E=MC Too

 

 

The American health care system clearly needs to be rationalised. It is inefficient, with multiple competing bureaucracies, high costs and poor outcomes. many people cannot understand how it has continued to develop in what appears to be such a dysfunctional way.

 

But what if the size and shape of American health care is entirely rational if you understand the parameters that it operates within?

 

In my general theory of money I argue that the fundamental structure of capitalist economies is a broad alliance of competing money forms, (partial money), that act as a means of extracting wealth from society as a whole for their respective constituencies and through this process money forms divide up the economy.

 

Under this model INSURANCE is a money form, whose purpose is to allow its issuers and users (constituency) to extract wealth protected by its representatives among the elite: FACTIONINSURANCE.

 

You might imagine that because ‘healthcare’ is the subject of insurance that ‘health’ is somehow integral to this insurance business. It is not. ‘Health’ is no more integral to health insurance than birds are integral to ‘Dove’ shower creme.

 

To make it absolutely clear: ‘Insurance’ does not exist as a consequence of the social need for ‘Healthcare’ rather ‘Healthcare’ exists as a consequence of the economic need for ‘Insurance’. Who has an economic need for insurance? The faction that creates, buys, sells and uses it.

 

An easy way to understand it is to look back at the development of both rail and then car travel. First trains were invented and then the marketing department for the rail companies had to think of somewhere desirable to go on them. The same applies to the motor car. First the car was invented and then a desirable destination had to be invented. In this way first the ‘seaside’ and then the ‘countryside’ were invented…as well as the suburbs.

 

Insurance was invented as a money form. Then the insurers had to find something desirable to insure- enter healthcare.

 

I will build on this insight:

 

There are a number of competing money factions of which FACTIONINSURANCE is one and FACTIONDERIVATIVE is another; the latest edition to the elite power structure.

 

I have previously explained how QE was specifically an economic and political arrangement to protect and regularise emergent derivatives in the wake of the crash they caused.

 

If we accept that there are a number of money factions competing for economic and political primacy and we accept that derivatives have been inducted into the elite club, we can surmise that the derivative share of power must have been allocated at the expense of another competing money faction.

 

In other words someone must have been made to move over to make room for derivatives at the money table. Which brings us to the following intriguing anomaly:

 

In both Britain and America the newly elected post credit crunch administrations undertook ambitious and far ranging ‘reforms’ of their respective health care systems, despite the fact that many observers noted that the administrations had far more pressing concerns that they appeared reluctant to confront.

 

It does seem odd that a Conservative a government in Britain and a Democrat government in America should go out of their way to look for trouble when they had so much of it already.

 

But what if, in line with my model, they had to rejig the position of FACTIONINSURANCE within the system as a whole to accommodate FACTIONDERIVATIVE?

 

To put it another way, to get the support of FACTIONINSURANCE they had to get something in return for what they were losing to FACTIONDERIVATIVE

 

Then the actions of both Anglo Saxon elites would entirely make sense.’ Healthcare reform’ can now be seen for what it is- a central ECONOMIC part of the QE programme.

 

If my model of how the system operates is correct- how would that be reflected in what we actually observe? We would expect to see an increase in health insurance without a corresponding increase in health. Sound familiar?

 

All of which brings me to my E=MC2 moment. This is a simple formulation which is the basis for explaining all economic and political history over the past hundred years. It supersedes and clarifies all other economic theory. (Is that all, Andy ?)

 

Among other startling things my theory makes it possible to calculate to 2 decimal places the Socialism of any individual in comparison to any other individual on the planet.

 

The Credit Crunch and subsequent QE heralded the formal acceptance of derivatives into the elite money pantheon.

 

I explained how FACTIONINSURANCE got paid off to allow this to go ahead. But what about FACTIONEQUITY, FACTIONBOND etc?

 

Well they all got paid off too. In fact everybody seems to have got paid off, except one faction, and you know who that is don’t you?

 

Yup,

 

FACTIONCASH got shafted on all sides.

 

And what happened as FACTIONCASH had its political and economic power stripped away?

 

Why, Socialism evaporated into the air as though it had never existed!!

 

Surely this is the time above all others when people would have turned to Socialism. But they can’t turn to socialism because it doesn’t exist as a real separate political force.

 

Which leads me to my central formulation:

 

CASH=SOCIALISM

SOCIALISM=CASH

 

Want to know exactly to two decimal places how socialist any particular person is?

 

Find out what percentage of their wealth is held in cash and how much cash  they carry around..

 

I have prepared the following graphic for you to approximate just how Socialist you and your friends and colleagues are…

 

If you doubt my analysis ask yourself:

 

What would the world be like if there was only one money form and it was cash?

Socialism, no?

 

Why were elites all over the Saxon Axis so desperate to get welfare recipients onto digital payments?

 

Because it is bad enough if some members of society are socialist, but it really would be too much if the poor were as well…

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House Burning Down

 

It might be useful to consider further the relationship between the production of paper news and the production of paper money.

 

I observed that both paper money and paper news are forms of informational transaction. This might be more accurately described as  the transfer of meaning. In this sense ‘meaning’ is the value measurement of information; Meaning is the unit of value of information because meaning transforms data into information and makes it valuable. The construction of meaning is exactly the assigning of value to data.

 

Consider hyper inflation in the money supply . In the traditional monetarist model (the one that has more or less taken over all mainstream economics), this is caused by an oversupply of money into the market. In other words Monetarists argue that the problem of hyper inflation and inflation generally is one of quantity. Actually the problem is one of quality. We can show this with the following:

 

There is a direct relationship between publishing an edition of a newspaper and publishing an edition of money, which is effectively what is done each quarter when the interest rate is set. The interest rate is news about how things are going to be according to a central bank and money notes carry this news.

 

Money published at 0.5% base rate is a different edition of money from  that published at 1% base rate. Same ‘newspaper’, same publisher, but different news, different information, different headline.

 

Just as each particular edition  of a newspaper contains information specific to a particular time and place (as I mentioned last time), the paper money note also contains information. I will describe the nature of this information below but for now lets stick with newspapers.

 

In the example of a newspaper, let us say that the edition of January 6 has the headline: ‘War Is Declared!’. And the edition of January 7 has the headline that ‘Peace Is Declared!’. Taken in sequence the meaning of these events is clear.

 

First there is a state of war, then there is a state of peace and the present condition of affairs is that of peace.

 

Now imagine that the newspapers in question were not dated January 6 and January 7 so that there was no way of telling which was the first headline and which was the second. It could be the case that war is declared and then peace declared or it could be the case that peace is declared and then war is declared. So in the first instance we are now in a state of peace and in the second instance we are now in a state of war.

 

Now let us say that an unscrupulous news agent receives both editions of the undated newspaper from the publisher in correct order but chooses to release them to the local population in either one or the other order for his own personal advantage. If the local newsagent wants to promote the idea that we are at a state of war he will release the newspaper with a war headline second and if he wants to promote the idea that we are at peace he will release that newspaper second.

 

Just such an instance as this is described when  banker Nathan Rothschild famously withheld news of the British victory at Waterloo in order to take advantage of market uncertainty as to the outcome of the battle. By the time the markets received the news that Wellington had won,  Rothschild had bought equities at knock down prices  and made a killing on the rising market.

 

If the local population becomes aware of the possibility that news may be manipulated by a local newsagent for the purpose of controlling perceptions, they might hold on to one or more editions of a newspaper in order to compare headlines and get some idea of what the actual facts of the matter are in sequence.

 

 

Logically, in such a case the local population will have to conclude that NO particular edition of a newspaper is to be objectively trusted and that all editions are either wrong or lying. In other words the paper in its entirety is worthless rather than just this or that edition. This is the qualitive nature of the problem.

 

After all, how can two editions of the same newspaper with the same editor and the same journalists and with no differential date information be judged between? How can you know which is the truth NOW and which is not?  This is in effect what happens in the case of hyper inflation.

 

Think of a paper money note as a generalised abstracted unit of information. On a more sophisticated level we can think of a money note as a unit of evidence. We can say that one or more units of evidence goes up to make an argument and that therefore the more units of evidence you can muster in support of any particular argument the more likely you are to win that particular argument.

 

In a standard economic transaction the argument in question is that you should sell a car,(or any other commodity), to me for this number of paper notes. Or to put it another way, you should swap your car for this number of paper notes.

