There Is Not Enough Money On Planet Earth
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Leslie Jones Über Boston 1936 "The Hindenburg over Boston Common" No matter how you look at it, as The Automatic Earth and other
[See the full post at: There Is Not Enough Money On Planet Earth]Ilargi wrote: Put your remaining wealth somewhere where no-one can get their hands on it. And then lay low and try to ride it out, that perfect storm. The only way to outsmart it is to go where it can’t touch you. Even if that’s close to home.
Where exactly would that “Safe Haven” be Ilargi? Not Gold, not USTs, not even FRNs in the Bank of Sealy. None of these financial instruments/money forms are very safe anymore. Neither is it all that safe to own Land either.
We’ve all been through the scenarios many times, and Inflation or Deflation, the primary problem is that Trade will collapse here and make most products/foodstuffs unavailable to buy at any price. The subsistence permaculture farming paradigm has its own problems as well in a scenario where most of the population doesn’t have money or expertiese enough to produce all their own food. Even the Full Primitive Bugout scenarios have many issues that preclude them from being a “safe haven”.
it is true, there is NOT enough “Money” in the world to resolve the problems before us, because the problem really is not money at all, it is just money by proxy. The real problem is the depletion of energy to run the systems we have while at the same time the population has overshot the carrying capacity of the planet by a LONG Shot in the absence of cheap energy.
Where do you “lay low”? Where is left to go Run and Hide anymore? Oz? Here on the Last Great Frontier where I live? I think not. Although I believe the more remote you are the better off you are, by no means do I think anywhere at all is safe from the conflagrations to come here.
I think it will ALL become a battlefield of one sort or another as time goes by here, and there is no monetary means by which to secure “wealth” anymore. Mainly here, you have to prepare yourself by joining with others and hoping to hell you picked the right hole where people pull together rather than go at each other’s throats. Lotta LUCK involved with that choice.
The further out you are, the better off you are, but few of us are prepared to join either the Inuit of Nunavut OR the Bushmen of the Kalahari, and that includes me. In all other places besides the most marginal though, it is not safe anymore. The MONEY certainly is not safe. It will not survive a world of contraction. Money depends on surplus for its existence. In a world of scarcity, Money is History.
I can’t imagine what you are talking about when you say people are not buying homes. In the last 2 or 3 months, it’s been crazy. Just when I thought prices were coming to within 10% of bottom, all that pent up demand from the last 3 years has exploded. Open houses are mobbed. Any halfway reasonably priced house is going under contract within a few days, and many overpriced houses are too. Very depressing. It’s like these idiots learned nothing from the last 10 years. Of course a lot of them are bidding up the prices too high and many of the contracts fall thru, for reasons unknown to me. One would hope because the banks are telling these idiots that they have offered way more than the houses are worth, but that would mean someone in this country has learned something (I’m not optimistic). But even with cancellations, the decent houses are finding new offers very quickly. I assume this is all election year related to help the incumbents avoid a rout. But I’d say there are a few more years left in this bubble economy, at least.
PS, this website is ridiculous with the number of times you are required to log in just to leave a comment. Last time I do *that*.
Great article. Like TAE of old. Succinct and persuasive.
Reverse Engineer, you reiterate a number of questions raised by anyone who fears a financial and social unwind. But TAE has been offering many ideas that can help to mitigate the risks you mention. I don’t think TAE has ever said there is a foolproof way to protect against so many risks. I’m sure some folks who do everything “right” will still get caught at the wrong place and the wrong time. No one knows where the precisely “right” place or “right” time will be, but the more of us who are aware and thinking ahead, the more of us who have a chance to survive it and advocate for a better financial/social/political landscape in the future.
If this article is true and inflation cannot render the debt situation manageable, then a debt moratorium would have to come up for consideration to prevent the collapse of our society in my opinion. Are billions of people going to suffer the rest of their lives for a debt situation gone wild and beyond all sane behavior, especially when most of them had absolutely nothing to do with it and did not even participate in the drunken orgy of debt? A debt moratorium is a delay in the payment of debts or obligations. The term is generally used to refer to acts by national governments. A moratory law is usually passed in some special period of political or commercial stress; for instance, on several occasions during the Franco-Prussian War, the French government passed moratory laws. Their international validity was discussed at length, and upheld in the English law case Rouquette v Overman (1875) LR 10 QB. Debt moratoriums are generally opposed by creditors.
Proponents of debt moratoriums argue that it is a sovereign decision by the government of a nation to suspend payment of debt to its creditors, in the event that to do otherwise would do irreparable harm to the welfare of its citizenry. A debt moratorium may take the form of a complete cessation of debt payments, or a partial cessation; for example, the government of President Alan García of Peru implemented the so-called “Ten Per Cent Solution”, where it was announced that only 10% of export earnings would go to debt payment.
Nations which have, at one time or another, declared a debt moratorium, are Peru, Pakistan,[1] Brazil, Mexico, Russia, Argentina and the United States in the Great Depression with its World War I debts (1931). The most recent addition to this group is Ecuador, which entered a technical moratorium on its foreign debt on 14 November 2008. Ecuador stopped all payments on its 2012 bond, but has continued on the 2015 bond. The investment company Dubai World, owned by the Dubai government also declared a debt moratorium in November, 2009
First, you need to define money cause it ain’t what it used to be. In reality, there is no more money… it’s all debt. Every single dollar is not money it’s debt. Banks create debt, not money. Every bit of ‘money’ you have is really debt… if all debts are paid off, then you have nothing because all money is debt.
Banks create debt, governments DO NOT print money (they BORROW money). If only banks create debt, where’s the money? Simple. There is no money.
This, as we all know, will not end well. I have not yet been able to see how this must end, but I will someday see that as well. My initial thought on the matter is that the U.S. will end with a major war – but that is only a result of thinking, not actual understanding.
Our monetary system is a ponzi scheme designed to funnel ALL money to the capital machine. That’s what it’s done since 1913 and they almost have it all. They do have all here in the U.S. and have now set their sites on the far east. Unless they’re stopped, we here will end up on the dung heap of history.
RE
Why do you bring up the term safe haven when I don’t? I simply said get out of the way to the extent that you can. Which for many is plenty hard, given family, friends, community. Which is just what you need by the way: no better prospect than with the people you trust. Helps if they understand what you’re getting at, that’s true.
Depletion of energy as the “real problem” is debatable. It certainly isn’t in the short run, and that’s what we’re addressing here, or at least I am. You can try to see money as proxy, for many it will be shackles. “Not all that abstract after all”, they’ll think while being led away.
Permaculture (like Transition Towns) has as a benefit that it produces actual food. As a movement it is vulnerable because few involved understand the weight of the economic system and its demise on their undertakings.
There may indeed not be an ideal place, if only because that place will not be the same for everyone. And even if it were, that all by itself would bring along a whole new set of issues.
What I think people should do, and can do, is to decrease their dependency on the systems they rely on. Whether that means moving away from where they live is so different for so many that no-one can answer that question.
Oh, and money, cash, as we know it, will be around for a while. Down the line all fiat money is doomed, but stashing some in a mattress of sorts is a whole lot better than leaving it in a bank. Short term sovereign bonds will be good for a while longer as well.
Got to be practical. Stop trying to see too far ahead. Be ready for tomorrow, and only if you got that down, look at the day after that. Preferably not on your own.
“But wait, it gets worse. He reminded the audience of the numerous “cliffs” the country faces at the end of 2012 when the George W. Bush tax cuts expire: More than $1.1 trillion will be cut from the budget, about half of which will come from defense because of the infamous “sequester” of last year; the payroll tax cut will expire, as will the “patch” in the alternate minimum tax. “If you add all those up,” he said, “it’s probably $7 trillion worth of economic events that are going to occur in December. And there’s been little to no planning for that.” [..]”
