Global Debt, Global Currency

With the latest installment of the ‘US debt ceiling’ melodrama over, for now, perhaps it’s a good time to ask, what was it all about really?

I know that officially it was supposed to be an edge of your seat, high stakes thriller about how much debt the US government can carry before some disaster strikes, and who has the authority to decide. But I think that behind the lumbering domestic stage show there was actually a different, larger battle, with different stakes, being played out. The debt ceiling debate was, to my mind, something of a proxy war. Real for those caught up in its angry rhetoric, but seen from further away, clearly just a local manifestation of something deeper, and something being directed by different people than those making speaches in the spot-light.

Actually I think the fight over the US debt ceiling is a proxy for who controls the world’s real reserve currency. And that currency is not the dollar. I suggest we would understand events more simply if we recognized that the world’s real reserve currency is debt -pure debt.  We should not be confused by the fact that debt, globally, is denominated in several forms. Much like the dollar comes in bills of ten and twenty,  so the debt currency comes in dollars, euros, Yen and Yuan. But they are not the currency itself they are just the different bills it comes in.

In Britain we have pound notes issued by the Bank of England but also by the Royal Bank of Scotland, Clydesdale and Ulster Bank, but they are not different currencies, they are all pounds no matter whose logo in on the notes. I think globally we are now in the early and perhaps not quite recognized days of a similar situation. It is debt which is globally traded and used to settle and value all deals everywhere. The problem is this global debt system is not yet fully formed. It is still umbillically tied to the old system of national currencies and their issuers. And like mummies everywhere the old issuers like to think they are in charge long after they no longer are.

If you are willing to accept this idea, at least for argument’s sake, then the domestic dramas in different countries over how much of this or that kind of debt backed note, with this or that logo on it, should be permitted, take on a different character. I am not saying that the domestic arguments over how many dollars or euros can be printed up, how much debt should be carried are unimportant. They are important and do have profound real life consequences for people and businesses. But I am saying that the driving logic is not domestic and nor is it controlled or even understood by most of the domestic players.

Think of the Vietnam war. In Vietnam it was North vesus South. But for the wider world North and South were just proxies for a much deeper conflict of Communism versus America. And the politicians of South Vietnam were not really in charge of very much. I think this is increasingly the situation of domestic politicans when it comes to finance, debts and currency. Only they don’t yet know this one vital fact. Thus we have the dis-spiriting spectacle of watching the fag ends of our representative democracy argue about things most of them do not understand. An endless stage show where the actors strut and fret, and deliver their lines with gusto, pulling with all their puffed-up might on the familiar levers of power available to them, expecting applause. Yet all the while their drama and the levers of power they squable over are less and less connected to the actual engines of change.

The Democrats and Republicans think they are arguing over who should control the amount of debt the Fed will take on. Not realizing that neither of them, neither Republican nor Democrat controls the matter over which they are arguing. Neither do they realize – not fully at least – that theirs is no longer a theatre of power, it is mostly just a theatre. Power, fundamental power,  has moved elsewhere.

What the debt-celing debate was about, I suggest, was a fight between those who think they control the Fed and the currency (because once they did) and those who do control it but would prefer we not quite realize this.

I think the real battle going on is between the financial players led by the global banks, assorted funds and Insurers, all of whom are very much addicted to fiat debt-money, and a dwindling cadre of politicians who still think central banks control the currencies and elected officials decide how much debt is enough.

This latter group seemingly cannot understand why they can’t get the Fed or the ECB to do what they both said, ever since 2008, they would do, which is to ‘exit’ or to use the prefered term ‘taper’ the ‘extraordinary’ and ‘temporary’ measures they took in 2007, then took again in 2008 and again in 2009 and again in 2010 and 2011 and 2012 and 2013. Which is, let’s be fair to our puzzled politicans and pundits, a confusingly frequent use of ‘extraordinary’ and a long time for ‘temporary’. Hence their confusion.

What our politicians – most of them but crucially not all of them – seem reluctant to underdstand is that neither the FED nor the ECB nor any other central authority, can limit the amount of debt that is issued into the global markets. The banks issue the debt not governments. But that debt, conjured into existence by extending loans does then, particularly in periods of market uncertainty, ‘need’ – or rather or ‘demand’  - backing from a national currency. This creates a pressure on central banks to ‘issue’ more sovereign debt paper to provide the backing for the ALREADY created debt.

The big banks issue the reserve currency. It is a global reserve currency and replaced the dollar some time ago, only no one noticed becaue they kept the old brand name going. It’s not even as if it is just American financial intitutions which issue dollar debt which the Fed finds itself being forced to cover – foreign banks do it to. And anyone who issues dollar denominated debt has a hand on the strings which move the Fed around. Obviously the same is true for other major currencies and their central banks.

The governments and central banks can try to influence the creation of debt though interest rates or ‘stress tests’ and setting levels of ‘regulatory capital’ that must be held. But all of these can be and are gamed by the banks. And when gaming is not sufficient then a debt crisis can be brought in to play to force the reluctant politicians to do what they ‘must’. And that last ploy is the debt ceiling.

Once private debt has been created the central banks are under-pressure to create public debt with which to back it. They know this is how it works they are on record as saying so. But they are caught in a dilemma. The politicians and the public think the government and central banks are in charge and can tell the markets how much debt is enough. The central banks know they do not really have this power because in reality it is the markets not the central banks who are in charge and  decide how much debt is good for THEM.

What can the central banks do? Nominally they work for the government. The people even think they work for them (ho ho!) Whereas the logic which controls lies in the markets and the levers are in the banks. If the Central banks were to come clean and tell the government and the public who is really in charge, who they really work for, what would happen? So they don’t come clean, at least not in public, leaving the poltiicans to argue fatuously amoung themselves for our entertainment.

There are only a limited number of end games I think. The issuance of debt will go on despite the increasing drama of the decisions. The question for the banks will be how best to manage it with the minimum of fuss and least chance of the real situation becoming too clear too early.

