January 3, 2013

Swing in interest rates will torpedo Trackerville

Posted in Irish Independent · 226 comments ·
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Good morning and Happy New Year. I hope your Christmas went well and the virtuous resolutions are still intact after day one. This week, let’s have a look at the international factors that will dominate the global economy in 2013 before looking at the main issues likely to influence Ireland. This isn’t a forecast, rather an assessment of the forces that will emerge as pivotal in the path of the economy.

For the first time in a long time we kick off with Japan. For so long the sick man of the global economy, having suffered the missing decade or two following its property crash, Japan will have a disproportionate impact on the world economy via the financial markets this year. The news reflects the impact of political change in Japan and the fact the economy is still in the doldrums.

Unnoticed in this part of the world over the Christmas period are the moves by the new Prime Minister Shinzo Abe, who said this week that he wanted to push up the target rate of inflation in Japan. He wants to generate inflation over and above the rate that the central bank is happy with. Why might he do this? Surely that sounds wrong?

Well, not if the people in Japan are still saving too much of their income because they believe prices will fall next year. As they are caught in a deflationary frame of mind, they react unusually to retailers dropping prices to coax people to spend. Because they believe prices will keep falling, the very act of cutting prices makes them postpone rather than bring forward spending. The only way to break this deflationary psychology is to officially increase the target rate of inflation.

How do you do this? You adopt your own version of quantitative easing to infinity and beyond. So you force the central bank to buy up all sorts of assets from the banks, pumping money into the economy and not stopping until the price of goods in the shops starts to rise, not fall. This is what Mr Abe has said he is going to do.

Now what does this mean for Japanese interest rates and the yen? This is where events in Tokyo have an impact here. As the yen falls because Japan is printing money hand over fist and Japanese interest rates fall for the same reason, the global casino that is the financial markets will obviously want to borrow in yen and then place bets all over the world with this money. The more the yen falls, the less these guys will have to pay back next year because they are borrowing in a currency that is falling. This is likely to lead to another “carry trade” opportunity for investors to borrow at ultra cheap rates and buy up assets outside Japan.

This has huge implications for large infrastructural projects outside Japan and in Europe in particular — and maybe in Ireland, if we have any such projects. So, for example, if our country was to try in the next few years to finance, maybe energy projects in whatever technology we decided was appropriate, a trip to Japan might be helpful in this environment. Thus the global carry trade orchestrated by Japan might have positive implications for large projects in Ireland, if we get the right type of advice.

The next big issue in the global economy is really a less aggressive version of the Japanese carry trade. One thing is almost certain next year and that is that the era of very low interest rates will remain. In the US, Europe and the UK, mega low interest rates will allow the destroyed balance sheets to be gradually nursed back to health, but without economic growth lots of restructuring will be needed.

THIS brings us back to Ireland and the place I term Trackerville — the ticking, financial, social and political time bomb which will determine the next election.

Trackerville is a place that knows no county boundaries. It is a vast swathe of thousands of starter homes financed by tracker mortgages, built at the height of the boom, existing in the precarious twilight world between huge loans that can only eventually go up in cost and depleted take-home incomes that can only decline.

Starting in the early 2000s, trackers spread though the country like a virus. The great Irish tracker pandemic was fuelled by people who were desperate to get on the housing ‘ladder’.

The figures for tracker mortgages are startling. There are about 400,000 tracker mortgages in Ireland. Trackers account for close to 60pc of the €26bn in residential loans issued by Permanent TSB. Just over half of AIB’s €27bn mortgage book is accounted for by trackers, as is a quarter of the €16bn lent by EBS. The prize for King of the Trackers goes to Bank of Ireland: tracker loans make up 62pc of its €28bn mortgage book.

The continuation of low interest rates this year means that hundreds of thousands of Irish people will continue to enjoy subsidised mortgages. But this situation is merely playing tricks on them because they are lulled into a false sense of security about their ability to pay these huge mortgage debts. As defaults rise around them — over 150,000 mortgages at this stage in Ireland — the residents of Trackerville are wrapped in financial cotton wool because their repayments are artificially low.

Over the next few years, as the global economy eventually recovers, the Germans will insist European interest rates are raised aggressively to reward its savers who are being punished now by excessively low rates that are in turn “rewarding” the debtors of Trackerville.

Over the business cycle, or the life of any loan, the pendulum of interest rates swings towards and away from the saver and the debtor at various times. When rates are low, the saver is punished; when rates rise, the opposite pertains.

Ireland’s mortgage debtors — particularly those in Trackerville — are right now at a stage where they are being rewarded (although it doesn’t feel like that). Imagine what it will be like when rates go up? A recovery in the global economy will trigger mass defaults here via higher interest rates. This is why a huge programme of debt restructuring should be top of the agenda for the Government’s EU presidency. The Government should reiterate to our partners that the moment interest rates rise, Ireland will be torpedoed below the water line.

Pointing this out when rates are low and looking for a solution is not economic opportunism, rather it sounds more like the height of prudence.

David McWilliams’ new book The Good Room is out now.


  1. Realist

    Japan – “For so long the sick man of the global economy…”
    “..they are caught in a deflationary frame of mind”

    First of all Japan is not in deflation nor it is in a sick state !!!!!
    Except if you are pure Keynesian and seeing GDP growth as pure measure of economic health ????

    Despite conventional opinion, Japan’s economy has not been stagnant; it has in fact been growing in real terms although not in monetary terms.
    The crucial point is that monetary changes do not necessarily reflect real changes.
    Japan’s GDP growth has been slow because money-supply growth has been slow as it is mainly money growth which drives GDP numbers.
    Therefore, going forward, we must try to observe real economic growth that is the production of real goods and services instead of just GDP.
    Seeing things in the correct light allows us to recoup Japan’s lost decades, which weren’t really lost.

    http://mises.org/daily/5170

    Only crazy governments want to inflate their currency as that does not help anything:
    http://mises.org/daily/5928

    Also Japan is in huge debt due to these crazy infrastructure projects and property boom caused by sponsoring family led companies from government (sound familiar?).
    Thanks David, but we do not want anymore of that from our government, we had enough of it !!!!!

    • rohan1666

      All these people who talk about the lost decade should visit Japan . Its a very affluent country which tops the list in health metrics, peoples well being and standard of living. Japan has achieved this despite the massive government’s reckless spending.
      More over it is the asset prices that have deflated and not so much consumer prices . Even that is due to a simply repricing in a currency (yen) that has strengthened over last two decades.
      America , during most of Nineteenth and early twentieth century saw stable or falling consumer prices. During this time America made the the greatest leap in the prosperity and increase in standard of living.

      • Realist

        Exactly. Well said.
        I hope some bigger country, including Japan, will break this madness and start trimming government spending and show the world that as slimmer public spendings are the better the economy.
        This will just trigger others to replicate the success.

  2. Your.Country.Your.Fault

    I don’t think we will be going to Japan for cheap money, as the article suggests. the TPP is seeking to set up a bond market across asia (i attended one of the discussions), and that’s where any carry trade will / should go. bidding for the bonds from the developing nations in the region will drive up bond prices fast, so i don’t think there’s a good reason to expect that that money will come to Ireland. Frankly, cheap credit in China through a Japanese bond (or internediary firm that washes it of its Japaneseness) will be a surer bet.

    for the Trackers, well as long as the EU political will is there to keep interest rates low, then the trackers will be OK. The Germans will simply work harder and indeed, spend a little more in comsumption and invest throughout Europe. It is entirely inkeeping with Lagarde’s policy that Germans comsume more, save less and invest in Europe. These discussions will be had too, and have been had already.

    So, no need to panic, as pointed out in the previous artile, plenty irrational reasons to celebrate the politics. Ther eis an invisible hand of government too, it’s not just the visible one that matters. Conversations between the IMF and EU will be in favour of Germany being a little less classically German.

  3. Grey Fox

    This is a continuation of the policy adopted by all Central Banks to destroy savings.
    Conicidentally I posted yesterday on elements of your post:
    http://awakenlongford.wordpress.com/2013/01/02/god-do-you-ever-just-say-damn/
    Any rise in interest rates will start a avalanche of default which will make the budget cuts being imposed look like small change.. we are on a hiding to nothing…
    2013 will be seismic, and for all the wrong reasons!

    • Realist

      The interest rate is expressive of peoples’ valuation of present goods relative to future goods.
      It should be a resulting variable rather than a forcing variable.

      What central bank and governments want us to believe is that future goods are cheap and we should invest, not save !!!!
      They want to force us again into property market and who knows what with “cheap money”.

      Increasing interest rate is the nail in their coffin and this is why they are not doing it easily and not sure it will happen really :)

      Instead of leaving interest rate to be variable by the will of people they play their ugly monopoly game fixing it to whatever serves their purposes.

  4. Beaver

    My thoughts entirely. If the average tracker holder was using this breathing period to pay down his loan I would say hes laughing, however all the tracker holders I know are interest only at the momemt and the original loan effectively grows in out defaltionary economy.

  5. Forget about Trackerville Kneel to Shinto Sunshine

    If every home borrower were able to change directly the currency of their home loan from Euros to Yen .They can benefit by :

    a) The almost permenent low Yen Interest rate ( outside the influence of the EU) : and

    b) Initially , from the reduction in the Yen/Euro Exchange rate .

    Invite Japanese Banks to lend to Ireland or insist that all Irish Banks under licence from The Minister to immediately offer to all Home Borrowers the option to change the currency of their house loans to Yen.

    This avoids the The Troika and The Mandarins compromising the Euro borrowers with the Euro Depositors .

    I am proposing that the Borrowers move into First Division and relegate the Troika to Second Division .

    Then the EU Bank Policies will remain a foreign agenda and every village in Ireland will build a Shinto Shrine .

    • Grey Fox

      Or we could all simply stop paying mortgages altogether!
      Spend your monthly mortgage money into the Irish economy, the bank’s have probably securitised your mortgage anyway, thus been paid already, let the gambler who bought your MBS take the loss, after all it was only a bet!
      Perhaps then, the “financial Professional’s” who survive the private banking carnage that would ensue would act like professional’s in the future instead of putting all the fuduciary responsibility on the ordinary Joe Soap who essentially knows nothing of finance, this of course would require our politicians to grow backbone’s and place the welfare of the Irish People above all other vested interests and self interest, and that is a big ask, knowing what we know about Irish politicians!
      Rising interest rates will cause the same scenario except, if Irish people act like sheep and hand over their homes to the bank’s under some misguided loyalty or belief that they are entitled to those homes!
      I remember 15-20% interest rates but I cannot visualize the wasteland that would be Ireland if they or anything close returns.

    • Forget about trackerville and kneel to no one.
      I was not born to kneel Irish Brother. Full stop.

  6. Deco

    Happy New Year to all of you.

    I wish you every success in your important projects in the year ahead.

  7. DC

    For a really insightful view of the current global economic/financial quagmire, including some scary facts on Japan.

    http://www.youtube.com/watch?v=JUc8-GUC1hY&feature=youtu.be

  8. Your.Country.Your.Fault

    there is a way forward for Trackerville that fits the pattern of the EU to date and that is
    a) avoid debt default (mortal sin)
    b) kick the can REALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLY far down the road (solution!)

    the powers that be bundle all existing mortages into a superfund that restructures the nominal value of the debt into a really long term bond, so the loans are
    “paid off”, but in future-time heavily inflated euros. This will be for al mortgages holders who want this “jubilee opportunity” to restrcute the mortage now. reduces the selling price of the house massively, but increases the payability. If you want to hold onto it, then let your kids pay off the mortage in their cheaper currency years down the line. It’s a new thing, in some ways for debts to be paid off in lifetimes….

    Your mortage will simply be a 100 year mortage When you resell the house, you sell the mortage with it, the subsequent owner pays off on that too, as well as a cheque to you for selling the place. That’s how you get some cash from it, just not as much as through the usual business. The model will be “sell on the debt with the apartment”. And why not? Works for companies. It’ll work its way into the pricing and eventually, like a roll of marla that was once a crazy mix of colours, become a sinlge amorphous financial dollop of gloop and you have no idea how it came to be in the first place, but the price is the price.

    It fits EU policy, it allows the euro to continue and survive, and people dont’ ahve to worry about negative equity, it’s presumed that there’s a sustantial part of negative value in the house debt after all

    Come on, tell me this is not a great compromise? There must be similar situations across the world.

    The housing market can continue to come down in price, for those who pay in 20 years, but the archaic prices remain high as they are balanced by the debt outstanding which forms the offset.

  9. Pat Flannery

    David:

    In view of this your latest article do you still think that the Irish Government should press for a 400,000 tracker mortgages debt-for-equity-swap deal with the Troika during its Presidency, as you have repeatedly urged?

    Are you sure you have fully thought out your debt-for-equity suggestion? Can banks become both lenders and borrowers at the same time? Isn’t that what will happen in such a debt/equity deal? Also, how does a bank foreclose on itself?

    I am looking forward to your clarification as to how Irish banks, therefore Ireland, would benefit from a debt-for-equity deal when as you say correctly “the moment interest rates rise, Ireland will be torpedoed below the water line”.

    Or do you think that interest rates will remain low forever i.e. that the inflationary dragon has been permanently killed in the new global market economy?

    • Your.Country.Your.Fault

      Debt for equity will NEEVVEERRR happen
      nobody wants to own another’s debt like that. that’s entrepreneurship.
      dont’ try to be too differnet, strcuture it as debt, it’s an easier sell. jsut a differnt kidn of debt and you will find a deal can be reached.

      deal making is t about purity of purpose, or long term vision, it’s about getting somethign to happen in the here and now before another opportunity eclipses it

  10. SMOKEY

    David, 4.25% in July of 2008 was the recent high from the ECB and it has been going down ever since, how high to do you think the rate may go? 5 6 or even 7% or do you think 4.25%, given the lower wages is enough to tip it.
    Ive done the math and believe 3% is the new tipping point but would like an opinion if possible.

  11. Adam Byrne

    subscribe.

  12. redriversix

    Growing Debt , more unemployment, reduced wages, increased indirect taxes ,No lending to business , Immigration.A Government still promoting a failed policy of austerity,Banks now clearly in charge of Government policy in relation to how Bankers operate..with immunity.Reduced workers rights,Bankrupt Health care system,questionable Courts system in dealing with debt for private citizens.

    This years will be held in October…2 months earlier than usual , reducing Government “income” figures.

    Spiraling private health care costs..

    A massive derivatives market with massive debt “floating” around the World…..America with no real solution to the “fiscal cliff”

    Our and many European Countries economies to contract further in 2013.

  13. redriversix

    Continued….Sorry..This years budget to be held in October, 2 months earlier than usual reducing Government income figures.

    Massive debt bonds due for renegotiation around Several Countries in Europe.Solving Debt with more debt….still impossible.

    Spiraling private health care costs

    So with a economy in recession…a falling workforce with reduced wages and increased costs..reduced exports.Recovery..! next year or the year after..? FFS

    A mortgage crisis spinning out of control & many S.M.Es to close between now and March…let me be clear..THEIR IS NO RECOVERY..NO SOLUTIONS PUT FORWARD TO BRING ABOUT RECOVERY…….What about the bubble that is the bond market..?

    Eamonn Gilmore interviewed by Harry McGee in yesterdays Irish Times Talking about how we are on the road to recovery and how will exit the I.M.F in 2013…more utter spin, drivel & nonsense with no facts in the article.We left 2012 with Government lies and we enter 2013 with Government lies louder than ever.

    So you think their may be recovery in a few years David ?..Come with me for a day and see if you can find a few “shoots” of recovery bursting through the cracked concrete of the Housing & industrial estates I visit.

    Japan has been in rescission for twenty years..! from property bubble ? LOOK AT THE MANUFACTURING THEY HAVE !

    Recovery ? never heard such utter Bollix

    Good Day Sir..!

    Barry RR6

    • Steaf35

      +1…….what more can I say…?? Happy new year…??

    • Happy New Year RR6

      Fuck the government. They would just love it if we all went to sleep and became dependent on them and their fourth arm – frontline, vb et all. They don’t call it programming for nothing

      I believe 2013 will be the year of the sole trader

      If you have a bag of skills to sell then what are we waiting for?

      Best to just work and get on with it rather than blame Dail Eireann

      The system has been set up so it’s every man for himself out here. The assault on the Irish people is unrelenting

      But hey it is right because it’s what the majority voted for

      • We are always blaming the govt and I am sick of it. It proves that government has power that far exceeds it’s intellectual capabilities. This is what ignorant Lowry voting pumpkin heads from Tipperaray don’t have the intelligence to realise. They are voting for sleazeballs and charlatans who will fleece them while telling them sure oi knew your father

        I propose that we take to the meeting halls and challenge this mailaise. Sure they all know the words to James Connolly but they don’t have a clue what the man stood for, where he came from or what he was

        It is like the sickness that subsumed communist Russia. If we wait on governments to sort out problems we will wait an eternity. It’s 2013 and we are not getting any younger

        We have all these people wanting to use the land to grow vegetables but the land is forbidden because property is the last sacrament of the white man’s greed and irrationality. You’d have to prise open his dead hand to get the bastard to show some humanity and care for his community

        There are too many laws which forbid of from using the land and with all the vacant land we have that is not on. NO way

        All those green acres yet we are told and ecouraged to buy our produce at supermakerts who are fighting to convince our governments that GMO is good

        Oooh don’t those 6 inch tomatoes look lovely!

