Financialization

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One of the things that ails us in the modern age is we have yet to adjust our thinking to the modern economy. The great political-economic thinkers lived in a time when money was either gold, backed by gold or a fiat currency. The result is our political and economic debates are based in the logic of a world that no longer exists. The modern global economy is not based on fiat money or hard money. It is based on credit money, which has a unique set of characteristics.

For instance, the US government is no longer able to print up greenbacks and sprinkle them on the economy. Instead, when they expand the money supply, they expand lending, both domestic and global. It’s not just any sort of lending either. The central bank can buy up long term notes in order to drive down long term lending rates, thus expanding lending for capital goods. Alternatively, they can buy up short term debt and increase the amount retail lending. The Federal Reserve holds close to 2 trillion in mortgages, for example.

There’s no question that this new form of currency arrangement has had benefits to the West. Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true. The mortgage meltdown of 2008 did not result in a global depression. The worst you can say of it is the result has been a long, localized recession. The rulers look at current asset values and see a ringing endorsement of credit money and central banks.

Putting that debate to one side, there are longer term problems that come with credit money. One is the slow eating away of the middle class by eating away at small and mid-sized business. The most obvious example is the collapse of retail. The old joke was that Amazon turned big box stores into their showroom. Consumers would go to Best Buy to look at electronics, get free advice and then go on-line to buy them. This can only last for so long and the mass closure of retail stores we see this year suggests the end is near.

The libertarian argument is that the more efficient business has displaced the less efficient business, and that’s not completely wrong, but it ignores the salient aspects of this phenomenon. A world in which everyone either works for or buys from a global company run by a Bond villain is not a world most people want for themselves or their progeny. There’s also the question as to whether it is economically sustainable. Business needs customers and customers need jobs in order to have money to be customers.

There’s also the fact that Amazon would not exist without credit money. In a world of real money, Amazon would have gone bankrupt long ago. This is true of the social media companies that now control public debate. None of them would have made it past the hobby stage if not for the financial system’s ability to conjure credit money. In effect, we now live in a world where the rulers can make their money more valuable and your money worthless, simply by manipulating the amount of credit money.

There’s another way in which the financilization via credit money erodes social stability by undermining the middle-class. Take the example of industrial supplies. This has always been a middle-class, local business. The “value” added was the owners willingness to invest in their location and facility in order to meet the needs of their local customers in the commercial trades. They were almost always family businesses with the wife running the office and the husband running the shop.

The miracle of credit money has allowed investors to back the acquisition and consolidation of these mom and pop businesses. The way it works is investors back one business buying up other shops in the area. This allows the new owner to replace the previous owners with low cost salary men. It also allows for the consolidation of accounting, IT, human resources, etc.. This makes the over all business more efficient, giving libertarian economist a tingle in all the wrong places.

This increase in efficiency does not mean lower prices to consumers. It often means the opposite. In some areas, there’s no longer competition so prices rise. The economic gains from efficiency show up in the returns to the investors. The lack of community investment, like sponsoring local little leagues and social organizations, is also stripped out and returned to investors. This is great for a Bain Capital, but it is terrible for the local communities. Instead of communities, we now have areas populated by strangers.

Another useful example is education. Just a generation ago, a college diploma had real value that exceeded the purchase price. The financialization of college has not only decreased the initial value of the diploma, it has stripped away much of its long term value through the student loan rackets. The only people benefitting from college today are the people running the colleges and the money men financing it. The school makes millions staging mock combat with retarded black men and your kid gets saddled with the debt.

Credit money has unleashed financial pirates on the American middle class, turning every small town and family business into a Lindisfarne, in the eyes of our financial class. A big reason why the economic data looks good, but the the people are revolting is the social capital that held together the American middle has been financialized and moved to the balance sheets of global financiers. Increasingly, the relationship in the modern American economy is not between buyers and sellers, but between predators and prey.

At least when the Vikings raided a village, they did not demand that the locals celebrate their ruination. It was a raid and the local authorities tried to prevent it. That’s the other aspect of this that is eating away at our civic life. It used to be that government worked to reign in the financial tricksters, not because they cared about the suckers, but because it was bad for politics. Today, if the political class has anything to say about it at all, it is usually a celebration. The Danegeld has now become an institution.

When Alfred the Great faced off against the Great Heathen Army, he quickly learned that adherence to old customs and old ways was a liability. The world had changed. In fact, it changed so much that he nearly lost his crown before he could adjust to the new realities presented by the Viking raids. The Norse played by a different set of rules and they had no respect for the Anglo-Saxon ways. In fact, they sought to exploit those ways to their advantage. To survive, Alfred had to embrace new tactics and new methods.

Eventually, Alfred resorted to guerilla tactics, something previously seen as dishonorable by the Anglo-Saxons, to weaken the Danes and maneuver them into the decisive battle at Edington. The point here is that those old economic arguments from the libertarians, like those constitutional arguments from the Buckley Right, are no longer relevant. In fact, they are now hindrances. The modern pirates have figured out how to turn our virtues into vices. That means we will need new virtues and new tactics.

129 thoughts on “Financialization”

    • The overriding assumption of the managerial class is that the old Roman metonymic “bread and circuses” actually worked. The custodial state turns all of us into toddlers living in giant day care centers for adults. The infantilization seems to be a key element, as it provides a need for more custodians. The trouble is, whites don’t seem to reproduce in captivity. Since no one has figured out how to make a modern economy work without a white population, demographics would appear to be our rulers greatest long term threat.

      • Mormons have figured out how to get whites to reproduce, Amish too. Properly incentived whites will reproduce.

        Our system now is deadly for productive working class whites. Our rulers desire the collapse of this class. Unless they provide a workable outlet it will end. Bread and circuses are just palliative care until we are gone.

        • I noticed it in the States, and it’s true here, that the less educated (all races) have the most number of children and seem to contribute the least to society. While the more educated, have few if any kids. Clearly, we all know who’s paying for who.

          Coincidently, the majority of EU leaders (e.g. Merkle, Macron, May, Gentiloni, Lofven, Rutte and Junker) have no children. So it’s clear they have zero concern for the future of Europe, which explains a great deal about their positions on immigration.

          • check out the movie Idiocracy. then, whenever someone knocks on the door, shout “baitin!!”

          • I love that movie. I am always buying new copies because people borrow it all the time.

        • Mormon TFR is not that high and the bulk of Mormon growth is not in the USA . Its been around 14 million for decades enough to hold the line basically

          Now Utah does have above replacement fertility , its 2.3 or so which is roughly 1971 ,early post baby boom level. Its the best in the US, second maybe to Chechnya, and among the highest on the planet

          The next highest is in South Dakota which is around 2.2 or so last I checked.

          These are just a tiny bit above replacement

          Also Amish people aren’t part of modernity in any meaningful way.

          No developed nation has significantly above replacement White or Asian fertility, not a single one.

          This suggests to me that at a certain point, development will simply unravel and the problem will self correct. Basically we have exceeded our social carrying capacity and as such a die-back is inevitable and healthy.

          Now, longer term solution mean simply control of the economy and technology and forced removal of the financial parasites . This will mean war as the leeches won’t go quietly and a huge percentage of the population assumes that basic populist common sense regulation means gold stars and concentration camps on the horizon, the economic liberals of the Ayn Rand Jihad are as big a problem as the financiers

          Functionally though , automation must be controlled, work shared the the incentives that drain wages removed. Hiring people needs to make financial sense and without government intervention, it won’t happen.

          And I’m sure someone will soon start saying the correct minimum wage is zero. True enough but without wages you don’t have customers but you do have government .

          In essence, wage arbitrage or Henry Fordism is a vote for chaos or socialism over prosperity

          Choose wisely

          • Not really. Consanguineous marriage is very rare in the US among Whites.

            The size of the mating pool and the Mormon obsession with genealogy prevents any kind of bad admixtures as well.

            They are however quite tribal in the way Jews are and breed tightly , to type. You can with a little experience pick them out of a crowd pretty easily

            In general quirks aside and outside a small amount of cuckery by Church leaders LDS do things mostly right

          • You make same great points backed up by stats. Upvote.
            You are correct to note that the masses are trained to be paranoid about government even though they’re just fine with the highway system, public schools, NASA, and the military.
            Minimum wage, as I see it, prevents a catastrophic race to the bottom. It’s something we need to have to compensate for an employer’s massively superior bargaining position over low-skill labor.
            It can’t be too high or else it starts to eliminate jobs and starts to have the college loan effect on the next tier of jobs, reducing them as well.
            If too low, we have a race to the bottom.
            Our current rate is probably a bit too low and ought to track inflation over time.

          • Bloody hell.

            I see constant references in these columns to how the “right” has sold out – and here I read yet another example.

            What ‘catastrophic race to the bottom’ ??

            We have a race to the bottom going on right now. It’s a race fueled by FORCED higher and higher minimum wages – which make it more and more untenable to employ people who’s marginal value as workers is not supported by the wages that the employers are forced to pay them. So what do they do? They get rid of them – send the work overseas, replace them with robots – or in some cases I’ve read of increasingly over the last few years ….. the owners just decide to close up shop and retire.

            So what happens to all those newly unemployed people – who can’t be employed because they simply cost too much?