In my opinion, none of those things will happen. The Bush tax cuts will be extended, perhaps with a little tweaking. The payroll tax cut will be continued in 2013. They will not cut defense spending. Instead, they will cut something else, in the year 2050, or there about, to get around it. I’m not sure about about alternate minimum tax.
If deflation was the most likely outcome, we could just collect food stamps and watch our ‘take home pay’ increase in buying power. However, I think inflation is the more likely outcome. This is why I like the idea of producing my own food. Right now I have a backyard garden. But I’m working on some experimental farming methods, using rain barrels on a moderately large scale. Since I’m using only gravity flow, the energy requirements are very low, compared to other methods of farming.
Where to begin?
What is at issue? Easy as pie: banks were bailed out with many trillions of dollars in taxpayer funds (which they won’t pay back, they’ll just come back for more) without any scrutiny to speak of.
Bernanke and Geithner at best (yeah, right!) just “hoped” they would lend again, but they never made it a condition of the bailouts. What we find now is what I have repeatedly been saying for years now: The banks are far too deep in debt, even after the bailouts, to revive lending even to “healthy buyers”. The entire bailout circus has been a scam, since the money was handed out to banks without looking at how much debt they really have on their books.
Sorry, I disagree. The problem has never been gross exposure (only in the EU where there is no lender of last resort) rather the absence of remunerative enterprises to lend to/borrow. Waste doesn’t pay any more.
It never did but the costs are much higher now w/ + $100 petrol.
Taxpayers aren’t on the hook for anything. All funds are borrowed from finance … to be lent to finance. Any shortfalls are borrowed from finance and lent back. Taxpayers are irrelevant. (In EU, the system is demanding exogenous funds while rationing endogenous funds, WTF?)
The pressure to lend is also endogenous: finance institutions are no different from hat stores which must sell hats to stay in business. Zero- lending and finance firms fail. The only ‘bankable’ enterprises remaining in our great world are pyramid schemes that do not require resources.
Credit was handed to banks because the consequences of not handing credit were more costly than otherwise.
So where do Ben B.S. Bernanke’s deliberate “failures” show up? Have a look, I’ll try and paint you a picture. First, here’s Caroline Baum for Bloomberg:
Government’s Snake Oil Won’t Cure Jobs Ailment
Operating under the assumption that more stimulus will create more jobs, the Fed reduced its benchmark interest rate to 0 to 0.25 percent, pledged to keep it there at least through the end of 2014 and engaged in multiple rounds of bond buying to lower long-term interest rates. The Fed rationalized its stance, well after the crisis and recession had passed, as necessary to fulfill its full-employment mandate.
This is reflexive non-analysis from Bloomberg: The establishment began lending at very reduced rates during money panics at the beginning of the 20th century to reduce funding costs to firms bankrupted by high funding costs. There never was a connection between funding costs for firms and employment other than the obvious: a failed firm has no labor force.
Bernanke sez low rates will reduce unemployment? Why not? What he does is irrelevant, so is what he says. Meanwhile, the central bank does what it can. What is the alternative?
You don’t want to know.
Bonnie Kavoussi for Huffington Post:
Half Of Recent College Graduates Lack Full-Time Job, Study Says
Of all those who have graduated college since 2006, only 51 percent have a full-time job, according to a Rutgers University study released Thursday. Eleven percent are unemployed or not working at all.
More ‘blame it on the Fed’. The problem is increased automation in the search for labor productivity, output/man hour. Why the surprise? This hunt has been underway since the industrial revolution. Even China is inserting robots into its assembly lines: this works until the ‘juice’ runs out and it becomes cheaper to higher carbon-based robots again. Automation + population explosion = unemployment.
Which takes Ben by surprise, he’d like you to believe. Glenn Somerville for Reuters:
Bernanke: even worthy borrowers can’t get mortgages
Banks have become so restrictive in making mortgages that many worthy home buyers are being frozen out of the U.S. housing market, and lending practices are not likely to loosen any time soon, Federal Reserve Chairman Ben Bernanke said on Thursday.
Analysts don’t read: if unemployed cannot find jobs, that leaves the robots to buy houses. Good grief.
Last week William D. Cohan tried valiantly to cut through this sort of crap for Bloomberg:
U.S. Perfecting Formula for Budget Failure
Erskine Bowles, a true Southern gentleman and co-chairman of President Barack Obama’s erstwhile budget-deficit commission, came to New York City from his home in North Carolina the other night to talk sense about the nation’s perilous fiscal condition.
“I think today we face the most predictable economic crisis in history,” he told an audience on April 24 at the Council on Foreign Relations — an audience that might actually be able to help do something about the problem. “Fortunately, I think it’s also the most avoidable. I think it’s clear, if you do simple arithmetic, that the fiscal path that the nation is on is simply not sustainable.”
Hard to say who created more crap, Cohen or Bowles.
Here’s a bit of (crap) from Harry Wilson at the Telegraph.
Companies must raise £28 trillion ($45 trillion) to finance ‘wall’ of debt
Businesses will need to secure as much as £28.5 trillion to refinance old borrowings and fund new spending, raising major questions over the ability of the world economy to avoid a recession, according to a report from Standard & Poor’s.
They borrowed it before, why would they have problems borrowing again?
British banks have dramatically reduced the size of their balance sheets in the past three years, as well as tripling the amount of capital they hold against potential losses. However, these moves have led to a shrinkage in the amount of credit available to businesses and soaked up some of the investor demand for new debt.
Anthony Peters at SwissInvest said it was likely there would “not be enough money” available in the coming years for companies to refinance and raise the amount of new debt required. “There is not enough money on planet Earth to fund it all. We are living on borrowed money and there is no way of avoiding that,” he said.
This is simply wrong. Businesses that require hundreds of billion$$ of whatever don’t borrow from banks. They borrow on the money-market and the repo, longer-termed debt- and commercial paper markets. There is no limit to how much debt finance can issue as it can monetize what it has already issued.
Is this debt costly? Relatively: finance debts can either be repudiated or rolled. There is an implied risk/cost in either/both. The debt ‘issue’ is only problem within a broader context: what activities that debt enables and whether claims the debts represent can be perfected. These are the real problems within finance, not the size of the debts or that there are debts.
– Wanna get rid of debts? Get rid of all industries. Go back to a craft/workshop/distributed economy and debts are unnecessary. What is a craft economy? I dunno, go out and figure it out for yourself! (You will have to, nobody knows how.)
– Failure in the EU is simply a matter of policy: finance for its own reasons (fuel theft) is refusing to lend to individual EU nations. The outcome is bankruptcy as no one will lend in finance’s place.
– US government is NOT at all constrained by debt. It can simply issue currency and retire debts both public and private at will. That it does not do so is a matter of policy choice. See ‘Abe Lincoln’ and ‘greenbacks’.
– If the US Treasury issues fiat currency and that is used to retire existing debts, there is no increase in currency in circulation (and no inflation): both the debt and the currency are extinguished at the same time. See ‘Irving Fisher’ and ‘debt deflation’.
– The Federal Reserve does not create new money, it and other central banks are collateral constrained. All transactions between banks and the Fed are loans to or from the central bank. Collateral is taken at a premium (haircut) in exchange for funds from the central bank: no collateral, no loans. The Fed does not ‘print money’: it cannot and remain a central bank as doing so would discount collateral, it could not function as a lender of last resort.
