In Reply to RossC or The Iago Strategem.

220px-Edwin_Booth_as_Iago

I received the following from RossC :

 

‘Hello I have followed your blog and read most of your Book/PDF not to the end yet so it may be in there but how do we take down the monetarists? how do we shift the battle field so much that it is possible to defeat them?

 

There is I assume no going back to socialism as few would want to so how do you jump past what is and what would you present to the people to make them want to follow.

 

I am a New Zealander and we have had 30 years of monetarist policies with constant privatization, destruction of the left and the other same old things house boom, wage stagnation and attacks on welfare yet still we vote national (tories to you) and even with a labour government we get only small changes.

 

We do have an MMP electoral system with 70% voting this leaves 30% outside the system a large portion young or poor non-voters.

 

What shape should any future look like to oppose the monetarist system?

 

Cheers’

 

RossC, Thank you for your comments:

 

‘how do we take down the monetarists? how do we shift the battle field so much that it is possible to defeat them?’

 

There are two aspects to your question.

 

  1. The short term need to stop this specific phase of the Monetarist program and
  2. To address the underlying causes that brought Monetarism about.

 

Monetarism and the Democratisation of Money is the project to privatise the issuance of money, that is to privately control what money is issued, what kind of money it is, and when it is issued.

 

Why is this a problem?

 

Because this project seeks to destroy the Social Aspect Of Money– the fact that money ‘in common’ is in itself is a social good.

 

If your neighbour has a nice garden and a clean tidy house it benefits you and it benefits everyone in the neighbourhood, even though individual people in the neighbourhood don’t actually own any of the house. You benefit from the social aspects of the house. It is part of THE COMMONS. Of course if the house is scruffy and run down then you and everybody else suffers correspondingly.

 

Though people find it hard to understand, money basically has the same social aspect. The kind of money in circulation, where and when it is put into circulation affects the well being of everybody. The social benefits of money as a common good benefit everyone, even people who don’t actually own any money!

 

This is the antidote to Monetarism.

 

Just as Monetarists believe that there is no such thing as society in general terms they also believe that there is no such thing as society in monetary terms.

 

From what I have said that we can understand the Monetarist project as the destruction of the social benefits of money. Our response should be to restore and expand the social benefits of money. That means we have to understand and explain the social benefits of Government Issued Money in common.

 

Here are some of the social benefits of Government Issued Money that Monetarists are destroying and the way that they can be restored:

 

 

Social Benefits of Government Issued

Money In Common

Why Is This A Benefit? How Monetarism (Democratised Money) Is Removing This Benefit How Can We Restore This Benefit?
The right to privacy Government issued Paper money can be exchanged and stored in private. You can conduct your financial affairs in line with your own best interests by means of free association giving you comparative rights with those wealthy enough to buy privacy. The Shadow Economy is privacy for bankers FROM public scrutiny.   Transferring more and more economic activity to digital banking and the Permanent Credit Economy means all public activity can be tracked and permission given or withheld by a digital economy elite. (Ditto Bitcoin). Remove all legal limits on amount and purpose of cash transactions. Strictly control information that can be gathered and passed on bank activity. Advise people to hold as much cash as possible. Rebuild the cash economy. Make the Shadow Economy (Democratised Money) illegal.
The right to enter in and out of the economy at will. By having access to money notes that can be entirely held outside the economy, each individual can maximise personal financial benefit by choosing where and when to interact with the wider economy. By destroying bank interest and forcing growing dependence on the Permanent Credit Economy this is the Participation Economy. By allowing banks to operate with below minimum reserves. By maximising the amount of money held by individuals in cash. By forcing all parts of the economy to accept cash as payment and payments to be made in cash if required. By restoring interest rates to long term averages. By making derivatives (D Money) illegal.
The right to collective negotiation with the state on taxes and benefits. Collective groups will have more leverage than individuals when dealing with the state. By preventing any democratic political access to the control of the issuance of money Make monetary policy the subject of democratic process. Make illegal any money issuance outside of political process.
The right to collective negotiation with private entities Collective groups will have more leverage than individuals when dealing with private entities. By destroying the cash wage economy, the traditional employment model and trades unions. Restore the cash wage economy the traditional employment model and trades unions.
The right to commonly decide interest rates Interest rates can be used to promote the kind of economy and job availability that maximises benefit for the most people. By preventing any democratic political access to the control of the printing of money Make monetary policy the subject of democratic process. Make illegal any money issuance outside of political process.

 

 

Money in common is a social good. Money that is privatised, Democratised Money, is a destructive force. Its purpose is to destroy the post war settlement that benefited the ordinary people of the developed world to such a great extent.

 

The points in the above table outline a short to medium term strategy for dealing with Monetarism. What about a longer terms strategy, dealing with why Monetarism has come about?

 

A couple of the points RossC makes illustrate this very clearly.

