Monday, April 12, 2010

Crossroad Signs

We are, as usual, at a financial crossroads and the signs to guide us to the proper route are, also as usual, smeared with graffiti and conflicting directions.  But in this instance the crossroads are significantly more important than at other times;  it's a bit like equality amongst Orwellian animals.  Decisions made in times of Great Recessions carry much more impact for the future than any other time.

Roadsign To Future Success

But, at least, we have a pretty good picture of the possible futures we may face:
  • (a) High(er) inflation, caused by the massive amounts of "new" money created by western central banks and governments in the course of The Great Bailout or,
  • (b) Deflation, caused by the default of these western nations crushed by their massive sovereign debt obligations versus their earned income or,
  • (c) None of the above, see further below.
In the current context most analysts and academics are already choosing (a) high(er) inflation, though they routinely mask their arguments in terms of "growth", "recovery", "higher real interest rates", etc.  They expect this to be the least painful eventuality, probably because of their familiarity with high inflation during the 1970's and '80s.  Another reason, particularly for Americans, is their institutional fear of the Great Depression with its wrenching bank runs, dust bowls and fulminating political unrest. (They didn't call them grapes of wrath for nothing, and it should be remembered that in the 1930's the monied classes considered FDR a communist.)

As partial - but powerful - proof that the cognosenti are preparing for Future (a), PIMCO  (the world's largest fixed-income money management firm based in California, assets under management $1 trillion) is planning to offer actively-managed equity funds for its clients, since bonds severely underperform equities in times of rising inflation.

By contrast, almost no one is seriously predicting a real bout of Great Deflation - no one, that is, but members of the inevitably regular doomsayer brigade for whom the clock is permanently stuck at 5 minutes to catastrophe du jour.  But some of them may have something valuable, indeed, to contribute to our views on possible monetary and fiscal futures;  I should't even call them doomsayers.  Prophets of inflection points, perhaps?

I am referring to peak oil theorists and analysts.  First, please note the absence of capitals in "peak oil";  it is meant to separate sober fact from the panting and hyperventilation common just a couple of years ago, when crude oil had reached $150/bbl.  Add climate change to the mix, stir well and let settle.  Do you see a possible monetary future emerging - or, at least, a desirable future?
  • (c) A plateau-eing in outstanding amounts of money/debt, zero to slightly negative overall credit expansion, very low interest rates and the gradual removal of finance from center stage in the economy.
Under such a scenario, central banks and policy makers are going to dust off a long-neglected monetary policy tool, i.e. targeting money supply

I claim that the EU/IMF $61 billion standby bailout arrangement for Greece can and should be interpreted in terms of money supply conservation, i.e. it is meant to prevent the rapid evaporation of fiat money/debt into thin air via default.  At the same time, because of global sober credit evaluation and very low risk appetite it is impossible to create trillions in incremental high-powered money/debt.  Leverage has become a four-letter word and I believe it will remain so for decades.

Now, is the road-sign any clearer? Umm..


  1. Over in the saloon I stuck down a post on magic.
    You're talking about macro analysis here.
    But... if the system at the lowest levels is all about encouraging us to think that money grows in ATM machines, how are we going to "save" fiat money ?
    Maybe this question is way off in left field, I don't know.
    But the system is not JUST what our governments and our financial institutions decree at a high level.
    The system hangs together at ALL levels.
    What about the lower levels ?
    What about the fact that we have been encouraged for so many years to BELIEVE that our social problems will be solved by fiat money ?
    Do you see any indication that these beliefs can be inflected ? Do you think they SHOULD be inflected ?

  2. Dear Debra,

    The vast majority of people don't have our luxury of philisophising about how it all hangs together. They are much more concerned about their jobs and how to make ends meet, plus - maybe - save a couple of extra bucks for their kids or old age.

    As I have said before, I have no problem at all with fiat money, as long as it doesn't get abused. In fact, I agree with Keynes that gold and such "money" is a "barbarous relic" that inflicted untold woe on people in the past.

    At best, fiat money allows us to believe (fides, credo) in OURSELVES, as opposed to being hostage to a pile of useless metal in a vault AND to gold producers, wherever and whomever they may be.

    At worst, well.. Sudden Debt.

    Until something better comes along, I am a strong believer in fixing the system, not chucking it out of the window in order to replace it with an ancien regime.


    PS Is there a reality OTHER than magic?

  3. [T}he EU/IMF $61 billion standby bailout arrangement for Greece can and should be interpreted in terms of" torpedoing what remains of the sovereignty of EU members in favor of the globalists' agenda. Now German and French taxpayers are formally on the hook for the monetary excesses of Club Med, thereby, accelerating the collapse of their own unsustainable fiscal nightmare trajectories.