    • “This years budget to be held in October, 2″

      I hollered to my parner the same sentence. Her reply was:

      “Fly fucking bastards”

  14. Adam Byrne

    Very informative and interesting article David.
    From an Irish perspective, the key phrases for me are:

    “if we get the right type of advice”

    and…

    “Pointing this out when rates are low and looking for a solution is not economic opportunism, rather it sounds more like the height of prudence”.

    You are well qualified to give the right type of advice, as are several others and you’ve been pointing out the bleedin’ obvious for years on end with no notice taken, except for one shameful occasion when you made a useful suggestion which was bastardized for the benefit of the Insiders, whereafter the blame was directed back at you (for something you didn’t advise) on behalf of ‘the people’.

    As Barry rightly notes, the same charlatans (including arch-charlatan Eamon Gilmore) are already out and about lying through their teeth just a couple of years into the New Year.

    The evidence so far indicates that no progressive tactics, strategy or change will be forthcoming in Ireland. As usual, everything will be done arseways and for the benefit of a select few at the expense of everyone else.

    You have been basically banging your head against a brick wall for the guts of a decade David but you do a great job and it’s people like you that should be getting awards for keeping people informed, not the scoundrels that are currently driving the country and the continent into the ground.

    Thanks a lot and Happy New Year,

    Adam.

    • Adam Byrne

      Couple of days into the New Year, I mean to say, of course

    • redriversix

      Hi Adam

      was out all day yesterday visiting families who asked for help in relation to post they received yesterday morning from banks which was sent on Christmas eve.

      The tone & content of the letters was truly shocking even to someone like me who has been at “this” for two years now.

      Startling thing is the people I visited ARE trying to pay their way at the cost of their quality of life,I am pretty sure two of the “middle class houses I visited could be deemed “unfit for purpose”…Shocking

      and I thought I couldn’t be shocked anymore..!

      every day is a school day.. I will can get some kind of positive result for these people WITHOUT adding to their already burgeoning stress & anxiety levels…..

      Tired [ already ]

      Barry

      • Adam Byrne

        Good man, keep going Barry. We are all doing our part. Yourself and David more than me in practical terms right now but I am studying my brains off so I can eventually make a difference in some form or other.

      • molly

        Can you put up whats said in these letters and show people the type of people bankers are

      • molly

        Sad to here the type of Ireland we live in under kenny and Gilmores watch shame on us Irish for allowing fellow Irish people to be treated like this.

        • Well said

          That is why RR6 posted his contact details and wants to talk offline. That is just what they want. They have the technology

          They have us cowering for fear of being caught communicating. Yes it is pathetic but I’d rather come out and say what I feel publically. Fuck them and I will face them down face to face

          It is becoming like Stasi East Germany.

          Food for thought for people who think they are free

          • molly

            Yes I will call RR6 its just these letters the bank are sending out should be put up on what ever form of media there is to expose these and the persons identity should be with held protected and any intimidation should be exposed and stopped ASAP .

      • Please elaborate RR6.

        Your first sentence is very intersting but will be unfamilair to people know don’t kow you persoanlly. I’d like to know more

        Regards

  15. Deco

    I have read the article. And I disagree on one assumption. The assumption that interest rates will remain low.

    In his book “The Ascent of Money”, Prof. Neil Ferguson, makes the point that underpining the entire financial market iss the bond market. It is much larger than the stock market. And it funds state borrowin, and loans to perceived stronger entities. The bond market, makes an assessment of risk, and this influences the interest rate that it settles.

    The central bankers are setting prices in concert. This means that their primary objective has consensus approval. And that approval points to continuing to use monetary policy as a tool fo economic stimulus. In effect they are manipulating the market to provide a subsidy to speculation. Now, if you provide a subsidy to speculation, you will get speculation. Nothing is surer. In effect, central bankers are operating as an olipolistic arrangement. This is the sort of arrangement that is loaded with assumptions about there being no adverse kickback.

    The greatest bubble of all in the past 40 years has been the bond market. And there is not a word of it, in the mainstream media, or in the political world. Not even a whisper of concern. If returns in the bond market are less than the rate at which the money supply is being increased, then the central banks are threatening to cause all sorts of systemic crises.

    I reckon that at some stage this year, elements of the bond market will panic. I reckon that they will realise that the risk in the sovereign bond market is too high compared to the ability of the state to repay their loans. They will become concerned about the return OF their investment, more than return on their investment. Simply put, the entire political establishment with it’s relentless vote buying and constituency sopping with borrowed money. is going to come a cropper. And Japan, Spain, France, and possibly certain US states like California are about to play loose and fast with their own debt obligations in such a manner as wreck everything. Perhaps the UK, which has fudged on the Bliarite policy framework that requires massive borrowing, might also join them.

    In other words, the ambition of central bankers, politicians and statist commentators to control the monetary expression of humanity, will be undermined by players who are seeking to get out of the said ponzi scheme.

    At some point the bond market might go into a sub-prime type spin. The bond market already has some very subprime borrowers, who are being propped up by ECB rate policy. The sub-prime mess occurred because the risks were mispriced. the ratings agencies were found to have their pants down. Is it any different today, with the ratings of certain US states, or countries like France or Japan ? I reckon it isn’t. There are several Western countries, where the intellectual condition is such, that there is no way the loans will be paid back. Not only that, but there are now politicians like Hollande and Abe who will state bluntly that they want to get free money from the market by playing inflationary games with the money supply, and who regard those who question their approach as reckless.

    It is all a matter of timing. I reckon we are on a trajectory towards a sub-prime type crisis in the bond market. I don’t know how long it will take. But the contributing factors are now all being lined up, just like they were in 2006.

    The game is up. Watch commentary from the king of the bond market, Bill Gross, so as to see where the bond market is heading.

    • Adam Byrne

      Surely if they ‘panic’ they will assure the crash of their own market Deco?

      Would it not be better to avoid rocking the boat and hope to get paid back eventually?

      Or does the first one (or two, or a few) out still get paid?

      Perhaps my characterization is over-simplified but why kill the goose that laid the golden egg?

      Thanks for the alternative perspective.

      • Deco

        Adam,

        A sovereign bond crisis starts based on the realisation that a country is not going to pay. Then, it causes bond markets in other countries to be subject to more scrutiny. The Viet-NAMA strategy, based on the policies of LBJ in the 1960s, is a startegy of containment. A consensus policy os constructed based on assumptions about contianment of the problem.

        Well, Greece is a bit like VietNam. Basically, the EU is saying that it will run Greece through local proxies, and fix it. And all the time the problem keeps festering away. And like in VietNam, there is escalation of commitment, etc… But there is no solution. Because the EU will not withdraw. It wants the world to beleive that the EU cannot fail. Just like the US in the 1960s. And all that does is cause more suicides in Greece, and more absurdity.

        The EU is afraid of certain cracks widening. It is afraid Belgium will break up, and Brussels itself becomes an oddity in the rump state of French speaking Belgium – which incidentally would have a worse debt to income ratio than Greece or Portugal if the Flemish speakers cut their losses.

        The point of the EU nowadays, is that it offers a policy monopoly. And this sucks in lobbyists, and the worst kind of politician – like a dung heap attracts flies. Of course, we do not hear any discussion of this. If we did, it would be corrected.

        In the bond market, all it takes is one participant to decide that the smartest thing to do is sell now, before the price falls. And suddenly you get excess supply on the market. There was a very good film describing this behaviouur on Wall Street about two years ago, before the sub-prime crash. I think it was called Meltdown. (?)

        I think there could be a serious crisis in the new year. Real interest rates being charged to sovereigns for new debt will increase. The ECB, Fed, BoJ, BoE are already printing money to buy bonds. They might suddenly have to do it massively. But at some point the game will be up. Interest rates will rise in complete deference to the official commentary of the ratings agencies.

        A bigger and worse meltdown.

  16. Adam Byrne

    An article from John Gray that is a few months old but still relevant, pertaining to the Euro, other currencies, Europe, Asia, social unrest, extremism and inflation etc.

    http://www.guardian.co.uk/commentisfree/2012/oct/17/europe-sinister-currency-elites-eurozone

    “However one views the nation state — and I am no great fan — it has proved to be the upper limit of democratic accountability”

    • Deco

      The EU has become completely unaccountable. The enforcement of repayment to the Bank bondholders being the classic example. No such thing as losses for gamblers, only for taxpayers.

  17. happyboy

    Premier Shenzo Abe is to spend up to one trillion yen buying up factories and machinery, which are in trouble, in order to force the pace of investment. They will then be leased back to the firms. It may even violate World Trade Organisation rules on subsidies

    He has also set an exchange range target of 90 yen to the dollar, instructing the Bank of Japan to drive down the yen with mass purchases of foreign bonds along lines pioneered by the Swiss.

    Yen devaluation is a complex story. It appreciated by over 25pc against the dollar between mid—2009 and late—2012, causing a slow “hollowing—out” of Japan’s manufacturing base as companies shift plant abroad.

    The currency has since slid 10pc to 86.4 yen on the “Abe effect”, the weakest in 27 months.

    But Japan is playing with fire by trying to reflate – it could decimate the bond portfolio of Japanese lenders and set off a banking crisis. The banks hold government bonds worth 900pc of their Tier 1 capital

    • Deco

      One of the reasosn why Japanese are so reticent about spending their savings, is that they savings do not make them feel they can afford to, with a 1% rate of return.

      • happyboy

        The “real” value of savings is rising in Japan, in stark contrast to the West.

        The USA did QE immediately, when it got into difficulties.

        It has taken Japan 20 years and the Fed’s Ben Bernanke to show them how to do it

        • StephenKenny

          What are you talking about.

          Japanese government debt is over 200% of GDP, the US, although growing fast, is a mere 100%.

          What Benanke showed everyone was how to ignore all the evidence and stick to your religious beliefs.

          • Realist

            … religious beleif of printing money and puming cheap money into economy telling entrepreneurs to invest in expensive projects otherwise will not be invested.

            This always causes more pain as what US is doing just prolonging quiet death into violent one.

            Japan with its sovereign debt is no better on that ground for a sure, but if they start following US on printing more money the same way it is going to be even worse.

  18. bonbon

    Buying up toxic assets, loading that debt onto the physical economy is what the ECB and FED are doing. Both have failed utterly. Trichet lets the cat out of the bag:

    Two Years Later, Trichet Admits that EIR Was Right: The ECB Is a Bad Bank

    Jan. 2, 2013 (EIRNS) — Former ECB President Jean-Claude Trichet warned in an interview with CNBC on Dec. 21, that the ECB and other central banks’ balance sheets are “profoundly abnormal.” Thus, Trichet has admitted what he officially denied on at least two occasions while he was ECB president: first, in January 2010, answering an {EIR} question, and then in September 2011, when he delivered his famous “world-class rant” in response to a question from the stock market daily {Börsen-Zeitung}. On both occasions, Trichet hysterically denied that the ECB was becoming a “bad bank” through the expansion of its balance sheet.
    Now, in the CNBC interview, he says that regarding “all central banks in the advanced economies” you see “something profoundly abnormal.” He says, “Surprisingly, if you look at the increase in the size of balance sheets since the crisis erupted in 2007, you see the same order of magnitude: at least 12% of gross domestic product.”
    Trichet also says that “deleveraging of the financial sector is proceeding with a dimension and an amplitude which is considerable” — in plain language, that the bankruptcy of the banking sector is expanding at full speed.


    Is this known in Japan?

    • StephenKenny

      What makes you think that anyone cares. The point is that it’s happening everywhere at the same time.

      The dollar won’t fall because there isn’t anything for it to fall against – every currency is as managed as the dollar.

      The goal is to keep all market forces asleep until the economies have “recovered”. The trouble is that all that is happening is that everything that went wrong in the first place, is now getting a lot “wronger”, as these wrong things provide massive and risk free returns (assuming a government guarantee), while wealth creating business is risky, and has a comparatively low return.

      The stated aim of the central banks is to reflate stock markets and property prices, which will, they believe, set the economy growing well again.

      In the last 15 years we’ve seen a massive stock market reflation and a massive property reflation – neither worked very well. Perhaps they’re hoping that if we do both at the same time, it’ll work out differently this time.

      • Realist

        It will not work of course as it never did in the past.
        They just follow advises of stupid morons like Krugman who is telling that the state is not spending enough, it should spend more.
        When they asked him how much more, how many trillions, you think he knew the answer.

        Politicians will be dumb as they listen to these “wrong” economists, nobelists.

        It will crash sooner or later, no doubt in that.
        I am only worried how long, as it longer takes it will cause more pain as it is destroying wealth.

        And there is no path back to prosperity without governments downsizing radically, and that is not really happening that we can see, as they think they need to be bigger to sort out “somebody elses” fault.

      • bonbon

        The point is that without protecting the commercial banking sector, it is going bankrupt. That very sector we need to survive. This is what Glass-Steagall is all about.
        We need a functioning sector for reconstruction.
        The Electric Ring-Fencing London wants just shows the panic level.
        I do not know of any Japan calls for Glass-Steagall, or a serious splitting, yet. Reflating under these conditions can only result in hyperinflation.

  19. redriversix

    Enterprise Ireland spokesperson on 6.01 news…”Ireland is now a growing economy,job losses falling,Companies now investing in Ireland…even said we have turned the corner”………

  20. redriversix

    David davenpower on RTE News just said deficit down because Government did not have to pay “big promissory note last year”………….!!!

  21. cooldude

    Interesting article in many ways. Firstly we have the theme that Japanese people are suffering from a “deflationary psychology” which prevents them from purchasing goods because prices are falling. But is this actually the way consumers actually behave? If we look at the high technology market of mobile phones, laptops, mini pads, tv’s etc this does not actually seem to be the case. Every year the prices of these items fall yet people still are spending heavily on these items. When the
    IPhone 5 recently came out the price of the IPhone 4 dropped by 100 euro straight away. Yet people still waited in line for the newer model even though they know it will drop by 100 euro in eighteen months when the next model is issued. You see this same phenomenon in laptops and tvs where people want to pay more for the latest model rather than wait a year for the price to drop significantly. So deflation in prices is not really a significant factor if consumers really want to purchase an item.
    So why are central banks becoming more embroiled in this global currency debasement? The reason is because we have reached the endgame in this current experiment with unbacked currencies. If they do not keep increasing the levels of currency creation the whole pack of cards will collapse. We have open monetization of debt throughout all western societies and Japan. As Deco has pointed out the next bubble to burst will be the bond market which is actually the most dangerous market on this planet at the moment. After that blows we will have a full scale currency crisis accompanied by some serious inflation which will cause huge losses in the purchasing power of the existing paper currencies. The only protection against this scenario is through moving most of your money out of the insolvent banking cartel and into hard assets which cannot be debased.

    • StephenKenny

      The reason that its the most dangerous market to blow up is that there is nothing that any government can do about it: a bond market is, by definition, a collapse in confidence in a country’s finances – any efforts by the country are part of that lack of confidence.
      When it happens to the bond market broadly, then there isn’t anyone ‘outside’ (of any size) the problem, so there’s no on who can intervene.

      It’s worse than you might initially think because all these governments are also the only lenders!

      It seems probable that the governments of the major economies have agreed to stop this happening – at any cost. The system is clearly at panic stations, with all corruptin and crimes, however vast (MF Global), and however inhuman (HSBC money laundering), being swept under the carpet. This means that the law enforcement and legal systems are part of the problem.

      The question then is will difficult and not very profitable (compared to government backed derivatives trading) wealth creation ever recover? Given the alignments of incentives of the financial and state sectors that we now have, what will that mean?

      • Realist

        +1 for you and cooldude

        It is the endgame now of course, the only thing how long it can last. It already lasted a long :)

        Wealth creation will recover in a country that recognizes that “lower public spending” means prosperity due to giving people and entrepreneurs more money back (less taxes) to invest/buy in competitive and more free market.

        Only drastic reduction of government size with their public expenditures will reverse country back to a welth creation and not wealth reduction.
        We were lucky to live in the times where public fiasco was hidden with technological advances and increases in efficiency due to having more capital goods and more knowledge.

        To understand how much wealth is destroyed in Ireland we would need to know what happened to the production structure that lays outside GDP figure and should be multiple of it.

    • Realist

      “So deflation in prices is not really a significant factor if consumers really want to purchase an item.”

      Indeed.
      A growing economy consists of prices falling, not rising. No matter how many goods are produced, if the quantity of money remains constant, the only money that can be spent in an economy is the particular amount of money existing in it.
      So growing economy, without money pumping, will lead to lower GDP every year (not that GDP figure tells us anything, so here used only for comparison with this current broken economic school).