Debt issuance will go on because the present economic system, fueled as it is by debt, requires growth above the rate of interest they are all charging each other. The Pension companies require more growth than that because they have long term obligations to pay out at a higher rate. In boom times growth takes care of itself. In bad time that growth ‘must’ be provided by ‘stimulus’ AKA public debt. The minimum growth they want for the headlines is 3%. Which seems reasonable till you do the maths and find 3% growth means a doubling every 17 years. Given the frequency of ‘busts’ built into the debt based system and how much they cost the public each time – (and they are built in – I explained one aspect of this in the last part of the Securitization series. (For completeness here are parts 1 and 2.)  This series is my take on the same logic than Minsky had of course already come to before and more fully) – it is clear how much ‘growth’ is going to be based on public debt. So the debt will grow.

But while it does, other parts of the economic system and their political friends will complain about the size of the debt. So there will continue to be a pressure to stop the debt ‘getting out of control’. How to sqaure this idiot’s circle? The answer is already here only in its infant form. Public Debt created to back private debts will be ‘required’ to grow. Public debt for other things will therefore be under pressure to be cut. So far what has been cut has been the easy and the small beer.

The sums ‘saved’ have been tiny in comparison with the sums created in order to ‘help’ the financial system, even though the misery created in cutting them has been huge. But who cares about miserable poor people when you’re a rich happy one? Nevertheless the sums saved through ‘austerity’ are not going to be sufficient over even the medium term of the next decade. The ‘savings’ need to be orders of magnitude greater. For that the only option is to target the long term, ‘unfunded commitments of health, state pension and long term welfare. These are what the bankers will target when people have been softened up and the next bust hits.

The option I think they will go for is complete privatization of health, welfare and state pension.

All these long term ‘unfunded obligations’ as they are called appear in public debt accounts as future liabilities, future debts. But as soon as the same obligations are shifted to the private sector they become future profits rather than future debts. No matter that people might not be able to pay for them – accountants are not paid to worry about such details. To you and me it might seem daft to think that by moving things from one column to another , from public to private that this will suddenly make things better. And of course it won’t. The private sector will argue it will be ‘better’ because they are so much more ‘efficient’. Believe that if you like.  But the main thing is the acounting exercise will make the number in the public debt column go down.

The important thing for any discussion of public debt levels, is that removing these ‘obligations’ from the public account suddenly cuts the future public debt. Freeing up all that now uncommitted future debt to be available for pumping into the private financial sector . Which it would suddenly make ‘good economic sense’ to help, given the now very buoyant future demand for private health, pensions and welfare provision.

Public debt is always seen by the financial world as a drain, an obligation. The same obligations re-cast as serivces are seen as a source of future profit. Thus I think we will see in the next few years an all out attack on every aspect of public service provision.  Libertarians amoung you might cheer at this point. I think you will not cheer when you see what is going to replace what you currently dislike.

I believe the era of the Nation-State is coming to an end not because of attack from outside enemies but because Nation-States are being dismantled from the inside – by the  State itself.  But the State has no itention of losing power. It is simply changing jobs and employer. The big welfare state is being dismantled but in its place is going to come an even bigger and certainly more repressive Corporate State.

But the End of the Nation-State and the emergence of a global system of  Technocratic, Managed rather than democratic Corporate-States is a larger discussion I am still writing.

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82 Responses to Global Debt, Global Currency

  1. averagejoe October 17, 2013 at 4:19 pm #

    Another thought provoking post David. There is no doubt in my mind, that democracy is morphing into corptocracy. There are little signs everywhere. Note Osborne’s latest idea to allow the Chinese to ‘invest’ in nuclear power, but at the same time allowing them to charge pretty much what they want for the electricity in the future. If you thought your bills were rising fast now, its going to get worse. There is no longer any desire to invest publically. It has to be private, we are told. What we are seeing is the creation of an endless series of cartels or monopolies, to allow the public to be bled to death, and it is called a ‘free market’. I read a book previously by ,the authors name escapes me, how society passes through a cycle of various ruling elites, ie warriors, intellectuals, and then capitalists, and each ruling elite sows the seed of its own demise. Perhaps some of it is far fetched, but the part that sticks with me, is he said that said change would only come about, in the current phase, when the middle classes were reduced to subsistence levels. I can see this happening slowly but surely.

    For your interest you might be interested in this recent interview of Michael Hudson. http://michael-hudson.com/2013/10/global-property-ponzi-policy/
    He points out, amongst other issues, that the government’s subsidising of the mortgage market is in effect another bailing out of the banks, as it will inflate prices of real estate, and help reduce the banks bad debt. But the propaganda is, its ‘helping people onto the property ladder’!

    In general I think most politicians are pretty thick. However, their advisers and policy makers, know what they are doing. But there is something they cant prevent. We are reaching a point where natural resources limit growth, and the economic system cannot function without growth. So crisis again is inevitable as we go forward. And the great financial debt creation machine, will suffer first. In effect it has become a cancerous growth at the heart of the economic system.

    • Mr Shigemitsu October 24, 2013 at 10:43 pm #

      averagejoe, I think this is the theory to which you refer:

      http://en.wikipedia.org/wiki/Law_of_Social_Cycle

      “…propounded by the Indian philosopher and spiritual leader P.R. Sarkar in the 1950s and expanded by Ravi Batra since the 1970s….”

      “…In Sarkar’s vision social progress is seen to be established on the basis of a new vision of human progress. Sarkar’s theory focuses on four basic ages of warriors, intellectuals and acquisitors, as well as a brief age of labourers.

      During such ages humanity has faced an eternal struggle with each epoch deteriorating into a harmful exploitative phase.

      Sarkar devises an exit strategy from such a development, based on the role of enlightened moralists, the Sadvipras.[7]

      It is their role, based on their self-less virtues and ideation on the divine, to apply energy and accelerate social progress when the evolutionary process is caught up in a stasis whereby the ruling class has abandoned its original virtues and through an intense focus on their social agenda inflict misery on the other sections of society…”

      I’ll repeat that last bit:

      “a stasis whereby the ruling class has abandoned its original virtues and through an intense focus on their social agenda inflict misery on the other sections of society…”

      Sounds about right.

