JoNova

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The money – you earn it, they print it. Welcome to the world of Corruption.

Ladies and gentlemen, it’s obvious (to anyone who knows there’s no free lunch) that one way or another this Festival of Funny Money was going to end in tears. And so it flows… but let’s not forget what lead us to this, the problem that lies under all others.

The government can print (base) money from nothing, and they can set interest rates artificially low so as to encourage private banks to create (bank) money from nothing. And governments keep doing it, because it’s so much easier to be elected handing out loaves and fishes, and grants and solar-rooftop-subsidies, in a froth of easy money and rising asset prices. Any fool can spend someone else’s money, especially when the sucker doesn’t even know it was their money.

Thus does inflation steal from all and sundry. Silently.

Watch them print money… say hello to inflation.

In the real world, we have to repay our debts. But the world of the ruling class never has to make ends meet. Alan Greenspan admitted that this weekend — effectively announcing that the US is the United States of Wonderland, where no matter how high the debt is they can never default — because they can print money. Helicopter Ben to the rescue!

There is a pot at the end of this rainbow. And it works as well as any superhero or perpetual motion machine.

As soon as money is blinked into existence, it starts to redirect economic activity away from the things that people-who-earned-money thought were useful. Instead the behemoth of mass activity swings towards producing things that those-who-blink-money want… and they come up with unlimited ways to waste money: like giant windmills that stop floods, bicycle paths that prevent cyclones, and ten top techniques to stuff a fertilizing gas down a mineshaft where nothing will ever grow.

But money is created from debt in today’s system, like a chain of endless IOU’s and all good things must come to an end. Since 1982 the bubble has grown, and after 25 years of bubbling, the bubble-weirding came to seem normal. (We could own a house, live in it, and use it to buy a 42 ft cruiser in Florida too.) Finally in 2007 the world private sector ran into debt saturation.  And in 2011 it is now obvious that most governments cannot borrow or tax much more either. There are no more stops on this line, buy your tickets for the Fiscal Stimulation Express and watch them find ways to print.

The people are catching on.

We need a special kind of wealth to worry about bad weather 100 years from now.

Thus we arrive at the strangest of moments when the world is figuring out that the forecasts of fire, flood and plague were faked, just as they realize the reassurances about the money were faked too. Disaster is coming, but not because of carbon. We’ve been worried about the wrong tipping point.

Is it a coincidence? A random convergence of delusions? Not so. It takes one falsity to feed the other. We need a special kind of wealth to worry about bad weather 100 years from now. No one was watching the dollars hard enough, rewards for scamming became wildly high compared to the return on whistle-blowing or real journalistic investigation. Corruption reigned across the high end of town. Politicians lied, scientists lost data,  bankers mispriced risk and sold it to suckers but were bailed out, and public servants served government instead of the public. Science journals forgot what science was, professors broke laws of reason, and virtually everyone in  the old media let them get away with it. Indeed the old-media was busy hacking phones for entertainment.

The youth in London who stole a 50 inch monitor today in a looting fest said he was just taking his banker’s cut. The dumb punters have realized that grand theft is going on, they know that cheats are in charge. The incentive to be honest is not compelling. No, large crimes don’t excuse the small, they should all face the court. But lawlessness is what happens when people know their leaders are not being held to any standards that count.

We all know it’s wrong.

And as far as S&P’s ratings go, the real question is, why wasn’t the USA downgraded to a B minus a decade ago?

This apt email turned up in my intray. You don’t need a Wall St PhD to know the numbers don’t add up.

“If you want to understand the magnitude of the recent debt and budget reduction actions agreed to by Congress and the President, this non-partisan example really puts it in perspective.

U.S. income: $2,170,000,000,000

  • Federal budget: $3,820,000,000,000
  • New debt: $ 1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

It helps to think about these numbers in terms that we can relate to. Therefore, let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family:

  • Total annual income for the Jones family: $21,700
  • Amount of money the Jones family spent: $38,200
  • Amount of new debt added to the credit card: $16,500
  • Outstanding balance on the credit card: $142,710

Amount cut from the budget: $385″

(H/thanks to Martin S and whomever wrote this).

The only thing that will get us out of this is hard work, hard decisions, and sticking to the rules. But the call will go out for governments to increase regulation, to remove risks, to print money, and to take control of markets. We must be relentless in calling for a return to rule of law, where one rule fits all, and where people who deceive go to court instead of being promoted.

We don’t need new rules, we need to enforce the old ones.

Other posts tagged: Fiat CurrencyMonetary History, Money Base, Corruption (markets), Corruption (science)

The Two dismal sciences (climate and money)

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329 comments to The money – you earn it, they print it. Welcome to the world of Corruption.

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    Paul

    Jo, good commentary,

    I would just add to this: “Is it a coincidence? A random convergence of delusions? Not so. It takes one falsity to feed the other. We need a special kind of wealth to worry about bad weather 100 years from now.”

    This “special kind of wealth” is generated and justified via the adoption Keynsian economic policies, which as as you note have much in common with “official climate science” in terms of how they became a resectable and dominant view, and I would posit that Keynsian economics was a necessary prerequisite for the existence of “official climate science” and most other far-reaching government involvement in things generally.

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    Ken Stewart

    And who is the lender for America’s debt? China. And who is funding Australia’s resources boom? China. So who will be affected if America goes into recession? Australia. So who has a vested interest in America printing money i.e. inflation? Everybody, especially us. The money wheel will keep spinning faster until we all fall off.
    Good stuff Jo. I don’t know much about Keynes but I couldn’t run my house like that. And yes, only those who think they are rich can afford luxuries like worrying about the weather in 100 years. The others are worrying about surviving tomorrow.
    Ken

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    RJ

    “In the real world, we have to repay our debts. But the world of the ruling class never has to make ends meet”

    A mistake that many make Jo. It was the main cause of the 1930s depression and yet we forget so quickly.

    The main problem today is many economists, politicians and monetary reformers do not appreciate macro economic realities. They are basing their recommendation on micro (individual or company) related beliefs and then making dangerous and destructive assumptions like Govt debt and big Govt is a problem. It isn’t. In fact it is essential today to reflect two significant changes that are occurring in the West

    1 Greater production per head and
    2 An ageing population

    Example
    Let’s assume that 60% of the population can produce enough for everyone. The question is how do we provide enough money for the other 40% to pay for these goods and services. This is where Government has a key and growing role (as we become more and more efficient and fewer people can produce all we need).

    Govt can either employ people in various roles or pay unemployment benefits. I would just accept that we no longer need to employ everyone and say allow people over a certain age to retire on a much higher (double or triple) unemployment benefit if they wish. Or pay people to educate themselves etc.

    The other question is how to pay for this (ie the cost of employing or paying the other 40%). One way would be to just tax the employed to exactly equal tax required over a period. But this creates the second problem. And it is clear that many do not understand this point (including economists) and yet it MUST be understood. Otherwise incorrect recommendation will be made.

    The only way to create non Govt saving is for the Govt to run deficits. The non Govt sector can’t do this as a commercial bank lending always results in an equal debt and credit (asset and liability).

    It is the key to understanding why Govt debt and deficits (or money printing) are in fact essential in an ageing population (if people are to save money).

    And does Govt debt (from Govt deficits) matter. Not in the slightest. Central bank credit, Govt bonds and the resulting commercial bank credit can be and should be created from thin air (by accounting entries) as required. The key is to calculate how much Govt debt is required but at present there clearly is not enough (or money printing). So higher Govt deficits are needed.

    We (taxpayers and society) all benefit from these deficits for many reasons. We may not agree with how the Govt spends this money but then use democracy to change this. And tax cuts can also produce the required deficits.

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  • #
    RJ

    Ken @ 2

    “And who is the lender for America’s debt? China”

    Totally wrong. China can not lend the US US dollars

    In fact what really happens is China sells real good to the US. And in return China receives US$ money. Which is no more than a balance in a US bank account.

    And where does this money come from. It’s simple a bank accounting entry.

    China really are unwise to have let this balance get so high as they will find it almost impossible to ever use this almost 1 trillion US S’s. Not until they start consuming a lot more and even then it will be difficult. And the value of this money will decline over time.

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  • #

    I once had a framed certificate of a bond issued by the government of the Czar of all the Russias. I bought it in London’s Portobello market as an interesting bit of paper that had been augumented with a cheap frame by a good enterprising capitalist street trader. After the USSR fell, all those silly bits of paper had to be redeemed before they could rejoin the capitalist system and it was too.

    At some point, all debts have to be repaid.

    Pointman

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  • #
    PJB

    It is all about value for money. Not gambling in the market to make derivatives and swaps that pay off based on leverage. It is leverage that is the major problem. Glass-Steagle kept it to 10-1 but Sommers, Geithner et al got it moved up to the 100-1 range.

    Printing money is not the problem as long as there is value behind it (resources, productivity, innovation etc.) With no standard, it is too easy for governments to over-print and debase the currency (more money than value for it). The banks make it worse because they charge interest for the privilege of having control over the supply….hard to believe but true.

    A balanced budget just means that you create the money that you need and no more. The need is determined by the productivity and associated commerce because money is just a means of exchange. Thievery and trickery require regulations with teeth that are enforced and not conflicted interests that look the other way as we are robbed of our earnings and our heritage.

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    RJ

    “At some point, all debts have to be repaid.”

    True for an individual but not for all debt or a govt.

    The other side of debt is credit. Credit today is money. If all the debt was paid back there would be no money left.

    So Govt debt is simple rolled over. And non Govt debt moved from one person or company to another one. And as a population ages debt must grow to generate the required credit financial savings needed.

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    Tom

    Oh dear. The golddiggers have had a cave-in at the Canberra mine.

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    RJ

    PJB @ 6

    The banks make it worse because they charge interest for the privilege of having control over the supply….hard to believe but true.

    WHY?

    Interest revenue cover the banks costs, interest on deposit and profit.

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  • #
    Madjak

    Jo,

    Italian prosecutors have allready raided Standard and Poors offices and seized documents.

    I think Standard and poors may have decided to start trying to do their Job properly and become a real rating agency.

    For this they will be skewered by the annointed ones and the messenger will be blamed. as well as anyone else trying to bring this beneficiary based capitalism to some semblance of reality.

    Wall St – the biggest pack of bludging beneficiaries in history. I guess they need help funding the money they end up snorting, poor things.

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  • #
    pat

    8 Aug: Chicago Tribune: Reuters: ICE to shutter Chicago Climate Exchange
    Intercontinental Exchange Inc. will close its U.S. emissions derivatives platform, the Chicago Climate Futures Exchange, after the first quarter, the Wall Street Journal reported.
    ICE plans to start listing derivatives related to emissions reductions plans in New Jersey, Massachussetts, Connecticut and California, along with a sulfur-based contract, the Journal said, citing a notice issued by the company to traders on Friday.
    The company is shutting the exchange down as it is losing money and the chances of a federal carbon-reduction plan being put into place look slim, the Journal said…
    http://www.chicagotribune.com/business/breaking/chi-ice-to-shutter-chicago-climate-exchange-20110808,0,7784695.story

    8 Aug: Reuters: Chicago Exchange’s Closure Drives Another Nail in US Carbon Market
    by James Murray at GreenBiz.com
    “The US has not enacted carbon cap-and-trade legislation, and changes to the EPA acid rain programme have reduced trading activity,” ICE said in the notice. “Accordingly, Chicago Climate Futures Exchange volumes are down substantially and the exchange is operating at a loss.”
    Matthew Gray, an analyst at IDEAcarbon, said that the closure came as “no surprise”, insisting that traders had been aware of the low volumes on the exchange for some time.
    He added that the closure will not make a huge difference to the market, as trading will simply transfer to other exchanges.
    But Gray acknowledged that the move will deal a further blow to confidence in the US carbon market and the voluntary Regional Greenhouse Gas Initiative (RGGI) cap-and-trade scheme, despite California’s commitment to moving forward with its plans for a state-wide emissions trading scheme…
    http://in.reuters.com/article/2011/08/08/idUS225967687620110808

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    Brad R

    FYI, I saw that budget example yesterday on The 5 Min. Forecast, and they credited Michael Pento of Euro Pacific Capital, who in turn credited David Thomas of Equitas Capital Advisors for the inspiration.

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    pat

    9 Aug: EnvironmentalLeader: ICE Adds 21 Emissions Contracts to Replace Futures Exchange
    The new contracts will mirror products to be lost when the futures exchange closes, the Wall Street Journal reported. New products include derivatives linked to emissions reductions plans in California, Massachusetts, New Jersey and Connecticut, ICE said.
    All of the new forward contracts will be available for the trade date of Monday, August 29, 2011, and options will be available Monday, September 19, 2011, ICE said.
    With the products announced yesterday, ICE will offer more than 550 cleared OTC energy contracts.
    The new contracts are:
    •Climate Action Reserve Forward
    •Climate Action Reserve Forward Options
    •Carbon Financial Instrument, United States, Forward
    •Carbon Financial Instrument United States, Forward Options
    •Connecticut Compliance Renewable Energy Certificates Class 1 Forward
    •Massachusetts Compliance Renewable Energy Certificates Class 1 Forward
    •New Jersey Compliance Renewable Energy Certificates Class 1 Forward
    •Regional Greenhouse Gas Initiative Forward
    •Regional Greenhouse Gas Initiative Forward Options
    •Sulfur Financial Instrument Forward
    •Sulfur Financial Instrument Forward Options
    •Cross State Air Pollution Rule TR SO2 Group 1 Allowance Forward
    •Cross State Air Pollution Rule TR SO2 Group 1 Allowance Forward Options
    •Cross State Air Pollution Rule TR SO2 Group 2 Allowance Forward
    •Cross State Air Pollution Rule TR SO2 Group 2 Allowance Forward Options
    •Cross State Air Pollution Rule TR NOx Annual Allowance Forward
    •Cross State Air Pollution Rule TR NOx Annual Allowance Forward Options
    •Cross State Air Pollution Rule TR NOx Ozone Season Allowance Forward
    •Cross State Air Pollution Rule TR NOx Ozone Season Allowance Forward Options
    •California Carbon Allowance Forward
    •California Carbon Allowance Forward Options
    More information on the new contracts is here (pdf).
    http://www.environmentalleader.com/2011/08/09/ice-adds-21-emissions-contracts-to-replace-futures-exchange/

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  • #
    Bulldust

    Got to love the difference in two of Australia’s papers… in the red corner we have the SMH with Ross Gittens and his “don’t worry, be happy” attitude to the current crisis:

    http://www.smh.com.au/opinion/politics/sorry-to-be-so-sober-but-the-world-is-not-ending-20110809-1iku7.html

    And in the blue corner we have The Australian with Warwick Mckibbin, the economists’ economist, telling it as it is:

    http://www.theaustralian.com.au/news/opinion/ditch-the-delusion-that-stimulus-saved-us-from-gfc/story-e6frg6zo-1226111941575

    Judging by a lot of the comments, people realise Ross is blowing the proverbial smoke up their fundamental rear orrifices. He is coming off as a cheerleader for the political pigmy that is our Fed Treasurer.

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  • #
    Louis Hissink

    Actually it’s nothing more complex than a giant Ponzi Scheme.

    The problem is that if we do it, we go to gaol, but if government does it, that’s ok and I know of plenty of sincere lefties who really believe this activity is moral, and the only way of ensuring equality for all.

    Couple this attitude with multiculturalism and wealth redistribution policies, and you have the mess we have today.

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  • #

    This madness will end no matter what. The only questions are when it will end and will it be voluntary or due to the collapse of the fraudulent monetary system and the consequent collapse of governments and society in general. The so called money that is being printed has no more real value behind it than a check drawn on a closed account. The logic behind it is exactly the same as thinking you would be rich if you wrote a check to yourself for ten million dollars. In fact, you would be poorer by the value lost through defacing the check.

    The governments pretend they can get away with it because they think they have the power of the gun to force the rest of us to accept the worthless paper as having value. Unfortunately, we are getting close once again to the time that when one check bounces, the whole structure collapses.

    Once it would have been quite simple to stop spending fake money and to focus on building real wealth. We could still do it but it would take a massive contraction of government size and power, a major lifting of the burden of taxes and regulation on the lives and actions of individual and corporate citizens. This has happened a very few times in history. Most of the time, the process goes to a very ugly and costly involuntary collapse of nearly everything.

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  • #
    Bulldust

    Incidently if you haven’t watched it already, then do it:

    http://www.youtube.com/watch?v=FzrBurlJUNk

    Get a copy of “Inside Job” … a brilliant disection of the GFC and how we got into this mess.

    *WARNING* This movie will stun you and make you mad. I was numb halfway through at the audacity of the Wall Street punks who are rorting the world.

    Also worth watching again is the day the dollar died… scary seeing parts of this fictitious clips become reality as time passes:

    http://www.youtube.com/watch?v=2N8gJSMoOJc

    QEIII is on people’s lips as I write…

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  • #
    Mike W

    PJB:
    August 10th, 2011 at 6:54 am
    Printing money is not the problem as long as there is value behind it (resources, productivity, innovation etc.) With no standard, it is too easy for governments to over-print and debase the currency (more money than value for it).

    There is no value behind money!!!
    Just electronic entries..
    The problem is not so much that Governments “over print”.
    The problem is..they owe a debt to banks for every note printed.
    Thats the start of the problem..

    RJ:
    August 10th, 2011 at 7:00 am
    PJB @ 6
    WHY?
    Interest revenue cover the banks costs, interest on deposit and profit.

    Interest revenue..is their profit..
    Banks have no initial “costs” when they “create” money from nothing.
    Yes..it does cover the interest on deposits..
    Bank “profit” is not a “cost”/deficit to them so I am not sure why you are implying it is. :)
    A billiant..and sadly scary book on this is
    Web of debt

    Many people are unaware that The US Federal Reserve is not the US govt per se but bankers who control the printing of money from nothing for the government.
    Somehow..bankers have convinced most people in western countries..that they should be the controllers of the production of money.
    Then..for every note they produce..for us..a debt is incurred..by the govt/us..
    And for any jack in the box troll with a comment like “your just a conspiracy kook“..
    Just do some research first instead of making yourself look ridiculous . :)

    Mike

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  • #

    Nothing happens by accident, every event is a planned event, every design has a designer. The snakes in suits, an elite tribe, are step by step swamping the world with their ‘money’ which costs nothing to produce and on which compound interest must be paid. By encircling the world with their non repayable loans every nation is eventually foreclosed on and the world becomes their possession. They want to be King of the World, and they are achieving that status by economic means.

    ‘The love of money is the root of all evil’.

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  • #

    “Angry Harry” has a witty style and his article “printing Money” is well worth a visit. [in my opinion]

    http://www.angryharry.com/esPrintingMoney.htm

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  • #

    The simultaneous collapse of Western economies and the climate scare is no mere coincidence!

    The sordid history of deceit in government sciences since 1971 is below.

    1. “The Bilderberg Sun, Climategate & Economic Crisis”

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf

    2. “Neutron repulsion” “Neutron repulsion”, The APEIRON Journal, preprint, in press, 19 pages (2011) :

    http://arxiv.org/pdf/1102.1499v1

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

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  • #
    JMD

    Bankers cut?

    That’s a better excuse for stealing than ‘humanitarian’ intervention.

    That guy should be Prime Minister!

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    Oliver @ 21

    1985, “Pinch off the tailpipe”, devise a scam based on a lie that CO2 causes global warming thus occassioning the economic collapse of nations worldwide by cutting off their oxygen?

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  • #
    Bulldust

    RJ:

    Don’t know where to begin… I am not sure which utopian book you read, but half the population isn’t going to slog their guts out then be taxed to death just so the other half can lay about on benefits. Human nature will not permit such a situation, as Greece is finding out the hard way, and Spain (with 20% unemployment) is about to find out.

    Another thing to know is that except for one special and unique exception, NO Government has EVER avoided default after passing the 120% debt to GDP ratio.

    Iceland, Ireland, Portugal passed this point some time ago.
    Greece WILL default (technically it already has).
    Spain and Italy are about to reach the point of no return.
    UK and USA are not far behind.
    Japan’s massive savings are the only thing keeping it ticking, but they are entering negative savings territory soon… plus 200%+ debt:GDP.

    These are facts from actual macroeconomic measurements. Try telling any of these Governments, let alone their creditors, that debt does not matter. I, and many other economists, shall beg to differ with you – see McKibbin above, for example.

    PS> There is no limit to the amount of stuff that needs to be created in an economy, because to date people’s desires have not been met. Until such a point is reached there is no real excuse for a large proportion to be unemployed.

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  • #
    Joe Lalonde

    Jo,

    Excellent!

    I came across a story once on how the US banks were allowed to use the gold that they held in reserve and use that as collateral at 10% of value. This then generated 90% more borrowing on fictional actual reserves. Instant money out of 10% of gold holdings to be borrowed on.
    Certainly the banks did not have to pay any borrowing costs.

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  • #
    Grant (NZ)

    OT – Has anyone noted that the Credit Rating Agency is itself C & D- (Standard and Poors)

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  • #

    Dear God, RJ wants the government to employ more bureaucrats to harass us so they can get paid for doing so out of the money we earn.
    I’d rather they were unemployed.
    So how is the government going to pay interest on the its borrowings? People aren’t going to lend them money for no return forever. Eventually all the tax receipts will be paying intrest on government debt. What then RJ?

    Jo’s article here is pretty much what Karl Denninger has been saying for years. “Stop the looting and start prosecuting”.

    The riots in the UK have an easy solution. See Jerry Pournelle’s “The Mercenary”. Hint: It involves machine guns and lots of bullets. Any government that cannot keep civil order and protect the lives and property of its law abiding citizens has lost its reason for being. The UK government will pick on individuals but won’t maintain law and order. Gutless. What else to expect from Cameron?

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  • #
    PJB

    Web of Debt is a very good appreciation of the failings of the banking system. “The Creature from Jekyll Island” is another that provides perspective.
    Fractional reserve banking is the problem. Making ten times the assets from anything on their books. The spread in interest rates from investments made with deposits is their “take”. The Federal Reserve is just a consortium of private bankers that conspire to profit from their position.