 

‘There is I assume no going back to socialism as few would want to so’

 

This is a strange thing to say. Socialism has never been more popular among the rich and bankers. The entire financial system is run as an international socialist syndicate. It is widely accepted in right wing as well as left wing circles that what we have now is ‘Socialism for the rich and Capitalism for the poor’. How can we explain this bizarre set of circumstances? We have to turn to the study of WHITEISM.

 

 

‘ how do you jump past what is and what would you present to the people to make them want to follow’.

 

We must explain the Social Aspect of Money, this is the missing part of the opposition response to Monetarism and Austerity. Monetarists have succeeded in promoting the idea that it is in the best interests for a small elite to control the money supply. This is the essence of their attack and this is the place we must meet them head on.

‘ yet still we vote national (tories to you) and even with a labour government we get only small changes.’

 

There is a direct relationship between the Democratisation of Money and Whiteism. There is no long term answer without understanding and addressing Whiteism.

 

The key to take away from all this is that:

 

There are social goods that we all hold in common. Monetarism seeks to take advantage of the fact that most people do not understand the importance and the benefits of these social goods. They hope that this ignorance will allow Monetarists to hijack these social goods permanently and to use the massive power this gives them to institute a new permanent global power system.

 

We have not lost control of these social goods yet, although the entire purpose of Monetarist propaganda is to try to convince us we have. Call this the IAGO STRATEGEM.

 

Our battle is to inform people of the existence and benefit of these social goods in particular COMMONLY HELD MONEY and to convince them to fight to defend them.

 

This is the battleground where the fate of Monetarism will be decided…..

 

Write again soon….

 

@P

 

 

 

 

A SHAME Or Why Crackernomics Matters

crying-sad-clown-23899989

It has been 7 years since what has come to be generally called ‘The Credit Crunch’ exploded in the world economy. And now after those 7 years Monetarists are ready to declare complete and unconditional victory in their battle to fundamentally and irrevocably alter the global economic and political landscape.

 

‘Alternative’ voices on the ‘left’ and the progressive ‘libertarian’ movement have totally failed to mount any sustained attack on the physical and intellectual structures that Monetarists have put in place. They have conceded every substantial point in economics and politics in the post Credit Crunch world. As a consequence there is nothing to stop the Monetarists concluding their takeover of existing systems and creating new global structures to further their plans.

 

Monetarist global restructuring is a massive and risk laden enterprise. But at every step of the way; at every major juncture when there was a danger of the Monetarist plan coming unstuck, the one thing that Monetarists have been able to count on is the unfailing inability of their opposition to understand the significance of the situation and take appropriate action.

 

As a consequence of these repeated failures what began as a hard beating has turned into a humiliating rout. Were this the extent of our woes it would be bad enough. But intellectual and moral collapse means that the very ideas that could underpin any chance of an alternative being created in the future are being corroded to the point where they will be soon be unsalvageable.

 

Those who claim that alternative economic and organisational forms will somehow spontaneously spring up as a response to the Monetarist onslaught are worse than naive. They are perhaps the most destructive force we face. Not only do they not challenge the new world order, but their ideas and prescriptions are built upon the very forms that give rise to it. They reinforce it. They guarantee its total victory.

 

You may disagree with this prognosis.You may think it overly gloomy. Or you may accept some of it but take comfort in the fact that ‘life’, your life and the lives of those you care about will go on, maybe not as well as before, but go on nevertheless. And in some sense you are right. It might be possible to put your head down, shut your mouth and try to get on with things the best you can within the situation you find yourself.

 

But that is simply to rationalise and accept loss. To turn your face away from the horror of your situation. Because once lost, freedoms are not retrieved, no matter what you might say to console yourself. Within half a generation people will not even remember what those freedoms were. They will become incomprehensible marks and signs in a book that mean nothing. Your children will be taught to despise them just as you have been taught to despise the freedoms and the dignities that existed before Capitalism. Or even the freedoms and the dignities that existed before WWII…

 

…Just like Winston Smith scribbling in his notebook. The real tragedy behind 1984 is not that it is so bad, it is that it is not so bad. People adapt. After a while the amputee can’t even remember what it was like to have two legs. That is not rhetoric, it is reality. And those who are most adaptable, best at forgetting, rise to the top just like Darwin says they must. We are programmed to forget.

 

Make no mistake, this is fundamentally about freedom. If you imagine yourself as an individualist and a libertarian who is happy to see the welfare state being dismantled and the post war liberal corporatist settlement being torn up, don’t kid yourself that the state is actually going to shrink as a consequence of all this. Not for one second.

Because if there is no butter on offer there will surely have to be plenty of guns. Now you are going to find out what a big state is really all about…

 

When I began writing the ‘United States of Everywhere’ I did so out of a sense of increasing incredulity at what I was seeing unfold. I saw the Credit Crunch and Q.E. as clearly the product of Monetarism, after all Q.E. was simply Monetarist ideology taken to its logical conclusion.. Was this analysis overly simplistic? Bernanke and Greenspan, all admitted Monetarists were advocating unprecedented printing of money while dismantling the post WWII welfare state. What else could this be but hard core Monetarism? I thought that many others would see this as clearly as I did and argue from this context. But they did not.

