Posts Tagged ‘Monetary System’

Capitalism hasn’t stopped, its not on the high street but it’s alive and well online and in the home (where the state now resides – we home school our kids via the state, we work from home, under authority of the state and we are still consuming from home..)

I don’t know what’s to come and find it futile and almost arrogant to pretend I have more insight than anyone else… so I will state a few facts and leave you to form an opinion from these…

1) Separate capitalism from the monetary system…capitalism has taken a knock (sort of) but still goes on…many businesses are still legally doing reasonably well and are pivoting to take advantage of any future developments

2) The monetary system is alive and well….it hasn’t been knocked over in the slightest….yet, but money is as unsound (meaning ever more debased and fictitious) as it has ever been

3) The key which one should focus on is CONFIDENCE…after the crash of 2008, governments and central banks have dished out even more of the same medicine and if the last dose left us with 10 years of ‘emergency conditions’ it’s not guess work to understand the economic future will bear similar structural issues for those that pull the strings

4) The response by central banks and governments has been greater magic tricks (money trees) but this time there doesn’t seem to be many limits….what ever it takes…we’ll pay your wages, give you loans, forgive your tax, not charge you rates, keep public services going…they really mean whatever it takes….unless it destroys confidence, then that’s possibly the game changer…?

5) The monetary system has for the past 50 years been forecast to implode….that is the nature of fiat money, and so perhaps this incarnations time has come….but that doesn’t mean the house falls down….the landlord is still in power….he’ll just move us into one of his other properties…it’s a new build, but with less space

6) Unless the masses start to believe the game is up? Will they vote him out of power and bring in an outsider? Will they get used to doing things themselves so they don’t need the state as much as they thought…and unless they see through the curtain, up the skirt, and abandon the need to play along, become detached and go it alone…it may not be their choice to make if these other options are just co opted decisions which will move them from one world to the next construct…meaning this is simply refinement nothing more

7) Our generation has never experienced a war which engulfed the nation we live in…in a manner of speaking this is the closest we’ve got thus far….using the past as a guide (if we can do this, which we may not be able to….) then the capitalist monster was just paused, only for a long readjustment phase to begin throughout the 40s/50s until the 60s/70s we starting believing we had come through the worst and we’re happy to start smoking the shit being dished out to pacify us before ramping things up from the 80s

8) I find it fascinating that whilst the retailers and the airlines and people are calling for bail outs….the banks seem fairly calm….not that they won’t lay off staff, they will but no ones lining up to withdraw their money (yet) there’s no bank run…that doesn’t look like an existential economic crises to me….yet

For all the talk of liberalism, the end of history capitalism, the power of the people, it is in desparate times that everybody can clearly see the wood from the trees, and now, globally, it is the state apparatus which is underwritting and underpinning our lives….almost by choice

The question 12 years ago, in the last great crisis, was will the central banks and the governments have any fire power left to tackle the next economic downturn. This has been emphatically answered, the state apparatus will do ‘whatever it takes’ to save whom they choose to save, the fiat money system will create as much money as it sees fit to maintain CONfidence…such that there is any still left

Interest rates no longer matter…only businesses borrow at next to nothing, the end consumer (the people) may be paying historically low rates but they are still high enough to be paying additional thousands of pounds on their debt

The irony that it is a Conservative government, still proud to be assocoiated with Thatcherism, is bursting open the deficit and piling on the national debt, for future generations to pay off through an increased tax burden and reduced public/welfare services

There was much talk of helipcopter money in the aftermarth of 2008, something that had previoulsy been seen in Japan I believe, in the 80’s/90’s, but now we see a realisation of that concept in the flag bearring nation for consumerism; the United States, promising to give americans earning under a certain amount approximately $1,200 each. In the UK, qualifying workers are being paid their income by the state, up to a certain threshold

I would also like to return to the concept of the ‘Implied Guarantee’ for most large corporations, when in distress they have an unwritten insurance poilcy by the state to rescue them, therefore they have an incentive in good times to take greater risks and not make their own rescue provision. If ever there was a test that this guarantee will always be available in the worst case senario….this is it.

This system, at its core, is a state backed goliath in which every citizen will feel thay have a claim for public funded support….there is no real private sector, no fair level competition, and no limit to what the state can fund…so the next time a politican takes to a public platform to decide on spending plans…know that when push come to shove, everything is on the table, and at all other times, its a CHOICE, to do, to intervene, to save or not….