 

The more units of evidence that you can muster in support of this argument, i.e. the more paper notes that you offer in return for the car, the more likely you are to win that argument.

 

But there is an unfortunate corollary to this. If you win the ‘argument’; by offering more pieces of paper money evidence than the other guy, you also implicitly argue that each individual piece of paper money evidence is worth relatively less.

 

We can return to the practical consequences of this shortly but first, as I argued last time paper bank notes or units of evidence are introduced into the market at a particular time and particular place and at a particular price. So in this sense, they are first and foremost evidence in an argument on behalf of central government made to the general population.

 

The individual argument that paper money notes are evidence for is: ‘These pieces of paper are valuable to this or that extent not only in comparison with objects such as commodities, but those pieces of money paper that have gone before and those pieces of money paper that will come after’.

 

This is of crucial importance.

 

From this perspective the crisis point of hyper inflation occurs when too much information is presented at any one time which results in not a quantitive problem but a qualitive one.

 

Let us say that two purchasers are competing to buy a particular car. They both make the argument that you should swap the car for this number of pieces of paper money. The number of pieces of paper money is the totality of evidence that this or that exchange argument is true and valid.

 

Obviously they cannot offer the same number of pieces of paper as evidence/arguments or the seller will have no way of differentiating between the two. So let us say that Buyer A offers 100 money units and buyer B offers 110 money units. Buyer B wins the argument because he has offered more ‘evidence’ in support of his argument. So far so good.

 

But what if Buyer A offers 100 units as before but Buyer B offers 5000 units? What is the seller to make of that? These two arguments are wildly different, they containing wildly differing amounts of evidence in the form of money notes. (bear ‘fake news’ in mind at this point)

 

Well surely the answer is simple, the seller takes Buyer B’s offer.

 

Not so fast. Most sellers would want to know a little more about it before making a decision in these circumstances. The problem is the totality of evidence.

 

Instead of 210 units in total chasing the car,(both bids), which might be seen as reasonable there are 5100 units chasing the car which is not seen as reasonable given what the seller knows or thinks he knows. Something else is going on…

 

What if a third buyer comes along ten minutes later and offers 10,000 units for the same car? Now the seller will be pretty sure something is seriously going wrong. And the inevitable effect is that he will be forced to distrust all money notes in whatever amount because they are all the same.

 

If ten information money notes are worthless then 10,00 money notes are equally worthless, this is both the strength and weakness of the informational money system. The implication is that the seller  will be forced to distrust the overall message he is getting from the government. But it is a qualitive and not quantitive problem because it does not rely on amounts.

 

So what was that central bank/government message I referred to above? It is that ‘We are in charge and everything is all right’. That is the basic unit of money news implicit in every money note.

 

The second piece of money news is the interest rate, which is the price at which private banks buy money from the central bank. This can be understood as that particular headline for the quarter. But this piece of money news is intimately tied up with the distribution mechanism of the paper notes themselves.

 

A newspaper printing and distribution operation will have a central printing press, regional distribution warehouses and sub warehouses which distribute to newsagents and even paper sellers on the street.

 

Each element of the distribution chain decides how many papers to take and to move on down the chain of distribution according to how profitable they predict this process will be. This depends to a large extent on the nature of the headline. ‘Queen Dies!’ or ‘War Is Declared!’ will tend to sell more copies than ‘Water Supply Goes Off In Addis Ababa’ or whatever. (perhaps not in Ethiopia though..) So the headline affects and ultimately controls the distribution process.

 

The same is true with interest rates. Depending on what the Central Bank decides the interest rate will be, each element of the distribution chain, from the large commercial banks downwards decides how much of this edition of money they will take and distribute according to how profitable they calculate it to be.

 

But what is of the utmost importance to understand is that in the case of money news everyone in the chain acts like the unscrupulous news agent I described above. Everybody is encouraged to withhold editions of the news  and to release them onto the market only when it is in their individual best interests!

 

When you receive any particular edition of money, you either release it into the public by means of spending it or you withhold it by means of saving it. You manipulate the information contained in the note for your own best interests. That is what you are supposed to do- to lie, to spread disinformation.

 

Of course everybody is therefore equally dishonest and so no-one can point the finger at anyone else. The system is based upon everybody spreading corruption and lies. Wouldn’t such a system be inherently unstable and prone to periodic collapse?

 

You betcha!

 

Wouldn’t someone try to contain this corruption and tendency to collapse? Wouldn’t they try to devise a system to mitigate the problem?

 

Yes they would. They would take the logical step of trying to date and order the headlines on each edition so they could be read and understood in sequence. How would they do that?

 

By means of a code that can be read and understood by themselves but importantly, not by you. If you doubt this, take out a currency note and find the identifying  code printed on it, usually referred to as the serial number. Do you know what this code means? If you do not, why don’t you? After all it is supposed to be money issued by a democratically elected government in your name and for your benefit!

 

The purpose of this code is for the people who issued the notes to understand each ‘headline’ and the order it was issued in, but not for you, or anyone like you, to be able to.

 

The system is built on a small minority being able to fully understand the meaning of the money news and the vast majority below them taking part in a game of charades where they lie to each other and manipulate the news supply to each other for the purpose of individual advantage.

 

As a simple illustration of this suppose you had 500 units of currency  and you found out that this denomination of money would be abolished or worthless the next day. What would you do? You would try to go out and buy something with it wouldn’t you? You would try to use the information advantage that you had to pass the problem onto someone else. This is the key to inflation and hyperinflation.

 

We are building up a picture of a central money news/information agency that is issuing news on a regular basis. That news/information is then taken up by the various parts of a supply chain and manipulated and distorted in order to obtain the best possible individual outcome but with inevitable damage to the system as a whole. Assuming that he purpose of the system is to transmit information that is.

 

With this news information model in mind we can now go back to look at hyper inflation. The trouble with hyper inflation is that the seller has no way of knowing which is the most valued up to date piece of information on which to base his decision.

 

This problem presents itself as there being too many pieces of money information in circulation. Discrepancies between the amounts of money evidence offered in any particular argument (trade), force the seller  to increasingly regard all pieces of paper money as being equally invalid- hence the hyper inflation.

 

But the root of the problem here is not validity of any particular trade argument and the money evidence presented in support of it  but the equality between each and all pieces of evidence. Because of this money is actually only credible and valid within a relatively narrow and stable bank of circulation. The sameness of each piece of money information  requires sameness of prediction and sameness of outcome to work.

 

No matter how many paper notes are issued in any financial period they are all  of equal validity to  paper notes  issued  in another given quarter. In other words any episode of  inflationary money printing activity is absorbed into the whole of the financial system and is only ameliorated by later activity.

 

Just as any incorrect news report is absorbed into news production and distribution system as a whole. The system relies on its credibility to absorb the effects of any mistakes and keep people believing in the system even as they curse and dispute virtually all of the specific outcomes the system produces!

 

Since individual savers and consumers effectively act as newsagents, storing the information and only releasing it when it suits the particular interest of the moment, it is inevitable that conflicts of meaning and value will happen.

 

Hyper inflation is an insane babble of arguments that taken collectively can only mean that each individual argument is more or less worthless  since in the last analysis it is all the same argument, that we are in control and everything is alright.

 

Periodically the logic of worthlessness produced by exchanging paper money arguments is expressed by and through a significant number of news agents  going from one door to another  desperately seeking a way out as they sense the impending doom.

 

As the doors are increasingly closed to news hawkers selling bogus information  brands the volume of money seeking any  way out increases exponentially until an overwhelming tsunami of money at any and every exit guarantees it cannot escape. Think of it as a house besieged by fifty street newspaper sellers shouting:

 

‘Extra! Extra! Your House Is Burning Down!’

 

while the house owner cowers within.

 

Disaster.

 

In conclusion I will ask: Is there anything we could do to rectify this state of affairs?

 

And surprisingly perhaps, there is a very simple and very straightforward solution. To date and value stamp money. So that instead of being interchangeable all money is clearly given a value – a ‘sell by date’ at which time it becomes valueless.

 

The closer this expiry date comes, the less the exchange value of the money note. This would solve all the problems now associated with inflation hyper inflation and Monetarism then we could…

 

Oh wait a minute.

 

This form of money already exists. It is called a bond. It is what the banks themselves use when they are dealing with central banks.

