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interesting that redwood doesn’t get to the heart of the problems with central banking

The real reason the recent problems cannot be solved, despite the varying factions John Redwood does mention, is that banking is a government cartel, a monopoly.

Ron Paul is another gold bug who also misses this central factor.

Within the straight-jacket of accepted unquestioned dogma, John Redwood has some grasp of the real problems the gold bugs and others would generate.

But the only way to break the problem, should you be prepared to carry the costs, is to allow banks to issue their own money and to allow people to choose banks with the policy stance/s customers favour (regulation then becomes a matter of monitoring fraud).

The only way to hope for monetary probity is competition.

This is, of course, why governments do everything possible to remove such competition, as demonstrated by the European monetary union.

In free banking, one bank may offer you gold-based banking.This would mean lower risk and would end in you paying higher banking charges. Another bank could offer you money linked to a basket of goods, or to wage levels, or housing.

Another bank could offer you a high reserve ratio, and thus lower risks and lower profits. Another could offer you a low reserve ratio, and attendant high profits with high risk.

This process would give you much greater choice, and get interfering governments out of another part of public life where they operate to your grave disadvantage.

No wonder no government is proposing such freedoms. They are making far too much money out of inflation taxes and exerting far too much power through their control of the presses.

related material
the mechanics of inflation: The great government swindle and how it works



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the deliberate intentions of sub-prime, the history of the current usa ‘depression’

This history includes:

  • 1930s: Franklin Roosevelt’s New Deal
    Fannie Mae started as the Federal National Mortgage Association.
    Fannie Mae provided local banks and thrifts with money needed to
    finance home mortgages.
  • 1968: Lyndon Johnson converted Fannie Mae into a public-private hybrid called a “government-sponsored enterprise” [GSE].
  • 1970: Freddie Mac, was created so Fannie Mae would not monopolise mortgage buying (but they have, in fact, marched in concert).
  • 1977: Under Jimmy Carter, the Community Reinvestment Act [CRA] compelled banks to make loans to poor borrowers.
  • 1999: Under Bill Clinton, banks were given strict numerical quotas for forcing sub-prime loans.

There is another way you can see this, as no accidental breakdown but a deliberate attempt to “spread the wealth around”. Many of the people who could not afford the properties are now steadily being bailed out. There are pseudo-legal attempts to stop repossession etc.

Bush, McCain and Greenspan all warned this was a disaster waiting to happen, and tried to stop it. The Democrats blocked changes.

Obama is heavily enmeshed in Wall Street, with several of Wall Streeters in his administration.

I am increasingly convinced that much of this mess has been at least semi-deliberately engineered.

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fanny mae and freddie mac - the best politicians money can buy?
fanny mae and freddie mac - clearing up the mess
fannie mae / freddie mac - a summary



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debt, inflation, money and power

It is important to distinguish between government internal debt and government external debt.

Most internal debt is effectively inflated away. In other words, it is a default by other means. If you default on foreign debt, your loaner tends to get annoyed, and others get less inclined to fund you.

But all governments are ‘at it’. Obviously, what matters is who has the power, and in what currency the debt is denominated.

For instance, lots of silly things are being said of Chinese lending, but much of that lending is in recycled dollars, or otherwise denominated in dollars. That debt can also be inflated away. In my view, the Chinese are far more interested in maintaining internal power than in getting money back. That power depends heavily upon growing standards of living. There are limits to that process, and therein lies the tipping point.

Returning to the above, it is a matter of power and which currency. Similar arguments apply to the debt of individuals to internal banks. Bankruptcy is a reality of modern economies, it is not some end-of-the-world matter. It happens every day.

Just about every country has also defaulted on external debts at one time or another. The more advanced countries can mostly cheat/default on their own citizens with impunity.

Fiat money is not a gold or silver economy. A very great deal of nonsense that applied in the olden days of gold is being transferred by dull theorists, as if fiat money does not make critical differences. It does make critical differences.

Further, money for the sheep, is a means of exchange or communication, or even a store of value. For the farmers, commercial and government, money is about power. Money is not some settled ‘meaning of life’ It is like words, it varies with the wind and with circumstances.



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is china trying to start economic warfare?

“The 17 elements known as rare earth minerals - numbers 57 to 71, as well as a couple of others, on the periodic table - are found outside China, but most of the mines in other countries have long closed down.

“Until the mid-1980s, the US dominated production, but then China entered the market. Soon, China had cornered it; as Deng Xiaoping said in 1992, "Arabia has oil, China has rare earth".

“China has been tightening export quotas since 2006, sparking increasing concern about its ability to disrupt supply chains.”



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on the stories of currency wars

“The countries actively intervening in exchange markets to suppress their currencies – China, Japan, Korea, Thailand, even Switzerland, to name a few – are all too often the same ones that have the biggest trade surpluses with the US.

“They are taking active steps to prevent America extricating itself from the worst unemployment since the Great Depression, now 17.1pc on the latest U6 index and rising again.

“Each country is doing so for understandable reasons: Japan to avoid a deflationary crisis, China to hold together a political order that is more fragile than it looks. In both these cases they are trapped because they clung too long to a mercantilist export strategy, failing to wean themselves off American demand when the going was good.”

In my view, the main current ‘war’ is against the rentiers.

With a world of nation states, I cannot see many resisting the temptation to gain advantages at the expense of their neighbours. Neither can I see outcomes where the brightest and most experienced modern world nations do not end up with the best (for them) outcomes.

Overborrowed entities get to a stage where they cannot pay back. Thus, we have bankruptcy laws. Now we have a raft of states that are effectively bankrupt, especially if you consider the ‘promises’ made by venal politicians the like of Bliar and Brown the Clown.

Iinterest can only be paid out of future production. What happens when the limits of production sink below the level of nominal debt?

Meanwhile, population levels continue and socialists try to encourage more immigration in order to gain more votes, while cartel business is happy to welcome the cheap labour. The creeping corporate state.

And the government money cartel grows ‘money’ on printing presses, unbacked by any real value or market competition.

Bliar was, and Obama is, using ‘money’ as a political weapon, rather than as a means of communication and exchange, or as a store of value.

“Thus inflation is unjust and deflation is inexpedient. Of the two perhaps deflation is, if we rule out exaggerated inflations such as that of Germany, the worse; because it is worse, in an impoverished world, to provoke unemployment than to disappoint the rentier. But it is necessary that we should weigh one evil against the other. It is easier to agree that both are evils to be shunned. The individualistic capitalism of today, precisely because it entrusts saving to the individual investor and production to the individual employer, presumes a stable measuring-rod of value, and cannot be efficient-perhaps cannot survive-without one.”
[Quoted from Essays in Persuasion by Keynes, p. 75 - Social consequences of the changes in the value of money, 1923]

related material
the mechanics of inflation: The great government swindle and how it works



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systems instability - on high speed computerised trading    page 2

“The mutual fund company, according to the report, used a computer-driven automated strategy to sell E-Minis at any cost, as fast as possible.

“In the past, the company had made bets as large in the E-Mini market, but had controlled for price and time, according to the report. Those trades took more than five hours to execute and caused no problems.

“But this time, the program completed all its trades in 20 minutes.”

“ With the stock market already sagging, there were far more sellers than buyers for many stocks. With little to no liquidity, trades in some stocks occurred at unfathomable prices - under a penny or at $100,000.”

Full report, a 100+ page pdf for anyone with the time.



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