 

I tried to understand what could be stopping the majority of people from drawing what I thought were fairly obvious and uncontroversial conclusions. I began to wonder if there was something more deep seated within ‘western’ society that could account for this. I began to question the fundamental idea of progressive politics and of the left. Not whether they were ‘right’ or ‘wrong’ but whether they had ever really existed in any meaningful sense. And I began to research more closely what had actually happened in the Credit Crunch instead of relying on anybody elses (including the self-proclaimed opposition) analysis. And this was when I really became uneasy.

 

When I looked at actual information, I quickly became aware that what was being reported as the course of the Credit Crunch and Q.E. was not what was actually happening. And if this failure to report was true of the ‘establishment’ it was doubly true of the ‘opposition’. I could rationalise to myself that I understood why the ‘establishment’ would seek to put a certain spin on what was happening but I could not understand why the ‘oppostion’ would as well. It was clear to me that the problem was not just what was coming out of the opposition but what was going in. The input was just as distorted as the output. Why was this?

 

As I deconstructed what I read I realised that the securitisation of mortgages (bundling and re-selling), was a self sustaining system and that mortgages were being created to ‘feed’ the mortgage securities system and not the other way round! This was a self sustaining, potentially unlimited system and it was actually a license to ‘print’ money! In fact Securitised Mortgage Bundles (financial instruments) were money. What else can they be? What else can the term ‘financial instrument’ actually mean but money?

 

Financial:

pertaining or relating to money matters; pecuniary:

 

Instrument:

a tool or device used for a particular purpose; especially : a tool or device designed to do careful and exact work

 

I initially called this process the ‘Privatisation of Money’ but I realised that this terminology would be confusing because people understood money as private anyway. They were unaware of the social aspect of money. I realised that this process was actually better characterised as the Democratisation of Money.

 

Only later did I appreciate the significance of this.

 

The nearest analogy I can think of is that of a scientist drawing conclusions from a set of data. If the scientist draws an incorrect inference from data even if he does this knowingly, he is still operating within the terms of science, although bad science.

 

But when a scientist makes up data to conform to a pre arranged conclusion that is ‘Democratisation’. And if those conclusions are used to make a drug which kills lots of people that is the Credit Crunch. And if the scientist and the drug company he works for is let off by the Courts with paying a fine for all the damage they have caused, that is the United States of Everywhere.

 

After this I drew a link between Monetarist policy and privatisation. It went like this:

 

Monetarists seek to manage the economy through control of the money supply.

They seek to maximise privatisation.

They will seek to merge privatisation and Monetarism.

They will seek to privately control the money supply.

 

Is this analysis so incredible?

Is it so unbelievable?

I can’t understand why it is not generally accepted.

 

Well, that’s a shame of course but none of the above explains why Crackernomics matters to you, now.

 

Because all around us, if you look you will see that the opposition is starting to adapt to the new reality.

All the right wingers who were screaming about hyper-inflation and the Austrians who said there never could be a rise in interest rates and the radical leftists who put their faith in SYRIZA and all the countless others, the Gold Bugs and the Bitcoiners and all the rest are all starting, bit by bit, to make their accommodation with the way things are going to be.

 

Of course there will be back biting and recriminations and score settling and grumbling and selling out and all that stuff but when the smoke is settled the Monetarists will have got everything they wanted.

 

And the reason for that is the opposition have never really understood why they are fighting.

 

They have never really understood what they are fighting for.

 

And that is a shame.

 

The only way anyone can really appreciate what is actually at stake is through understanding Crackernomics and the Democratisation of Money.

 

For this reason I have no hesitation is recommending that you spend a little of your time reading ‘Crackernomics’ (it is free to download).

 

And I have no hesitation is suggesting you recommend it to anyone you think might be interested.

http://www.smashwords.com/books/view/312882

Shell Game Or The Real Deal

 

There are traditionally three shells in a shell game. Under one of the shells a pea is hidden. The shells are rapidly moved around and back and forth in an effort to confuse. A player is then required to determine which shell is hiding the pea at any given time. A small wager is usually made to make the game more interesting…

 

Watch the shell game being played for a while and you might start to notice some things that were not obvious at the beginning. Things are not as they initially seem.

Three shells found on the periphery of Europe are Britain, Ukraine and Greece. These are nations that have produced significant cultural constituencies in the past couple of years:

 

  • Britain has produced Saxon Maidan, SNP and a ProtestantRedoubt       franchise
  • Ukraine has produced EuroMaidan and NovoRossiya and
  • Greece has produced SYRIZA.

 

Cultural constituencies are sub national groups brought into existence by the new economic order. Just as geographic constituencies are the building block of Germanic Land Democracy and the nation state so non geographic cultural constituencies are the building blocks of the Permanently Failing Nation State.

 

By what means are nation states failing?

By means of proliferating international treaties that strangle them.

