Global financial system implosion begins

[Darios]

Thank you both, DF and BG for the links.

 

[Jessiedog]

Thank you both, DF and BG for the links.

Aye!



And....





Woof

 

[Bernie Gunther]

Heh, no problem. Glad to find anyone interested in this stuff.

Meanwhile, that Orlov guy is hilarious in a deadly Russian black humour sort of way. Hadn't come across him before so thanks in turn.

Financial collapse, as we are are currently observing it, consists of two parts. One is that a part of the general population is forced to move, no longer able to afford the house they bought based on inflated assessments, forged income numbers, and foolish expectations of endless asset inflation. Since, technically, they should never have been allowed to buy these houses, and were only able to do so because of financial and political malfeasance, this is actually a healthy development. The second part consists of men in expensive suits tossing bundles of suddenly worthless paper up in the air, ripping out their remaining hair, and (some of us might uncharitably hope) setting themselves on fire on the steps of the Federal Reserve. They, to express it in their own vernacular, "fucked up," and so this is also just as it should be.

The government response to this could be to offer some helpful homilies about "the wages of sin" and to open a few soup kitchens and flop houses in a variety of locations including Wall Street. The message would be: "You former debt addicts and gamblers, as you say, 'fucked up,' and so this will really hurt for a long time. We will never let you anywhere near big money again. Get yourselves over to the soup kitchen, and bring your own bowl, because we don't do dishes." This would result in a stable Stage 1 collapse - the Second Great Depression.

However, this is unlikely, because in the US the government happens to be debt addict and gambler number one. As individuals, we may have been as virtuous as we wished, but the government will have still run up exorbitant debts on our behalf. Every level of government, from local municipalities and authorities, which need the financial markets to finance their public works and public services, to the federal government, which relies on foreign investment to finance its endless wars, is addicted to public debt. They know they cannot stop borrowing, and so they will do anything they can to keep the game going for as long as possible.

About the only thing the government currently seems it fit to do is extend further credit to those in trouble, by setting interest rates at far below inflation, by accepting worthless bits of paper as collateral and by pumping money into insolvent financial institutions. This has the effect of diluting the dollar, further undermining its value, and will, in due course, lead to hyperinflation, which is bad enough in any economy, but is especially serious for one dominated by imports. As imports dry up and the associated parts of the economy shut down, we pass Stage 2: Commercial Collapse.

As businesses shut down, storefronts are boarded up and the population is left largely penniless and dependent on FEMA and charity for survival, the government may consider what to do next. It could, for example, repatriate all foreign troops and set them to work on public works projects designed to directly help the population. It could promote local economic self-sufficiency, by establishing community-supported agriculture programs, erecting renewable energy systems, and organizing and training local self-defence forces to maintain law and order. The Army Corps of Engineers could be ordered to bulldoze buildings erected on former farmland around city centers, return the land to cultivation, and to construct high-density solar-heated housing in urban centers to resettle those who are displaced. In the interim, it could reduce homelessness by imposing a steep tax on vacant residential properties and funneling the proceeds into rent subsidies for the indigent. With plenty of luck, such measures may be able to reverse the trend, eventually providing for a restoration of pre-Stage 2 conditions.

This may or may not be a good plan, but in any case it is rather unrealistic, because the United States, being so deeply in debt, will be forced to accede to the wishes of its foreign creditors, who own a lot of national assets (land, buildings, and businesses) and who would rather see a dependent American population slaving away working off their debt than a self-sufficient one, conveniently forgetting that they have mortgaged their children's futures to pay for military fiascos, big houses, big cars, and flat-screen television sets. Thus, a much more likely scenario is that the federal government (knowing who butters their bread) will remain subservient to foreign financial interests. It will impose austerity conditions, maintain law and order through draconian means, and aide in the construction of foreign-owned factory towns and plantations. As people start to think that having a government may not be such a good idea, conditions become ripe for Stage 3

source

 

[david dissadent]

Its all getting a little Olduvai Gorge round here

 

[Darios]

However, this is unlikely, because in the US the government happens to be debt addict and gambler number one. As individuals, we may have been as virtuous as we wished, but the government will have still run up exorbitant debts on our behalf. Every level of government, from local municipalities and authorities, which need the financial markets to finance their public works and public services, to the federal government, which relies on foreign investment to finance its endless wars, is addicted to public debt. They know they cannot stop borrowing, and so they will do anything they can to keep the game going for as long as possible.

Here's one of the key things for me. Above is possibly anti-state argument #1, relative to the current crisis. It's force is felt by miniarchists and anarchists alike; yet the statists appear utterly impervious to it. It was only a matter of days ago here on Urban when various people were getting incredibly excited about a major nationalisation programme. Despite the fact that it was primarily the state's intransigence that brought us to today's abyss, many are clapping with joy at the prospect of those who fucked us receiving even more power and resources to do the same again - and as Orlov notes - draw out the pain for longer.