– The US does not have ‘too much debt’. Rather, the costs of our wonderful waste-based economy cannot be met by its operation. The central activity of the modern world — driving a car — does not pay the driver, neither does driving a car meet the cost of the car itself. The aggregated costs involved with hundreds of millions of cars and all that goes with them — the factories, the shipping, the highways and real estate, the energy production and militaries, the insurance/loss mitigation as well as the undocumented waste-carrying costs — all of these expenses have been met for a hundred years plus- with debt.
Not any more: the cost of fuel added to the cost of the aggregate debt taken on to finance the waste of that fuel have become too expensive.
Without examining the mechanism that drives the creation of trillions of dollars, euros, yen and other currencies worth of debt, the process becomes a mystery.
There is no mystery! We waste and we revel in it because it can be monetized and because it appears to give us power in the form of fetishes. In the real world of 2012 our fetishes bankrupt us: our conveniences bankrupt us, our comforts bankrupt us our security blankets bankrupt us.
Credit/debt is an abstraction: what is real is the inability of the real world to provide for all that make demands upon it. Erskine Bowles doesn’t have a clue.
{Overall, Bernanke said, home mortgage credit outstanding at banks has contracted about 13 percent from its peak.]
And housing prices have fallen what, 35%, from their peak.Add on the HELOCS and the banks haven’t come close to working their way out from under their bad loans and Bernanke wants them to make MORE mortgage loans in the teeth of his artificially levitated economy? Bankers maybe doing the Lord’s work, they maybe ‘dancing’ , they may even be stupid but they aren’t going to make loans against collateral they KNOW is still falling in value unless its got that government guarantee attached.
How do banks KNOW home prices are still too high? Because they know how many homes they already own and how many they have yet to foreclose on. They also know that if Congress doesn’t extend the tax holiday on forgiven debt past December the short sale is DEAD and foreclosure will soar as underwater homeowners can’t even sell their homes at a loss without incurring a heavy tax burden.
Steve! How did I know you would drop in on this one? LOL. I was going to refer Ilargi to the Undertow to bone up on waste based economies and the credit stripping currently being undertaken over in Greece and Spain, but since you have arrived I’ll let you handle that part of the argument.
Now to Ilargi’s response
ilargi post=2793 wrote: RE
Why do you bring up the term safe haven when I don’t? I simply said get out of the way to the extent that you can. Which for many is plenty hard, given family, friends, community.
No that is not what you simply said. You said, “Put your remaining wealth somewhere where no-one can get their hands on it.” That sounds like a Safe Haven to me.
Depletion of energy as the “real problem” is debatable. It certainly isn’t in the short run, and that’s what we’re addressing here, or at least I am. You can try to see money as proxy, for many it will be shackles. “Not all that abstract after all”, they’ll think while being led away.
Its not a debatable problem for the Egyptians or the Israelis curently disputing what comes over the NG pipeline there, and its not a debatable problem for the Greeks who are being credit stripped and no longer can buy Gas, thus exporting their demand to the FSofA. Next up for the Strip Tease are the Spaniards, who will get their credit stripped and then further free up gas they cannot buy for Chinese and FSofA Konsumers to waste.
All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era. Any “wealth” came from the extraction and waste of that resource, and the very same people (Rockefellers et al) who “Owned” the Oil were the ones issuing out the Credit to buy that Oil. Now that they are running thin on Oil to sell, they are rationing out the credit available to buy it. Big fucking surprise there.
Oh, and money, cash, as we know it, will be around for a while. Down the line all fiat money is doomed, but stashing some in a mattress of sorts is a whole lot better than leaving it in a bank. Short term sovereign bonds will be good for a while longer as well.
Depends which brand of Cash you are talking about. If its Euros, there’s a better than even chance inside of 2 years it will only be good to wipe your ass with. FRNs probably have a slightly longer life expectancy here, but when the Nation State of the FSofA breaks apart as the Soviet Union did, FRNs won’t be any better than Confederate Dollars were after the Civil War. You folks here at TAE acknoledge a return to localism is a likely outcome and not to depend on Da Federal Goobermint for aid,, so once that occurs the Dollar is meaningless. This is probably not going to occur as fast as the Euro collapse, but a Decade is not out of the question, and that is well within the time frame people plan for financially.
Got to be practical. Stop trying to see too far ahead. Be ready for tomorrow, and only if you got that down, look at the day after that. Preferably not on your own.
I’ve got tomorrow covered, and the day after that also. In fact I am pretty well covered for a couple of years. I have no debts, I own no property to encumber me or trap me or to tax, I have plenty-o-money, i’m still employed and I live in about the lowest population zone on the face of the earth you can live and still have a full time connection to the Internet. Given these facts, I am free to look out just as far ahead as I would like. Looking out into the future 10 or 20 years and saying “Money will always be with us” might be true; or it might not be true. FRNs in the Bank of Sealy are better than Digibits in your BofA ATM account, but exaclty how much better they are when there is nothing left to buy is an open question. ” “Put your remaining wealth somewhere where no-one can get their hands on it.” is out of the question. No such place exists onthe face of the earth.
RE
I can’t foresee what is going to happen with currencies: it’s completely non-linear. The European problem is outside the euro, by the time the Europeans themselves figure out what they’ve done to themselves they will have been bled white.
For shits-and-giggles check out John Ward’s site. He’s English so he gets the time advantage, he’s as caustic as Ilargi w/ some excellent insights.
Steve said, ” I can’t foresee what is going to happen with currencies: it’s completely non-linear.”
I’m in the inflation camp, but it really doesn’t matter what happens to currencies. When you reach a certain critical mass, you (plural) CANNOT store your wealth in the midst of a population bubble!!!!
With the USA being 25% of the global economy, we are easily over the limit. The baby boom is the population bubble that has caused all the trouble. The boomers have been working hard, in high paying positions, with great education, and low unemployment, so where is their wealth?
They cannot possibly sell their houses, stocks, bonds, or anything else without pushing the price against themselves. Incredibly, they haven’t even started selling in earnest, and already most of their asset classes have rolled over, except US Treasuries. They are just barely starting to draw social security and medicare benefits, and both programs are completely unfunded. And, what little wealth they do have is callable collateral for $15 trillion in federal debt and $100 trillion in unfunded liabilities. The boomers, collectively, are many tens of trillions underwater, as they barley start to enter retirement.
Specific boomers might have cleverly stored some wealth, or a lot of it, but collectively they (we, lol) have negative wealth. No amount of currency, interest rate, or tax policy manipulation can create enough wealth to cover the perceived wealth that boomers THINK they have.
Consider the case of a small, isolated island. For centuries they store their wealth by teaching their children not to over fish, to practice sustainable agriculture, to take care of old folks, to right size their families, based on available land/fishing rights, etc.
Then, by whatever accident, they get a period of below normal childbirth, followed by a period of above normal childbirth. As the big generation moves into the workforce, things go swimmingly. Instead of two workers for each retiree, there are four. But then, eventually, there are way too many houses, fishing boats, tractors, etc. In an attempt to mitigate the mal investment, the government prints money for social programs and to bail out banks, which creates a form of Greenspan put, and it is risk-on all around. You know the rest of the story. It all starts with a population bubble.