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  • #
    Crakar24

    Here is a description of how the US got into this mess from Michael Rivero

    The American media has been remiss (intentionally) in reporting on the mortgage-backed securities fraud, even though it is the initiating event in the economic disaster which continues to engulf the world. But while the government can pretend none of this ever happened, the civil suits will drag the scandal into the public eye, and well it should!
    For the newer readers, here is a summary of how DC and Wall Street got us all into this mess.
    After the last Depression, Congress enacted a law, Glass-Steagall, which forbid banks, insurance companies, and investment houses to be in the same institution, to deter reckless speculation with depositors’ money, which was seen as a major contributor to the stock market instability of the time. Then in 1999, at the height of the “Deregulation” craze, Citigroup and Travelers merged, a clear violation of Glass-Steagall. But rather than enforce the law, Congress repealed the prohibitions of Glass-Steagall with the passage of the 1999 Financial Services Act.

    That opened the floodgates for runaway financial speculation. Wall Street knew that if they made money they would be allowed to keep it, but if their investments lost money, the US Government would step in to transfer the losses to the American people, because that is what had been demonstrated during the S&L debacle of the 1980s.

    Starting about in 2005, Wall Street started bundling mortgages together into investment bundles. The initial offerings were greeted with great success, and soon everybody wanted to get in this new “product.” So great was the demand for Mortgage-backed Securities (MBS, also called Collateralized Debt Obligations) that Wall Street started running out of mortgages to front-load the system! This led to the creation of the “sub-prime” mortgage; granting mortgages to people who normally would not qualify. Congress, themselves invested in the Wall Street firms that were profiting from selling MBS, passed an $8000 first-time homebuyer tax credit (actually a loan repaid in future taxes) to lure more buyers in which helped front-load the process even faster. This sudden surge in new homebuyers increased demand and home prices skyrocketed! This made investors and homebuyers even more confident, demand for homes and MBS soared even higher and a genuine bubble was being formed.

    Demand for MBS was so great that as the supply of available mortgages began to dwindle, brokers started taking ‘shortcuts’. Bear Sterns was pledging the same mortgages into multiple investment bundles; a clear case of fraud. Other brokers were blending mortgages into the bundles that were already in foreclosure. As the returns from the MBS failed to materialize evidence surfaced that the earlier earnings had not been genuine, but were “ponzi” payoffs, using money collected from new investors to send dividends to older investors.

    The whole scan started to unravel in 2008 and here is where things took a dark turn. Because Congress had their own fortunes invested in the companies at the heart of the fraud, Congress decided to prop up the scam with taxpayer money and block any efforts to investigate or prosecute. That is why TARP was passed by the Congress despite 90% popular opposition. Congress were saving themselves at the expense of the taxpayers. The phrase “toxic asset” was DC-speak for the fraudulent mortgages backed securities, which were being repurchased in order to avoid investors seeking to jail the Wall Street criminals, which would have brought all of Wall Street down. Despite claims that the US taxpayer would be refunded when the “Toxic Assets” were resold at some point in the future, the reality is that none of those assets will ever see a penny of repayment, because they are all the product of the biggest financial swindle in history. Bigger than Tulip mania. Bigger than the Great South Seas Company disaster.

    Together with having to cover the credit default swaps sold with those mortgage backed securities, it is estimated that the swindle has cost the nation $27 trillion, at least $16 trillion admitted to by the Federal Reserve in “loans” and “bailouts” (actually buy-backs) from foreign investors such as Credit Suisse, Deutchebank, the Bank of Libya (boy, did THEY get hosed; 98% of their sovereign wealth fund destroyed by Goldman Sachs aka Gold In My Sacks!), etc. Globalism took a major crims n the US financial system and turned it into a global cataclysm from which we are all still reeling.

    But while the “Too Big To Fail” banks were being bailed out by the US Government, smaller banks caught in the mess were struggling to stay solvent as cash poured out of their coffers to buy back all that bad paper they had sold to investors. Those monthly payments made by home-owners were not sufficient to cover the losses; the whole value of those homes needed to be returned to the banks’ balance sheets to keep the banks technically solvent. So again, starting in 2008, Washington DC sent out a private message to banks and mortgage companies that DC would look the other way if foreclosures to home loans were “short-cutted.” This kicked off the “Foreclosuregate” scandal in which phony foreclosure paper mills, bogus notaries, MERS were all used to facilitate a massive land grab from the American people. As Damon Slivers put it during Congress’ hearings into the foreclosure mess, “We can have a realistic discussion of the foreclosure mess, or we can preserve the capital structure of the banks. We cannot do both. Which shall we do?”

    In hindsight, it is obvious which choice the government made. We are seeing wealth confiscation, no different than when FDR confiscated the gold from the American people to save the banks, only this time, done in a covert way to trick Americans into thinking it was their own fault they lost their homes. But again, this was the result of official US policy which gave tax credits to corporations that actually encouraged offshoring of American jobs. In short, the US Government took their jobs to make it easer for the banks to take their homes, to save themselves from going to prison over the mortgage-backed securities fraud.

    Icel;and had the right solution. They tossed the crooked bankers in jail and fired the government that tried to loot the people to save those bankers and Iceland’s economy is already on the rise. (Which is why you don’t see much mention of them any more in the American media)
    That is it in a nutshell!

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    Bruce of Newcastle

    Its fun to watch some of the ‘great games’ being played.

    The US Fed is trying to depreciate its currency as fast as it can to restore competiveness and inflate down the debt mountain.

    China is resisting appreciation of its currency, so it can continue to outcompete the manufacturers in the US which the Fed is trying to make competitive. But in doing this they’re having to repress the food riots caused by food prices staying the same whilst the yuan follows the dollar down.

    Europe is also following the US down because they let a pack of dole bludging countries into the euro zone and now those countries can’t inflate away their euro denominated debt, so the whole euro shebang is tottering.

    That leaves Australia and Switzerland and NZ and Canada who still actually make stuff (admittedly Ms Gillard is trying her hardest to fix this for us) so our currencies have been soaring, making us uncompetitive.

    The only thing I can say is its better than during most of history, since rulers had no qualms about going bankrupt and jettisoning their debts (and sometimes their creditors too, in quite nasty ways). So this mess is a historical improvement, sort of.

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    Crakar24

    Here he talks about the 11th marble, basically what he is saying is that for every dollar you borrow you owe more in interest therefore you can never pay back the debt hence the 11th marble.

    http://whatreallyhappened.com/WRHARTICLES/11thmarble.php

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    Joe Lalonde @ 25

    If you are a member of the IMF you are specifically prohibited from having gold backed currency.

    The financial elite own the worlds gold and are not going to part with it.

    Saddam Hussein demanded that his oil be for in gold instead of $U.S. dollars and they hung him.

    Colonel Gaddafi demanded that his oil be paid for in gold so they assembled a coalition of forces to knock him off.

    Every nation uses a fiat currency which is being continually devalued.

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    Joe Lalonde

    Jo,

    China is holding over a trillion dollars of US debt.
    They should have sold it off for gold early. Can you imagine what that would have generated into conversion now that gold is at over 1700 US?

    China is getting irritated that the US may not have been a good investment and is the possibility they could default on their loan agreements.

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    Graeme

    I explained the US fiscal situation to a friend of mine as follows.

    Imagine you have the following situation.

    You earn $20,000 per year.
    You spend $35,000 per year.
    You owe $150,000.

    You have promised to look after the medical and retirement expenses of your aging parents, uncles, aunts and cousins, which is expected to cost you $2,000,000 and this cost is rising at 8% per year.

    Your earned income of $20,000 is stagnant.

    You want other people to keep loaning you $15,000 (+) per year at an interest rate that is below the rate of inflation so that the loaned money is losing value.

    You claim that you are the safest credit risk in the world.

    What wrong with this picture???

    BTW just convert each $10,000 to $1,000,000,000,000 (that’s 1 trillion) to get the real picture for Uncle Sam. ($2T tax receipts, $3.5T Expenses, $14.5T Debt, $200T Medicare, Medicaid, and Social Security Obligations).

    I apologise for any roundings and approximations…

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    Andrew Barnham

    I know next to nothing about this subject, but that looks like a hockey stick graph to me. Should I be alarmed? :p

    Also – those numbers with all those 0′s on the end give me a headache. Like Indonesian currency. Replacing ,000,000,000 with a ‘T’ makes it easier to read.

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    MattB

    Sorry – what’s the problem with the bike paths?

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    CameronH

    RJ @ # 3. What is produced can be divided into needs and wants although the line between these can be blurred. While people needs can mostly be simple there is no end to their wants and desires. As productivity goes up more wealth is created within the society there is more for people to spend on their wants and desires. If it is easy and profitable for businesses to be set up to produce goods and services for these wants and desires at a price that people can pay then this will happen and there will no need for unemployment. It is only the constant meddling of governments and the resultant increase in bureaucracy as well as the increasing cost of regulations that prevents this. This is a lesson that appears to have to be learned many times over.

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  • #

    As you read this, I fully understand that it sounds like a whopping big conspiracy theory, something that it patently isn’t.
    Let’s go back to GFC One back in September of 2008.
    There was an obscure video hidden away on CSPAN TV in the US, which has even less percentage of viewers than does SBS here in Oz. Because of that, very few people saw it until it was posted at the You Tube site, and people wrote their stories from that
    The man in question is Paul Kanjorski (Dem Pa.)
    Listen to the video very carefully before reading the text of the Post.
    This one single video is the most misinterpreted video of that whole meltdown, just because of the way he actually says things.
    He said and I quote:

    It was about September 15th…..

    After reading the text, go back again to the video and I’ve marked the spot where it starts, at around 2.07.
    What he says has been totally misinterpreted.
    What happened was the bank raid was on the Thursday.
    On the following Monday, the feds, Ben Bernanke and current SecTreas Hank Paulson appeared before a Congressional Inquiry into what actually happened.
    That Monday was the September 15th that Kanjorski mentions.
    He goes on to say that on the Thursday etc etc.
    Everybody immediately associated the date, the 15th with the day the Thursday because of the way Kanjorski spoke it.
    Because this didn’t come out till February of the following year, every commentator immediately went to press saying that the raid was on Thursday the 15th September.
    Since then, what was written, and written by so many people in so many different places has become the accepted way of interpreting it.
    Now, what I want you to do is to go to the time and date thing in the bottom right of your screens, in the system tray there where it shows the current date.
    Click on that and when the clock comes up, change the year back to 2008, and the Month to September.
    Look at the 15th. It’s not the Thursday, but the Monday, when that Congressional hearing was taking place.
    No need to look at the date for the previous Thursday when the raid actually occurred.
    Listen again to what he says and the way he says it.
    Everyone was so transfixed by the amount that they forgot to check their calendars.
    Here’s the link to the Post with that video.
    $550 BILLION Raid On Banks – But On Which Thursday?
    Tony.

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    Bruce of Newcastle

    One result of the skyrocketing Fed money supply is this.

    “The Price Of A Big Mac Is Now $17.19 In Zurich.”

    “a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it”

    Strange days.

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    Bulldust

    For people struggling with a trillion dollars as a concept, this amusing video puts it in perspective:

    http://www.youtube.com/watch?v=YZkIuXJ7tOY&feature=related

    Enjoy…

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    Bulldust

    As for people spreading the Zurich Big Mac story…. ummm no. Try more reliable sources please:

    http://www.economist.com/blogs/dailychart/2011/07/big-mac-index

    As of the July 2011 Economist Big Mac Index (they created it) the Swiss one cost the equivalent of US$8.06 (see link). Still a chunk of change but less than half of what is quoted in those dodgy blogs.

    Bulldust, your resident skeptical economist.

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    MattB

    It appears they confused the cost of a Big Mac Meal… anyway the $8.06 is now about $9.10 as the franc has firmed about 15% on the USD.

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    Bruce of Newcastle

    Bulldust at #42

    I read The E religiously this last 20 years, love the index. Yep you’re right except PPP is what that list is.

    Swiss franc has gone up vs USD by more than 10% since July. Now take it back off of PPP and you add 50%. Blue dots. That gets you to about $13. I can’t see how to get to 17 bucks, but I suspect Zurich is a touch more expensive given the prevalence of Gnomes.

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    Mark D.

    Mattb (the id10T) comments aside, is that graph a “hockey stick” or what?

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    Mark D.

    Graeme @ 35:

    You claim that you are the safest credit risk in the world.

    I’ve never made that claim, I do look around at Spain and Greece and where ever. It may still be a true statement. That should not cause anyone a comfortable sleep tonight.

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    Why People Often Hated Bankers

    “Even the French Emperor, Napoleon, seemed to hate them,….

    “When a government is dependent on bankers for money, they and not the leaders of the government control the situation, since the hand that gives is the hand that takes…..Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”

    And in this piece, I just want to talk about one of the main reasons why bankers have been so often hated.

    WAR!

    http://www.angryharry.com/esWhyPeopleOftenHatedBankers.htm

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    bananabender

    Bruce of Newcastle:
    August 10th, 2011 at 2:32 pm

    “The Price Of A Big Mac Is Now $17.19 In Zurich.”

    “a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it”

    The Big Mac Index is BS.

    A Big Mac in Zurich is about $8. This is about one hour’s work at the US miniumum wage.

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    Bruce of Newcastle

    On the other hand I know people do like to exaggerate. So, check check check. Cup of SB’s tall coffee in Zurich is about four times US price, so Big Mac plausibly similar. I should get job as a climatologist.

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    Crakar24

    Just got this email thought i would share

    U.S. RECESSION

    The recession has hit everybody so hard…….

    My neighbour got a pre-declined credit card in the mail.

    Exxon-Mobil laid off 25 Congressmen.

    Wives are having sex with their husbands because they can’t afford

    batteries.

    CEO’s are now playing miniature golf.

    A stripper was killed when her audience showered her with rolls of pennies while she danced.

    I saw a Mormon with only one wife.

    If the bank returns your check marked “Insufficient Funds,” you call them and ask if they meant you or them.

    McDonald’s is selling the 1/4 ouncer.

    Angelina Jolie adopted a child from America.

    Parents in Beverly Hills fired their nannies and learned their children’s names.

    My cousin had an exorcism but couldn’t afford to pay for it, and

    they re-possessed her!

    A truckload of Americans was caught sneaking into Mexico.

    Immigrants are cursing the day they chose USA to immigrate instead of Canada, Australia or Brazil.

    A picture is now only worth 200 words.

    When Bill and Hillary travel together, they now have to share a room.

    The Treasure Island casino in Las Vegas is now managed by Somali

    pirates.

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    Mark D.

    Bananabender: 48 those numbers are BS…..

    $7.25 per hour USD minimum wage (Minnesota) and that is before taxes; FICA, federal income, and state income are withheld. To pay for that Big Mac you’d work more like two hours.

    Of course if you owned a car and lived in a home you’d pay much more in taxes and fees.

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    Crakar24

    Greame in 35,

    Just a slight correction.

    You have promised to look after the medical and retirement expenses of your aging parents, uncles, aunts and cousins, which is expected to cost you $2,000,000 and this cost is rising at 8% per year.

    The reason why you promised to look after the medical and retirement expenses is because they have been paying you money all their working lives so you would have the money now to pay for it all. However you have spent it all on other things and now you have no money for these things (or in this case the US government (Clinton mainly)).

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    [...] The money – you earn it, they print it. Welcome to the world of Corruption. [...]

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    Bruce of Newcastle

    I surrender. CHF 6.5-6.9. If I ever go to Zurich I promise to eat only Big Macs and not touch the coffee.

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    Crakar24

    OT but we cannot take our eye off the ball for a second

    http://www.telegraph.co.uk/earth/earthnews/3310463/Global-warming-makes-Mont-Blanc-grow.html

    Head line “Mont Blanc, the highest mountain in France and western Europe, has grown more than two metres in two years – ironically as a result of global warming, experts have found.”

    Words fail me………………..

    And

    The next time some tells you we know all there is to know about ocean warming

    http://content.usatoday.com/communities/sciencefair/post/2011/08/explorers-discover-deep-sea-hydothermal-vents/1?csp=obnetwork

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    Crakar24

    Bruce,

    Just had a thought have we factored in the size of the serving? A US big mac is the size of a Queensland mudcrab whilst the Euro version is not much bigger than a cup cake……so by measure of mass (thats for Mark and MFJ) you might find that the cost is quite extraordinary.

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    memoryvault

    Crakar @ 24

    Amazing stuff this global warming.
    Back in 2005 it caused Mt Everest to

    SHRINK

    1.4 metres.

    http://news.bbc.co.uk/2/hi/asia-pacific/4204539.stm

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    Ken Stewart

    RJ@4:

    I sell you a car for $10,000 on the never never. You promise to pay me sometime in the future. In the meantime, you owe me money i.e. are in debt to me. In effect I am lending you $10,000 until you pay me back.
    Over simplified I know.
    Ken

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    Bruce of Newcastle

    Crakar at #55

    True. I normalised the coffees, didn’t think of BM’s. I had a BM in London once that was roughly the size and consistency of a shrivelled prune and the Mcworkers were rude. Living proof of why Great Britain became great. After that I ate apples, which were much nicer.

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    RJ

    Mike at 19

    “A billiant..and sadly scary book on this is Web of debt”

    Its a good book (although not scary) as is her web site. But Ellen is still not clear about certain subjects. Based in part on her underlying belief that the banking system is not fair.

    But if you really want to understand banking and credit read the brilliant moslereconomics web site.

    Warren Mosler is a very successful banker and bond trader etc. His free book (the 7 deadly etc) is outstanding. It was the book I looked for to explain what I had finally worked out for myself. After never getting the full answer (or contradictions) from the likes of Ellen Brown. Ellen is great but she can only take anyone so far.

    Its like a mystery that Ellen has not quiet fully solved yet. But she is closer than most.

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    Colin Dixon

    China is not the lender to the US as such just anyone who accepts the US$ FIAT currency, Arab oil included. Back to Gold is the only way.

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    Tel

    Just for the record, I think the Reserve Bank of Australia has done a much better job over the last few decades than any of the US or European central banks.

    They have kept interest rates reasonably stable, not stupidly low, while using low interest rates in a sensible manner during the worst of the crisis to take the edge off the problem for ordinary Australians. The RBA has never tried to leave low interest rates in the system for an extended period of time. I think we have all benefited from that.

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    RJ

    Mike at 28

    Jo’s article here is pretty much what Karl Denninger has been saying for years. “Stop the looting and start prosecuting”.

    Ignore Karl. He is the equivalent to a climate alarmist but based on Govt debt rather than CO2.

    They are all just modern day end of worlders. And basing their dire predictions on flawed beliefs.

    Warmists that CO2 will almost destroy the world
    Karl that Govt debt will do likewise

    Both are completely and utterly wrong. CO2 is essential as is Govt debt.

    But people on this site (including Jo) who have not fallen for the CO2 misinformation have about Govt debt.

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    Tel

    The youth in London who stole a 50 inch monitor today in a looting fest said he was just taking his banker’s cut. The dumb punters have realized that grand theft is going on, they know that cheats are in charge.

    I think that any ruling class needs to maintain at least an atmosphere of legitimacy in order to keep *MOST* of the punters in line and believing in the system. You simply cannot rule using brute force alone (as various dictators discover, they run their countries into the ground, and spend all of their energy defending their ever shrinking patch of turf).

    If *MOST* of the punters have something to gain (even something small) from the system, then they will generally support the system, even if only out of habit.

    That’s really what’s killing the US economy — failure to follow the rule of law, and loss of a sense of legitimacy in the Federal system. I do wonder whether this state of affairs was planned or accidental. Maybe George W Bush was just playing dumb?

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    MaryFJohnston

    RJ @ var

    You’ve got to admit the theory goes against conventional wisdom.

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    MaryFJohnston

    Crakar24: @ 50

    That post was the sort of gallows humour you get at the ” end of the world ” which is where the US seems to be now. Funny and disturbing at the same time and weigh off topic.

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    MaryFJohnston

    Tel @ 62

    “” failure to follow the rule of law, and loss of a sense of legitimacy in the Federal system “”

    This is also what’s happened in Australia over the last 40 years.

    Everybody suffers even the politicians who “give way” and leave us with a less than pleasant society.

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    Raven

    If this is already posted apologies in advance ….
    Damian usually nails them. Anyway head over to the age and support or post a question , as apparently only skeptics run the Internet !

    http://oursay.org/the-sunday-age

    It seems to be going quite well … Hehehe :)

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  • #

    RJ, you’ve been polluting Andrew Bolt’s blog with your bizarre economic theories for a while.
    Tell us please how the government services its debt? If it simply prints more money to do this it devalues all the currency units in circulation. The end state is Zimbabwe or Weimar Germany or if we’re really lucky, Argentina. I’m not feeling that lucky.
    Australia worked pretty well for a while with no government debt. According to you that can’t be so.
    Heck, I’m beginning to have my doubts about the worth of any government when they cannot even protect their citizens from violence and their property from destruction, let alone “manage” economies.
    Devaluing the currency is simply THEFT from the savers. That you advocate policies that will do this makes you no better than a common THIEF.

    A very succinct summing up of the short term thinking exhibited by many on the left and their bleeding heart hangers on is “The Democrats would feed the seed corn to the hungry children” (Byron in Don Kingsbury’s quirky SF novel “The Moon Goddess and the Son” – he was referring to the US Democratic party). Also applies to “stimulus “packages etc. Cover up the short term only to create a larger problem in future.

    A little dated now but the novel was a LOT of fun. You’ll like Diana, Mr Ling, Byron and Charlie(the son).

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    Louis Hissink

    This is a general comment but central bank activity is simply a euphemism for a belief in the command economy, that government can control economic activity by regulation and command. But we know that no command economy has ever worked, yet the belief that a central bank, by manipulating the aggregate via interest rate adjustment can affect the performance of an economy is no different to the belief in a command economy. In both cases it is state interference, either directly as in the command economy, or by proxy via a central bank policy, of the economy.

    Yet to reject the philosophy of the command economy theory yet embrace central bank monetary policy suggests somewhat confused thinking.

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  • #
    Jaymez

    As an experienced and well qualified finance and economics professional I can only endorse your article Jo. Really it is as simple as you have put it, but it seems Treasury, economists and bankers still want to pretend it’s all magic. It reminds me of an old joke but to understand the joke you need to know the Irish pound (English) or ‘punt’ Éireannach (Irish) was the currency of the Republic of Ireland until 2002. The joke goes:

    Q. Why did the Irish name their currency the ‘punt’?
    A. Because it rhymes with ‘banker’!

    Some on this forum have blamed Keynesian economics (Government spending in times of economic decline), for the economic problems the US, other countries and Australia are having or will have. Let me say that I have studied Keynes thoroughly and I am absolutely certain he would not have supported:

    – sending cheques to all and sundry.
    – subsidising or paying for private expenditure such as roof insulation, solar panels or private school halls.
    – increasing middle class welfare
    – reducing the tax base (in Australia by 1,000,000 tax payers) at a time when Government Debt is growing exponentially.