 

[Bernie Gunther]

Well, if it actually was nationalisation, it'd be better than just pumping up the government debt more to prop up the status quo. As it is we get a bit of short-term breathing space, which is important given how tangled our lives are with the global economy, but very likely set up worse to come further along.

 

[david dissadent]

Here's one of the key things for me. Above is possibly anti-state argument #1, relative to the current crisis. It's force is felt by miniarchists and anarchists alike; yet the statists appear utterly impervious to it. It was only a matter of days ago here on Urban when various people were getting incredibly excited about a major nationalisation programme. Despite the fact that it was primarily the state's intransigence that brought us to today's abyss, many are clapping with joy at the prospect of those who fucked us receiving even more power and resources to do the same again - and as Orlov notes - draw out the pain for longer.

We are about to enter a global deflationary recession, pretty much at the point where we need to make huge structural changes to the way our nations produce and consume energy. The fact that we probibly managed to avoid a complete collapse and depression is solace enough for me at this moment.

 

[Bernie Gunther]

We are about to enter a global deflationary recession, pretty much at the point where we need to make huge structural changes to the way our nations produce and consume energy. The fact that we probibly managed to avoid a complete collapse and depression is solace enough for me at this moment.

The issue with government debt for me at least is the power, in a world of basically unregulated financial flows, that it confers on capital over our society. We might have avoided a collapse for now, but the recession is going to be hard enough and leaving the causes of the problem not only unresolved, but actually granting these clowns even more power, seems to me to be asking for bigger trouble down the line.

 

[darkfibre]

Another interesting dynamic in all this is the demurrage effect of ~1% interest rates coupled with inflation many times that.

Even if you take the official figures of RPI/CPI of ~5%, you're looking at savings diminshing in value by ~4%.

This means that - as a 'saver' - you're more or less forced to go and speculate in the global casino if you wish to even stand a chance of breaking even.

Again, another way of making participation in the ponzi scheme these clowns are running mandatory.

I mean... what's a boy to do?

 

[TomPaine]

Cheers for the links above, some good reading there.

If any of you have 3 hours spare and want to listen to a boring documentary I would recommend the "Money Masters" some of it is a bit circumstantial but it gives a pretty robust critique of the FBR system and the bloody mess we are in.

As for:

"The government says it can afford extra borrowing because it has reduced debt over the past 10 years."

I believe that it is mathematically impossible for the government to truly reduce debt whilst we use the current FBR/BoE method.

TomPaine

 

[gosub]

I believe that it is mathematically impossible for the government to truly reduce debt whilst we use the current FBR/BoE method.

TomPaine

The next time logically we will get an oppurtunity to deal with this is when a system built on the need for perputual growth runs slap bang into some shocking figures relating to finite resources which it logically it must do. Obviously thats not now, because there seems little interest in a fiscal revolution amongst our political classesgrowth and sustainability are not easy bedfellows.

 

[darkfibre]

Terrifying graphical representation of USG's financial commitment:

http://www.nytimes.com/imagepages/2008/10/17/business/20081018_SYSTEM_GRAPHIC.html

 

[TomPaine]

The next time logically we will get an oppurtunity to deal with this is when a system built on the need for perputual growth runs slap bang into some shocking figures relating to finite resources which it logically it must do. Obviously thats not now, because there seems little interest in a fiscal revolution amongst our political classesgrowth and sustainability are not easy bedfellows

Possibly, although there has to be the will to return to a money issuing system like colonial script for example. Even in a system with finite resources, when the method for dealing in said resouces is built upon a system of incremental debt, you still leave those who essentially print the money in control, and thus in control of the finite resources.

As I mentioned regarding "currency reset" i.e. the process of removing the constantly inflating currency and starting over with a new one is bound to gain more credence in the coming months (still leaving the super rich who control the money ststem.. in control!).

Have a read of this bloomberg article:

http://www.bloomberg.com/apps/news?pid=20601087&sid=apjqJKKQvfDc&refer=home

Sarkozy has also been discussing the idea of some form of global currency, pressumable not the $.

A quick google search based upon something I caught on the radio brought up this:

http://www.euronews.net/en/article/18/10/2008/sarkozy-seeks-us-backing-for-global-money-summit/

The more articles/speeches we see skirting round the edge of talking about fusing currencies, tri-polar currency groups etc. the more likely in my humble opinion we are to start seeing politicians talking about new merged currencies to solve the problem.
This would also in my opinion see a massive transfer of wealth as well as the sort of rip-off style pricing up of products as seen after the inro of the Euro.