            Put them on various forms of government subsistence of course. Which also has to be paid for somehow. So now we’ve got a bunch of people who are employed – forced to pay for a bunch of useless people who cannot be employed – and striving to find a way to make what they have left actually support their lifestyle.

            So more cost cutting occurs – and more jobs get shipped to China.

            Sooner or later it will become apparent that the only way to cure the problem is to print out the lists of anybody receiving a government check – and start up the ovens to “cure the problem”.

            And it all could be traced back to the government FORCING people to get paid more than they were worth.

            Sorry – but you’ve got it wrong: the minimum wage is not preventing the race to the bottom – the min wage is fueling it – and much worse.

          • This kind of panic just makes the situation worse. To avoid the mass immiseration you fear and hate so much, you have to bargain with, make rules for employers. Making infinite concessions doesn’t help. If you give them complete power, they’ll give you the barest amount of crumbs you need to keep breathing, less if there’s surplus population to replace you after you’re worked to death.
            Obviously a mandatory $15 an hour minimum wage is way too high and would kill business except perhaps in the very highest cost of living areas.
            If your concern is jobs being sent overseas, minimum wage isn’t the cause of that. 1st world nations have a higher cost of living that means wages must be higher too.

        • The trouble with these examples is that they aren’t applicable to the broader white middle class. Mormons succeed and breed largely on the same account as Jews: they’re ruthlessly nepotistic atop being reasonably intelligent. Applying their system to a population group in the double digit percentages (both Mormons and Jews sit at 2%) would end up imploding as the rest of the population would quickly notice the left side of the Mormon bell curve was being rapidly promoted despite their inadequacy. (eg. Evan McMullin)

          The Amish are a better example, but to the elite who worship progress the Luddite variants are obviously nothing too interesting. That said, I do think the Amish will inform a lot about future white societies, if they exist at all. Namely, there will be much more consideration given to the long-term ramifications of technology and policy on the well-being of the nation’s people(s) due to the fact that productive humanity will be nearly, if not totally, destroyed by the end of the twenty-first century.

          The only thing the System can do to conserve both itself and the white productive clades that it needs to exist is to unilaterally and unambiguously destroy the political left and pave the way for currently unthinkable levels of eugenics, deportation, and ethnic separation.

          • It seems that Z-man likes to blame a lot of things on “libertarians” – but the libertarians I read – mostly on sites like LewRockwell – point out that the financialization that is the topic of this column – is there to support the state – which is a creature of the left. The reason why there is such a point put on the elimination of gold in the money system by libertarian leaning economists – is because it USED TO act as a form of forced honesty in the printed money system. Once that was removed – the leftist statist system is free to print at will – and fund it’s many misadventures.

            There is almost complete and total retardation on this topic on the right from what I have seen. I’ve sat in front of conservatives who come out and say utterly stupid things like ” without the Federal Reserve – we would have communism”. No dummy – the Federal Reserve is one of the essential planks of communism. The money supply must be controlled by the government – because government controlled money directly equals government controlled population.

      • “Since no one has figured out how to make a modern economy work without a white population, demographics would appear to be our rulers greatest long term threat.”

        It would seem that Venezuela may be the model we are pursuing. If so, we would become easy targets for the Asians at some point later in this century. And they are capable of sustaining a civilization, just no the kind you or I would want to live in.

      • Since no one has figured out how to make a modern economy work without a white population, demographics would appear to be our rulers greatest long term threat.

        Well, maybe that’s how you view the situation, but it would appear that they don’t look at it that way, which is a large part of the problem.

  4. I’d love to hear some practical examples of what those new virtues and tactics would be (i.e., developing our own bartering system, no longer feeding the “beast,” etc.)

    Can anyone lay out some clear things we can start doing today?

    • My best thought is some kind of frontier, something to go to, challenge and produce. Idk maybe open up the federal land in the west to productive settlement. Only those willing and determined to work it could stay. Boiling off would allow a concentration of the frontier spirit, honor and pragmatism.

      • The frontier is over, has been closed for nearly a century. You aren’t getting another one under nay plausible circumstances

        If people wanted something like one , right now Wyoming and the Dakotas would be far more developed as would the far north of California and Alaska

        These areas are only marginally habitable and men and especially women do not want to live there. Like it or not, the US is fully developed which means no frontier, no liber-tard opt out of social costs

        Vomiting up more tract homes isn’t a frontier either.

        The best option you have and you won’t like it is expulsion of 30-50 million people (most recent immigrants) and a far more authoritarian state in social and economic terms

        Women are expected to marry and have children and incentives will be changed to make automation and finalization less profitable

        On top of that you’ll still have to go to work sharing since the way certain goods are made uses far fewer middlemen in any case.

        Until people are ready for that, the current situation can’t be fixed and the natural tendency of the system to run down will take its course

        My best guess, assuming no civil war is expect things to get crappier for a long while than just stop working , recovery comes it it comes at a lower complexity level and the population stabilizes at a smaller level.

        Theory of catabolic collapse basically

          • I was promised space. Then a man called LBJ came along. He sold our patrimony for a mess of pottage.

          • You underestimate the costs involved.

            Even if we has avoided the Vietnam war and the Great society costs , this would not have been enough for a sustainable space colony

            There is no positive ROI for such things do to lift costs , its a cash sink of unparalleled proportions

            We would have had a lunar base though or maybe a Mars base but the glorious space future wasn’t going to happen

            if you want to know where your patrimony went , you are using it. All our research and effort went into computers and all the geeks and techs and nerds that would have built space colonies did something that would actually yield a return

            Jeff Hammerbacher — ‘The best minds of my generation are thinking about how to make people click ads. That sucks.’

          • It would be much much simpler to colonize the Gobi or Siberia than Mars or the moon.

            Both are nearly empty

            Bruce Sterling the SF Author

            I’ll believe in people settling Mars at about the same time I see people settling the Gobi Desert. The Gobi Desert is about a thousand times as hospitable as Mars and five hundred times cheaper and easier to reach. Nobody ever writes “Gobi Desert Opera” because, well, it’s just kind of plonkingly obvious that there’s no good reason to go there and live.

            Space colonies are so expensive that no society can afford it, none of them have any mechanism to develop that amount of surplus, to capture it and no healthy developed society has a surplus population for that kind of stupidity

            Its normal for fertility rates to stabilize and as such the old “make room, make room” hysteria of the late 60’s and 70’s is utter nonsense

            Less developed societies back in the day had vast amount of trouble procuring colonists , especially women and sending them to farm, timber and mine.

            Try sending people to an airless vacuum

            Only a tiny number of anti social romantics who can’t handle the idea that society is fully developed would want to go

            However a space colony would be by nature a police state as one mistake means death for all. Your vacuum frontier gives you less freedom than on Earth.

            A small base on the moon? Doable, either we or the Chinese may l get one, but getting tens of thousands of people, vast amounts of material across unforgiving distances is nonsense.

            There are technologies that make it technically possible, nuclear rockets for example but we have no social order capable of managing that tech or are existing waste right now and no private citizen will be given nuclear rockets ever.

            There is a singular caveat, if, big if, the EM drive pans out and society reboots somehow and the money is spent, maybe regular space travel if possible and lift might become cheap enough to make say a simple Lunar or Mars colony possible maybe. Its an extreme long shot and my guess is, we aren’t going anywhere

            FTL is probably impossible and with the best tech we can possibly make , travel is so slow that no society will last long enough to get there, 200 year journeys make for good SF but societies aren’t that stable .

          • I wasn’t expecting moon or mars colonies with thousands of people.

            And of course they would have strict safety rules but you wouldn’t need a police state anymore than you do on the Apollo missions. Because you wouldn’t bring people that need policing. Most of a police officer’s job is frequent customers. Most people never get anything worse than a traffic ticket.

            The achievement is enough all by itself. And they’ve already written fiction of an entirely settled world including the Gobi. They’ve written fiction about deep sea colonies, living on Antarctica and man made islands.

            Yes, most of our people will live in a vr world before anyone walks on mars but the doing is what matters. EM drive would be nice. It would say least open up the solar system.

        • The feds have millions of acres. Some of it is marginal done of it is great. We need to return to our pre-1965 pop in composition and numbers.

          When I was a kid there were fewer than two hundred million Americans. We can get back to reasonable numbers.

          Most won’t want frontier land anyway. The point isn’t to change society but give those who need a purpose greater than a cubical or a call center some options. And an incentive for those too weak to leave.

          I have no illusions about what it was like. I was raised by my grandparents and great grand parents. Some crossed the Rockies in covered wagons, some were here to meet them.

          But this is only a stop gap anyway. Space is our ultimate destiny in this life.

      • Space, eventually- the whites almost escaped.
        The oceans. Aquaculture, mining.
        The western states- big honking canals bringing meltwater from Canada.

      • All non-pioneering human cultures are inherently pathological and, thus, contemptible.