 

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

LISTEN UP

 

If there is only one thing you take away from all this it should be:

 

THERE IS MORE THAN ONE FORM OF MONEY, THERE ALWAYS HAS BEEN. EACH MONEY FORM SERVES THE NEEDS OF ITS CREATORS. ANYONE CAN CREATE MONEY BECAUSE MONEY IS A COMMONS. MONEY IS A COMMONS BECAUSE IT IS NOT ANY PARTICULAR THING IT IS A FUNCTION- SOMETHING THAT AN OBJECT CAN BE MADE TO DO.

 

GOVERNMENTS MAKE MONEY FORMS TO CONTROL THEIR POPULATION. BANKS AND CORPORATIONS MAKE MONEY FORMS TO CONTROL THE PUBLIC. BITCOIN IS A METHOD OF CONTROLLING ANY SUCKER WHO BUYS INTO IT.

 

PRIVATELY ISSUED DEMOCRATISED MONEY IN THE FORM OF DERIVATIVES IS THE MOST COMPREHENSIVE ATTEMPT EVER DEVISED IN HISTORY TO CONTROL THE WORLD POPULATION DIRECTLY THROUGH THE PRODUCTION AND DISTRIBUTION OF A NEW MONEY FORM.

 

 

 

 

 

 

 

 

 

 

 

 

BLINK: Apr 12 2016

 

eye

Nose on your face..

 

In this piece Mr Edelman says:

 

‘Remarkably, today the derivatives positions held by the large banks approach 10 times those of 2007-2008. In four banks alone, they exceed the GDP of the entire world. This is the interesting consequence when unchecked risk management rests in bankers’ hands.’

 

Is this a co-incidence? If it is not a co-incidence, then it must be intentional musn’t it? What could be the intention behind creating ten times as many derivatives as there were in 2008?

 

It seems that central banks and politicians must want lots of derivatives what else could this mean? Why would they want lots of derivatives? What is it about derivatives that central bankers and politicians like? If you visit USE regularly I think you already know…

I’m the real-life Gordon Gekko and I support Bernie Sanders
Asher Edelman

The potential for a depression looms on the horizon. The Vermont senator is the only candidate who can stop banks from spiraling out of control again

 

http://www.theguardian.com/commentisfree/2016/apr/12/real-life-gordon-gekko-supports-bernie-sanders-wall-street-banks-regulation

 

Things Fall Apart..

 

This diagram shows in a very clear and succinct manner the point I have been making in Vector History about capitalism and financialisation DISINTEGRATING society..

 

@ian bremner

 

The best explanation so far

 

 

Head-Brick Wall

 

American Trotskyists can’t seem to understand why information like this doesn’t provoke a move towards ‘class’ politics but instead provokes a move towards what they call ‘identity’ politics. Until they address the arrival of CULTURAL CONSTITUENCIES, they are going to have to continue stumbling around in the dark..

Life expectancy gap between US rich and poor widens
By Jerry White
12 April 2016
http://www.wsws.org/en/articles/2016/04/12/life-a12.html

 

Roll over
Reuters coverage of the Syrian theatre of war just seems to get more ridiculously lopsided by the day..

Syria’s Assad shows no willingness to compromise
CAIRO | By Samia Nakhoul

 

http://uk.reuters.com/article/us-mideast-crisis-syria-insight-idUKKCN0X50O0

 

Cake or Ha’penny
 

You can have millions of pretend jobs or you can have productivity growth but you can’t have both at the same time…

Britain suffers biggest downturn in productivity since the financial crisis
Figures a bitter blow to hopes the UK is finally escaping the stagnation that has bogged down the country since the banks crisis

 

http://www.independent.co.uk/news/business/news/britain-suffers-biggest-downturn-in-productivity-since-the-financial-crisis-a6974011.html

 

Uppity
 

This black gentleman might not quite be on the ball about everything, but he is having a go at thinking about Eurasia etc., so good for him. He seems to me like a reasonably nice, relatively harmless type.  But oh dear, check out the response..

 

Imagine a world without whiteness

Professor Calls For “Whiteness” to be “Abolished”
 “We need to….demolish the whole concept”

Paul Joseph Watson
Prison Planet.com
April 6, 2016

Professor Calls For “Whiteness” to be “Abolished”

 

Living History

 

This is what ancient Greek democracy actually looked and sounded like. It wasn’t Lawrence Olivier and Marlon Brando walking about in bedsheets making speeches over Gina Lollobrigida, it was this: Rape, torture, cruelty and murder. All over Athens, all over Sparta, all over. Next time someone tries to give you the spiel about how noble and great democracy was/is, show them this….

 

‘House of horrors’: Police find apparent sex slave chained to stripper’s pole in Detroit home

 

By Peter Holley April 6 Follow @peterjholley

 

When police searched the run-down, two-story house on Tuller Street in Detroit, they found something that took even longtime cops by surprise: a woman chained to a stripper’s pole, with a padlock around her neck.

 

https://www.washingtonpost.com/news/morning-mix/wp/2016/04/06/house-of-horrors-police-find-apparent-sex-slave-chained-to-strippers-pole-in-detroit-home/

 

 

 

Notes on the Standard Narrative..

 

http://www.theguardian.com/business/2016/mar/05/timeline-seven-years-of-record-low-interest-rates-bank-of-england

The Guardian recently published a potted history of interest rate setting and associated financial shennanigans, seven years after the start of the Credit Crunch. I have reproduced it here in full along with a few comments of my own (in bold) offering an alternative interpretation of central bank policy and what its real purpose is.

From ‘The Guardian’

By Katie Allen Saturday 5 March 2016 07.00 GMT

 

Seven years ago on Saturday (5 March), the Bank of England slashed interest rates to a record low of 0.5%. At the time, the cut and plans to pump billions of pounds of electronic money into the economy seemed like an emergency measure to cushion the UK from the global financial crisis. But borrowing costs are still at their record low and amid warnings that a new global slump is around the corner, Bank policymakers show no signs of raising rates any time soon.

 

We look back over seven years of ultra-loose monetary policy:

March 2009: The Bank of England cuts interest rates from 1% to 0.5%, the lowest since the central bank was founded in 1694. Policymakers also push the button on a quantitative easing programme – which will pump tens of billions of pounds of newly created money into Britain’s troubled economy.

 

‘The lowest (interest rates) since 1694’ – effectively since the beginning of capitalism.

 

If the base interest rate reflects the value of a national currency, and a national currency reflects a nation and its economic system, this is another way of saying that as of March 2009 the net added value of three centuries of modern capitalism is zero!

 

‘Pump tens of billions of pounds into…’

As though something is actually being put into the economy instead of the value of existing money being debased by ‘printing’ more money without any increase in production…

 

‘ into Britain’s troubled economy..’

Guardian being careful not to specify which part of the economy all of this money is going into- so as to imply it is going to all parts of the economy equally (which it did not, and was not intended to ).

 

It is the sixth time that UK borrowing costs have fallen since October 2008, when rates were still 5%. Announcing the cut to 0.5%, the Bank’s monetary policy committee, led by governor Mervyn King, notes a slowdown in the global economy and “persistent problems in international credit markets”. In the UK , it highlights a drop in economic output at the end of 2008, a rise in unemployment and tight credit conditions for businesses and households.

 

King says it is unlikely that the bank rate could go any lower and policymakers will shift focus to creating money instead. “We are very close to zero. What we are doing now is switching to injecting money into the economy directly.”

In the case of the Bank of England, QE took the form of banking ‘other institutions’ as though they were licensed banks- effectively giving them the status of licensed banks.

 

This means taking them directly under the wing of the Bank of England and licensing them to create money just as private banks do, with protection as privileged institutions. Non bank ‘financial institutions’ were given the same status as banks. And their products- private democratised money in the form of derivatives, were given the SAME PROTECTED STATUS as private bank credit issued in the form of loans.

 

May 2009: The Bank of England surprises the City by announcing it is to increase the size of its quantitative easing (QE) operation by £50bn to £125bn, amid growing concern that the programme announced in March is failing to turn the economy around. It is the first of many increases in QE to come over the years that follow, taking the total to £375bn.

On the same day in May 2009, the European Central Bank (ECB) cuts interest rates to a record low of 1% and says it will follow the Bank of England in launching QE in a bid to pull the Eurozone’s stricken economy out of recession.