  2. averagejoe October 17, 2013 at 4:36 pm #

    Michaels Hudson setting out the modern definition of ‘free market’
    “Free market:
    Markets dominated by the financial and propertied classes whose objective is to secure all discretionary income for themselves, ultimately by asset stripping, leaving the economy without freedom of choice except to pay the rentier class. Hence, a market in which choice is minimized, by stripping away all government protection against monopoly and predatory behavior. (See Free Lunch, Kleptocrats, Military Junta and Race to the Bottom.)”

    Spot on!

  3. Hawkeye October 17, 2013 at 5:58 pm #

    A very powerful post David. I think that you have just described the over arching strategy in perfect detail. Expect increased attention from various acronym entities!

    You are meddling with the primal forces of nature, Mr Malone!

    http://www.youtube.com/watch?v=NKkRDMil0bw

  4. Just me October 17, 2013 at 6:15 pm #

    “News Analysis: Risks linger despite U.S. debt resolution”

    http://news.xinhuanet.com/english/indepth/2013-10/17/c_132807600.htm

  5. Jonathan Sugarman October 17, 2013 at 7:23 pm #

    This is a 5 minute clip re the state of America’s finance & democracy that you will not regret watching:

    http://www.youtube.com/watch?v=gIcqb9hHQ3E

    As always, THANK YOU David for spelling things out and putting them together like very very few can.

  6. desmond October 17, 2013 at 8:38 pm #

    Thank you again again David. It is good to read how we have become the slaves of other peoples debt……

  7. simoncz October 17, 2013 at 8:56 pm #

    Stunning insight. Debt as the global reserve currency. This is the first genuinely eye opening article I’ve read in a long time.
    Heartfelt thanks to you.

  8. Phil T. October 17, 2013 at 9:39 pm #

    Golem,

    Thank you for the embedded reference links to your previous illuminations (Securitization…Undead heart). Additionally, I am recalling your recent thoughts from Twilight of Justice & The Too Big To Fail Insurers… and thus agree with your point on the world’s real reserve currency – pure debt as well as the following sentiment from above:

    I think the real battle going on is between the financial players led by the global banks, assorted funds and Insurers, all of whom are very much addicted to fiat debt-money, and a dwindling cadre of politicians who still think central banks control the currencies and elected officials decide how much debt is enough.

    From The Too Big to Fail Insurers …
    You can either believe that we’re all in this together and it’s all getting better. Or you can believe, as I do, that it is getting better for the few (5%) who own 50% of the worlds’ financial wealth and worse for the other 95% of us…

    If it can be rightly assumed that the politicians are bought & paid for, then presumably it is this 5% (perhaps less) that are behind that purchase. In this recent Gov-shutdown debacle in the USA, the public are led to believe that a small faction of the Republican Party (aka Tea Party Republicans) were singularly responsible for bringing the government shut-down and generally manufactured chaos.

    From Speigel Online Int’l :

    …Adding to this is the almost unlimited flow of campaign contributions, which finance the increasingly brutal mudslinging during congressional elections every two years. Behind those donations are often radical groups or interested billionaires, such as the brothers David and Charles Koch, who have financed the Tea Party and are thought to have helped plan and direct the most recent crisis…

    http://www.spiegel.de/international/world/commentary-us-budget-shutdown-has-exposed-deep-political-flaws-a-928393.html

    I am wondering where private individuals such as these Koch Brothers figure in to your assessment of the Kabuki performances of politicians well out of their depth … Are these individuals out of their depth as well or a they attempting to corner their share of the world’s real reserve currency via the politicians and G-Sii’s ?

    Cheers & best wishes going forward …

    • Golem XIV October 18, 2013 at 12:07 am #

      I don’t think the koch brothers are out of their depth.I suspect they understand and, as you suggest, are out to make their money from the general ruin.

      • Phil T. October 20, 2013 at 10:25 pm #

        … Very much looking forward to your musings on that larger discussion… the End of the Nation-State and the emergence of a global system of Technocratic, Managed rather than democratic Corporate-States … and perhaps an accompanying podcast on that very large topic !

        Best wishes …

  9. Buck Turgidson October 17, 2013 at 10:17 pm #

    Golem the plan you just outlined only can continue if you are able to control the”crazies” who oppose it. Every mainstream publication paints the Tea Party as wacko’s. The Tea Party followers may be strange but they stand for the nation state and do not support a cartel of international bankers.

    It is not lost on me that many of those at the right fringes of American society support Edward Snowden as fervently as their left wing brothers do..

    The enemy of my enemy is my friend.

  10. old dog October 17, 2013 at 11:45 pm #

    Another excellent if even bleaker piece, a lot to take in, one comment which i hope isn’t too pedantic, you referred to viet nam & the communist domino theory, i heard a new (to me) explanation last week , the domino theory was real enough to them but the U.S wasn’t bothered about the complexion of govt , it was just independence & thought that it might catch on that rattled them, the commie threat was an easier sell

    • Golem XIV October 18, 2013 at 12:04 am #

      Not pedantic at all. I did stop and wonder if I should describe the conflict in terms of America versus Communism or as America versus anyone who dissagreed with them. But as you say Communism is an easier if more surface description.

      • John G October 24, 2013 at 8:16 pm #

        The threat of a good example.

  11. S.M. De Kuyper October 18, 2013 at 8:52 am #

    I think you are missing the point, that this debt situation is unsustainable whether or not it is maintained by military force, as you seem to believe the debt situation will continue, you are sustaining the situation of empire as it is…We Have No Choice ‘wisdom does not cut
    it, cannot not, cut it with 90% of the globe’s population. Those who are not able to read your clarifications. Suzanne

    • Golem XIV October 18, 2013 at 11:43 am #

      Hello Suzanne,

      I didn’t mean to suggest that this debt situation was good or innevitable. Only that as far as those currently in charge are concerned it must go on and they will endeavour to make sure it does. it is therefore up to the rest of us to oppose it. But we cannot look to any of our current politicians or political parties to take any sort of initialtive. I am sorry if I came across as defeatest in any way. I am not. Not at all.