Cultural constituencies are populist movements that emerge within national territories in response to transnational agreements and treaties. They either seek to defend specific interests against these agreements or seek to use the agreements to forward specific interests.

 

  • SaxonMaidan challenges Germanic domination
  • SYRIZA challenges Germanic domination
  • Euromaidan challenges Russia,(with the backing of Germanic Europe)

 

What makes the above three examples significant is that cultural constituencies have to a greater or lesser extent achieved political power. We can learn something from watching how they have functioned so far. I chose the British shell to look under…

 

Saxon Maidan in Britain

 

The newly elected Conservative government in Britain has just issued an ‘emergency’ Budget. The reason it’s an emergency budget is that Conservatives never actually thought they would get into power.

 

Mainstream Conservatives exceeded electoral expectations by co-opting the emergent SaxonMaidan cultural constituency. This resulted in a wholly unexpected outright majority. Confusion ensued since Conservatives made promises on the margins of the SaxonMaidan they never thought they would have to keep.

 

Welfare Bait and Switch

 

For instance, cutting the welfare budget by £12 billion. SaxonMaidan likes the idea of permanently shrinking the welfare state and sticking it to all the ‘shirkers’, but in economic terms it is pretty stupid; it will inevitably adversely effect growth.

 

But here the hand is quicker than the eye. Conservative Chancellor of the Exchequer (widely tipped to be next Prime Minister), George Osborne announced what appeared on the face of it to be a substantial increase in the minimum wage- much to the ‘astonishment’ of assorted media types since Conservatives and particularly Saxon conservatives are historically vehemently against this sort of thing.

 

In reality this is a bit of nifty handwork by Osborne and his advisors. The raised minimum wage kills two (or three), birds with one stone (or pea).

First, it overcomes the demand shrinkage that is a consequence of welfare cuts. As I said above, taking £12 billion spending power out of the economy is not a good idea, especially as it will precisely affect mostly the low end jobs and wages that require a minimum wage.

 

Second, it sets the ground for the forthcoming referendum on continued EU membership that was a key concession to obtain SaxonMaidan votes. This is a particularly slick move:

 

Prime Minister David Cameron promised to negotiate tougher terms as a continued basis for Britain staying in Europe. One of these terms is cutting in work welfare entitlements for European immigrants.

 

Up until now there has been strong resistance to this, especially from poorer EU member countries that provide the immigrants benefiting most from welfare. But now the EU will concede welfare cuts because instead of direct welfare benefits, the British government will guarantee immigrant income indirectly through the new minimum wage.

 

Cameron will claim victory on cutting immigrant welfare and campaign for staying within the EU. Everybody happy. Well, everybody on the inside anyway.

 

Permanent Credit Economy

 

Third, the minimum wage raise helps usher in the Permanent Credit Economy. The P.C.E. is a planned economy– it has long been accepted by western elites that there is no other way to manage society. In fact the P.C.E. defines the failed capitalist state!

There is no free market in labour. There is no free negotiation in labour and SaxonMaidan and the Conservatives want even the symbolic remnants of collective labour bargaining effectively outlawed. In its place will be government mandated income levels.

 

In tandem with the minimum wage, bank credit is central to this.

 

The P.C.E. takes all the social provisions supplied by the welfare state and makes them the subject of bank provided private credit, including but not limited to: Housing, Education and Health.

 

The last dregs of social housing in Britain are being privatised in the budget and the very few remaining government grants which enable the poorest young people to take part in further education are being withdrawn. They will be replaced with’ education mortgages’.

 

The end purpose of the Permanent credit economy is to permanently integrate the banks into the state as a decentralised planning system. Enforced credit and no free bargaining means there will be no disposable income as we have understood the term.

 

Economist Michael Hudson has reached exactly the same conclusion:

‘It is much harder to write down debts owed to or guaranteed by governments. U.S. student loan debt cannot be written off, but remains to prevent graduates from earning enough take-home pay (after debt service and FICA Social Security tax withholding is taken out of their paychecks) to get married, start families and buy homes of their own. Only the banks get bailed out, now that they have become in effect the economy’s central planners.’1

SaxonMaidan Doesn’t Like the BBC

 

The specific purpose of the BBC is to cohere British society around the values of ‘One Nation’ Protestantism (what has become ProtestantRedoubt cultural constituency). Because of this SaxonMaidan hates the BBC with a passion. Rupert Murdoch and the Sky network is the perfect expression of this SaxonMaidan hatred. The SaxonMaidan is constantly looking for ways to damage the BBC and now with its new-found electoral power it has come up with three ways:

 

  • Forcing the BBC to pay the price of free TV licences for old age pensioners (which the BBC estimates will cost it £650 million from its budget).
  • Making the non payment of the license fee no longer a criminal offence but a civil one. (The BBC estimates this will cost around £250 million) and
  • Forcing the BBC to privatise online services making them a subscription service.