TomPaine

 

[free spirit]

Terrifying graphical representation of USG's financial commitment:

http://www.nytimes.com/imagepages/2008/10/17/business/20081018_SYSTEM_GRAPHIC.html

shit

 

[darkfibre]

Here you go. This might cheer you up.

http://www.feasta.org/documents/shortcircuit/contents.html

It did, that.

A well articulate paragraph from one of the side panes in Ch. 3:

WHY DO GOVERNMENTS LET BANKS CREATE MONEY?

One of the most perplexing problems future economic historians will face will be that of explaining why almost every 19th and 20th Century government allowed private banks to create almost all the money their citizens used even to the extent of requiring their state treasuries to pay interest for the loan of money private banks had created merely by making entries in their account books when the governments could have created an equivalent amount of currency the same way themselves and financed, interest-free, whatever they wished to do. At the very least, the practice constituted - and constitutes - a massive subsidy to the banking sector and to the wealthiest groups in society.

(my emphasis)

 

[darkfibre]

Possibly, although there has to be the will to return to a money issuing system like colonial script for example. Even in a system with finite resources, when the method for dealing in said resouces is built upon a system of incremental debt, you still leave those who essentially print the money in control, and thus in control of the finite resources.

The question of the circumstances under which currency reform might take place I find perplexing.

Given Capitals power over The State, and given that The State has the final say in what is and is not legal currency (as in acceptable as payment of taxes, fines etc.), I can see how any serious attempt at systemic reform (see Bernie's feasta link above, ch. 3) is going to get stomped on. Hard.

In the face of this, what sort of strategies might be most effective in bringing about such change?

(good links, thx)

 

[TomPaine]

Darkfibre> I think many people have asked that question, but when it comes down to it, we know that the people that control this i.e. the Fed, BoE etc. are NOT going to give up this power. Everytime this method of banking has been abolished in the US, it has been introduced again a few years later, US Federal Income tax goes to paying off the interest on this money.
The last US president who was prepared to abolish the Fed was JFK and he was bumped off before it was brought into law.

Look back to the conception of the BoE in the 17th C and you can see just how far back this form of maniplulation by the ultra welathy goes.

TomPaine

 

[TomPaine]

In the face of this, what sort of strategies might be most effective in bringing about such change?

Good question, any party that was prepared to abolish the BoE would have to actually have to get into power first. They would then have to smash the BoE control over the currency and abolish the bank.
The secretive nature of how it operates needs to be fully exposed to the public light and those who control it need to be rooted out and exposed as well.
We then need to make sure future generations do not allow something of this nature to be introduced again.

Since I can't see ay party getting into power to do this in the near future we are stuck with it

TomPaine

 

[Darios]

Great to see such discussion on this topic on urban without shouting and abuse. I'll add some more thoughts myself later when I have time.

Since I can't see ay party getting into power to do this in the near future we are stuck with it

TomPaine

Still, no reason not to support those of us who are making such proposals in the meantime.

 

[TomPaine]

Darios> Yes I noticed you folks over at the LPUK are opposed to the BoE/FBR which is very good in my opinion.

TomPaine

 

[hipipol]

Good question, any party that was prepared to abolish the BoE would have to actually have to get into power first. They would then have to smash the BoE control over the currency and abolish the bank.
The secretive nature of how it operates needs to be fully exposed to the public light and those who control it need to be rooted out and exposed as well.
We then need to make sure future generations do not allow something of this nature to be introduced again.

Since I can't see ay party getting into power to do this in the near future we are stuck with it

TomPaine

Aye get the lizards out !!!

"The secretive nature of how it operates needs to be fully exposed to the public light and those who control it need to be rooted out and exposed as well. " Do you actually believe that?
It so close to the JAZZ Illuminati madness I can only assume you meant it as some sort of joke.
You will have noticed that if the bank is totally transparent and tell all in its approach, mass panic then ensues - hardly an improvement.
What would you use instead of money? We are no longer a subsistance economy (actually prob havent been for a good 3 or 4,000 years) I do not wish to have to swap my labour for sheep pelts or a big bucket of goats intestines.

Perhaps you wish to retain money but instead have the "control" passed to some other group - how long till said group is behaving pretty much the same as the BoE?

Its farcical to assume that somehow human nature will change to the degree that those who do the replacing in whatever revolution you care to have wont change in a simalcrum of that and those they displaced

 

[hipipol]

Great to see such discussion on this topic on urban without shouting and abuse. I'll add some more thoughts myself later when I have time.



Still, no reason not to support those of us who are making such proposals in the meantime.

LIbertarian?
What a joke
Idiots to a man, woman, their offspring and no doubt their pets

Suggest you bugger off to the states mate where that sort of unmitigated twaddle is given time of day.....