 

Part of a co-ordinated global response to the crisis. By devaluing ALL government issued money simultaneously, Monetarist cabals are launching their all out war on government issued money – which is now intensifying as the War On Cash’.

 

May 2010: A new coalition government is formed by the Conservatives and the Liberal Democrats after the general election. Bank of England governor Mervyn King gives his strong backing for spending cuts in new chancellor George Osborne’s first budget to come later in the summer.

 

The breathing space granted by QE was designed to be used for the restructuring of western economies and the end of post WWII welfare states, to get them in line with the new privately issued money system. This process is being led by the Monetarists of the Saxon Axis.

 

June 2010: George Osborne announces the biggest shakeup in City regulation since 1997 and hands sweeping new powers to the Bank of England designed to prevent a fresh financial crisis.

 

King emerges as the big winner from the chancellor’s shakeup of supervision that will abolish the Financial Services Authority. The Bank is given new tools to prevent bubbles from developing in the financial system, including the right to force banks to hold more capital during boom periods.

 

This is the formal recognition of the new structure whereby private financial organisations are brought under the wing of the Bank of England and granted money creation privileges. From now on there is to be NO formal democratic political control of the money issuance process at all. It is entirely privatised.

 

September 2010: The Bank’s deputy governor Charlie Bean urges Britons to go out and spend to help invigorate the UK’s economic recovery.

Rising inflation stokes rate rise bets

Inflation rises, pushed up by higher petrol prices

 

‘Britons’ are supposed to max out credit cards to wet the head of the democratised money baby. A bit like your wife telling you that her pregnancy is the product of a sexual liaison with her personal trainer and then demanding that you organise and pay for a baby shower..

February 2011: Following a VAT rise and a pick-up in petrol prices, official figures show inflation hit 4% in January – well above the Bank’s 2% target. Inflation goes up further over following months and peaks at 5.2% in September 2011.

 

City speculation rises that the Bank of England will be forced to raise interest rates within months to curb price pressures. The CBI business group predicts interest rates will begin to rise in the next few months and will end the year at 1.25%.

 

Minutes from the latest monetary policy committee meeting show concerns about inflation are growing there too. Two members voted for a quarter-point rise in interest rates while a third urged a half-point rise.

 

All of which goes to show that the Bank Of England never had, and never will have, any intention whatsoever of ‘fighting’ inflation. The purpose of these maneuvers is to devalue all government issued money and raise the relative exchange value of privately issued money (derivatives) in relation to the pound.

 

July 2011: The Bank of England’s Eurozone counterpart, the European Central Bank, shrugs off the region’s debt crisis and raises interest rates for the second time in 2011 to curb inflation. The move takes the ECB’s benchmark rate to 1.5%. The ECB is forced to start reversing those rises before the year is out amid fears the eurozone crisis could tip economies in the single currency bloc back into recession.

 

Unlike the Anglo Saxon oligarchies, the continental Germanic government which controls Europe has two factions; one which fully embraces Saxon financialisation and one which seeks to hold on to the post WWII social corporate state system. Guess which one has more or less lost the battle…

 

August 2011: Against the background of wild swings on world stock markets, the two hawkish members of the Bank’s monetary policy committee abandon their calls for borrowing costs to rise.

 

Get away- you don’t say !

 

November 2011: The world’s major central banks pledge concerted emergency measures to underpin fragile eurozone banks and prevent the global financial system from freezing up.

 

After a teleconference chaired by King involving six central banks, they announce “coordinated central bank action to address pressures in global money markets”.

 

The moves are reminiscent of autumn 2008, when central banks came together to slash interest rates and inject liquidity into financial markets in the wake of the collapse of Lehman Brothers.

 

More QE and a new funding for lending scheme

How did Katie somehow forget to mention at the beginning that all of the central banks had been co-ordinating an attack on government issued money from the very beginning of the crisis?

 

July 2012: The Bank’s monetary policy committee votes to raise the total amount of quantitative easing to £375bn, citing signs that the global economy is flagging and having knock-on effects on the UK’s recovery. The move coincided with interest rate cuts in the crisis-hit eurozone and in China.

 

Later the same month, the Bank of England unveils a scheme to boost lending to first-time buyers and small companies in a move that ministers hope will inject fresh funds into the ailing UK economy.

 

The “funding for lending” scheme is welcomed by the chancellor, George Osborne, who says the launch of the £80bn emergency facility shows Britain is “not powerless to act” in the face of the eurozone crisis.

 

The scheme offers cut-price loans to banks and building societies, which are expected to make the money available through mortgages to homebuyers and loans to small businesses. But experts warn the new cash may not reach those who need it the most.

 

August 2012: A Bank of England paper concludes that Britain’s richest 5% gained most from quantitative easing. Threadneedle Street said that wealthy families had been the biggest beneficiaries of its £375bn QE programme but also insists the scheme has helped all sections of the population by sparing the country from a deeper slump.

 

In order to protect existing ‘Mortgage Backed Securities’ and even more importantly to protect the PRINCIPLE that private entities will issue democratised money and the state will clean up any resulting mess, the housing bubble has to be protected as the basis for Mortgage Backed Securities -financial instruments- derivatives-privately issued money.

 

November 2012: The Treasury announces that big cash balances amassed by the Bank of England as a result of its electronic money-creation programme will be used to pay down the national debt by £35bn over the next 18 months. Osborne wants Threadneedle Street to hand over the interest payments it has received on the gilts bought since the start of the QE scheme in early 2009.

They steal your car but they leave your furry dice on the pavement as a consolation..

 

November 2012: George Osborne springs a surprise on the City by announcing Canada’s central bank chief will succeed Mervyn King as governor of the Bank of England.

 

Mark Carney, the governor of the Bank of Canada, is the first non-Briton to become Bank of England governor. He is largely unknown outside the cloistered circles of central bankers and financial regulators, but has gained a reputation as a tough operator able to confront leading banks at the heart of the financial crisis.

 

It later emerges that Carney will pocket an annual £250,000 housing allowance, taking his total pay package to £874,000 a year when he takes the reins in the summer of 2013.

 

July 2013: Mark Carney takes over from Mervyn King as Bank of England governor. On his first day in the new job, Carney arrives in Threadneedle Street by tube.

 

First of all the idea was to make the Bank of England run by a group of non elected technocrats. Then the idea is to give it over to be run by someone who was not even English! The next appointee will be someone wearing a black hood and you won’t even be allowed to ask his (or her) name…

 

August 2013: New Bank of England governor Mark Carney unveils a strategy of “forward guidance”, under which policymakers will not consider raising rates until unemployment declines to 7% (from 7.8%). The Bank’s own forecast puts unemployment above 7% in 2016.

 

The governor says the Bank will only think again about its pro-growth stance if there is a threat of higher inflation or asset bubbles.

 

The scheme is greeted with skepticism in the City. Long-term interest rates, set by investors in financial markets, rise after forward guidance is first announced, amid a slew of upbeat data about house prices, retail spending and business confidence.

 

September 2013: Chancellor George Osborne says he is giving the Bank of England greater powers to prevent the government’s help-to-buy scheme causing a property boom.

 

The ‘fighting inflation’ story was shown to be nonsense, so then the Bank Of England concocted a story about unemployment being the most important indicator. Anything to avoid the truth, that it was the relative value of derivatives in comparison with the state issued currency that was the most important factor.

 

November 2013: Bank governor Mark Carney reins in the mortgage market in a bid to prevent five years of ultra-low interest rates and George Osborne’s help-to-buy scheme from fuelling a housing bubble. Carney announces he is refocusing the funding for lending scheme that gave lenders financial incentives to provide home loans. The focus will now be on business lending, the governor says.

 

February 2014: Just six months after forward guidance was launched the unemployment rate has already dropped below 7% – two years earlier than the Bank had been expecting. Carney signals, however, that the Bank will keep interest rates at the record low of 0.5% for at least another year and that policymakers “will not take risks with this recovery”. He also insists “forward guidance is working”.

 

Inflation was a nonsense excuse for QE now unemployment was shown to be nonsense excuse for QE

 

May 2014: Mark Carney warns that the housing market poses the biggest risk to Britain’s economic recovery as a shortage of new homes drives up prices.

June 2014: Bank of England gets new powers to control the size of mortgages. Carney warns that interest rates are likely to rise before the end of 2014.

 

Later that month, members of parliament’s Treasury select committee accuse the Bank of behaving like an “unreliable boyfriend”, giving mixed messages on when the first rise in interest rates is likely.