      Since GDP is mostly a measure of inflation, if banks are willing to lend and borrowers are willing to borrow, then the newly created money that the government is spending will make its way through the economy.

      And how nice of our politicians and central bankers to push such money pumping idea upon us :)
      The endgame is funny when GDP is falling while money printing is not helping to prop up GDP.
      Ha ha ha, should not lough on our own misery :)

      • Tony Brogan

        Hi Realist, good postings from you but my observation here is….

        “if the quantity of money remains constant, the only money that can be spent in an economy is the particular amount of money existing in it.
        So growing economy, without money pumping, will lead to lower GDP every year (not that GDP figure tells us anything, so here used only for comparison with this current broken economic school).”

        If the quantity of money remains constant the economy can still grow as that money can be spent many times over but it is never used. As money circulates it acts as a catalyst as a medium of exchange.
        a silver 20 euro coin can be passed around to ten people in exchange for goods or services and the total calulation would be 200 euro spent. Volume of money is nothing to do with GDP(monetary total of transactions) but it is an accounting gismo as it goes by but counted as money it is still only 20 euro. That is why adding to the money supply is inflation as all existing money is immediately diluted in value.

        • Realist

          Hey Tony,

          I might not used the proper wording so you understood me wrongly.

          “If the quantity of money remains constant the economy can still grow as that money can be spent many times over but it is never used.”

          Not sure do you mean here multiplier effect?

          The economy can grow of course, but not due to the multiplier effect.
          Multiplier concept is one of many Keynesians fallacies people are not aware (together with aggregate demand, ..).
          A few years back I believed too that moving money from one hand to another is doing more good, like it is anything to do with creating real goods.
          Goods need to first be created so just moving money around creates nothing.

          Money is merely the commonly used medium of exchange. It plays only an intermediary role.
          What the seller wants ultimately to receive in exchange for the commodities sold is other commodities.

          One of articles, but it is explained in many austrian books and articles:
          http://mises.org/daily/1889

        • Tony Brogan

          http://www.investopedia.com/terms/m/multipliereffect.asp#axzz2H1rizCIO

          No not mutiplier effect which is perceived growth from adding more money to the money already in circulation.Today the multipier effect is negative as adding money to the economy is distorting the economy to such a degree that the economy is being disfunctional in many areas. Manipulation is so rampant that there is no free market anywhere and so no basis for accurate price discovery. So miscaluculations are endemic and some realising this are actually withdrawing from the economy and sitting on the sidelines.

          Regarding your comment “just moving money around”
          Money can not just be moved around.That is taking money from peter to give to paul has no effect on overall demand. It must be present or available to faciltate the exchange or barter is resorted to. money only changes hands when acting as a medium of exchange. That is it enables a satifaction of demand for a good or service which demand is satisfied by increased production.

          “If the quantity of money remains constant the economy can still grow as that money can be spent many times over but it is never used.”

          “never used” should read’ never used up’or ‘never destroyed’ That is, the 20 euro coin still exists after the transaction, so that it can continue to the next transaction and then on to the next etc.
          sometimes described as the velocity of money or the speed it moves in the economy.

          http://www.investopedia.com/compare/forex-platforms/?utm_source=Investing&utm_medium=website&utm_campaign=CompareForexPlatforms&utm_content=728x90Ad

          It would be hard to measure and is wrongly supposed to cause inflation.

          “Money is merely the commonly used medium of exchange. It plays only an intermediary role”

          Correct, we agree. Money plays its part to facilitate the exchange and then moves on. It acts as a catalyst being unchanged in the process and so can be used again and again.

          • Realist

            We agree Tony.

            Money is just there to serve the exchange of real goods (present and future) and nothing else.
            It should not be monopoly for some, created out of thin air, to benefit their first users (banks and governments and their sponsored companies) until prices are inflated.

            And we better forget dummy terms from keynesians and other modern economists: mutliplier effect, velocity of money, aggregate demand, …
            Velocity of money means nothing: http://www.mises.org/daily/918

    • Realist

      “Every year the prices of these items fall yet people still are spending heavily on these items. ”

      We all have our own subjective values that cannot be quantified, and this is why mathematics is failing in economy.
      A judgment of value does not measure, it arranges in a scale of degrees, it grades. It is expressive of an order of preference and sequence, but not expressive of measure and weight.

      Only you know your scale of values.
      Simple example will be that you value 1kg of potatoes more than 1 bread, but less than 2 breads.
      For me 1 bread might be more valuable.
      Apple phone is valuable to my friend away more than for me.
      And he decided to spend e500 on new iphone regardless as he sees that he cannot do anything better with e500 at that moment in time on his valuation scale.
      Some people will of course save e500 euro and still use old Nokia phone, like me.

      This is the pure reason why government (or any central bank, ..) will never be able to have enough economic information to know to set interest rate, global projects, .. as they will never know what is what people want, do they want to save, spend or what to buy.

      Only companies (entrpreneurs) can grasp or try to grasp what people want and what they are going to buy next, with risking their capital and resources to produce iphone 5 or bread.
      If they are correct they strive and if not they die.

    • They used to conquer us with hard slave labour but now we have a class of slaves who dont have the intelligence to realise they are slaves

  22. Clare Leonard

    In March of 2012 the government announced a deal to defer the payment of the 3.06 billion promissory note due to bondholder .
    The promissory note was swapped for a long-term government bond which was funded initially by the national asset management agency,
    before it was cleared by Bank of Ireland shareholders , the promissory note was changed to a long term government bond.
    This was cleared by a general meeting of the B of I .
    We the people, who are told to pay for this were not consulted.
    My understanding is that the interest rate on this NOW SOVERIGN BOND is 6.8% .
    Compounded this will double to 6 billion in a few years.
    With another 3 billion plus due in March 2013.
    The ECB allows the bank to value this bond on their books as Irish sovereigh debt and tier I capital, in order to meet some of the banks liquidity requrements. Happy days, State and banking corporations merge, Please remind me of the word the Italians use to describe that set up.

    This promissory note is an Odious debt, the ECB, the Government and Bank of Ireland may call it whatever they wish,
    it does not change the fact that in law it is part of an Odious debt, Bank of Ireland may want to take this into consideration, in the off chance they are asked to be the bagman for the ECB again, and charge we the people of 6.8% , they forgot very fast WE bailed them out.

    Look up Odious Debt.

    The fact that Pat Rabbitt said that the promissory not was not paid this year – just leaves me in despair,
    how any government minister would not know the facts relating to 3 billion plus is nothing short of ALARMING.

  23. oe1

    Its a bit off the point, but the bank bailout cost the state 40% of GDP and the banking system “paid” for this guarantee for 4 years with fees. Now they are coming off the guarantee in June and will stop paying fees. I can’t understand why are they not going to pay penalties for decades to come. Otherwise it seems like a slap on the wrist. Are the banks and the state interwined? Even an ordinary Joe Soap can see through this game of charades. Personally I think interest rates will need be kept low to avoid a mass default. You cant take much more out of the peoples pockets.

  24. Clare Leonard

    Thanks paddythe pig,
    Glad to get that info.

  25. Just a slight correction on the description of how the money supply increases. If the Bank of Japan wants to increase the money supply it will ”buy up all sorts of assets from the banks, pumping money into the economy” but this is too simplified a description of what happens.

    First of all, the Bank of Japan can only create reserve-account-money which is the type of money that banks use to settle payments between each other. The banks can’t lend this money or use it to buy anything from anyone other than another bank.

    For money to enter the economy someone has to walk into a bank and organise a loan, at which point the bank will create new money on their behalf. If no-one is willing or able to take on debt then a bank freshly capitalised with reserve-account-money can create new money to purchase anything it sees fit.

    So it’s really bank loans and bank purchases that increase the amount of money in the economy, not the central bank’s actions. This is an important point and either David is just not familiar with how money is really created or he’s telling the truth – but not the whole truth.

    • Your.Country.Your.Fault

      Dear Paul

      I find your ideas intriguing and wish to subscribe to your newsletter

      reading your website (sensiblemoney.ie) I have to say I have potentially learned a great deal. So to check :

      For money supply to grow people have to borrow from banks, who create fiat money to allow people to have “money to spend”.

      Is this why it is normal in the UK to have banknotes issued by commercial banks? Something i always found “quirky” but may well be a simple consequence of the fact that the banks (in the manner you allude to in the cash version of banking on your website) effectively print the money that we use.

      Central banks now really exist to keep the commercial banks creating fiat money by telling them that the music will never stop and not to worry, they can borrow from each other to kepe their own accounts making sense. But if the music did stop, then the Central Bank (CB) could do nothing to help, beyond nationalising all commercial banks and then creating money and THEN becoming the direct lender to the people. Which sounds AWFULLY familiar. Is this the main reason behind the nationalisation of the Irish banks instead of them being allowed to “go bust”? is this why some banks are indeed, “too big to fail”? Was letting Lehman’s go bust merely a way to sending a signal to banks that they were fallible and needed the CB at least as much as the CB needed them, so they had to come to the table and negotiate?

      Does all this explain why the promissory notes (PNs) need to be paid and destroyed? Because all money is destroyed once debts are paid, as money is really debt? So, not paying the PNs would not mean that there is cash to spare at all, its simply an accounting procedure. There would not be extra cash to spend, and it’s not being “taken from the economy”? NNot paying the PNs woudl mean writing off a debt that would ALSO destroy the same money? So, no net effect to “default”?

      the view you propose on your webstie is to reset the process, make all fiat money “legal tender” and start again, but this time only the CB prints money and banks can only lend what the CB creates for them to lend, not having the CB act as a confidence backstop that in principle should (must!) never be used.

      • Your.Country.Your.Fault

        One other little clarification, so, do you think that Freedie Mac and Fannie Mae were nationalised in the US as they were simpler beasts to manage, while Citibank was supported differenntly as, while it was in as bad a shape as many other banks (and all banks are by nature bankrupt anyway) it was not worth the subsequent hassle to take over and have the US government become the entity to whom all the hundreds of millions of customers came to with their problems? Is bailling out a bank essentially “outsourcing” the role of the central bank to someone who is frankly better positioned to make the process successful? Freddie and Fannie were seen to be more manageable, and acted as a symbolic taking on of a mantle of responsibility of the central bank for what shoudl have been done by rights across the board?

        Also, if Citibank is allow to either go bankrupt (and therefore instantly write down loans, and hvae other banks who lnt to it write down their bonds) the effect woudl be to destroy a trillion dollars (give or take) of money supply?

        Much of what i read in terms of “what the government should be doing” tends to come from the high mmoral ground that say, DMcW or Stephen Donnelly promote. Technically, correct. Morally, irreproachable. But practically, unrealistic.

        I am basing this last line on my emerging undertsnaidng on “how the world works”, not how it should work, from a fundamentalist point of view.

        As pointed out by DMcW in an earlier article, markets and people are irrationl. Well, they are also horribly selfish. Take the high moral ground to protect the collective, and it seems the individuals always move to protect themselves, to a person. So, you always end up losing by betting on the better nature of people.

        So, the government has to do things that are “wrong” in order to do something that is “effective”

        the alternative of course, is to install a dictatorship who can reset the clock and not worry about the political correctness of it, and get things back to a state of being (mis)governed again through the usual democratic process. Cincinnatus, as it were.

        Dictatorships offer such clarity. but usually the absolute corruption resulting ends that attempt at social order perfection.

        Rambling a bit.

        • Your.Country.Your.Fault

          And finally, to overstay my welcome, you knwo the old “the central bank promises to pay the bearer five pounds” spiel that was on bank notes? Has that been a lie since the end of the gold standard? It seems like an obvious “yes”, as fiat money which we all use, is tno at all redeemable. It does, nonetheless, expain the crazy attitudes people have towards money, as they think it’s an asset in their pocket, that they can “cash in”. But it isn’t! It’s someone else’s debt that is floating out there hopping never to be recalled. Once recalled (debt repaid) it disappears.

          Your view of money supply reminds me of the apparent spontaneous matter-anti-matter generation experiments in physics, where under certain conditions it seems that the above pairs appear out of nowhere. wont go itno details. but it makes me think also of the notion of “peak oil” and artificial shortages. There are those who say that there is tons of everything to go around, and even a few who say that oil is generated through steady-state geomorphic processes (more controversial than climate change skepticism, so again won’t muddy the waters here). but the analogy si that there is enough of all kinds of resources to go around should we wish, it’s just that supply is artificially constrained, for no reason other than to maintain a form of manageable political status quo.

          Perhaps it’s a good thing to have fiat money, and fractional reserve banking is only a messy halfway house that is no more than an artefact of creating the illusion that there is anything that underpins the value of money other than, that old chestnut, confidence.

          I think what you and your pals in sensible money are saying, let’s call a spade a spade. central banks create money for macro reasons, and banks get to act as financial services intermediaries. right now, in order to create the illusion of “asset backed” loans, we pretend that deposits are themselvs somehow an asset, and the fractional reserve model needs to have this levereaged asset somehow in existence.

          But really, it’s been so long since any real asset exists (gold, and that jsut through mutual agreement of the world’s peoples that it’s a shiny useful metal that is worth something), we are all just trading on talk.

          Game of Thrones. I’ve seen the tv series not but read the book. anyway, spoiler coming. there’s this dude who talks big and says he’s zany rich with amazing assets backing him up, locked up in this unbreakable safe. Which is certainly unbreakable. because of that, people let him do all sorts of things, transact, negotiate, decide, you name it. Well, watch the book, i mean read the movie. You will see.

          • Your.Country.Your.Fault

            so IN BRIEF

            If you want money, you have to play by money rules.

            It’s just that money may not be what you always thought it was

            The whole troika business had to happen. And SF would have done the same things in power post FF (who would have done the same things post troika watershed).

            Politics has no effect on goverance. we are locked into a process that was started a long time ago.

            i recall Brian Lenihan quipping to some FG colleage as they exchanged the reins, and he essentially, said with a sad smile, “you will see”.

            I think i see now.

            to change the world, we have to change how money works. Not change the government. Root versus symptom, cause versus syndrome.

          • Tony Brogan

            Fire(close) the central bank
            Return money creation and printing to treasury at no interest.
            Ban fractional reserve banking
            Allow silver and gold coin to circulate as money to keep everyone honest(easy to monetize existing coin such as Mapleleafs’ or silver eagles etc.
            Repudiate the odious debt
            Demand the bank bailout money be returned (halves the national debt)
            If they will not or cannot pay forclose on the banks and sell off the assets to recover the money.
            Put all government jobs up for tender to the best competive bids.
            Reduce size of government to essential services . services to be kept decided by referendum
            Implement DDI referendum , initiatve and recall legislation. Return the government to the people debt free.

            State will now own the bank mortgages which will be sold at market value to investors. All mortgage holders be given right of first refusal to buy back their loan (30 day option)
            Pass balanced budget legislation
            Pay off balance of national debt with new treasury notes.

            Net result is the natonal debt is gone. Income tax can be eliminated. And people can go to work and are re-employed in viable businesses. most mortgages are reduced to manageable size, and the problem banks gone out of busines. Sell off NAMA holdings asap and start again.

            All this other talk is piffle blowing in the wind.

            Problem solved. Give me 6 months and protection from assassination before the job is done. ThePTB will do all they can to prevent its happening.

          • Realist

            Excellent one Tony.

            In one of countries I lived before the prime minister was shot dead by special forces for trying to improve things, so I am sure good protection is well needed.

          • You’re right that we haven’t had a currency backed by anything like gold or silver for many decades. The gold was abandoned in 1971 and even then it only applied to international trade of US dollars.

            I’m not a fan of a commodity currency at all though for the following reasons.

            1. Fluctuating Money Supply

            First of all, if we discovered a whole new batch of gold we’d be ‘allowed’ to print a new batch of money in proportion to this find. However the amount of economic activity won’t always go up by the amount of new money that we suddenly ‘get’ to create and we could easily experience inflation.

            On the other hand, if we won the bid to host the European championships, for example, a currency linked to anything could pose problems. If we have a fiat currency we could carefully create the extra money needed for all the extra activity and host the games just fine. We could reduce the amount of money in the economy quite easily afterwards if needs be also. However if the currency is linked to a commodity, and we can’t find any more of that commodity, then we can’t host as good a games when all the real world resources are the exact same in both cases. It’s only the amount of the man-made substance that supposed to help us to trade. i.e. money that’s scarce is the second scenario.

            2. Population Growth

            As well as this a commodity currency doesn’t support population growth very well. If the population of an area doubled in a short space of time we could easily double the amount of a fiat currency and prices, wages and the standard of living could remain the same for all. However under a commodity currency the only way for people to enjoy the same standard of living as before is for prices and wages to half. We may get used to welcome lowering prices under a commodity currency. Welcoming lowering wages as the population grows would be more difficult to achieve.

