The demise of the central banking system.
Posted 21 February 2003 - 06:20 PM
The problem with a central banking system is that they cannot create wealth out of thin air,they can however create money out of thin air by creating credit,which is all our money,all our money everywhere,is. Credit doesn't sound as bad as debt but they are one and the same. So,a fiat money system creates money by creating debt.They do not create the money to pay the interest on the debt,only the principal. So they must create more debt every year to pay the interest on the debt. If we ever decide we have enough debt,and do not borrow for a year,there will be a shortage of money equal to the average interest rate on the entire debt. There would therefore be widespread defaults.There are currently more debts in the system than assets.There is absolutely no way all the debt in the system can ever be repaid with out a drastic devaluation of all the major currencies.This is why any talk of paying off the debt just makes a banker laugh.
I've heard several otherwise very smart people say that interest rates being low is a sign of strength,nothing could be further from the truth. The recent interest rate cuts have increased the speed of debt creation by making debt cheap. The money supply growth in the US in the fourth quarter of 02 was 18% on an annualized basis,the low rates in the 90's built a debt pyramid on top of the bubble in stocks. Now most of the debt is flowing into the bond,housing and derivative markets. The point is that the root cause of the bubble hasn't gone away,it's gotten bigger. And rate cuts are only a temporary fix to keep the cost of servicing debt low enough to prevent a collapse of either the whole debt structure or the currency itself. Whether we're talking about dollars,yen,pounds,marks, whatever, the problem is roughly the same.
For the first time,ever,drastic rate cuts by the american FED seem to have had little or no effect on the economy,other than to keep it from falling fast and hard. I could go into the exchange stabilization fund and the central bank dumping of hard money to strengthen rapidly weakening currencies,keep interest rates artificially low and generally hide the inevitable from the populace but I don't want to confuse the issue too much for now.
The point I'm trying to make is that debt-based currency is the very worst money the world has ever seen. Bad money always drives out the good,and if allowed to go unchecked we just continue to go from bad to worse. There are only two groups of people who benefit hugely from this system, The bankers(particularly the shareholders in the federal reserve) Not only do they own the whole planet give or take but they've convinced the masses to pay them interest on every transaction they make,like the kings of old without any responsibility for the welfare of the people. Giving these parasites control of our money gave them control of our lives and property. And the governments, who used their ability to deficit spend to wage world wars and build welfare states such as the world has never seen before,and hopefully never will see again. The peace movement could do more to end oppression and war by marching for stable money,if debt finance were recognized as the crime against humanity it is war on a large scale would no longer be possible and oppressive dictatorships would fall on their own.
Posted 21 February 2003 - 06:31 PM
The only solution for Japan, and for the world, is to allow private enterprises to stand or fall on merit. People will always want things,and other people will always find a way to supply what people want. When governments try to save companies that make things nobody wants you end up impoverishing everyone.
Posted 21 February 2003 - 06:37 PM
Very interesting post. I read your dollar thread. I'd be interested to hear more from you on these matters. I too believe we are all heading for a big fall within the next 12 months, as you rightly said the signs are here already. Some people don't want to believe what they are seeing.
In the UK pension funds have gone down so hard and so fast that most people are now having to reconsider there retirement plans. The housing market is still dangerously inflated and interest rates have been cut again recently for no good apparent reason.
I could go on regarding other industries such as the severe colapse of the manufacturing industry and other key areas that are suffering but i'm sure you know what i am driving at.
Posted 21 February 2003 - 06:39 PM
Credit card use is encouraged for everything now. Some things you can only buy with credit cards. Thats scary to me.
They want you to leave a paper trail, so you can be watched.
Posted 21 February 2003 - 06:56 PM
I've heard recently that they're cracking down on "non traceable assets" supposedly part of the war on drugs/war on terrorism.
I think the problems are systemic and global, the dollar thread could also have been the pound thread.
Every time a fiat money system has been tried it has ended very badly,this time the whole world bought into the scam.
Posted 21 February 2003 - 07:03 PM
Except they kept on going and going and going and unlike a country they do not have the people to destroy who could replace the lost funds. Some got very rich off it.
Oh wait, greenspan already said something similar. The difference between him and others is, he got the power to tax you to death if need be to pay off his mistakes.
Posted 21 February 2003 - 07:10 PM
Derivatives are the elephant in the room that nobody mentions.
If we had a fractional banking system I'd agree,but we don't anymore,we have a wholly debt based banking system based on promises to someday repay. Fractional banking requires a fraction of reserves of inherent value. So we have two elephants in the room,doing a wild tango,and nobody seems to notice.
Derivatives also are playing a large role in the destruction of third world countries via the IMF
Posted 21 February 2003 - 07:23 PM
The Iraq war hasn't caused the insanity of the last 100 years or so.
It didn't cause the tech bubble
It didn't cause the debt bubble that caused the tech bubble,bond bubble,real estate bubble, and derivative bubble.
It didn't cause inflation, it caused more maybe.
It does make a nice excuse for every piece of bad news doesn't it?
What was the excuse last year? Enron?
2001? oh yeah 9/11.
2000? that pesky tech bubble again,what happened there anyway?
I'm quite sure there will be a good excuse when the dow drops below 6000 in 04 too, maybe N korea? Iran?
Posted 21 February 2003 - 07:42 PM
You should hear the financial press in the US, listen to CNBC for a couple hours and you feel an overwhelming urge to buy tech stocks. It's like a cheerleading team. After hearing "it's Iraq" a gajillion times it's no wonder some believe it. Not necessarily a fool, just dreadfully misinformed.
Posted 21 February 2003 - 07:49 PM
But how can anyone still belive anything the pundits keep on saying? They been wrong for so long that most people dont have anything left to even bother listning anymore.
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