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| Extracting the Stone of Stupidity |
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| A flame |
CH4 + O2 → CO + H2 + H2O
Next, the hydrogen oxidizes, giving off more water vapor and energy:
2 H2 + O2 → 2 H2O
Finally, the carbon monoxide oxidizes as well, producing carbon dioxide and more energy:
2 CO + O2 → 2 CO2
This is quite typical of how we go about explaining just about everything we encounter. To understand the flow of traffic, we think about individual vehicles and the interactions between them. To understand epidemics, we think about the course of the disease in individual patients and the spread of infection from patient to patient. To understand how an industrial chemical affects an ecosystem we look at its effect on individual cells in individual organisms. We take a specimen, study its behavior, and extrapolate it to the population as a whole. This approach gives at least the illusion of explanatory depth; more importantly, it often allows us to establish cause and effect relationships and, based on them, make constructive changes that decisively influence the outcome: impose speed limits, quarantines and environmental regulations, respectively.
All money is debt. It is created when someone takes out a loan, promising to repay it (with or without interest) with proceeds from his or her future labor. If that promise is broken, the money ceases to exist. In the normal course of affairs, the lender then “loses” the money. If the lender loses more money than he happens to have, then the lender is bankrupted and, economically speaking, ceases to exist as well. What happened during the financial collapse of 2008 is that the real estate bubble burst and many loans went bad at the same time. The response was not to liquidate the lenders who lost more than they had, but to prop them up by issuing further loans that were not supported by any specific mechanism or realistic chance of repayment—just the compulsive thought that big financial organizations must not be allowed to fail because that would irreparably damage the system. Propping up bankrupt institutions by issuing fake money (or, more precisely, fake debt) has been assumed to be less damaging to the system than doing nothing.
This assumption would perhaps have been justified if the financial difficulties were, as was once thought, temporary in nature, that the economy would roar back to life and growth would resume. Now, three years later, we find ourselves back where we started, and this assumption no longer seems tenable. It is not clear why growth should resume, as many factors, persistently high energy prices among them, continue to weigh it down. We shouldn't bet on any more economic expansion, at least not in the developed world. As Richard Heinberg argues persuasively in his latest book, The End of Growth, growth has reached its limits, which are both numerous and insurmountable.
There is a plain and simple distinction between the two kinds of money: real money, which was lent into existence with a specific and realistic promise of repayment by a specific party, and fake money, which was dreamt into existence by a central banker without anyone specifically promising to repay it. Suppose a person walks into a grocery with fake money in his wallet, and buys something. This is no different from paying with counterfeit money: the grocer is getting robbed. But there is also a difference: the officially issued fake money is indistinguishable from real money. But just because you can't spot a fake doesn't mean that you aren't getting robbed. And so the fake money mixes with the real money and sloshes about the economy, robbing each person who touches it, until everybody is poor. Since poor people can't pay back big loans, the central banker's conceit that the fake money is debt seems rather unjustified. It is owed by the central banker to the central banker, and it would be foolish of us to expect him to ever work it off.
I am using the word “robbery” here not to indicate moral indignation or feigned umbrage, of the “I am shocked! Shocked to find that gambling is going on in here!” variety. I might even say that sometimes robbery is justified (“expropriation” or “commandeering” are its more polite, civilized variants). I am using it because the trick—paying with a fake—is an obvious one, and the result—the robbed party becomes poorer—is obvious as well. And so whether it is a retiree spending his deficit-financed social security check at the dollar store or a banker spending his bailout-financed bonus on lavish gifts for his trophy girlfriend, or a construction worker drinking his economic stimulus-financed paycheck at the bar, somebody somewhere is getting robbed—and becoming poorer.
Rest assured, I am not advocating letting people starve or forgo beer or anything of the sort. A warm bed and three squares a day is, to me, a human right. I am not interested in policy (nor are policymakers interested in me). But I am interested in making a specific prediction: that government and central bank efforts to stabilize the financial system and restart economic growth will do the exact opposite: they will destroy that which they are trying to save more completely although a little bit later. They are living on stolen time.