      • Roger October 21, 2013 at 6:31 am #

        Has anyone else been reading and watching some of the insights Karen Hudes has been sharing regarding her Experiences with the World Bank ( as a senior Lawyer). in the Philipines. Siimalar to Jonathan Sugarman, she describes being sidelined and marginalised for bringing breaches of standards ( Criminality) to the notice of the chain of command.

        https://www.youtube.com/watch?v=4hgA9j-4dB0

        Karen’s message is quite positive the interview in the link is a rallying call to keep shining the light into the shadows of the banking system.

        ”We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light”.

        Plato

  12. averagejoe October 18, 2013 at 10:37 am #

    Whilst the debt situation is certainly far from sustainable, I think the ruling‘elite’,which is essentially the banks, will seek to keep the status quo going at long as possible and I’m sure will be quite inventive in its techniques to ensure it keeps going.

    Much of what is going on seems to me to be very similar to the dying days of any previous empire. Those that rule the empire have done very well out of it, and it has made them very wealthy, and they will seek to keep accumulating an ever greater proportion of that wealth until it collapses. This will be the point at which there will be the impoverishment off all except the ruling elite. I can see various positive feedbacks that are speeding up the process. Michael Hudson points out in his interview, see link above, that one of the corporations (they are probably all doing it!), are trying to make sure they have no profits on which tax will be due, by as I understand it, buying their own shares rather than reinvesting in new products and development and in turn jobs. The money is therefore staying in a loop of reinvesting in the financial economy, and not flowing into the real economy. This is a positive feedback loop and another sign the whole economic system is beginning to eat itself.

    I don’t know how this will end, but inevitably we will get another financial crisis, and each time we do, the cost of bailing it out will grow exponentially. Eventually it will reach a scale, no one can bail out. How long it takes I don’t know, but probably longer than we expect, and probably inconveniently timed in terms of resource depletion and or climate change.

    • Wirplit October 30, 2013 at 1:53 am #

      An example close to home for many these bleak days and highly topical are the energy companies..which state they are only making a profit of 5% on selling gas or electricity to domestic markets because of its cost to buy… but forget to mention that the other part of the company is generating that energy and selling it to itself.

      See this current battle for understanding of these privatized companies in the UK as crucial to a wider understanding of the current system. The pain and hurt their gamed price rises are causing the poorer among us is becoming ever clearer and now it needs people to keep joining up the dots…

  13. bill40 October 18, 2013 at 10:39 am #

    Golem,

    Golem, great piece as ever and much easier to understand with a very brief mention of how money came into being. Grasping that debt comes before money is vital to understanding the current battles being fought. Your central assertion is (what MMT has long argued) that money is endogenous and beyond central bank and control. Is there any evidence for this other than your excellent pontification?

    It would seem we a strange ally for this namely the Bank of International Settlements, the central bankers’ bank. As long ago as 2010 they were urging the normalisation of interest rates and the markets told them to get lost and continue to do so. Now such an event would be hardly likely to pass zerohedge by and it didn’t. http://www.zerohedge.com/news/2013-06-23/bank-international-settlements-warns-monetary-kool-aid-party-over

    The central bankers have a new master and the BIS doesn’t like it but from the article comes that vital word again I quote ” Which is why recently none other than the TBAC warned that the US is suddenly facing a $10+ trillion high quality collateral shortage in the next decade.” Collateral is the most important word in the financial in the financial lexicon and remains Golems most important piece. The argument over Obamacare is do we fatten up health for future privatisation or scam what we have now? The choice is recycle debt or a massive new abundance of quality collateral.

    Recycling ever increasing government debt to the private sector will preserve American (and western) hegemony. The new collateral would indeed de-Americanise the world. A final thought is this. Somalia is resource rich yet exists in a state of poverty and near anarchy. Do you thing that the likes of the Koch bros. GAF as long as they get the resources?

    My apologies for rambling a bit.

  14. Hawkeye October 18, 2013 at 2:52 pm #

    Not watched this video yet, but the subject matter seems along the lines of this post:

    http://www.youtube.com/watch?v=iFDe5kUUyT0

    Mike Maloney (no relation!) refers to the money system as the biggest scam in history.

  15. Roger October 18, 2013 at 3:51 pm #

    Heres a cool Ian Anderson tune to brighten up the weekend.
    Education, micro-managed.
    MBA: a doddle mastered.
    City-bound, Canary Wharf.
    A cushy number, fluky bastard.
    Banker bets and banker wins, never missed yet, for all his sins

    Hedge funds, wraps and equities.
    Lackeys, aides in fierce attendance.
    Trusts and gilts, reserve currencies.
    Liquid gold in safe ascendance.
    Banker bets and banker wins, never missed yet, for all his sins.

    Treat myself to quality time, test a porsche and snort a line,
    Eat Hermione for lunch.
    Set that glum PA a-jumping,
    Book front row tickets for something after we munch.

    Fast-tracked futures, hard-nut traders.
    Feeding frenzy, pigs a-troughing.
    Fuelled by forecasts, and hot share options.
    Big fat bonus in the offing.

    Draconian calls for regulation
    Are drowned in latte with Starbucks muffin.
    Mortgage melt-down: non est mea culpa.
    Threatened exit, stage left, laughing…
    Banker bets and banker wins, never missed yet, for all his sins.
    Banker bets, cheque’s in the post: not worth the ink it’s written in.

    http://www.youtube.com/watch?v=vrYcah4yOS4

    • Phil T. October 19, 2013 at 10:52 pm #

      Bravo !!! Couldn’t help but click on http://www.youtube.com/watch?v=BV-ASc0qkrM after watching/listening to your link…

      • Roger October 21, 2013 at 6:38 am #

        A great band, It’s nice to see Ian Anderson is still writing such thoughtful lyrics this stuff is certainly the preferred sound track for my revolution I Think Wat Tyler ( http://en.wikipedia.org/wiki/Wat_Tyler) would be comfortable with much of the melodic content. ´´Flute Solo ” playing now from the Thick as a brick Link , goose bumps.)