 

September 2014: Carney warns workers they face higher interest rates in the spring of 2015 before they receive rises in real wages.

 

The Bank of England, like the Fed desperately wants to ‘normalise the situation, by getting off zero interest rates.

 

 

Deflation threat sparks rate cut talk

 

March 2015: With inflation falling closer to zero, Bank of England chief economist Andy Haldane suggests policymakers may be forced to slash interest rates to zero in the coming months to tackle the threat of deflation.

 

Official figures after Haldane’s remarks show that inflation has dropped to zero for the first time on record in Britain. Inflation was pushed down by a deep oil price slump and a fierce price war being fought out by supermarkets. Inflation, measured on the consumer prices index (CPI), turns negative in April.

CPI inflation.

 

May 2015: The coalition government is replaced by a Conservative government. The coalition was the first administration in more than half a century to enjoy unchanged borrowing costs for its entire term. In the first announcement from the Bank under the new Conservative government, interest rates are again held at 0.5%.

 

New rate rise hints from Carney

 

FFS!

 

July 2015: The BoE governor says an interest rate hike in the UK is “moving closer”. He tells the Treasury select committee households should start to manage their finances with a future hike in mind and he notes the UK economy has been performing well, that wages are starting to pick up and that employment has seen a big increase.

 

Later that month, Carney suggests the first interest rate rise since the global financial crash could come around the turn of the year. In a speech, he adds that after an extended period of what were expected to be emergency rates, borrowing costs were likely to peak at just over 2% – half their average historic norm since the Bank was founded in 1694.

 

‘borrowing costs were likely to peak at just over 2%’

There is a direct relationship between the total amount of money in circulation, the amount of the economy it services and the base interest rate. The long term average interest rate is PROCLAIMED by the Saxon elite henceforth to be around 2% as a clear statement of intent: From now on, Government Issued Money will only service a fraction of the total British economy.

 

What fraction is this?

 

The previous average post war interest rate is approx 5%, so it will be 2% divided by 5% – or 40%. In other words, the elite have proclaimed that in the medium to long term OVER HALF the British economy will be serviced by privately issued money.

 

But minutes from the Bank’s latest rate-setting meeting show concerns among policymakers that slow progress resolving the Greek debt crisis could delay a rate rise.

Chinese slowdown fears intensify

August 2015: China devalues its yuan currency against the dollar, sending shockwaves through global markets – already jittery over signs of a worsening slowdown in the country’s economy and wild swings on its stock markets.

 

The currency move dampens talk of interest rate rises in the US and UK given the prospect that cheaper Chinese goods will reduce inflationary pressures in those countries.

 

But Carney says that while a slowdown in China’s economy could push down further on inflation, it does not change, for now, the central bank’s position on when and how it might increase interest rates.

 

Carney really wants to push the button and get on with it. Raising interest rates is an important signal that the democratised money project is concluding its initial stage.

 

September 2015: BoE chief economist Haldane again warns that interest rates may have to be cut further from their record low level as he highlights signs that the global financial crisis is entering a third phase of turmoil.

 

Haldane is speaking a day after the US central bank decided to delay an interest rate rise for the world’s biggest economy. The US rate-setters blamed a more fragile global outlook in remarks that further rattled jittery financial markets.

 

November 2015: The Bank of England is ready to step up controls on the housing market if a prolonged period of record low interest rates risks inflating a property bubble, Carney says. As he signals that interest rates are likely to remain on hold well into 2016, Carney suggested the Bank may have to revert to other measures, such as tighter lending rules, to keep a lid on house prices.

 

KATIE YOU FORGOT TO MENTION THAT THE FED RAISED INTEREST RATES IN DECEMBER!!!

 

What does this tell you about the quality of economic reporting in the Guardian and the media generally with regard to finance and the economy?

 

February 2016: Carney says policymakers in the UK could cut interest rates to zero if necessary, but would seek to avoid following Sweden, Denmark and the eurozone by setting negative rates to bolster growth and inflation.

 

Responding to questions from MPs on the Treasury select committee, Carney says the world economy has entered a period of low growth and low interest rates and is likely to be prone to financial shocks.

 

March 2016: The UK marks seven years of record low interest rates.

 

New research marking the anniversary claims rock bottom borrowing costs and quantitative have cost savers an estimated £160bn, but supported strong increases in the prices of property, stocks and bonds. In its analysis, financial firm Hargreaves Lansdown suggests loose monetary policy has “annihilated” returns on cash.

 

Savers have net transferred value to speculators to the tune of £160bn (and you can bet it is considerably more than that). More importantly, the ‘interest bearing function’ of money is being destroyed. One of the benefits of government issued money is being destroyed, taken away from you. What is the effect of this? It makes the alternatives to government issued money seem a lot more valuable. One of the alternatives of course, is Democratised Money.

 

Throughout the entire Guardian narrative the central bank response to the Credit Crunch is presented as being fundamentally arbitrary, contingent and chaotic. In other words there is no fundamental perspective or purpose that is driving the logic of central bank actions.

Actions and consequences happen in a confusing and sometimes contradictory swirl of intention and understanding.

 

So the drama unfolds as a revelation to the authors of the crisis as much as it does to us.

 

But from the perspective of privatising the supply of money- the democratisation of money- the actions that have been taken by monetarist central banks and the consequences that these actions produce, suddenly seem straightforward and entirely predictable.

 

 

 

Animal Crackers In My Soup

 

tomato soup

Andy Warhol is famous for predicting that in the future everyone will be well….famous for 15 minutes. This should rightly be considered as the pre-eminent definition of the Democratisation Of Celebrity.

Even more perceptive, (although lesser-known), is another Warhol dictum: ‘Art is what you can get away with’.

In the United States of Everywhere money, like art, is also what you can get away with. So in a sense, art is money. That is to say, there is a clear parallel between the way that both art and money are produced, and a correspondence between what art and money can do- their functionality.

This brings us to Andy Warhols famous Campbells soup tin paintings.

On the surface, it appears that Warhols soup tins are something of a satirical comment on mid 20th century capitalism and consumerism. But if we look deeper and within the context of Warhols background in media, design and advertising we see that these images are something much more profound than mere satire;   an exploration and meditation on the production of authority and persuasion.

Authority is a fundamental component of persuasion. This seems to be counter intuitive. Authority is associated with force. Persuasion is generally regarded as the counterpoint to force; force is resorted to when persuasion fails. But persuasion and force are two points on the same spectrum.

Persuasion rests upon the authority of the persuader. Authority is the expression of the validity of power. In effect, you are persuaded by the force of an argument, or you are compelled by the force of an individual or organisation if the argument fails.

The nexus between Authority and Persuasion is the form of a proclamation. The proclaimer makes a statement which is then tested by subsequent events. In this sense we can think of a proclamation as a kind of contract between the proclaimed and the future, or the proclaimed and reality.

A proclamation is a statement to the effect that: ‘Things should be this way’.

Should the proclamation turn out to be in accordance with the future or with reality, the authority of the proclaimed is enhanced. Should the proclamation turn out to be at variance with the future or with reality then the authority of the proclaimed is diminished.

This all might seem a little abstract, so let’s return to the practical example of the soup tin paintings

The Naked Lunch

naked soup

Warhols soup tin paintings begin with an actual tin of Campbells soup. No soup-no paintings. More specifically, no Campbells soup, no paintings.

A tin of Campbells soup is made up of two separate components: the tin of soup itself and the label on the tin which describes what it is. After differentiating between can and label we can understand that Warhol was primarily interested in soup tin labels as opposed to tins of soup. If Warhol was actually interested in tins of soup as opposed to labels, he would probably have embarked upon a career as a chef as opposed to that of an artist….

Having isolated the Campbells soup tin label as the point of interest we can examine it in more detail. It is composed of a number of graphic elements. It is important to understand that each of these elements fulfils a specific purpose.

The first of these elements is the Campbells logo. This logo is exactly the same on every tin of soup. There is a reason for this. Consistency of this element represents consistency of intention, or more precisely consistency of contract. The meaning conveyed by a brand is: You know what you are getting; this is your guarantee.

The second of these elements is the name of the specific soup- the contents. This tells you what is actually inside the tin and varies from can to can of soup. This is also a form of contract. The fact that you can rely on Campbells soup company to produce consistently the same quality of soup that differs only in type is the substance of the contract that you have with the Campbells company.