    • One example may be as simple sounding as prepare for quiet revolution, develop guerrilla tactics and insurgent methods of an underground economy.
      All most of us can directly effect is on our very local level.
      Something more attainable in rural like areas, small communities and enclaves. Where I live in WV there is a natural underground economy, and over the last few years it is increasingly embraced out of necessity because of the loss of the coal mining economy.
      The interesting part of how it functions is based on an economy of living as mind set. Do with less, repurpose things if at all possible, don’t waste nothing, co-operative efforts in everything from firewood to truck gardening, sharecropping really, but going back to simple traditional practical basics of living which are not dependent of the corporatized larger outside economy.
      It is called hunkering down by many. I’ve read other places it’s called system D like in Vietnam and other parts of Asia. Those things seem to have an underlying immunity to the effects of Financialization as Z described. Because they step outside that system, and take from it beneficial components as they present themselves. Lot of improvisation and adaptation. but the basic way it functions is independently as much as practically feasible. I don’t see any set rules or standards, it is a flexible way of getting things accomplished outside the system if anything.
      Some embrace it fully, some as it fits their circumstances, but it is done. And maybe that is the key, by embracing it in some fashion people make the system then work.

      • I wonder if we will see more folks step away from new technologies. The internet is becoming a marginal benefit, in a lot of ways. Blogs are disappearing and what’s left is worthless social media. We seem to love our cell phones but what benefits do we really get from them?

  5. I can suggest one tactic. We should pass a law that every public company must pay at least 1/3 of all employee compensation in voting, dividend-paying, common stock.

    Next, we should pass a law that all private companies above a certain size (say, $50MM annual revenues) should do the same thing.

    That way you have many owners, spread out in the hinterlands, with real voting power.

    • Or we could just repeal all laws of incorporation and its associated features of limited liability, artificial personality, and perpetual lifespan. (As I recall, general partnerships also, in Louisiana, have one or more of these features.) Afterward, every business would be organized as a sole proprietorship or a partnership. This would cripple giant enterprises, for they are utterly reliant upon the incorporation trick (i) to protect their many untrusting owners from each other and (ii) to provide the irresponsible owners (who are generally strangers to each other) with the easy liquidity that undermines attachment to any community.

      After abolition, the natural tendency for enterprises to remain smaller will work its magic upon the insatiable giants, and the proportion of owners to employees will increase. This is good for communities, good for employees, and bad for the giants of finance, too, which is like a double bonus.

      The academic nerds of efficiency will screech and howl in a great chorus of hysteria. More bonus.

      Another bonus will be the greatly increased difficulty of acquiring centralized control over commerce. There will be so many more owners with a long term stake in their businesses that they will more zealously resist encroachment, given that momentum would no longer favor concentration. Much of this encroachment now is in the form of taxation, which provides the means to finance the militarism and communist redistribution rightly condemned by libertarians. Killing the corporation kicks out one of the legs of militarism, and it should invite a few questions which communists will find embarrassing. (They claim to hate corporate behavior. So why no abolition movement??) So, here we see more benefits from abolishing incorporation, which will make millions of American “conservative” blowhards grind their teeth in anger. Again, more bonus.

      True, there will be losers. For instance, many government school teachers have pensions dependent upon perpetuation of incorporation, but it’s difficult to see how they don’t deserve to suffer for their role in turning the world into a giant prison by indoctrinating the young in the ideals of nihilism, servility, and communism.

      • “No ass to kick, no soul to damn…that is the corporation.”
        Mike Mansfield – Montana Senator

    • “…pass a law that every public company must pay at least 1/3 of all employee compensation in voting, dividend-paying, common stock…”

      That’s a good idea.

      We could also take the Supreme courts own rulings to their logical extension. They said corporations are people and that they can spend unlimited money in elections then we should treat them like people and if the corporation commits crimes we should put all the officers, the board and all high officials in jail. They should be treated like people with liability.

    • GAAP rule changes destroyed the whole stock-option for employees game a decade ago. Now it’s no longer worth offering options to anyone except Executives on a contract.

    • Plus shares of everything government.
      We paid for every brick, wire, pipe, vehicle, and square foot of carpet of government assets.
      We Own It- not the other way around.

  6. Serious Question: What’s the critical difference between computerized fiat money and credit money_?

    I get it that fiat money doesn’t act like hard money, both for good and for ill, but isn’t the Fed just using computers rather than actual printing presses to flood the economic zone with non-physical fiat money_?

    • In the Roman times, the government would mint coins from copper, silver and gold. In theory, the coin’s value was its weight in the metal used. In time, the Romans started to mix in cheaper metals. This seemed like great idea as the state could buy more stuff with less money. Soon enough, people got wise and prices rose. This is classic currency debasement. The same thing happens with paper representations or fiat money. The temptation of the issuing authority to print paper to pay bills is overwhelming.

      With credit money, the state has a lot less control of the money supply. The central bank is somewhat free of political meddling. That’s a good thing. But, the central bank can’t just order up a bunch of cash pay to pay bills. In fact, it never wants to do that as it defeats the goal. You just get inflation. Instead, the central bank goes out and buys debt. Imagine you are the Bank of Al and you have lent out most of your money. That means you cannot do anymore lending until you get some more deposits. Alternatively, the central bank comes to you and offers to buy your loans at face value. You now have more cash to lend.

      In theory, banks lend to good customers investing in new products and services. The idea here is that instead of just pumping money into the economy during bad times, the central bank can get new money into the productive hands and that will spur economic growth. At the same time, when the economy is booming, the central bank can cool things buy selling its debt and reducing the amount of cash in the economy. This raises interest rates and reduces speculation.

      This sounds good in theory, but all policies are trade-offs. In exchange for economic stability, we are heading toward something that looks a lot like feudalism.

      • So, credit money enables transnational elite predation on the actual assets of any country but does not cause it, then. IOW, elite fraudsters being able to buy their way out of financial consequences (e.g. ‘too big to fail’) plus financial indiscipline by the masses who seek to emulate them in their apparent immunity from financial consequences is the real driving factor for the subinfeudation we’re seeing.

        So, it is a *political* solution that is needed. Consequently, Pres. Trump just might be able to bring off restoring US jobs by tilting the financial playing field against transnational elite predators. No wonder the Cloud Folk are freaking out_!

      • In time, the Romans started to mix in cheaper metals. This seemed like great idea as the state could buy more stuff with less money. Soon enough, people got wise and prices rose.

        I’d guess that maybe some people actually assayed their coins, but the problem of inflation would happen even if they didn’t. The point of reducing the silver content of the denarius is that then you can take a given amount of old coins, melt them down, and then issue a larger number of coins of lesser silver and greater copper content. (Of course, there is also the question of how much new bullion was made available via mining, but presumably this more or less kept up with the decrease in existing coinage via hoarding, wear and simple loss.) Certainly, the drastic decline in silver content in the third century (as opposed to the gradual decline during the preceding two centuries) resulted in a precipitous increase in inflation simply because there were a lot more coins out there chasing after a more or less finite economic output (and the troubled times may have led to a decrease in out via trade disruption, population decline etc.).

        As for the cause of the debasement in the third century, that was undoubtedly due to the costs of wars (both civil and foreign) without any increase in revenues. The military was the imperial government’s single largest expense item by far, and armies at war cost a lot more than ones that stay at home in their camp. Previously, the army’s active engagement was comparatively limited, but by the middle of the third century, major wars were going on all over the place, all the time.

        • Someone graphed the silver content from ~Augustus forward and it was remarkable. I should try and find that graph as it was remarkable.

          A similar process happened with Hapsburg money in the Thirty Years War.

    • “…What’s the critical difference between computerized fiat money and credit money…”

      Nothing except only the central banks can create money from nothing. If the Treasury wants money from the FED they give them a bond promising to pay the principle plus so much interest. The FED then “allows” the Treasury to print up the agreed amount of money. The FED produces NOTHING. ALL money is created this way in the US. So all this talk about lowering the debt is impossible as ALL money is created with debt. You may think I’m mad but that’s the way it is. It should be stopped.

      One, of many, alternatives is do away with the FED and give a citizens dividend to all citizens. If the banks want money then they will have to get the citizens to lend it too them from the citizens dividend or from profits made form government spending. No other method of money creation would be allowed.

      This is one of the single most important tools of the deep State and the financiers. They and their buddies control the capital.

      • I agree with your analysis but your solution is never going to happen. Credit money is what keeps politicians in power. They use it to buy votes and big donors use it to buy them. Why would they vote against their interests, assuming donors would allow them to, which they won’t? It’s bread and circuses as far as the eye can see. Who the new barbarians will be that overrun us is anybody’s guess.

      • Based on this extended discussion, don’t think the basics have changed all that much. Only the hype and speed are amped up.

        IOW, I agree with you in the sense that ‘savings’ are an enforceable call option on future production. If it weren’t enforceable, who would save_? The savings/calls are re-loaned by intermediaries/bankers to others willing to pay for the privilege of consuming in the current year the current production the saver is willing to forgo. Thus a debt is created and interest must be payed thereon for that privilege.

        Money of whatever kind is used to facilitate these transactions and other economic exchanges. That the US uses an electronic two-step to create fiat money instead of just running the printing presses is a distinction without a difference. If money expands faster than the economy, inflation results and conversely for deflation. The joker is nobody knows what future production will be.

        The problem discussed arises when the calls on future production vastly exceed any possibility of being honored by actual, physical delivery of that production. IOW, banksters have collectively sold that future production over and over again and this is tolerated as being ‘good for business’ not to mention that it enriches the intermediaries.