The alternative (in case policymakers suddenly decided to pay attention and were capable of taking on board such a radical notion) is a jubilee: full repudiation of all debts public and private and a ban on all repayments, repossessions and collection activities. This would force a full shutdown and cold restart of the financial system. But it will probably have to happen anyway. In the meantime, do your best to avoid getting robbed.
30 comments:
i can't remember if i read it here or elsewhere, so forgive me if i am re-posting, but have you read the article why Iceland is no longer in the media? (yes, it relates to repudiation of debt!): http://sacsis.org.za/site/article/728.1
countries can do this...do this as an individual... hah! it will land you in jail
i also have concerns about the convergence of two phenomena:
1) the growing private prison industry's influence over the legislature
2) the growing movement to prosecute unpaid debt, and resulting jail terms until the debt is paid
if they really want to stimulate the economy, they would either forgive unpayable student loan debt (unpayable due to unemployment), make it payable through national service (not just military either), or allow bankruptcy to include student debt. This would free up a lot of money that would be used to buy things..start businesses... the scam of student debt is the next bubble to cause havoc, eh?
i am 51, can only find a part time job after 5 years of looking, have an invalid wife, and between us two, we have 100K plus in debt and no assets at all. I was the first to go to graduate from high school in my family, and we took out student loans in better days to get graduate degrees based on assurances from then-current employers before the crash of 2008, and a period of lengthy unemployment plus older age plus the economy? ... what can one say, stupid... i am an artist and always knew i'd probably end my days in some dugout in the woods. but, my wife...
Did you see they have the Russian animated modern classic online that supposedly relates to the fall of the Soviet state? --Grey Wolf and Little Red Riding Hood - http://www.youtube.com/watch?v=aaXgeJjeiaA
a lot of truth there in that claymation...
Since the "value" of money is precisely "what someone will give you for it," calling some of it "fake"-- when it's just as good as any other-- misses a little.
What you've got, with a $100 bill-- is society's permission to use ~$100 worth of goods or labor from someone able & willing to make that transaction. We can't really have "too much" permission to use goods or services...
but (as with ration stamps) we can have more permission than we have goods.
We obviously don't have more permissions than labor; we have a distribution problem whereby the permission to use labor doesn't get to anybody with a legitimate use for it. Things need doing; people need things to do-- but connecting the two would damage people's "freedom"-- That is, 'freedom to hoard financial power at everyone else's expense.'
If the government were to issue more "permissions"-- and with them, permit more people to do useful things in exchange for food, beer, & books (even permit more people to educate themselves in various ways, that being a useful service to society in itself)--
this would not be "fake" money; it would be the real thing serving its proper role.
So it isn't the quantity that makes money fake (as long as stuff remains to spend it on) but the fact that it's been taken out of use and converted to juju! Which has most of us too scared to say boo!
That jubilee idea is a good one-- and so would be a reduction of property values to: "If you aren't using it-- worth the first offer you get from someone willing to live there, go into business there, etc." But something along WPA lines (only with fewer restrictions as to what activities to support) seems an even stronger need.
D.,
Ultimately, the point that you appear to be making is that to avoid being "robbed" one must learn to live without money-- am I right?
While there are some at present largely managing this, most of these people are still dependent upon others to provide a significant portion of their needs (woven blankets, boots, eyeglasses, etc.) and that these others that which they're dependent upon are tied into a larger "moneyed" economy-- one of which appears to be in its death-throes.
As there is only so much room in the fishbowl and room-to-roam to scavenge, perhaps a illustration on a barter economy would be helpful? ( I do believe you have done so in past writings)
The mention of how central banks created money was a helpful reminder to me, but I feel it didn't go far enough to illustrate how local banks are complicit in the scheme of money-creation or the creation of fake-money, though it would admittedly be a challenging topic to address in one post.