    Keynes was always concerned about Government expenditure filling the gap left by private expenditure in times of recession. What this and other Governments have done is to ‘crowd out’ private expenditure. For instance the billions spent on the school halls sucked tradesmen and labourers out of other important areas of our economy and forced mining companies to pay even more for their labour. It caused the cost of building private dwelling to sky-rocket leaving Australia with a growing public housing shortage.

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    theRealUniverse

    The big banks of the ‘street’ dictate to the Federal reserve and pulls the strings of the Whitehouse. The whole thing is setup plus a few ‘random fluctuations in the void’ (so called market forces). The plans are usually setup at the secret illegal Bilderburg meetings several years before although not everything goes the globalists way but close to it.
    This from Dr Paul Craig Roberts (Assistant Secretary of the Treasury in the Reagan administration)

    In the succeeding half century the military/security complex became ever more powerful. The main power rival was Wall Street, which controls finance and money and is skilled at advancing its interests through economic policy arguments. With the financial deregulation that began during the Clinton presidency, Wall Street became all powerful. Wall Street controls the Treasury and the Federal Reserve, and the levers of money are more powerful than the levers of armaments. Moreover, Wall Street is better at intrigue than the CIA.

    The behind the scenes fight for power is between these two powerful interest groups. America’s hegemony over the world is financial, not military. The military/security complex’s attempt to catch up is endangering the dollar and US financial hegemony.

    Dont be fooled by market fake rises there’ll be more to come.

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    J.H.

    Well said JO. Excellent article.

    Jaymez…. On what you said about Keynes. Actually you might not be far off the mark. He would not have been advocating those remedies….. What is being done is more in line with bloody Marxism and all it’s unintended consiquences to boot. It’s just pure and simple unsophisticated redistrubution of wealth with no forthought or friggin’ clue.

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    RJ

    MaryF @ 65

    You’ve got to admit the theory goes against conventional wisdom.

    Not true. the US are currently running large deficits. And its what helped end the 1930s depression.

    And most countries have govt debt

    http://www.usdebtclock.org/world-debt-clock.html

    It’s ignorant Govt debt hawks that are the real danger not the Govt debt itself.

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    Tom

    Figuratively rolling on my back laughing: Fairfax’s Sunday Age is trying to buy back some credibility (and readership) on climate change after banishing any questioning of the “science” for the past four years in favour of the chanting of zombie Green slogans dressed up as reportage. A “competition” is being run, the result of which will be some reporting by the Fairfax climate change “journalists” on readers’ most popular questions. Most of the top-rating questions are by by sceptics who, I’d say, have already cancelled their subscriptions or are about to. But what do you think the headline was? “Who is funding climate change sceptics?” Don’t know about you, but I just love my nightly bath in Texas sweet crude.

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    RJ

    Mike @ 69

    The end state is Zimbabwe or Weimar Germany or if we’re really lucky, Argentina. I’m not feeling that lucky.

    Complete and utter nonsense.

    Here’s something from Ellen Browns web site

    IS QE2 THE ROAD TO ZIMBABWE-STYLE HYPERINFLATION? NOT LIKELY.

    Professor Michael Hudson has studied hyperinflation extensively. He maintains that “every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts.”

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    RJ

    “As an experienced and well qualified finance and economics professional I can only endorse your article Jo”

    Then I suggest you read articles on modern monetary theory to expose yourself to another viewpoint.

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    bananabender

    Costs are all relative.

    A Big Mac in Zurich costs CHF6.50

    The unofficial minimum wage in Switzerland is around CHF2200/month (USD3000). However most unskilled workers earn much higher wages.

    That means a “minimum wage” Swiss worker works <30 minutes to buy a Big Mac. About the same time as an American on minimum wages. The difference is that an unskilled Swiss worker is only poor relative to very high average Swiss incomes and is far wealthier in absolute terms than an American counterpart.

    The obvious fact is that the US dollar is relatively worthless rather than Switzerland being inherently expensive.

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    bananabender

    RJ:
    August 10th, 2011 at 8:25 pm

    MaryF @ 65

    You’ve got to admit the theory goes against conventional wisdom.

    Not true. the US are currently running large deficits. And its what helped end the 1930s depression.

    Complete bollocks. The US depression only ended in 1941 with the US entering WW2. This was 4-5 years later than the rest of the world. This delay was mostly due to protectionist tarrifs and inefficient Keynsian stimulus packages.

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    Paul S

    I read recently that for the first 140 yrs or so of the US the dollar’s value was tied directly to a defined amount of gold – around 380 grains or so. During that time the purchasing power of the dollar increased by 10 -15%. In the last 70 odd yrs, the dollar has been uncoupled from this gold standard and its purchasing power has declined by 95%. Is this due to the fact that the dollar has no “real value” any more? I am quite ignorant of the hermetic secrets of economics and would appreciated the point of view of some of our more enlightened contributors.

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    RJ

    Bulldust at 25

    Another thing to know is that except for one special and unique exception, NO Government has EVER avoided default after passing the 120% debt to GDP ratio.

    You say this an then contradict your self with Japan.

    Read this article.

    Monetary Sovereignty. Th e key to understanding economics

    Some debt hawks say that a Debt/GDP ratio exceeding 100% puts a nation on the brink of bankruptcy. Yet today, Japan has a debt/GDP ratio above 200%, and this Monetarily Sovereign nation has absolutely no difficulty servicing its debt. The debt hawks, as usual, having learned nothing from this, continue to wail about the meaningless debt/GDP ratio, which because it is a classic apples/oranges comparison, is devoid of significance (the numerator is a 200-year measure; the denominator is a one-year measure). Federal “debt” merely is the total of T-securities outstanding. All federal debt easily could be eliminated tomorrow, if the federal government merely credited the bank accounts of T-securities holders. That would require pressing a few computer keys.

    Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it? Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary. Federal spending itself creates money. If U.S. federal taxes and borrowing fell to $0, or rose to $100 trillion, neither event would reduce by even one penny, the federal government’s ability to create the money to pay any size bills.

    Although Monetarily Sovereign nations need neither to tax nor to borrow, they may choose to do so for many reasons unrelated to financial need

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    RJ

    @ 80

    Complete bollocks. The US depression only ended in 1941 with the US entering WW2.

    And what did the war do. It resulted in Govt’s running larger deficits. Why do people forget the lessons of history.

    And MMT has nothing to do with Keynes. Govt deficits are needed for purely credit reasons. To ensure that there is adequate bank credit to meet the purchasing requirements to generate full employment.

    Otherwise its like a sports stadium not being able to sell all their seats to a game because the do not have any tickets left. Bank credit in the economy is equivalent to the stadium tickets. There must be sufficient to buy all the goods and services to ensure a full stadium (or full employment).

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    Joe Lalonde

    RJ@82

    If you were owed US dollars for services rendered would you not feel cheated that they just print it off and give it to you?

    This generates a problem for the whole planet of cheating the system by printing off to pay debts rather than working for it.
    Hmmmmm….I think I read this??? :-)

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    Redshield

    The Australian Government doesn’t print the money, it borrows it from the Reserve Bank of Australia who loans it out with interest.

    The kicker here is: the Reserve Bank of Australia is a privately owned business controlled by the very International Bankers destroying other countries.

    Research the Rothschild Family.

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    bananabender

    RJ:
    August 10th, 2011 at 9:04 pm

    @ 80

    And what did the war do. It resulted in Govt’s running larger deficits. Why do people forget the lessons of history.

    You don’t seem to understand history at all.

    The reality is that US male unemployment disappeared instantly because millions of men joined the military. However the previous decade of expensive stimulus packages and tariff barriers had actually increased unemployment.

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    RJ

    Joe

    Where do you think credit or notes and coins come from

    Notes and coins are just printed as required

    And bank credit is simple a banks accounting entry.

    And it is not cheating. And more than a sports stadium is cheating if they print seat tickets to sell in exchange for seats in the stadium.

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    Paul R

    Monetary Sovereignty

    What the hell does that mean? It sounds Mc wonderful and at the same time I’m thinking heartburn, inflation, wheelbarrows full of paper and war.

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    bananabender

    Paul S:
    August 10th, 2011 at 8:50 pm

    I read recently that for the first 140 yrs or so of the US the dollar’s value was tied directly to a defined amount of gold – around 380 grains or so. During that time the purchasing power of the dollar increased by 10 -15%. In the last 70 odd yrs, the dollar has been uncoupled from this gold standard and its purchasing power has declined by 95%. Is this due to the fact that the dollar has no “real value” any more? I am quite ignorant of the hermetic secrets of economics and would appreciated the point of view of some of our more enlightened contributors.

    The US dollar has depreciated 70% against the Swiss Franc and 50% against the German Mark and Yen since 1950.

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    RJ

    You don’t seem to understand history at all.

    No it’s you that doesn’t. And use some common sense. Unemployment is caused by insufficient credit (or money).

    Increase it and unemployment will diminish. Reduce it (by running Govt surpluses for example) and it will take off unless there is no unemployment and the economy is overheating.

    Deficit hawks like Jo are pushing very dangerous policies that is already causing grief (unemployment). Aust needs much higher Govt deficits. I know this sound odd but it is based on very sound logic

    http://www.nvnews.net/vbulletin/showthread.php?t=128381

    Conservative columnists playing dishonest numbers game to falsely claim the New Deal failed to reduce unemployment.

    Recently, conservative columnists George Will and Mona Charen have been playing a dishonest numbers game to falsely claim the New Deal failed to reduce unemployment. http://mediamatters.org/items/200812030014

    However, according to data from the Bureau of Labor Statistics, the unemployment rate in 1933 was 24.9 percent and that it fell each year thereafter (to 14.3 percent in 1937) until 1938 when it rose to 19 percent. http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm

    Why the increase from 1937 to 1938? It was a reversal of the New Deal policies, which had reduced unemployment, that actually led to recession and drove the numbers back up.

    It’s worth noting, by the way, that these numbers do not include those in federal work-relief programs (at the time, BLS counted those employed by the New Deal’s emergency work programs as unemployed). So, the unemployment numbers were actually lower than reported in these years.

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    Thanks, JoNova for Greenspan’s truth:

    “The US is the United States of Wonderland, where no matter how high the debt is they can never default — because they can print money.”

    Is this really any different from the behavior of ordinary folks that suffer from various forms of addiction (alcohol, drugs, food, gambling, prestige, sex, etc)?

    Does the answer lie in understanding the behavior of entire complex organisms?

    Is spiritual knowledge, “wisdom”, about the behavior of the whole organism?

    Is scientific knowledge about the behavior of individual parts?

    Most, if not all, religions teach that selfishness, self-centeredness (the highly addictive “ego cage”) is the force of evil that we must each battle in life. Are cancerous cells ruled by these evil forces? Have “capitalism” and “communism” been ruled by these same forces?

    I don’t know the answers, but they may contain the key to understanding mankind’s self-destructive behavior.

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

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    RJ

    Research the Rothschild Family.

    For goodness sake. Do not believe everything you read on the internet

    Read Niall Ferguson’s books on the Rothschild’s for another viewpoint.

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    RJ

    @91

    “The US is the United States of Wonderland, where no matter how high the debt is they can never default — because they can print money.”

    Its a fact. But its more that they can issue credit without limit. And people would see this if they stop believing money is like real goods and services.

    It isn’t. Credit (and the equal matching debit) is just an accounting entry to allow people etc to easily buy or exchange real goods and services.

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    Redshield

    RJ:
    August 10th, 2011 at 9:52 pm

    For goodness sake. Do not believe everything you read on the internet

    Read Niall Ferguson’s books on the Rothschild’s for another viewpoint.

    I do my own research and Niall Ferguson is a Harvard White Shoe boy – meaning he’s “one of them” – you fool.

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    bananabender

    RJ:
    August 10th, 2011 at 9:04 pm

    Govt deficits are needed for purely credit reasons. To ensure that there is adequate bank credit to meet the purchasing requirements to generate full employment.

    Otherwise its like a sports stadium not being able to sell all their seats to a game because the do not have any tickets left. Bank credit in the economy is equivalent to the stadium tickets. There must be sufficient to buy all the goods and services to ensure a full stadium (or full employment).

    Is this what they taught you at the Robert Mugabe School of Economics? I have never heard such complete and unmitigated crap in my entire life. I suggest you read The Wealth of Nations by Adam Smith to learn how economies really function.

    Real jobs are created by enterprising individuals in the private sector not commands by governments.

    The Isle of Man has managed to operate for over 1000 years without ever having a deficit because their constitution prohibits doing so. They have zero unemployment and virtually no taxes. Go figure.

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    Paul S

    Bananabender@89; what is the reason for the US doller depreciation vis a vis the Yen, Franc and Mark?

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    Mark D.

    RJ @ all

    If what you are saying is reality, then why do governments even bother to tell us what their deficits are running? They’d be better off ignoring or hiding the numbers.

    Of course they don’t because you are insanely wrong. Governments do not create wealth, they are always on the expense side of the ledger. Printing more money always devalues the money already in circulation.

    The best thing government can do is get out of the way of productive people.

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    bananabender

    93
    RJ:
    August 10th, 2011 at 9:59 pm

    @91

    “The US is the United States of Wonderland, where no matter how high the debt is they can never default — because they can print money.”

    Its a fact. But its more that they can issue credit without limit. And people would see this if they stop believing money is like real goods and services.

    It isn’t. Credit (and the equal matching debit) is just an accounting entry to allow people etc to easily buy or exchange real goods and services.

    People aren’t idiots. That is why the USD has depreciated over 90% since 1900.

    In the (very) near future countries and individuals will simply refuse to accept US dollars as payment for goods and services. The US dollar then becomes toilet paper.

    How will the US survive when OPEC will only swap oil for Swiss Francs, gold or silver?

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    bananabender

    RJ:
    August 10th, 2011 at 9:35 pm

    Joe

    Where do you think credit or notes and coins come from

    Notes and coins are just printed as required

    And bank credit is simple a banks accounting entry.

    And it is not cheating. And more than a sports stadium is cheating if they print seat tickets to sell in exchange for seats in the stadium.

    Total garbage. A seat in stadium is a tangible product. You can only sell as many tickets as you have spare seats. Selling more tickets than available seats is fraud plain and simple.

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    bananabender

    Paul S:
    August 10th, 2011 at 10:18 pm

    Bananabender@89; what is the reason for the US doller depreciation vis a vis the Yen, Franc and Mark?

    The US government simply prints more and money to pay their foreign debts bills. This gradually makes each dollar worth less.

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    RJ

    @ 94

    The Isle of Man has managed to operate for over 1000 years without ever having a deficit because their constitution prohibits doing so. They have zero unemployment and virtually no taxes. Go figure.

    I suggest you read some articles on modern management theory. With an open mind.

    And stop confusing bank or other credit (and the linked debit) with real goods and services

    And re the Isle of Man. Deficits can be easily eliminated by treating cash notes or coins as revenue.

    ie credit treasury revenue rather than Govt debt / liability when the JE is done

    Refer to this article

    http://www.correntewire.com/coin_seigniorage_and_irrelevance_debt_limit

    This was use to happen in most countries before the 1960s

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    bananabender

    You only have to read books like A Random Walk Down Wall Street by Burton Malkiel to realise how deluded many economists are. He genuinely believes Warren Buffett is the world’s richest man purely due to luck. It is a bit like arguing that Don Bradman was the highest scoring batsman in history purely due to incredibly poor bowling and catching by every other team.

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    RJ

    @98

    Total garbage. A seat in stadium is a tangible product. You can only sell as many tickets as you have spare seats. Selling more tickets than available seats is fraud plain and simple.

    Once again

    There is a difference between the

    Tickets or bank credit and

    The actual seat or actual goods or services

    You are very confused about what money or credit is. Credit is not real goods or services. It is an accounting entry to allow two (or more)entities to trade in real goods and services. Once is given one or more credits (seller) and one equal debits (the buyer). This accounting is managed by banks.

    Both the debit and credit are accounting entries.

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    J.H.

    No RJ… If you make people’s money and thus hard work and endeavour, worthless…. They will not participate in your economy…. They’ll create their own that has real value for work done.

    Governments cannot just continually run up debt without a limit. They cannot just print money.

    If they could, I’d wake up every morning, grab a cup of coffee and open my government cheque of free money for JH… Nobody would need to work because the government would give them hot off the press money along with their bread…. How you would get the baker or the money printer to get up at 4am to print and bake it for me might be a problem… Might have to create an enslaved underclass for that ‘eh?….;-)

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    bananabender

    RJ:
    August 10th, 2011 at 10:43 pm

    I suggest you read some articles on modern management theory. With an open mind.

    Management theory is some of the most pseudo-intellectual BS ever perpetrated on the planet. It is written by people far too stupid to be real scientists or philosophers. Just like most economists are people who couldn’t make a career as proper mathematicians.

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    Sceptical Sam

    Jo’s fictitious Jones family:

    “Total annual income for the Jones family: $21,700
    Amount of money the Jones family spent: $38,200
    Amount of new debt added to the credit card: $16,500
    Outstanding balance on the credit card: $142,710″

    Ah yes. It takes me back. When I was a creditor of Mr and Mrs Jones they got sorted at my expense. They sold their house and all their other assets (as I recall they had a very nice Monet bag full of goodies) and borrowed as much as they could on their credit cards. Took it all in cash. Tucked it away with a friend who looked after their interests. Then declared themselves bankrupt.

    They discovered a diamond mine in deepest darkest Africa and had their fortune restored.

    Currently, they’re driving around in very smart Mercs and flying to France for holidays – presumably that’s where they stashed it. Or was that Liechenstein?

    I give you my bond that this is true, or I would if I could remember.

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    Mark D.

    RJ it is you that are confused about what VALUE is. The VALUE of a currency is why it is used at all. Credit has nothing to do with VALUE. Issuing credit only will come about only if the issuer has confidence that the debt will be paid and the VALUE retained (with interest).

    You’ve said nothing in your posts about VALUE. What VALUE does a government debt have? not it’s accounting entry, but actual VALUE?

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    TrueNews

    @Kevin Moore: #33

    “If you are a member of the IMF you are specifically prohibited from having gold backed currency…
    Colonel Gaddafi demanded that his oil be paid for in gold so they assembled a coalition of forces to knock him off…”

    Hmmm – The ‘Gold Dinar’ (real gold currency) that Gaddafi was gaining support for, in the Oil producing world, seems to have been his downfall.

    Looks like Syria and the rest must have accepted the $USD as the standard for Oil purchases – because they are not getting the crap bombed out of them by NATO on the behalf of the US.

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    Joe V.

    That brilliant idea of putting in terms of a household budget , really brings it home.

    With a US population of 312 million, that means the
    US Govt has $45,741 on their credit card , for each and every citizen.

    Who’s going to pay that off ?.

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    Mark D.

    “With an open mind”

    I can only translate this to: A mind devoid of reason and intelligence.

    Management “theory”

    This is what management people that can’t do or aren’t doing, come up with: theories.

    The management that can do and are doing it call it: success.

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    pat

    Tom -
    that Age nonsense is yet more PR for CAGW, isn’t it? all the stories – about half a dozen – on the page when i first saw it were alarmist. what is there today is plain silly.
    the BBC may have pension funds tied up in green investments to rationalise their bias, but what is it with the rest of the MSM, Fairfax, News Ltd., ABC/SBS and free-to-air TV? Sky News Australia is at least as bad as ABC in its fervour for CAGW stories.
    in fact, the MSM seems willing to self-destruct for the sake of this scam.
    what i have noticed, tho, is the MSM refuses to go beyond the Believers/Deniers meme. there is no interest in exposing and/or warning about the CARBON INDUSTRY at all. in other words, it’s not the science driving this scam, it is the CARBON INDUSTRY and the MSM is out to protect it no matter what the cost to their own reputations.

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    Mark D.

    Joe V @ 108

    Who’s going to pay that off ?

    Fantastic news Joe, according to RJ we don’t have to! We just keep charging more and more because we’re aging………

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    RJ

    JH @ 103

    “Nobody would need to work because the government would give them hot off the press money along with their bread”

    Typical deficit hawk nonsense

    You lose on logic and evidence ground so revert to this rubbish.

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    I wouldn’t use the term ‘ponzi scheme’, I prefer to use ‘robber barons’. There are robber barons in Wall St that are taking advantage of a weak US government. It is clear that the US political class and these robber barons are in bed together.

    It’s often hard to give enough focus on the whole of the solution because the amount of money the few are making is simply obscene. But, the reality is that the Chinese regime’s debt addiction is as bad is the US government’s. The Chinese communist party is massively in debt to the Chinese citizenry. The ability to purchase US dollars is borne by the lending of the productive sector to the Chinese government. The domestic market and yuan are far too weak for the government to run budget surpluses of any significance. They borrow the money to purchase USD through bank deposits by ordinary citizens. This funds the corruption and market fixing which defines the Chinese economy.

    If you’re looking for one clear signal for a USD collapse it is the raising of yuan. At the moment the yuan is artificially inflating the value of the USD and unfortunately for the Chinese government they are caught between a rock and a hard place. If they raise the yuan their economy is burnt as bank deposit values are slashed overnight. If they don’t raise the yuan, the Chinese will continue to be the west’s slave labour force and the domestic economy will never be strong enough to promote productive efficiencies which will lead to the industry innovation so desperately needed to become a developed economy. The Chinese regime has failed to take clear an decisive action on this issue for 20 years.

    I suspect Chinese civil unrest could be one of the canaries in the coal mine should the USD collapse in the coming years.

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    Mark D.

    Bananabender:

    How will the US survive when OPEC will only swap oil for Swiss Francs, gold or silver?

    We’re OK on this one. We don’t need OPEC we have plenty of oil and coal of our own. If only the world’s Green meddlers would let us go get it…..

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    RJ

    Mark @ 112

    We do not have too. And should not either

    But keep holding onto your flawed monetary beliefs. And ignore evidence and reason. Just like warmists do with climate change

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    DB

    The money supply graph has a small blip about the year 2000 with an annotation “…the dot com bust?” That was actually the Y2K concern.

    Will money supply increase cause inflation?
    http://www.wnd.com/?pageId=1869
    The Federal Reserve’s record increase in the U.S. money supply — the largest such monetary expansion in its history — in anticipation of Y2K-related financial problems may well lead to inflation, depending on how bad Y2K turns out to be, according to economic experts.

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    Mark D.