            3. International Trade

            A commodity currency doesn’t support international trade very well either. If we are net importers then eventually most of the money we issue will be abroad and foreigners will have a claim on whatever we’ve linked our money to. As well as this our domestic money supply would constantly be decreasing and we’d have no way of increasing it because we’ve linked it to some commodity that we may no longer be able to find more of. At the moment we’re net exporters and if this remained the case then, extremely simplifying things, we could expect to have all the money we issue permanently in Ireland plus an ever increasing amount from abroad. This would lead to permanent uncertainty about the value of the Irish currency relative to other fiat ones. As well as this a side effect of having a currency that’s seen as strong, as a commodity currency would be, is that exports from your country seem really expensive to other countries. We could expect Ireland’s exports to lower once the currency exchange rates settle to take account of the fact that the Irish currency is ‘Fixed’. Whether lowering our exports is good or bad is another debate but it would be a side effect to be aware of nonetheless.

          • Tony Brogan

            Good day Paul ,I am afraid I take issue with many of your statements

            Paul Fergusonsays:
            January 4, 2013 at 6:29 pm
            You’re right that we haven’t had a currency backed by anything like gold or silver for many decades. The gold was abandoned in 1971 and even then it only applied to international trade of US dollars.

            I’m not a fan of a commodity currency at all though for the following reasons.

            1. Fluctuating Money Supply

            First of all, if we discovered a whole new batch of gold we’d be ‘allowed’ to print a new batch of money in proportion to this find. However the amount of economic activity won’t always go up by the amount of new money that we suddenly ‘get’ to create and we could easily experience inflation.

            [The chances of discovery of a whole new batch of gold is highly unlikely. The last to have any effect was the rape and pillage of the Americas by the Spanish.

            The two or three notable gold strikes since have had little effect on the overall value of gold as money. With 170,000 tonnes estimated to be held in the world, even a discovery of a 100 million ounces would as a percentage have little overall effect on the total. 100 million oz =3110 tonnes or less than 2% of the current gold held. In addition it costs to get a hold of and get it out of the ground. Anywhere from $1000-1800 an ounce are the latest estimates so a discovery is likely uneconomic to develop. Your point is speculation and has no merit.]

            On the other hand, if we won the bid to host the European championships, for example, a currency linked to anything could pose problems. If we have a fiat currency we could carefully create the extra money needed for all the extra activity and host the games just fine. We could reduce the amount of money in the economy quite easily afterwards if needs be also. However if the currency is linked to a commodity, and we can’t find any more of that commodity, then we can’t host as good a games when all the real world resources are the exact same in both cases. It’s only the amount of the man-made substance that supposed to help us to trade. i.e. money that’s scarce is the second scenario.

            [ Money is never scarce even in a fixed supply. It is a fallacy that it is required to expand the money supply. There is always enough.

            2. Population Growth

            As well as this a commodity currency doesn’t support population growth very well. If the population of an area doubled in a short space of time we could easily double the amount of a fiat currency and prices, wages and the standard of living could remain the same for all. However under a commodity currency the only way for people to enjoy the same standard of living as before is for prices and wages to half. We may get used to welcome lowering prices under a commodity currency. Welcoming lowering wages as the population grows would be more difficult to achieve.

            [Incorrect–see above. money is not the standard of living. Money is a medium of exchange and facilitates the efficient exchange of goods and services which is how we all get better off. Your argument returns to the one where less money means poverty and more means wealth. In the biggest money expansion ever seen over the last 5 years there is increased poverty.]

            3. International TradeMore

            A commodity currency doesn’t support international trade very well either. If we are net importers then eventually most of the money we issue will be abroad and foreigners will have a claim on whatever we’ve linked our money to. As well as this our domestic money supply would constantly be decreasing and we’d have no way of increasing it because we’ve linked it to some commodity that we may no longer be able to find more of. At the moment we’re net exporters and if this remained the case then, extremely simplifying things, we could expect to have all the money we issue permanently in Ireland plus an ever increasing amount from abroad. This would lead to permanent uncertainty about the value of the Irish currency relative to other fiat ones. As well as this a side effect of having a currency that’s seen as strong, as a commodity currency would be, is that exports from your country seem really expensive to other countries. We could expect Ireland’s exports to lower once the currency exchange rates settle to take account of the fact that the Irish currency is ‘Fixed’. Whether lowering our exports is good or bad is another debate but it would be a side effect to be aware of nonetheless.

            [A commodity currency and an international one at that is the best medium of exchange there is to facilitate trade. It is a constant. At present nations currencies flip up and down relative to each other that inhibits trade.Also, nobody can continually export more than they import or import more than they export.

            Domestic currencies grow stronger or weaker according to supply and demand. A weaker currency allows easier exports and higher cost imports and a lower standard of living. The reverse a higher standard of living. The only way to maintain a higher standard is to work harder, work better and be smarter.

            A proper gold (classical ) standard helps trade not hinder it. Both domestic and international.

            Your fiat paper based currency is still subject to the meddling of people who think they know better. That is what we have now and what a mess that is.

            Sorry Paul but if you expect that a boffin peering into a crystal ball can accurately guess the state of the current economy I would like to see who it is. Maybe someone can glimpse with accuracy the past, but they cannot forecast the future actions. and so a central banker manipulating the money supply is already too late as well as guessing. It does not work.

            Nothing personal Paul, I just disagree with your position but a acknowledge your sincerity in positing your position.I would enjoy a couple while we had a good debate to sort out things. We have some commonalities.

        • I’m actually not that familiar with how the US dealt with its recession. All I can offer is that allowing a bank to fail is an absolute last resort. This is because 97% of money exists as accounting entries on the books of the banks and they fold as a company many of their customer’s bank balances read zero almost overnight and you can imagine the effect this would happen on the economy.

          Under our proposed system a bank could fail and everyone’s current account balance would simply move to the bank of their choice.

          People could also be as irrational as they like under the proposed system and it wouldn’t affect the economy. There would be no need for a dictator under this system either!

      • Hi,

        Thanks for that. You can sign up to our newsletter by going to this link:

        http://sensiblemoney.ie/newsletter/ and adding your details.

        Yes, banks in Northern Ireland and Scotland are allowed to print their own notes although they have to give an asset to an equivalent amount to the Bank of England.

        Central banks exist to regulate the economy. They used to decide how much money to print. Nowadays they try to guide the economy primarily by either discouraging people from taking out loans during times of inflation. Or encouraging people to take out loans during times of recession.

        If no-one will take out a loan then banks can create money by buying someone and typing new money into the seller’s account and the central bank can encourage this by creating new reserve-account-money for the banks such that they are well capitalised.

        Finally the central banks can try to guide the economy through open market operations. This involves creating the money they need to buy new Government bonds. The Eurozone central banks are forbidden from doing this however and so they buy existing bonds only.

        I think the main reason why the banks weren’t allowed to fail is because 97% of our money exists as accounting entries on their computer screens.

        You’re right that once the PN are repaid the money won’t exist anymore and this is the case with all accountancy money, including reserve-account-money. However if we didn’t repay the PN the money would still exist and we would be better off in monetary terms.

        I’m not so much trying to reset the process. We have a nice smooth transition planned out. It’s quite detailed in Section 5 of our publication at the link below:

        http://sensiblemoney.ie/data/documents/A-Guide-To-Full-Reserve-Banking-In-The-Eurozone.pdf

        But yes the money we’re proposing would be a fiat currency that gains its value from the fact that you can buy products and services with it. It would also be the only legal tender and the only currency acceptable as payment of taxes and/or court fines etc. This would also give it value but people would be free to trade with whatever they like the same as today.

        • Your.Country.Your.Fault

          hi Paul

          I am very grateful to you and the Sensible Money team’s efforts in clarifying this situation. I feel a bit silly for having this antiquated idea about what money was / is, the rearragement of the landscape happend for me when you pointed out that

          a) digital money is an accounting entry
          b) banks earn interest by creating the zero-sum money, and then charging a fee for this in direct proportio to the amount of zero sum money made
          c) and this is where 97% (give or take) of our “money” comes from

          I can ceratinly see why the Occams razor approach you are the SM guys are suggesting attacks the root of the current problem, namely that the incentives are set in place for commercial banks to indebt people who might not necessarily put the indebtedness to good use.

          Having banks as service providers to handle money that a central bank decides to create by fiat makes more sense, and stops the rat race pretty fast. It also incentivises service quantity, not money quantity as the underlying productivity incentive.

          Looking back at Celtic Tiger Ireland, it is all totally obvious in hindsight, why and how AIB and BOI slapped on the afterburner to go after Anglo. Because they could, with full backing of the central bank. Hell, the CB implicitly mandates them to create money if it’s not assuming the leadership role itself.

          The system incentivises and rewards debt creation, not investment returns. Fiat money / debt is not a wrong thing per se, and i am ceratinly in agreemetn that physical commodity based money is like a return to the middle ages, and woudl easily, EASILY, cause a military conflict, like our wonderful European wars. Fiat money allows thinkers and entrepreneurs to invest the same way as goldowners. Where the system creaks is in the incentives to make (short term) interest money through debt creation without any thought to whether (long term) principal can be paid back. That was the exact root of the propoerty bubble in ireland, the bankers were incentivised to create money now, to get interest payments quickly and in as much quantity as possible. Who CARES about the future.

          Wow. So simple, really.

          Anyway, thanks loads for your clarity, no stridency in your communications, an oddity in the fora. Hats off.

          will review your proposed solution now, of course, that’s really in the hands of Fate. Stranger things have happend theough, and i cite the creation fo the European Coal and steel community as an example. We just gotta get lucky with leaders. We can help by education, training and finally electing capable ones. Say what you like about the French, they do have ACTUAL schools for public service. We really need professional public adminsitrators…. now there’s a revolutionary idea….

          • I’m glad I could help and I look forward to your review of our proposal.

          • Hi Tony,

            No need to apologise. I don’t think either of us are going to convince the other so I’d imagine we’re going to conclude with a mutual respect for each other’s dislike of the current system. That being said my responses to your points are below.

            I accept point 1 above is weak when the commodity in question is gold. The amount of it can’t fluctuate too much.

            On point 2 though do you not accept that, under a gold standard, if the population of an area (or the amount of products and services) doubled that prices and wages would, roughly speaking, have the halve for everyone to have the same standard of living? I’d imagine you do agree on that point.

            That being the case we’re going to differ over whether we think people would welcome this situation or not. We may welcome lowering prices. It’d hard to see that we’d welcome lowering wages though.

            I’m suggesting that in the event of a doubling of the population we’d double the fiat money supply such that wages and prices could remain the same. If we did it carefully enough it could work very smoothly. I agree that doing it carefully enough is the challenge open to abuse but I’m proposing the most transparent system I can design to safeguard against this as best as possible.

            Next, If Ireland were to host the European championships the amount of economic activity would increase and then decrease suddenly after the event. I’m saying the smoothest way to accommodate this would be to increase the money supply before and then reduce it after the event. You’re saying that there would just always be enough money before and then not too much after. Can you elaborate? How would there just be enough whenever more is needed?

            Perhaps you mean the velocity of gold could increase/decrease according to our needs but again for this to happen under a fixed money supply prices and wages have to decrease/increase. I just don’t think price levels and wages would lower quickly enough for there to be ‘excess’ money with which to fund the smooth hosting of the championships. This would apply to any large project including some that could really improve the quality of life for the people of an area. Can you imagine a council proposing a new hospital and then explaining to people that they expect economic activity to increase by 20% so they’re asking everyone to lower their wages and prices to around 84% of what they are now? I’m saying creating around 20% more money and not consulting anyone would be a much smoother way of doing it.

            On point 3 I think we’ll agree that it’s not possible for a country to be a net exporter or net importer for very long if all countries were under a gold standard. I know you may think ‘Why should a country get to import more than it exports?’ but we can’t expect all countries needs to exactly match the resources they can offer to others all of the time.

            The perfect example is Iceland. We know that it is possible for our productive capacity globally to support the population of Iceland. All the Icelanders do their 9 to 5 like the rest of us and so on. It’s not like we’re shipping free lunches to them. If we adopted a world wide gold standard then after a while Iceland would have to wait ’til it sold exports in exchange for gold before it could import anything. People just couldn’t enjoy the same standard of living there as they do now purely for economic reasons when of course, as a globe, we can support a good standard of living there.

            Luxembourg is another good example. Imagine it could only import an equivalent amount to that of its exports. Not many people could live there because of an arbitrary boundary over which the amount of gold that crosses must balance to zero in the short term. The argument could be applied to any arbitrary boundary. If you think a country shouldn’t continuously import more than it exports then why should a province do so? Why should a town and so on?

            So can we agree that for the optimum running of the global economy some countries need to be net importers continuously? In which case a strict gold standard would be unfit for purpose?

            China is a good example of a country which is happy to be a net exporter continuously by the way. I don’t think this is so much due to the current debt based monetary system which encourages exporting. I think it’s more due to the fact that they want to maintain high employment. I can see plenty of countries happy to be net exporters under my debt-free fiat currency proposal too for the same reason, even though it would mean they’d have to continuously destroying some money to do so.

          • Tony Brogan

            Paul Fergusonsays:
            January 6, 2013 at 1:32 am
            Hi Tony,

            No need to apologise. I don’t think either of us are going to convince the other so I’d imagine we’re going to conclude with a mutual respect for each other’s dislike of the current system. That being said my responses to your points are below.

            I accept point 1 above is weak when the commodity in question is gold. The amount of it can’t fluctuate too much. No very little. mining provides less than a 2% increase in supply of the amount held by central banks. And around half a percent pa of the total amount of gold held everywhere.

            On point 2 though do you not accept that, under a gold standard, if the population of an area (or the amount of products and services) doubled that prices and wages would, roughly speaking, have the halve for everyone to have the same standard of living? I’d imagine you do agree on that point.There is no situation where the money supply of gold could double in a short space of time so the point is irrelevant. However that is what has happened with the fiat money pumped by the current system and we see the disaster unfolding around us. This is impossible with a gold standard.or a money system backed by gold.

            That being the case we’re going to differ over whether we think people would welcome this situation or not. We may welcome lowering prices. It’d hard to see that we’d welcome lowering wages though.

            I’m suggesting that in the event of a doubling of the population we’d double the fiat money supply such that wages and prices could remain the same. If we did it carefully enough it could work very smoothly. I agree that doing it carefully enough is the challenge open to abuse but I’m proposing the most transparent system I can design to safeguard against this as best as possible.Transparent or not it is total foolishness to propose doubling the money supply. I repeat Who is to be the judge how much is enough. It is a delusional suggestion.

            Next, If Ireland were to host the European championships the amount of economic activity would increase and then decrease suddenly after the event. I’m saying the smoothest way to accommodate this would be to increase the money supply before and then reduce it after the event. You’re saying that there would just always be enough money before and then not too much after. Can you elaborate? How would there just be enough whenever more is needed? There is always a demand for money. The world is in fixed supply. But even Ireland operating its own currency would be a fixed supply.

            The demand for money is defined as the wish to have more of it or savings. The savers are not spending. Less spending puts the value of goods and services down a little. Saving the money increases the demand and rases the value of the money . These raises and lowerings are incremental but never the less real. Those people working and spending as usual find there money stretches further as mild deflation is induced to economy. All people are better off. Money is defined in precious metals as a weight not a value. A good costs so many grams or fractions of a gram. As savings increase there it is able to be used to purchase or develop capital. Plus some savers seeing prices cheaper than thet were move back to consumption and that puts their money back into circulation and the process is reversed. As this happens through millions of individual decisions there is a sort of equilibrium in the ecomomy. As such the money incirculation od savings expands and contracts in response to demand.

            Perhaps you mean the velocity of gold could increase/decrease according to our needs but again for this to happen under a fixed money supply prices and wages have to decrease/increase. I just don’t think price levels and wages would lower quickly enough for there to be ‘excess’ money with which to fund the smooth hosting of the championships. This would apply to any large project including some that could really improve the quality of life for the people of an area. Can you imagine a council proposing a new hospital and then explaining to people that they expect economic activity to increase by 20% so they’re asking everyone to lower their wages and prices to around 84% of what they are now? I’m saying creating around 20% more money and not consulting anyone would be a much smoother way of doing it.

            This is ridiculous as the local council operates in a wider economy and the savings elsewhere are adequate to fund anything you want. The greatest age of industrialization happened in the late 1800 and happened efficiently with private capital from private savings raised from private people. Money travelled the globe to where it was needed the most. Under a gold standard too.

            On point 3 I think we’ll agree that it’s not possible for a country to be a net exporter or net importer for very long if all countries were under a gold standard.Under any standard I know you may think ‘Why should a country get to import more than it exports?’ but we can’t expect all countries needs to exactly match the resources they can offer to others all of the time. Of course not. Our problem is the world agreed to have the US dollar as the reserve currency. Originally held in check by being based on gold (a quasi standard bound to fail which it did) but when released from any resistance to expansion funded the greatest binge the world has ever seen. The US has run a deficit for over 50 years and other countries surplus accounts. Now the US is Bankrupt and the creditor nations have supplied goods that they may never be paid for as the bonds held are almost certain to be defaulted upon.