 

But wait here comes the fight back from ProtestantRedoubt: Say hello to voluntary taxes!:

‘The BBC will ask people aged over 75 to voluntarily pay the licence fee to help tackle a 10% real-terms cut in its budget as a result of this week’s controversial shotgun deal with the government. A senior BBC executive said it would ask elderly viewers and listeners to consider paying the annual charge even though they have not had to pay it since 2001.2

 

I refer to this cultural practice specifically in a previous piece:

 

‘What differentiates cultural constituencies from political constituencies?

Simply put, political constituencies vote with ballots to control money and cultural constituencies vote with money to control politics.’3

 

Battles on the Border

 

At the same time that SaxonMaidan came into existence the SNP cohered north of the border. This is hardly surprising; the exact forces that gave rise to SaxonMaidan created the SNP; just like a photographic negative forms a print. Of course they hate and are baffled by each other.

 

This has resulted in a SaxonMaidan campaign for English votes on English laws. In other words Scottish SNP members of parliament will not be allowed to vote on certain aspects of British law. Needless to say this has not gone down well North of the Border.

 

There will also be a comprehensive redrawing of the geographic electoral boundaries substantially and permanently advantaging the Conservative party.

From our peek under the British shell we can draw some general conclusions about the game is run:

Generalities

Agitating for Permanent boundary revisions are a feature of cultural constituencies. In the case of the Ukrainian Euromaidan and NovoRossiya this hardly needs further elaboration. In the case of SaxonMaidan and SNP the boundary questions are fairly clear also. If we look to PODEMOS in Spain and the Catalonian independence movement we can see how boundaries will be of importance here also.

 

Here is a prediction:

Assuming SYRIZA is not deposed in the near future, don’t be surprised if a boundary dispute breaks out on or near the Greek territory….

 

Control of media is becoming ever more clearly a key objective for cultural constituencies. I pointed out how this is coming to the fore in SaxonMaidan and it’s battle with the BBC. Now Labour Party leadership candidate Andy Burnham has stated that he will not give an interview to the Sun (a Murdoch tabloid), because of its reporting of the Hillsborough Football disaster4 This is a clear attempt to begin constructing Labours very own cultural constituency if you aren’t part of one, try to start your own!

 

Here is a prediction:

SNP will be involved in a serious BBC related dispute in the near future.

 

The role of the Greek oligarch media in the recent referendum has been clear and unambiguous. SYRIZA has made it clear that if they can get the chance it will be open season on their oligarchy enemies in the media.

 

And of course Ukraine Euromaidan has opted for open and direct censorship.

 

Here is a prediction:

Now look for a media battle featuring PODEMOS.

 

What every cultural constituency I have described has startlingly shown is an Unexpected relationship between geographic constituency and cultural constituency

 

In Britain SNP won by a landslide; the extent of the win was a surprise. Conservatives gained a surprise majority in England with the aid of SaxonMaidan.

In Greece SYRIZA first surprised by being the largest party and then again by so convincingly winning the referendum

Even in Ukraine the total collapse of the Yanukovych administration was largely unexpected. It was this shock as much as anything that led to NovoRossiya gaining such momentum and splitting the territory.

 Why does this succession of surprise victories happen?

 Because existing national structures find it very difficult to deal with the emergence of cultural constituencies. In the ideology of the nation state, cultural ethnic and regional differences have all been effectively neutralised by geographic democratic politics, as I explain above.

To see these pre-national differences re-appear is a profound shock to the elites of nation states. Especially since the only plausible explanation for their re-appearance is the failing of nation states. In order to be able to a develop a realistic response to emerging cultural constituencies, national elites are going to have to openly admit that to some extent their nations are failing!

And if you doubt this is the case, just look at the difficulties that the British government is having even talking about Western Takfiris……..

 

1 The Financial Attack on Greece: Where To From Here? By Michael Hudson July 08, 2015

http://www.informationclearinghouse.info/article42330.htm

http://www.theguardian.com/media/2015/jul/10/bbc-over-75s-to-licence-fee-voluntarily-budget-cut

3 ‘American Sniper Or ‘Don’t Shoot!’ Or ‘Cultural Constituencies’ Or Money Where Mouth Is’

https://unitedstatesofeverywhere.wordpress.com/2015/01/27/american-sniper-or-dont-shoot-or-cultural-constituencies-or-money-where-mouth-is/

4 http://www.bbc.co.uk/news/uk-politics-33496931

Do Banks Create Money? or No Big Deal

 

 

To get a real insight into whether banks do indeed create money, we must first sharpen the focus of our enquiry:

 

If banks do create money, what kind of money do banks create?

 

For instance, do banks print foreign money?

 

It has been rumoured that in the past North Korea has printed North American dollars, but for the most part this practice is frowned upon and we can say that generally banks and governments refrain from printing each others currencies.(Although that might change in the Eurozone quite soon).

 

Do banks create their own private money? Is there such a thing as Lehman dollars?

Banks printing money in this form is not generally held to be the case, (at least not yet), but we can come back to that later.