    RJ @ 116

    And ignore evidence and reason. Just like warmists do with climate change

    What evidence and reason? You’ve simply blabbed a bunch of crap and then back it up with more crap (just like the warmists)

    My evidence: Value of the USD 1900 to today.

    Why aren’t you answering my other questions mister ignore?

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    bananabender

    @Kevin Moore: #33

    If you are a member of the IMF you are specifically prohibited from having gold backed currency…
    Colonel Gaddafi demanded that his oil be paid for in gold so they assembled a coalition of forces to knock him off

    Or get yourself arrested on trumped up rape charges if you upset Wall Street.

    Dominique Strauss-Kahn was arrested for rape and was replaced by John Lipsky former Vice Chairman of the JPMorgan Investment Bank.

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    RJ

    @105

    Sorry

    Modern monetary theory

    http://moslereconomics.com/

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    pat

    Tom -
    more on the Age – google news has the Who funds the sceptics? piece as a top story – heavily bolded – in a grouping on their main News page, along with a Grist piece and the following which is so funny, it will make u weep for the state of academia in the US. the fact it involves a Bob Brown, but not ours, only adds to the ironies. in order to get a clear idea of Bob, i’ve linked from the piece on google news, so u can see his CREDS, his latest piece and his previous Deniers’ piece a mere two days previous. btw bob’s thing is “global change science”:

    Seattle Post-Intelligencer: About Bob Brown
    9 Aug: : The State of Global Change Science
    7 Aug: For Global Warming Deniers
    http://blog.seattlepi.com/robertbrown/author/robert_brown/

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    Speedy

    Waffle @ 114

    Great post – thanks!

    Speedy

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    bananabender

    RJ:
    August 10th, 2011 at 11:53 pm

    @105

    Sorry

    Modern monetary theory

    http://moslereconomics.com/

    I’ll read it after I finish reading Modern Phlogiston Theory and Lamarckian Evolution for Dummies.

    p.s. I’m taking the piss in case you haven’t realised.

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    RJ

    A better name for deficit hawks might be deficit alarmists.

    http://usjamerica.wordpress.com/2010/04/20/can-we-please-stop-the-deficit-alarmism/

    I’m a Govt deficit realist.

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    RJ

    Or maybe a deficit alarmism sceptic

    I could be called a Govt deficit denier (or deficit denier) in years to come.

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    TrueNews

    @RJ #102 + (various other crap)

    “…Credit is not real goods or services. It is an accounting entry to allow two (or more)entities to trade in real goods and services. Once is given one or more credits (seller) and one equal debits (the buyer). This accounting is managed by banks.

    Both the debit and credit are accounting entries.”

    .

    Thank you soooo much for the lesson in business 101 and banking 101.
    .

    Let me give you a very simple lesson in business and banking that actually operates in the ‘Real World’, and that you may not have been taught at either the ‘Leihman School of Banking Ethics’ or the ‘second hand Porsche Garage’ you probably now work in.
    .

    1. Credit is extended by me, as a supplier, to a reliable, credit worthy, Debtor.

    2. My Debtors are considered as ASSETS, they are potential Cash Flow. (PS. The Tax Office agrees with me and want their share before I get mine)

    3. My Bankers are happy though, because I have Cash Flow. (and Cash Flow is King)
    .

    So – let us now consider the following:

    My Debtors become impaired, either they fail to make payment,(Like Greece eventually will)) or I am advised that they are not as credit worthy as first thought because they keep running up debts all over the place, and do not have the ‘Cash Flow’ to service them.(Like the USA and the rest of Europe)

    .
    I ask my Bankers for help, they tell me I have ‘Bad Debt’ and that they cannot lend me anymore money to service my own loans.
    .

    What do I do ??
    .

    Go on then RJ – In your econometrically illiterate world – what would you do ? – Ask your Bankers (China) for clemency ? or hop down to the garden shed and fire up the Note Printing Press ?.
    .

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    RJ

    TrueNews

    This has no relevance to what we were discussing

    And
    1 China is not the US’s banker. Only the very confused believe this
    2 A Govt in a country with their own currency is in a very different situation to non Govt entity. Or even a country in the Euro

    Don’t compare the two. Many do unfortunately and form badly flawed conclusions as Jo has in this post.

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    TrueNews

    RJ:

    So China is not the USA’s banker RJ.

    Perhaps China should sell ALL its US Bonds and then your point could be proved.

    PS.
    Government or Business – the same principles NEED to APPLY.

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    RJ

    @128

    Government or Business – the same principles NEED to APPLY

    NO NO NO NO NO

    Totally and utterly incorrect. for the reasons I have given in this thread. And don’t be lazy on find out why

    Deficits alarmists will cause a massive depression for no reason if they succeed. Just due to appalling ignorance about Govt debt and equating it with private or company debt.

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    TrueNews

    RJ:

    I am no defeceit alarmist, neither am I ignorant.

    Unfortunately you appear to be young, and naive enough, to have not lived through the times when countries, like businesses and housholds lived within their means.

    Be it a Country, a Business or a Household the same budgetary rules apply.

    Otherwise we would end up with the ‘Spend and Tax’ cretins running the world.

    PS. You don’t work for the UN do you???

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    TrueNews

    RJ:

    When do the I.O.U’s in your system eventually run out ?

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    RJ

    Be it a Country, a Business or a Household the same budgetary rules apply.

    Rubbish

    But you seem to be too lazy to take the effort to find out why.

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    J.H.

    Are you are trying to tell us RJ, that Government debt is different to Private debt?

    My friend….. Down that road, there be tyranny.

    You cannot have your freedom cake and eat it in a nanny state. To allow your political classes and their cronies to use your future labor and productivity as collateral for their spending, is to allow them to enslave you.

    I had a read through your posts…. Your first post is posited on Government being the economy manager and caretaker of the population….. It is not. You are talking Socialism… Modern socialism, progressivism…. But socialism none the less.

    Private enterprise is fully capable of looking after society. It doesn’t need inefficient government with ever increasing power to look after old people or sick people. The family unit does this, has done this and will continue to this do in the future…. To allow the state to break down the family unit. Is to invite disaster.

    Also, you keep basing your point on an efficiency argument

    ….”Let’s assume that 60% of the population can produce enough for everyone. The question is how do we provide enough money for the other 40% to pay for these goods and services. This is where Government has a key and growing role (as we become more and more efficient and fewer people can produce all we need).”

    The economy isn’t an efficiency argument, it’s a participation argument. The reason being is that the economy is organic. It’s made of people… Remember, if you had to pay for the unpaid work that goes on in the real world…. No monetary welfare system could afford it…. So efficiency is down the drain.

    A population must be engaged in the pursuit of their own ambitions. Otherwise there is strife.

    We don’t want to simply swap an aristocratic elite, for a bureaucratic elite.

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    RJ seems to be a believer that somehow (by magic?), if its government action it is good no matter what the consequence.

    Some basic realities he is not taking into account.

    1. Before something can be consumed it must first be produced by someone or several someones.

    2. For money to have value, there must be something that has been already produced for it to buy.

    3. Government is ONLY institutionalized force of the gun.

    4. The force of guns can only break things, redistribute already produced wealth, and kill people but it cannot produce wealth.

    5. The production of wealth takes people CHOOSING to think, know, and act based upon that knowledge.

    6. The entire history of governments is that when they initiate force to cause people to choose differently than they would have voluntarily done, the results are uniformly worse than the condition that was used to justify that force.

    7. The only proper use of government force is in response to the initiation of force or fraud upon others and then only to stop that initiation and any possibility of its repetition.

    8. Since the first government, governments have been the primary initiators of force and fraud.

    Government is an exceedingly dangerous servant and a totally lethal master. It is not and cannot be the source of all good. The best it can to is do no harm.

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    J.H.

    Oops…. No Welfare system could afford it….

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    RJ

    JH

    “Are you are trying to tell us RJ, that Government debt is different to Private debt?”

    Yes. Because this Govt liability (called Govt debt) always becomes a non Govt asset (A bank deposit initially)

    The non Govt sector needs financial assets. More as the population ages. The ONLY way to generate these financial assets is through Govt deficits.

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    RJ

    And JH

    I’m anti big Govt. But Im also an economic and monetary realist

    But the key is Govt deficits not lots of Govt spending. This could be achieved by low tax or higher unemployment benefits rather than the current route which is big Govt with many Govt workers doing meaningless work. Or work that restricts our freedoms as they just find things to do.

    And think about this. If 60% produce enough for everyone (and this is now happening) the 40% need to be able to afford the production of the other 60%. Otherwise their work will slowly dry up. It’s how best to achieve this and provide financial capital for retirement.

    Its to free us. The current route will do the opposite

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    RJ

    Also, you keep basing your point on an efficiency argument

    No. This is reality. It has already happened. Robots for example can now do work that people once did.

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    MaryFJohnston

    RJ

    In the World as it is at the moment we already have the system you imagine could exist.

    The model you propose has it’s head office in New York and goes by the name of “The United Nations”.

    The UN Aristocracy who don’t even need to print money, since it is passed over to them by compliant Politicians who want a place there.

    The money of course, comes from the hard work of the drones back in place like Australia where the aspirant politician occasionally returns to seek more UN grants for Humanitarian works.

    If the drones have not worked hard enough, there is no problem, our Government can just ” print ” or “borrow” from someone else.

    With our hard earned in hand our rep goes to UN HQ on Manhattan where he begins to save the world from his US$2,000 a night hotel room.

    OUR aspirant pollie, once in the system, can then employ has family members thus reducing the work force back in poor old Oz.

    Unless the drones wake up, the entire Island of Manhattan will be taken over by this UN creature while the reduced world workforce supporting them gets smaller and more enslaved by the burden of “good works” magnanimously thrust upon them by our noble UN rep presently Kev the Sequestrator.

    There are No good works, just the appearance of that. Look at Somalia, the Middle East, The Balkans ; everywhere a shambles and massive loss of life while the UN observers observe.

    Back here in good old Oz the aging workforce, whose savings of 40 years have all been ripped off by the Banksters from Manhattan, are now Very very unhappy with the political class and ready for REVOLT.

    God help us all.

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    Tom

    Mary @ #139: I wouldn’t worry too much about RW – he sounds just like a climate scientist from the IPCC: “Only I know how the world works. Moreover I know exactly how it works, which is not how you think it works. And, if you don’t accept my authority over you, you are a stupid peasant.” We have rude words for people like RW that we don’t use in polite company.

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    3x2

    RJ:
    August 11th, 2011 at 2:56 am

    Also, you keep basing your point on an efficiency argument

    No. This is reality. It has already happened. Robots for example can now do work that people once did.

    Apparently this now includes thinking. Perhaps you should head to Europe? Solving their problems with a few keystrokes probably never even occurred to anyone there. What were they all thinking?

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    Lionell Griffith

    RJ says: The non Govt sector needs financial assets. More as the population ages. The ONLY way to generate these financial assets is through Govt deficits.

    If it is that easy, why not have the government write everyone a $1,000,000 check and increase the national debit account by that much? How is that really different from what you are advocating?

    The so called money coming off the government printing presses or the bits added to the computer based accounts do not represent real wealth. They represent an involuntary promissory note to be paid by the efforts of every producer of actual wealth now and well into the future generations. There is no present or saved productive wealth behind it. There are no goods and services created that gave it its value. It is a total fiction. It is only the gun of government that forces us to treat it as a real value. Such so called money does not create wealth, it only transfers wealth from its producers and destroys wealth and wealth making power in the process.

    Yes, government debt is different from your personal debt. You volunteered to take on the debt, chose what to do with the proceeds, and to pay it back in a reasonable time period. You could have just as easily not taken on the debt. The government took on the debt in your own name, you had no choice in the matter, it spent it for it’s own purposes, and then expects you, your children, you grand children etc. to pay back the debt. If you don’t, out comes the gun. If you don’t believe the gun is there, try not paying your taxes.

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    Bulldust

    RJ:

    What on earth makes you think Japan won’t default? Also, what makes you think debauching a currency by printing excessive notes is not a technical default?

    Seriously dude…

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    1DandyTroll

    Some topics just make the communists flock. Given an chance the communist will debate economics until old age does its part, however, point out that the communist debater support the ideology of undemocratic, evil, violence, and mass murder, the same crap as nazism, the somewhat mentally stable ones keep quiet, at least until next time.

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    Roy Hogue

    …because it’s so much easier to be elected handing out loaves and fishes… – Joanne Nova

    But only for a while…

    Their rope draweth near its end.

    Unfortunately we hang with them.

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    Bulldust

    Also RJ, I suggest spending some time on John Mauldin’s blog. He and his guest posters have a firm grip on what is going on, and predicted the debt deleveraging cycle a couple years ago:

    http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/default.aspx

    Here is a recent article discussing competing economic theories:

    http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2011/07/18/three-competing-theories.aspx

    The great thing about Mauldin’s blog is that the posts are interspersed with telling graphs of facts. I also highly recommend “The End Game” video here:

    http://www.youtube.com/watch?v=4mn4ujPLKvA

    If, after consuming some of this material, you still believe much of what you are saying here on this blog, then (and I am being very polite here) all I can say is that your faith in your ideology is stronger than the facts.

    And I catch myself sounding like the warmists LOL. Difference here is that much of the economic evidence is readily measured and unequivocal. The 120% government debt to GDP ratio is simple mathematics. The economy hits a point of paying too much of its GDP as interest on debt, from which no economy (bar one exceptional example) has ever recovered with some form of default on the debt.

    Please go digest some of this economic goodness and think about it.

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    Bulldust

    PS> BTW Wall Street tanked again overnight… we are back on track.

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    Looks like the rebellion is coming! Did you expect anything else from Greenpeace?

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    pat

    figure are not our forte, says the Govt:

    11 Aug: Australian: AAP: Counting down: the shrinking carbon tax
    “Under the previous (Kevin Rudd carbon pollution reduction scheme) package the number that we thought was going to be in the system was more in the order of 700,” climate change department secretary Blair Comley said today.
    “(Now) the number of emitters that we think will be covered is more in the order of more like 400.”
    Mr Comley was giving evidence in Canberra to a parliamentary inquiry into the proposed carbon tax…
    But the 400 figure is somewhat rubbery.
    The climate change department knows which companies are currently required to provide data under the National Greenhouse and Energy Reporting scheme.
    “(However) the question is when we go to further activity there may be others that come forward,” Mr Comley told the Senate inquiry hearing…
    Liberal senator Mathias Cormann asked Treasury officials if the department had been asked to provide advice on whether the start date should be reconsidered “given current global and financial circumstances”.
    Senior official David Gruen told the parliamentary inquiry the answer to that question was “No”…
    http://www.theaustralian.com.au/national-affairs/carbon-plan/counting-down-the-shrinking-carbon-tax/story-fn99tjf2-1226112489916

    how many times did Richard Denniss quote “last year” Kloppers when debating Monckton at the NPC? cherry-picking as usual:

    11 Aug: Australian: Sarah-Jane Tasker and Scott Murdoch: BHP’s Jac Nasser gives government productivity warning
    Mr Nasser (BHP Billiton chairman)said although he was not completely familiar with the details of the NBN, the $36bn to be spent on the project was not an appropriate allocation of that level of capital in Australia.
    “When you try and marry large capital expenditures with a fast-moving pace of technology change, I think that is fraught with risk,” he told an American Chamber of Commerce in Australia event…
    Mr Nasser also warned against the government’s rush to introduce the carbon tax by July next year, arguing that it was a difficult time to push ahead with that type of reform. In May, before the government had finalised its plans to place a $23-a-tonne price on carbon before shifting to an emissions trading scheme, Mr Nasser urged Australia to adopt a “go-slow” approach to tackling climate change. His comments differ from the original position taken on the government’s plans by his chief executive, Marius Kloppers, who last year called on Australia to take a global lead on pricing carbon…
    http://www.theaustralian.com.au/national-affairs/bhps-jac-nasser-gives-government-productivity-warning/story-fn59niix-1226112721124

    factor in Super Funds investing in uneconomic Renewables, etc, and this becomes even more concerning:

    20 July: Australian: Nicki BourlIoufas and Geoffrey Newman: Super funds feel pain of carbon tax but experts say funds are unlikely to make investment changes
    The average balanced fund has about 30 per cent of investors’ money in Australian equities, of which the materials sector including miners makes up about 28 per cent and energy stocks 7 per cent…
    http://www.news.com.au/money/superannuation/super-funds-feel-pain-of-carbon-tax-returns-will-fall-but-investment-changes-are-unlikely/story-e6frfmdi-1226098050706

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    Raven

    Tell ya what waffle , a few $ went into that !

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    NIck

    Anyone interested in this topic should check out a couple of excellent videos – one that came out over 10 years ago now: The Money Masters (3 and a half hours!) and another more recent one Money as Debt . You can also purchase the DVDs at http://www.themoneymasters.com/ These more than anything explain what is happening today and has always happened – eg the decline of the Roman Empire coincided with a drastic drop in the money supply.

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    gnome

    Thanx RJ for all that effort up till now. This is normally a global warming sceptic/denier site and that often means putting up with a swag of conservative nonsense, but usually no-one bothers to take them on.

    Lets stick to the unifying interest in future, we can sort out the politics when the scientific nonsense fades away.

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    Have we had enough fun with the RJ deluded fool, yet?

    Government is just a business. A protection racket. “Give us money so we don’t have to work and we’ll maintain order and protect you from external enemies”. They lie of course. Then more of their friends needed money without doing real work(there are only so many priest and shaman positions)so they expanded the function of government to telling you how to live in minute detail and “managing” the economy. Then then they found that the people didn’t want to give them that much money so they “borrowed” some. But they couldn’t figure out how to pay it back so they devalued it by printing more (or creating more credit – money and credit spend the same way as KD points out).
    That’s where we are now. The government has every incentive to kick the can down the road as far as they can, hoping it won’t be that it is filled with concrete on their watch.

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    Raven

    Speaking of money .

    Would anyone care to predict the theme of the ages reply to this question ?
    The very point of Australia’s carbon tax is to reduce global warming. How much will reducing 5% of Australia’s around 1.5% contribution of global CO2 emissions reduce global temperature by? If the amount is negligible (which it is), then given the present economic turbulence, what is the probability of Australia’s carbon tax inspiring major emitters like USA, China and India to make ACTUAL cuts to their C02 emissions (as opposed to mere carbon intensity) and economic growth?
    I will give a $150 retail gift voucher for the best journalistic attempt at mimicking the ages answer .
    Second place $ 75 retail gift voucher .
    Jo can judge them if it’s ok with her .
    Closing date is at end of the vote for questions
    http://oursay.org/the-sunday-age
    I think this question will finish in the top 10 , although that may depend on 600,000 rabid getup trolls
    Trying to make democracy work for them ;)

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    Kevin Moore @24

    1985, “Pinch off the tailpipe”, devise a scam based on a lie that CO2 causes global warming thus occassioning the economic collapse of nations worldwide by cutting off their oxygen?

    That seems to be what happened, Kevin.

    I had no idea why experimental data on the origin, composition and source of energy of the Earth-Sun system had been misrepresented since 1972 until the Climategate scandal broke in 2009.

    After world leaders and leaders of the scientific community failed to criticize government scientists for generating fraudulent temperature data, I started to fit the puzzling pieces together.

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    Oliver @ 155

    And also -

    It seems to me that the United States of America is just one big privately owned corporation.

    The Federal Reserve is privately owned.

    NASA is I now find out also privately owned.It is not a part of the US government.The US government only holds shares in NASA stock.

    Corporations make profits for shareholders. Who is NASA working for?

    As I understand it,

    Dr Daniel Goldin, the Administrator of NASA said that sending humans into space was too costly and unsafe and so pushed the proposal that studies needed to be made into our own planet. He then enrolled the “lets invest the NASA budget in our planet” environmentalists for which end he specifically cited the proposed examination of the sources and sinks of carbon dioxide around the Earth.

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    Bruce of Newcastle

    Bulldust at #147

    You’re right the spooked sheep are racing from one side of the field to the other again.

    But keep in mind for all the hysteria, Wall St dividend yield is averaging higher than treasuries for the first time since about 1960 (aside from the GFC). Reporting season has been pretty good. The S&P/ASX 300 average dividend yield is well above 10 year Oz bonds – even the Reserve acknowledges they’re at modestly contractionary levels. On top of it all BHPB is yielding before tax near to the Oz bond rate, and may go above if the Reserve cuts, which would be unheard of (they are famously stingy with their dividends). And if you buy the big 4 your before tax yield is over 10%.

    Of course there is always the carbon bloody tax, flood tax, mining tax etc to look forward to. Likewise standing in front of stampeding sheep risks being run over no matter what the fundamentals.

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    Kevin Moore @156

    Thanks for your comment.

    The anthropologic global change scam has been intertwined with the standard solar model of hydrogen-filled stars since 1971.

    Here is a summary of experimental data that have been hidden, ignored or manipulated over the years:

    “Neutron repulsion”, The APEIRON Journal, preprint, in press, 19 pages (2011) :

    http://arxiv.org/pdf/1102.1499v1

    Why? I don’t like the conclusion, but here it is:

    It appears that in 1971 world leaders seem to have traded away

    1. Our constitutional form of government,
    2. The future of our space program, and
    3. The integrity of government science

    To avoid the threat of mutual nuclear annihilation.

    Their goal was noble, but the method adopted to achieve that goal threatens to enslave us all to a tyrannical government.

    That is, in my opinion, a much greater danger than global climate change.

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc

    Tomorrow I hope to complete the 5th video in a summary of unexpected findings since I started research in 1960. I plan to post the videos here for others to see.

    Again, thanks for your comments.

    Oliver K. Manuel

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    Raven

    This makes interesting reading , no mattervwhich way you approach it .

    http://www.theaustralian.com.au/news/world/out-of-weapons-to-fight-recession/story-e6frg6ux-1226112642350

    Apologies if posted ..

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    Mike Jowsey

    Here in NZ the Act party has just introduced the Spending Cap Bill:

    Minister for Regulatory Reform Rodney Hide today introduced into Parliament the Spending Cap (People’s Veto) Bill. The Bill will help prevent governments from going on spending sprees and leaving future taxpayers to pay the costs.

    The Bill would limit public spending from increasing faster than inflation and population growth.

    Any Government that wished to increase public spending at a higher rate would need to seek the public’s approval, through a binding referendum.

    “It’s far too easy for governments to spend, and leave our grandchildren to pick up the bill. And based on previous experience, it’s proven too hard for governments to show restraint when times are good. This can’t go on,” Mr Hide said.