    Allowing IMF involvement in the "bailout" of Greece is merely greasing the skids for the rest of the developed world countries to eventually hand over sovereign control of their monetary and fiscal policies in favor of the globalists controlling the IMF/BIS/FSB cartel.

    Surely even Hell has enough imagination to perceive such an obvious outcome.

  4. Don't forget that Keynes himself realized that in order to keep the party going, he needed to reduce real inequality and ultimately began focusing on consumption, becoming Director of the British Eugenics Society.

    I chose the word ultimately for a reason as I'm sure you remember how others tried implementing his policy recommendations with their own cultural twist.

    Hell, why is targeting the money supply not just another form of printing?

  5. Re: money supply targets another form of printing?

    No, I don't see it that way at all.

    Printing money (aka quantitative easing) is a policy decision independent of targeting interest rates (current monetary policy tool) or targeting money supply. It can be done under both regimes.

  6. Wherein we see that Jefferson sees the glass half empty...
    We need to be careful about developing arrogance when we talk about... "the vast majority".
    We didn't like this arrogance, most of us, when we saw it at work in... Dick Cheney and George Bush, did we ?
    It cuts away at our perception that "the vast majority" is made of people LIKE OURSELVES (maybe with less comfort, less.. MONEY, but if we think this way we will be subtley encouraging money as the measure of ALL things in our OWN minds...).
    I have no desire to bring back l'Ancien Regime, and even if I did, it would not be possible. (Heraclitus, I think ?)
    Maybe we could start looking at WHY we believe that the Ponzi scheme is everywhere these days ?
    Is this as true as we seem to believe ?
    Or is it yet ANOTHER example of the glass half empty ?

  7. One chart from the most recent BIS report says it all:

    Everybody is insolvent. Just a matter of timing.

  8. Re: BIS chart

    Don't you just love those 30-years-out extrapolations?

    As a thought exercise, do this if your age permits: think back to 1980 and try to remember some of the assumptions we made back then about today. For example, gold hit $900/oz back then and high inflation was supposed to be permanent.

    Or, how about the projection that Japan would become so powerful it would rule the world. Remember the best-selling books from then? Theory Z?

    All I have to say is,

    Sic transit groria predictor.

  9. The BIS graphs are way too optimistic about what sovereign debt levels the market will allow. No way most countries are allowed to get anywhere near even 200% public debt to GDP levels.

    The trajectories, assuming even the best case scenario for fiscal reform and GDP growth, indicate impending sovereign debt collapse in every developed nation in the world.

    The charts don't show where exactly the wall is for a particular nation but the graph makes it obvious every OECD nation will crash into one.

    Good thing the IMF/BIS/FSB will be around to pick up the pieces, right?

  10. This comment has been removed by the author.

  11. which way can I go?

    It's a four dimensional world. At the very least. Smile!

  12. Jefferson..
    If we are ALL in the same book, then optimism is the name of the game.
    Optimism and cooperation.
    Sometimes.. really interesting things can happen when you have nothing left to lose.
    Or.. you THINK/PERCEIVE that you have nothing left to lose..
    Let's not get bowled over in the millenarist scenario, right ?
    But maybe.. THIS time it really could be the end of the world arriving ?
    Who knows ?
    Nobody human, at any rate...
    About three years ago I woke up to the sudden, blinding realization that...
    THIS WAS/IS LIFE, and there is NO safety net for it..
    How many other people are there out there still waiting to wake up to this realization ??

  13. I am betting in 2 directions (hedging):

    A variation of Business as usual (either low deflation or mild inflation). I.e. going on with my "normal" life.

    Hyperinflation. For this I am investing some money in books about agriculture, self-reliance, etc., and some time spent in my family little property in the middle of nowhere (with access to water and plenty of sun), learning basic rural skills.

    I expect peak oil to start hitting with more strength in below 10 years, and that will increase Extremistan scenarios quite a lot.

    I am also using my oil allowance: visiting places that I believe I will not be able to visit in 10 years time. This might be not very moral behaviour, but the cynicist in me as long won.

  14. Gold is hardly useless. It's certainly far more useful than paper money, which I can only imagine being used in fireplaces, furnaces, and outhouses.

    As for inflicting untold woe on humanity, well, when I think what has transpired with purely fiat monetary systems in, what is, where the span of human history is concerned, almost no time at all, I think fiat has gold beat all hollow on that front.

    Don't worry though, Hell, the planet isn't going to go to "Go Gold" in any formal way, though China just might.

    As for the system we have, well, I maintain it isn't any more amenable to fixing, or, for that matter, deserving of fixing, than a one legged elephant is amenable to, or deserving of, playing hopscotch.