        At some point there is a ‘run on the bank’ when confidence is spooked and nobody wants to be the last one out, holding an empty bag. Works the same way for gold-backed money. The difference this time is computers.

      • I’m not necessarily disagreeing with any of your points. One of the great virtues of non-debt based money is if the politicians screw up the money supply it comes much faster. Everyone knows much faster. In a debt based system the party can go on much longer and be much more damaging.

        • Yeah, I guess I was unclear. The point I intended to make was that wildly unconstrained fractional reserve* banking/money-lending is the culprit at bottom. The FED has made it worse by obscuring how out-of-whack the situation actually is but didn’t actually cause it (at least intentionally) at first.

          So I’d say boosting lending standards and reserve requirements is the better political point of attack. Privatizing profits and socializing risks/costs has been the goal of money lenders for, probably, all of human history. And they are incredibly creative, always working away at that. But, except for sovereigns, this feat was impossible on a large scale in the US until the The Progressive Era. It created the means to effectively do so, most definitely, to your point, including the FED.

          * For a single moneylender, loans + reserve = deposits. The reserve has to cover depositors wanting their money back today plus loan losses. For the financial system as a whole, part of the loan proceeds becomes another moneylenders deposit since the borrower is unlikely to spend it all at once. This deposit then can be also be loaned out minus a reserve with that moneylender, and so on in decreasing fashion.

          In practice now, the FED has made reserve requirements essentially 0 since FED and US Govt. paper can be counted as reserves. This is what must change. Whether the revised reserve requirements are gold or bitcoin, really makes not much difference.

  7. During my recent US road trip, I had the pleasure of talking with all kinds of people across the Midwest and was amazed how much debt the average person actually admitted owing. I’m not just talking about home mortgages or student loans, but all the “stuff” they’ve bought on credit – boats, jet-skis, RV’s and some were paying off holidays.

    When I asked how they could afford all this, they openly admitted they got it on credit and some borrowed against the value of the homes or just racked up credit card debt. How is this even possible? And when I asked about the health insurance situation, quite a few claimed they couldn’t afford it. Huh? They could afford a RV but not health insurance?? I was a bit confused how this is even possible but didn’t want to push the issue as that would have turned into an entire discussion on personal responsibly for one’s finances.

    I remember a story some time ago where the US government was telling people to save because times could get hard. And so they did. Within a year or so, the next story came out that they were told to start spending because no one was consuming and people were losing their jobs. Amazing.

    I did notice that there were a number of closed shopping malls across many of the mid-western states and the few big ones I wandered through had a lot less people than I remember seeing a few years ago. Even Walmart (my favorite!) wasn’t all that full.

    • People have different priorities for their money. Kind of like how people will say they can’t afford to eat at a five star restaurant but they can all afford cars that cost more than the meal. They are saying they don’t think it’s worth the asking price.

    • According to to the OECD German household debt is 89%explosions of personal debt are the old Soviet satellites. The data is interesting as it appears the countries with the biggest growth in personal debt are highly socialized nations in the free world. At the other end are the former Soviet satellites.

      • @ thezman – I would believe those statistics. There’s been a shift over the years of more and more Germans buying on credit, specifically high end cars (e.g. Audi, BMW, Mercedes) which is a relatively new trend. Typically in the past, the house was the largest expense and most people drove modest cars (e.g. VW Golf, Audi A3’s or the cheaper Renaults or Peugeots). Now, with easier access to credit, you will see more expensive cars on the road and people are also getting into the habit of putting holidays on credit as well. Not a good sign!

    • People should be allowed to declare bankruptcy for all debt. Student loans, credit cards, or whatever. Then the lenders would be more careful lending it out.

      • In general loans have become detached from their consequences. I’ve read enough analyses of the housing boom and crash to hear every excuse possible.

        The normal process of a bank loaning money out based only on its chances to recover that money with a profit has been disrupted. Anything and everything that disrupted the consequences for the buyer or the bank is the problem. We wouldn’t have to worry about banks giving out bad loans if the consequence was they didn’t get paid because it would have bit them in the ass in short order. The buyer after losing their house after several payments would have learned a quick lesson in finances as well. What we really had was people who can’t afford houses buying them, and banks who knew they wouldn’t be repeated loaning them the money since the burden of this stupidity wasn’t felt by either party.

        I don’t see how your plan would accomplish anything besides making loans impossible.

      • The lenders scarcely care. They package the debt as bonds or CDOs as quickly as their algorithms let them. Then they sell them to investors. Often, the investors are government pension funds desperately looking for something, anything that will give them a high enough rate of return to stay solvent. The “lenders” are just skimming their fees off the transactions. The risk is all transferred to someone else. “Privatize profits, socialize risk” should be translated into Latin and inscribed on the coat of arms of the Cloud People.

      • You say,”…

        In general loans have become detached from their consequences. I’ve read enough analyses of the housing boom and crash to hear every excuse possible…”

        Then,”…I don’t see how your plan would accomplish anything besides making loans impossible.”

        Which s it? I see other entities that are able to discharge loans. Why should student loans or credit cards be different? Besides they paid the legislatures to not make them dischargeable.

        I think people should be able to go bankrupt if they are.

        A lot of people look on this as some deep inner sin but the banks don’t have little old ladies money that will bankrupt the little old ladies and throw them on the streets. They churn as much in loans as they can because they think they will never be responsible.

  8. “The Norse played by a different set of rules and they had no respect for the Anglo-Saxon ways. In fact, they sought to exploit those ways to their advantage.”

    So… the equivalent of modern day Muslims then.

  9. “There’s no question that this new form of currency arrangement has had benefits to the West. Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true. The mortgage meltdown of 2008 did not result in a global depression. The worst you can say of it is the result has been a long, localized recession. The rulers look at current asset values and see a ringing endorsement of credit money and central banks.”

    This bit speaks to the basic difference between the hard money and easy money points of view with respect to the aftermath of recessions. You can either have long, drawn out, somewhat shallow recessions, or shorter, deeper recessions/depressions. The hard money types prefer the latter, easy money the former.

    Our current credit money world is an easy money world, and as such the 2008 aftermath has been a long drawn out malaise as you say. This fact doesn’t discredit goldbugs, it is in line with their view, particularly when you consider that 2008 itself was preceded by the sort of central bank fueled credit binge they warn about.

    Once you embark on a credit orgy, you will have a problem down the road. The only question is whether you will solve it by letting the bad debt collapse and endure a deep recession/depression, or ‘solve’ it by embarking on an even bigger credit orgy. We consistently choose the bigger credit orgy, which is solely responsible for the second and third order issues you describe very well in the subsequent paragraphs.

    Maintaining the ‘order’ of perpetually increasing asset prices has come at the price of Middle America consistently having their costs outpace their incomes, resulting in an increased reliance on debt and an decreasing ability to save for the future. It has resulted in nearly every rung of that old ‘American Dream’ life path becoming less and less attainable. How are the younger generations, already in debt to their eyeballs by 25, supposed to spring for a home with prices at all time highs?

    Those all time highs are a supposed benefit of the credit money orgy, yet they are a hindrance to the younger generations starting off, which in turn leads to societal problems. Again, you’ve gone through a lot of the issues as the essay went on.

    But I have to vehemently with the characterization of hard money as a thing of the past with credit money as something more in tune with the ‘modern’ economy. The 19th century economy was also a ‘modern economy’ at the time, and it did just fine with a sort of money which accurately reflected the fact that at any given time the amount of goods and services in existence is finite. Credit money gives the illusion that there is infinite money and thus infinite goods, which leads to a problem as time goes on.

    I see the view that hard money is antiquated as analogous to the cultural ideas leftists preach today, namely that Christianity and Greco-Roman philosophy are antiquated while nebulous concepts like equality, diversity and tolerance are more fit for life in the modern Current Year.

    Credit money and the social justice set both seek to offer us a way to paper over the cracks in order to hide the ugly truths of our world. For me the extent to which we succumb to that crack-papering is the extent to which true progress is hindered.

    • I agree with much of what you said; however, i will say that the current credit dollar is, at bedrock, a sort of specie. The petro-dollar is the glue that holds the credit-expansion machine together. Endless expansion of credit is made possible by the hegemonic dollar-oil converter and as-such one could expect even a gold-backed currency to eventually turn itself into a similar bedrock-of-hegemonic-credit system too.

      Personally, I don’t think the economics-as-first-mover argument against credit or fiat is wrong, but I think we’d be wrong to miss the observation that credit bubble systems are indicative of over-extended empires already eating their seed-crop. The problem with current policy isn’t so much an unwillingness to unwind as it is a yawning gulf of socio-political connection between the imperial elite and the citizenry which predates the total abandonment of specie.

      Social Justice had it’s forerunners in the late 18th or early 19th century which was around the time the elites cooked up the idea of a world credit system and a global mass of lumpenprole afro-asiatics to rule over. Those ideas probably did as much, if not more, to fuel the endless credit expansion cycle than did the move from gold-backed to petro-dollar.

    • Have you read wolf and iron?

      An interesting book of America during and post an economic correction.

  10. By credit money, I assume you mean credit unbacked by savings. We know from history that excessive credit is vey unstable, leading to financial crisis on a regular basis. In my lifetime, I’ve witnessed this at least 3 times.