    “New Zealanders have learned from the recent recession that we all need to live within our means. Spending more than we can afford over the long term is a recipe for disaster. It’s important that governments learn the same lesson.

    “The Spending Cap Bill does not ban future governments from spending more, if they wish to. However, any increases in spending would need the explicit approval of the public. After all, it’s their money,” Mr Hide said.

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    JMD

    Minister for Regulatory Reform Rodney Hide

    Is he head of the Department of Deregulation?

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    Andrew Barnham

    Hi RJ. Thanks for the posts, all this is very interesting to me. I got hands on 7 deadly innocent frauds and reading through it at the moment. I am trying to keep an open mind yet I find the blase tenor of the document and the author quite unsettling. It is interesting to discuss behaviours of currency producers and currency users one first level basis, and I am learning.

    But my immediate concern is the simple fact that currency is only as valuable as the value currency users perceive it to hold. A currency user, such as myself, regards currency as follows: Principally its capacity to do work for me. Also its capacity, from my point of view, to measure work and wealth and productivity of both myself and others. Currency needs to be pegged against something, if it is not gold then peg it against economic activity and worth. Now if a currency producer, such as a sovereign government starts doing stupid things with money, misusing the money they generate to perform things which I perceive to have little value (i.e. hiring public servants for the sheer fun of it, as opposed to deploying them to meaningfully improve our community and with focus on doing so efficiently and productively), my confidence in that money takes a serious hit; and like-minded people are going to react in a similar way. So yes a government prints money and can print as much as they like, but as someone who trades in wealth I generate via my professional craft and one who seeks the craft of others, the medium used to facilitate those transactions that I use needs to be trustworthy and needs to convey a fair sense of worth in my productive inputs to the broader community. If a government just started handing out money to anyone for the fun of it, not because they wish to drive community outcomes and facilitate properly productive economic activity, then my reaction will be, why am I working my butt off? I’ll just join the queue with my hand out and also live the rock-and-roll lifestyle. At which point the system breaks down, surely no?

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    Bruce of Newcastle

    Speaking of corruption, Greek citizens seem to have all independently decided not to pay their taxes:

    “new finance ministry data showed Greece’s state budget deficit in the seven months to July 2011 widening 24.6 per cent from a year earlier as revenue collections continued to lag.”

    Which is why French bank shares all collapsed on the CAC last night.

    Its not only governments that can be corrupt, whole societies also.

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    RJ

    Mary @139

    Back here in good old Oz the aging workforce, whose savings of 40 years have all been ripped off by the Banksters from Manhattan, are now Very very unhappy with the political class and ready for REVOLT

    The ONLY way to generate these saving is from Govt deficits

    Government $deficit (a Govt laibility) = non government $surplus (net financial assets)

    So blame the deficit hawks and the people who vote them into power. Not the banksters as you call them.

    Look at the small size of Aust Govt debt. And the huge size of non Govt debt. Yet Aust’s still do not see what the problem is.

    Fight the deficit hawks or pay the price. And the price will be heavy. It’s almost a mathematical certainty. Yet entirely avoidable.

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    pat

    Kevin Moore -

    NASA is an executive branch agency of the United States government and can be extremely political. check Griffins’ academic creds in the following against James Hansen’s, and yet look how Wikipedia and the MSM characterised Griffin’s perfectly sane comments, which are even more prescient today:

    Wikipedia: Michael D. Griffin. NASA Administrator 2005-2009
    Global warming controversy
    In a follow-up interview to his May 31 interview with NPR’s Steve Inskeep airing June 1, 2007 on NPR News’ Morning Edition, Griffin said the following:
    “I have no doubt that global — that a trend of global warming exists. I am not sure that it is fair to say that it is a problem we must wrestle with. To assume that it is a problem is to assume that the state of Earth’s climate today is the optimal climate, the best climate that we could have or ever have had and that we need to take steps to make sure that it doesn’t change.
    First of all, I don’t think it’s within the power of human beings to assure that the climate does not change, as millions of years of history have shown, and second of all, I guess I would ask which human beings – where and when – are to be accorded the privilege of deciding that this particular climate that we have right here today, right now is the best climate for all other human beings. I think that’s a rather arrogant position for people to take.”
    Some climate scientists referred to his remarks as ignorant. In particular, James E. Hansen, NASA’s top official on climate change, said Griffin’s comments showed “arrogance and ignorance”, as millions will likely be harmed by global warming. Jerry Mahlman, a scientist at the National Center for Atmospheric Research, said that Griffin was either “totally clueless” or “a deep antiglobal warming ideologue.”
    In a closed-door meeting on June 4, 2007 at the Jet Propulsion Laboratory, Griffin said:
    “Unfortunately, this is an issue which has become far more political than technical, and it would have been well for me to have stayed out of it.” “All I can really do is apologize to all you guys…. I feel badly that I caused this amount of controversy over something like this…
    http://en.wikipedia.org/wiki/Michael_D._Griffin

    June 2007: NYT: AP: John H. Marburger III, the White House science adviser, said he was not disturbed by the remarks (by Griffin), but distanced them from President Bush, who announced a global warming plan on Thursday. “It’s pretty obvious that the NASA administrator was speaking about his own personal views,” he told The Associated Press
    http://www.nytimes.com/2007/06/01/science/earth/01griffin.html

    now check this Wikipedia spin, for which it is said “citation needed”:

    Wikipedia: Sean O’Keefe, NASA Administrator 2001-2005
    In the buildup to the 2004 election, a scuffle in the press occurred between Sean O’Keefe and NASA climatologist James Hansen. In 2003, it was revealed, Mr. O’Keefe warned Dr. Hansen not to discuss humans’ role in global warming. “The administrator [Mr. O'Keefe] interrupted me;” Dr. Hansen said in the New York Times “he told me that I should not talk about dangerous anthropogenic interference, because we do not know enough or have enough evidence for what would constitute dangerous anthropogenic interference.” O’Keefe’s spokesperson said that O’Keefe did not admonish Hansen or mean to suggest that research efforts should be cut. (citation needed)…
    http://en.wikipedia.org/wiki/Sean_O%27Keefe

    it couldn’t have been easier to find the necessary citation, and look who was provided the Hansen speech in advance and spun it, none other than NYT CAGW gatekeeper Andrew Revkin of the NYT. to be honest, i just knew it would be Revkin before i found it:

    26 Oct, 2004: NYT: THE 2004 CAMPAIGN: THE ENVIRONMENT; NASA Expert Criticizes Bush On Global Warming Policy
    By ANDREW C. REVKIN
    A top NASA climate expert who twice briefed Vice President Dick Cheney on global warming plans to criticize the administration’s approach to the issue in a lecture at the University of Iowa tonight and say that a senior administration official told him last year not to discuss dangerous consequences of rising temperatures.
    The expert, Dr. James E. Hansen, director of the NASA Goddard Institute for Space Studies in Manhattan, expects to say that the Bush administration has ignored growing evidence that sea levels could rise significantly unless prompt action is taken to reduce heat-trapping emissions from smokestacks and tailpipes.
    Many academic scientists, including dozens of Nobel laureates, have been criticizing the administration over its handling of climate change and other complex scientific issues. But Dr. Hansen, first in an interview with The New York Times a week ago and again in his planned lecture today, is the only leading scientist to speak out so publicly while still in the employ of the government.
    In the talk, Dr. Hansen, who describes himself as ”moderately conservative, middle-of-the-road” and registered in Pennsylvania as an independent, plans to say that he will vote for Senator John Kerry, while also criticizing some of Mr. Kerry’s positions, particularly his pledge to keep nuclear waste out of Nevada.
    He will acknowledge that one of the accolades he has received for his work on climate change is a $250,000 Heinz Award, given in 2001 by a foundation run by Teresa Heinz Kerry, Mr. Kerry’s wife…
    But in an interview yesterday, Dr. Hansen said he was confident that the award had had ”no impact on my evaluation of the climate problem or on my political leanings.”…
    In the speech, Dr. Hansen also says that last year, after he gave a presentation on the dangers of human-caused, or anthropogenic, climate shifts to Sean O’Keefe, the NASA administrator, ”the administrator interrupted me; he told me that I should not talk about dangerous anthropogenic interference, because we do not know enough or have enough evidence for what would constitute dangerous anthropogenic interference.”
    *****After conferring with Mr. O’Keefe, Glenn Mahone, the administrator’s spokesman, said Mr. O’Keefe had a completely different recollection of the meeting. ”To say the least, Sean is certain that he did not admonish or even suggest that there be a throttling back of research efforts” by Dr. Hansen or his team, Mr. Mahone said.
    *****Dr. Franco Einaudi, director of the NASA Earth Sciences Directorate at the Goddard Space Flight Center in Greenbelt, Md., and Dr. Hansen’s supervisor, said he was at the meeting between Dr. Hansen and Mr. O’Keefe. Dr. Einaudi confirmed that Mr. O’Keefe had interrupted the presentation to say that these were ”delicate issues” and there was a lot of uncertainty about them. But, he added: ”Whether it is obvious to take that as an order or not is a question of judgment. Personally, I did not take it as an order.”
    Dr. John H. Marburger III, the science adviser to the president, said he was not privy to any exchanges between Dr. Hansen and the administrator of NASA. But he denied that the White House was playing down the risks posed by climate change.
    ”President Bush has long recognized the serious implications of climate change, the role of human activity, and our responsibility to reduce emissions,” Dr. Marburger said in an e-mailed statement. ”He has put forward a series of policy initiatives including a commitment to reduce the greenhouse gas intensity of our economy.”
    In the interview yesterday, Dr. Hansen stood by his assertions and said the administration risked disaster by discouraging scientists from discussing unwelcome findings…
    http://query.nytimes.com/gst/fullpage.html?res=9803E3DE143DF935A15753C1A9629C8B63

    the CAGW crowd, including Wikipedia, NYT, AP, etc., have been in this game a very long time.

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    J.H.

    RJ….. Mate. You miss the point. Government doesn’t generate income….It consumes it. Government uses other people’s income. For it to borrow money to perform a function that we are already paying it for… is beyond stupid….

    Government doesn’t affect productivity with it’s spending… it does that via regulation. You are getting so confused. The money side of the equation is really simple… The regulatory side is much more fraught.

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    RJ still hasn’t told us how a government can service the debt it has. Eventually its tax revenue will ALL be used for debt servicing. I guess it could tax 100%. Then nobody would work, the government would give everybody handouts and we’re all happy – right? Oh wait I think I just described the former unlamented Soviet Union. Bastion of human happiness and enlightenment.
    RJ try to think of the government as a business. It collects revenue in exchange for maintaining civil order and defence against external enemies. There’s nothing that says it has to be the issuer of currency. This could be done privately. This has been done in the past. So does private debt matter? In a globalised world governments have competition as issuers of currency – other governments. Those who don’t print excessive amounts of money find their currencies are stronger. Wonder why the USD has fallen against other currencies recently?

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    RJ

    Andrew @ 162

    I’m anti big Govt. If it was up to me I would

    Slash tax and
    Just accept that we can no longer employ everyone. And say allow people over 40 to retire if they wish on a good unemployment benefit.

    So we would end up with

    1 A smaller non Govt workforce (maybe 50%) producing everything needed for everyone.
    2 Guaranteed work for everyone (or free education etc) up until say 40. These would just be Govt jobs created to keep people employed.
    3 A smaller more efficient Govt. Doing the essential or core work required by Govt.
    4 Much higher unemployment payments for those that decide to leave the workforce at say 40 or maybe 45. We would need a change in attitude though to just accept that there is no longer any need for everyone to work. And it is much less costly to pay unemployment than employing everyone in Govt jobs.

    And here’s the key. Govt deficits would to be run until the non Govt savings are high enough. This would also require another attitude change by people. Because unlike private or non Govt debt. Govt debt is not only good but essential to create the bank credit needed for an efficient economy.

    And it seems to me that the West has now reached the end of being able to operate with dated and flawed beliefs about money (or credit) and Govt deficits. Unless attitudes changes (as the US is now slowly doing) the future will slowly get worse economically. Much worse if the deficit hawks win this battle.

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    bananabender

    Economist and Climatologists are cut from the same cloth. They are generally second rate mathematicians who prefer convoluted computer models to empirical evidence.

    Economics should primarily be about real world human behaviour (psychology) not hypothetical mathematical concepts.

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    John Brookes

    I suppose its bloody obvious, but the US has problems with its budget because they start unnecessary wars and refuse to tax enough. And they are certainly not alone on the taxes.

    However you run a society, you really need everyone to participate meaningfully – or else you get outbreaks like the ones in England. Its a bit tricky really, either you collect enough in taxes to make society work, or you put up with the consequence…..

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    RJ

    Mike @167

    There’s nothing that says it has to be the issuer of currency. This could be done privately

    It is now done privately (notes and coins are now only around 3% of the money supply. It was 50% 50 years back).

    Most banks are now privately owned. So bank credit or money is now totally issued privately.

    But here is the point that you and most deficit hawks completely and utterly fail to grasp

    Bank credit is the banks liability (but our asset). The bank must hold an asset to offset this credit

    This asset to offset this credit is either:-

    Govt debt or
    Non Govt debt

    Because Govt debt is so low in Aust. The bank asset is almost entirely from the non Govt sector (the banks asset but non Govt sector liability). This is where your current problems largely originate from.

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    J.H.

    RJ…. you missed deregulation. Industrial relations. The repeal of eco fascist legislation… There is plenty of areas that people can participate in and gainfully employ themselves and others if they are allowed…. No Nanny state needed. No excess immigration or extensive welfare needed. You forget that Western populations are relatively stable.

    It is Government regulation that has degraded the economy, the interference in the free market. The economy is not just money. Not in a Capitalist society. The right of ownership and the ability to sell that property or product unhindered is also intrinsic.

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    J.H.

    John Brooks…. Wrong. England’s problems are manifest because of the Welfare state. Lack of taxes has nothing to do with it. Collecting taxes doesn’t make society work. Society works because of a network of self interest, shared responsibility, sense of identity and ownership.

    Read Theodore Dalrymple’s ‘Our Culture, What’s Left Of It: The Mandarins And The Masses’

    It gives a good insight into Britain and the problems therein…. You probably could extrapolate aspects of similar problems within other countries quite easily.

    On the issue of Society, you are right on the money about people participating meaningfully…. It is actually a very fraught and vexing problem contained within the bounds of such a small sentence….. Getting people to participate. Probably a good start would be allowing them to.;-)

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    Crakar24

    JB in 170,

    You certainly have a strange view on life.

    I will agree on one thing if the US stopped roaming the world killing brown people then they would have more money to spend on other things. However another problem the US have is that in order for your country to make money they have to manfucture products that others want to buy and there are only so many nice new shiny bombs that you can sell. The US government both current and previous went out of their way to enable all the high paying jobs to be sent off shore so when your populace cant get a job or the job they have pays a pittance then you dont get the tax revenue you used to and no simply increasing taxes does not make up the difference so unless you reign in your spending you will slowly go broke which is where we are now.

    Oh and another thing, rubbing two pieces of paper together to make 5 is not considered maunfacturing a product.

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    RJ

    John @170

    Its a bit tricky really, either you collect enough in taxes to make society work, or you put up with the consequence…..

    How do more taxes ie making everyone poorer help matters.

    Especially when tax is already very high in the UK

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    Tom

    John Brookes @ #170: You can’t believe in global warming unless you also believe in big government and high taxes. You really are a true socialist zombie, JB, and you ARE the problem this country has. The contest of the next two years is between your mates’ leftwing fantasy world and the rest of us who believe in a capitalist mixed economy, with a dash of socialism that delivers our health system, for example — a valuable institution, even though it has its problems. I also agree with you, but not with the same looney worldview, that the West mainly (Europe and Australia) has been getting a financial freebie from the US military, which has been largely fighting our war against mass-murdering zealots, only a paper-thin paradigm away from socialist zealots like you, who are trying to destroy Western enterprise and culture from within. Your temporary ascension to the Australian ruling class will be fleeting, cobber. I think we’ll win.

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    bananabender

    RJ:
    August 11th, 2011 at 3:06 pm

    Because Govt debt is so low in Aust. The bank asset is almost entirely from the non Govt sector (the banks asset but non Govt sector liability). This is where your current problems largely originate from

    The real problem is red tape and excessive taxes.

    In theory it is quite possible to set a a microbusiness with a few hundred dollars of capital. A barber only needs a pair of hairdressing scissors, a comb and a old kitchen chair or stool. If he had zero capital he could offer to rent the chair and scissors for $5/day with no money upfront. The barber could literally set up on a busy street offering $5 haircuts if he was allowed too. He would recover his initial costs in a few days. Even at a mere $5 per haircut he could easily make a comfortable living ($20-40/hr net) because he has no overheads.

    However a vast array of government regulation prevents this from happening. In reality the barber would need a shop, insurance, a registered business name, council permits etc. His upfront costs would probably be at least $50,000 before he sold a single haircut. This means he has to effectively work for practically nothing for a year or two and charge $20-25 per haircut just to recover his initial costs.

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    bananabender

    A real world zero capital-zero red tape business is streetwalking by prostitutes.

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    Bulldust

    Bananabender:

    I’d say ouch, but I trust you don’t toss me in the “all economists” set :p Lucky for me I am a cycnical bastard because I started life as an engineer (though my degree had precious little hardcore engineering units in it). I have certainly done enough econometrics (economists’ magic with numbers) and modelling to know how dodgy they are. I do my best to present statistics in an unambiguous manner, something I cannot say for the Government or the warmists who like touting ridiculous statistics like CO2 emissions per capita or country ranks as if they mean anything.

    RJ: You still haven’t looked at my links yet have you? If you keep pushing ideology over logic you are going to look even more foolish than you already do. I would also recommend watching the entire lecture series on Justice at Harvard by Michael Sandel. It is a brilliant course and explains why we pay taxes for Government services. Here is the link: http://www.justiceharvard.org/

    The problem is when people’s expectations of service provision is out of sync with the taxes they are willing to pay.

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    Andrew Barnham

    @Tom 176. I am going to wade in here and stick up for John Brooks. With respect your post is one of the most ridiculous I read here for some time and I cannot distance myself from it enough. Firstly, ones position on CAGW does not pre-suppose ones political views. Secondly, people will always differ on views on matters of political policy, and yelling at someone and aggressively asserting that “you ARE the problem this country has” is not a meaningful conversation.

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    RJ

    Mike @167

    RJ still hasn’t told us how a government can service the debt it has.

    http://www.progressive-economics.ca/2011/08/10/japanization-lavoie-seccareccia/

    The difference is that Canada, the United States and Japan are sovereign states and issuers of their own currency, while the countries of the Eurozone are not, because of the existence of a single supranational currency. Hence, those three countries (with their own sovereign currencies) cannot possibly default on their payments, regardless of the opinion of the analysts of Standard and Poor’s, unless their governments recklessly choose not to want to meet their obligations because of some opportunistic political motives. These three countries issue their own currencies, their foreign exchange rates are not fixed, and they face no institutional constraint with regards to the central bank purchases of government securities. In other words, if you hold a government security that you would like to cash, the respective governments of these three countries would be able draw a cheque on their accounts at their respective central banks, and could then reissue and sell new bonds, directly or indirectly, via their central banks without any other consequence.

    The situation of the countries of the Eurozone is quite different.

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    bananabender

    RJ:
    August 11th, 2011 at 2:43 pm

    Andrew @ 162

    I’m anti big Govt. If it was up to me I would

    Slash tax and
    Just accept that we can no longer employ everyone. And say allow people over 40 to retire if they wish on a good unemployment benefit.

    So we would end up with

    1 A smaller non Govt workforce (maybe 50%) producing everything needed for everyone.
    2 Guaranteed work for everyone (or free education etc) up until say 40. These would just be Govt jobs created to keep people employed.
    3 A smaller more efficient Govt. Doing the essential or core work required by Govt.
    4 Much higher unemployment payments for those that decide to leave the workforce at say 40 or maybe 45. We would need a change in attitude though to just accept that there is no longer any need for everyone to work. And it is much less costly to pay unemployment than employing everyone in Govt jobs.

    I agree with you on this.

    Australia could close our totally uneconomic car industry. We would have access to much cheaper imported cars because we wouldn’t be spending $20k per car subsidising Australian built cars. It would be cheaper to pay the redundant carworkers $100k/year to stay at home.

    My preferred option is for people to only work 20 hours per week to keep their minds active rather than retiring at 40.

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    RJ

    Bulldust @ 179

    RJ: You still haven’t looked at my links yet have you? If you keep pushing ideology over logic you are going to look even more foolish than you already do. I would also recommend watching the entire lecture series on Justice at Harvard by Michael Sandel. It is a brilliant course and explains why we pay taxes for Government services. Here is the link:

    FFS. This is a pathetic.

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    RJ

    bananabender @182

    My preferred option is for people to only work 20 hours per week to keep their minds active rather than retiring at 40.

    Another good option.

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    Bulldust

    RJ:

    I don’t think default means what you think it means. Just because a sovereign nation with it’s own currency can run the printing presses as much as it likes, doesn’t mean they are paying their creditors something of value. Do you really think China, Saudi, Japan etc will be happy to receive New Obama Dollars worth 1c of the current currency value? Technically that is as much a default as delaying or not paying off your debts. Sure it isn’t a default in the strictest definition of the word, but to the creditor nations it is a big middle finger in their faces.

    If you can’t agree with the above then you are simply trolling… but then I suspect that is what you were about from the start.

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    bananabender

    Bulldust:
    August 11th, 2011 at 4:33 pm

    Bananabender:

    I’d say ouch, but I trust you don’t toss me in the “all economists” set :p Lucky for me I am a cycnical bastard because I started life as an engineer (though my degree had precious little hardcore engineering units in it).

    It wasn’t one of those Oxbridge “engineering” degrees that consist of nothing but miscellaneous physics and maths subjects was it?

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    RJ

    Bulldust @ 185

    I don’t agree with your statement. Its crap

    Why do you think China has been willing to sell a trillion $s worth of goods in exchange for US$s if the $s have no value

    You really are out of your depth on this subject.

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    Bulldust

    Between your comments at 183 and 187 I rest my case. Hurl some mome abuse, but don’t kid yourself that you are getting under my skin.

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    John Brookes

    J.H@173:

    John Brooks…. Wrong. England’s problems are manifest because of the Welfare state.

    You won’t find me arguing too much on that one. Read what I said – “meaningful participation”. The welfare state does not provide meaningful participation. That is why there are riots. That and teenagers watching bankers steal money and thinking, “If its ok for them….”.