Imagine that you purchased a tin of ‘chicken noodle’ soup only to find inside the actual tin was ‘black bean’ soup. In other words, imagine what the effect would be if the contractual elements on the outside of the tin can differed from the contents on the inside of the tin.

It Does Exactly What It Says On The Tin

In the event the soup you thought you were getting did not live up to either the quality or the description on the label then the Campbells brand would be diminished. In other words it’s value would fall.

Both the Campbells brand name and the soup type description are in fact proclamations. They are contractual proclamations made on the basis of the brand authority that Campbell soup company has. They are proclamations tested at the point of future consumption.

If you doubt this argument is correct, imagine buying unlabelled tins of ..whatever from a discount store. Could you sue the manufacturer for breach of contract if it was the ‘wrong’ flavour? Could you sue manufacturer for breach of contract if it were below desired levels of quality?

No, you couldn’t- no contract exists to be breached because the manufacturer has not specified the terms of any contract in the form of a label. Effectively the contents of the tin would have no value.

The Proof Of The Pudding

The test of the Campbell soup company proclamation comes in the opening of the tin and the eating of the contents. Either the contents live up to the label or they do not.

A money currency note fulfils essentially the same function as a Campbells soup tin label. In the same way that a soup tin label has a brand name so currency note has a brand-name; that of the issuing central bank.

And in the same way that a soup tin label has a specific flavour, so currency notes have a corresponding specific interest rate.

The brand is what all Campbells tins of soup have in common; the flavour is what they have in difference. The central bank is what all currency notes have in common, the interest rate is what they have in difference.

A bank note issued at 25 basis points is a different flavour from one issued at 50 basis points! They have the same brand label, but they are NOT the same soup !!

You test the soup proclamation by opening the tin and eating the soup. You test the central bank proclamation by bearing the money and using it to turn a profit.

If the soup tin company product turns out to be rubbish you look for an alternative, which forces the company to change its recipe. If the currency notes issued in any particular quarter at any particular interest rate prove incapable of producing a profit you also look for an alternative forcing the central bank to vary the interest rate.

The Plot Thickens….

So far so good.

Then along comes Andy Warhol who leveraged the meaning of the Campbell soup tin label and the authority of Campbells. (Remember here that the meaning of the Campbell soup tin label is a contract). By means of his soup tin paintings Andy Warhol produced what was effectively a derivative of the Campbell soup tin label.

This is one of the hardest things to understand about derivatives: the relationship between a derivative and the nominal subject of the derivative:

There is no direct relationship between a derivative and the subject of activity of that derivative. The derivative, as its name makes clear is one step removedderived from its subject.

For instance, there is no direct link between the infamous Mortgage Backed Securities and the housing which they purport to represent (as everyone found out to their cost in the Credit Crunch).

This lack of a direct link is precisely the basis on which derivatives can be said to be money and money can be said to be equivalent to derivatives.

WHEN YOU CAN’T SPECIFY (LEGALLY RESOLVE), WHAT THE RELATIONSHIP BETWEEN A CONTRACT AND THE SUBJECT OF THAT CONTRACT IS, THAT CONTRACT IS A FORM OF MONEY.

THIS MEANS MONEY IS INTRACTABLE.

Everyone is aware that there is no longer a link between silver and gold and the five pound note in your pocket. But most people still fail to understand that there is no direct link between the 5 pound note in your pocket and the wealth of the British economy. You cannot take a 5 pound note into the bank of England and claim a portion of ‘Britain’ on the basis of the contractual ‘promise’ made on a 5 pound note.

This absence of direct relationship is the basis for a currency notes which are a generalised contract being money.

Does this mean then that there is no relationship at all between activity based on a derivative and the subject of that derivative? In fact, the subject of a derivative is used as a trigger to activate a particular clause in a derivative contract in the same way that a horse race is used to trigger a particular clause in the betting contract between a punter and a bookie.

The bookie leverages the authority/power of the winning horse to run a book on the race. This is the essence of a proclamation.

The race itself can be regarded as a commons. A horse race is an open, common event. Everyone has equal access to it.   Bets are money/derivatives based on that event.

The economy/society is an open series of events. Money/Derivatives are generalised contracts like betting slips, based on this series of events.

Andy Warhol leverages the power of the Campbells brand which can also be regarded as a commons. The Campbells brand necessarily works on the basis that a large number of people recognise it and its significance, whether they actually buy Campbells soup or not.

They recognise the significance of the label and the contract that the label represents. This is related to, though separate from the soup itself. The Campbells commons is separate from the soup- nothing to do with the physical soup. It is to do with the label, the contract and the meaning. The brand value; paid for by advertising and found on supermarket shelves.

The soup is private, the label is a commons.

The Campbells label contract is ubiquitous. Ubiquity is always a characteristic of a commons. As I explain on previous occasions the appropriation of all or part of a commons is the fundamental process of democratisation. Democratisation- the process of creating a Democracy, works by stealing a commons from the people. That is what democratisation is and always has been.

The reason that the soup paintings have ‘cultural power’ is the ubiquity of the Campbells brand. Andy Warhols soup tin can paintings based on the soup tin originals are a private appropriation of cultural commons.

Who is appropriating this commons?

Andy Warhol and the wealthy patrons of Andy Warhols art. Andy Warhol is issuing a proclamation based on the Campbells Soup Tin Contract (the ‘Andy Warhol proclamation’), and his art dealers and patrons are trading on that proclamation. Andy Warhols reputation and value as an artist (like an issuing bank) is derived from the reputation and value of the Campbells Soup Co.

The use that this derivative will be put to is considerably different from the use that the original label contract was put to And the effect of this is that an Andy Warhol painting of a tin of soup it’s worth a hell of a lot more than the tin of soup that it derives its value from.

Still, there is nothing here that is fundamentally unstable. The problem arises when the paintings of the soup cans no longer actively correspond with the with the reality of the soup cans they are based on. So for instance, if Andy Warhol produces a painting of ‘mosquito wing and belly button lint’ flavoured soup, this clearly does not correspond to any soup that exists in the real world.

In other words if the Andy Warhol painting is judged to be inauthentic then its value or the value of the proclamation it makes will be reduced, possibly to nothing.

And this, believe it or not, was the basis for the credit crunch that destroyed so much of the western economies since 2008.

Before financialisation managed to establish a death-grip on the worlds developed economies, the production of currency proceeded more or less more or less along the lines that the Campbell soup can company produces soup.

Every three months or so central banks produced soup at a proclaimed interest rate, (equivalent to a flavour), and people decided whether to buy that soup or not.

Then along came Andy Warhol (derivatives creators and traders) and Andy Warhol chose Campbells soup to be the subject of his painting practice. Note that there is no direct relationship between soup production and painting production, there is only an indirect derived relationship.

Financial institutions decided that housing would be a good area to base their derivative production on. Just like Andy Warhol, it was simply a matter of choice..

After a while, as they became more confident, financial institutions began to imagine all kinds of strange flavours of soup in the images they produced. They could do this because no one dealing in these images was actually going to eat any soup or have to taste it. Unlike the Campbells soup company there no   constraint on the about what flavour of soup got the financial institutions could produce.

And this went on until 2008 when those who dealt with and owned this new form of art became increasingly worried about the validity of their purchases. This can and does regularly happen in the art world of course. Some art appreciates in value and some doesn’t.

Now imagine that Andy Warhol found that his ‘mosquito wing’ flavour soup tin paintings weren’t being well received by the critics or selling so well. So he contacts the Campells soup company and tells them that they need to actually start producing mosquito wing soup so that he can point to the real tins on a supermarket shelf and prove that his vision is valid.

‘Why In Gods Name would we want to do that?’ asks the soup company

‘Because I am a very famous artist’ says Andy Warhol

‘The people who buy and trade my art are very rich and very important. If they lose money on my paintings and go bankrupt this will bring the entire economy down. In other words, I am Too Big to Fail’

And that is more or less what actually happened in Quantitive Easing!

For the past seven years, like Oliver Twist and the foundlings in the workhouse, savers have been put on an enforced diet of Campbells Very Thin Gruel. Meanwhile, the sick and the old have been treated to Campbells Good Old Fashioned Poverty Broth.