            This is what happens when you meddle with the money supply DISASTER LOOMS.

            The perfect example is Iceland. We know that it is possible for our productive capacity globally to support the population of Iceland. All the Icelanders do their 9 to 5 like the rest of us and so on. It’s not like we’re shipping free lunches to them. If we adopted a world wide gold standard then after a while Iceland would have to wait ’til it sold exports in exchange for gold before it could import anything. People just couldn’t enjoy the same standard of living there as they do now purely for economic reasons when of course, as a globe, we can support a good standard of living there.I DO NOT KNOW WHAT THE …. YOU ARE TALKING ABOUT.

            Luxembourg is another good example. Imagine it could only import an equivalent amount to that of its exports. Not many people could live there because of an arbitrary boundary over which the amount of gold that crosses must balance to zero in the short term. The argument could be applied to any arbitrary boundary. If you think a country shouldn’t continuously import more than it exports then why should a province do so? Why should a town and so on? You are now talking riddles and off the subject. any business is the same as any country. They can profit doing what they do well or die. Same as an individual. Occupy yourself at the highest utility and you make more money or profit on your labour or human capital than others. Each doing that benefits the whole. Innovations and efficiencies induce a deflationary element to the economy. Even the poorest benefit with the successful even more. The income levels are closer together and the spread is less.

            So can we agree that for the optimum running of the global economy some countries need to be net importers continuously? In which case a strict gold standard would be unfit for purpose? No I do not agree with this at all. Absolute rubbish. Impossible. Gold is the standard against which all currencies rise and fall. Only in your world of fixed currency rates will it be possible for that manipulation to take place. We have competitive devaluations taking place today on a global scale as each country tries to out maneuver the other to an advantage in currency. All citizens are thus subjected to inflation of currencies and a plummeting standard of living.

            In BC since 1970 the standard of living for the average skilled labourer has dropped by an astounding 55%. That is, his hour of labour buys 45% of what it did 40 years ago and that is on gross income and not net of taxes. I suspect it is worse on an after tax calculation.

            China is a good example of a country which is happy to be a net exporter continuously by the way. I don’t think this is so much due to the current debt based monetary system which encourages exporting. I think it’s more due to the fact that they want to maintain high employment. I can see plenty of countries happy to be net exporters under my debt-free fiat currency proposal too for the same reason, even though it would mean they’d have to continuously destroying some money to do so. You have not thought this through at all. Why are they continuously destroying money. Only under a debt based fiat currency where money is issued as a loan is there a reduction in the money supply as a debt is repaid. If your system does that it is still a fiat based paper money currencies back by nothing and subject to a collection of boffins to determine how much is enough or too much.

            Only a specie money, and historically proven to be the most acceptable to the greatest number of people is gold and silver.Of relatively fixed supply and relatively rare makes it precious. Iyt is durable and does not decay. In coin it is hard to counterfeit. It is easily divisible into milligrams or multi tons, It is fungible meaning every unit is identical to every other unit.. It is a storage of wealth. It is in short the finest money ever devised by mankind.

            There is a reason the central banks despise it. It is the only threat to there power over government through the fiat currencies and the central banks that control it. It is attacked and manipulated downward through the use of paper promises , futures and derivatives. Now they are so desperate that there is only one ounce of gold available for every 100 paper ounce traded. It only requires 2% of the market to demand physical delivery and the system blows up and the financial mess with it. The bond bubble is sitting on a thousand pins that any one could cause the pop.

            There is a reason the Chinese and most of the world are feverishly buying all the physical gold they can get there hands on before the the prices blow sky high. You paper money system need huge revision.as to me it looks like a paper Chinese lantern of no substance but pretty to look at.

            You are in my opinion leading people astray by pointing out the problems of the current money system and providing a faulty solution. It is true that the central banks issue to the commercial banks who then create a loan to increase the money supply and if the loan is repaid the money supply shrinks. but that is also true of the central banks who issue money as a loan out of thin air. That is why the

            central banks must be destroyed

            Fractional reserve banking made illegal.

            All state issued money be through treasury directly.

            The legal tender laws must be repealed. I should not be forced to accept fiat notes in payment of debt if I do not wish to.People should be allowed to use whatever currency they wish to use as money. As a free person I need to be allowed the freedom to operate my finances any way I wish.

            silver and gold coin must be allowed to to circulate along side the paper money as a parallel currency. As a competing currency it would keep the paper notes honest as people will turn to the best money. so let the market decide.

            any coin of recognized weight and purity can act as specie money and be monetized by the state.Could be any coin such as an Austrian Philonomic, a Canadian Maple Leaf etc. and Ireland can mint its own coins as well. That proposal is at http://www.tonybrogan.com for those interested It is designed for Canada but I will post another for Ireland.

            There is no question the world is moving to a gold and silver based money system so we should be prepared.

          • Tony Brogan

            This fecking program
            I put all my commentary into bold and italics and when it was submitted it converted the script to all the same
            I will repost in readable form at the bottom with a new post.
            My comments in CAPS

          • Realist

            Paul,

            You should spend some time reading the opposite views from austrian economists. It will benefit broaden your keynesians/monetarist views about money.

            “We may welcome lowering prices. It’d hard to see that we’d welcome lowering wages though.”

            Money is used to establish exchange rates between goods. Any amount of money can do that.
            Wages numerically are not important as what is important is what you can buy with it.
            I would gladly give my thousand now for 100 tomorrow if I can buy more real things for it !!!!

            “On point 3 I think we’ll agree that it’s not possible for a country to be a net exporter or net importer for very long if all countries were under a gold standard.”

            This is actually the beauty of it all as money will flow the other way sooner or later.
            If country have no enough money, demand for money will increase, that will lower prices and lower prices will drive exports again and foreign investments, so money inflow.
            The countries (or better say companies) will need to compete for real in such regime and try to create more wealth in such process.
            Not like now to fight to get more benefits from governments across the world or more patents, prohibitive businesses and other absurd government benefits like printing money.
            It will be impossible to have these boom-bust cycles like now.

    • Realist

      Banks credit expansion is one way of printing money, but not the only one.

      The other way is through open market operations, buying securities, e.g. ECB buying government bonds, US QE’s, …

      And this is when things are getting more nasty as banks are trying to outlive government :)
      Central bank is pushing Irish banks to loan mortgages as there is something called “quota”. They might even charge banks for holding too much deposit and not lending it to prop up economy. What an absurd, adding fire on fire is not helping.

      • Your.Country.Your.Fault

        it all seems to boil down to the view though, that money no longer exists as an asset. Imagine that, the basis for liquidity is debt, not cash! Or indeed, cash, per se, is no longer relevant. It may as well not exist.

        our accounting system from the florentine period presumes that cash is a net positive asset.

        If only 3% of our cash (see the sensiblemoney.ie site) is actual legal tender, the world has to live by the premise that debt makes the world go round.

        the other methods of QE that you mention above all seem to point to the same thing, the money in your pocket is an IOU for SOMEONE who can in theory claim it back and then shred it.

        Central banks chiding banks for “too much deposits” is therefore irrelevant. This is because the fractional reserves are themselves unnecessary. Who cares what deposits you have. The point is, they should simply be chided for not issuing more debt, as debt makes the world go round. Savings are worthless anyway in the grander scheme of things. I’m being strident here to vocalise a view, not accept it as a valid model.

        • Realist

          “Central banks chiding banks for “too much deposits” is therefore irrelevant”

          It is just showing who is the main cluprit of the problem.
          Even if the banks want to be more “conservative” or better to the economy by not lending too much, they get push from the central banks and government officials.
          And it is showing that banking system is not free, but rather unfree, as it is controlled centrally.

          Savings are the main bloodline of wealth creation and that is not understood well.
          Without prior savings should not be debt issuing and investmments.
          This is where is the main breakpoint in economy.

          • Your.Country.Your.Fault

            Thanks for your comments Realist, i am now interpreting what you say that savings are really indicative of wealth generation (what do you mean by “bloodline”?), as people have savings when they are feeling comfortable with the results of their labours, as they do not need to spend or invest them further? That said, i know that the so-called unsophisticated investor is someone who thinks that savings is “money in the bank” that is to say, an asset representing value created and accessible in the future. Fiat money, though, is an illusion. You are better off getting your money working for you, than waiting for you.

            In a way, you know for sure that you are wealthy when you can touch your wealth with your hands. Because government can take money away, banks can take money way, in ways that thieves would find much harder to replicate with physical assets.

          • Realist

            I meant here more about saving as generic, e.g. saving any kind of resources for future use.
            E.g. we save money, goods, capital goods, labour, land to be employed in useful future projects, …

            By really saving money, or to say putting it under matress, you are doing good to economy as removing money from it and causing lower supply of it, so less money will cause prices of goods to drop that benefits all of us.

            People do whatever they feel satisfying their most urgent needs. When they value future goods more, they save or invest, otherwise they spend it on present goods.

            Saving fiat money under inflation is always risky business, especially when bank runs are always possible.

            I lived in a country where hyperinflation eaten all fiat-money savings in a few months, and this is why I am contributing here to if possible help anybody.
            We also had bank runs (so called pyramidal banks, like others are different) and remembering my father waiting 5-10 years to get something back from the government (again tax payers money).

            Government wants us believe we should spend as this is the only way to “grow” economy and prosper (like their imaginary GDP is giving me bread on a table).

    • bonbon

      Sir, you are also not telling the whole truth, intentional or not. That means looking at the Triple Curve, noting the drastic physical economic collapse in progress, and what is needed to reverse this.

      From the lead in your website, “In The-Fix we propose one system that we feel is currently best: It would provide an adequate supply of money to help us trade. And if we look after the money supply, employment will look after itself. ” (emphasis added).

      That is pure monetarism, punting to the Irish reader yet again, now thoroughly swindled, that the wave of a magic wand will reverse the physical collapse. This is the signature of all Adam Smith spinoffs, such as Keynes, Hayek, Fisher, the entire London School of Economics.

      The signature of this hand-waving book-keeping trick is the pre-industrial feudalism that from mere “sound”, “sensible” monetary tokens, whether fiat, metal or digital, will spring forth an industrial economy “of itself”.

      The Triple Curve typical collapse function makes this painfully obvious.

      FDR countered these British monetarist schemes with Glass-Steagall, the RFC, New Deal, TVA, and Bretton-Woods. This is the Hamiltonian Credit system in action, suppressed by Andrew Jackson in the US, but fully expounded by Arthur Griffith here in Ireland, and Friedrich List in Germany.

      It is time for Ireland to break with monetarism now. This is how to do it. No more Adam Smith sentiments.

  26. Happy New Year David and same to everyone

    This article is far too technical for me and I am out of my league but I have a couple of point to raise

    The population of Japan is reducing fast. Any ideas to reasons why?

    85% of Japanese people want nothing to do with nuclear power yet the world’s media would have us believe the complete opposite

    The Japs might have a lot of savings and balls but they were given a hard lesson on the sands of Owo Jimo

    Personally I don’t like the bastards one little bit. Some of the old boys in the Celtic end were only half the men they could have been if it was not for that shower of cruel cold hearted bastards. They can stick theit Yen up their ass.

    Once again. Happy New Year Irish brothers

    • Realist

      > The population of Japan is reducing fast. Any ideas to reasons why?

      Expensive to grow kids. At one stage their properties were worth 60% of all worlds property market (if I remember correctly).

      > The Japs might have a lot of savings and balls but they were given a hard lesson on the sands of Owo Jimo

      This just shows that government cannot tell people what to do. Even with low interest rate they save.
      Similar is in Ireland, people save like never now when interest rate is crap and DIRT is 30%, so to say 2/3 of interest rate is what you get really.
      Did they mention around 100 billions in savings in Ireland, but that money is already spent, so gods know who’s money will survive till all is either overinflated or confiscated (bank run).

      > Personally I don’t like the bastards one little bit.

      I do not like neither governments, states, but people are people, they are OK in all countries.

      • bonbon

        You do not like the idea that people elect government by the people,, for the people? I think people have that right whether you like it or not.

        Eire is a constitutional republic, a nation state, being destroyed from within and without.

        Maybe you like the state-less EU, the unelected EC Commission, the banking union?

        • Realist

          > You do not like the idea that people elect government by the people,, for the people? I think people have that right whether you like it or not.

          I want this democratic system to go the other direction, to libertarian society, and not to totalitarian states, where government grows every year and as we can see nobody can feed them enough.
          I am sick of somebody else deciding for me. I want to decide for myself bonbon, that is all I want, but your democracy is not giving me the choice.

          As I am seeing this all goes to totalitarian state direction I am not happy at all.
          Leaving stupid politicians to pile upon debt and destroying wealth is the last thing I want.

      • I wasn’t thinking straight and have had time to think. This is not about property prices and cost of rearing kids. There is something fundametally wrong with their psyche and for 100 years leading up to their Armadeddon in 1945 they were a nation brainwashed on violence, self sacrifice and honour. They had been turned into robots and the only way they could be stopped was through extreme measures, aka, little boy

        The population is reducing because people are getting the hell out of there and rightly so. They are being exterminated with radioactive contamination and consistently lied to by their government. A good place for all the pro nuclear crowd to learn the truth is the top right list of links on rense.com

        No-one with an instinct for survival of the species would go within 10,000 miles of Japan and now the west coast of Aemerika is being polluted with radiation.

        When I was growing up in Scotland the Japanese were hated. Put it this way there wasn’t much call for Japanese restraurants among the people who remembered the war and there still isn’t

        Where did the Japs get their Yen?
        Disaster Capitalism.

        After ww2 the Americans, most likely through guilt, went in and taught them everything they needed to become the industrial powerhouse they became in the 70s and 80s. They have blown it and now they are complacent

        Corporate Japan is as corrupt as anywhere else and they are nothing special.

        • In some respects they are reminiscent of todays generation of unthinking drone pilots who were selected on their abilities with computer games and zero O levels

          Hi honey I’m home. Just managed two kills today. Boring as heck. Now get me a cold beer and a tv dinner from the fridge bitch before you stretch my temper. And give me my meds ffs.

          You forgot them yesterday and I really feel like giving you a hiding moron!

        • Realist

          Harsh words so I will leave it to you.

      • In the interests of harmony I will consider what you are attempting to articulate re goverments and people. People are fine wherever we go. It is governments that are the real bastards but people don’t want to know what their governments are up to. Hence politicians are shamefully on the make like a band of whores. Lowry

        Elected right wing governments in Ireland and England have been caught with their pants down recently. Both have been dishing out foreign aid while they let their own people starve. Foreign aid is a joke. It’s like going to confession to convince yourself that you never have impure thoughts

        Most of the foreign aid is siphoned off in return for kickbacks. Check out the sleze surrounding that awful Napoleanic snail Sarkosy. How much has Blair got stashed in the Cayman Islands? Yet masses of people became spell bound willingly voted for these despicable criminals

        So don’t try to lecture me on democracy. Please!

        If that is how openly corruptible elected politicians can become then I wonder what the people in the background are like. I bet the atmosphere is almost satanic in its poison

        The people of Amerika and Japan were used to achieve the aims of their respective elites. The result was Hell In The Pacific

        The Americans brutalised and brainwashed their own soldiers so hard that by the time they fought the Japanese on the sands the American soldiers saw the Japs as vermin. Some of the things done to Japanese soldiers was sub human but it was done in the name of spreading freedom and democracy

        Freedom. The only place where anyone can find true freedom is inside their own heads.

        • Realist

          > So don’t try to lecture me on democracy. Please!

          I do not like democracy, so no intention from me there :)
          I am for libertarian society with the proper free-market capitalism, with non-violence and property law in place.

  27. Tony Brogan

    Report from http://www.lemetropolecafe.com

    Is the German economy this good? If so will Euro zone interest rates start to rise to cool the German economy?

    Germans optimistic about 2013: The FT noted that despite the spillover effects of the Eurozone debt crisis, the latest poll from Ernst & Young published on Wednesday showed that more than three-quarters of German consumers feel optimistic about the coming year. The paper said that confidence in the German labor market (where unemployment is at the lowest level in 20 years) was the main driver behind the bullish sentiment

    • Realist

      I would say German economy is just slightly better than of their competitors, especially inside EU.
      They still have huge sovereign debt and trouble with EU :) As very efficient part of EU they might break out even before Greece. It is usual with cartels to break due to the most efficient company to break out.
      Germans are thinking they are working for all these peripheres, while we are thinking German’s screw everybody else :)

      Some of the reasons why they might be better off is due:
      1. Higher level of savings/investments (including gold) for future goods and consumptions, so they did not drive prices crazy as some other countries with current over-consumption. Such domestic capital might be employed locally easier if it cannot find some better place elsewhere (as it might be the case currently).
      2. More free-market labor laws causing labor to be less expensive than in countries where it looks cheaper (e.g. Spain) – for example no minimum wages except in some special professions, they are free to negoiate salaries, no legal severance package … This all means more employment and that workers are more careful to work properly increasing productivity too.
      Companies will (or at least they did) more willingly employ German worker than Spanish worker for example due to all of this.