  16. Elspeth Crawford October 18, 2013 at 7:21 pm #

    Hi – I wanted to reblog this post of yours but couldn’t work out how, so I just linked to it instead. Your many blogs are much appreciated. Elspeth

  17. Mike Hall October 18, 2013 at 10:24 pm #

    Good evening Golemites :)

    Something different from me….lyrics of

    ‘All Along the Watchtower’ – by Jimi Hendrix

    “There must be some kind of way out of here,”
    Said the joker to the thief,
    “There’s too much confusion,
    I can’t get no relief.
    Businessman they drink my wine,
    Plowman dig my earth
    None will level on the line, nobody offered his word, hey”

    “No reason to get excited,”
    The thief, he kindly spoke
    “There are many here among us
    Who feel that life is but a joke
    But you and I, we’ve been through that
    And this is not our fate
    So let us not talk falsely now, the hour is getting late”

    All along the watchtower
    Princes kept the view
    While all the women came and went
    Barefoot servants, too

    Outside in the cold distance
    A wildcat did growl
    Two riders were approaching
    And the wind began to howl
    *buisness man there, drink my wine,
    Come and take my herb.”

    Written ~ 40 + years ago, substitute ‘banker’ for ‘businessman’ & it’s a good fit today huh?

    I’m listening to a dance/cover version played by Move D at the Boiler Room in Berlin.

    The original by Hendrix is a work of pure genius & that always plays along in my head, how good is that :))

    • El Gallinazo October 19, 2013 at 7:00 pm #

      It was not written by Jimi Hendrix; he just covered it, though a superlative cover it was. It was written by Bob Dylan.

      • scofflaw October 20, 2013 at 2:10 pm #

        El Gallinazo

        If you are the El Gallinazo, who I was posting with when you had just moved to S. America from an Island off of the US, good to run into you again! It was the mountains of Peru you moved to wasn’t it. Are you still down there? I forget the moniker I was using at the time, but, I do remember who wrote Watchtower and also it’s album which I bought at the time, ‘John Wesley Harding’.

  18. BobRocket October 20, 2013 at 2:35 am #

    Devastating piece David, this is one of your best.

    In order to save the insurance industry then mandatory 3rd party insurance will become a requirement before you step outside your front door (the housebound will be exempt at first, cuz we care)

    The pensions industry has voluntary auto-enrollment to keep them going for a few years until that too becomes mandatory

  19. scofflaw October 20, 2013 at 6:07 am #

    Thanks Golem,

    One can see the resources shrinking and population rising and one realizes that some frogs in a drying pond will be the last to go. I did not how that would work itself out, other than through a chaotic frog eat frog world. You have given structure to that world. Good going!

  20. Karalan October 20, 2013 at 2:39 pm #

    ” Libertarians among you might cheer at this point.“

    I sincerely hope not – isn’t the whole point of Libertarianism for individuals to be free from any institutional coercion?

    If replacing rule by State with rule by Corporation is the goal of Libertarians, then perhaps we need a new school of thought: leave us the fuck alone.

    • Golem XIV October 20, 2013 at 4:49 pm #

      Karalan,

      You made me laugh with your new school of thought. Thank you!

    • David Sheegog October 21, 2013 at 6:48 pm #

      We live now in a largely libertarian world. What happened was corporations took over our govt in the name of freedom. You know, Free Markets, Free Enterprise, Free Trade, Free Money for the big financial players…

      • steviefinn October 22, 2013 at 9:37 am #

        A shadow revolution.

  21. Just me October 20, 2013 at 10:46 pm #

    “Geraldine Van Bueren QC is Professor of International Human Rights Law and Visiting Fellow at Kellogg College, Oxford.”

    http://ukhumanrightsblog.com/2013/10/18/should-we-have-an-enforceable-right-to-food-professor-geraldine-van-bueren/

  22. Phil (Mcr) October 21, 2013 at 10:57 pm #

    ”The financial sector isn’t the powerhouse of the UK economy. It’s more like a Wendy house”

    http://www.newstatesman.com/2013/10/financial-sector-isnt-powerhouse-uk-economy-its-more-wendy-house

  23. Malcolm Waters October 23, 2013 at 1:06 pm #

    A good and well thought out piece. David

    To further your ideas you perhaps should look at the writings of Andy Perry at Crackernomics and the Democratisation of Money.

    He points to the need for an exchange rate between Private Debt and Government Money which at the moment is 1:1 but but not for much longer!

    I am sure that you will also see where this all leading us.

  24. Slobadob October 23, 2013 at 1:12 pm #

    A great piece again, David.

    Can I suggest that you take a look at Andy Perry’s writings over at Crackernomics.(http://unitedstatesofeverywhere.wordpress.com/)

    He points out that the Democratisation of Money requires there to be an exchange rate between Private Debt and Government Money which at the moment is 1:1.

    But not for much longer!

  25. Mark Northfield October 23, 2013 at 2:09 pm #

    Another great post, David. I note you say of polticians ‘most, but crucially not all’. I’m guessing the Green Party might be included in that latter category, especially as they’ve now voted in favour of a policy at their recent conference to end private money creation by banks:

    http://www.positivemoney.org/2013/09/green-party-passed-a-motion-to-place-money-creation-into-public-hands-and-end-fractional-reserve-banking/

    A small step, but a welcome one in terms of getting the idea debated and considered by more people. Ignorance, apathy and helplessness simply have to be fought, and I say this as someone who has really had to do battle with those ‘it’s all hopeless’ feelings (as much in relation to climate change as anything).

