 2011.


        Citizens Not Subjects.


        Masters of War, Dylan Cover.


        There are all sorts of useful links in the video descriptions.

        • Gary July 11, 2012 at 12:03 pm #


          I don’t agree with Mish on his union views. I happen to support unions as a democratic representation of employees. There is nothing anti-libertarian about unions that I know of.

          As to monetizing debt NOT being inflationary, there is an easy quantification of inflation : if existing savings are being reduced, then you have inflation. When you monetize debt you increase the supply of money you reduce the interest rates(supply and demand) and this reduces the interest on savings. We now have negative REAL interest rates, which is the effective rate of return on savings, and this erods savings.

          Another foolproof , and related, way of looking at this is to look at the price of gold. The price of gold(POG) moves inversely to the REAL rate of interest(it is the most solid empirical relationship in all economics , according to Keynes and Summers/Barskey) and the POG has increase by 500% since 2003. BTW: I actually think the price of gold is being suppressed by paper ETFs that do not actually have the physical holdings that they claim. If they can suppress LIBOR , they can manipulate anything.

          More printing of money = lower price of money(supply/demand) = lower real interest rates = erosion of savings = higher gold price= inflation.

  34. Gary July 11, 2012 at 4:53 pm #

    Gold manipulation , the smoking gun.

    “Why Gordon Brown sold Britain’s gold at a knock-down price

    Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.

    I spoke with Peter Hambro, chairman of Petroplavosk and a leading figure in the London gold market, late last year and asked him about the rumours above.

    “I think that Mr Brown found himself in a terrible position,” he said.

    “He was facing a problem that was a world scale problem where a number of financial institutions had become voluntarily short of gold to the extent that it was threatening the stability of the financial system and it was obvious that something had to be done.””


  35. Gary July 11, 2012 at 5:57 pm #

    Savings collapsing. This is the hidden crime of inflation , which MMT does not believe is possible. It is a callous scandal, that we must bail out the feckless debtors and throw the innocent and vulnerable onto the scrap heap and then have the gall to pretend that there is no inflation. Who said the Libertarian , free-marketers were cold-hearted ? For cold-heartedness, nobody can top these guys.

    “Over-75s hit by falling incomes, Aviva says

    People over 75 have seen their bank savings fall by 40 per cent over the last two years as the rising cost of living has forced them to dip into their nest eggs.
    Pensioners are suffering due to the rising cost of living, Aviva has found Photo: ALAMY
    James Hall

    By James Hall, Consumer Affairs Editor

    6:00AM BST 11 Jul 2012

    According to a report into the finances of over-55s, the average person over the age of 75 currently has a savings pot of £13,000. This compares to savings of £22,500 just two years ago.”


  36. alan July 17, 2012 at 12:00 pm #

    Many thanks for your writings, views and TV programmes!
    I see “finance usurping democracy”. Ultimately a mass shift in levels of consciousness is the only real answer to this and many other problems of us “human beans”.
    Meanwhile, I would offer http://www.positivemoney.org/uk as having some immediate and realistic suggestions.

  37. Roger July 18, 2012 at 9:09 pm #

    An original protest Song I have written and recorded over the past few days.

    you can download it for free from http://www.reverbnation.com/belmontjam
    By joining the mailing list on my Bands Channel there.

    Its called We are Sparticus( Burn the chains of debt)


  38. Spaniard Demon July 24, 2012 at 5:24 pm #

    An interesting paper:


  39. Laura August 12, 2012 at 6:46 pm #

    It’s a shame you don’t have a donate button! I’d without a doubt donate to this fantastic blog! I suppose for now i’ll settle for book-marking and adding your RSS
    feed to my Google account. I look forward to new updates and will
    talk about this blog with my Facebook group. Chat soon!


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