Lance Foster raises a point that cannot be ignored: the prison industry's influence over law and the criminalization of debt: one who is indebted cannot pursue a moneyed-free existence without legitimate fear of criminal prosecution. As many of these debts offer no recourse, one is such a position has but the choice to live as a slave to their debt or as an outlaw in the world that unfolds before us.
Happy sailing!
I think the term "fiat money" is redundant and obscures the basic fact that ALL money is fiat, gold- and silver-backed as well as floating money (U.S. currency actually floats, or floated, on oil, not air). Gold and silver have absolutely no intrinsic value. Money is a social construct, whether based on a precious metals or not. So to me, the term fiat money leads to a dead end, to people wasting time trying to bring us back to a gold or silver standard. Remember, those with the gold would then have absolute control over everything, as they did in the past, and I doubt anyone (other than gold hoarders, and let's face facts, we average Joes can't obtain enough gold to matter) would want to live in that kind of world again.
Other than that, the other points in this article seem well made and to the point. A debt erasure would be the only sane solution, especially as most of the debt was built on figments of the imagination. But sanity is not in rich supply these days.
Gold used as currency is debt.
Any intermediary used as currency is premised on debt.
The only debt-free exchange is barter... I'll cut down that dead tree and turn it into firewood, if you'll give me a dozen eggs every 2 weeks for the next ____ months.
Put a "money" item in the middle of it and you are creating a debt.
It's not that tough to understand, unless you actually do not want to see it or understand it.
People who argue that the USA needs to return to gold-backed money value are simply investors in gold, or investor wannabes.
I have no use for gold. I don't care how much gold you want to give me for my talents and my work services/products. I have no interest in the gold, and don't care how much value YOU have placed in the gold.
Gold works only to the extent you have a fellow gold-loving materialist/mercantilist to engage in commerce.
Commerce is dead, though. This should be obvious.
forrest - not quite. The point that I am making is that conjuring up injecting money into a resource-constrained economy that cannot grow does not stimulate it but kills it. All it does is drive up commodity prices and cause another crash soon thereafter.
jason - again, not quite. Life entirely without money is not possible for a great many people. I am making a much more general point, and avoiding getting robbed is much tricker than just doing without money. You have to think of what will remain useful once money becomes useless. (Hint: it's not gold or silver.)
brian - "All money is fiat" is just plain wrong. I can think of plenty of items that serve both as stores of value and as mediums of exchange that are definitely not fiat.
sumus - Gold isn't debt. If you had a time machine and wanted to take some money with you into the past or the present, gold is what you would take.
things that are worth more than money:
-reliably reciprocal social relationships/friendships/ family (there was a reason for intermarriage among strong clans in every culture around the world)
-health and its maintenance
-skills and knowledge worth using and trading (medical -human or animal, basic electrical/
machining/plumbing, etc., gardening, scavenging) etc., hunting and gathering
-good soil, timber, wild and diverse animals and plants
-WATER, water, water, especially good reliable water not connected to aquifers affected by fracking and other such mindlessness
-character (perspective, endurance, adaptability, versatility, resilience, reliability, loyalty, generosity, courage, humor, etc.)
these word verifications for comments are a trip-- mine is "fright" -heh!
I understand your point perfectly well. Adding money to a real estate economy makes no new land.
We are not at all constrained with the resource of labor; we have a lot of labor entirely wasted-- jailed, earning a living via disability, free-lance scrounging-- and probably much more labor misemployed in drug-dealing, guarding prisoners, tormenting poor people in various ways. Constructively injecting money into use of that resource would probably increase available concrete resources: less oil being used to ruin the soil, more food per acre, more thorough recycling-- as well as reducing the amount of labor being used to produce disservices.
Commodity prices are being driven up by speculation more than actual shortages. Because money injected into the financial sector has exactly the effect you're talking about. There has to be at least some fictitious source of that money's alleged growth; it used to be real estate mortgages & now it's commodities.