 

Since it is clear that private banks don’t create money in general we have refined the question to:

 

Do banks create the national money used by you and I? Or to phrase it using democratised money theory language: Do private banks issue Government Issued Money?

 

And of course, when you put it in these terms, the answer has to be ‘no’.

 

Problem solved to my satisfaction at least.

 

But maybe not quite to yours.

 

In my last post I commented on a quarterly bulletin of the Bank of England that seems to suggest that banks do indeed create the majority money in circulation in the form of debt. This capitulation to the radical interpretation of economics piqued my interest. Putting aside the question as to whether banks do or don’t create money, why would the Central Bank retreat from earlier positions and just as importantly, why would it do so after all this time?

One plausible reason for a tactical concession to the insurgents is to better position the Monetarists for the next assault in their ongoing campaign to control the future of money.

 

It could be that central banks are positioning themselves so that it is not such a big shock when they come clean about derivatives being money. The message will be; Sure, private banks and financial institutions print money of one kind or another; they always have. So what’s the big deal? Perhaps the arrival of this political concession actually means that the time is approaching when the shadow economy will be coming out of the shadows.

 

This would be a reasonable assumption if there is a need for some kind of normalisation of interest rate policy. It will be impossible to significantly and permanently raise global interest rates without some corresponding amendment of national and international banking and exchange rules. These rules would need the justification of a new worldwide orthodoxy on money and banking. This might be the actual truth behind all those predictions of a world currency.

 

If orthodoxy were to concede that derivatives were to be regarded as a form of money it would confirm what I have been arguing for more than five years. But I don’t think I will be celebrating my intellectual success. Any successful attempt to conflate bank credit or anything else with Government Issued Money can only serve one purpose: to discredit and denigrate cash money. And that is nothing short of a disaster for you and for me.

 

There is a horrible synchronicity here between both orthodox and unorthodox wings of the monetary conflict; Monetarists and radical Bitcoiners. The message from Bitcoiners and Monetarists alike is leave government cash behind, the battle has moved on.

 

Bitcoiners argue that their cryptocurrencies are democratic and free from central bank oligarchy control and therefore better than cash. Monetarists argue for a technocratic ‘non politicised’ control of money issuance; effectively privatisation of money control in a credit card world. Both result in the end of cash money guaranteed by the state, under political control. Both result in the privatisation of the issuance of money.

 

In the light of these developments the strategic imperative for us is to ague for the sole primacy of Government Issued Money as the only form of currency. Let me explain why.

 

There has been a constant attack on the use of cash for at least two decades and this attack has been centred around the point of contact between cash and banking. The introduction of numerous legal requirements on bank reporting of activity as well as private petty restrictions on how much cash you can depots and withdraw have had a chilling effect on cash based banking.

 

At the same time cash has been increasingly frozen out of commercial activity- many utilities are virtually impossible to purchase with cash unless you use prepaid cards and are extorted by the utility provider for the privilege.

 

For the past six years or so this attack on cash has been masked by the attack on savings deposits expressed through negative interest rates. Not only do deposits not pay interest, but bank accounts and their supposed contents are rapidly losing their legal status.

 

The end game in all this is bail ins where banks simply convert deposits into shares, which you are not even allowed to freely trade! If bank credits really are money as the Bank of England paper argues, on what basis is this being done? Follow the actions not the words and you will at least begin to question any supposed conversion of monetary orthodoxy to radicalism.

 

It is possible to cut through the confusion between cash and credits illustrated by comparing the decision to hold goods, cash or credit.

 

Let us say that due to deflation you decided to put off purchases, that is to say to hold cash or bank credits. Are the risks and benefits the same in each case?

Holding and using cash offers the benefits of anonymity and privacy. Does bank credit offer this?

Cash money offers the benefit of dealing with no ratification, in other words no-one oversees and confirms any deal you might choose to make. Does bank credit offer this?

Cash money is legal tender, it has to be accepted in settlement of debt. Does bank credit offer this?

Cash money offers complete liquidity. Does bank credit offer this?

Bank credit is subject to seizure, forfeiture and conversion (as in bail ins). Does cash money suffer from this?

Cash money clearly offers a number of benefits and guarantees that bank credit cannot. Bank credit suffers in the comparison with cash money.

 

It should be clear from this that as bank credits become denigrated by the state it increasingly becomes necessary for central banks to delegitimise cash to at least a corresponding amount. Because if only a very small minority of the general population decided cash was the better option that would cause a lot of problems.

 

Only around 3-5% transactions are cash and this proportion will significantly diminish further if Monetarists have their way. But if usage of cash was to increase significantly, the plans of Monetarists would start to run into serious trouble in short order.

 

Firstly, cash is hard to take back in a way that credit is not. Paying off bank created debt ‘dissolves’ credit money but cash money has to physically be withdrawn from the economy which is much more difficult to do- this means hard inflation. The kind that central banks cannot control except by raising interest rates.