    The welfare state is the result of a straightforward analysis of the cost of welfare vs the cost of policing, prisons and public safety. Of course if you could bring back the death penalty (or transportation), the calculation would change. An important strategy to minimise the cost of welfare is to convince the recipients that theirs is a shameful state, and is a result of them being substandard human beings. That way, they worry about losing what little they have, rather than wondering why society is structured so that they can’t play. This strategy is run often on the current affairs shows, where the unemployed are bashed.

    So yes, J.H, I agree with you that England’s problems are a result of the welfare state. But short of reintroducing the death penalty, how are you going to fix it?

    And RJ – on taxes. On average over many years, a governments tax revenue must match its expenditure. Certainly I have no problem with expenditure exceeding taxation for periods of several years. But I do have a problem if a government’s spending continually exceeds its tax revenue. If this happens, government debt must continually increase, and at some point no one will lend to it any more, or they will, but at very high interest rates. In Australia, we are in the position where, if no one would lend to the Australian government any more, we could probably increase taxes by an average of around $30 per week, and then we wouldn’t have to borrow. In an emergency, we could do this. The problem gets rather more severe when you’d have to increase taxes by $200 per week if you could not borrow……

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    Cripes! JB actually making some sense for once.

    I don’t have a problem with government debt as such. Spending is sometimes “lumpy” when for example large defence expenses are due or bridges, ports, airports, water supplies need construction and these items are going to last much longer than the lifetime of the people who were alive when they were constructed. It is reasonable to get those who will get the ongoing benefit to contribute to the cost to pay it off. This is the same as buying a house and car with borrowings. You have to have the infrastructure to live somewhere and you need transport to get to and from a job. Note however both loans are usually designed to be paid off eventually.
    I do have a problem with government borrowings to pay ongoing running costs of a bureaucracy or benefits. This is like buying groceries on your credit card and keeping on running up the balance. Eventually the card hits the limit and the interest bill is crippling, or both. What then?
    RJ doesn’t understand who the losers are when the government “could then reissue and sell new bonds, directly or indirectly, via their central banks without any other consequence.” Think carefully and tell us RJ when you’ve figured it out. You can play that game for a long time until the marks tumble to it as they seem to be doing now. It never ends well.

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    3x2

    Considering the post topic … excellent cartoon from The Australian

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    RJ

    And RJ – on taxes. On average over many years, a governments tax revenue must match its expenditure.

    wrong for the reason I have given above. It does not have to match and is economically very unwise to do so. It will always lead to huge non Govt debt (eg Aust today).

    And Govts never have to borrow. They can issue Govt bonds to soak up excess commercial bank reserves but could if they wish just fund deficits from central bank credit.

    And then pay interet on excess reserves instead. As the US in now doing.

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    RJ

    Mike @ 190

    I don’t have a problem with government debt as such.

    Govt debt is essential for a balanced economy

    Government $deficit = non government $surplus (net financial assets)

    Without it high non Govt debt (with all the associated problems) is inevitable. As Aust is now finding out.

    So an economy either has

    Lots of non Govt debt

    or

    A balance of

    non Govt debt and
    Govt debt

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    Joe V

    Is Abbott. Lifting his game at last, in response to Cate Stuart’s call ?
    Coalition attack Carbon modelling

    opposition finance spokesman, Andrew Robb, this week agreed with a radio announcer who said that international permits were ”issued by some bloody witchdoctor in the highlands of Borneo or something who says, well, I’ve got a million teak trees”

    .

    Do I foresee an emerging market in…. Ethnically sourced Carbon permits. ?

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    Steve Schapel

    3×2 (#191)…

    Yes, fair enough cartoon. But wow, what a punchy article!

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    John Brookes:#170
    August 11th, 2011 at 2:58 pm

    However you run a society, you really need everyone to participate meaningfully – or else you get outbreaks like the ones in England. Its a bit tricky really, either you collect enough in taxes to make society work, or you put up with the consequence…..

    If only the Brit Gov taxed Lauras parents a little more heh John?

    Among the accused was, for instance, Laura Johnson, the 19-year-old daughter of a successful company director. She lives in a detached converted farmhouse in Orpington, Kent, with extensive grounds and a tennis court.

    She is an English and Italian undergraduate at Exeter, favourite of the Boden-wearing classes. Before that, she attended St Olave’s Grammar, the fourth-best state school in the country, and its sister school, Newstead Wood …

    At St Olave’s, she studied A-levels in French, English literature, geography and classical civilisation. Yesterday, at Highbury, she was accused of something slightly less civilised – looting the Charlton Curry’s superstore of electrical goods worth £5,000.

    The Formerly Great Brittain is suffering some consequences of it’s past and present actions, but it has nothing to do with fiscal or monetary policy.

    The rot starts at the head. The ruling (read parasite) class is a good place to start if one wants to know what caused these riots.

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    bananabender

    John Brookes:
    August 11th, 2011 at 6:04 pm

    The welfare state is the result of a straightforward analysis of the cost of welfare vs the cost of policing, prisons and public safety. Of course if you could bring back the death penalty (or transportation), the calculation would change. An important strategy to minimise the cost of welfare is to convince the recipients that theirs is a shameful state, and is a result of them being substandard human beings. That way, they worry about losing what little they have, rather than wondering why society is structured so that they can’t play. This strategy is run often on the current affairs shows, where the unemployed are bashed.

    One of my friends is a highly regarded psychiatrist. He once told me that “dole bludgers” don’t really exist. His reasoning was that nobody would willingly accept the shame and poverty associated with being long-term unemployed. He said that the majority of unemployed people have undiagnosed mental health problems that are too subtle for them to be eligible for disability pensions yet too severe for them to stay in the workforce. Unless a person has a history of being hospitalised with schizophrenia or bipolar disorder the government considers them work ready.

    Thirty years ago a person could walk into a factory with no previous experience and start a well paid job immediately. Now this is impossible. Most unskilled factory jobs are now contracted out to employment agencies. Frequently the pay is poor, there is no public transport available and work is often intermittent.

    The TV current affairs shows also regularly make false claims that their are vast numbers of $150k/year jobs in the mines for these “bludgers”. The reality is very different. Most of the mine jobs require specific skills, extensive experience and a steady work history.

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    Bruce D Scott

    I know that I could be abused for being simplistic, but, as far as I know, you can not spend your way out of debt.

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    John Brookes

    Good point bananabender. In my youth I had a few stints of unemployment. At the time I was struggling somewhat, although you put on a brave face and pretend that its entirely a matter of choice. Luckily people gave me breaks every now and then…..

    When I first worked, in a cool drink factory in the holidays, there were guys working there who would not get a job these days. It was a form of industrial socialism. These days they’d be unemployed or on the disability support pension.

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    RJ

    Bruce @ 198

    A Govt with their own currency can. Because of this.

    Govt debt replaces non Govt debt
    Non Govt debt is a problem. Govt debt is not

    http://moslereconomics.com/support/

    Government $deficit = non government $surplus (net financial assets)

    Operationally, government spending is not inherently revenue constrained. Any such constraints are necessarily self-imposed.

    In the banking system, the causation runs from loans to deposits, that is ‘loans create deposits.’

    The Fed is the monopoly supplier of net reserves to its banking system, and, therefore has no option but to set at least one interest rate.

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    John Brookes

    and Baa:

    The rot starts at the head. The ruling (read parasite) class is a good place to start if one wants to know what caused these riots.

    You would have heard about the youth who when questioned about the TV he was carrying said it was his “bankers bonus”, his “parliamentary expenses”.

    And Laura Johnson may be wealthy and priveleged, but she may still be disengaged. Indeed, hasn’t it often been the children of the wealthy who have trouble seeing the point of it all?

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    Tel

    The welfare state is the result of a straightforward analysis of the cost of welfare vs the cost of policing, prisons and public safety.

    It is a straight forward short term analysis of costs.

    In the longer term you get multi-generations of welfare, whole suburbs of welfare, and all of the associated government paraphenalia to manage that. The cost never goes backward. What’s more, the entitlement threshold continues to climb, and the government interference continues to suffocate productive activity. There comes a point when imust collapse under its own weight, and it’s about at that stage in the UK at the moment (although I personally believe that the powers that be have pre-empted the collapse somewhat by deliberately antagonising the problem in order to ensure they manage the ultimate transition, but that’s just my gut feel).

    Fortunately Australia is being kept afloat by minerals prices, food prices, and Chinese productivity.

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    Raven

    When those economic tax slugs are unleashed, we know who to call …….take a ride back in time and check out justice , Bob Brown style .. :) it’s a crack up .

    http://www.youtube.com/watch?v=YjeqRHdBwkY&feature=youtube_gdata_player

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    Tel

    The ruling (read parasite) class is a good place to start if one wants to know what caused these riots.

    Although there is certainly a parasitic component amongst the ruling classes, genuine leadership is valuable. The trouble is that bad leadership is all too common, and a significant number of people have discovered ways to keep their positions of power while offering no leadership at all.

    That to me points to a systemic problem that we are going to have to deal with. Back in the feudal system there was regular warfare and what it did was clean out the people who had positions of power but were useless managers (they generally lost). The feudal system even operated under a code of chivalry to minimise the pointless desctruction in these events. Modern warfare is far more destructive, and we have largely adopted the “doctrine of total war”, or in other words chivalry is dead. Thus, we are stuck without a replacement cleaning mechanism.

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    Louis Hissink

    RJ

    “A Govt with their own currency can. Because of this.

    Govt debt replaces non Govt debt
    Non Govt debt is a problem. Govt debt is not..”

    No government has money except what it takes from its citizens.

    Other than this, what planet did you come from?

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    RJ

    @ 205

    No government has money except what it takes from its citizens. Other than this, what planet did you come from?

    So where do you think new notes and coins come from. The Govt simple print them as required

    And what’s more the value of new notes and coins use to be treated as treasury (Govt) revenue up until the 1960s. One of the reasons why Govt debt was so much lower back then. Due to an accounting difference. New notes and coins were credited to revenue rather than a Govt liability account (called Govt debt)whereas today new Fed credit goes against debt.

    http://www.correntewire.com/coin_seigniorage_and_irrelevance_debt_limit

    The main problem in the West is still this today


    “All of the perplexities, confusion, and distress in America arises, not from the defects of the Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation.” — John Adams, Founding Father

    People are largely ignorant about credit yet think they know it all

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    Joe Lalonde

    Jo,

    The US economy could not be in a more dire situation. Many companies fled to China for bigger profits on cheaper made Chinese goods. Automation of companies took away many jobs. Take overs to plunge and take companies assets and bleed the company dry to bankruptcy is not uncommon.
    Old companies have been sliced up to get rid of pensioned ex-employees.
    The US is still wasting vast amounts of money in the hopes that future citizens can create new companies and generate new jobs.
    There is a vast amount of regulation, laws, etc. built up over the years that a company has to go through, why bother when other countries has much less restrictions?
    The US did default on loans by printing money to cover their obligations.

    What gets me is that the US thinks they have done absolutely nothing wrong and are entitled to print their way out of their debts.

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    RJ

    What gets me is that the US thinks they have done absolutely nothing wrong and are entitled to print their way out of their debts.

    Not out of

    Govt surpluses remove credit (money) from the banking system. So they will never reduce the govts debt. Not until unemployment is very low and the economy starts to overheat

    And the US is a long way from this point.

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    MaryFJohnston

    BB @ 197

    Your comment:

    “One of my friends is a highly regarded psychiatrist. He once told me that “dole bludgers” don’t really exist. ”

    At one level this true but; and there are always buts;

    I am sure if your friend was trying really hard to look for the best scenario for these people he would say that Government is not doing its job and should do the right thing by those now on the dole.

    Read sheltered workshop as an example.

    Politicians need to get off their butts and devise suitable work at a level these people can function at..

    In our area there are many square kilometres of scrub that needs “beautification” it would be an ideal activity.

    These people are victims of the “Compassion” industry and the failure by society to give them useful work is just indifference and neglect dressed up as “compassion”.

    We should never lose sight of the fact that the aim of politicians is to gather as many votes as possible for the least expenditure of taxes and effort on their part.

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    bananabender

    Tel:
    August 11th, 2011 at 8:17 pm

    Back in the feudal system there was regular warfare and what it did was clean out the people who had positions of power but were useless managers (they generally lost). The feudal system even operated under a code of chivalry to minimise the pointless desctruction in these events. Modern warfare is far more destructive, and we have largely adopted the “doctrine of total war”, or in other words chivalry is dead. Thus, we are stuck without a replacement cleaning mechanism.

    The main reason for the constant warfare in the Middle Ages was that fact that their were so many boy kings looking for adventure.

    Medieval warfare was not particularly dangerous because battles were short and infrequent and armies were typically very small. Capturing territory was far more important than killing enemies. Relatively few important nobles were killed in battle because it was considered preferable to capture them for ransom. Most knights were highly trained professional soldiers not rich amateurs.

    Chivalry was pure pragmatism. There wasn’t much genuinely altruistic, heroic or moral about it. Knights went to battle because they were professional soldiers who were paid to fight. They also relied on captured booty or ransoms to become wealthy. Knights were captured alive and treated well because they could be potentially ransomed for huge sums. An enemy knight would only be killed as an absolute last resort because he was worthless once he was dead. Towns usually weren’t sacked or burnt because that would destroy valuable property. Enemies weren’t needlessly tortured or killed because that would set a a dangerous precedent.

    Chivalry ended simply because firearms made knights obsolete.

    Modern warfare is not “total”. It is fought under very tightly controlled rules of engagement – just like medieval warfare.

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    Mark D.

    Tom @ 176 has this gem:

    but not with the same looney worldview, that the West mainly (Europe and Australia) has been getting a financial freebie from the US military, which has been largely fighting our war against mass-murdering zealots, only a paper-thin paradigm away from socialist zealots like you, who are trying to destroy Western enterprise and culture from within.

    Which goes a long way to respond to Crackar24 @ 174:

    I will agree on one thing if the US stopped roaming the world killing brown people then they would have more money to spend on other things.

    Crakar24, most of the time I find that I agree with you. The “killing of brown people” is a gross misrepresentation, offensive, and enraging.

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    bananabender

    MaryFJohnston:
    August 11th, 2011 at 10:01 pm

    Prior to the mid 1980s there was an unwritten social contract in Australia. Companies would look after workers and executives only worked 9-5 for a reasonable salary, generous superannuation and job security.

    The move to globalisation in the mid-80s changed everything. We inherited the American disease of managerialism. General Managers became CEOs. Their salaries increased by a factor of 10 or even 100. To justify the massive executive salary increases huge numbers of workers were made redundant. Executives were paid handsomely to make short term cost cuts so factories were closed and dodgy financial engineering was introduced.

    James Strong was paid $200k/year as General Manager of QANTAS in the 1980s. Alan Joyce is paid ~$5 million/year as current CEO of QANTAS. However by most objective standards QANTAS was a much better company 25 years ago.

    The Scandinavians and Germans somehow manage to have a vibrant manufacturing industry despite very high wages, strong unions, good working conditions and very “lowly” paid (by US standards) executives.

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    bananabender

    MaryFJohnston:
    August 11th, 2011 at 10:01 pm

    John Howard has his disgracefully named “Work for the Dole” scheme which was purely punitive. The unfortunate victims of this idea weren’t trained in anything useful and were treated as though they were criminals.

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    John Brookes @ 170:

    I suppose its bloody obvious, but the US has problems with its budget because they start unnecessary wars and refuse to tax enough. And they are certainly not alone on the taxes.

    You will never be able to unveil the obvious contradiction to those on the extreme right. Wars fought in the name of freedom which enslave a society to debt are not just. They just are and only fools rush in.

    Baa Humbug @ 196:

    The Formerly Great Brittain is suffering some consequences of it’s past and present actions, but it has nothing to do with fiscal or monetary policy.

    The rot starts at the head. The ruling (read parasite) class is a good place to start if one wants to know what caused these riots.

    I think the press should no longer be referred to as the chatterati. They should now be called the apologerati. I’ve yet to see anything close to accurate, in terms of the UK riot analysis. When ordinary people see their politicians getting their moats cleaned on the tax payer’s dime, when bureaucrats in another country make their laws without any local debate, when their own police force is involved with eves-dropping on their citizens, when they are filmed 24/7 going about their own lives, when they are told how to live and in what manner they should raise their children, when the bankers’ credit ponzi scheme is bailed out by the government and, when the government continues to run their climate ponzi scheme that allows the poor and infirm to needlessly die, the youth of the UK can rightly say that a state of lawlessness already exists. What would you do in that situation? I know I’d be on the streets venting my anger at a ruling class that sees me only as an inconvenience and an embarrassment to the establishment.

    The victim argument from the media that the looters are only damaging small business so false. All businesses are insured so, an attack on a retail outlet is an attack the very insurance companies that helped put them in the mess they find themselves today. The ‘yuf’ of today know this much. Just another example of how belittled the working and underclasses of the UK are today.

    bananabender @ 197:

    One of my friends is a highly regarded psychiatrist. He once told me that “dole bludgers” don’t really exist. His reasoning was that nobody would willingly accept the shame and poverty associated with being long-term unemployed. He said that the majority of unemployed people have undiagnosed mental health problems that are too subtle for them to be eligible for disability pensions yet too severe for them to stay in the workforce. Unless a person has a history of being hospitalised with schizophrenia or bipolar disorder the government considers them work ready.

    I agree with this. In my life I’ve been working class, long term unemployed, homeless, and a business owner who is a highly skilled professional. Anyone who thinks being economically harder on unemployed and treating them as lazy bums are delusional. I can tell politicians all the ways in which they can fix the long term unemployment problem but, the sad fact is they want the unemployed class. They need the unemployed class to be the villains to blame and chastise to divert the ignorant public’s attention away from their economic misdeeds. Most policies directed at the unemployed have the intention of converting them to long-term, institutionalised unemployed and eventually(hopefully) criminals. This started under John Howard and is still the case today. This is deliberate policy. Obviously, I don’t think highly of people who pound on the unemployed. Doing so requires either, a severe intellectual dishonesty or, a complete lack of empathy. Neither are good traits for a person to have.

    The argument that social security is a drain on the economy is false. The real drain is a lack of tax revenue that unemployment brings. I can tell you also, that for every dollar of dole spent, two more dollars have to be spent policing our poor ‘dole bludger’ making sure that they are scared $#!7less of being cast out onto the street because they can’t make rent as their benefits got suspended over the phone by some person in a call center in another state. But, like I said, the unemployment level is purely a political decision. Any administration/government can have effective full employment if it desires it and implements the correct policies to achieve this. Do we have unemployment is times of war? No. Enough said.

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    Brc

    This had the promise of being a good discussions but all that Weimar era thinking crap from Rj makes it unreadable. Sigh maybe one day there will be a decent thread on this topic without a spewing of rubbish from people with a bunch a banjo noise in their head instead of clear thinking.

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    RJ

    Brc @ 215

    Be fair. We can’t all match the standard of your contributions like this one.

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    Andrew McRae

    Hey you guys, here’s the REAL science of global warming….
    http://www.abc.net.au/science/articles/2011/03/14/3161789.htm

    Suddenly the carbon tax makes sense. It’s penance for your original carbon sin.

    Heh.

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    TrueNews

    @RJ # many

    I begin to see some of where you come from in your logic RJ – but it is sadly flawed.

    Yes – (independant) governments can print money because the ‘Gold Standard’ no longer exists, and yes – ALL goverments do sometimes need to borrow.
    (I would love to know where Europe fits in to your flawed equation RJ ?)

    Some governments, even the Socialist / Communist ones, promote that a budget surplus is not only needed but absolutely required.
    (That kinda flies in the face of your arguament RJ).

    I would suggest that you either go back to ‘Academic Economics’ class (and hope Garnaut is not your lecturer again) or seek the help of Wayne Swan to explain your economic ‘faux pas’.

    I look forward to talking to you again, when you graduate.

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    bananabender

    Waffle:
    August 11th, 2011 at 11:15 pm

    I can tell you also, that for every dollar of dole spent, two more dollars have to be spent policing our poor ‘dole bludger’ making sure that they are scared $#!7less of being cast out onto the street because they can’t make rent as their benefits got suspended over the phone by some person in a call center in another state. But, like I said, the unemployment level is purely a political decision

    One of my mates worked at DSS (Centrelink) nearly 30 years ago. He told me it was far cheaper to pay a disability pension than the dole because of administration costs.

    The same mate is now a boutique funds manager. He also told me it is far cheaper to simply pay everyone an aged pension at 65 than to offer tax concessions for superannuation.

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    RJ

    @ 218

    (I would love to know where Europe fits in to your flawed equation RJ ?)

    Are you referring to Euro countries

    http://rodgermmitchell.wordpress.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/


    The financial problems of Portugal, Ireland, Italy, Greece and Spain (The PIIGS), are due not to deficits and debt. They are due to these nations having surrendered the single most valuable asset any nation can own — their Monetary Sovereignty — thus preventing them from servicing their debt by creating money.

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    RJ says: Government $deficit (a Govt laibility) = non government $surplus (net financial assets)

    I will ask the question again, if it is that simple, why not have the government print and give a $1,000,000 check to each citizen and add that amount to the government debt? That way, there would be a huge non government surplus. All the problems would be solved.

    The problem is, were is the $1,000,000 of goods and services that the surplus can buy? It does not exist. It has to be brought into existence (aka produced) by the self same person who received the $1,000,000. When they do that, there is still the $1,000,000 of government debt that will take each person another $1,000,000 of production to pay off. The logic of this escapes me. Why not eliminate the middle man (aka government) and simply produce the wealth in the first place?

    Again, RJ evades reality and is only looking at manipulations of empty symbols. Real people with real needs working to create real wealth that can satisfy real needs don’t exist in his fantasied universe. In his universe, the symbols of wealth can be created by an accounting trick and you only need to look at one side of the equation. The debit side really doesn’t exist and need not be dealt with. Unfortunately, the credit side also does not exist but MUST be dealt with as above.

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    RJ

    A number of points

    1 What is money

    There is debate over this point when there should not be. Clearly money is nothing more than debit and credit accounting entries to reflect a transfer of real goods or services between two parties.