But there's no shortage of "real estate"; there's a shortage of real estate available for small scale agriculture, modest-income housing-- and even for small business-- We can see such real estate all around town here in San Diego, with "for sale or lease" signs on it-- but the 'need' to have that land make large profits for its owners is what renders it unavailable. That's not so much "money injected into" as "money sucked into" via government tax policies that favor owners vs users.
I look at the debit issue as the logical consequence of increasing inequality. Because money is lent into existence with the creation of debt, I argue that "too much debt" is just the other side of the coin of "too much idle cash" here:
http://squashpractice.wordpress.com/2011/09/12/debt-distraction/
Credit money (loaned into existence) is being destroyed (bad loans). However the fed is replacing it with base money (M0)which is a promise to print physical dollars. These promises are held in 'excess reserves' at the fed. When, not if, the velocity of money increases the fed will have to honor this promise to print or the banking system will collapse (run on the banks, hyperinflation). The printing is a response to hyperinflation, not the cause, but the result is the same. Debt destruction, the system clears, monetary reset. The casualty will be the world dollar reserve standard, american living standards will collapse accordingly as the US must trade, not print, for imported goods.
What a great article, and I love the comments as well. However it works out, we certainly live in exciting times!
Mr. Orlov has written expansively on the topic of housing, particularly that the U.S. has taken a very expensive and wasteful approach to housing its citizens. However, as he said earlier in the comments, what we can be sure of is that housing is a problem that will not go unsolved for long, as shelter is among the most basic human needs. Seemingly, however, we have decided as a society that this need involves a great deal more effort to secure than any of our other basic needs. As Forrest mentions, one reason housing is so expensive is that we have a class of society who derive their income from renting housing to people. Adam Smith wrote about this issue in the Eighteenth Century, showing that this is a very old problem, indeed. However, what he said has a lot to do with the housing bubble of the 2000’s. “A dwelling-house, as such, contributes nothing to the revenue of its inhabitant. If it is lett [sic] to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue, and the revenue of the whole body of the people can never be in the smallest degree increased by it.”
Another Smith quote shines some light on the issue of currency proliferation: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.”
Without getting into the distinctions of specie vs. fiat currency, I think this quote is helpful to the discussion as well. You can delve as deeply as you want into a definition of what money “is”, but the point remains that arbitrarily increasing the amount of money available will not also increase the amount of goods available to be obtained thereby. I see the distinction between goods and labor being made above. However, this doesn’t get us out of the woods. Increasing the amount of currency, even if it is spent on labor, will then put the currency in the hands of the workers who will want to spend the currency on goods. The bottom line is, at any given time there is only a certain quantity of a given good, and arbitrarily increasing the amount of funds available to purchase that good CANNOT make the good more available. It can only increase the price of the good, as more people are able and willing to pay more for it. I think, on a grand scale, this is what is happening that is inflating commodity prices. And, as Orlov has said, flooding the world with new currency does not accomplish the goal of patching up the failed financial system, it merely kicks the can down the road, with unintended consequences perhaps more dire than the original problem. However, getting past this, I don’t see the need for the forgiveness of all debts as mentioned in the Old Testament. Allow failed banks to fail. Allowing failed institutions to fail is how our society purges itself of businesses/institutions that are not viable.
flipjack -
How is "our society" not a failed institution?