    But the reform notion is moot, since everyone who has a say in the matter, at least around these parts- these parts being "The West"- are Alice though the looking glass, denying that financial problems, among other problems, are still legion, and instead pretending that the severely dented economic trolley car is in full repair and back on the track. The Emperor is buck naked and his willy is blowing in the breeze, but you'd think he was wearing a three piece silk suit, Bally shoes, and a felt fedora.

  15. Debra,

    It is not a question of maintaining a sunny disposition or positive attitude. That is a matter of individual temperament.

    The relevant inquiry is whether people recognize the current economic or political nightmare as being the result of deliberate manipulation on the part of the globalists to advance their own selfish agenda.

    Only by recognizing the underlying aims of the global elite who are orchestrating a controlled demolition of existing economic and political structures can one begin to intelligently discuss potential solutions.

    The disgust I convey merely reflects the repugnant and cynical nature of the globalists' own underlying objectives and strategies notwithstanding their purported pursuit of Utopian ideals.

    Hell believes that government action is the solution. I believe that government interference constitutes the greatest threat to individual liberty and freedom.

    In other words, I refuse to drink the kool aid.

  16. It would be interesting to run a historical comparison of things like GDP growth rates, infant mortality, life expectancy, etc... on countries when they were on a gold standard and when they were not.

    You could do compare the same country between two different time periods and a composite of countries on and off the gold standard, etc...

    It doesn't predict the future but it would be interesting never the less. I will say you are slowly converting me Edwardo. I think Hell is just being selfish as he just doesn't want to play with chemicals in a test tube any more. ;-)

    Or maybe two countries might cooperate enough to even do a prospective trial? It wouldn't be randomized but it would still be more powerful than the other kind of FYI.

    ... Of course this would require "deliberate manipulation on the part of the globalists" so I'm thinking non-elite non globalist are going to have some cooperation issues.

    And then some of them just might recognize that gold is really the aims of the global elite who want to orchestrate a controlled demolition of existing economic and political structures and we couldn't have that either.

    I'm thinking a few in the fishbowl nether see the bowl nor their own tail.

    Tiago, its just my two cents but wherever we do decide to budget, I don't think travel will likely be it. There are many other ways.

  17. Re: historical comparisons of GDP etc under gold/fiat

    Plus: BIS charts

    Fiat came into being well after WWII, coinciding with the global oil/petrochemicals prosperity boom and all the technological/medical advances it brought. It would be unfair to gold, thus, to do the comparison you propose - fiat would win hands down, but for the wrong reasons.

    A bit more on the BIS charts. I am sure the author of the article accompanying the charts wants to show how the current pensions/medical benefits system is unsustainable and must be revamped.

    And it will be, and soon.

    I am confident we won't ever see government debt/GDP ratios of 200-400% - something else will happen well before that to lower the future actuarial obligations of the pension systems and thus their present value.

    In a word, Sustainability will HAVE to take the place of Permagrowth.

    I will soon write a post on how I think things will play out.

    PS On the present value of future obligations: perniciously, the current ultra-low interest rates act to balloon the present value of future obligations, just because of the way they are calculated mathematically (low discount rate and portfolio return assumptions).

  18. Looks like we are now moving into the end game for the globalist:

    The Executive Board of the International Monetary Fund (IMF) today approved a ten-fold expansion of the Fund’s New Arrangements to Borrow (NAB) and the transformation of the Fund’s premier standing credit arrangement into a more flexible and effective tool of crisis management. The NAB will be increased by SDR 333.5 billion (about US$500 billion) to SDR 367.5 billion (about US$550 billion), representing a major increase in the resources available for the Fund’s lending to its members.

    IMF is now lining up $500 Billion in SDRs to "bail out" developed world economies in exchange for promises to pay back loans in SDRs. So much for any discussions of a future gold standard.

  19. Re: NAB et. al.,

    Thanks for the IMF news. At the core, Jefferson,we agree.

    The difference between us is that you are making predictions of what will happen (prophesy), whilst I am making suggestions of what should happen (proposed solutions).

    Both could be valid and valuable responses to the current crisis.


  20. "Deliberate manipulation on the part of the globalists to advance their own selfish agendas".
    Jefferson.. it all hangs together.
    If you were living on the same soil that WW1 and WW2 were fought on, you would understand that that globalist agenda ALSO includes the fervent desire of many people to avoid the extremely traumatic effects of rampant, out of control nationalism by creating supranational institutions designed to control nationalism.
    What you're griping about is part of a... larger context.
    I think that finger pointing that singles out any single caste as being responsible for our current predicament is simplistic, and demonstrates our global tendancy to scapegoat.
    Indeed, it is because we don't recognize how EVERYBODY participates in creating an elite that the same events keep repeating themselves from generation to generation since the ancient Hebrews, at least.
    Continuously demonizing the rich and powerful in any form is a little bit like.. what Adolf did when he singled out the Jews for being responsible.
    Scapegoating remains scapegoating.
    And it is not going to get us out of this mess.
    And scapegoating may indulge our sadistic fantasies, but it is not going to solve our problems in a.. uh.. RATIONAL fashion.
    We need to keep our heads.
    And SMILE too, while we're at it.