Developing economies have enjoyed Campbells Hyper Liquidity Hot Money (a spicy concoction that burns going in and burns even more at the other end)… And for the upper echelons of the market it is Campbells Extra Thick Full Fat Cream Flavour.

And the reason that the shelves are full of this stuff and are going to remain so for the foreseeable future, is so that the derivative soup tin paintings look authentic and the proclamations they made are valid…

Bon appetite.

 

 

Spelling It Out or It’s Not You, It’s Me

You can often hear proponents of the ‘Austrian’ school and others on the ‘right’ calling for the market to set base interest rates. This bizarre call is a non sequitur – meaningless.

 

The market is made up of both buyers and sellers and their interests are necessarily conflicting. The market does not ‘speak’ with one voice; by definition, it cannot. How can it set anything?

 

It is like asking a field of runners halfway through a race to come to an agreement on where the finish line should be…

 

Of course the market can’t collectively determine anything. Firstly, when the market ‘speaks’ it is the preponderance of individual views of within the market. When the market ‘speaks’ it is the result of something; it is a reaction; the exact opposite of being the cause of something.

 

Secondly, for communication to convey meaning it has to be the result of some form of reason. For the market to actually express a meaningful point of view it would be necessary for it to consciously arrive at a point of view, enunciate that point of view and stick to it.

 

But the market changes, literally from second to second because the balance of forces within the market changes from second to second. Even if you were to somehow accept the idea of ‘speech’ from the market, you have to accept that the meaning of that speech will change in a couple of seconds time. Even if you try to argue the market has a mind, you have to accept that the market can never make that mind up.

 

Because although the buyers and sellers who make up a market are supposed to be rational agents expressing their own rational self interest, the cumulative consequence of their actions is not. These are the ‘animal spirits’ of ‘fear’ and ‘greed’ that everyone agrees the market expresses.

 

Market religion claims that by means of alchemy the market changes base instincts into what is best for everybody inside and outside the market. Somehow something even better than considered reason appears spontaneously!

 

The market cannot speak because it cannot have an established continual rational point of view and it cannot create a rational point of view because it is made up of conflicting impulses. If there was no such conflict it wouldn’t be a market.

 

It does not matter whether it is a pre-centralised system of private banks or a modern central bank system, a rational market ‘mechanism’ to set base rates is impossible.

 

It follows from this that if base interest rates are to be set for any given period, they have to be presented to the market in advance by somebody outside the market, working to some kind of rationale. And every nation and collection of nations operates on this basis.

 

So what is behind the call for base interest rates to be set by the market? The main reason given is that interest rates are seen to be all going one way. Since the Credit Crunch and the implementation of ’emergency measures’ central banks have followed a Zero Interest Rate Policy.

 

Of course, it is becoming harder and harder to see ZIRP as an ‘emergency’ measure after seven years or so. Direct government dictat has the consequence of shredding the rhetoric of supposed central bank independence.

 

And ZIRP disguises a secular decline in interest rates that has been taking place in the Anglo Saxon economies since the 1980’s. Economists on left and right have no way to explain this outside of tautology: Interest rates are low, well…. because interest rates are low.

 

I argue that base interest rates are proclamations made by an authority, be that authority elected government officials or ‘independent’ central banks.

 

The interest rate setting authority makes a proclamation; sometimes characterised as an offer depending on how you wish to portray it. Depending on how many individuals take up that offer, the issuing authority amends the offer next time, this is the market reasoning justification for the system.

 

If an increasingly large number of people take up the credit offer at a given interest rate the interest rate is increased to stem the ongoing flow of credit applications. If a decreasingly small number of people take up the credit offer at a given interest rate, the interest rate is decreased to stimulate the flow of credit applications.

 

You might ask: Why don’t authorities amend the interest rate from hour to hour or even minute to minute – why do they only change the interest rate quarterly?

 

The answer is they need time to collect, collate and process the information. Because their decision is supposed to be based on reason to some extent. You might not agree with their reasoning, but you wlll see that if a central bank announced that base interest rates will be 1.5% for the next hour based on a ‘hunch’, the economic system it was set up to administer wouldn’t last for very long!

 

In other words the system we used to have and the system as it is now are not the result of arbitrary choices, they operate at the exact limit of development allowed by politics and technology at any given time.

 

Since the system is not really open to arbitrary change what does that say about the decisions that the system makes? It means that the decisions it is making at this time are the only possible decisions it can make given the limitation of politics and technology. If we understand the constraints of politics and technology we can understand what the decisions have to be.

 

With this in mind, we should address the fact that the main decision of central banks seems to be not to make any decision. Interest rates are effectively at zero and staying there. We have the quarterly ritual of: ‘Will they, won’t they move off ZIRP?’ and the answer so far is always no.

 

This is problematic for me as I have argued that moving towards a new baseline average interest rate of 2.5-3.5% is the next step in the implementation of Democratised Money. I have also argued that international exchange rate blocs are a fundamental requirement for the international framework for Democratised Money. And neither of these things has happened yet.

 

It is possible that the delay in normalising interest rates and creating exchange rate blocs is linked to the Pacific and European TTIP agreements. Trade blocs like Pacific and European TTIP are an inevitable part of the Democratised Money world. It could be that nothing else will be done until they are both securely in place. Now that the Pacific TTIP is moving forward again, the increase in interest rates and exchange rate blocs will be implemented.

 

But I think there is another reason for continued ZIRP and it comes from the internal ‘logic’ specific to this exact time and place.

 

All central bank rate setters, be that the Federal reserve, The ECB or the Bank of England are ‘democratic’ to the extent that they vote to decide about where to set base rates but that is as far as the democracy goes.

 

Nobody elects the members of any central bank committee, they are there by appointment. So they cannot claim any democratic mandate per se. The justification for being there is actually an inversion of a democratic argument.

 

Independent central bank advocates argue that political control of base rates by an elected official is detrimental to market confidence in that rate. The rate setter needs to be able to operate independently of democratic ‘pressure’ e.g. pressure from electorates. Democratic voting is the method by which rates are arrived at, but technocratic reasoning is the justification.

 

But this line of argument presents certain problems.

 

The post 1970’s call for independent banking was justified by the Monetarist shibboleth of inflation. This was supposed to be the one and only overriding consideration. Monetarists claimed that if inflation was under control and the money supply regulated all would be well. But as the Credit crunch and resulting QE opened the door to direct political interference reasons had to be found to provide cover for and justify direct interference. And so the mandate of central banks was modified to include macro-economic ‘stability’.

 

When the situation was ‘stabilised’ to some extent it was suddenly found that central banks also needed to target unemployment and so interference would have to continue.

 

When employment seemed to recover somewhat, central banks discovered that broad economic growth must also be added to their macro economic mandate.

 

When growth seemed to recover somewhat central banks discovered the ‘productivity gap’. When it became apparent nobody really believed in the productivity gap or understood what it was, central banks discovered the threat that interest rate rises posed for developing economies and that is where we stand today.

 

The specific logical conundrum is this: If central banks are indeed identifying problems and fixing them as they claim to be, then they either have to find new problems to fix or to stop interfering in the market at some point. On the other hand, if central banks are identifying problems and not managing to fix them, then something is seriously wrong with the central bank system itself.

 

The upshot of this is that insurgents continually claim that central banks have failed to solve any of the serious macro economic problems. The establishment claim that they have solved a number of problems and are effectively managing the new ones that always seem to be appearing.

 

But what unites establishment and insurgents is the claim that central bank interference in the economy is somehow voluntary and limited. The establishment claims that the central banks will stop interfering at some point in the future because they will have fixed all the problems. The insurgents claim that the central banks interfere because they want to protect their fraudulent ponzi scheme etc.

 

But I argue that Monetarists have no choice but to interfere to in order to protect democratised money. Once the creation of privately issued money began, everything else that followed was inevitable.

 

The purpose of QE and ZIRP is to defend and promote the growth of privately issued democratised money. The Fed and the Bank of England cannot and will not stop with emergency measures until they believe that derivatives are completely integrated into the global financial system in a way that means they can never be removed.

 

It is this imperative to protect democratised money that has been the real reason behind the ongoing interference in money markets. It is this imperative that is the logic behind QE and ZIRP. And it was the belief that the project of irreversibly integrating democratised money has largely been achieved that led to the recent hints of a rise in base interest rates in America and Britain.

 

But the Fed cannot bring itself to pull the trigger. They are trapped in their own logic.