    And following on from the song lyrics others have posted, here’s a 2minute fast n furious pop song I made called ‘Good Money’ with some appropriate imagery attached!

    http://www.youtube.com/watch?v=Dr9Oh32jE_0

    GOOD MONEY
    Sell the past for a pint of gold
    Milk the future for trillions more
    Keep the policy makers sweet
    Cause all’s fair in trade and war
    Hail the genius of leverage
    Sleight of hand, that’s entertainment
    White is black – it always was
    Regulation’s inefficient
    You could make good money
    You could make good money

    Rake it in til the bubble bursts
    Load the pain on the public purse
    Stash it offshore out of sight
    Tax is for the little guy
    And welfare’s SO last century
    Workfare is the new tradition
    Weep the tears of a crocodile
    A proud salute to the City and Goldman
    You could make good money
    You could make good money

    Debt creating your every whim
    Debt everyone’s pseudonym
    Race us down to the ocean floor
    The super-rich can always take more
    Advertising how much you care
    Advertising because you’re worth it
    Drug the kids and rob them blind
    Curse the nerve of Occupy
    With your good, good money
    You could make good money

    • Joe Taylor October 23, 2013 at 2:46 pm #

      That information about the Green Party resolution has to best the best news I’ve had for a very long time.

      If only Labour would do the same.

      What little knowledge I posses leads me to believe that the single act that have most impact in turning around the terrible state of affairs we find ourselves in would be if commercial banks where unable, by law, to create our money supply out of fresh air, then decide who gets it and for what purpose. Lunacy!

      Deal with that one issue then sit back and see what follows. The world would be a very different place in a couple of generations – it still might be a place worth living in.

      That change won’t come about unless the party controlling government wants it to come about, and the Greens won’t win the next election. The Conservatives wont go for it. Labour might if enough pressure is put on them before the election.

      Get off your backside and go see your MP, whatever their party, but especially if they are Labour.

      Don’t pontificate – do something that might make a difference..

      • Golem XIV October 24, 2013 at 1:23 pm #

        Which is why I am standing as parlimentary candidate for the Green Party at the next election.

        • steviefinn October 25, 2013 at 1:35 pm #

          Good luck with that David.

        • Joe Taylor October 25, 2013 at 7:35 pm #

          Good on you. When the time comes let me know and I’ll try to get down there and do some foot-slogging for you

        • Mark Northfield October 27, 2013 at 6:02 pm #

          That’s excellent news, David. :)

        • M_T_Wallet October 28, 2013 at 2:23 pm #

          David, which constituency are you standing in? Or is that still to be decided?

          • Golem XIV October 28, 2013 at 6:16 pm #

            Hello M_T_Wallet

            I will be standing for Scarborough and Whitby which is a fair old chunk of North Yorkshire. The incumbent is Robert Goodwill.

            He’ll be very hard to beat. He will have the Tory party machine and tribal vote on his side. Labour will have its tribal vote. My hope is if, over the next 18 months I can get to talk to people face to face in small or large groups, in their front rooms, anywhere they’ll have me for ten minutes to answer questions, speak directly – then maybe.

            Somehow I’ve got to get passed just asking people for their vote two weeks before election day and somehow get their attention.

      • Mike Hall October 24, 2013 at 3:17 pm #

        If positivemoney’s banking system can work & the casino got rid of, then I’m all for it.

        By far the most important aspect for me remains the ‘functional finance’ aspect. (I wonder, how many people actually know what this is? I’m assuming the Greens are signing up to this as well, if they ‘officially’ support PM?)

        However, at first glance, it seems the Greens are also looking at some sort of ‘BIG’ or Basic Income Guarantee.

        I hope not, as I agree with Randall Wray’s (& others) critique. (Essentially, all it does is raise prices of everything & we’re right back where we started trying to achieve a decent minimum wage. And it has no counter cyclical, or automatic stabiliser aspect to it.)

        http://www.economonitor.com/lrwray/2013/07/09/how-big-is-big-enough-would-the-basic-income-guarantee-satisfy-the-unemployed/

        I suppose we should applaud the fact that UK Greens have finally copped on to some sane economics (the Irish Greens are still hopeless – Eamon Ryan still thinks Ken Rogoff has something interesting to offer, twat), but really, WTF is wrong with a (MMT style, ‘transition’) Job Guarantee?

        Seriously, can anyone think of a better automatic stabiliser measure? One that guarantees that minimum wage?

        Having said all that, unless the general public can be educated with some basic monetary system & macro economics principles & knowledge, I doubt any ‘heterodox’ based political campaign can succeed.

        • Penny Bloater October 26, 2013 at 6:50 pm #

          Caroline Lucas has also spoken about taking back public control over the issuance of credit from the private banking cartel.

          More power to you David.

  26. Robin Smith October 23, 2013 at 3:02 pm #

    Help to Buy. Want to know about money and debt? Then at least avoid the experts and you will be nearly there:

    http://www.meltfund.com/2013/10/help-to-buy-want-to-know-about-money.html

    The primary disaster is The Mortgage. Debt secured against the increasing value of property in land. Banks are pedalling it. Households, the major buyers and sellers of property the willing gamblers. Politicians supporting it all by a households every vote.

    Yet you only point out the politicians bankers and wealthy who merely exploit what the people keep voting for. Avoiding the major perpetrators – The People.

    Your analysis does not stack up.

    How much property do you own. Do you have a mortgage. Or are you a tenant with aspirations to get on the ladder. Or are you still living with Mum, rent free?

    Mortgages: Borrowing other people’s money, for an unearned income, recycling it back into more property. Needing taxation of hard work skill and industry to mitigate. A giant Ponzi making Madoff a mere minnow.

    12 million citizens are at it in the UK alone. Gambling with the future of our children.

    You never talk about this. What gives?