    Looks like Hell has made that link, fiat money and oil, as...LIQUIDITY that hangs together.
    Maybe we otta find something... LESS LIQUID next time to barter with ?
    Not gold... when I think of all those beautifully crafted objects melted down over the generations to make filthy lucre out of, it turns my stomach...

  21. Debra,

    So according to you my condemning the agenda and strategy of the international banking cartel, represented by the IMF/BIS/FSB cabal (who just happen to also be responsible for financing the endless wars and genocide in the Middle East, Asia and Africa), to deliberately torpedo the financial systems of all the major developed nations is equivalent to supporting Hitler.

    The level of cognitive dissonance contained in such distorted reasoning is truly astounding.

  22. Keep your head, Jefferson.
    I'm not accusing you of resembling Hitler.
    Throwing around those labels is no sign that you are keeping your head either.
    Why is it that many of the people who keep harping on about how rational we need to be are the last to see where THEY are being irrational ? (Classic case of the mote and the beam.)
    Come to think of it, it would be nice if we stopped demonizing (scapegoating) Adolf too. Because it keeps us from thinking and... REASONING. That activity that everybody puts on a pedestal...
    At a certain level we ALL resemble Adolf.
    Because... Adolf was a human being.
    WE are human beings too.

  23. whatever will happen to fiscal responsibility then?

  24. Correct "resembling" above to read "supporting", please.

  25. Hell: "I will soon write a post on how I think things will play out."

    Very curious to read. I hope you do it.

  26. "In a word, Sustainability will HAVE to take the place of Permagrowth.

    I will soon write a post on how I think things will play out."

    I'm with Tiago; this sounds intriguing.

    " I will say you are slowly converting me Edwardo."

    Right after you had converted me to thinking knowledge would become the ultimate tradeable item. And I still believe whoever can produce the most energy(or other value) with the least resources will "win". Or at least the competitors will eventually exhaust themselves so the tech group will win by default. So in summary I'm saying that whoever has the knowledge and technology to live sustainably will outlast those who are not living sustainably. And they'll be able to sell/trade their technology for whatever price in whatever currency they want whenver the masses become desperate.

  27. It's impossible to make a decent comparison of the sort that you would like to see, Thai, and the reason Hell provided is exactly why.

    Debra, I'm afraid you've run afoul of a defensible position when you assert that:

    "Continuously demonizing the rich and powerful in any form is a little bit like.. what Adolf did when he singled out the Jews for being responsible."

    Attacking a group at the top of the pyramid, regardless of whether they were enabled to occupy pride of place as a result of a "group" effort

    "...because we don't recognize how EVERYBODY participates in creating an elite"

    that includes, by hook or crook, all members of the social order is not remotely like targeting a severely disadvantaged cohort.

    The reasons for this should be clear.

    I agree with your contention that "EVERYBODY" participates in creating an elite, but the quality of participation from individual to individual and group to group varies widely.

    To wit:

    I used to help prepare biscuits for supper when I was a child, but I assure you my contributions to the effort were, in every faintly measurable way, less influential to the quality of the final product than those of the more senior members of the food prep brigade.

    I see no reason why the creation of the elites by EVERYBODY should be any different.

  28. First off, I would not like Jefferson to think that I was picking on him personally, as if you read me correctly (...) you will notice that I use the inclusive WE and not the exclusive "you". I apologize if you felt personally targeted, Jefferson.
    Edwardo... I see your point.
    The rich and powerful are not as limited an entity as the Jews. Not all members of the elite are Jewish, of course.
    But I would like to maintain my impatience with what I find to be the luxurious futility of the blame game.
    It makes us feel better, but I am not sure that it solves problems.
    End of point.
    As far as investment goes... I vote for neurons. Thinking. Industrious thinking.
    Discipline. The old values.
    Before the merry go round started spinning so fast..

  29. Debra: "But I would like to maintain my impatience with what I find to be the luxurious futility of the blame game."

    To intimate that we all share equally in this mess or that the workers are just as guilty as management for poor decisions at GM, or that middle class homeowners are as culpable as CEO of MBS spewing entities is silly, or an ideology gone awry. And that is the real danger in times of trouble--ideological despots gaining power because of ill-served desperate masses.

    There are real practical benefits from blaming and punishing wrong-doers. It is a lot more difficult to run your Ponzi scheme from a prison cell--and it keeps the masses believing in a system of law.


  31. OK, first, I'm just an artist. Love this blog, and the comments even though I don't understand everything. I remember reading the Greenback proposal, and thought it was a great idea. But wouldn't it be better if it was adopted worldwide? We do live on one planet desperately in need of care and clearly every country is effected by this financial crisis.