    The current arrangement depends on a cycle of asset inflation to (at the minimum) maintain asset prices, but optimally, increase them for collateral against new credit. As well, nominal income needs to increase to provide service for ever expanding debt.

    Currently, asset prices are at historical highs and nominal income is either stalling, or stalled. This is happening during a period of historically low interest rates, which despite Central Bank hubris, will turn when the market decides to off-load bad credit. Should Central Banks try to sanitize this market revolt by expanding their balance sheets once again, currencies will be debased further, sparking even greater inflation.

    All this sets the stage for the next Minsky moment. When, not if, it happens should result in the end of this experiment in modern monetary theory or, in plainer English, charlatanism.

  11. Creating fiat out of nothing then washing it through a spoils system, breaking the debt created to wash the unbiased fiat through that system, down into derivative parts, and then selling that as something with value after most of the value has been skimmed off doesn’t strike me as exactly healthy or can be sustained. And what of those who actually create something tangible with their labor? Aren’t they the only part of this spoils system that actually originate, create tangible hard value and worth?

  12. I would say that most money today exists in movement. Settled money — that is, when it sits in banks — has a limited value to an economy. The churn of money, or rather keeping it ‘liquid’ with credit, continues the illusion that we in the west at least are rich. But the practicalities of everyone being equally rich are frightening.

    On this, I recall some lefty desperately urging a poverty-stricken tribe not to accept jobs in some newly open factory in because, he said, he only wanted them ‘to keep smiling and remain happy.’ In his view. earning a wage could only bring unhappiness, but I wonder if he really feared they might get wealthy and he knew already that wealth, equally divided, tended to mean smaller shares. He would prefer his money prospects to keep washing round the western world to which he would soon return.

    Also he might have worried each tribesman would buy a car as a good as his and perhaps — perish the thought — enjoy driving it more than he did.

  13. An excellent analysis, but I would add one very important dimension that underlies this phenomenon. Governments (and large globalist companies) have evolved into the functional equivalents of addicts. Their appetite is boundless, and they will gorge until there is nothing left to consume or the drug itself brings them to the brink of death. They cannot change this behavior unless circumstances cause them to hit bottom, and the they will take everyone around them down with them.

    Enablers will do everything in the their power to avoid confronting the truth of this addiction and no one will see the end coming until its too late.

    • But we already see the end coming … and it may be too late right now!

      • It’s not that it may already be too late. It’s that, for an addict, it’s inevitable.

        And as far as seeing it now, that is just anxiety your feeling, not the actual appearance of hitting bottom. When it happens for real, there will be no ambiguity.

  14. The people that gain the most from fiat money have been the Jews. They control the creation of money by controlling the central banks which create money from nothing. It’s worth noting that all other groups have to create their money by debt. Every last penny in the US economy has an equal debt higher than it’s value. All money created is created with debt, except for money the central bankers create for themselves.

    The Jews using group preferences use this money creation to take over businesses. Remember the 80’s big takeovers? Most were done by the Jews. As long as they could pay the principle on the debt they got the companies and all their assets for free. So we had a lot of perfectly run companies with no debt run into the ground trying to make profits AND pay on the debt made to capture them. Hundreds of years of growth in these companies transferred wholly to the Jews and their lackeys.

    Now as noted Amazon is using preferred Jew debt to run deficits and drive out small business. They don’t even have to pay taxes or follow local regulations. It would seem to me that Amazon’s web page is a store front and they should follow all rules and regulations any small business in the location they sell to has to. Anything else is cheating.

    • If I may paraphrase, you are saying that all of the world’s (8,000,000,000+ people) financial problems are caused by “the Jews” (including all the Jews of modest means and those who live hand to mouth, people you have never seen because you haven’t tried to find them). How convenient! All of the Christian, Muslim, Hindu, atheist, Chinese, Japanese etc millionaires and billionaires are entirely innocent of this crime against humanity. Convenient indeed!

      • “If I may paraphrase, you are saying that all of the world’s (8,000,000,000+ people) financial problems are caused by “the Jews”…”

        Your paraphrasing to the point that the meaning has changed but I would be glad to add that they are responsible for all the ills of the world in the exact same proportion as Whites are by the Jew saying.”The white race is the cancer of human history … “. In that vein I would agree.

        And I’ll add I don’t don’t give a damn about starving Jews. They don’t care for me I don’t care for them. If all the Jews on planet earth disappeared one night it would be vast improvement for most humans. I don’t think the same would apply for Whites.

  15. I used to run the NYC derivatives desk for the world’s largest Privare Bank.
    The financialization of the economy has achieved exactly what it was supposed to: the concentration of wealth into fewer and fewer hands.

    We’ve now had thirty years of Ashkenazi Jews heading the Fed. And the main beneficiaries are?

    • You can probably tell by now, but I have an interest in monetary history. The thing I can never nail down is if the financial class knew this was the consequence or they simply stumbled into it after the politicians finished the Louvre Accords. I’ve read stories by former JP Morgan people, for example, where they dreamed up things like CDO’s not entirely sure they were even legal or possible. Back in the 90’s I did work cleaning balance sheets and a lot of what I did I just made up and then waited for someone to say “no” and kick it back. That did not happen a lot.

      • Fascinating. Sick how fake it was (and still is, probably even worse). How long can that charade last? So many inter-connected pieces – I’m sure that “bubble burst” talk will come true. How soon is the concern.

      • The problem with cui bono analysis, especially in today’s informationalized (stole that word from the Chicoms) world, is that the person or group that ultimately benefits from from the change may not be the person who thought he was going to benefit from the change. The person who initiated the change may be too embedded in old information, financial, trust, etc. networks to benefit while a newcomer or outsider may have the ability to rapidly take advantage of the new conditions. Xerox invented CSMA (ethernet). IBM commercialized the desktop computer. Others came to take the lion’s share of the surplus and dominate.

        The thing I took from the Big Short (besides reinforcing my view above) was the opacity of the financial world. Aside from the apparently second-hand account of Hubie Hubbell, Lewis seems to have almost no information about the decisions being made in the big investment banks. More people snitch on the big crime families than the banksters!

  16. “we now live in a world where the rulers can make their money more valuable and your money worthless, simply by manipulating the amount of credit money.”

    So, don’t own money, own land, businesses, productive assets. My own view is that for too long “savers” have been over rewarded at the expense of risk takers. What is so wonderful about the mere act of not spending that it deserves a huge reward?

    I’m also bitter about all the wailing about the disembowelment of the middle class. I’m middle class, doing OK. So are most of my middle class friends and associates.

    The ones who are not doing well are doing poorly because of the usual reasons: sloth, stupidity, drugs, alcohol, intemperate behaviour, poor impulse control, failure to act on opportunity, hubris, you name it, the seven deadly sins and some new ones those jerks have figured out all on their own.

    I am so sick and fucking tired of burnt out, useless, lazy ass, boomers complaining and blaming their shit arse messes on everybody but themselves. And I’m a boomer.

    • You want to blame the victims? Great, when I was eleven my grandfather got cancer and asbestosis. We lost our ranch. We had to move five hundred miles and live in a trailer where an old busted up cowboy could still find work.

      I ran cattle for neighbor ranches, trapped in winter, fixed a irrigation systems, cut firewood for a dollar fifty a cord. I was big for an eleven year old so I could drive the truck and operate the chain saw. I had to split and stack it by muscle power though. We lost that finally. Here was a guy who had pulled his family out of poverty on the reservation when he was thirteen reduced to a crappy trailer in the desert because he worked in the shipyards in WWII.

      My mom died after being given the wrong medications at the hospital. But it wasn’t quick. It was long and painful and my dad lost everything. All the property he had carefully purchased, all the savings he had set aside, all of it and my mom was killed by the hospital anyway.

      Our neighbors lost their ranch too. The feds just came and took it. Put it in ‘wilderness’. My friend lost his job after twenty years at the same place. Why? Because to hell with you that’s why. They don’t need to tell you. So he went to work at three jobs to support his family. Lost his home, lost his family, lost everything. Now he still has to work at the three jobs.

      I’m not bitter about losing the ranch. It happened years ago but the idea that my grandfather did anything wrong getting cancer, that just doesn’t sit right.

      I see them deliberately squeezing the middle and working class where I live. Why? So some rich fool from NY can come to the ‘wilderness’ and vacation. Can’t have mills, log trucks, clear cuts, and those dirty smelly loggers ruining their Memorial Day weekends.

      You cannot take a man who has worked in the woods or the fields, or ran a hammer all his life and expect him to mash buttons on a keyboard for a quarter of what he earned from the sweat of his own brow.

      If you’re adaptable, great. It’s fantastic. But the right half of the bellcurve owes something to the left. They get rich off the left half mostly through control of the government, monopolies, rentier practices and shady credit creation where they can ride the bubbles. They can at least acknowledge the damage they’ve done. They haven’t just bound the mouths of the kine. They’ve cut their throats and left them to die in the traces.

      • Back when I was working on my Novell CNE, I took a class with a guy that had been a tractor mechanic. He was getting up there in years and felt that his field was probably not going to be needing many workers. So they retrained him. I guess someone asked him if he liked computers because they signed him up for all 7 classes, back to back and put him up in a hotel for a month to take them. It was clear, first class, that he was in over his head. I have seen this time and again, with people that work traditional labor jobs. They give them training and wash their hands of it.