    A bank records and guarantees credit balances. It also requires prior approval before a customer has a debit (over draft) balance

    Example. I have a $100,000 credit balance and wish to purchase $200,000 of gold. The bank approves this purchase with security being the gold held

    The banks then debit my account (dr 200,000 balance now -100,000) and credit the sellers account (balance increases by $200,000)

    2 Why do we need to hold credit balances

    For two reasons

    For consumption and
    For savings especially for old age. But also for a rainy day etc

    3 How much is needed

    Enough to satisfy 2 above. Too little will cause unemployment and excessive demand for credit

    Too much will cause inflation

    4 What can banks hold as assets to support credit balances

    This varies but the main 2 categories are

    a Govt debt. Like Govt bonds or central bank credit
    b Notes and coins
    c Non Govt debt

    The key is to get the balance right between 4a and 4c. If 4a is too low then Aust will end up with a private debt problem as at present (and unemployment and lack of net financial savings). If 4a is too high then there will be too much credit. This will cause inflation and very low bank profits.

    So a Govt could credit everyone with $1 million. But this would have a disastrous outcome.

    It is typical though of what debt hawks bring up to counter informed Govt debt realists like myself. Debt hawks if they succeed would destroy Western economies but they will not let go of their Govt debt is bad no matter what beliefs.

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    RJ

    My other reply has got held up for some reason

    But this article is interesting

    http://moslereconomics.com/2011/08/11/connecting-the-dots-deficit-reduction-is-now-only-about-inflation-not-insolvency/

    Connecting the dots- deficit reduction is now only about inflation, not insolvency

    Posted by WARREN MOSLER on August 11th, 2011

    From comments by Warren Buffet to Alan Greenspan,

    And from all the responses to the S&P downgrade by economists and financial professionals from the four corners of the world,

    THE WORD IS OUT!

    The US government is the issuer of the US dollar.

    So no matter how large the federal deficit might be:

    The US government can always make any payments in US dollars that it wants to.
    There is no such thing as the US govt running out of US dollars.
    The US government always has the ‘ability to pay’ any amount of US dollars at any time.

    NOW CONNECT THE DOTS TO:

    The US is not dependent on tax revenue or foreign borrowing to be able to spend.

    And,
    whereas Greece is not the issuer of the euro,
    much like the US states are not the issuer of the US dollar,

    THERE IS NO SUCH THING AS THE US BECOMING THE NEXT GREECE

    There is no such thing as the US getting cut off from spending by the financial markets and forced to go begging to the IMF to get US dollars to spend.

    Nor is the US government subject to market forces driving up interest rates on US Treasury bills.

    EVEN AFTER BEING DOWNGRADED US TREASURY BILL RATES REMAIN NEAR 0%

    Why, because, any nation that issues its own currency also sets it’s own interest rates.
    So in the US, the Federal Reserve Bank votes on the interest rate

    SO, THEN,

    WHAT IS THE POINT OF DEFICIT REDUCTION?

    Suddenly, it’s NOT solvency.
    The US is suddenly NOT going broke.
    Social Security is suddenly NOT broken.
    There is suddenly NO risk the US will not be able to make all payments as promised.

    So now,

    the deficit hawks must CHANGE THEIR REASONS FOR DEFICIT REDUCTION
    or shut up!

    they must FLIP FLOP
    or shut up!

    Yes, there is a new reason they can flip flop to.

    Inflation.

    They can start claiming the current path of deficit spending will lead to inflation.

    Fine.

    Bring it on!

    First, they need to do the research, as they haven’t even thought about this yet.

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    Bulldust

    If you stop basing all your economic arguments on oddball web sites on the fringe of sanity you might begin to piece together a coherant picture of the global economy RJ.

    You honestly seem to think that you can spend your way out of any deficit and come out smelling like roses… this is a sad delusion mate. As every individual, institution or government throughout history has discovered, if you keep fighting market forces the market will inevitably pwn you. Ask the former Soviet leaders, ask de Beers, ask the International Tin Cartel operators etc…

    For those that have not bothered to click on RJ’s links, here is the mantra of the chap whose web site he prays to:

    MOSLER’S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

    I’ll grant you the guy has a massive ego … that’s about it though… oh he ran in politics (US Senate) once… less than 1% of the vote /golfclap

    PS> To the sane readers here, comment 222 by RJ is simply a copy & paste from the web site. He is another one of those SkepticalScience-like copy & paste warriors.

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    RJ

    @ 223

    If you stop basing all your economic arguments on oddball web sites on the fringe of sanity you might begin to piece together a coherant picture of the global economy RJ.

    But this is the path the US is currently taking

    And the US would continue on this path except maybe for the ignorant deficit hawks.

    Deficit hawks are just like alarmists. They base their fears (about Govt debt) on ignorance and irrelevant beliefs and refuse to look at the evidence.

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    Mark D.

    RJ The first part of your rant is arguing to thin air.

    Sure the US government can print money-no one has said otherwise and everything that is worrisome is BECAUSE WE KNOW THAT!!!!

    If the government doesn’t need taxes, why do they tax us?

    The US deficit is approaching the point of “broke” because the interest payments are nearing what the tax revenues are. In other words the government WILL have to print money to cover those payments. That WILL cause a devaluation of all other US money.

    You have been told repeatedly that it isn’t about money it’s about the VALUE of that money.

    INFLATION REDUCES VALUE, also causes higher interest rates which then becomes a double whammy.

    Do us all a favor and take your “theories” into the future on a time line. Start today with today’s numbers and fill in the perfect solution year by year. What should be carried as debt, what should taxes be.

    PS Rodger Mitchell (above web link) is as one of his responders says: “confused”.

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    RJ, even the slightly unhinged Warren Mosler admits that money printing will lead to inflation. That’s what the sane here are trying to tell you. The experiment has been run many times and never ended well. Inflation is theft, which was the point of Jo’s article here.
    Since 1966(introduction of decimal currency) the value of an Australian dollar has been debased by a factor of 10. How many zeroes do you want? This results in higher interest rates than if the value was kept the same but the higher rates aren’t of benefit to those lending the money. Add in taxation on the interest and do the numbers.

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    brc

    RJ – come back to us with the answer from @225.

    Yes, the USA is currently on fairyland economics path. That’s the whole point. We can all see where it ends. You think it’s not a problem.

    Tell you what, how about you agree to sell me 10 ounces of gold in 2020 at todays USD price. Fair deal, no? After all, if all the deficit spending didn’t matter, you’d be happy to sell me today at the 1972 price of $35/ounce? Numbers don’t matter after all, do they?

    Inflation is an insiduous problem, a theft of the labor of savers, a destruction of the social construct where people can exchange labor through a trusted medium of exchange. As Gillard will tell you, once the trust is gone, it’s not coming back. Every fiat paper currency dies, zero exceptions. The only question is how long it takes before that happens. In the case of the US, the end-destruction seems to be being brought forwards because of belief in fairyland economics.

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    I just finished this summary of my career:

    A. Scientific Genesis Videos:

    1. Science vs. Propaganda
    (1961)

    http://www.youtube.com/watch?v=GOLld5PR4ts

    2. Origin of the Solar System (1975)

    http://www.youtube.com/watch?v=AQZe_Qk-q7M

    3. The Iron Sun (1983)

    http://www.youtube.com/watch?v=yLjQSSHIe6k

    4. Neutron Repulsion
    (2001)

    http://www.youtube.com/watch?v=sXNyLYSiPO0

    5. Global Warming Scam (2011)

    http://www.youtube.com/watch?v=m3VIFmZpFco

    B. Text Summary in Dropbox:

    The Bilderberg Sun, Climategate and Economic Crisis

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.doc

    http://dl.dropbox.com/u/10640850/20110722_Climategate_Roots.pdf

    Today all is well,
    Oliver K. Manuel

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    bananabender

    The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5 percent passbook account whether she pays 100 percent income tax on her interest income during a period of zero inflation or pays no income taxes during years of 5 percent inflation. Either way, she is ‘taxed’ in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 120 percent income tax but doesn’t seem to notice that 5 percent inflation is the economic equivalent.

    Warren Buffett

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    Tel

    I will ask the question again, if it is that simple, why not have the government print and give a $1,000,000 check to each citizen and add that amount to the government debt? That way, there would be a huge non government surplus. All the problems would be solved.

    If you keep sugesting that, someone is going to do it. I’m serious.

    What the $1M cheque does is pretty much punch the reboot button for the economy… wipe out all existing debts with a flood of new money. Paul Krugman has been claiming that inflation is a good thing in the present environment, and he is wringing hands that inflation is not high enough (mind you, he ignores food prices and fuel prices, and he is suspicious about any commodity prices, which is why he can’t seem to find any inflation). Paul Krugman has also been pushing hard for higher taxes on the wealthy, which is another type of reboot button, clearing away accumulated assets.

    So yeah, there are plenty of calls for reboot economics (in various different flavours).

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    Crakar24

    Are we all enjoying the financial rollercoaster? If so then you have the plunge protection team (PPT) to thank. What most people dont know is that the stcok prices you see are just an illusion, they are not real, they are artificially manipulated and the PPT plays a major role.

    The PPT was set up during the Read=gan administration in response to the 1987 black Monday, the PPT has access to vast amounts of money that they use to prop up the stock market when times are tough (like now).

    Here is a Washington post version of the PPT.

    http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm

    Here is a more realistic version of what the PPT does

    http://www.rense.com/general52/secretsoftheplunge.htm

    All they are doing is delaying the inevitiable so the money junkies cans teal that last dollar………….

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    Tel

    Modern warfare is not “total”. It is fought under very tightly controlled rules of engagement – just like medieval warfare.

    You mean tightly controlled media. I guess you can explain NATO’s position on destroying Libya’s water pipeline?

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    Raven

    Can some one tell me the estimated ( gross ) USD reserves for eg : what would be used if someone were to follow the gold standard path ?, I mean is it just precious metals , what other collateral can governments use, or is everything they have leveraged so far beyond that hypothesis that it could never be used to realign the US economy ? , even if it were a viable option, in a perfect world maybe , pssst don’t mention the war .
    Oh I mean independent estimate , not the US Govt estimates .

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    Tel

    By the way, there’s a very easy to read explanation of why Modern Monetary Theory is a complete load of cobblers:

    http://mises.org/daily/5260/The-UpsideDown-World-of-MMT

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    Crakar24

    Seriously?

    Give everyone a million dollar cheque. Wow wont that fix things……………..not. You know what inflation is? Inflation is basically the devaluation of the dollar ie you need more dollars to buy the same thing. Governments try to reduce inflation by pulling dollars out of circulation, one way of doing this is by ratcheting up interest rates. If everyone became instant millionaires can you imagine how much the dollar would devalue? Picture needing a suitcase full of fifties to buy a loaf of bread and this is good for the economy…….how?

    The past two labor gov. have gone on a spendy up with free money for everything only problem is we have nothing to show for it except a collection of sheds on school grounds, pink batts in homes and heavily discounted solar panels etc. These stupid policies did nothing but cause inflation to rise as they have not generated productivity (ie generate wealth) if they had of built several Hydro dams or something similar then maybe they would have had a nett benefit.

    So here we are with a slowing economy but rising inflation, if you raise rates to combat inflation you cripple the economy, if you drop rates to breath new life into the economy you push inflation even higher. Welcome to the world of stagflation my friends.

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    Crakar24

    Tel 232,

    You mean tightly controlled media. I guess you can explain NATO’s position on destroying Libya’s water pipeline?

    Yep sure can Gold in my sacks stole 98% of Libya’s money, cue NATO to indiscriminately bomb the crap out of the place, 98% what 98%?

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    bananabender

    During WW2 Germany had a brilliant plan to bankrupt Britain by dumping vast amounts of perfect couterfeit currency to end the war.

    http://en.wikipedia.org/wiki/Operation_Bernhard

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    bananabender

    Tel:
    August 12th, 2011 at 10:59 am

    Modern warfare is not “total”. It is fought under very tightly controlled rules of engagement – just like medieval warfare.

    You mean tightly controlled media. I guess you can explain NATO’s position on destroying Libya’s water pipeline?

    A very sensible idea. Cut off the food and water and starve the enemy into submission. Quicker, cheaper, safer and more humane than bombing people. Pipelines can easily be repaired once hostilities end.

    The Libyan pipeline is one of the most idiotic ideas ever devised. It sends non-renewable groundwater out in the desert to grow crops at vast expense. Libya would be far better importing food.

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    bananabender

    Tel:
    August 12th, 2011 at 10:51 am

    I will ask the question again, if it is that simple, why not have the government print and give a $1,000,000 check to each citizen and add that amount to the government debt? That way, there would be a huge non government surplus. All the problems would be solved.

    If you keep sugesting that, someone is going to do it. I’m serious.

    What the $1M cheque does is pretty much punch the reboot button for the economy… wipe out all existing debts with a flood of new money. Paul Krugman has been claiming that inflation is a good thing in the present environment, and he is wringing hands that inflation is not high enough (mind you, he ignores food prices and fuel prices, and he is suspicious about any commodity prices, which is why he can’t seem to find any inflation). Paul Krugman has also been pushing hard for higher taxes on the wealthy, which is another type of reboot button, clearing away accumulated assets.

    The million dollars will buy:

    week 1- a house.
    week 2 – a car
    week 3 – a plasma TV
    week 4 – a haircut
    week 5 – a coffee
    week 6 – nothing

    It will also destroy all existing bank deposits, the banks themselves and most companies.

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    crakar24

    Bananabender in 238,

    A very sensible idea. Cut off the food and water and starve the enemy into submission. Quicker, cheaper, safer and more humane than bombing people. Pipelines can easily be repaired once hostilities end.

    The Libyan pipeline is one of the most idiotic ideas ever devised. It sends non-renewable groundwater out in the desert to grow crops at vast expense. Libya would be far better importing food.

    Ever heard of the Geneva convention?, ever heard of crimes against humanity? ever heard of war crimes? Well collective punishment is a war crime.

    The 4th Geneva convention, Part 3, Section 1, Article 33 states. No protected person may be punished for an offense he or she has not personally committed. Collective penalties and likewise all measures of intimidation or of terrorism are prohibited.
    Pillage is prohibited.
    Reprisals against protected persons and their property are prohibited.

    So here we have the North Atlantic Treaty Organisation wanting Gaddaffis head on a platter so they systematically destroy the peoples power, sewerage and water supplies. Therefore NATO is committing a war crime.

    ANd here you are glibbly condoning their actions.

    Other examples or collective punishment are: The USA and Israel refused to talk about peace with Yassar Arafat and the PLO until the Palistinian poeple elected a government so after free and fair elections they elected Hamas. USA and Israel did not like this (Hamas winning) so since then Israel has blockaded the Gaza strip this is a war crime as it is collectively punishing a group of people. The use of phosphor bombs and cluster bombs during opperation “Cast lead” was also a war crime. They get away with this behaviour because people like you condone it.

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    Andreas

    Inflation is a tax on the prudent, on those who have carefully scrimped and saved so that they can be self-reliant. Saving is exactly what we should be encouraging, not discouraging! We want people to look after themselves, not be reliant on government.

    Look at the parlous state of Australia’s indigenous people, obviously there are many factors at work but broadly that’s what too much welfare does to a people, that’s what being reliant on government rather than on your own ingenuity does. The idea that the government can just print more money to settle its debts is appalling and discourages people from working hard so they can earn and save. Why bother if you can just rely on the government to look after you, or on the government to make all your hard work worthless through idiotic and irresponsible policies. The fact that money is so by fiat is precisely why governments have a special duty of care not to abuse their powers to create more at their own whim. Inflation corrodes the character of people, I think even the RBA’s target of 2-3% inflation is too much.

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    bananabender said @ 239: It will also destroy all existing bank deposits, the banks themselves and most companies.

    RJ doesn’t care. In fact that is what he wants to have happen. Oh, I know he will claim he never said that but when you repeatedly support something that has repeatedly achieved a specific result, you are in fact demonstrating that is what you are wanting and demanding. You don’t have to say you want it. In fact you can even say you don’t want it but those words are empty. Your continued actions speak much louder than your words and wipe out any claims to the contrary.

    Printing press money (aka accounting tricks money) have caused inflation every time it has been tried. If continued long enough, it ends in hyperinflation and collapse of the economy. Soon after the government that did it falls too because it has destroyed the wealth it was planning to steal.

    It all has to do with the fact reality is real. Specific causes have particular effects BECAUSE specific entities have particular identities and will behave constant with that identity. No matter how earnestly you want or need the cause-effect entity-identity link to be different it will not be.

    If you want a particular result, you must implement only those causes that will have the effect of that particular result. If you implement a particular cause, you will have only the result that cause will give you. You have no choice in the matter beyond the which cause or which result you want and must accept/expect the other side of the choice to become evident.

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    Mark D.

    Crakar24 So you ignore my chastise at 211?

    That is worse than a retraction, worse than denial

    Gloves off……..

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    Mark D.

    Andreas @ 241

    Inflation is a tax on the prudent, on those who have carefully scrimped and saved so that they can be self-reliant.

    Very wise comment.

    Thank you

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    Crakar24

    Mark D,

    Sorry i just read 211, is it appropriate that we continue this discussion here? If so then pistols at noon it is.

    You shoot first.

    Cheers

    Crakar24

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    Mark D.

    Ahh My AU friend you’d be mortally hit.

    I trust you know more than me so I’ll put the gloves back for now

    On the other hand why not continue here?

    Noon your time or mine?

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    Andreas@241, exactly. The inflation target should be zero and if it is exceeded on the up side it should be reduced to zero in the next year by running a little deflation so that over time the currency retains its value. This would certainly make business and personal financial planning easier. The US had nearly 50 years of this up to 1913 or so. Anything else is simply borrowing from the future, fraudulently, with no intention to pay back the equivalent value. You can do this for a long time until it blows up on you.

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    Crakar24

    Its 1:27PM in Adelaide AKA “The back blocks of nowhere” but it is approaching 12 noon in Perth.

    If we constrain the debate to my comment then i think you will have to concede i am right, exactly how much money does the US spend in maintaining a military presence in the following countries.

    Bulgaria
    Germany
    Iraq
    Israel
    Italy
    Japan
    Kuwait
    Kosovo
    Sth Korea
    Afghanistan
    Bahrain
    British Indian Ocean Territory
    Brazil
    Cuba
    Spain
    Guam
    Greece
    Australia
    Greenland
    Qatar
    Saudi Arabia
    Singapore
    Kyrgyzstan
    Netherlands
    Portugal
    Turkey
    United Kingdom

    To name but a few, One can only imagine how much this must cost. If you want to dig deeper into the “killing brown people” thing then OK but i would rather not here unless Jo creates a thread for it and even then i would be reluctant to debate wth you about it. Blimey, MattB and JB would be an entirely different matter of course :) )

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    Crakar24

    Dang nabit,

    I forgot to mention “Africom” as the US now have a rather large military presence in Africa (i wont mention why they have a military presence there as it is way off topic).

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    Mark D.

    I have no personal reason to hide in front of or behind what the US does globally. If you have evidence that my country is fighting anywhere based on brown color (or any other color) I will listen.

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    Mark D.

    Oh to answer your question:

    how much money does the US spend in maintaining a military presence in the following

    Wayyyyy toooo much

    Any ideas on how to solve their problems and not spend that money?

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    Mark D.

    By the way the list of countries you supplied is fairly short on Brown People….

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    Rob Yallop

    The beginning of the article, and some earlier comments, seem to say that banks (as well as the Government) can create money. This is not the case. A non-government bank cannot lend out more money than it receives. If it did, its balance sheet would not balance.

    There is a money multiplier effect. This does not create money, but it does increase liquidity.

    Example: Bank takes deposit of $100. Bank then lends $90, keeping $10 as a prudential reserve. The borrower of the $90 spends it and the person he gives it to deposits it in a bank. This bank then lends $81, keeping $9 as a prudential reserve. And so on until the principal approaches zero.

    At the end of the day, there is still only $100 (the first bank has $10, the second has $9 and so on) but may people have a claim on it. This works as long as everyone doesn’t want all their money back at the same time.

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    Mark D.

    OOps maybe I proved your point…….

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    Benjamin Franklin on a visit to England representing the Colonies:

    “We have….no homeless…no income tax…. not a single man unemployed.. It is because in the Colonies we issue our own paper money. We call it Colonial Script, and we issue enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay”.

    …No inflation or deflation….MONEY SUPPLY WAS KEPT EQUAL TO THE VALUE OF GOODS AND SERVICES TO BE PRODUCED AND MOVED [distributed]

    “Colonial Script”

    http://www.kamron.com/Liberty/colonial_script.htm

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    bananabender

    crakar24:
    August 12th, 2011 at 12:58 pm

    Bananabender in 238,

    Ever heard of the Geneva convention?, ever heard of crimes against humanity? ever heard of war crimes? Well collective punishment is a war crime.

    I’ve served in the military so I’m well aware of these laws.

    Every single military operation conducted by Western countries is fully vetted by expert lawyers before commencement. No laws whatsoever have been broken.

    Contrary to the tripe published in pro-Islamist, conspiracy theory and and bleeding heart blogs this is not a crime against humanity. No one is going to die from a lack of water.

    The real purpose of the bombing is to weaken Libyan military-industrial capacity which relies on water.

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    @ 255

    I forgot to mention the War of Independence.

    Black hats. Snakes in Suits.

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    Crakar24

    Mark,

    I have confused you with the “brown people” comment, the US government do not base their wars on the color of ones skin its just a coincedence that people with brown skin live in the places the US government want to invade sorry for any confusion i may have caused.

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    RJ

    @ 242

    Printing press money (aka accounting tricks money) have caused inflation every time it has been tried. If continued long enough, it ends in hyperinflation and collapse of the economy. Soon after the government that did it falls too because it has destroyed the wealth it was planning to steal.

    I wish you deficit hawks would stop bringing up irrelevant nonsense like this.

    No one is suggesting massive Govt deficits. If I’m under-feed I need additional food. If I eat far too much (or the wrong combination of food) I could make myself sick.

    Likewise with credit. We are short at present and the balance between Govt debt and non Govt debt is completely out of balance (esp in Aust).

    This imbalance and shortage of credit needs rectifying. Not by tilting it completely the other way. It is NOT rectifying this imbalance problem by having far too much credit and Govt debt.

    But an essential first step is to recognise the critical importance of Govt debt to achieve this economic balance. And to reduce unemployment and achieve non essential net Govt financial savings.

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    Crakar24

    Mark D,

    Any ideas on how to solve their problems and not spend that money?