    Now before anyone flips out and calls me a globalist (whatever that means) it seems to me that globalization has been used to pit workers against one another across the globe. Would it be helpful, for workers and businesses on the local level if we all traded in one global currency? Am I wrong to think currency valuation is used to price workers in India less than workers in the west? Or no? Just trying to think of ways to encourage more hiring locally everywhere. It would be better for local economies and less taxing on the environment.

    OK, back to drawing...

  32. Thai has me reading this blog. I am new to this game and loving the Posts and comments as I am learning so much. Would not one world currency as "anonymous" suggests just encourage the kind of spending spree that Greece is being blamed for which devalues the Euro and now demands other countries come in and help out?(very simplistic description) Why would not having one currency put us at risk for the fiscal issues of other countries? Although, we do not appear to be doing that great with the dollar and our own spending.

  33. Hell,

    I must disagree with your characterization of my argument as being focused solely on what will happen without regard to potential solutions.

    Here is a question I would pose to you:

    How can you offer up realistic solutions with respect to potential alternatives to the existing monetary system without understanding the objectives and motives of the individuals and organizations driving the existing monetary system?

    Your proffered solutions of simply targeting money supply and creating energy backed "greenbacks" are woefully inadequate because they do not take into account the corrupt nature of the individuals and organizations running the show.

    For a cogent explanation of the unsustainable nature of the current debt based financial system and a possible alternative I recommend reading the following:

    We have hit the wall with respect to the sustainability of the current monetary system.

    The question is whether we will accept the "solutions" being offered by the very same set of miscreants responsible for creating the current economic fiasco.

    Or will people wrest back control over the monetary system from the parasites that currently exploit the existing system in order to further their own despicable social engineering projects?


    Your arguments are tantamount to scolding a rape victim for having the audacity to file a police report and seek justice against the rapist.

    I guess you would argue the Jews that were marched off to Auschwitz should have simply smiled and accepted their fate.

    And I guess you would further contend that the Nuremberg trials should have been called off because they were simply a case of misguided finger pointing and the Jewish people should have accepted their responsibility for allowing the rise of Hitler.

  34. The Globalist..

    Sounds like a movie title, doesn't it?

    Yes, I think that if we take Jefferson's thesis to the very end and we end up with a "global" government (and a global currency would certainly go a long way in imposing one) that would not be a very good thing. Local autonomy (a la Thomas Jefferson, obviously) would go out the door.

    But I very much doubt that this can or will happen any time soon. People are fractious by nature and Empires have a tendency to soon fall apart.

    Athens..Alexander.. Rome..Spain..
    Great Britain..USSR..

  35. Hell,

    I agree with you the globalists will ultimately fail primarily for the reasons set forth in Bookstaber's book Demon of our Own Design. In short, a single global currency administered by a committee of central planners depends upon the smooth operation of a highly complex, tightly coupled system subject to catastrophic failure. If anything the solution resides in decentralized authority and decision making processes. Choices should be made at regional and local community levels.

    Unfortunately the globalists have and will continue to cause untold suffering and collateral damage in their megalomaniac pursuit of power and control.

  36. Hell,

    By the way, I know you are a big proponent of the global warming hypothesis. But I wonder if you are aware of how global warming fears are being exploited by large multi-national corporations to disenfranchise and displace native populations in developing countries.

    Are you in favor of the green police in Brazil?

  37. Hellasious, empires do fall. Sure they do.

    The problem is, it usually takes too long, and by the time the damned empire falls, it often takes the whole civilization it represents down with it.

    I guess the one of quickest and easiest declines was the British Empire, which went from "sun-never-setting" to "scuttle" in little over half a century.

    But the decline of the British Empire was expedited by a pair of the biggest and bloodiest wars in all of human history.

    Would "scuttle" have happened, without the few nice hard shoves given to Britain at the Somme or Singapore?

    And bear in mind that in the end the British could "hand the ball off" to their ethnic and cultural kin living to the West--that was a great consolation to them in their decline and enabled them to "retire gracefully" from the empire business.

    But neither of the conditions attending the decline of Britain applies to the USA.

    I don't foresee an armageddon like the World Wars, since no other power, or combination of powers, in the world today can mount anywhere near the sort of military challenge to the USA, that Germany once posed to Britain.

    And next, the USA has no "near relative" of greater power to whom they can gracefully pass the mantle of hegemony.

    That means two things:

    The USA will be ABLE to cling to world hegemony for a much longer term than their relative share of global GDP would apparently justify, and

    The USA will be AFRAID to ever let go, regardless of whether or not such fears are justified.

    So the USA will cling to power, with less and less grace or noblesse as time goes on. They will last for a surprisingly long time because no one will be able to make them stop.