Orlov,
I don’t know if I’m answering this question as you meant it, but I think the distinction I would make is between society and institutions whether they are businesses or government, etc. I don’t want to recite your own writings to you, but perhaps for the edification of my fellow readers/commenters, I would cite those featured in your book and on this site who claim you have an optimistic view of collapse. As I understand their meaning, it is to say that “society” is more resilient than institutions. Perhaps I’m using the wrong term. Perhaps culture or civilization would be more appropriate, but there is a persistent assertion in your writings that humanity can continue along post-collapse while maintaining a respectable degree of decency and civility. If this turns out to be the case, then I would say “our society” is not a failed institution. Institutions that our society relies on may be a different story. Whether this is “free market” or “Darwinist” thinking, I tend to think that freedom to fail is important. Letting banks know they are too big to fail assures them that they can behave however they like. Had banks been allowed to fail (I won’t get into descriptions of what the effect would have been on the general populace, I do not know) then these institutions, which basically NO ONE likes at this point, would have been replaced by new institutions (supply) servicing the same needs (demand). However, these new institutions would have needed to circumvent the same problems that brought down the old ones, and would have needed to make themselves appeal to their customers, and this is likely, though not assured, to result in preferable institutions. There is even something to be said for them having to work their way into public acceptance rather than just being the current existing institutions which we have no choice but to interact with. This same thinking can be applied to governmental institutions. I personally have to agenda in this regard, but it is on the cover of every newspaper today that at this very moment, countries the world over are beset with riotous people who have lost all faith in their government institutions. They allege breach of the social contract and insist they are withdrawing the consent of the governed because they think the institutions either can’t or have no desire to help them or even protect them from harm. If these institutions were toppled by their malcontent subjects, perhaps they too would be replaced by institutions that would arise in the context of the factors I described above. Again, I may be missing your point, but as I see it, I don’t think society (the definition I am relying on) CAN fail as long as our species persists, and as long as our better natures incline us to cooperate and work toward the survival not merely of our selves, but of our fellow humans. It is the institutions of whatever nature that serve society’s myriad interests that can fail, and they must be allowed to when they are no longer tenable.
I have a question about the proposed jubilee. Let's say that it actually happens voluntarily. What does it mean for what comes next?
Does it mean a person with a house that is underwater suddenly owns the house free and clear? Does it mean people who bought jewelry and toys and such on credit suddenly own it free and clear?
Okay, then. What would that mean for prices when suddenly the grasshoppers in debt get to start over at zero (but with lots of assets) and the ants just have the money they saved but few assets?
I'm trying to understand if those who are NOT in debt should buy houses and jewelry and toys on credit or if there is something other than inedible honor in not needing a jubilee.
And before anyone jumps on me for being heartless, yes, I know that the creditors have been predatory and need to be punished and many people got into debt through no real fault of their own aside from not understanding how the game was rigged. A jubilee might very well be a great thing. I just want to understand what appens next.
There won't be any debt jubilee; you are describing debt deflation.
debt deflation = failing loans and a collapse in (the credit part of) the broad money supply. This can and will lead to a shortage of money in the domestic economy, which will go on to impact domestic demand for goods and services - a process which can and will feedback on itself if unchecked. We had this in the 30s on the gold standard and it destroyed a lot of the banking system. It is impossible to have debt deflation in a fiat money system; the fed will always act to save the system by replacing (buying up) bad debt. The result of this action is:
hyperinflation = international loss of confidence in the value-storing qualities of the dollar and it's various forms of paper derivatives (also certain other currencies, to varying degrees).
Hyperinflation destroys value stored in the currency, but does not destroy the currency, or the banking system. That is all that matters to the fed. It is also much more popular with debtors, whose debts are wiped out, than deflation which makes their debts harder to repay in real terms (strengthening currency).
This process is ongoing.
Mendur,
A debt jubilee would destroy the debtors debt, but would also destroy the bank that is defaulted on. While printing money allows the debt to be destroyed in real terms but paid in nominal terms. The bank uses its new cash to frontrun the inflation. Only those who save in the currency are hurt.
Printing money is the plan; it has always been the plan. Fiat currency is not going away. All you have to do is separate the store of value from medium of exchange. The ECB has already solved the problem by floating the price of gold on its balance sheet. Think about that.
"Hyperinflation destroys value stored in the currency, but does not destroy the currency, or the banking system." Come on Jeff, how many Zimbabwean dollars are you willing to bet on that? What are you going to deposit in that banking system that will stay intact? Trash you pick up as you walk along the road?