    • bonbon

      (Hyper)inflation Fears in Germany

      Dec. 28, 2012 (EIRNS)—A new opinion poll carried out by the TNS Emnid institute shows that 42% of Germans fear that inflation will eat up the euro; only 29% believe the euro will remain stable. Contrary to official propaganda that inflation is staying low, prices for standard household goods, in particular food (milk, vegetables, bread, cereals, etc.) continue increasing, some by 10% and more. For the average citizen and family, inflation is already here, and felt every day.

  28. SMOKEY

    http://vimeo.com/55128811#

    This is one of the reasons RR6 is misguided by saying the USA is walking the green mile.
    Trackerville on the other hand may be doing the green mile, as is this current Gubmnt.
    Check it out and get inspired.

    • redriversix

      Morning Smokey

      Have a great day

      Barry RR6

      • SMOKEY

        Look at this video and admit you are wrong, I know you are and so does everyone else, just admit it and you can set yourself free.
        Once youve been inspired you too can become more creative and original.
        Misery loves company so move on from it.

        • redriversix

          Hey Smokey

          Misery does love company and I am not negative,I am a extremely positive person.

          But,it is far easier for people & Companies to make decisions based on reality rather than hope or spin.

          Tell people the truth,even it is negative and they can make positive decisions about their day,week or even their future.

        • redriversix

          Smokey I watched the video

          its great very positive and inspiring…..still does not contradict my opinion on the States.

          This video represents entrepreneurial spirit happening everywhere today..are you suggesting that America is the only Country in the World that has inspirational people..?

          For you To say that everyone knows I am wrong is just wrong and more proof of America or Americans [?] continuing to think they have the final say and “know” everything.

          15 of the 19 9/11 alleged hijackers were Saudi’s……What action was taken against Saudi Arabia..?

          America was wrong about Vietnam

          [ Eisenhower,JFK,LBJ,Nixon]

          Wrong In Somalia ,1993

          Wrong about Grenada Reagan ]

          Wrong about Panama [ Bush Snr ]

          Wrong about Niagara [ Reagen ]

          Wrong about Iraq [Bush Jnr ]

          Wrong About Afghanistan [ Bush Jnr ]

          Wrong about Laos & Cambodia [LBJ & Nixon ]

          Wrong about Chile & Pinochet [Nixon ]

          Wrong about Libya [ Obama ]

          Wrong about Iran [ Obama ]

          Wrong about Operation Eagle claw [Carter]

          Wrong about Guantanamo.

          Right about The U.S.S.R

          Right about Korea

          Right about WW11

          Wrong about the “Patriot act”

          Wrong about “Homeland Security”

          Wrong about Alan Greenspan

          Wrong about Timothy Geithner

          Wrong about Ben Bernanke

          Wrong about N.D.A.A. Act signed into law again ! 03/1/13

          Wrong about Military budget for 2013 passed at 633 BILLION Dollars [ Obama ]

          Wrong about Rubin & his deputy ,Lawrence Summers “repeal of Glass Steagal act 1999″ [Clinton ]

          America is destroying itself, please debate more than inspirational videos which can be found anywhere.

          Regards

          Barry RR6

          • bonbon

            Wrong about Obama – elected again… Obama is carrying out the destruction of the US which csnnot survive another 4 years of this. The British Empire, his owner, are near their objective. The BAE-Saudi apparatus of both 9/11-1 and 9/11-2 (Benghazi diplomat murders) has not been declassified by Obama as promised. This apparatus is now trying to start WWIII with Syria. Obama osama.

          • cooldude

            The median family wealth in the USA is now below the level of 1969. 47.7 million of their people are on foodstamps (modern soup kitchens). If you include all the people available for employment the unemployment rate is over 20%. The land of the free is fast turning into a completely split society where the 1% have ALL the wealth and the 99% are just debt slaves to do as they are mandated. I’m afraid Mr Smokey your facts do not bear scrutiny.

          • SMOKEY

            Well guys you all have it in spades. Jealousy and apparent disdain. Too f’kn bad for you. You are without a doubt all on the same page, by the way the Obama election is a disappointment to many and the alternative would not have been much better, the picture you paint is of a nation at the end of its rope.
            That is a crying shame you see her that way. Dont know where I said I know everything but you are all wrong about America walking the green mile. Now admit you are wrong and put it to bed.
            Without the awesome muscular inventive and creative American spirit, I believe all of us on this Island would be up the creek much further than we are.
            Even if I were to say her better days were behind her it still does not imply a nation on life support which double R six has suggested.
            America doesnt have to answer to, or for any of its short comings, and there are many, to some nobody bloggers in Ireland. She does too much good to have to listen to that kind of shit. Not perfect, but your gonna hit a few bumps along the way. And I agree about the Saudi reference 100%
            Let put it in terms that seem to be a popular and effective way of getting Paddys attention enabling him to understand on his level, i.e. anything to do with a ball and a net,
            As the late Bill Walsh,former head coach of San Francisco 49rs, once said to a critic of Joe Montana, “you are not good enough to wash his jockstrap”
            So I say to you from me the following:
            You who are jealous of America are not good enough to clean her sewers.
            Now, I will probably get a bollocking from D-Mac or the mediator for straying from the subject of the article, if so, Sorry Dudes. And hey, double R, its all good.S

    • Tony Brogan

      Why would you put the fox (central Bank) in charge of the hen house (economy) when it is easily shown that central bank policies are the basic cause of the problem in the first place.

      You will not get the truth from the MSM as they are funded by the same sources as the banks and brokerage house The minnows are being netted while the sharks roam free looking for more victims.

  29. bonbon

    This is the game the ECB and Japan are obviously being “invited” to join : Helicopter Money :
    Just look at what the Federal Reserve under Bernanke is doing. At the last FOMC meeting, Bernanke announced QE4. The Fed is now purchasing $85 billion a month in U.S. Treasuries from the banks, and an additional $40 billion a month in asset-backed securities. At this rate, the Fed is bailing out the too-big-to-fail banks at a rate of $1.5 trillion a year, using new helicopter money with nothing backing it up. After four more years of Obama, this alone would add $6 trillion to the existing $16.4 trillion debt, if the process were linear. And that is without spending a penny on job creation, infrastructure, etc. This is pure bailout of the bankrupt banks.

    • bonbon

      What is more, at the same time that QE4 was being announced by Bernanke, the Fed also announced plans to buy 90 percent of all the new future US Treasuries issued in 2013. Geithner has announced that the debt ceiling was reached on Dec. 31, 2012, but he will come up with magic tricks to extend the deadline for raising the debt ceiling by another 60 days. This means even more Fed printing of fake money, driving the hyperinflation.

      It is very clear the conscious policy of the British Empire is to bankrupt the United States through this bailout of their Wall Street apparatus.

  30. bonbon

    The Pecora Commission in the 1930′s opened the door for the Glaas-Steagall reform.

    More Pecora Potential in Germany; Lawsuits Against Transatlantic Mega-Banks, Filed in New York State

    Jan. 3, 2013 (EIRNS)–DZ Bank and HSH Nordbank have gone to court against several top banks in the New York State Supreme Court. On Friday, Dec. 31, 2012, DZ Bank sued Citigroup and RBS for fraud in selling mortgage securities in the range of EU485 million. HSH Nordbank AG filed suit against UBS AG and RBS, related to mortgage securities in the range of $204 million.
    Both plaintiff banks said that credits, which were the basis for the bonds, were wrongly presented in the respective sales brochures. Both German banks suffered losses with these bonds.
    Already in the past, they had gone to court against JP Morgan Chase, Goldman Sachs Group, and Bank of America for the same matter.
    While HSH Nordbank is one of Germany’s troubled Landesbanken (which serve as regional central banks for the public Sparkassen), DZ Bank AG is the 4th largest bank in Germany by asset size; and it is the central institution for more than 900 cooperative banks and their 12,000 branch offices, with about 30 million clients.
    It is useful, that, in line with the mounting legal cases against Deutsche Bank, such lawsuits are filed — which make ever more clear the urgency of going with a clear banking separation policy.

  31. joe hack

    Money can only be about trust

    Basing money on earthly corpus stuff is nonsense’s – if the Maldives suddenly finds 100s of tons of gold this small island then dictates to the world and the result is inevitable… it won’t just the Argentinians that will be claiming the Maldives

    Money based on stuff breeds insecurity, insecurity beads fear – fear breads wars

    Tracker /yields /bonds /hedges /pensions/paddy power… this is gambling – never give money to alcoholics or gamblers-
    - the likes of George Soros calls himself philanthropic, he takes money by gambling on other peoples lively hoods and directs it to his pet projects (some very political motivated) he decides where billions are spent and not the people via elected governments, he is a dictator.

    Paul Ferguson above makes valid and interesting points

  32. joe hack

    Malvinas Argentinas not the Maldives

    • Er.. Thats The Falklands …Mate

      • joe hack

        oye….Malvinas Argentinas…che

      • bonbon

        President of the Argentine Republic Cristina Fernández de Kirchner’s letter to David Cameron (Published in The Guardian newspaper)

        Buenos Aires, January 3rd, 2013

        Mr Prime Minister David Cameron,

        One hundred and eighty years ago on the same date, January 3rd, in a blatant exercise of 19th-century colonialism, Argentina was forcibly stripped of the Malvinas Islands, which are situated 14,000km (8700 miles) away from London.

        The Argentines on the Islands were expelled by the Royal Navy and the United Kingdom subsequently began a population implantation process similar to that applied to other territories under colonial rule.

        Since then, Britain, the colonial power, has refused to return the territories to the Argentine Republic, thus preventing it from restoring its territorial integrity.

        The Question of the Malvinas Islands is also a cause embraced by Latin America and by a vast majority of peoples and governments around the world that reject colonialism.

        In 1960, the United Nations proclaimed the necessity of “bringing to an end colonialism in all its forms and manifestations”. In 1965, the General Assembly adopted, with no votes against (not even by the United Kingdom), a resolution considering the Malvinas Islands a colonial case and inviting the two countries to negotiate a solution to the sovereignty dispute between them.

        This was followed by many other resolutions to that effect.

        In the name of the Argentine people, I reiterate our invitation for us to abide by the resolutions of the United Nations.

        Cristina Fernández de Kirchner
        President of the Argentine Republic

        Cc: Ban Ki-moon, Secretary-General of the United Nations

      • joe hack

        Yep my parent’s sperm and egg had Irish flags on them and a picture of the pope…. Stockholm syndrome for the masses

  33. joe hack

    “Paul Krugman Finds Tim Geithner’s Resignation ‘Reassuring’”

  34. Tony Brogan

    Professor Polleit explains why fiat currency systems produce ‘collective corruption’

    Submitted by cpowell on 05:02PM ET Friday, January 4, 2013. Section: Daily Dispatches
    8p ET Friday, January 4, 2012

    Dear Friend of GATA and Gold:

    An interview done this week by GoldMoney’s Andy Duncan with the German economics professor Thorsten Polleit, in which the professor explains why fiat currency systems lead to “collective corruption,” delighted your secretary/treasurer because it reminded him of something a high school graduate said at GATA’s Washington conference in 2008 (http://www.gata.org/node/6242):

    “The problem with central banking has been mainly the old problem of power — it corrupts.

    “Central bankers are supposed to be more capable of restraint than ordinary politicians, and maybe some are, but they are not always or even often capable of the necessary restraint. One market intervention encourages another and another and increases the political pressure to keep intervening to benefit special interests rather than the general interest — to benefit especially the financial interests, the banking and investment banking industries. These interventions, subsidies to special interests, increasingly are needed to prevent the previous imbalances from imploding.

    “And so we have come to an era of daily market interventions by central banks — so much so that the main purpose of central banking now is to prevent ordinary markets from happening at all.

    “Central banking controls the value of all labor, services, and real goods, and yet it is conducted almost entirely in secret — because, in choosing winners and losers in the economy, advancing infinite amounts of money to some participants in the markets but not to others, administering the ultimate patronage, central banking cannot survive scrutiny.

    “Yet the secrecy of central banking now is taken for granted even in nominally democratic countries.”

    That is, money creation is power, infinite money creation is absolute power, and as Lord Acton said so famously, “Absolute power corrupts absolutely.”

    Professor Polleit backs it all up with some Austrian School economics in 27 compelling minutes at GoldMoney’s Internet site here:

    http://www.goldmoney.com/podcast/thorsten-polleit-discusses-collective-c

    CHRIS POWELL, Secretary/Treasurer
    Gold Anti-Trust Action Committee Inc.

  35. Tony Brogan

    http://www.tonybrogan.com/wp-admin/post.php?post=14&action=edit

    If you are not buying Gold and Silver, Don’t blame me by Mark Lundeen
    Very insiteful essay with supporting graphs.

    Posted at http://www.tonybrogan.com

  36. Tony Brogan

    The Central Banks by the Daily Bell posted at

    http://www.tonybrogan.com

  37. Submarine Torpedos

    This article is written with a pecerption viewpoint located under water .Its scope can rise when near the surface and only then can it see what might be moving nearby .Even that is limited because it is scared sh*t going to the surface doing so in case it encounters opposition.

    Its already too late if that happens and the remaining life of the occupants is where they are …’underwater’.

    Getting to the surface unscathed is an extraordinary achievement and being able to locate an enemy is just egg on toast .This experience is quiet often hugely under-valued and must be counted and achieved first before release of the torpedos .

    Again ‘some’ promulgate the art of ‘self-distruction’ with a sense of dual polarity orchestrating from depts of mass issuances and torpedoing to a blind object unseen and unknown except that its mass is made of metal and its echo chimes the size of a certain air bubbles .

    The salivating feral mindset hearded and ‘not shepard’ is not even like sheep to the slaughter or voting turkeys for christmas .Instead it is a ‘Pied Piper’ renditioning ‘I did it my way ‘ dressed in a naked ambition or ‘Opps I did it again’ when the virginity of having untouched money value is lost foever .Or a ‘blow-out’ , out of sight.

    The blindness from the deep depts underwater is ‘Real’ in the same way as the ‘Vision’ of the planets is real viewed from a space-craft .Vision is scarce underwater and blindness is not an issue from a space.

    Crafting the perception of a peace of mind with a hard metal that has a gloss only when the sun shines on it is like following the obsessed , duped doodle doo-dahs down Graftons Street to view the shinning stones completely covered in false sunlight with massive output only to Fool You to believing that you part with your ‘Exchange’ and then maybe then you will have Nothing .

    Wehen this metal is taken home there is no high volume sunlight pumping the mass voltage on to it and the shine you were induced into has not just lost its appeal but so have you lost everything and you know that when after the knock on the door you meet a stranger / sheriff / debt collector who then demands all what you have and valuing your metal at a small fraction of what you paid for it .

    In the meantime the vested interest continue to seel more metal and rub their hands with super profits .

  38. redriversix

    Good Morning

    A quote…….”The doors of the nations which are closed must be battered down………..Concessions obtained by Financiers must be safeguarded by ministers of state , even if the sovereignty of unwilling nations be outraged in the process”….unquote

    Princeton University President & former governor of New Jersey Mr Woodrow Wilson in 1907.

    Elected President of the United States in 1912

    thoughts ?

    RR6

    • bonbon

      Andrew Jackson destroyed the Second National Bank of the US, later Teddy Roosevelt prepared the Federal Reserve Act, signed into lay by Wilson. Wilson then sent the US on the wrong side of WWI, a war forecast by Bismarck, and the British Empire emerged global, with the US firmly in its claws.

      FDR made the best moves against this with the Reconstruction Finance Corp, directed towards a now urgently needed US National Bank. The FED must be brought back into Treasury, revering a century of financial empire that is now imploding. Glass-Steagall is the way to do this, now, abruptly, radically.

      Helicopter Ben Bernanke is shown to be driven completely insane – his FED cannot work, except to bankrupt the US which is clearly Obama’s British objective.

      • redriversix

        Hey Bonbon when you say “the wrong side of WW1″ are referring to the timeline ? i.e 1917…?

        Wilson got reelected in 1916 with the promise of keeping America out of the War…..

        Then realized America could not benefit financially from Victory if they were not involved and had a change of heart…….in 1917

        but the military had been “gearing up ” for some time before that.

        • bonbon

          Whenever the USA gets fooled into supporting colonial wars such as WWI, Vietnam, it destroys itself, as Britain intended. JFK realized this and was murdered so Vietnam went ahead.

          Woodrow Wilson re-launched the then-dead KKK from the White House, so named by Teddy Roosevelt himself trained by his condemned Confederate uncle.

          Wilson was the worst of the Versailles Treaty gang, paving the way for WWII.

          Now a Versailles II yoke on the entire transatlantic region is paving the way fro a New Dark Age.