    And the end might be very ugly--by the time they collapse, they will no longer even resemble the society they once were.

    Ecology won't make much difference. The time-hallowed human way to manage the problem of resource scarcity is simply to entrench social inequality. Such rigid hierarchicies of differential resource access can be extremely resilient and last for many centuries.

    Cheers, Roland.

  38. For those interested in developing an understanding of how the IMF has operated as economic hitmen for large global banking and corporate interests I highly recommend the following links:

    The IMF now plans to apply these same strategies to the developed world after having refined their strategies in places like Argentina.

  39. I agree with Hell's analysis of this situation.
    Hell is too.. savvy to get going on predictions.
    I think he has understood that we don't KNOW that the sun will come up TOMORROW MORNING (the future..), we BELIEVE it.
    Two different realms. Two different universes, tomorrow and today, and it's not because our language enables us to talk about tomorrow that the.. universe of tomorrow is LIKE the one we live in today. (Idem for the past too, while we're at it..)
    Tiago, Rufin has penned a pseudo sci fi book titled "Globalia" in which he talks about the, uh.. necessarily totalitarian nature of world government.
    Logical. Mother Nature LIKES difference and diversity. NOT.. homogenization and uniformity. (I say Mother Nature LIKES diversity because life on this planet has evolved in an extremely... diversified manner. That is. enough proof for me, for the time being.)
    Not me. I see NO indication of this whatsoever.
    I see... that bureacracy is a phenomenon that we have secreted since the Stone Age, probably.
    Bureacracy, and institutions that perpetuate themselves for their own sakes (Peter Principle ?) take the system down. Inevitably.
    And growling about the bad guys gets us off the hook on the fact that THEY too get caught up in the system. The system which is working... for ITSELF, and not us, as individuals, unfortunately.
    I backed down, why don't you stop growling and let go of the bone now ? (i too, love to growl and fight over the bone, as you can see...)
    Although name calling is fun, as I see in the myriad other blogs on line in the U.S. (and France..).
    I'm going to have to do a post in the saloon on name calling...
    Look at us..
    The ship going down... and we're busy pointing fingers and looking at statistics and charts, haggling over it in court and on the web to separate out HOW MUCH everybody is responsible.
    WHO'S being silly, I ask you ?

  40. "I claim that the EU/IMF $61 billion standby bailout arrangement for Greece can and should be interpreted in terms of money supply conservation, i.e. it is meant to prevent the rapid evaporation of fiat money/debt into thin air via default."

    But if the IMF is loaning money that will never be fully paid back, won't the IMF one day get into trouble?

    Is the idea to let organizations like the IMF to ultimately get stuck holding the bag and the let them implode in a few years?

    Can Greece truly pay them back at 5%?

  41. Why should the IMF get into trouble if people.. BELIEVE in it, or have faith in it ?
    If they don't, that's another problem...
    Is it NECESSARY AND SUFFICIENT for the IMF to receive repaid money in order for people to believe in it ?
    Na. It doesn't work QUITE that way.
    What gives us confidence in a (financial) institution ?
    What takes away our confidence ?
    Big questions...

  42. And now for some philosophical proselytizing (inspired by comments of other readers):

    1. Human nature being fractious is a feature not a bug (diversity is a necessary fact of life). People should embrace it and learn to live comfortably with difference in opinion. Better yet, encourage dissent against YOUR OWN VIEWS.

    2. Regarding the blame game: it is a good game as long as people START BY LOOKING IN THE MIRROR. And solve what they see, first. They will have little (tough more than zero) time to blame others.

    3. World government is energetically and technologically impossible. Fortunately. It would be a totalitarian EVIL.


    Readership of this blog might be interested in following this: . The guy is using twitter in a good way (yes, it is possible).

  43. Maybe I wasn't clear? I don't want a one world government. I want corporations to stop using cheap labor halfway across the globe spending energy shipping things that could be made locally. Immigration and outsourcing are a problem almost everywhere with multinationals pitting workers against one another. You say you don't want a central government, fine, but what should be done to check the power of multinationals that are beholden to no one? Global labor movement? Standard currency so workers in one nation cost the same as in another nation? What?
    Because right now you have corporations heavily influencing every government, elected by no one, interested only in profit.

  44. Y'all may have a hard time believing this but... one of the reasons why "corporations" (made up of flesh and blood people...) think ONLY in terms of profits is because.. WE think only in terms of profits...
    Dollars and cents.
    We buy... what's cheapest.
    We're always looking for a deal.
    Always looking for the way to spend the LEAST amount of money possible.
    We have... brought this upon ourselves.
    The BIG guys.. AND the little guys.
    We have made filthy lucre THE MOST IMPORTANT CRITERIA for everything.
    Tssk tssk.
    I will check out the link, Tiago.
    For now, gotta hand over the ordinaTUEUR to somebody else.