Reverse Engineer post=2802 wrote: I’ve got tomorrow covered, and the day after that also. In fact I am pretty well covered for a couple of years. I have no debts, I own no property to encumber me or trap me or to tax, I have plenty-o-money, i’m still employed and I live in about the lowest population zone on the face of the earth you can live and still have a full time connection to the Internet. Given these facts, I am free to look out just as far ahead as I would like. Looking out into the future 10 or 20 years and saying “Money will always be with us” might be true; or it might not be true. FRNs in the Bank of Sealy are better than Digibits in your BofA ATM account, but exaclty how much better they are when there is nothing left to buy is an open question. ” “Put your remaining wealth somewhere where no-one can get their hands on it.” is out of the question. No such place exists onthe face of the earth.RE
RE, I admire anyone who goes to the lengths you have gone to “prepare”. Your experiences will be very valuable as the crisis evolves. However, given the glacial pace of actual “collapse” (we’re talking Mad Max territory here), I think it weighs heavily in favour of Ilargi’s argument that we will have money for a lot longer than you think. And that means one has to be prepared financially as well as doing all the smart things you are doing. The US dollar cannot vanish at the same moment as the Euro or the Yen. There will be a pretty clear window of time between Euro and Yen collapse and a US dollar collapse, because we are not all going to start trading nothing but moccasins for food until every last shred of faith in the status quo has been stripped away. Most people are still within the status quo and can’t imagine anything else. When they’re hungry, they’ll be very thankful for a dollar to buy a bag of groceries. Of course if you have your bag of groceries already provided for, you’re ahead. But there will always be things you can’t provide on your own. Money in the form of real hard currency will be in increasingly short supply. It already is. Barter will rise only because money will be scarce. All these guys online who would love to buy every single ounce of gold from any “gold doubter” have a very perceptible obstacle in front of them…they need MONEY to buy said gold. A monetary system has an incredible efficiency to it, and when people are stretched to the limits of survival, the most efficient system will remain for some time yet. It’s why money has lasted so long and will last longer than the gold bugs believe. I agree with TAE that you’re well advised to do “both” if you can afford to–prepare to have money first, and then think about gold once all your other bases are covered, like land, etc.
Why do you bring up the term safe haven when I don’t? I simply said get out of the way to the extent that you can. Which for many is plenty hard, given family, friends, community.
“No that is not what you simply said. You said, “Put your remaining wealth somewhere where no-one can get their hands on it.” That sounds like a Safe Haven to me.”
And it may sound like a hole in the ground to someone else; I still didn’t use the term. You can’t have a serious discussion when people feel free to read into your words whatever they see fit.
“All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era.”
That is an interpretation issue just like the one mentioned above. All money comes from oil?! Hammer meet nail.
“Looking out into the future 10 or 20 years and saying “Money will always be with us” might be true;”
I don’t think I even know anyone who says that.
You can’t just change the goalposts on anything anyone writes and run away with that. It makes for a huge waste of time for everyone. I write what I write, not what you or anyone else think I should be writing. To then find comments that address something else than what I actually write is just strange, and not very useful.
Steve from Virginia
The world of money does not work the way you’ve imagined. For example, the FED does create money when they QE. Even then, what they buy is interest bearing, and that’s a real problem.
Corporations borrow from banks, no matter whether the source is the money market or what because ONLY banks can create money.
Governments DO NOT print money, there is no method by which they can do so, they borrow money from the capital machine. Doing so creates an interest obligation that falls on the taxpayer.
So much more of what you’ve written is just not so – because your fundamentals are incorrect. A fraudulent monetary system is the heart of the problem and understanding that is key to everything else.
ilargi post=2813 wrote: Why do you bring up the term safe haven when I don’t? I simply said get out of the way to the extent that you can. Which for many is plenty hard, given family, friends, community.
“No that is not what you simply said. You said, “Put your remaining wealth somewhere where no-one can get their hands on it.” That sounds like a Safe Haven to me.”
And it may sound like a hole in the ground to someone else; I still didn’t use the term. You can’t have a serious discussion when people feel free to read into your words whatever they see fit.
Subtext exist in everything you write, and the reader can always interpret the MEANING of what you write. You do not have to use the exact words to convey a meaning. I did not QUOTE you as writing “Safe Haven”, I just interpereted that from the subtext of what you wrote.
Insofar as how anybody else interpreted it, why don’t you put up a Poll on it? If your software doesn’t support Polls, I’ll put up a Poll on DD 🙂
“All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era.”
That is an interpretation issue just like the one mentioned above. All money comes from oil?! Hammer meet nail.
I know you and Stoneleigh do not follow the same set of arguments that Steve and I pursue with respect to the role of Money, Credit and Energy and their inter-relationships. Steve has written plenty on this, so have I, so if you want to get into a debate about how to interpret this question I will be happy to do so. Can’t speak for Steve, but I doub the could keep his keyboard quiet in such a debate.
“Looking out into the future 10 or 20 years and saying “Money will always be with us” might be true;”
I don’t think I even know anyone who says that.
Paraphrasing, you said a couple of things, one that Cash would be with us for the forseeable future and also that I shoudl concern myself with tomorrow and the day after tomorrow, not the far flung future. So I hit the intermediate period between tomorrow and the FFF as one worth thinking about here.
You can’t just change the goalposts on anything anyone writes and run away with that. It makes for a huge waste of time for everyone. I write what I write, not what you or anyone else think I should be writing. To then find comments that address something else than what I actually write is just strange, and not very useful.
Ilargi, this is the INTERNET. We do not operate by Robert’s Rules in debate on the net, never has been true on any board I ever participated on anyhow. I don’t think I moved the Goalposts that far, but even if I did that happens all the time. You can write what you write, and I don’t have any particular opinion on what you should write either. What you DO write though is open to interpretation, and if I argue a point you made, your choices generally are to ignore what I wrote, respond to what I wrote substantively, Napalm me or Ban Me. In this case you are Napalming me, you aren’t responding to the arguments I make, you are just saying it is not what you meant and my interpetation is “strange”. This is “Napalm Lite”, but it is still Napalm.
RE
QE is the recycling of credit, no new money is created.
Central banks cannot create currency. Only the government with private credit in hand from finance by way of central banks can create currency. In America in 2012 only the private sector creates new money as it and it alone can make unsecured loans. That this is true is self-evident: the central banks can lend but only upon collateral, otherwise they cannot be central banks, that is, lenders of last resort.
That the government can issue currency without taking liabilities: this is not a loan but truly fiat issue. The last time the US issued fiat was during 1933 (and I am not sure about it because the narratives aren’t clear). Gold-silver specie systems are also fiat money system. The US and the rest of the world use debt-money systems. In such a system the government borrows from private finance offering collateral to produce currency. Outside of the loans private finance make to government (to produce currency) the private sector produces all other money and credit.
The reason the Federal reserve was created in the first place is because under the gold standard of the time there was insufficient money to quell panics as was discovered during the ‘Bankers’ Panic of 1907′.
When there are money panics the desire among holders of assets to sell them at any price to gain currency. If this is done in the market when all are selling at once there is no bid, the asset price plunges. The central bank will take the asset at face value (perhaps with a small haircut) when the market will not, always presenting a bid for it. In general, the bids themselves will convince others either to not sell into the (malfunctioning) marketplace or to swap instead with the central bank.
All of the Fed’s transactions have been of this type for instance: swap of asset to Fed for credit at par or small haircut. The only complaints are some swaps appear to be open-ended.
If the Fed was to ‘print money’ it would be extending leveraged or unsecured loans. By doing so it would discount collateral which is the opposite of what the central bank seeks to do during a panic. It would convince asset holders to seek a better offers in the defective marketplace. In other words, the central bank would be just another commercial bank (or depositor) that makes unsecured loans. Without a reserve bank there would be continuing bank runs as depositors who are unsecured lenders would seek more security elsewhere. This is underway in the EU as the ECB (and Target 2) have APPEARED to make unsecured loans.