Kollapsnik, you may find this beyond the scope of your blog, and not want to post but it answers your question:
http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html
There are actually three parts, but if you don't like the first, no need to go on too far. If you have any questions I would try to answer.
The world has been preparing to move on from the dollar reserve standard for decades.
I like your blog.
Jeff -
Your link tells a rather long story, but I think the overall point is at once simple and easy to miss: from the point of view of the person who's been robbed, deflation and hyperinflation look the same, because they result in that person having no money. Discussing the subject at such length is like arguing about the blood pressure of a corpse or the culinary merits of a compost heap. But apparently money-obsessed people will go to any length to avoid registering the simple point I made here: the efforts to make bad debt look good are akin to robbery, and are only effective for a short period of time.
Dorothy and her friends have not aged well. What's she doing with a book on her head? If I were Scarecrow I would not trust Tin Man with that particular acupunctural implement, no matter how clever I thought it might make me. Unless I were a blockhead, of course. It's nice to know we've come such a long way with our modern lobotomies.
The idea of debt forgiveness - that is the term I've heard - in respect to impoverished countries like Namibia has been kicked around in leftist circles for well over twenty years. Such discussions generally involve bashing the IMF and World Bank and inveighing against the evils of global capital - with good reason, I fancy. Only recently have I heard such a jubilee proposed for people in the United States, which suggests our present true condition. I don't know what the immediate or eventual upshot would be, but it would certainly come as a relief to me, and to a lot of other people too, I'm sure.
Somewhat tangentially, when you have time for it Dmitry, I'd be interested to learn your opinion of the "Occupy Wall Street" demonstration that is currently in progress. Hitherto you've spoken slightingly of political activism, a view with which I'm in general agreement. Yet I get the impression this demo is somewhat different from the usual fare, judging by the intensity with which Wall Street wonks reputedly hate it. Can it achieve any worthwhile objectives, or are those people just wasting their time?
I agree with you about gold. Furthermore the Bosch painting is exquisitely executed, the landscape being especially fine.
The concept of Jubilee, as far as I am aware, has its origin in the Sabbath law proposed by God to the nation of Israel after escaping Egyptian oppression and upon occupying their promised land. Jubilee as God defined it to the Israelites was intended to function as part of a theocracy (God as head of state) design to keep the Israelites separate from (Holy) other nations. It applied to the land that was allocated by Joshua to each tribe, and to the families within each tribe. Sabbath law stipulates that every 7th day is a day of rest for people and animals of burden. Every 7th year is a Jubilee of rest (for the whole year) where no work is done, debts are erased and slaves are freed. You needed to plan ahead to survive a year without working, and have established plenty of perennial food sources along with good preserving culture. Every 49th year was a Jubilee of Jubilees where, in addition to a normal year of Jubilee, any ancestral land forfeited or lost would be returned, debt free, to the original titleholder.
I cannot see this system of land ownership getting a leg up in any form of humanistic government, especially capitalism, where asset ownership is a foundational "right". Heck, even the Israelites rebelled and asked for a human king to be like the other nations.
This is not to say that God's planned form of government wasn't and isn't superior. Imagine a system designed to ensure no super rich or no poverty could prevail for long and that every person had the basic right to arable land, food and water and to be free from slavery. Sounds good doesn't it? But all too frequently, human nature gets in the way and messes everything up.