This was the maxim of Pierre Mendes-France’s concerning governments function of being decisive in the face of a multitude of options.

Recently the UK Health Secretary announced a writing off of some NHS debt. Although it was at a zero cost, and one branch of the government effectively agreeing to not honour another branch of government…

Notice the terminology of the write off

Therefore it is possible to make these calls and instances such as these should be hghlighted….however the main beneficiary here is the government itself, it was a situation made simpler by not having to worry about external parties who would loose their investment.

Ofcourse this can’t necessarily be seen as a precendent in all cases however given the emergency this pandemic has presented, it is worth noting how much is possible in such circumstances

We have just passed yet another general election cycle where voters had to decide which lies they believed the most

As the purse strings are loosened in order to bribe voters there has been comment on the rising levels of public spending and the impact this will have on total borrowing, resulting in greater national debt.

Should it be needed to remind us, this raises the fundamental debate of justice at the heart of government spending plans. The cutting or expanding of public services are touted as the principle factors for how effectively a nation manages it national debt

If debt reaches proportions which are too high, service cuts are said to be the main remedy in restoring market confidence and being able to pay down total debt. This is the same sentiment used by the IMF when it looks to safeguard it foreign loans by insisting on public spending restrictions

Perhaps Ahmed Thompson articulated the deceit best in the tweet captured below

The greatest threat to debt levels have always been compound interest payments due to reckless borrowing in the first place. This compounding cannot be managed or paid off, but it can be written off by those who artificially created it in the first place

And therein lies the rub….we choose to cut spending for the most humane causes which will make no impact on the compounding interest built up but are utterly unmoved by the choice to retain financial commitments which exist on paper yet cause real world suffering. The choice is made to cause hardship in the name of keeping the monetary system afloat in the fallacy that it would cause a much greater impact if it were to sink….how can we loose something that was never real in the first place

The financial crises was an example of choosing not to let confidence (which is manipulated) drain away by signing blank cheques for quantities never heard of, yet the cutting of essential services to the vulnerable was fair game.

Any discourse on the nature of progress cannot be exercised in a limited manner, it must consider broader perspectives than just a narrow reading of economics and statistics….

Please read this article by MoneyWeek on the recent raising of the US debt ceiling….it continues to shatter the perception that the US is the most economically prosperous nation with a healthy growth rate

The US has just voted to blow its budget

This is a piece from 2017, by Putting aside the kind of doomsday/beware: the robots are coming type scenario, I would like to direct readers to the impact and consequences discussed for wealth inequality, productivity and earnings in this new era, which in turn has significant consequences for debt;

If he didn’t repeat himself yesterday, then I might not have known that he said the same thing back in 2015….

Bank of England governor trashes textbook theory and rips apart the workings and effects of the global financial superstructure, read the original speech here from three years ago

…and another blog which probably analyses it better than me here

Their world imagines self-interested, atomistic agents, coolly calculating odds over all future possible states of the world, writing and trading contracts with each other, all frictionlessly enforced, all achieving mutually beneficial – indeed socially optimal – outcomes.

Of course, markets only clear in textbooks. In fact people are irrational, economies are imperfect, and nature itself is unknowable.

When imperfections exist (which is always), adding markets can sometimes make things worse.

Mark Carney timeless quotes can be found throughout this speech

Please find enclosed a copy of Benedikt Koehler’s text on the application of market based principles extensively throughout out the early and later eras of Islam.

I hope to write more about this enlightening piece in a later post, but meanwhile, please do download a copy and read all about the history you never knew

Early Islam and the Birth of Capitalism – Benedikt Koehler

Also view the following presentation delivered in the City of London at the Legatum Institute, which includes a Q&A

Consider this post in reference to the concept of derivatives.

I feel that if anyone wants to attempt any critique of the derivatives market in its entirety, one has to move past any continued emphasis on ‘casino capitalism’, as this is an oft repeated line which, whatever its merits or otherwise, has become an easy reply for those who favour such practices.

I believe one needs to concentrate on debunking the notion of risk management in order to effectively retort.

Many supporters of derivatives would rightly point to their use is not just to speculate with (as in Investment Banking), but as a valid means to manage risk, especially in Insurance, and it is this aspect which deserves further attention in my humble opinion

The above linked post brilliantly draws together the notion of colonising time as an integral commodity, matching any such physical asset, thereby shinning a much needed light on the important and neglected aspects of this discourse of, post colonialism and global racial financialisation.