This is also why the ECBs efforts have had little traction w. regard to the re-liquifying EU banks. At the same time, they haven’t created any new money/credit. They (including the ECB) have taken on impaired assets in exchange for credit. After forty years of non-stop credit expansion there is no limit to the amount of impaired assets the central bank can take on in exchange for fresh credit: € 50 trillion or more. There is no need for the central bank to do more.
Central banks cannot print oil or jobs, they cannot move interest rates (money worth is set continually at gas pumps) they can do very little. They do not print money.
Governments can and do print money and have done so: they also execute people, initiate wars, steal persons’ property, etc.
It is a common trope that ‘central banks print money’: they extend credit against collateral. Fed swapping for Treasuries or other securities, is lending against against these as collateral with credit being applied to reserve accounts @ the Fed.
People who claim central banks print money are simply peak oil deniers as they have no argument to make regarding peak oil, making central banks as scapegoats. Bernanke himself has said repeatedly that the Fed does not create new money within or without quantitative easing. I suspect he knows something about his business, like a carpenter knows something about hammers and nails.
Do you follow Steve’s argument? Possibly not, because much as I agree with his analysis, he has a very confusing style for making arguments. Sorry Steve, this is true. LOL.
I’ll just pick out a core argument he makes and try to flesh it out from my perspective.
steve from virginia post=2824 wrote:
Central banks cannot print oil or jobs, they cannot move interest rates (money worth is set continually at gas pumps) they can do very little. They do not print money.Any money created in the Oil Economy has to work to BUY OIL. Helicopter Ben can issue more Credit to the TBTF Member Banks which own Da Fed, but he cannot make them lend out the credit he hands off to them for others to buy and burn oil.
It is not remunerative now for lenders to make Loans to individuals, biznesses or Goobermints to buy and burn Oil. It never was, but while there was a ton of it out there to waste the owners of the Oil could keep issuing credit to buy more of it, and collect on the interest of what they loaned out to buy it in the first place.
The problem the lenders face now is two-fold. First, all the consumers of the oil cannot repay on the debt of the oil already consumed, so old loans are now all going south. Second, they will not issue new credit to buy more Oil, because they just do not have all that much left to sell anymore to EVERYBODY. So some places are being triaged off the Credit Train, namely places like Egypt, Greece and Spain right now.
Money is not STRICTLY oil based, since clearly money existed before the Oil economy did. Money IS always energy based though, even in an Ag system where the energy to run the civilization is coming from what grows from the land. Monetary systems fail when the resources upon which it is based fall from surplus to scarcity. So an Egyptian monetary system fails when the Grain held in the Warehouse is no longer sufficient to feed the population. Money Tokens of whatever sort held are no good, because the grain just is not in the warehouse to redeem for the tokens.
Similarly here with Oil. there are numerous claims to the Oil held in the geound, as Stoneleigh puts it often “multiple claims to underlying wealth”. The Money issued though cannot make more Oil available, all you really can do is restrict credit to buy the oil from some places so others who still have credit can buy it. The credit system is collapsing because in this economy, the Oil resource upon which that credit was issued and is based is collapsing. The credit collapse of the monetary system is an EFFECT of Peak Oil, because since the beginning of the age of Oil, credit has been issued to BUY OIL.
RE
Reverse Engineer,
I’m a longtime reader, infrequent poster.
It’s not that you’re wrong, but just overly-focused on oil. Anything of true value can be used — steel I-beams, bushels of wheat, hours of manual labor, acres of land. Anything will real value is what “money” represents.
The best explanation I’ve heard is that “money is a claim on future goods and services”. If you want to always convert that into equivalent barrels of oil, that’s fine.
In regards to money vs credit: JP Morgan (the dude, not the bank) is famous for having said, “Gold is money. Everything else is just credit.” However, since credit spends like money, it’s common to talk about them together. In a deflation like S&I warn about, the difference will become universally obvious.
Ok, Steve from Virginia, RE, and others who participate on this board:
I’ve been reading this blog for years and only now want to take part in this discussion… so being new to the discussion I’m not yet familiar with the protocol. I don’t want to seem argumentative but some things I’m reading here are just not true.
Steve, you say that the government prints money, that is just not the way money works. There is no facility for that. The government borrows money, that’s why we have a public debt. While it’s true that the FED only buys previously issued debt, that debt is normally sold to the private sector. While the FED engages in REPO’s and such to adjust the quantity of money, only in QE does the FED buy and hold that debt. That means they create new money. New money is not created when the primary dealers sell that debt into the private capital machine.
What you need to understand is that the debt money system that is OUR monetary system is a ponzi scheme. New money must always be created to pay the interest from previous debt and the only way to get new money, excluding QE, is for consumers to borrow. Of course, when they borrow, more debt is created setting up a cycle of ever more need for more debt to create money to pay the interest…. evermore. IF consumers can no longer borrow money, no new money gets created and we have a recession/depression. That’s the real cause of the so-called financial crisis, consumers maxed out of credit and could no longer borrow. That’s why the FED MUST create new money.
Incidentally, if you’ve ever wondered why we’re now termed consumers rather than citizens, now you know. The consequences of a debt money monetary system are always the same, citizens become consumers and consumers become debt slaves and finally, the slaves revolt.
I have been thinking a lot more about the housing issues lately. We are about 10 years into a thirty year mortgage and don’t intend to sell because owning a home provides a freedom of movement that’s not generally found renting. There are ways to hedge your bets when you own that are very hard to do when renting.
But I see this reduction in interest rates as a way of hiding deflation that’s currently going on, possibly countering it with inflation instead. This means deflation is already happening on a practical level and tricks are being pulled out of a hat to try to keep balance sheets positive.
When people buy a house, the sticker price is generally a general comparative marker. it is the monthly payment that’s the primary marker, and this is also the major reason for concern— when property costs too much then young people can’t buy it and landowners can’t rent for enough to pay for the mortgage. This is a major reason to question long-term economic outlooks.
But right now, we are watching our monthly prices drop every six months, going down about 40% in 6 years. Housing prices spiked after we bought but are now down to about what we paid. I don’t think there is any question that relative to inflation, we are going to see continued deflation of monthly payments, and that it cant go much below where we are without either seeing increased inflation for everything else or deflation in housing prices. In general the latter is a far greater threat to banks, and so I think the fed will start pursuing a high inflation strategy to keep the banks open.
@Golden Oxen
Ecuador was very smart about their default. What the government (elected in part on an anti-US-base, pro-debt-default platform) actually did was argue that specific bond issues were fraudulant and that therefore the nation had no obligation to pay them back. They also used the FARC base raid and subsequent US mishandling to declare that all foreign military organizations, particularly the FARC (and incidentally the US) could no longer have any open bases in the country.
Housing anecdote…
I live in a mobile home park. My neighbors daughter moved here from Florida. She had major credit problems, when she left her job she took the money from her retirement account and bought a used trailer for $39K around August of last year. She has since decided that she prefers the weather in Florida to Minnesota and wants to move back. She was only able to sell the mobile home for $20K.
There is a new mobile home in the park that has been on the market for a year. People apply to buy it, but their credit is too compromised and they can’t get a loan.
I met another woman recently. She and her husband have been trying to sell their vacation home in Arizona for the past 7 years. They need to sell it for the retirement money. I didn’t say anything, I just wished her luck.
On the upside, one of my co-workers is writing a proposal so she can have some laying hens in her yard. The town she lives in currently won’t allow it. And one of my other co-workers actually has a small farm and gave me some eggs on Friday :).
All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era.
At the same time, Karl Marx just about predicted all of the problems occurring in global markets right now, and he didn’t write a lick about energy or oil. OTOH, he implicitly recognized its importance when he focused on the global expansion of industrial capitalism and its constant means of “revolutionizing production” through technology.