        Anybody that thinks the State is going to leave them alone to live their lives is a fool. Don’t count on the courts for any relief. Don’t think you can save for retirement and have the government leave that money there for you. Don’t think that you’ll be able to do anything with the property you pay taxes on. It is all rigged in their favor.

      • “…They get rich off the left half mostly through control of the government, monopolies, rentier practices and shady credit creation where they can ride the bubbles. They can at least acknowledge the damage they’ve done…”

        Exactly. Most people who go bankrupt I’ve read do so for medial reasons.

    • LOL.
      Since when have savers been “rewarded” in our lifetimes?

      Being against saving is to be against capitalism and being root principles of conservatism.

  17. Funny how this great country got along just fine until the federal reserve, (which is neither, but an amalgam of banking cartels), and federal income tax was imposed upon American’s.
    Guess where all that income tax is washed through?
    The tail that wags the dog, that returns to its vomit?

  18. Pingback: Outliers (#53) « Amerika

  19. This is a rely good essay. It pulls back the curtain on less visible macro financial trends ruining our society. I would love to share it with my financially clueless friends and family except that the line about retarded men would unnecessarily spoil the main message for them.

    • If that’s the case then there’s simply no point in trying. You just need to move on. They are lost forever.

      • those friends and family may be retarded themselves, you might want to get them checked.

      • I should move on? You made the point that we we need new virtues and tactics and another commenter made a point about birth rates not keeping up. How is reaching a larger middle class audience a bad thing? Do you really expect a thin group of high IQ middle managers to do anything more than go along?

        • I was being a little sarcastic, but the point remains. If the word “retarded” is a trigger word, there’s little chance they would understand the rest of the post. One of the many mistakes the Buckleyites have made over the decades is insisting they have to change minds. Some minds are beyond changing. Some people just need to be bullied.

  20. Libertarian economics is based on a simple principle: only the market can accurately transmit true economic information in the form of prices. Any attempt to manipulate prices introduces distortions which move through the rest of the system, making it impossible to know what anything is truly worth. This leads businessmen to using inaccurate information to make business decisions.

    Money has two prices, one called “interest rates” and the other “exchange rates”. Since all other goods are priced in money units, libertarians can easily imagine the extent of economic distortion which can be introduced by giving someone the ability to manipulate the value of money itself.

    This is why political target #1 of the libertarians has always been the privately owned Federal Reserve. This piece by you, another attempt to find something to bitch at libertarians about, merely makes you again look remarkably stupid.

    “It is based on credit money, which has a unique set of characteristics.”

    Yes, those characteristics being it’s not real. Thus, it lends itself perfectly to its use as a control and looting mechanism for the elite bankers. It can be conjured at will, and similarly can be withdrawn at will. At one point during the crisis, it was estimated the Fed had conjured some $21 Trillion in order to bail out the banks. Goldman Sachs, for example, quickly sold off all its bad debts to the Fed (where they remain on the Fed’s books to this day), and was quickly returned to profitability. The Fed is actively engaged in currency manipulation, engaging in foreign currency “swaps” with foreign central banks.

    Imagine the power accompanying the ability to declare something to be of “systemic importance” and then conjure up as much money as you need to buy anything you want, holding it as an implied threat forever? Imagine the power associated with being able to conjure up money-things from nothing and use it to buy another central banks similarly-conjured money-things? Imagine the power associated with being able to conjure up money-things from nothing and then loan them out at interest? This is the Federal Reserve, a private bank. Are you capable of understanding that? After reading this piece I have my doubts.

    “For instance, the US government is no longer able to print up greenbacks and sprinkle them on the economy.”

    You have absolutely got to be shitting me. The US government effortlessly and electronically creates a bond, a promise for the taxpayers to do real work and pay, passes it into the “markets”, where “primary dealer” banks, banks with huge excess reserve accounts recently stuffed by the Fed with effortlessly and electronically created money-things, use those new money-things to buy the bonds, loaning brand new money to the USG. This single step between the Fed itself and the USG is the thing which prevents the “markets” calling the process “monetization of the debt”. This brand new, effortlessly and electronically created “money” is then sprinkled on the economy as “deficit spending”. The process is completely transparent to anyone who has given the subject any study at all. But not to you. Why is that?

    “Alternatively, they can buy up short term debt and increase the amount retail lending. The Federal Reserve holds close to 2 trillion in mortgages, for example.”

    It is truly remarkable that you mention this. Yes, the Fed holds mortgages but not directly. The Fed holds them in the form of Mortgage Backed Securities, or MBS. And the creation of MBS, the rise of the CLO / CMO market, the subsequent creation of CDO Squared and the withering level of lying (by deliberately assigning higher-than-warranted credit ratings to bundles of liar mortgage loans) which went into packaging and selling these deals is absolutely the genesis of the 2008 crisis. This system was a Ponzi scheme in the truest sense. Home values underwrote the values of the MBS etc. Just like a stock market bubble, home values needed to stay up or even continue to rise, so a constant stream of new home buyers was needed. In a few years’ time, liar loans were invented and guys who worked on landscaping crews were buying $400.000.00 homes on balloon mortgages. For more information please read Nomi Prinz.

    That Timberwolf was one shitty deal. Look it up.

    And if you think this isn’t a depression you haven’t driven through flyover country lately. The bread lines are now safely tucked away in the EBT and SNAP systems, you just don’t see them.

    You really shouldn’t write about shit about which you obviously know nothing. If you’d like more detailed commentary on the remainder of this comically stupid piece, merely post as a reply “more please” and I will oblige you.

    • Excellent reply.

      RE: Landscapers buying $400,000 homes. When the housing market imploded – even the local liberal Boston Globe was forced to run articles about how insane the housing market had become. They tried to put a ” theses people were taken advantage of ” slant on their stories – but the whole thing was so ridiculous that even that didn’t work.

      The one that stands out in my mind – was a story about a woman who was an immigrant from some South American country – and worked cleaning offices. She got approved for a mortgage for something around $400k – with no down payment – and like magic she’s now into a home she cannot afford to make the payments on. Which the story pointed out – was a realization that dawned on her just one or two months into the whole thing. So she gets her mother to move in and share the payments – but that only postponed the inevitable for a few short months. Pretty soon they both realized there wasn’t a change in hell they were going to make the payments and they started falling behind.

      I don’t remember how the thing ended – I know they lost the house – and whatever money they put into it.

      I’ve heard numerous other equally insane stories of people getting into properties they simply could not afford – at all. In my estimation that whole housing implosion was driven by equal amounts of stupidity and dishonesty on BOTH sides.

      Simple math should show you that you cannot afford a $400k house when you’re making $8 an hour emptying yuppies trash barrels.

    • SWR, before I up-voted your post, you had a -1. What does that say about the economic literacy of this joint?

      • People were being polite. His tantrum was childish and stupid. But, that’s most libertarians. They simply lack the capacity to comprehend the world as it is, so they retreat into the fantasy world where we roll back 150 of social democracy and go back to riding horses and conducting trade in coin.

        Everything that the cult of libertarianism needs to say has been said a million times in a million ways. Yet, they walk around thinking they are the first guy to rant and rave about the Fed or the frickin gold standard.

      • As much as this may astonish you, a large number of us here are former libertarians. You aren’t really telling us anything new. In fact neo-reaction began as a critique of libertarianism by former libertarians. It seems they became former libertarians when they recognized that libertarian ideas weren’t working out as well in reality as they did on the drawing board. Rather than assuming the ignorance of everyone who disagrees with you, it may pay you to shut up and try to learn something from people who have already examined your ideas a lot more thoroughly than you have, and have very good reasons for coming to different conclusions.

        • Many of us are “Heinleinian” libertarians, which means, among other things, that most people do not value liberty as much as we do. I lived in East and South East Asia for 10 years and am well aware that most others do not value liberty as much as I do. Hence, I have come up with something I call “libertarian transhumanism in one tribe”.

          Far from being a part of the problem, technology, particularly bio-engineering and automation, is key part of the solution. It will allow for various factions of humanity (including the alt-right) to “go their own way” by enabling radical decentralization. Radical decentralization is the ONLY solution to our many problems.

          Any kind of authoritarianism is a big problem. For one, who gets to be the authoritarian? There is no way that a competent, self-starter type such as myself is about to submit to any concept of authority that is comprised of other humans not including myself. It is silly to believe otherwise.

          Guys, technology is here to stay and will only advance into the future. Instead of whining about it, why not use it as a tool of self-empowerment?

    • You’re why libertarians should be shot on sight. You guys walk around thinking you’re the smartest guys in the room, when you are usually the dumbest. Your comment is so stupid, it strongly suggests you have brain damage.

    • SWRichmond: “This brand new, effortlessly and electronically created ‘money’ is then sprinkled on the economy as ‘deficit spending’.”

      And now the money questions, all rhetorical of course: Who is near the front of the line to receive that new money? How much must those recipients kick back to politicians, party hacks, and shills like Center for American Progress in gratitude and prepayments for future favors?

      That stated, Z is right to pour some scorn on libertarians from time to time. Most of them are shrinking violets or slippery apologists for capitalist racketeers. But I sense that this situation is changing.