  45. Debra,

    I think you have a point: the greedy, self-centered, short-termist moral is highly pervasive across society - irrespective of class (or political options).

    I would actually suggest that we have a society that is very aligned with the moral majority (overwhelming majority).

    If there is a collapse before moral changes, the dissonance between physical conditions and moral positioning will be unbearable and I fear for the way ahead.

    And I do believe that moral is partly a societal construction, so we can tweak with it. Example: suggest to acquaintances that spending time with relatives and friends is even better than going to the mall.

    I remember the time where being a fireman, doctor or policeman was what kids wanted, now they all want to be rock-stars or models or soccer players. Some part of human moral is tweak-able, unfortunately we have been tweaking with it in the wrong direction for the last decades.

  46. "We have made filthy lucre THE MOST IMPORTANT CRITERIA for everything." Can anyone point me to a time in hx when this was not the case or a society that lasted that did not suffer from the same fault? We wax poetic about high ideals and we should strive for them, true but what system can we put in place to compel such selflessness? People shop at Wallmart for a reason. It's the same reason they stopped driving a horse and buggy and got a car. Wallmart will go when something better and or cheaper comes along. What group does not lament the current generation and hark back to a more ideal age? Everyone thinks everyone sucks but them for the most part.

  47. Here in the UK, fair trade chocolate is mainstream. Dairy Milk and Kit Kat are standard in fair trade versions (at least everywhere in my city).

    Not the majority, but clearly mainstream (not just tiny radical minority). This in the middle of a "Anglo-disease" country.

    Yes, people can think in other terms other then short-term self-interest.

    I was even told that, in the US, a few decades ago, people would not default (eg on mortgage) even if it was in their best financial interest: they would hold to their compromises.

    Humans are not angels, but they easily do better than Ayn Rand.

  48. Of course people can do better. We have it in us but they seldom do so when govt. or some other body sticks a knife in there back. People would not default on mortgage for the same reason characters in Ayn Rand books demand that they take care of themselves and everyone else does. In fact those two examples have an scary similarity. Shame. There is hardly any shame anymore. There is hardly any reason not to have sex with anyone or default on your loan or do almost anything because it is mainstream. People did less of this when communities were smaller and govt. was smaller and we cared about what others thought of us and integrity was an issue.(Sorry like characters in an Ayn Rand novel) We all agree it would be nice if people behaved better and although I am sure there is some debate as to what this means. How do we get people to be ashamed?

  49. Debra offered the following:

    "Why should the IMF get into trouble if people.. BELIEVE in it, or have faith in it?"

    I do hope this was said tongue in cheek.

    "If they don't, that's another problem..."

    Reality will out. It always does, just not necessarily in a timely fashion.

    "What gives us confidence in a (financial) institution
    What takes away our confidence ? Big questions...

    They may be big questions, but they are hardly unanswerable.

    What should give one confidence about anyone or anything are results commensurate with stated claims.

    Having said that. Here is the Fed's mandate.

    Do you have confidence in The Fed?

    "WE think only in terms of profits...
    Dollars and cents."

    Who is WE? Again I do hope that you aren't serious, but I fear otherwise. If you would like to make the claim that some plurality of, oh, say, U.S. society thinks and operates this way, that seems reasonable, but I'd steer clear of asserting that we all operate strictly, or even primarily, with a bottom line mentality.

  50. In a nutshell, consequnces

    @Tiago re: fair trade chocolate

    All I can say my friend is you are cheap date. ;-)

  51. Geez, from Edwardo to Doctor John, it sounds like you don't agree about the "money the measure of all things" paradigm I'm holding up...
    I think that it has become NORMAL for us to assert on the SOCIAL level that money is the measure of all things (dixit Doctor John...), while as individuals we behave SOMETIMES as though it were NOT the measure of all things. I think that we are operating under blinding prejudice in this respect.
    Thai.. I am surprised to not hear you talking about the benefits of.. cooperation here.
    I seem to remember that in that prisoner game... EVERYBODY came out ahead with cooperation.
    What destroys cooperation is... the loss of faith.
    I was not kidding about having faith in the Fed, and our international institutions, Edwardo.
    SOME people still DO have faith in them.
    Your assertion that our faith is directly proportional to what we individually GET out of our belief in the institutions, or even any kind of cause-effect clause does not pan out.
    Human beings do not have to, and do not necessarily behave this way. I maintain that it is a form of cynicism to advance this hypothesis.
    And I repeat that cynicism is the other side of the coin of... sentimentality. Both approaches are.. IRRATIONAL, if you like... (I'm not saying irrationality is bad... or.. all bad. It definitely has its place in every human life/psyche.)
    As for shame... it is another form of punitive social control in my book. I HATE it...