Saying money/credit is a proxy for energy (and, most importantly now, oil) is like saying working hours during the day is a proxy for energy. It is axiomatic. There can be no logical separation of the financial/monetary system from the extraction/production of net energy.
However, not every issue that arises within the former is directly a function of the latter, as evidenced by the theories of people like Marx, Fisher, Keynes, Minsky, etc. which accurately describe the dynamics of the economic/financial system but do not directly rely on the functions of the energy/oil industry to do so.
Ash said–“However, not every issue that arises within the former is directly a function of the latter, as evidenced by the theories of people like Marx, Fisher, Keynes, Minsky, etc. which accurately describe the dynamics of the economic/financial system but do not directly rely on the functions of the energy/oil industry to do so.”
How does one accurately describe how oil has traded at least a 200% premium to natural gas (and recently as much as 600%, and currently 450%) on a btu equivalent basis for three years?
For the same reason we threw away $3 or $4 trillion in Iraq. They cannot and will not let oil trade in anything buy dollars, as Saddam threatened to do. The oil trade is all that is propping up the dollar. Without it, it is completely worthless.
pipefit post=2843 wrote: The oil trade is all that is propping up the dollar. Without it, it is completely worthless.
How could ANY global reserve currency be worth anything without the support of the oil trade? Like I said, axiomatic. But that does not mean the oil trade is the ONLY function the debt-dollar serves, or the financial system in general. Imperialism and wealth extraction come in many forms – the oil trade just makes it really easy.
The article quotes this: “”If you add all those up,” he said, “it’s probably $7 trillion worth of economic events that are going to occur in December. And there’s been little to no planning for that.” [..]”
Ok… am I the only one who thinks it’s really strange that this is going to happen in December?? I’m definitely not inclined to believe in the Dec 21st Mayan stuff… but this kind of sh*t really makes me wonder.
m111ark post=2832 wrote: Ok, Steve from Virginia, RE, and others who participate on this board:
I’ve been reading this blog for years and only now want to take part in this discussion… so being new to the discussion I’m not yet familiar with the protocol. I don’t want to seem argumentative but some things I’m reading here are just not true.
Jump right in and be yourself and be polite. Individuality is what a feature, not a bug.
m111ark post=2832 wrote:
Steve, you say that the government prints money, that is just not the way money works.What I think steve tried to convey is that the government CAN print money and has done so in the past. If so, that is true.
However, you are correct, the current system doesn’t allow for that right now. They can coin debt free money…
But this is where Econ 101 comes into play. Whose interests does Bernanke represent? That is the KEY question because that will dictate the actions he will take.
The straight to hyperinflationists seem to mostly think that Bernanke will defend the politicians within government.
My research says Bernanke is ultimately employed by Big Finance Capital, which has perched itself atop the government and the major corporations, including major banking corporations, and Bernanke will defend their interests AT THE EXPENSE OF THE GOVERNMENT AND THE PEOPLE.
The monetary system is a con game and fraud and nobody in the “establishment” will call out the obvious – this is all fraud.
This flow charts shows how it works…
https://www.keepandshare.com/doc/3325954/debt-dollar-tyranny-2-54k?tr=77
BTW, that’s Big Finance Capital (BFC) at the top sucking everyone else dry, which is why they created this system in the first place. The borrower is servant to the lender, so the government is servant to BFC. In theory, this could change, but I’m pretty confident that anyone in power who would try and create this change would be risking their lives now that the CIA and Pentagon listen in on everyone’s phone calls and email… they know who to target.
m111ark post=2832 wrote:
There is no facility for that. The government borrows money, that’s why we have a public debt.In theory, that could change, though. I think that is what steve meant to communicate.
steve did confuse me when he said only the government can create currency. Uh, every time a credit card is used, currency (debt based bank credit, which I think is reasonable to include in the definition of “currency”) is created. Every car loan creates currency, etc… Perhaps steve is referring to only physical FRNs or coins – I think that is government issue only… in conjunction with the Federal Reserve international banking cartel Trojan Horse.
m111ark post=2832 wrote:
While it’s true that the FED only buys previously issued debt, that debt is normally sold to the private sector. While the FED engages in REPO’s and such to adjust the quantity of money, only in QE does the FED buy and hold that debt. That means they create new money. New money is not created when the primary dealers sell that debt into the private capital machine.If I understand correctly, they take $1 billion in “assets” in exchange for $1 billion in bank credit.
I think we all know that the $1 billion face value of the assets isn’t real, maybe $300 million or less.
However, this is still NOT printing money. That $1 billion issued as bank credit still has debt attached to it, it just isn’t collecting interest UNTIL the “assets” are recognized at their real value. Let’s say that’s $300 million.
Once the international financiers decide it is time to end this charade, they will release that, totally unforeseen events have revealed that the banks can’t pay back the $1 billion and the assets are only worth $300 million… THEY WILL THEN CHARGE THE TAX PAYER THE DIFFERENCE, $700 MILLION, AND COLLECT INTEREST ON THE AMOUNT DUE.
They just don’t charge interest while they pretend the “assets” offset the cash infusion. Oh, they will eventual bill their subjects, though.
m111ark post=2832 wrote:
What you need to understand is that the debt money system that is OUR monetary system is a ponzi scheme. New money must always be created to pay the interest from previous debt and the only way to get new money, excluding QE, is for consumers to borrow.While this is practically so, it doesn’t have to be this way. The reason it is this way is because Big Finance Capital doesn’t return all the interest they accrue lending nations money, therefore, the nations don’t have enough money to pay back THEIR debts, but BFC is flush with cash.
The flow chart, above, shows this mechanism graphically. if you want a text walk through, you can go here…
When Money is Debt; Wealth is Poverty
https://www.extraenvironmentalist.com/blog/2012/03/31/money-debt-wealth-poverty/
m111ark post=2832 wrote:
Of course, when they borrow, more debt is created setting up a cycle of ever more need for more debt to create money to pay the interest…. evermore. IF consumers can no longer borrow money, no new money gets created and we have a recession/depression. That’s the real cause of the so-called financial crisis, consumers maxed out of credit and could no longer borrow. That’s why the FED MUST create new money.They must continue to issue credit or else the whole thing collapses. In addition, if they keep issuing credit, the whole thing collapses, just at a later point in time.
So, the game is to figure out what the Big Finance Capital will tell their Trojan Horse to do… print into oblivion and wipe out BFC’s trillions in debt assets, trillions in cash and bail out those they put into debt or…
…steal as much cold, hard cash as they can then bust the system, bust the debtors, roll up the debtor assets into their front corporations so the sheeple don’t realize that one group benefits from much of this operation and then hyperinflate to balance the books. By then, it won’t matter whether the oligarchs have trillions in cash BECAUSE THEY WILL CONTROL MUCH OF THE PHYSICAL WORLD AND THE SERFS WILL BE MOSTLY IMPOVERISHED.
This is the world that Nicole describes, but in a way that is much less, shall we say, “conspiratorial.” I have no doubt she knows this was all rigged, though. Someone pointed out she had made this comment in the way back machine: “the system is corruption.”
Why yes, yes it is.
So, put up your Dr. Evil finger and tell us all what YOU would do in Dr. Evil’s role.
m111ark post=2832 wrote:
Incidentally, if you’ve ever wondered why we’re now termed consumers rather than citizens, now you know. The consequences of a debt money monetary system are always the same, citizens become consumers and consumers become debt slaves and finally, the slaves revolt.Hence the police state, the right of the bankster financed President to kidnap, torture, assassinate and brutalize anyone they want with no due process or no requirement to present even fraudulent evidence.