      • Actually, he is wildly wrong about the “the sprinkling” stuff. The money creation is done through Fed actions, which are targeted. No sprinkling.

        It’s the error most libertarians make. They don’t understand how our financial system works. The days of revving up the printing presses are long gone. Which is why the long predicted hyper inflation has never occurred. It’s also why asset prices are where they are.

        • Note to Liberty Community: Z Man defends Federal Reserve Bank.

          Offers only threats of violence and no refutation in response to internet dressing-down. IOW, loses argument.

          Did you drink the koolaid, or was it shoved down your throat?

        • Yes, money creation is more like a high pressure flow from a firehose.

          Imo, one of the most aggravating things that libertarians do when discussing money and banking is to claim that the FRS prints money, which is a silly description for at least two reasons: (i) The FRS buys its notes from the Bureau of Engraving and Printing, and (ii) their simpleminded figure of speech wrongly implies that most money supply expansion is in the form of paper. However, just a little research on-line at the FRS and BEP gets you all the detail you need about FR Notes and the price paid for them by the FR banks, and the FRS provided plenty of clues about depost expansion and money supply increase way back in the 60’s in a pamphlet titled “Modern Money Mechanics”. It was revised numerous times until about 1990 if I’m not mistaken.

          As for the supposed glories of social democracy, a lot of mistaken sympathy for it can be avoided by remembering that democracy is intrinsically social. So there is no need to colorize it with the adjective “social”, except to signal that the goal of social democracy is socialism, i.e. communism disguised with a euphemism and foisted upon the public through the tricks of electoral politics. So save some of your bullets for lefty after you finish off law firm partners and investment banking go-getters who admit that they are libertarian. (Or you could just shoot them no matter what political ideals they profess.)

          • Libertarianism, like autism, is a spectrum. At one end are the goldbugs and Federal Reserve paranoids. At the other are the old paleos who always understood the great chain of causality, but chose to go about from a liberty and property angle. I enjoy winding up the crackpots on occasion, but I have no patience for them most of the time.

            Again, it all comes down to the great chain of causality.

        • The hyperinflation hasn’t occurred yet because the public sector has stepped in ever since 1980ish to support the dollar whenever the private sector bailed.

          The $ is and has been hyperinflated. The chickens have just not come home to roost yet.

          For the last few years, private sector has been piling into the $ bomb shelter. When they start fleeing at the next real downturn/crash, I highly highly doubt any public sector will jump in and support our $ (buy treasuries) . China has peaked and started declining their amount of T’s and they were the ones to take over after Europe stopped in 2000.

          Who will fill that role, played by Europe from 1979-2000, then China from 2000-2014, once the private sector decides T’s are no longer safe haven?
          And when no one else steps in and our structural deficit keeps spewing 500 billion a year, how will that affect perceived inflation?

          • “This is where all those “excess reserves held at the Fed” become very dangerous. You see, those are monetary base reserves, not credit money. They may not be physical cash yet, but they are contractual obligations of the Fed to print actual cash. And if velocity picks up in a panic, that’s exactly what the Fed will have to do in order to keep the banking system from collapsing. Deflationists think this is a choice the Fed will have to make, but it is not.”

            http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html

    • I’m not so sure why SWRichmond was ranting at the zman but this statement below really pisses me off. I heard that it was $29 Trillion and maybe more though form analyzing financial records.

      I have no inside information but I bet that what they did with this money is buy the whole entire economy. Companies who are actually producing stuff which today is as close to hard money as you can get. One the reasons why the stock market at such ridiculous price levels. I bet they own EVERYTHING and no matter what happens they’ll be able to make money off the skim they get owning these companies. Food, fuel, etc.

      “…At one point during the crisis, it was estimated the Fed had conjured some $21 Trillion in order to bail out the banks. Goldman Sachs, for example, quickly sold off all its bad debts to the Fed (where they remain on the Fed’s books to this day), and was quickly returned to profitability…”

  21. The government itself is captive to this financialization. We found out during the Ted Cruz debt ceiling thing that the financial power is greater than Congressional power.

    Also, almost every state has massive pension shortfalls even at today’s high asset price valuations. And they are basing their expectation of growth at above 7% (the very long term stock growth rate) so their accounting understates their losses.

    • Pensions, those which were not designed to deceive in the first place, have shortfalls not because of stock prices, which are very high, but because historical interest rate returns have been deformed to suit the financial and government rulers. Five hundred billion dollars a year, if not more, are stolen from traditional savers.

  22. “For instance, the US government is no longer able to print up greenbacks and sprinkle them on the economy. Instead, when they expand the money supply, they expand lending, both domestic and global. It’s not just any sort of lending either. The central bank can buy up long term notes in order to drive down long term lending rates, thus expanding lending for capital goods. Alternatively, they can buy up short term debt and increase the amount retail lending. The Federal Reserve holds close to 2 trillion in mortgages, for example.”

    One could argue that consistently running a national debt to fund the welfare state is the economic equivalent of printing greenbacks and sprinkling them on the economy. Ditto with student loans that will never be paid back. Ditto with do-nothing government jobs programs. The government is not entirely out of the business of printing greenbacks.

    The petrodollar is the linchpin. We’ll need to sow evermore chaos in the Middle East to ensure that petrodollar survives.

  23. I console myself by looking at the Fortune 500 from decades past. The list from 50 years ago is full of companies that don’t exist any longer – because small upstart companies destroyed them – with plenty of help from their own bureaucracies and short-sighted management.

    Amazon will eventually be destroyed, stagnate into obscurity, or be sold off in pieces like AT&T, RCA, BorgWarner, and so many others.

  24. Everything that we look at today on the subject is based on the concept that money is now an entry on a computer screen or a spreadsheet. Money is no longer a tangible thing.

    Because money is an idea, not a thing, people are comfortable running through it when it is available.

    • @ Dutch – I think that’s going to be a real issue for the Millenians who have no concept of value of money since they rarely actually touch it. I grew up being given cash in hand for work, then later a paycheck I deposited into a bank. Today, it’s all direct deposit, no one hands you a pay envelope.

      These young people today never see their money come in, nor do they see it go out. Swipe a card, or scan a smart-phone, and it’s all digital. The day is coming when we are 100% cashless. The young already embrace it, and more and more stores are getting rid of cashiers in favor of self check out kiosks.

      Back in 2016, Amazon created a store without cashiers. “No lines, no registers, no self-checkout machines.” You simply take what you want, and the scanner at the door records what you walked out with and debits your bank account. No check out counter, no cashiers, just take and go. It’s just that easy.

      https://www.theverge.com/2016/12/5/13842592/amazon-go-new-cashier-less-convenience-store

  25. Yes, we will need new virtues, and new tactics. This I believe is the meaning of Trump — the people sensing this, and casting about for some new means to fight what is destroying them. The comments below provide some interesting ideas on options for developing and implementing these virtues and tactics. At bottom, though, we can either ride the train as it now exists to the point it goes over the cliff, or we do what is needed to stop it before it goes over. And what we have to do is neither easy or pleasant, nor is it a labor most Americans understand, or seem to have the will to undertake. (NOTE: This is not a call to violence ….. )

    A few thoughts:

    First — This change must come from us, not from our political betters (call them elites, intellectuals, academics, creative class, bureaucrats, corporate class, et cetera). They are too invested. It’s like the old Roman Cursus Honorum. Our ambitions young people now clamor to climb aboard this thing. There is a structure that provides them access to this world of our betters (yes, those Republicans too). They see it, they want to be part of it. They work through the various levels, in the different functions (business, government, politics, the academy & “arts”), striving to gain power and control, to provide for personal safety, and to cement a sense of meaning and purpose. They are not going to give this up willingly. They will defend it with whatever means are necessary.

    Second — We “others” have to organize. We tend to be individualists, and leave-me-alone-types, certainly, but this is a losing organizational principle. We must have commonality of purpose and methods. We need to provide for mutual support, and we need to understand our objectives and goals. However we do this — informally, locally, loose regional and national ties — it’s got to be done, or we simply cannot fight this Hydra we face.

    Third — We need to clearly understand our enemy — our antagonists, those who would change our nation, our world, our very reality — the people who are bending us to their new reality, and to their will. As a retired Army officer who eeked his way through considerable military history and doctrine, I can say that without a clear delineation of just who you are facing, you cannot proceed. Just look at how the various “conservative” or Republican, or right-oriented people categorize those who attack us: Leftists; Liberals; Progressives. We seem to use these terms interchangeably (I understand that there are those who have set out distinctions, and I believe they have hacked out some good categorizations, but we are too sloppy).

    Our cultural opponents use this apparent confusion of terms against us. These are different functions on the left — each with different means and motivations. They use this confusion, wwitching bwtween them to keep us off balance. We need to get together, agree on common terms (a good definition now, that all understand, is better than a perfect one once we are gone … to kind of paraphrase Patton). And, we have to make it simple, workable and comprehensible … all need to be able to understand it.

    Fourth — We need to have a plan … a comprehensive, operational template. And certainly, it would be just, a plan. As an (exchange Belgian) instructor at Fort Knox used to say: “Planning is everything; the plan is nothing.” It would change with circumstances, and grow as needed. But we would have a plan to work from.