Nathan -
The ancient Israelites were a weird little sect and, in my opinion, are not worthy of emulation. A "jubilee" is just a "round date", as in a "50-year jubilee". The periodic erasing debts was practiced by many peoples in many places. Wise rulers periodically ordered all debts erased to ease what we now call the "rentier" burden on society (resources wasted on an unproductive class of people) in order to restore prosperity. The US, where a small privileged and unproductive class of people manages to keep the rest of the population perpetually in debt, is an extreme example of a rentier society, and is now in a runaway rentier mode, if you will. But an analogy to cancer would be wrong: debt is not a physical phenomenon but a mental construct, a bit like mass hypnosis or an evil spell. It is enough for everyone to declare "We won't pay" for the spell to be broken. But people who are slaves to their own unrealizable dreams cannot do that. Here, there is a huge and powerful industry devoted to keeping these dreams alive and setting people against each other, through fake journalism and advertising, through the lottery and other forms of gambling, even through game shows and so forth. A warped sense of fairness doesn't help either: many Americans would rather go hungry than live with the idea that somebody, somewhere, might get a free lunch. And so here it will take a bit longer for them to get to the point where they are all forced to declare "We can't pay." In any case, debts that cannot be repaid won't be.
kollapsnik,
'We have met the enemy, and he is us'. People will always want to borrow for the things they want to have beyond their current financial means.
The use of money in any context, fiat, gold or seashells, has always entailed the use of borrowing and lending... And as long as economies function at a profit, debts are made and paid back without argument. However, when the eventual downturn arrives, some portions (perhaps a large portion) of the owed wealth (debt) cannot be returned.
It's here at this point in tribal life that all of the context from above comes into play. The "reality" of life on this earth is this: Some portion of society will use their influence or control of the leaders to make their debts easier to pay. In fact it's times 2 for that number of government influencers because even the ones that have debt owed to them will try to alleviate an impossible payback situation the ones that owe them face.
Tribal life and the human nature that comes with it will not allow any money system to "completely" destroy the wealth of a good portion of society. Even if everyone is plainly shown that they are going to lose something they would still option for the good of the overall tribe. This is why we return time and again to fiat monetary systems.
When the losses mount, our tribal human tendencies will not allow us to support a government or banking system that forces these real loses on only a portion of the group. Never has and never will! Without this escape valve, we go to war internally or on a world scale so we all can share the loss one way or another. As a human society of thousands of years outside of war we have learned to inflate our losses upon everyone as a whole for the good of the keeping the whole from each others throats. Even to the point of a total loss of the current system and all the destruction that entails for everyone.
Yes, indeed we will transition to the next fiat system from the dollar, when the time comes. Believe it!
Sorry for the length, I enjoy the discussion.
This is off-topic, but Dmitry wrote: "The ancient Israelites were a weird little sect and, in my opinion, are not worthy of emulation."
If anyone wants to further explore that provocative statement, Ii would highly recommend "Ken's Guide to the Bible," by Ken Smith, ISBN 9780922233179. It's an amusing and appalling look at the text so many take as their daily guide to life, a product of the ancient Israelites.
An ancient nomadic tribe of shepherds for whom we should give little credibility to in matters of ultimate truth, as one wit (I wish I could remember who) said, as they did not even know that the Earth orbited the Sun!
Kevin,
Some people are so stupid that they have to submit to surgery (as depicted) to have the stone of stupidity removed not once but twice. Notice the tulip (symbol of stupidity) that is already on the table, plus the one being extracted.
The metaphor is simple: one stone of stupidity was extracted in the course of financial collapse of 2008 (by means of bailouts and stimulus packages) and another is being extracted again (by means of liquidity transfusions and stabilization funds). But the poor dolts remain just as stupid.
I hope that Occupy Wall Street grows into Occupy United States, where the people take their country back from those who stole it from them. (I dropped by Occupy Boston by the Federal Reserve Bank near South Station last night, and it seemed to be going well.) I hope that the 1% dolts, in spite of their stones of stupidity, will come to realize that it is better for them to suffer a symbolic defeat in psychological warfare (what we have now) than to suffer physical damage in real warfare (which will inevitably come later should psychological warfare fail).
Open source psychological warfare has come a long way already, but it has much further to go.
It can be difficult to live with all the uncertainty, but it's good practice making all the fuss matter as little as possible.
Don't listen to too many idiots (Jeff mainly).