 

By citing an increasing number of different reasons for intervening, the central banks built for themselves a new group of constituencies. Effectively Inflation, GDP Growth, Unemployment, Productivity gap and Developing economies all represent constituencies that the central bank committees have come to claim to represent. And this is the argument that has largely been successful in justifying the central bank approach to the markets. It is a polygamous marriage of convenience. But to raise interest rates will undermine the interests of this collection of constituencies and bring to the fore the question of what the purpose of the central banks actually is.

 

This is the reason central banks are reluctant to begin raising interest rates. They cannot say they have fixed the central problem and ‘new normalise’ base rates without saying what the problem they have fixed, is!

 

The collection of constituencies that central banks have gathered together as a justification and cover for the democratised money project has proved to be very useful. But at some stage there is going to have to be a parting of the ways and at that moment a lot of people are going to be asking the central banks: ‘Did you ever really love me?’

The Opposition vs. the oppositions

Imagine a constitutional democracy with two political parties and a permanent electoral majority in favour of one of those two parties. Since only one of the parties could ever be elected to power can this country can still claim to be a democracy?

 

In this hypothetical situation the permanent opposition still has a role to play in questioning and challenging the assumptions, ideas and policies of the majority party. If they do this in a coherent way that represents the interests and opinions of the minority, systematic opposition can force the majority party to make ‘better’ decisions and the majority in society to be aware of the ideas and opinions of the minority.

 

By means of constant and aggressive opposition the majority can be exposed when it has failed in the conception and execution of policy. The population at large can be made to realise when the majority party is incompetent and/or corrupt and encouraged to respond accordingly.

 

Under this ‘adversarial’ model the claim can be made that democracy is possible even if electoral maths do not support a regular change of government. But this system only works to the extent that the opposition is capable of, and committed to, systematic opposition to the majority. In other words it is only possible if the opposition is sufficiently organisationally and even ideologically, separate and opposed to the majority*.

 

But that is clearly not what we have got now in developed capitalist societies. What we do have is often understood as a Controlled Opposition model -a term usually associated with Conspiracy Theory. Head down this road and before long you are in the company of the Illuminati and Worldwide Zionism etc.

 

But conjectures as to the causes of failure of opposition such as these are really simply the expression of not knowing what has changed and how it has changed over the past four decades.

 

A serious discussion of the possibility of controlled opposition leads to two closely related questions:

To what extent is opposition ‘controlled’? and

How is opposition ‘controlled’?

 

The key to answering these two questions lies in understanding the dovetailing of the subjective experience of opposition and the objective needs of the system.

 

The objective needs of the system and the subjective experience of opposition have clearly changed. The way that political parties relate to the public and the way this relationship services the overall polity are clearly not the same as they were in the last century. So the central questions are refined to: What is the nature of the difference between now and then and: What drives it?

 

The Objective Needs Of The System.

 

The 1970’s crisis led to the merging of state and capital in the form of Monetarism and the beginnings of Financialisation. The victory of Monetarist/Marxist theory made permanent political control of the economy through control of the money supply the central plank of economics. The Anglo-Saxon world put all its eggs in the state managed capitalism basket.

 

This approach had an obvious problem though. Since total power over the economy was now vested in the state, if a genuine democratic opposition*(see above) did manage to get control of government it would potentially control everything. It could do incalculable damage to the interests of the elite.

 

This point is well Illustrated by the saga of Quantitive Easing and the ‘printing of money’ to support post 2008 collapsing financial system. Once the politically motivated mass production of money (as advocated by Monetarism), is accepted as a valid economic strategy it is only a matter of time before some bright spark advocates a ‘Peoples QE’ to benefit ordinary people instead of the banks.

 

A people’s QE of course, would mean the effective end of the system… it follows that such a movement can never be allowed to come to power. So in as far as a highly centralised system such as state managed capitalism is vulnerable to democratic political takeover a solution has to be found.

 

The solution to this centralisation problem was the Democratisation of Money and the creation of the Permanent Credit Economy. The Democratisation of Money would take care of the international element of the new system and the Permanent Credit Economy would take care of the national element.

 

The Democratisation of Money is the creation of an international economic alternative monetary system to the nation state system. It is stateless money. No matter what happens to any, or indeed every, state issued currency, the use of Democratised Money in the form of derivatives and other financial instruments means there is a safe haven for international finance.

 

At the same time The Permanent Credit economy creates a decentralised planning system; this is planning through bank credits to control national economies. (This model of decentralised planning through banks is subscribed to by economist Michael Hudson)

 

Now a new decentralised system is nearly in place and successfully stabilised, which means all the eggs are no longer in just one basket. Now there is some room for flexibility. This means that objectively for the first time in four decades some form of opposition is possible.

 

This describes the objective reality of opposition: The amount of opposition in any society at any given time is the amount of opposition that can be afforded by that society. The presence of internal opposition is an expression of power and stability. When a society is fundamentally threatened, as at time of war, it will allow no internal opposition.

 

But the restructured system we have now necessarily means that the nature of re-emerging opposition is fundamentally changed. How is opposition changed?

 

In the transition period after traditional opposition was discarded in the 1970’s and before Democratised Money and the Permanent Credit Economy were bedded down, it was not objectively possible to have any kind of opposition. It was just too dangerous. The economy and society were effectively on a war footing.

 

Beginning with Reagan and Thatcher, through Clinton and Blair and so on, traditional adversarial opposition has been effectively ended. But it is vitally important that you understand that not just ‘left wing’ opposition was done away with –  ALL opposition was done away with.

 

Under Blair and Clinton, ‘right wing’ opposition was decimated and traumatised just as violently as the ‘left wing’ had been under Thatcher and Reagan. Look back to the rise of Newt Gingrich and the emergence of the Tea Party in the USA, look back to the Conservatives in Britain under Hague and Howard, and you will realise that ‘right wing’ parties on both sides of the Atlantic basically had an extended nervous breakdown.

 

Traditional adversarial opposition of the kind I describe at the beginning of this piece requires a legal framework, an open media and society. But after the 1970’s the media became overtly partisan and concepts of legality were revised (e.g. Glass-Steagall repeal and liberal military intervention) so as to be unrecognisable. This affected ‘left’ and ‘right’ in opposition equally.

 

The Subjective Experience Of Opposition

 

Which brings us to the Subjective Experience Of Opposition and the rise of cultural constituencies. There is no societal support mechanism for one unified, critical opposition of the kind I described   any more. This means that existence as adversarial opposition is no longer a viable strategy for mainstream political parties in the Anglo-Saxon world. It means that a party has to get elected at any cost.

 

With media and broader society no longer willing to support traditional opposition the cost of failure is too high. From this perspective you can understand the subjective experience and motivation of Clinton and Blair…The great move towards the ‘centre ground’ started when politicians like Clinton and Blair became conscious of the new reality; institutionalised adversarial opposition was over. You could no longer justify your party’s continuing existence on that basis. Opposition was now to be redefined as meaning solely understudy to government; to be a government in waiting.

 

So how does Jeremy Corbyn and Bernie Sanders and Alexis Tsipiras and of course Donald Trump, fit into this description of the world ?

 

First of all they all clearly operate in stark contrast to the ‘understudy to government’ team. Compare Corbyn to his rivals in the Labour Party leadership race; compare Bernie Sanders to Hilary Clinton or   Trump to his republican rivals.

 

Trump, Sanders and Corbyn all represent Cultural Constituencies as opposed to mainstream understudy politicians. Mainstream politicians are seen as shifting, empty and vacuous, in thrall to corporations, whereas cultural constituency representatives are seen as the opposite of this; vital and authentic. This is because Cultural constituency representatives espouse real, absolute moral positions as opposed to the governmental compromises of understudy politicians.

 

This works because it is not as if the compromises required for national government are even seen as being that practical by the mass of people anymore. Most people understand that international finance and trade have comprehensively restricted the ability of national politician to act freely in pursuit of their goals, whatever the nature of those goals might be.

 

From this point of view, the approach of Jeremy Corbyn is not only morally superior, but has at least as good a chance of actually achieving something as the compromises of a Tony Blair.

 

There is much more to say about all this but for now the main message to take away is that since the elite have successfully created a decentralised financial/political system we will have many decentralised oppositions.

 

And the nature of these oppositions is that they will subjectively be cultural constituencies.

 

Because that is what the new world order can objectively support.