    • JayD October 23, 2013 at 8:56 pm #

      Personally, a tenant with no aspirations….yourself! I have made the analogy myself on these pages about how the property owning middle class could be seen as akin to the prisoners of the holocaust that were forced into running aspects of the camps themselves. But I remain clear as to where ultimate blame/responsibility laid/lies, whereas you repeatedly attempt to place crosses on the backs of the victims….none of which justifies your assertion that

      ‘Your analysis does not stack up.’

      I, for one am deeply suspicious of your motives for doing this again and again and again!

      • desmond October 24, 2013 at 4:51 pm #

        i for two feel the same…

  27. steviefinn October 24, 2013 at 5:09 pm #

    O/T

    A new Brand opposed to a stale old one :

    http://www.youtube.com/watch?v=3YR4CseY9pk&feature=player_detailpage

    • JayD October 24, 2013 at 7:07 pm #

      Quality, I wish that I could find words with the ease that Brand does. Is Paxman really that dumb or playing a role!?….I loved the ‘sentimentality’ exchange.

      • M_T_Wallet October 28, 2013 at 2:21 pm #

        Clearly Paxman was role playing – I think him and Brand get on very well. Not sure about Brand myself – he is a bit of an egomaniac.

        Paxo himself must be bored of beating up mainstream politicians. They never answer a question just provide comment on stuff they want to.

        Recent Obits for Frost showed him asking Bliar whether her prayed with Dubya but IIRC I think Paxman beat him to that question. I may be wrong.

    • Geowaverider October 24, 2013 at 10:10 pm #

      Stevie

      One can only hope that a few more like Mr Brand put their heads above the parapet then maybe the masses will begin to take a bit more notice and become engaged in what is happening to their futures.

      Bri

      • steviefinn October 25, 2013 at 1:33 pm #

        We can only hope – Made a difference to the normal ” Punch & Judy ” interviews that serve as an illusion that Paxman has sorted it, while business continues as per usual.

        I value the BBC but when I discover a BBC Arts booklet aimed at kids which contains an article titled: ” Wikileaks steals secrets ” & watch the interviews with some careerist turd from the Beeb excusing their one sided coverage of the Iraq war which is featured in Pilger’s ” The war you don’t see “, that is no different than the shit shovelled out by ITV & Sky – I’m not so sure, I do not consider their peddling of an elite line as serving a public, who can be imprisoned for not paying a £ 145.00 license fee.

        JayD – He is very sharp.

        • JayD October 27, 2013 at 11:34 pm #

          The viewing figures on you tube must have got too high as it hasn’t moved in the last 10 minutes despite leaving and returning to view 3 or 4 times myself….refreshing to see the reaction it has generated though!

      • old dog October 28, 2013 at 10:17 pm #

        A chum was watching the interview at the end his wife turned and said -

        “He’s coming out with the same sort of shit you do ! ”

        got to be progress of a sort

        • geowaverider October 29, 2013 at 2:02 pm #

          Funny that, because that’s what my partners face looked like she wanted to say but she loves me too much. I must say apart from some of my work colleagues she does get my outpourings on the issues facing us full on.

          Sadly she is a 50 something teacher comfortably but not well off who just hopes it will get better in time.

          There are plenty of people like her and I don’t know how we go about convincing them to take an interest.

  28. Just me October 25, 2013 at 10:55 am #

    “Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America.”

    http://paulcraigroberts.org/2013/10/23/ye-sow-shall-ye-reap-paul-craig-roberts/

  29. John Souter October 25, 2013 at 5:54 pm #

    The most difficult concept for humanity to embrace is to accept the life they have experienced could have been better.

    • Joe Taylor October 25, 2013 at 7:42 pm #

      Don’t know where you got that one from John? I have no problem thinking life as I have experienced it could have been better. I don’t think this woman does either
      http://i.imgur.com/KOyt6.jpg

      • John Souter October 27, 2013 at 9:19 pm #

        Joe I use it in the form of the induced passivity accepted by most of the common herd as their lot and contribution to life.

        The ones who never apply their right to question nor their right not to question to the point where their questioning faculty is limited to and indulged by X factor or Strictly.

        But I appreciate the picture.

  30. Just me October 26, 2013 at 9:06 pm #

    “The WSJ failed to note that these contracts were not longs liquidating, but naked shorts – a party selling gold they did not have. These are done without posting margin. The activity is blatantly illegal.”

    http://paulcraigroberts.org/2013/10/25/gold-wars-kelly-mitchell/

  31. Roger October 26, 2013 at 9:49 pm #

    I have been messing about with this Kipling Poem this week and decided to jam out a version to a backing track. I am considering adapting to poem as a Lyric that is more along the lines of Banking Corporations and Debt Geld. At this stage I relate so strongly to the original poem and read it that way immediately so have a slight aversion to meddling with it.

    One Take Live. One Take Jams.
    Dane Geld , Rudyard Kipling set to music.

    [url=http://www.youtube.com/watch?v=h4sQ7y2LbT4]danegeld take mix 1 – YouTube[/url]

    Download Here.

    [url]http://tonefreqhz.bandcamp.com/track/[/url]…

    Dane-geld

    A.D. 980-1016

    IT IS always a temptation to an armed and agile nation
    To call upon a neighbour and to say: –
    “We invaded you last night — we are quite prepared to fight,
    Unless you pay us cash to go away.”

    And that is called asking for Dane-geld,
    And the people who ask it explain
    That you’ve only to pay ‘em the Dane-geld
    And then you’ll get rid of the Dane!

    It is always a temptation for a rich and lazy nation,
    To puff and look important and to say: –
    “Though we know we should defeat you,
    we have not the time to meet you.
    We will therefore pay you cash to go away.”

    And that is called paying the Dane-geld;
    But we’ve proved it again and again,
    That if once you have paid him the Dane-geld
    You never get rid of the Dane.

    It is wrong to put temptation in the path of any nation,
    For fear they should succumb and go astray;
    So when you are requested to pay up or be molested,
    You will find it better policy to say: –

    “We never pay any-one Dane-geld,
    No matter how trifling the cost;
    For the end of that game is oppression and shame,
    And the nation that plays it is lost!”