  52. Deb, I'm still deep in readings of mirror symmetry in chaotic synchronous systems but I'll be back.

    ... But my answer is (almost) always: "yes". Sync or cooperate... but there is an awful lot of complexity/diversity in the system that needs sorting out.

    If elements of the system want to synchronize around either money or global nobility or fair trade chocolate of monkey poop, its fine with me.

    Be well

  53. Deb wrote:

    "Your assertion that our faith is directly proportional to what we individually GET out of our belief in the institutions, or even any kind of cause-effect clause does not pan out. Human beings do not have to, and do not necessarily behave this way..."

    It's not exactly what I put forward, but, for the moment, let's hear what your reasons are for why "faith" operates differently.

    I will add that a lot of people in this country aren't paying attention, or are wholly ignorant about such institutions as The Federal Reserve, or the systems, political and otherwise, that they labor under. Here, faith, I suspect, has very little to nothing to do with it. And that, in turn, suggests that the question of faith is something of a red herring best left to those who enjoy pondering the number of angles that can dance upon the head of a pin.

    The question we might be better to ask is, why do Americans know so little about the pond they swim
    in? Is it because they "believe" in it, or because they are just too overwhelmed getting by on a day to day basis to take things in, or are they too addle-brained to cope with our brand of byzantine and less than transparent functioning? Does the US education system, and the culture in general, cause the vast majority of "We The People" to learn our lessons not wisely but too well. I hasten to add that most of these answers are not mutually exclusive.


    Cynical sentimentalist.

  54. ...we might do better to ask...

  55. I also meant to write that the answers to most of those questions are not mutually exclusive.

  56. Edwardo, I suspect that a lot of people are suffering from a general feeling of individual helplessness which goes hand in hand with loss of faith (faith in what ? Santa Claus ? a happy end ? Daddy and Mommy, a good God ? Justice/liberty/the Constitution...YOU choose...).
    They are bewildered by the complexity of the bureaucracy which has taken over our daily lives in many cases.
    They are... depressed from hearing bad news every morning, and feel helpless to do something THEMSELVES on an individual basis that will make a difference IN THEIR OWN EYES.
    The paradox being that in an extremely individualistic society which pays lip service to "me, me, me" and encourages people to think that having faith in anything or anyone makes them credulous dupes, the individual has perhaps never felt himself to be LESS powerful, less important than he does now.
    I fall in with Tiago.
    I believe that the human animal (i.e. ME...) is extremely influenceable, for better or for worse, and that we might draw more attention to what we COULD be capable of than always dwell on our, or our neighbor's... fuck ups all the time.
    And Edwardo ? I am an absolute person. I have a hard time getting rid of "always" "never", etc.
    This is an unfortunate part of my personality that mucho bucks and time spent in therapy has not got rid of.
    In the end, I tell myself that I am "cured", smile, grit my teeth and bear it.
    Can't do any better. Sorry.

  57. angels, not angles. Talk about 180 degrees in the wrong direction. Ugh.

  58. Edwardo: "I also meant to write that the answers to most of those questions are not mutually exclusive."

    A comment on the cognitive side: One of the things that I start to suspect is probably a source of major grief is that exclusive either/or reasoning that you refer to - Many times there is no disagreement, only different perspective points that, as you say, are not mutually exclusive.

    Debra, if you accept a sincere and friendly criticism (maybe others will disagree): I think your writing style does not do justice to some of your arguments. I am currently reading a book from Christopher Lasch and it constantly reminds me of you: ideas worth reading, in a not so pleasant form to read.

  59. Well Tiago...
    Come on over to the saloon, (Sudden Debt's Spawn Off) and read the piece on "Desert Flower" that I penned.
    You MIGHT like it.
    I sound.. rather different from what I sound like in the jungle. (Right Edwardo ?)
    I do not really consider myself to be a.. nice person, Tiago. But then, it is not really one of my goals in life either... ;-)
    Angles for angels, Edwardo ?
    The shrink's number 1 rule is... don't draw attention to it when you make a.. mistake ?
    Be.. generous with yourself. ;-)

  60. Debra,

    This is not about being nice (I personally have a distaste for nice people), but about being understood.

    Maybe it is a shortfall on my part, but it takes a lot of my cognitive energy to read your texts.

    I offer this very personal comment in a friendly and interested way: I think the content is worth it.

  61. Thanks for the friendly criticism, Tiago.
    Other people are medused by my writing style too, apparently...
    Not all the time, I hope ??
    I still say... check out the piece in the saloon for comparison.

  62. Hells, you once pointed out that the massive bank rescues didn't really expand the monetary base (create inflation) since it went directly into bank balance sheets and will stay there ie all that new money was merely digital entries in computers. So therefore the inflation risk isn't that much bigger than before the crisis?

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