          • redriversix

            Hey BonBon

            George Washington Gordon a confederate General is widely credited with forming the first KKK clan.died of natural causes in 1911 [born 1836].

            Cannot find any connection between him and Teddy Roosevelt…?

            President Coolidge was Klan,……regarding Harry S Truman ,he applied in 1920 for membership and than thought better of joining..or he was a member for two years and left after falling out with Klan leaders because Catholics were not allowed join..depending on were you find your research.

            Wilson was a signature on the treaty of Versailles but had a more moderate view to Germany’s punishment as his advisers felt that if the punishment was too great it could lead to another War.

            After his 14 point plan he championed the League of Nations whose goal was to prevent future War,….amongst other agenda.

            In the end America never joined the League of Nations as Wilson could not get the support for it.

          • bonbon

            Teddy Roosevelt’s uncle was James Bullock, British spy. Assassination of McKinley put that treason into the White House. WWI really began with the British-Japan war against China, removal of Bismarck and McKinley paved the way to the later phases. Woodrow Wilson personally promoted Birth of a Nation which lionized the racist KKK from the White House.

          • bonbon

            Woodrow Wilson was on the British Empire’s Versaille I side, treason enough. Colonialism, FDR told Churchill, must end. The recent provocation of awarding vast Antarctic areas to the Queen is a timely reminder of FDR’s intention.

    • We took out eye off the ball and got thrashed 9-3.
      Never again.

  39. bonbon

    Bad Day for the Banksters and Their Fellow Travellers

    Despite the seemingly unlimited human sacrifices willingly offered to the banking gods by stupid and morally bankrupt governments, notably our own, the banksters and their fellow travellers continue apace with their gambling and wanton criminality, bringing us ever closer to a complete financial and economic collapse.

    Three news articles from the past 24 hours illustrate the point and make clear the need for an immediate Glass Steagall implementation across the entire trans-Atlantic financial system. A new Pecora Commission is also urgently needed and that body will certainly have its hands full for a while cleaning up a cesspool of criminal activity from Switzerland to Wall St and of course its ultimate source — the City of London.

    Switzerland’s oldest bank shuts after 250 years due to massive fraud

    Central Bank finds major problems with stockbrokers

    Inter Alpha’s Royal Bank of Scotland subsidiary Ulster Bank to shut down 20 branches in North and South

    Add that to the report above on German bank lawsuits

  40. Deco

    Bill Gross making commentary concerning the Bond market

    http://www.chicagotribune.com/business/sns-rt-us-investing-pimcobre9020gs-20130103,0,6384605.story

    The bond market is getting nervous.

    • redriversix

      Fully Support you Deco about the coming bond collapse,this should be shared , preached , shouted out from the highest point.

      I hope we are wrong…doesn’t look like it today.

      Best
      Barry RR6

    • redriversix

      BonBon

      I believe your last post to be historically wrong.

      • Bonbon is an old program who needs a firmware upgrade to allow access to the latest information databases and techonlogies. He is living proof that sanctions work. Apparently he was designed and build by the Russians in the days when Pentium processors were hard to come by in Moscow

        He is the prime exampele of what can be achieved with an 8086 processor and some cunning. Less is more

        Hope that helps

      • Tony Brogan

        Which is his last post?
        The Last Post?
        you mean that is it from bon bon?

        • Thats it. The last post. Bonbon can never be reconnected to the mothership. He is 500 million light years away and will perish within days. I spoke to him personally and assured him that we will remember his contribution to the cause of Old Ireland and he seemed happy at the mention of us putting up some sort of plaster plaque in his half parish.

          When I reminded him that there was a case of Foreign Extra behind the cockpit visor it did wonder for his spirits. We even joked. ‘Great way to go out old boy’ etc etc etc

          Yes he was much more consolable when I put that to him god bells his heart. He sepeficically asked that the plaque be made by proper Hirishmen like the brothers over at Quinn Cement. I said leave it with me wink wink

          The sad truth. Bonbon reached the the limits of his processing power (kaput) and he sprung memory leaks right left and centre. It was an ineffiecient repair and already the government had made it’s decision of the technologies to replace him. He was in short …. redundant but he knew it and chose to accept it and die like a true Irish hero in the Connolly tradition

          We have concluded that is more cost effective to start again from scratch preferably using the technologies espoused by our advertising sponsors

          Good night. Rest tight and hit the pillow and take inspiration from a true Irishman who loved his country enough to die for it.

        • redriversix

          hahaha..!!!

          very good Tony

          “can you hear the last post ..?

      • bonbon

        Which one would that be, pray tell?

  41. Harper66

    The promissory notes are an accounting instrument adopted by an insolvent country as a means of getting the sufficient funds to bail out an insolvent bank.

    These notes have been the subject of a massive amount of misinformation and spin. This is an attempt to excuse the inexcusable.

    Example one – Despite prominent politicians suggesting the notes were not paid last year the truth is that they were paid.

    http://brianmlucey.wordpress.com/2012/12/17/are-ministers-deceiving-themselves-or-deceiving-us-on-the-anglo-promissory-notes/

    The notion of the “true cost” of the bonds is laughable. Who knows how many twists and turns are left in the sorry tale of the promissory notes.However this much is certain just as the money was created in order to be borrowed so too it must be repaid in order for it to be destroyed.

    So ignoring the spin and down right lies one thing is for certain Ireland owes 30 billion and must either find that money from what it takes in or we must borrow it. And if it is borrowed it will incur interest.

    http://thechatteringmagpie14.blogspot.ie/2012/01/anglo-promissory-notes-explained.html

    • bonbon

      Either, or? You know there will be defaults – better to burn the bondholders now. Glass-Steagall as step one to recovery. Removing the synthetic monetized debt will show the true cost of bonds.

  42. bonbon

    Bad Day for the Banksters and Their Fellow Travellers

    Despite the seemingly unlimited human sacrifices willingly offered to the banking gods by stupid and morally bankrupt governments, notably our own, the banksters and their fellow travellers continue apace with their gambling and wanton criminality, bringing us ever closer to a complete financial and economic collapse.

    Three news articles from the past 24 hours illustrate the point and make clear the need for an immediate Glass Steagall implementation across the entire trans-Atlantic financial system. A new Pecora Commission is also urgently needed and that body will certainly have its hands full for a while cleaning up a cesspool of criminal activity from Switzerland to Wall St and of course its ultimate source — the City of London.

    Switzerland’s oldest bank shuts after 250 years due to massive fraud

    Central Bank finds major problems with stockbrokers

    Inter Alpha’s Royal Bank of Scotland subsidiary Ulster Bank to shut down 20 branches in North and South

    Add that to the report just above on German bank lawsuits

  43. Colin

    David,

    The Irish Government are gonna do diddley squat. They prefer to do nothing. You have to get to grips with this mentality. Helping out young people goes against the grain of middle aged middle class Ireland. Young people are there to be despised and burdened and lab rats to undergo as much suffering as possible – that’s the view from Official Ireland.

    You have a lot of patience to be still living and working in Ireland. Lunatic Asylum comes to mind when I think of a description to describe the place I call home.

    Having said that, the pubs in Limerick were jammed over ‘The’ Christmas, as the locals call it.

  44. Good article for marketers

    “so few websites aggressively moderate their comments threads, it is in their financial interest to have as incendiary a thread as possible, all the better if the original article is relatively innocuous as that allows the website to say, “hey, don’t blame us for lowering the tone, it’s those damn internet users and their trollish behaviour”

    http://www.boomingback.org/2013/01/the-true-value-of-john-waters.html

  45. Tony Brogan

    Hi Tony,

    No need to apologise. I don’t think either of us are going to convince the other so I’d imagine we’re going to conclude with a mutual respect for each other’s dislike of the current system. That being said my responses to your points are below.

    NO VERY LITTLE. MINING PROVIDES LESS THAN A 2% INCREASE IN SUPPLY OF THE AMOUNT HELD BY CENTRAL BANKS. AND AROUND HALF A PERCENT PA OF THE TOTAL AMOUNT OF GOLD HELD EVERYWHERE.

    I accept point 1 above is weak when the commodity in question is gold. The amount of it can’t fluctuate too much. On point 2 though do you not accept that, under a gold standard, if the population of an area (or the amount of products and services) doubled that prices and wages would, roughly speaking, have the halve for everyone to have the same standard of living? I’d imagine you do agree on that point.

    THERE IS NO SITUATION WHERE THE MONEY SUPPLY OF GOLD COULD DOUBLE IN A SHORT SPACE OF TIME SO THE POINT IS IRRELEVANT. HOWEVER THAT IS WHAT HAS HAPPENED WITH THE FIAT MONEY PUMPED BY THE CURRENT SYSTEM AND WE SEE THE DISASTER UNFOLDING AROUND US. THIS IS IMPOSSIBLE WITH A GOLD STANDARD OR A MONEY SYSTEM BACKED BY GOLD.

    That being the case we’re going to differ over whether we think people would welcome this situation or not. We may welcome lowering prices. It’d hard to see that we’d welcome lowering wages though.
    I’m suggesting that in the event of a doubling of the population we’d double the fiat money supply such that wages and prices could remain the same. If we did it carefully enough it could work very smoothly. I agree that doing it carefully enough is the challenge open to abuse but I’m proposing the most transparent system I can design to safeguard against this as best as possible.

    TRANSPARENT OR NOT IT IS TOTAL FOOLISHNESS TO PROPOSE DOUBLING THE MONEY SUPPLY. I REPEAT WHO IS TO BE THE JUDGE HOW MUCH IS ENOUGH. IT IS A DELUSIONAL SUGGESTION AND HAS BEEN PRACTICED FOR THE LAST 100 YEARS TO THE UNFOLDING DISASTER.

    Next, If Ireland were to host the European championships the amount of economic activity would increase and then decrease suddenly after the event. I’m saying the smoothest way to accommodate this would be to increase the money supply before and then reduce it after the event. You’re saying that there would just always be enough money before and then not too much after. Can you elaborate? How would there just be enough whenever more is needed? There is always a demand for money. The world is in fixed supply. But even Ireland operating its own currency would be a fixed supply.

    THE DEMAND FOR MONEY IS DEFINEDAS THE WISH TO HAVE MORE OF IT OR IT IS SAVINGS. tHE SAVERS ARE NOT SPENDING. lESS SPENDING PUTS THE VALUE OF GOODS AND SERVICES DOWN A LITTLE. sAVING THE MONEY INCREASES THE DEMAND AND RAISES THE VALUE OF THE MONEY. THESE RAISINGS AND LOWERINGS ARE INCREMENTAL BUT NEVER THE LESS REAL. THOSE PEOPLE WORKING AND SPENDING AS USUAL FIND THEIR MONEY STRETCHES FURTHER AS MILD DEFLATION IS INDUCED TO THE ECONOMY. ALL PEOPLE ARE BETTER OFF. MONEY IS DEFINED IN PRECIOUS METALS AS A WEIGHT NOT A VALUE. A GOOD COSTS SO MANY GRAMS OR FRACTIONS OF A GRAM. AS SAVINGS INCREASE THERE IT IS ABLE TO BE USED TO PURCHASE OR DEVELOP CAPITAL. PLUS SOME SAVERS SEEING PRICES CHEAPER THAN THEY WERE MOVE BACK TO CONSUMPTION AND THAT PUTS THEIR MONEY BACK INTO CIRCULATION AND THE PROCESS IS REVERSED. AS THIS HAPPENS THROUGH MILLIONS OF INDIVIDUAL DECISIONS THERE IS A SORT OF EQUILIBRIUM IN THE ECOMOMY. AS SUCH THE MONEY IN CIRCULATION OR SAVINGS EXPANDS AND CONTRACTS IN RESPONSE TO DEMAND.tHUS THE AMOUNT IN CIRCULATION IS REGULATED BY DEMAND AND IS ALWAYS ENOUGH.

    Perhaps you mean the velocity of gold could increase/decrease according to our needs but again for this to happen under a fixed money supply prices and wages have to decrease/increase. I just don’t think price levels and wages would lower quickly enough for there to be ‘excess’ money with which to fund the smooth hosting of the championships. This would apply to any large project including some that could really improve the quality of life for the people of an area. Can you imagine a council proposing a new hospital and then explaining to people that they expect economic activity to increase by 20% so they’re asking everyone to lower their wages and prices to around 84% of what they are now? I’m saying creating around 20% more money and not consulting anyone would be a much smoother way of doing it.

    THIS IS RIDICULOUS AS THE LOCAL COUNCIL OPERATES IN A WIDER ECONOMY AND THE SAVINGS ELSEWHERE ARE ADEQUATE TO FUND ANYTHING YOU WANT. THE GREATEST AGE OF INDUSTRIALIZATION HAPPENED IN THE LATE 1800′S AND HAPPENED EFFICIENTLY WITH PRIVATE CAPITAL FROM PRIVATE SAVINGS RAISED FROM PRIVATE PEOPLE. MONEY TRAVELLED THE GLOBE TO WHERE IT WAS NEEDED THE MOST. UNDER A GOLD STANDARD TOO.

    On point 3 I think we’ll agree that it’s not possible for a country to be a net exporter or net importer for very long if all countries were under a gold standard.Under any standard I know you may think ‘Why should a country get to import more than it exports?’ but we can’t expect all countries needs to exactly match the resources they can offer to others all of the time.
    OF COURSE NOT. OUR PROBLEM IS THE WORLD AGREED UNDER DURESS TO HAVE THE US DOLLAR AS THE RESERVE CURRENCY. ORIGINALLY HELD IN CHECK BY BEING BASED ON GOLD (A QUASI STANDARD BOUND TO FAIL WHICH IT DID) BUT WHEN RELEASED FROM ANY RESISTANCE TO EXPANSION FUNDED THE GREATEST BINGE THE WORLD HAS EVER SEEN. THE US HAS RUN A DEFICIT FOR OVER 50 YEARS AND OTHER COUNTRIES SURPLUS ACCOUNTS. NOW THE US IS BANKRUPT AND THE CREDITOR NATIONS HAVE SUPPLIED GOODS THAT THEY MAY NEVER BE PAID FOR AS THE BONDS HELD ARE ALMOST CERTAIN TO BE DEFAULTED UPON.

    THIS IS WHAT HAPPENS WHEN YOU MEDDLE WITH THE MONEY SUPPLY. DISASTER LOOMS.

    The perfect example is Iceland. We know that it is possible for our productive capacity globally to support the population of Iceland. All the Icelanders do their 9 to 5 like the rest of us and so on. It’s not like we’re shipping free lunches to them. If we adopted a world wide gold standard then after a while Iceland would have to wait ’til it sold exports in exchange for gold before it could import anything. People just couldn’t enjoy the same standard of living there as they do now purely for economic reasons when of course, as a globe, we can support a good standard of living there.
    I DO NOT KNOW WHAT YOU ARE TALKING ABOUT. NOBODY CAN BUY WHAT THEY CAN NOT AFFORD WITHOUT GOING INTO DEBT

    Luxembourg is another good example. Imagine it could only import an equivalent amount to that of its exports. Not many people could live there because of an arbitrary boundary over which the amount of gold that crosses must balance to zero in the short term. The argument could be applied to any arbitrary boundary. If you think a country shouldn’t continuously import more than it exports then why should a province do so? Why should a town and so on?

    YOU ARE NOW TALKING RIDDLES AND OFF THE SUBJECT. ANY BUSINESS IS THE SAME AS ANY COUNTRY. THEY CAN PROFIT DOING WHAT THEY DO WELL OR DIE. SAME AS AN INDIVIDUAL. OCCUPY YOURSELF AT THE HIGHEST UTILITY AND YOU MAKE MORE MONEY OR PROFIT ON YOUR LABOUR OR HUMAN CAPITAL THAN OTHERS. EACH DOING THAT BENEFITS THE WHOLE. INNOVATIONS AND EFFICIENCIES INDUCE A DEFLATIONARY ELEMENT TO THE ECONOMY. EVEN THE POOREST BENEFIT WITH THE SUCCESSFUL EVEN MORE. THE INCOME LEVELS ARE CLOSER TOGETHER AND THE SPREAD IS LESS.

    So can we agree that for the optimum running of the global economy some countries need to be net importers continuously? In which case a strict gold standard would be unfit for purpose?

    NO I DO NOT AGREE WITH THIS AT ALL.
    ABSOLUTE RUBBISH. IMPOSSIBLE. GOLD IS THE STANDARD AGAINST WHICH ALL CURRENCIES RISE AND FALL. ONLY IN YOUR WORLD OF FIXED CURRENCY RATES WILL IT BE POSSIBLE FOR THAT MANIPULATION TO TAKE PLACE. WE HAVE COMPETITIVE DEVALUATIONS TAKING PLACE TODAY ON A GLOBAL SCALE AS EACH COUNTRY TRIES TO OUT MANEUVER THE OTHER TO AN ADVANTAGE IN CURRENCY. ALL CITIZENS ARE THUS SUBJECTED TO INFLATION OF CURRENCIES AND A PLUMMETING STANDARD OF LIVING.