 

But even more important is the relationship between cash money and banking reserves. Cash money is directly created by central banks and obviously bank deposit credits are not (this is the essential complaint of unorthodox economics). The creation of cash money directly affects the amount of reserves required to be held by each private bank and by the central bank.

 

Bank credits can be created forever without necessarily altering the requirement for reserves. If people take their physical money out of the banking system for use they are effectively calling it into physical existence– forcing the banks to actually print and therefore again forcing them to raise interest rates.

 

These two reasons why bank credits are not Government Issued Money are still within the bounds of standard economics but there is a further more fundamental reason within Democratised Money theory.

 

I have argued previously that money makes a proclamation as part of a general contract between issuer and user.

This proclamation takes the form of the Base Interest Rate which determines the nature and scale of the economy. It is something that is universally applicable to the same extent. It affects everyone equally.

It is inextricably bound up with the specific contract of the money itself. Once this printed money proclamation goes out the door of the central bank it cannot be undone.

 

The cumulative effect of these non- undoable operations is the recorded element of the currency. You can’t undo a money issue interest rate or the effects it has on the economy but you can use the next money issuance to offset the effect. In other words vary the interest rate from issuance to issuance.

 

In contrast, bank credit is a specific, not a general contract. Credit is offered on an individual basis. The ‘proclamation’ from the lender is concerned with what the individual borrower must do, not the general economy. Because of this the issuance of bank credit requires a separate individual contract, unlike money where the contract is part of the money. This ‘money’ creation through debt is subject to ratification by the legal system; it can be undone if deemed onerous or illegal, unlike cash money.

 

The cumulative effect of credit creation by private banks does have a massive effect on the economy. But it is not a general effect like money, it is a cumulative private effect. When you borrow from a bank you have to deal with the economic power structure as a lone individual instead of as a citizen member of society dealing with a central bank. In other words it is the ultimate codified example of divide and rule.

 

If as I argue, Monetarists want to create a Permanent Credit Economy, (that is a decentralised planned economy, with banks deciding who gets credit to do what),

Then deceiving propaganda giving bank credit the status of money can only be to their advantage.

 

We should oppose it.

 

 

Fakirnomics or Don’t Shoot! or The Permanent Credit Economy and the Point of No Return

 article-2599719-1CED6A5F00000578-392_968x681

George Osborne Needs You To Borrow Billions To Make His Plans Work

The Huffington Post UK  | By Asa Bennett tp://www.huffingtonpost.co.uk/2014/12/05/george-osborne-debt-obr_n_6274264.html?utm_hp_ref=uk

Revealed: how the wealth gap holds back economic growth

OECD report rejects trickle-down economics, noting ‘sizeable and statistically negative impact’ of income inequality

http://www.theguardian.com/business/2014/dec/09/revealed-wealth-gap-oecd-report

 

If a believable mainstream justification for Quantitive Easing is possible, it must centre on the restructuring of national economies in the aftermath of the Financial Crisis.

Both the Bank of International Settlements and the International Monetary Fund have called on national governments to use the window of opportunity provided by QE to carry out this restructuring. Indeed, they have expressly stated on more than one occasion that QE is only really justifiable if this restructuring happens.

But attempts at restructuring have met with at best mixed success; not least because it is very hard to get a concrete idea of that this supposed restructuring would actually mean. How can we know if restructuring has successfully taken place? Well this question at least does have a clear answer that everyone can agree on: there will be renewed growth in the economy.

By this measurement the most successful examples of economic restructuring are Britain and America. Unlike Europe and Japan, which have been balancing on the edge of recession for the past six years, Britain and America have experienced some level of growth. So if we understand what has changed in Britain and America we will have a pretty good idea of what restructuring actually is.

Have banks and financial institutions in Britain and America fundamentally changed their structure or the way they operate?

No.

There has been some regulatory tinkering round the edges of speculative banking operations but the core activity of manufacturing derivatives is largely untouched, even bonuses have not been substantially affected.

Does the financial sector play a smaller role in the economy now?

No.

Financial services continue to play an ever -growing role in the economies of Britain and America, there has been no real resurgence in manufacturing or traditional industries. These economies continue to be increasingly unbalanced in historical terms.

The growth we have seen in the domestic financial economy of Britain and America has centered on asset growth in the form of stocks and bonds, new derivatives and profits from privatised sectors like education, war, prison provision etc.

For ordinary people in the old fashioned economy there has been asset value growth in housing. This growth in the financial and legacy economies is financed though credit, not through wage growth. Mass immigration and an intensifying attack on trades unions and workplace rights means that wage growth is effectively impossible under the Monetarist regime.

In other words there is an ever increasing reliance on money itself as a vehicle for creating value, not only for the financial elite but for society as a whole. Rather than reducing the financial sector in favour of the real economy, the real economy is being made ever more like the financial sector. This is what restructuring has turned out to mean.