Oh, and now the political activist “retraining camps” the Army has been preparing for since at least 2010.
At least East Germany had the morality to fabricate evidence!
One caveat, though. Don’t expect the BFC oligarchs to just the economy collapse under its own weight or directly because of their policy change.
They will almost certainly concoct some *event* that will act as the “straw that broke the camel’s back,” as it were, and that even will be blamed for the collapse.
Perhaps this will be a Strait of Hormuz being blown up or a nuclear attack on a US city.
You see, people in Amerca can’t think on average. They don’t understand that correlation isn’t necessarily causation. Even worse, they never get to that point because they simply trust “authority.”
Cold, hard, corrupt, scientific dictatorship authority.
“Put your remaining wealth somewhere where no-one can get their hands on it. And then lay low and try to ride it out, that perfect storm. The only way to outsmart it is to go where it can’t touch you. Even if that’s close to home.”
WHAT IS BEING SAID ABOVE IS IMPOSSIBLE TO EXECUTE. THERE IS NO PLACE TO RUN OR HIDE BECAUSE THE COMMON DENOMINATOR OF CIVILIZATION IS BEING UNDERMINED… MONEY/CURRENCY. SECONDLY, NO ONE CAN ACCURATELY PREDICT WHERE THIS IS GOING THUS CAN NOT CORRECTLY “PREPARE” FOR IT.
WEALTH IS BASICALLY WATER, FOOD, SHELTER, CLOTHES, BASIC SURVIVAL TOOLS OR SERVICE FACILITIES (AND POSSIBLY LAND). I WOULD THINK THAT A SUCCESSFUL PLAN WOULD BE TO WORK OUT INDIVIDUALLY HOW ONE CAN ACQUIRE AND MAINTAIN THESE BASIC FORMS OF WEALTH OVER AN EXTENDED PERIOD OF TIME SO AS TO SURVIVE WHATEVER HAPPENS. NO ONE KNOWS WHAT WILL HAPPEN, IF IT WILL BE SEVERE OR MILD, HOW MUCH INFRASTRUCTURE WILL GO AND HOW MUCH WILL STAY, ETC. ETC.
pipefit post=2843 wrote: The oil trade is all that is propping up the dollar. Without it, it is completely worthless.
That’s nonsense. What is it – $11 trillion in American mortgage debts need to be paid back in dollars. In fact, every one of those dollars is owed to someone – and the wealthiest of those people have the government and their armies ready and able to back up their debt dollar tyranny.
What people don’t seem to quite grasp is “losing confidence in dollars” is equivalent to “losing confidence in the debt those dollars represent.”
Think it through. Understand the game that is afoot.
It is a game of control, or domination over the world by, ultimately, a very small group of people at the top of a hierarchical, top down system of, essentially, well marketed dictatorship.
The EU foreshadows the ultimate model. I’m sure, as they bankrupt the nation states and impoverish the people, there will be less velvet and more iron fist, though.
What Ilargi is saying, without being so blunt or conspiratorial, is that those “abstract” dollars are a tool of people who control the nation states… and those people will “get in your grill,” so to speak, to make sure their “abstract” societal asset and control stripping mechanism does EXACTLY what it was designed to do.
Yes, oil plays a very KEY role in keeping external players in the Debt Dollar tyranny system.
Again, ENFORCED by the people who use that abstraction for their own, personal gain.
The thing most of the “to date winners” in this system fail to understand is that they are not winners at all… they are eventual targets to be taken out. Their wealth was a necessary by product of this system, not the purpose of this system. Once control is ceded to Big Finance Capital, well, they will still want more and there will only be one group in which to TAKE IT.
If you don’t understand the strategy at play, you are doomed for sure.
Resist now, resist often.
ashvin post=2840 wrote:
All the problems in the credit markets are directly traceable to money’s role as a proxy for Oil in the industrial era.
At the same time, Karl Marx just about predicted all of the problems occurring in global markets right now, and he didn’t write a lick about energy or oil. OTOH, he implicitly recognized its importance when he focused on the global expansion of industrial capitalism and its constant means of “revolutionizing production” through technology.
I don’t think Marx was wrong in what he did analyze, I just don’t think it was a complete analysis. Like other economists of the era, I think Marx viewed energy as an inexaustible resource. His focus was on the flaws in the Industrial model far as finance goes, and those are accurate observations for the most part, though by no means am I well read in Marxist analysis to be able to defend that idea. I’m sure Ashvin could defend that better than I could. The thing is, there is no way you can make an accurate analysis of this problem without looking carefully at what underpins it, which is energy extraction and utilization.
Saying money/credit is a proxy for energy (and, most importantly now, oil) is like saying working hours during the day is a proxy for energy. It is axiomatic. There can be no logical separation of the financial/monetary system from the extraction/production of net energy.
No Labor and Energy are not comparable in this way because of the vast differential in terms of thermodynamic input into the manufacturing process that Oil has over Labor. You cannot substitute Labor for Oil in many aspects of this economy, a simple example would be the Interstate Highways, which took the power of many Caterpillar Back Hoes and Front End Loaders and Cranes to build. A force of Slaves would have taken millenia to build such a thing, even if it could be built at all. Laborers cannot make the huge steel beams that support those Spaghetti intersections.
While it is possible to base your Money on just about any commodity, in the Oil economy MOST of the money in existence, probably 99.9% of it is tagged to the Oil it can buy. The Oil produces the Food through the Industrial Ag process, literally we do Eat Oil that is processed this way. Oil produces the McMansions we buy and sell and it provides the Energy to run them and make them livable.
The folks who Own the Oil issued the Credit to buy the Oil, in many ways through Sovereign, Corporate and Private debt issuance over the course of the Age of Oil. It is no coincidence of course that John D Rockefeller who created the Monopoly of Standard Oil ALSO was the main force behind Chase Manhattan Bank, the bank my Dad the Pigman worked for making many bad loans to South American countries back in the 60s.
As the Oil decreases in its availability due to extraction costs in more difficult locales and more places with expanding populations demand the Oil, the truth is the Rockefellers do not have enough left to SELL to everyone anymore, and so the Credit to buy it is disappearing here now. Various economies all over the world are being Triaged off of the Oil Economy, Steve expresses this as “Cosnervation by Other Means”. Demand crushed in Greece is exported to the FSofA, which still has some credit to buy Oil, but that is disappearing as well. It is just masked because so many other places are doing WORSE here in the contraction of credit availability.
Any Nation State can issue it’s own Credit, but if that credit won’t buy Oil, then it is useless as a means to maintain an Oil based economy. The Greeks can go ahead and issue Credit in Drachmas, but the Drachmas won’t buy Oil or it’s products. They can try and trade Olives for Oil, but it’s unclear how many barrels of Oil a barrel of Olives would actually buy. In any event, they cannot get “productive” enough with an Ag based economy to buy much Oil at all.
However, not every issue that arises within the former is directly a function of the latter, as evidenced by the theories of people like Marx, Fisher, Keynes, Minsky, etc. which accurately describe the dynamics of the economic/financial system but do not directly rely on the functions of the energy/oil industry to do so.
Again, I do not think any of these economists directly confronted the issue of limitations to the energy reserves of the world. The assumptions they make sometimes hold true in a world of surplus energy, but for the most part I do not think any of these economic theories are holding up too well as the energy inputs become scarce and expensive.
It remains true that in an Energy intensive economy based primarily on Oil now, whatever Money is issued out must serve to Buy Oil. More debt issuance can increase the Money Supply (if it is lent out), but it will not be lent out if the Lender knows from the Get-Go its a losing bet. The non-productive nature of Industry is revealed as the Energy input crosses a threshold price level and there isn’t enough cheap energy to keep subsidizing it.