    IN BC SINCE 1970 THE STANDARD OF LIVING FOR THE AVERAGE SKILLED LABOURER HAS DROPPED BY AN ASTOUNDING 55%. THAT IS, HIS HOUR OF LABOUR BUYS 45% OF WHAT IT DID 40 YEARS AGO AND THAT IS ON GROSS INCOME AND NOT NET OF TAXES. I SUSPECT IT IS WORSE ON AN AFTER TAX CALCULATION.

    China is a good example of a country which is happy to be a net exporter continuously by the way. I don’t think this is so much due to the current debt based monetary system which encourages exporting. I think it’s more due to the fact that they want to maintain high employment. I can see plenty of countries happy to be net exporters under my debt-free fiat currency proposal too for the same reason, even though it would mean they’d have to continuously destroying some money to do so.
    YOU HAVE NOT THOUGHT THIS THROUGH AT ALL. WHY ARE THEY CONTINUOUSLY DESTROYING MONEY. ONLY UNDER A DEBT BASED FIAT CURRENCY WHERE MONEY IS ISSUED AS A LOAN IS THERE A REDUCTION IN THE MONEY SUPPLY AS A DEBT IS REPAID. IF YOUR SYSTEM DOES THAT IT IS STILL A FIAT BASED PAPER MONEY CURRENCIES BACK BY NOTHING AND SUBJECT TO A COLLECTION OF BOFFINS TO DETERMINE HOW MUCH IS ENOUGH OR TOO MUCH.

    ONLY A SPECIE MONEY, AND HISTORICALLY PROVEN TO BE THE MOST ACCEPTABLE TO THE GREATEST NUMBER OF PEOPLE IS GOLD AND SILVER, OF RELATIVELY FIXED SUPPLY AND RELATIVELY RARE MAKES IT PRECIOUS. IT IS DURABLE AND DOES NOT DECAY. IN COIN IT IS HARD TO COUNTERFEIT. IT IS EASILY DIVISIBLE INTO MILLIGRAMS OR MULTI TONS, IT IS FUNGIBLE MEANING EVERY UNIT IS IDENTICAL TO EVERY OTHER UNIT.. IT IS A STORAGE OF WEALTH. A LARGE VALUE CAN BE STORED WITH A LITTLE VOLUME. IT IS IN SHORT THE FINEST MONEY EVER DEVISED BY MANKIND.
    AND IT CAN BE USED DIGITALLY IN THOUSANDS OF A GRAM OR OUNCE. PEOPLE WILL CARRY DEBIT CARDS WITH WHICH TO PAY FOR GOODS ETC. JUST AS THEY DO NOW.

    THERE IS A REASON THE CENTRAL BANKS DESPISE IT. IT IS THE ONLY THREAT TO THEIR POWER OVER GOVERNMENT THROUGH THE FIAT CURRENCIES AND THE CENTRAL BANKS THAT CONTROL IT. IT DESTROYS THEIR PROFIT CENTRE OF DEBT BASED CURRENCY WHICH RIPS OFF MAN WOMAN AND CHILD.IT IS ATTACKED AND MANIPULATED DOWNWARD THROUGH THE USE OF PAPER PROMISES, FUTURES AND DERIVATIVES. NOW THEY ARE SO DESPERATE THAT THERE IS ONLY ONE OUNCE OF GOLD AVAILABLE FOR EVERY 100 PAPER OUNCES TRADED. IT ONLY REQUIRES 2% OF THE MARKET TO DEMAND PHYSICAL DELIVERY AND THE SYSTEM BLOWS UP AND THE FINANCIAL MESS WITH IT. THE BOND BUBBLE IS SITTING ON A THOUSAND PINS THAT ANY ONE COULD CAUSE THE POP.

    THERE IS A REASON THE CHINESE AND MOST OF THE WORLD ARE FEVERISHLY BUYING ALL THE PHYSICAL GOLD THEY CAN GET THEIR HANDS ON BEFORE THE THE PRICES BLOW SKY HIGH. YOUR PAPER MONEY SYSTEM HAS A GOOD START BUT NEED HUGE REVISION.AS TO ME IT LOOKS LIKE A PAPER CHINESE LANTERN OF NO SUBSTANCE BUT PRETTY TO LOOK AT.

    YOU ARE IN MY OPINION LEADING PEOPLE ASTRAY BY POINTING OUT THE PROBLEMS OF THE CURRENT MONEY SYSTEM AND PROVIDING A FAULTY SOLUTION. IT IS TRUE THAT THE CENTRAL BANKS ISSUE TO THE COMMERCIAL BANKS WHO THEN CREATE A LOAN TO INCREASE THE MONEY SUPPLY AND IF THE LOAN IS REPAID THE MONEY SUPPLY SHRINKS; BUT THAT IS ALSO TRUE OF THE CENTRAL BANKS WHO ISSUE MONEY AS A LOAN OUT OF THIN AIR. THAT IS WHY THE CENTRAL BANKS MUST BE DESTROYED
    FRACTIONAL RESERVE BANKING MADE ILLEGAL.
    ALL STATE ISSUED MONEY SHOULD BE THROUGH TREASURY DIRECTLY.

    THE LEGAL TENDER LAWS MUST BE REPEALED. I SHOULD NOT BE FORCED TO ACCEPT FIAT NOTES IN PAYMENT OF DEBT IF I DO NOT WISH TO. PEOPLE SHOULD BE ALLOWED TO USE WHATEVER CURRENCY THEY WISH TO USE AS MONEY. AS A FREE PERSON I NEED TO BE ALLOWED THE FREEDOM TO OPERATE MY FINANCES ANY WAY I WISH.

    SILVER AND GOLD COIN MUST BE ALLOWED TO TO CIRCULATE ALONG SIDE THE PAPER MONEY AS A PARALLEL CURRENCY. AS A COMPETING CURRENCY IT WOULD KEEP THE PAPER NOTES HONEST AS PEOPLE WILL TURN TO THE BEST MONEY. SO LET THE MARKET DECIDE.

    ANY COIN OF RECOGNIZED WEIGHT AND PURITY CAN ACT AS SPECIE MONEY AND BE MONETIZED BY THE STATE.COULD BE ANY COIN SUCH AS AN AUSTRIAN PHILONOMIC, A CANADIAN MAPLE LEAF ETC. AND IRELAND CAN MINT ITS OWN COINS AS WELL. THAT PROPOSAL IS AT http://WWW.TONYBROGAN.COM FOR THOSE INTERESTED IT IS DESIGNED FOR CANADA BUT I WILL POST ANOTHER FOR IRELAND.

    THERE IS NO QUESTION THE WORLD IS MOVING TO A GOLD AND SILVER BASED MONEY SYSTEM SO WE SHOULD BE PREPARED.

    YOU CAN PUT YOUR PAPER MONEY IN TO CIRCULATION IF YOU WISH.
    I WILL SUPPORT MOEY ISSUED DEBT FREE FROM TRASURY.
    THE CENTRAL BANKS MUST BE CLOSED
    THE COMMERCIAL BANKS WILL BE SERVICE CENTERS AND NOT ALLOWED TO CREATE MONEY SO THE FRACTIONAL RESERVE SYSTEM MUST GO.
    AND GOLD AND SILVER COIN MUST BE ALLOWED TO CIRCULATE ALONG SIDE THE PAPER MONEY.
    aS THE NATION GAINS PRECIOUS METALS SAVINGS IT CAN CIRCULATE TREASURY BILLS FULLY BACKED AND REDEMABLE FOR SILVER.

    THEN I AGREE WITH YOUR PAPER MONEY SYSTEM. I ANTICIPATE THAT WITHIN 20 YEARS THE PEOPLE WILL OPT FOR THE ‘REAL’ MONEY AND GOLD AND SILVER BACKED CURRENCY WILL BE THE NORM IF THE PEOPLE ARE GIVEN A CHOICE.

    • Hi Tony,

      I want to go back to the point about a population and/or productive capacity increasing.

      If the population doubled the amount of gold per head of population would halve. Can we agree that to maintain the same standard of living for everyone economic activity has to double? i.e. Twice as many people would, loosely speaking, mean twice as many bakers needed to bake twice as many loaves etc. Can we agree that the price of each loaf of bread had to halve? Can we also agree that the wages of each baker has to halve?

      • bonbon

        Much better and from actual economic science is the relative potential population density of a cultural phase. This must increase, and in steps, with individual discoveries of principle.
        “Leaving the economy to itself” is a suicide recipe, a monetarist trait, as Arthur Griffith wrote.

        • Realist

          These two things are opposing in my views:
          1. “.. with individual discoveries of principle.”
          2. “Leaving the economy to itself” is a suicide recipe

          What is wrong with people and companies discovering new things, new methods, new ways of travel, new ways of living and so on?
          They always did and will continue so.

          Are you saying people are stupid to decide economically, but are smart to elect politicians democratically?
          I would always say 6 billion of people are smarter than a few thousand of politicians.
          What is wrong with leaving each person to satisfy their most valued wants ?

      • joe hack

        Or is it time to start culling the human population of? Follow the so called evil Chinese formula

        • bonbon

          The Troika culling formula – see below the IMF Nürnberg Defense “We could not have known the effect our our actions”.

      • Tony Brogan

        Paul
        If you are trying to implythat the income of each person falls under the scenaro you desribe it is not true.
        Firstly the chance of a populationdoubling overnight is an asurdity. Perhaps we will have another German reunification example but unlikely.
        Suppose. THe money supply is fixed. firsrt of all one has to redistribute the money. All in the possession of what is now a half. So it presupposes there is no money coming with the aquired half.
        Let us suppose then instead that the world population doubled. Now the economy adjusts as it grows the population.
        Presently the population growth is less than 2% pa which is the same rate as the growth of the gold supply used as money. Secondly there is this pool of unmonetised metal used as jewellry.

        Assume
        As the population increases then the amount of gold in circulation stays the same. Remember we do not assign a value to gold as it is describedas a weight.
        so the economy doubles and each unit of gold required in the transaction is reduced to half of what it was. That participant in the trade finds that the trade is still the same. his hour of labour buys what it did before it is just that the “money” required to effect the transaction is half what it was.
        The butcher, baker, candlestick maker all get whazt they used to for an hour of labour as the economy has not changed just the amount of gold needed to effect the transaction.
        It matters not to the economy who much gold there is as there is always enough. The question to answer is does it act as a medium of exchange.
        The answer is yes. The money is never (gold) consumed in the process but acts as a catalyst to effect the trade and passes to the next person.
        Effectively there is no drop in income as it is not measured in the same manner as currency.Your income and wealth is measured in what your output is worth per hour and do you exchange your labour for the things you require at the same rate.

        Measuring the economy as a unit of currency has lied to us and still does. Taking the monetary amount of the trade does not take the real economy into account. EG the US shows a GDP increase and everyone says they are growing. The real measurements of activity like units of electricty used or the amount of goods moved by ships(Baltic Dry Index) show a slowing of activity.
        People like John Williams at http://www.xhadowstats.com show the unemployment rates and the inflationrateswithout the calculated distortions.

        his stats show and unemployment rate well above 20% about 23% i recall the last time I checked and an inflation rate of about 8-9 percent.

        Subtracting the inflation rate from the rate of growth of GDP leaves a negative five percent (-5%) in real growth which is well in depression territory.

        This after a doubling of the money supply. The distortions embedded in to the economy because of the meddling and the wrong messages it sends leave such malinvestment that the economy is shrinking.Today it is recorded that each dollar aded to the economy actually shrinks the economy.
        It is the monetary road to madness.

        Short answer. With a fixed amount of money in circulation with gold or silver as money there is always enough and any meddling with the supply leads to distortions that create recessions/depressions.
        The butcher , baker, candlestick maker still earn what they used to if the population doubled as calculated in real terms.

        A gold standard is not monetarism as quoted by bon bon. Monetarism are the schools of economists that advocate controling growth by manipulating the money supply.
        The gold standard and use of specie as money is the opposite of monetarism as it brooks no interference with the money supply.

        mon·e·ta·rism

        /ˈmänitəˌrizəm/

        Noun
        The theory or practice of controlling the supply of money as the chief method of stabilizing the economy.

        Paul, your policy is monetarism
        The PM money system is not.

        • bonbon

          Both policies are monetarism, the Triple Curve shows why. They are simply Adam Smith sentiments.

          The physical economy, not monetary tokens of any kind, whether metal, paper, fiat or digital, is the key issue, and its Reconstruction. The Relative Potential Population Density is the only measure of value, and a commitment to increase this in steps, platforms, the basis for Public Credit – i.e. the Hamiltonian model firmly opposed to all British monetarist variants.

          • Tony Brogan

            Changing the definitions is your forte bon bon
            When it comes to the economy and money you are usually wrong.
            You quote but do not understand.
            Hamilton your favourate was a monetarist par excellance. Was a Rothschild agent and married into the family and a statist central banker. You propose exactly what has ruined us for all to see.

            You pratle about economic matters
            time for me to have breakfast here and go sailing . It is wonderful for the clarity of the mind. Try it sometimes it will work wonders for you.

          • Realist

            Last thing we want is to continue the same way as per Hamilton’s curse:
            http://mises.org/misesreview_detail.aspx?control=346
            http://mises.org/daily/3254

            He is the father of economic nationalism:
            http://mises.org/daily/6323/Founding-Fathers-of-Participatory-Fascism

          • bonbon

            von Mises et all have to resort to calling Hamilton and FDR fascists, “socialists”, statists. This is where they really lose it in public. Anyone that faces down Adam Smith, Laissez-faire, “magic of the markets”, Austerity, is now enemy number 1. Good. The Empire is on notice.

            von Hayek and Keynes both resorted to totalitarian states and “international agencies” resp. and the elimination of nation states exactly as the EU is doing. It is amazing how the traumatized (inflation victims) spout their torturers lines. But that is Tavistock “mother” at work.

          • Realist

            So, how you call states and central bodies who coerce money through taxes and inflation tax (money creation) for their own benefits ?
            Hamilton’s National Bank led to Central banking and is no different, so your ideas are no different.
            Total control of state is what you want so you cannot be called anyhow different than socialist.

      • Your.Country.Your.Fault

        hi Paul

        to follow your analogy, would this imply that savers are rewarded, and debtors are penalised?

        Tony, i note what you say about there being enough money to go around with a goldased currency, that’s true if money is only used for effecting a trascaion, and is not used before or after.

        when you consider savings and loans, however, the decreasing weight of gold required to effect a transaction mans that savings increase in buying power as the population increases and the supply of gold does not (and vice versa, savings decrease if more gold is ound and the population does not increase). That means that the butcher with 10 ounces of gold in the vult coudl decice to retire and let the candlestick maker and baker slug it out to serve a growing market with a fixed supply of gold to transact with, and his savings will allow him to buy far more ina few eyars time.

        Equally, if the baker is in debt, then a fixed amount of gold means that the ability to work off the debt (presumably denoted in weight, as you point out) diminishes as economic activity increases.

        So, a fixed gold supply (or one that could not increase as fast as population or economic productivity) would have serious impacts on savers and debtors. Lenders as well would have to face the likelihood of default and demand a very high return on their gold lent.

        Fiat money supply, in fairness, allows the economy to grow without these issues inbuilt.

        One of the great revolutions in money supply came when worthless bits of paper and coin coudl represent a “pound” of silver / gold etc. this means that you don’t need to verify that the gold you have is the right density and weight before accepting it as legal tender.

        There’s a lot to be said for trust-based currency.

        My father has a stack of ol coins, including some old roman ones. they all had bits shaved off them, and they were plain copper. Gold, as you point out, is fungible, so the incentive to steal it from coin is undeniable. Paper and less valuable metals obviate this desire as the return is not there.

        • Realist

          “So, a fixed gold supply (or one that could not increase as fast as population or economic productivity) would have serious impacts on savers and debtors.”

          Prices and interest rates are going to change to reflect the amount of money.
          Demand for money will increase and that will lead to price decreases and cheaper labour.
          It will mean your coin tomorrow will be worth it more, not less, and savers are going to benefit as they should.

          Banks will be aware of such too, so interest rates will be lower when more savers/investors or higher when no savers/investors.
          They are suppose to incorporate the risk factor when lending money and that is how they earn it, not like today, where they risk tax-payers money to save them.

          What do you think will happen to prices if we are somehow magically to wake tomorrow with 2 times more money in our pockets ?

      • Realist

        Hi Paul,

        True, but that does not affect economy at all.

        It only means that I would use half of money to replace my 10 minutes labour for 1 bread.

        Imagine if we are to wake tomorrow with twice more money in our pockets. What will happen to prices?
        The first day, people will rush to buy things until sellers realize and up prices.
        Prices might go 2-3 or more times up on some articles until people see it is not worth it buying it anymore.
        After a few days (or maybe months) prices will just come to be around 2 times what they were.

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