Dear Dmitry (and Patrick),
I would not diss that "weird little sect" so lightly:) I bring PKD to the defence:
"I must admit that when I got into the Torah and discovered the humane elements of this ancient system of beliefs, for me it was probably one of the great moments of my life. And I still read it -- I was reading it last night. There is one thing in Deuteronomy where he says, "You must always pay the hired man before sunset. For he is poor and has his heart set on it." And in the notes Rabbi Hertz has for that, there is: "The workman is so poor that unless he is paid by sunset, he will not be able to buy food for his family." I just lay there thinking about that, "For he is poor and has his heart set on it." It is so incredible that we have fallen away from something that was so basic to our civilization, for maybe as many as 2,000 years."
-Philip K. Dick's Final Interview, in Rod Serling's The Twilight Zone Magazine, Vol. 2, No. 3, June 1982, pp. 47-52
When the 99% Movement seizes power and appoints me Secretary of the Treasury here is how we'll start over:
At the stroke of midnight I'll declare all "money" backed by the private Federal Reserve central bank to be illegal for any use other than starting a five in the barbeque. Bankrupt banksters will be encouraged to jump from their glass towers during low traffic hours to avoid public disturbance.
All debts payable in old dollars will become null and void.
Every citizen will receive $50,000 New American dollars printed by my Treasury as authorized in the constitution. Bill Gates will receive the same starting capital as a crack dealer in the Bronx.
Each state will have a state bank modeled on the North Dakota system, capitalized by the deposit of $40,000 from each citizen. The remaining $10,000 will be distributed as coins and paper bills to provide a means of daily commerce. Community banks can be privately owned but they will be prohibited from expansion beyond a single branch, and will act as utilities for the state bank with the primary role of making lending decisions, handling deposits and withdrawals etc. Officers salaries will be prohibited from exceeding the civil servant pay scale.
All mortgages and loans will become the property of the state banks, but they will not be interest bearing and will be re-written as property tax liabilities. Anyone living in a modest house that they own free and clear will be exempt from taxes as long as they stay in the house.
Property taxes on homes will be based on a use & need basis and be highly progressive. A single family home under 2,000 sq. ft might pay $1 per year, but I'm afraid that Bill Gates' 60,000 sq compound would qualify for the 25% annual rate along with second homes in Jackson Hole. Sorry Bill, I guess you'll have to downsize or go back to work.
Sailboats used as residences will of course be tax free. That's you and I Dimitri!
I'm awaiting the call to serve my country, and will faithfully represent the interests of the 99% who placed their trust in me.
Anyone interested in pondering what money is and it's relation to debt should check out David Graeber's new book "Debt: The First 5000 Years."
Graeber talks about how debt jubilees were a frequent occurrence in the early civilizations of the Middle East, not because the level of debt would grow to threaten the system via abstract financial mechanisms, but in order to prevent revolts by the indebted classes. People in hopeless debt situations would abandon the cities to wander the countryside and then band together in sufficient numbers to re-invade the cities.
Back then (and in some places today) if you couldn't pay your debts your creditor would take possession of your children or your daughters would be forced into prostitution. So jubilees meant that sons and daughters could return to live with their parents. Thus the original word for "freedom" is the Sumerian "amargi" which means "return to mother" and is a reference to the fact that sons and daughters could return to their parents after a jubilee.
I'm still working through Graeber's book, but it has helped me to grasp some of what Dmitri has been saying about the nature of money. There is also a ton of fascinating information in it about the nature of slavery, the origin of patriarchies, how economies not based on coinage work (related to Dmitri's post on gift economies), the origins of the axial religions and philosophies, reasons for the appearance and disappearance of slavery in human history, how the Dark Ages represented a major improvement in quality of life for most people compared to what came before, and more.
I'm nearing the end of the book and I think it is leading up to the origins of the modern corporation. I am interested to consider modern corporations after having been provided 7000 years of background history of human economic relations.
I can't say I comprehend it all, nor can I assess its accuracy entirely. But it is definitely food for thought. Dmitri, I think you'd enjoy it, even though it is a long book.
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