    [url]http://www.kipling.org.uk/rg_danegeld[/url]…

    Backingtrack

    [url]http://www.youtube.com/watch?v=EqvDXO[/url]…

    [url=http://www.positivemoney.org/how-mone]How Money Gets Destroyed [Banking 101 Part 6] » Positive Money[/url]…

    [url=http://publicbankinginstitute.org/]Public Banking Institute – Banking in the Public Interest[/url][/QUOTE]

  32. stone October 27, 2013 at 9:27 am #

    I think part of the motivation for austerity is that it is deflationary. It maintains the financial power of debt by preventing inflation from eroding away its real value. Without increasing public debt, an ever increasing polarization between private debtors and creditors would not be sustainable. The debtors would default and the debts would have to be written down. Increasing public debt allows things instead to be perpetuated so that financial wealth becomes an ever greater multiple of every thing real there is to buy. The more extreme the ratio of financial paper wealth to the value of the real economy, the greater the demand will be from creditors for austerity to uphold the value of that paper wealth even as austerity destroys the value of the real economy.
    To my mind the only way out looks to be to replace the current tax system with an asset tax so that we are taxed on what we own rather than on what we do.

  33. ambrosius October 28, 2013 at 3:37 pm #

    “Any fool can face a crisis. It is day to day living that wears you out.” [ A. Chekhov.]
    Well ladies and gentlemen, I cannot vouch for the Six stages of Dimitry Orlov’s collapse, but I can certainly vouch for the first three: The ” inevitable” Financial, Commercial and Political collapses because they are here ; blaring through fog horns despite what the head honcho of the Bank of England says.
    This man previously with the Sachs of Gold [ surprise, surprise ] is very much on the news. With so few journalists left to trust and so many shills busy rolling the propaganda machines and oiling their fingers the last thing the govt needs is someone pointing a beam of light. Well done Golem.
    As the great brave Karen Hudes states : “there is nothing but insider trading “.
    She knows. She meant ” nothing.” The famous count was a pedestrian blood sucker compared to the effervescence displayed by our current bunch. If this continues in this fashion tomorrow you and I and all readers included will have nothing left to loose. These insiders have no return address. Their possibilities for war are endless . By now their corruption is so deep inside us all ,that our tails are sparking; no wonder they have to print or die . But that ‘s alright ; They have our permission. Don’t we go along with it ?? Desperately ? To keep these enemies of mankind extorting money from us all ? A sure sign of being slaves and in league with satanic forces perhaps.
    Ancient warnings like :
    “Those who hide their plans turn everything upside down ” [Isaiah] or :God sets up the basest of men over nations .”
    or: ” The fish rots from the head “,
    or closer to home: “Those who give up essential liberty to obtain safety deserve neither ”
    mean very little in our end times, only perhaps to have arguments as wet as monsoons with, to the multitudes that are plugged into the Borg. While behind the scenes the U.N. is developing extinctions. Read all about them . Theirs are official documents and come from their top echelons. The Illuminati do not give a hoot for us.
    “Nothing is secret that will not be revealed.” Even though the lie that binds us is wonderfully constructed.
    America went into receivership in 1932. Today Amerika’s situation is so terrifying its criminal mafias have introduced capital controls. Soon they will be introduced everywhere else to accompany its collapse. The Bank of International Settlements was started by England and the nazis in the 1930′s. Its a club.
    It drives up decibels to the Tourettes because capital controls are a sure sign
    that all major banks have imploded. No exceptions. Parasitic speculators affect yours, mine and everyone’s life directly ; they are the true news that are so seldom mouthed by the fervent shills of our propaganda press. They have permission.
    If I was running this system I would be scared too .
    After all the governments routine extortions worldwide if you are not scared by now nothing can help you.
    It is two thousand years of plotting in the shadows and coopting our ignorant and corrupt rulers. ENOUGH.
    ” Open the door HAL ” [ Kubrik's 2001 ]

  34. Phil T. October 28, 2013 at 7:22 pm #

    from SPIEGEL ONLINE
    10/28/2013 06:08 PM

    Appearances and Reality
    Merkel Balks at EU Privacy Push

    By Gregor Peter Schmitz in Brussels

    “Chancellor Merkel has put on a good show of being outraged by American spying. But, at the same time, she has impeded efforts to strengthen data security. Does she really want more privacy, or is she more interested in being accepted into the exclusive group of info-sharing countries known as the ‘Five Eyes’ club?…”

    http://www.spiegel.de/international/europe/germany-impedes-eu-privacy-efforts-despite-outrage-at-nsa-spying-a-930488-druck.html

  35. Annos November 6, 2013 at 12:19 pm #

    I knew this was coming, when the NHS goes private the same will come into force to pay for a visit to the doctors, people can’t win, they never will!!!, the top 10% want it ALL.

    http://www.thetimes.co.uk/tto/news/politics/article3912171.ece

  36. Just me November 6, 2013 at 2:53 pm #

    “BAE cuts 1,775 jobs at its English and Scottish yards”

    http://www.bbc.co.uk/news/uk-scotland-glasgow-west-24831779

    “Tony Blair and BAE Systems”

    http://educationforum.ipbhost.com/index.php?showtopic=9094&hl=%2Bcorruption+%2Blabour#entry89303

  37. David Morey November 12, 2013 at 8:33 pm #

    Democratic change is one hope, but it may fail us. But what if the system does collapse? What if tomorrow there were no more money and no way to collect or record any more debts? Do we need to think about and prepare for such an eventuality? Without money could we learn to actually cooperate and share as a way to live together? Roy Bhaskar has suggested that a new and better world may require us to learn to live without money, and hopefully, I would add, debt.

  38. Robin Smith November 16, 2013 at 5:20 pm #

    Real Bank

    http://www.meltfund.com/2013/11/real-bank.html

    “Real Bank does not loan money. In the same way all other banks do not loan anything they own.”

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