Contrary to the rhetoric of the Neo Liberal project, the mass scale extension of credit is effectively creating a fully planned economy. But instead of governments, it is private credit agencies that increasingly decide what resources are allocated where. The financial and political elite are moving towards comprehensive planning without the political problem of having to admit that the free market is a mirage. This will be quite some trick if they can pull it off.

This is the Permanent Credit Economy. Where credit is not an optional decision, but a permanent necessity of economic life.

But there is a cost to the use of credit as the brain and the heart of the economy. As more and more people integrate more and more credit into all their economic activity, the ever increasing burden of interest payments diminish earning power at an even faster rate than immigration and deregulation does.

Wages have to be allocated to paying off the interest on student loans, mortgages, car loans, credit card and other unsecured debt . This money taken out of the commodity economy is one major cause of the deflation we are now seeing across the developed world. People simply don’t have as much money to spend on commodities as they used to have. In other words there is less and less discretionary spending; you have less and less choice where your money goes.

Increases in credit push up prices on student loans, mortgages, cars, and credit card debt. The more credit that is available the more can be charged for the things that are bought on credit. Were it not for the financialised restructuring of developed economies, the I Phone would cost no more than $200…

But even more insidious than the ratchet effects of interest and credit, is the control and planning effect of credit I refer to above. What you buy is increasingly determined by credit agencies. You are able to get credit for any purchase to the extent that the purchase has a commensurate value and to the extent that you are able to service the payments on that purchase. You can’t borrow $2000 to buy an old car that is only determined by the lender to be worth $1000. This is the flipside of the end of discretionary purchases, even if you are allowed to have the money (credit), you are not allowed to spend it as you wish.

Economies all across the developed world are now growing or not growing entirely to the extent that financial institutions are successful in getting people to take up the offer of credit. There has been some take up of credit for housing in Britain, the market has been goosed by government subsidy. This housing asset recovery is taking place in parts of America also. (San Francisco for example).

On the other hand the failure to take up credit is reflected in the gloomy headlines with regard to the economies of Europe and Japan. In Europe there is at best stagnation and more often contraction in housing credit. Japan is notorious for its domestic populations tendency to save and avoid credit. Shinzo Abe has resorted to shock and awe tactics to firebomb the savings of the Japanese public and force them into the speculative credit marketplace.

A recent article in the Huffington Post made explicit that George Osborne is counting on a further massive increase in secured and unsecured debt as the means to ‘grow’ the British economy.

The HP tells us that:

‘the Office for Budget Responsibility, …forecast that Britons will need to add £360bn over the five years to its levels of unsecured lending, which includes credit card debt, payday loans, and bank overdrafts’.

The £360bn figure represents a £41bn increase on the OBR’s forecasts just nine months ago and would take households’ unsecured lending, as a share of total household incomes, to a record 55%  by 2020. This would be well above the pre-financial crisis unsecured debt ratio of 44%.

And:

APPG member Willie Bain, member of the Commons business committee, told HuffPostUK:

“The chancellor promised in 2011 that the government would lead an export-led recovery, yet this week the share of growth coming from net trade was predicted to fall further in each of the next five years. As the Bank of England said recently, recovery needs to be based on policies which boost wage growth, raise productivity and create more higher skilled jobs. Growth based on soaring levels of personal debt is no recovery at all on living standards for millions of working people in Britain.”

 

Hand in hand with the extension of credit comes the shrinking of the real economy. When the real economy shrinks, the state that relies on the real economy is forced to shrink too:

This comes after the Institute for Fiscal Studies warned that Osborne has “colossal cuts” left to make in order to meet his deficit reduction plans that would leave the size of the state “changed beyond recognition”.

Despite ministers’ indications that the bulk of the austerity agenda is over, the economic thinktank said that just £35 billion of the cuts in spending by Whitehall departments have already happened, with £55 billion yet to come.

You cannot have a viable consumer society without a welfare state. The efficiencies and security that comes from knowing that education, health and housing are backstopped by the state means that people can afford to spend on consumer goods. Without this state guarantee, people are forced to take up private insurance to cover necessities. This is risk that has been transferred from collective provision to the individual.

This is money that no longer goes into the commodity economy which shrinks as a result. This shrinking in turn causes more redundancies and less income and lower tax receipts. Which shrinks the state, which further shrinks the economy, and the process starts all over again ratcheting ever tighter.

As reported in the Guardian:

[the data collected from the thinktank’s 34 rich country members] suggests it is inequality at the bottom of the distribution that hampers growth.”

Rising inequality is estimated to have knocked more than 10 percentage points off growth in Mexico and New Zealand, nearly nine points in the UK, Finland and Norway, and between six and seven points in the United States, Italy and Sweden.

The ‘old’ economy serviced by government issued is shrinking. The ‘new’ economy serviced by democratised money goes from strength to strength.

Indian fakirs are famous for holding an arm aloft for years and years at a time until it finally begins to shrink and wither away. It is a demonstration of extraordinary willpower. The population of the developed world has stood before the Monetarists with  hands in the air for six years now. They are withering away. Soon we will be past the point of no return.