    We are blessed on the Traditional side with many intelligent, articulate people from among the masses of us lying in the strata below our elites. Many of the blogs — such as this one — provide great material for reflection and new ideas, and keep us apprised of what’s happening. They provide great analysis and illumination of what our foe is doing; they serve as an alternate information source (around our opponents massive propaganda machine), and provide some mental respite from the constant bad news we’ve endured the past 55-plus years (and more). But this is only part of what’s required. We are aware now of the fact that we face in intractable foe — one who plans for our destruction, who follows rules that we find reprehensible, and who plots to plow under Western Civilization and (traditional) American culture.

    We know now who the enemy is. We just have to call him by his proper name — and WE must name him — and we must have a plan to defeat him.

    As an aside, the Army had a tremendous tool for planning — the Military Decision Making Process — we should employ that collectively. We could modify the process to our needs, but the basic template works.

    I know this has gone long … isn’t short and pithy, and I apologize for the excessive length. However, these are some things we have to do. We’re not going to beat these guys piecemeal; it just ain’t going to happen. I also know these things seem “pie-in-the-sky”. But they have to happen, or we will be expunged from any meaningful part in our culture.

    Look at the “LEFT” — they are organized, they have a plan; they clearly identify the threat (US); they track WHO we are (look at the Southern Poverty Law Center’s list of right wing individuals and groups); they coordinate their efforts, destroy potential leaders on our side, and they have been winning. Yes, they’ve suffered one big loss — Trump — just look at their reaction. This thing, this evil we face, isn’t going to fall on it’s own.

    If we don’t get together, put aside our petty arguments, develop a plan and execute, then we will be no more than a strange collection of dioramas in their future Utopian History Museum.

    • or you can get off the doomed train, and wait for the next one to come along.

      • I don’t think this thing we call the left is that forgiving, or foolish enough to allow us to survive, if they push us past the point where we can fight back effectively. For us, there will be no more trains.

    • sub vexillario, rolling back leftists and secularists won’t happen without a religious awakening that disdains errors like theocracy, materialism, presentism, and the cult of willpower shared by both theocracy and secularism.

      Christianity, a palpably secular religion which fetishizes the body, has been discredited. There is no going back, and much of our contemporary problem is rooted also in a very vulgar and primitive craving for sensual indulgence—to which both Christianity and Islam pander with their doctrine of bodily resurrection. The Constitution, too, misleads us. No sane people would insist, as does the C with the phrase “We the people”, that all people are qualified to rule. Children, drug addicts, money grubbers, gluttons, and feral humans are unfit to rule.

      Presentism: It’s discredited by the absolute truths that time and simultaneity are relative. (This knocks down determinism, too.) One of the implications is that your whole life, from beginning to end, is something like a rope stretched through time but with various endings on individual strands and threads of the rope. The whole rope exists together through time; the moment called now is like a cross section of one of the stands or threads. But you are more than just a cross section as the presentists, in effect, believe. If you reject both the common beliefs in annihilation AND personal eternal life, you’ll be on the right track.

      https://en.wikipedia.org/wiki/Philosophical_presentism

    • Shunning the inevitable thought of “violence” is seemingly a form of political correctness. The dreaded V-word and it’s physical application is a correct potential solution during times when the BS factor becomes untenable to moral humans. The thought of such does not make one a leper…..soapweed

      • In my post above, I’m not “shunning” violence. I’m saying that my comments aren’t the ravings of some guy dreaming of cracking though the thin barrier that holds the jungle away from this …. civilization, or better world …. we’ve created. I’m just not embracing it. We will likely get there soon enough. When we do, it will be a horror. At present, though, we don’t even have the basics of a plan to deal with the threat destroying our nation, our culture, our history, our mythology, our civilization. We need to get into place a basic structure and functional capability. It’s certainly not there now.

        We need to clearly articulate who we are facing — if we don’t solidify our terms and definitions, we can’t counter them effectively …. whatever that might entail. Obviously, political (and cultural) counter-force has not worked. The Republican party is unsuited for this type of operation — it seems unsuited for much of anything in this new environment; the formal conservative movement, likewise. It’s going to have to come from us, and the sooner we accept that and begin to get ready, the more likely we are not to be exterminated.

        And getting ready doesn not mean oiling up the old AR, and dreaming of driving a 7.62 round through some black-clad anarchist-rioter (aka Democratic activist). It can mean our own best and brightest setting aside egos, and getting together to do some basic clarifying and planning. It would also involve people learning who holds the same beliefs and hopes as themselves … and working together to ensure the survival of their communities. It must first be those things, or what follows later … if the worst comes … would only be senseless and violent anarchy.

        We are two distinct and incompatible peoples now — occupying the same physical space. We’ve let this thing go too far, and it may already be too late for a solution that doesn’t involve … tremendous destruction and misery. But we’re not going to talk and analyze ourselves back from the brink now. We need to be prepared to defend ourselves physically; protect our culture/mythology/civilization; ensure that we survive … whatever that entails. And without clear principles to unite, organization and a plan, this will NEVER happen.

  26. Health care. Same thing. Universities taking it over with their foundations and banks helping. Your family doc used to be a Mom and Pop business, too. I started out that way. Finished residency, hired a girl who knew how to bill and code, and the wife and I went to a business course offered by the AMA and learned double entry bookkeeping and some business law.
    Now the AMA just teaches new grads how to sell their souls.

  27. Man, does this need an ‘Essential Knowledge’ page. Perhaps then I could understand what Zerohedge is talking about.

    My concern is the Unacknowledged Economy, the stratosphere economy of the Nomenklatura.

    Above borders, above laws.
    Increasingly un- and in-humane.
    Like dark matter, it warps the visible economy out of true.

    Most ‘economics’ memes are marketing to cover the various flavors of carnage, consequences of
    Liberal mafias (extortion, patronage, theft)
    Conservative war (foreign and domestic)
    Libertarian surrender

  30. “Libertarians and goldbugs will spend hours arguing against this sort of currency manipulation, claiming it will lead to a financial collapse, but so far, the opposite has been true.”

    How is that statement accurate? “Credit-money” is really a form of fiat currency, and it has led to cycles of boom and bust in every society that has used it. The US economy stumbles from one financial collapse to another, forever shouting the mantra that “recovery is right around the corner.” We keep having collapses, and the dollar keeps losing its value, and real people keep losing their hard-earned savings. But printing more paper and issuing more debt never solves this problem, it just makes the next bubble even bigger, exacerbating the inevitable collapse. Granted, a paper-hanging racket can go on for a long time. And one failed racket can be replaced with a new one, via re-monetization. But the fact remains that only hard-currency has real value, and anything else will eventually prove to be an empty promise. It’s just that the paper-dollar-racket hasn’t reached the end-game YET.

    “The libertarian argument is that the more efficient business has displaced the less efficient business, and that’s not completely wrong, but it ignores the salient aspects of this phenomenon.”

    An observant libertarian would never think that the big-box stores are inherently “more efficient” than smaller stores. Prima facie, they appear more efficient, but that discounts the VAST government subsidies and assistance they receive – low interest loans, tax-funded infrastructure, licensure and other barriers-to-entry, employment laws and regulations, indefinite copyrights and patents, as well a a thousand legal and regulatory loopholes that small firms cannot use. The list is endless. Without big-government propping them up, the big-box stores would have to compete with leaner-and-meaner small stores. They only appear more efficient because of the myriad inefficiencies forced on small business by the government, and because of the hidden helping-hand that is given to them and them alone.

    “There’s also the fact that Amazon would not exist without credit money. In a world of real money, Amazon would have gone bankrupt long ago.”

    Yes, obviously. This is why fiat/credit currency is abhorrent, and why small-business would have a natural advantage in a hard-currency economy.

    “The miracle of credit money […] makes the over all business more efficient, giving libertarian economist a tingle in all the wrong places.”

    Huh? A primary feature of libertarian economics is the function of “mal-investment”. Credit/fiat currency leads people to spend foolishly, causing them to “invest” in things that have little actual value. If you think that credit money gives libertarians a “tingle”, then you don’t know much about libertarians or the roots of their economic philosophy.

    “The point here is that those old economic arguments from the libertarians […] are no longer relevant.”

    I smell a straw-man. What economic argument are you referencing? A libertarian in the tradition of Mises and Hayek would be opposed to credit/fiat currency – only hard-money is real-money. Böhm-Bawerk, Mises, Hayek, Hazlitt and Rothbard were all very clear in their writings – hard-currency supports sound investment, and paper currency leads to ruin.

    “The modern pirates have figured out how to turn our virtues into vices. That means we will need new virtues and new tactics.”

    Yep. This is why people like Matt Bracken believe that the best way to break the back of our enemies is financial – use silver coin. Stop using their phoney money. Go back to real money. Libya was trying to setup a gold exchange for their oil, and the NeoCons toppled their government to prevent it. Russia and China have already established a gold exchange market, and are buying-up physical gold as fast as they can. The Deutsche Bundesbank has also repatriated all of their gold, physically moving it to Frankfurt from New York and Paris. These people are not doing this out of atavistic stupidity.

    Per Article 1, Sec 10, Clause 1, only gold and silver coin is legal tender. A shadow economy, functioning via trade in silver coins, will bankrupt our enemies and enrich our friends. Wishes and rainbows aren’t going to cut it.

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