 

[Crispy]

Great to see such discussion on this topic on urban without shouting and abuse.

Spoke too soon

 

[TomPaine]

What would you use instead of money? We are no longer a subsistance economy (actually prob havent been for a good 3 or 4,000 years) I do not wish to have to swap my labour for sheep pelts or a big bucket of goats intestines.

Perhaps you wish to retain money but instead have the "control" passed to some other group - how long till said group is behaving pretty much the same as the BoE?

Its farcical to assume that somehow human nature will change to the degree that those who do the replacing in whatever revolution you care to have wont change in a simalcrum of that and those they displaced

I'll address this point first. Do you actually understand how the system works, or are you trying to be funny for the sake of it?

I have not seriously suggested that we wouldn't have a monetary system, this would only be posible in some sort of Utopia which I doubt would ever exist somehow. Currently though the BoE prints the money for the government and LENDS it at interest to the state. The public is perpetually paying off the interest on this loan. The BoE is/was a private bank regardless of what the name suggests and has major shareholders who reap in the profit of the interest.
The Major shareholder I believe currently is the government since the Bank was re-nationalised after WW2 (although Gordon gave it more independence since becoming to Chancellor), however the government issued stocks to replace the private shares owned by individuals and now has to pay interest on them, a thoroughly stupid measure.

The system that would replace it would be a system where the state issues the money debt free. This worked for hundreds of years from the reign of Henry I through to the creation of the BoE in 1694. The English colonies of New Egland also used their own debt free money system called Colonial script until in the 18th C London banned it and forced the colonies into a recession. Guernsey has done the same in the past.

I'll come back to your first point, and no this has nothing to do with David Icke, Jewish conspiracies or lizards.....

TomPaine

 

[TomPaine]

Aye get the lizards out !!!

"The secretive nature of how it operates needs to be fully exposed to the public light and those who control it need to be rooted out and exposed as well. " Do you actually believe that?
It so close to the JAZZ Illuminati madness I can only assume you meant it as some sort of joke.
You will have noticed that if the bank is totally transparent and tell all in its approach, mass panic then ensues - hardly an improvement.
What would you use instead of money? We are no longer a subsistance economy (actually prob havent been for a good 3 or 4,000 years) I do not wish to have to swap my labour for sheep pelts or a big bucket of goats intestines.

Perhaps you wish to retain money but instead have the "control" passed to some other group - how long till said group is behaving pretty much the same as the BoE?

Ok with regards to the secretive nature. The method of FRB and how the BoE operates on a mechanical level is public. You can read Money Mechanics, the Federal reserve document that explains FRB for example.

The problem and secrecy comes in the fact that private banking interests have a controlling say in how the system is run. The BoE essentially works as an oversight body for the private banks, but is staffed with people from.... private banks.
The bank is mostly controlled and run by those from the world of banking, business and economics. The Court of Directors, who are responsible for setting policy and overseeing its functions are also from the world of.... banks, insurance and big business.

So we are not talking about some sort of Icke like conspiracy, but we are talking about a system where a group of directors/Bankers can get together, discuss monetary policy behind closed doors for their own benefit and then implement it for their own benefit rather then the for the purpose of maintaining a monetary system that allows the exchange of goods in a sensible manner i.e. not having to barter.

The BoE also fluctuates between periods where private shareholders are reaping the profit of the interest on the debt money created (as in the US currently with the Fed) or where the government recieves the interest from the debt money but has to pay it back out to former shareholders in the form of stock dividends.
Of course I am sure if we where to trace these stockholders they would probably turn out to be the same banking interests that end up sitting on the board of directors at the BoE.

So sorry no conspiracy in sight nor Illuminati, but a group of rich elite who probably run your own bank, perpetuating the system for their own benefit.

TomPaine

 

[gosub]

Colonial script is still a fiat based idea. Thinking more along the lines of OPEC (possibly with Russia) creating a new currency, with one OPEC worth 1 litre of brent crude.

 

[kyser_soze]

So all you can come up with as alternatives are returns to commodity backed currencies? Why not just use gold or silver?

 

[gosub]

Coz we aren't burning though millions of tonnes of gold a year. Rareity just encourages faster tapping of reserves. Brent backed would also give a greater transparency in translating alternative energy sources


In the last 3000 years plus people have come up with commidty backed and FIAT, you were expecting to Nobel prize winning new approach on Urban

 

[kyser_soze]

No, but you both seem to have spent eons basically saying lets go back to a commodity backed currency...

Only poking dude...

 

[TomPaine]

Well either a fiat colonial script style or a gold backed currency is OK as a first stepm (both have their obvious problems), as long as the control over the currency is placed firmly back in the hands of the government and no FBR methods are used.

TomPaine