Marx foresaw a crisis in Capitalism based on economic principles, and he was largely correct far as I understand Marx anyhow. The analysis is not complete though, because Avaialble per capita Energy puts even more stress on the system and undermines the Finance economy further. Basically, this just produces a Bigger and Better Collapse than Marx ever foresaw.
RE
RE,
One point on the energy thing. Both the US and Western Europe are now using substantially less oil than they were 5 years ago. The oil that Greece can no longer afford is going to the BRICs, not the US or Germany.
If you just look at crude imports it’s not obvious because a bunch of the imported crude is refined here and re-exported.
Reverse Engineer post=2849 wrote:
Any Nation State can issue it’s own Credit, but if that credit won’t buy Oil, then it is useless as a means to maintain an Oil based economy.That is a very severe rub and a method of control.
The sad thing is that THE PEOPLE own the oil, but the bankster political operatives have given that resource over to the banksters – just another sell out to their true masters while telling the proles about the glory of our “Democracy.”
As for Marx, did I miss it or did he also predict Stalin and Mao?
Just askin’.
RE, I owe you my thought process on evil being a human trait rather than a monetary trait… so here goes…
e·vil (vl)
adj. e·vil·er, e·vil·est
1. Morally bad or wrong; wicked: an evil tyrant.
2. Causing ruin, injury, or pain; harmful: the evil effects of a poor diet.
3. Characterized by or indicating future misfortune; ominous: evil omens.
4. Bad or blameworthy by report; infamous: an evil reputation.
5. Characterized by anger or spite; malicious: an evil temper.
n.
1. The quality of being morally bad or wrong; wickedness.
2. That which causes harm, misfortune, or destruction: a leader’s power to do both good and evil.
3. An evil force, power, or personification.
4. Something that is a cause or source of suffering, injury, or destruction: the social evils of poverty and injustice.https://www.thefreedictionary.com/evil
mo·ral·i·ty (m-rl-t, mô-)
n. pl. mo·ral·i·ties
1. The quality of being in accord with standards of right or good conduct.
2. A system of ideas of right and wrong conduct: religious morality; Christian morality.
3. Virtuous conduct.
4. A rule or lesson in moral conduct.Given the definition of evil and moral, that portion of the definition can’t apply to money because money is inanimate. It can’t be moral or immoral because it has no conduct, rather, it influences the conduct of people. The people have the conduct, not the money.
Point #2 in the definition of evil can’t apply, either, because money doesn’t cause anything… people cause things. Money is inanimate.
Point #3 could apply to money, but again, it is PEOPLE that will bring the misfortune to the person with money, NOT the money itself. So having money could be a bad omen of being robbed and killed BY PEOPLE.
Point #4 suffers the same fate. It could apply to inanimate money, but, ultimately, it is DECISION OF PEOPLE that would put money is such a light.
Point #5 doesn’t apply to inanimate money.
So, some definitions of evil don’t apply to money. The ones that do could only apply because of DECISION MADE BY PEOPLE.
By the way, they need not apply at all, again, based on DECISIONS MADE BY PEOPLE!
Now, assume that money had some kind physical mind control properties like a drug of some sort. If the chemical change in the human was directly initiated by the money and that was the root cause for the bad HUMAN CHOICES, I could see blaming money as evil.
But abstract concepts can’t EXTERNALLY impact people in this manner.
If human behavior isn’t externally motivated, as in drug induced mind control, then the HUMAN BEHAVIOR has to be INTERNALLY generated.
James 13-14 sums up this principle nicely, IMHO.
James 1:13-14
13 When tempted, no one should say, “God is tempting me.” For God cannot be tempted by evil, nor does he tempt anyone; 14 but each person is tempted when they are dragged away by their own evil desire and enticed.The bad news is that one’s evil (selfishness – not caring for others equal to oneself) comes from within. The good news is that one’s evil comes from within so one can take action to mitigate it.
Can money “grease the skids” of human evil desire? Absolutely. Is it the root cause of human evil desire? Absolutely not.
At the same time, Karl Marx just about predicted all of the problems occurring in global markets right now, and he didn’t write a lick about energy or oil. OTOH, he implicitly recognized its importance when he focused on the global expansion of industrial capitalism and its constant means of “revolutionizing production” through technology.
I think it is more complicated than either a complete decoupling or a close coupling. Additionally fossil fuels aren’t only about energy, but also materials. Without coal, we can’t produce steel without rapid deforestation, for example, and natural gas itself is used as a feedstock in producing all sorts of things, as is oil.
Money pretty clearly functions as a proxy for scarce resource allocation generally, and energy sources are scarce resources, and indeed is necessary for the production or exploitation of every other resource……
TheTrivium4TW post=2851 wrote:
RE, I owe you my thought process on evil being a human trait rather than a monetary trait… so here goes….You do not really owe me a further explanation on this Triv, though I am glad you do have a good rationale for your belief structure. As I said in another thread though, its not all that important whether Money is the ROOT of all Evil as I make the case for or just Greases the Skids of inherent Human Tendencies as you make the case for. In EITHER case, it mucks up the works as far as Human Society is concerned, and therefore must be wiped off the Face of the Earth FOREVER MORE. You just cannot run an equitable society that stewards well the resources of the Earth if you jack money into the equation. Whether it induces Greed itself or merely exacerbates the tendency to Greed, it is still facilitating Greed and this is what ends up in more rapid consumption of Earth Resources than we can tolerate and remain viable as a species.
I do NOT know for sure that Homo Sapiens can develop a sustainable society even without money. As Gail Tverberg points out in many of her comments on her own Blog of Our Finite World, the consumption of Earth resources in an unsustainable manner actually predates Money for many cultures. Not ALL cultures, some did live by practices that were long term sustainable, but many more did not. For Homo Sapiens to survive for the LONG TERM, aka until the Sun goes Red Giant, Best Practices will need to be the Rule of Law for our species. What ARE those Best Practices and how can we REVERSE ENGINEER our way back to them? Matter of Debate all the time in the Diner of course.
One thing I DO know for sure is that in the presence of Money and its fallout, Homo Sapiens will not last much longer on this Planet. If we persist in trying to run this paradigm, we will go the way of the Dinosaur inside a Century or two at the most. I GUARANTEE it.
RE, I have to agree that humanity is doomed on its current course. When doom hits, the root cause probably doesn’t matter too much.
IMHO, even the oligarchs are being played for fools… their lust for “more” will destroy themselves as well. It has already made them bitter, angry, soulless people.
TheTrivium4TW post=2854 wrote: RE, I have to agree that humanity is doomed on its current course. When doom hits, the root cause probably doesn’t matter too much.
IMHO, even the oligarchs are being played for fools… their lust for “more” will destroy themselves as well. It has already made them bitter, angry, soulless people.
Understanding the Root Cause does matter, because if enough people understand how Money perverts Human Society, they may be able to reject it in time enough to prevent an Extinction Level Event. Time grows short though now, the Window is Closing here on Homo Sapiens.
IMHO, it is our JOB as Bloggers and Commenters to get the MESSAGE out NOW to as many people as we can, as fast as we can. I write at a furious pace to achieve that goal. I will NOT GIVE UP on Humanity. Not so long as these Keyboard fingers will cruise at 100WPM or even BETTER than that sometimes when I really get going. Not so long as the Internet remains up and running, and even after that if I am still walking the earth I will find another means to get the message out.
The Keyboard is MIGHTIER than the Sword. Keep WRITING Triv. Get the MESSAGE OUT.
SAVE AS MANY AS YOU CAN
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