    What problems? Oh i get it well they can leave………for example 3 months before the Afghan invasion pezident Boooosch invited the Taliban to Washington to discuss the possibilities of building an oil and gas pipeline through their country. The request was based on this report from congress in 1998:

    http://commdocs.house.gov/committees/intlrel/hfa48119.000/hfa48119_0.HTM

    Important bits , this quote is from Unicol,

    The second option is to build a pipeline south from Central Asia to the Indian Ocean. One obvious route south would cross Iran, but this is foreclosed for American companies because of U.S. sanctions legislation. The only other possible route is across Afghanistan, which has of course its own unique challenges. The country has been involved in bitter warfare for almost two decades, and is still divided by civil war. From the outset, we have made it clear that construction of the pipeline we have proposed across Afghanistan could not begin until a recognized government is in place that has the confidence of governments, lenders, and our company.

    The Taliban rejected the offer and went home. After the invasion Karzia signed a contract with Cheney’s Haliburton to build the pipelines so Unicol can transport the oil and gas. Ten years and countless deaths later they are no closer to building the pipes. It would have been cheaper to buy the oil and gas rather than try and steal it.

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    Mark D.

    RJ, answer my questions!

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    RJ

    @ 253

    The beginning of the article, and some earlier comments, seem to say that banks (as well as the Government) can create money. This is not the case. A non-government bank cannot lend out more money than it receives. If it did, its balance sheet would not balance.

    It is the case.

    What you are referring to here is the way the Govt use to restrict bank lending (90% of base money or central bank credit and notes and coins)

    This restriction no longer applies.

    Money today really is no more than the credit balance of debit and credit accounting entries to mainly record a transfer of real goods, services or an asset (including investments) between two parties.
    A bank records and guarantees credit balances. It also requires prior approval before a customer has a debit (overdraft) balance.

    Example. I have a $100,000 credit balance and wish to purchase $200,000 of gold. The bank approves this purchase and a 100,000 negative credit or debit balance with security being the gold held.

    The banks then debit my account (dr 200,000 balance now -100,000) and credit the sellers account (balance increases by $200,000)
    after the transfer takes place and the paperwork is (or appropriate entries are) received.

    Banks are restricted to the value of overdrafts or loans (debit bank balances) based on capital restriction.

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    bananabender

    Andreas:
    August 12th, 2011 at 1:10 pm

    Look at the parlous state of Australia’s indigenous people, obviously there are many factors at work but broadly that’s what too much welfare does to a people, that’s what being reliant on government rather than on your own ingenuity does.

    It is overwhelmingly Aborigines living on remote outstations that are in parlous state. City dwelling aborigines have fared much better.

    There is also massive rorting of Aboriginal affirmative actions programs by middle class whites with very limited aboriginal heritage.

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    Crakar24

    Bananabender in 257,

    I’ve served in the military so I’m well aware of these laws.

    That makes two of us.

    No laws whatsoever have been broken.

    ROFLMBFAO :

    In the end you think that in order to save the people from Gadaffi opression we have to kill them, ok so i expect that you dont mind the fact that the people of Faluja are suffering from radioactive radiation due to the intense use of depleted uranium weapons. The legacy of this war crime….sorry no laws have been broken but the legacy of this is already apparent with still births, birth defects and so on. But the good news is no laws have been broken right.

    What about the mass killings of civilians due to wayward JDAM’s or simply piss poor intelligence? Rest assured no laws have been broken.

    Loo i have to go and may not responed to posts for a few days.

    have a good weekend.

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    Mark D.

    @ 261
    President OOOObama did what to correct?

    I am a civilian. Nothing to gain by BSing you or anyone.

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    RJ still refuses to recognize that printing press money and accounting trick money has no real value. Ii is not real wealth. It is only a promissory note on the future drawn on a non-existent account backed by no savings at all. ALL that kind of fake money does is dilute all the other fake money already issued worth less in exchange value. This necessitates the creation of still more fake money making things still worse.

    There is NO real wealth behind the fake money. In the long run, any economic system based on ANY degree of fake money will either have to stop the use of fake money or collapse from hyperinflation. Once governments get addicted to being able to pay of past debts (loans once based upon real wealth) with fake money will continue the scam to the bitter end. What looks like a good deal for the issuing government, destroys wealth AND the power to create more wealth because it destroys the capital base of the economy. It is nothing but a race to the bottom. It has always been and will always will be.

    There is NO amount of fake money issued that is productive of wealth. All that RJ sees are the initial and superficial benefits to the initial passers of fake money. He does not take into account the unseen but very real effects as they ripple throughout the economy. All it is, is redistribution of wealth from those who produced wealth and saved some so they would have a future. Another word for redistribution is theft.

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    Mark D.

    For reference I do not support or agree with the actions against Libya.

    More reference: all that the US has been involved in the middle east since 1948 is to protect Israel. Libya isn’t/wasn’t the problem. Oil isn’t the issue-we have our own. Conspiracy?

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    bananabender

    RJ:
    August 12th, 2011 at 3:08 pm

    Money today really is no more than the credit balance of debit and credit accounting entries to mainly record a transfer of real goods, services or an asset (including investments) between two parties.
    A bank records and guarantees credit balances. It also requires prior approval before a customer has a debit (overdraft) balance.

    Example. I have a $100,000 credit balance and wish to purchase $200,000 of gold. The bank approves this purchase and a 100,000 negative credit or debit balance with security being the gold held.

    The banks then debit my account (dr 200,000 balance now -100,000) and credit the sellers account (balance increases by $200,000)
    after the transfer takes place and the paperwork is (or appropriate entries are) received.

    You have a very vivid imagination.

    The bank actually loans you $100,000 using the gold as security in case you can’t repay the loan. The bank charges you interest of 5% pa for use of their capital. To lend you the $100,000 the bank must borrow $100,000 from their depositors or another financial institution at 3%. The interest rate difference pays the administration costs. These transfers are not just entries on balance sheets but real (non-physical) transfers of capital.

    If you default on repaying your loan the bank must still repay the $100,000 to their creditors. To recover their money the bank will confiscate your gold and resell it. They don’t just cross out the book entry and write off the debt.

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    Rob Yallop

    @263

    The fact that capital adequacy requirements (e.g. Basel III) have replaced prudential or reserve requirements for many banks in the world does not mean that banks create money out of thin air.

    If you replace the 10% reserve with 0% in my example @253, the banks lend $100 at each step and there is still only $100 cash left at any one time (in the last bank to have received a deposit).

    In a way it’s like a ponzi scheme; everyone thinks they are richer, but if they all tried to get their cash at the same time the banks would run out and be forced to close their doors. This would not happen if the banks created real money rather than just credit (so I think we’re actually kind of agreeing on this point).

    Still, each individual bank cannot lend more than it has received in deposits or borrowed from other banks.

    Whilst it is at least partially true, based on my example, that a lot of “money” in the world is just debits and credits, what most people are saying here is that this system will not work if people lose confidence in it. The GFC was only indirectly caused by sub-prime mortgages; the real damage occurred when all the banks lost confidence and stopped lending to each other and the whole system came to a grinding halt.

    If the US just printed as much money as it needed then 1) they wouldn’t have needed to lift the debt ceiling (in fact, why did they borrow money at all? just print more) and 2) the world’s banks would lose confidence in the US and stop lending to its banks and you would have the GFC all over again.

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    bananabender

    Mark D.:
    August 12th, 2011 at 3:32 pm

    More reference: all that the US has been involved in the middle east since 1948 is to protect Israel. Libya isn’t/wasn’t the problem. Oil isn’t the issue-we have our own. Conspiracy?

    Complete garbage. The US had very little serious military or diplomatic involvement with Israel until the 1973 Yom Kippur War. If anything the US considered Israel to be a major nuisance rather than an ally. Prior to 1973 Israel’s most important military and diplomatic ally was France.

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    Mark D.

    Cheney and Halliburton

    Not garbage. Re read what I said. Were we there to protect anyone else?

    Don’t say Oil. We have plenty of our own.

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    Mark D.

    Whoops the “Cheney and Halliburton” was intended for a future post. Please disregard.

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    bananabender @ 271

    Research into to who Israels ally was in the “six day war”.

    Look at the long USA/Israel relationship in the UN.

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    RJ

    The fact that capital adequacy requirements (e.g. Basel III) have replaced prudential or reserve requirements for many banks in the world does not mean that banks create money out of thin air.

    Banks create money (the credit side of a JE to record a transaction between two parties) by an accounting transaction. (some call this creating money out of thin air).

    Until you accept this you will be confused about money and banking

    And you have confused Govt debt (re the debt ceiling) with money (credit and debits from a banks JE).

    And the US does not need to (and really should not) borrow money. This is just a hangover from the gold standard days. US Govt debt should be funded by Fed credit. And then pay banks interest on excess bank reserves. This is where the US has now almost totally moved to (they really now have almost no choice).

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    RJ

    My above post is a response to @270

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    RJ

    @ 269

    To lend you the $100,000 the bank must borrow $100,000 from their depositors or another financial institution at 3%.

    If the seller banks with another bank then the buyers bank will need to settle with the seller bank for $200,000. This is done through the central bank using central bank credit.

    Otherwise bank credit is simple transferred from one account (the buyer) to another one (the seller).

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    RJ

    @ 267

    In the long run, any economic system based on ANY degree of fake money

    So what is real money and what is fake money.

    Are some journal entries more real than other ones. Or are some transactions real and others not?

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    This is no surprise.

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    The Tri-City-State,
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    … and many more esoteric & occult matters,
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    Visit the website linked to the name “Axel” to see
    hundreds of full feature length videos, and latest
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    Thank you for reading thus far. :)

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    RJ asks: So what is real money and what is fake money.

    Real money is a commodity that has real economic value and had a real cost to produce that was in proportion to its economic value. It helps if it has high value for a small volume (a luxury item perhaps), unlikely to degrade by use and age (gold, platinum, and the like), be dividable into smaller portions of value (a malleable metal), and easily recognized as being of value for itself for many private and commercial uses.

    A paper certificate redeemable in said commodity on demand is not real money. It is nothing more than a claim on real money. However, it is easy to confuse with real money because it is easily exchanged for the commodity behind it. It tends to be used in place of real money AS LONG AS IT IS REDEEMABLE ON DEMAND. Just as a check written on an account holding rights to sufficient real money to redeem the check can be and will be accepted in place of real money. The instant that it is discovered that the account had “insufficient funds” it becomes a worthless piece of paper.

    A certificate that is created without it being redeemable on demand is not even close to real money or being a demand certificate for real money. Especially one produce by a government who claims the power to enforce the worthless paper to be used as payment of all debts both private and public at the point of gun. THIS is fake money.

    For instance, every last bill of current US currency is fake money. It has no real value behind it. It has only the power of government, a gun, to force it to be accepted in place of real money. A gun, in this case, delivers no value. It simply forces the transfer of actual wealth from its producers to those who don’t. It does not represent an exchange of value for value. It is a non-value for a value exchanged by extortion. It is theft pure and simple, it is destructive of wealth in all instances, and destroys the ability to produce wealth to the extent that it is used.

    As an economist, you are very deficient in understanding how a real economy works: producers of wealth voluntarily trading their produce for the produce of other wealth creators to mutual benefit. Thereby creating more wealth by the trade than doing all the work themselves. It is the result of the simple mechanism of division of mental and physical labor. One trades what one does best for what others do best. Everyone profits.

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    RJ

    Lionell @ 280

    Real money is a commodity that has real economic

    You are confusing money (credit) with the goods, services or assets used to buy with this credit.

    you need to separate the two.

    Money is the outcome of an accounting entry that records a transaction between two parties.

    It is not the goods, services or assets that resulted in this accounting entry.

    And every single transaction will always generate an equal debit and credit entry. The debit side goes to the willing buyer. And the equal credit to a willing seller.

    So to say some of these credits are real and others not is silly. It could be that the banks hold inadequate security for some of their debit balances (overdraft or bank loans) but this is another matter.

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    Tel

    And every single transaction will always generate an equal debit and credit entry. The debit side goes to the willing buyer. And the equal credit to a willing seller.

    Wrong.

    A transaction contains four entries. A debit and credit in the world of money (that’s two), and a stock movement consisting of someone who provides goods or services and someone who receives those goods or services (that’s two more entries). If you choose to ignore the stock movements then your tracking of the money becomes meaningless.

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    As I said, RJ blanks out reality. His focus is on empty manipulation of equally empty symbols. Hence, he believes the symbols can be multiplied without limit and without negative consequence. The debt is not real nor is the credit. He pretends he creates the universe by simply thinking of it. Then he demands to trade his fantasy credit accounts for the real product of the lives of others and pretends this is how the economy works.

    My repeated question of why not have government issue a $1,000,000 check to everyone and add that amount to the government debt which can thereafter be ignored goes unanswered by him. Apparently, the people receiving the check would be rich and will no longer have to work to produce things to trade for the things they want and need. All they need to do is subtract something from their fictional credit account to buy those things. Things that have no cause and no source but simply come into existence because of that fictional credit account. How? His answer is “somehow” aka magic. Back in the real world, things don’t work that way.

    Before something can be bought, it must exist. For that something to exist, it first must be produced by applying thought, energy, and effort to rearrange other things that exist. The existence of a fiat credit has nothing to do with that process. Fiat credit is nothing but the gun of government being used to take the products of others without payment of anything real – ie theft pure and simple.

    In the final analysis, JR is advocating nothing more and nothing less than theft on a grand scale and is trying to hide behind academic double talk. His words lead me to believe that he has never done an honest day’s work in his life and has never produced anything of value either to him or anyone else on earth. As a consequence, he is living in a parallel universe that is a product of his imagination. He expects us to move into his imaginary universe and pay rent. Rent that he thinks is justly his because of his magnificent imagination.

    As I have suggested to others, JR should be required to get a real job and actually earn a living. All he is now is an intellectual thug and an economic parasite without the courage to pick up a gun and go rob someone who produced something. No, he wants the government to do that for him and pretend the theft did not happen. Coward!

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    RJ

    @ 283

    My repeated question of why not have government issue a $1,000,000 check to everyone and add that amount to the government debt which can thereafter be ignored goes unanswered by him.

    My reply is held up in the system (Jo)

    But the answer is obvious isn’t it. See if you can work it out based on what I have posted above.

    Can I challenge you to put your strongly held beliefs on this to one side and consider the evidence and logic I have presented above. Or read some of the excellent MMT websites or articles

    Otherwise you are behaving no different to an CAGW alarmist.

    [I found the post caught in spam it is freed and @ 222 ]ED

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    3x2

    Steve Schapel:
    August 11th, 2011 at 6:55 pm

    3×2 (#191)…

    Yes, fair enough cartoon. But wow, what a punchy article!

    You want punchy? Allow me…

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    RJ,

    Our conversation is over.

    Because:

    1. You are living in a universe of your own creation
    2. You refuse to deal with real things, real people, and a real economy
    3. I am not willing to move into your imaginary universe and pay rent

    I would much rather have a conversation with a tree stump. At least it is real.

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    3x2

    Brc:
    August 11th, 2011 at 11:44 pm

    This had the promise of being a good discussions but all that Weimar era thinking crap from Rj makes it unreadable. Sigh maybe one day there will be a decent thread on this topic without a spewing of rubbish from people with a bunch a banjo noise in their head instead of clear thinking.

    RJ is just another fleeting individual who, having read the theories of some other fleeting individuals, now believes that there is no such thing as government debt and if there is,it is somehow different from all the other forms of debt. The only reason RJ can maintain his wacky belief structure is that he obviously has no surplus to invest and therefore has nothing to loose if he is wrong. Having nothing to loose, one can believe anything one wants to believe.

    It is interesting that you bring up the “Weimar era thinking”. It seems to me that while playing around with “fantasy economy II” on the X-Box, RJ, and indeed some world class economists and governments, miss an essential point. They are modelling not just an economy but people. When people drop out of the “model economy” they are not just 0′s and 1′s, they don’t disappear as per the computer model – they vote for (or simply support), as in the debt fuelled Weimar republic, The National Socialist Workers Party. They want revenge and will vote for whatever gives them that revenge. Take someone’s livelihood and house and you have made an enemy who will not be satisfied until you are hanging from a lamp post. Meet RJ’s future.

    The parallels with the “Weimar era” are uncanny. Debt fuelled affluence and the attendant miss-allocation of capital followed quickly by the deepest “recession” in modern industrial history. Followed by …..

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    MaryFJohnston

    Lionell @ 286

    Speaking of which and totally O/T, there is an amazing tree stump in the new musee in Newcastle.

    Huge.

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    MaryFJohnston

    bananabender: just noticed your @212

    Totally agree

    Australian industry, despite being “industry” was a good place to work post WW11.

    Then as you say, there came American Management systems.

    In a short space of time we went from reality to fantasy land.

    Just look at Telstra.

    It was in many ways dysfunctional, union bound and constipated but political will and commonsense could have fixed it. I’m not really up on how well it has been changed but the American who “fixed” it was OVERPAID.

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    MaryFJohnston

    Hi Banananbender 213

    “‘John Howard has his disgracefully named “Work for the Dole” scheme which was purely punitive.
    The unfortunate victims of this idea weren’t trained in anything useful and were treated as though they were criminals.”"

    I ‘m not familiar with the working of this system and don’t see punitive as useful but unless society has a way of giving everyone a place and some meaning (thru work and contribution ) we wont have a good society.

    My point was that Polits should be held accountable to make work available for all at their level of capability. Useful work, not the old “make work” of filling in time.

    Are you saying they should get the dole and be left to their own devices; to stay home, drink and gamble the Soc Sec money away?

    I’ve seen this system at work and it is worse than alternatives.

    Many thinking Aboriginal leaders (as a more visible group to use as an example) see the “free money ” system as a form of euthanasia of their people.

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    Bulldust

    RJ is a great demonstration of how a little bit of knowledge can be a dangerous thing. To understand the basics of money transfers in banks tells you nothing of the underlying fundamentals, i.e. the economic transactions that were going on. I got tired of pointing that out, thanks to the others that persisted.

    The US is about to reap the credit downgrades it deserves as a result of increasing the risk of it’s economy through excessive debt levels. Simply saying it doesn’t matter and we are all “deficit hawks” doesn’t change the reality that the risks associated with the US economy have increased, and so credit ratings will drop and interest charged on new loans (i.e. debt) will begin to escalate.

    The only reason Japan did not default a long time ago is that the Government relies on its own peoples’ savings for credit. Unfortunately the Japanese savings rate has almost reached 0%. Remember the old days when you were taught Japan saves about 15% of its GDP? It doesn’t anymore… it is rapidly approaching 0%, at which point the Government is out of options for additional debt. It has been an amazing run for them, but their game is up… it may take a couple years to impact, but it will. It certainly doesn’t help that the yen-carry-trade forces their currency up at a time when a lower rate would be preferred. Such is life…

    My gut feel at this stage is that the US economic future will follow a track similar to Japan of the last decade or two. That is to say, kicking the can down the road, but not realising the large economic growth of yesteryear. Whether this changes for the better in a decade or so depends on the decisions politicians make in the meanwhile.

    The US has no easy options to reduce its debt:

    1) Default (decreases credit rating to junk and increases cost of borrowing –> decreases GDP);
    2) Decrease Government spending (decreases GDP);
    3) Increase taxes (decreases GDP);
    4) Borrow more until it passes the Greece/Ireland/Iceland etc debt event horizon (resulting in option 1).

    Those are the choices. If you know of an easy way out, a Nobel Prize awaits you.

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    Mark D.

    Crackar24 @260

    Mark,

    I have confused you with the “brown people” comment, the US government do not base their wars on the color of ones skin its just a coincedence that people with brown skin live in the places the US government want to invade sorry for any confusion i may have caused.

    I apologize too, for not seeing this post (260) during the volley. That was my main objection and I see now I mistook your comment (to mean that their are racist motives).

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    brc

    3×2 @ 288 : spot on.

    I brought up the Weimar republic for a specific reason which appeared to fly above the banjo-music filled heads. I was hoping they would get the reference but apparently only students of fairyland economics and not of human history.

    As Lionel has tirelessly pointed out several times, an economy is just the exchange of products of labor between people. Money is just an efficient way of storing and dividing that value. If you destroy the trust in money, you also destroy trust between people and society as a whole breaks down.

    And, as you so succinctly point out, most people will find someone else to blame. When you have an angry populace looking for a scapegoat, then you have the recipe for trouble.

    And the Weimar republic money printing was a reaction to government debt. Only this debt was externally forced as a result of losing the first world war. But if deficits didn’t matter, then that shouldn’t have mattered. Instead the Weimar administrators destroyed their currency, and in doing so, destroyed the repayments of the Versailles treaty. They messed up when they didn’t demand war reparations be paid in gold, but, by the 1920′s the idea of fiat money was well and truly ablaze as the way of the (doomed) future.

    The truly ironic thing is that we can compare the pre-WW2 German economy (Weimar, leading to Nazi) with the post WW2 economy. The Weimar economy destroyed itself in a short blaze of glory. The post-war German economy – same people, more smashed up infrastructure – managed to not only rebuild itself, it became one of the leading economies of the world with one of the strongest and most stable currencies.

    What was the difference between pre and post WW2 Germany? Post ww2 (west) germany had a strict economic liberal policy based on balanced budgets, low regulations and free trade, underpinned by a complete zeal to never over-issue currency and run budget deficits. The same thing that proves itself time and time and time again, yet we still end up with people trying to invent wealth from funny figures and overtaxing producers to give to spenders.

    Money printing and endless government deficits and debt destroy economies, countries and social fabric. That anyone even tries to argue against this just beggars belief because of the overwhelming evidence that it is true, and the fact that no country, ever, has run a persistent budget deficit and debt exceeding 90% of their economy and has survived to tell the tale, let alone prosper. Sure, at any point in history you’ll find an example here or there of a place which hasn’t yet collapsed, but taking the long view, no such thing exists.

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    george

    This might generate some further discussion…?

    “From an investor’s point of view, there are no longer any definitive safe havens. Of course, US Treasury bonds remain quite safe in the sense that you will get your cash. It’s just a question of what that cash will be worth by the time you get it. Put differently, the chances of a Federal Reserve Chairman standing up to the politician who appoints him and refusing to print money to buy bonds is quite small. And that’s no secret. But more money means existing money is worth less.”

    From this link;

    http://www.dailyreckoning.com.au/the-truth-about-americas-debt-downgrade-and-how-you-can-profit/2011/08/13/

    And a little more;

    “Most money nowadays isn’t cash. It’s just a bunch of numbers on computer screens. And that money came into existence by being lent into existence. Banks don’t have the money they lend, they only have reserves. And they are a small percentage of the funds they lend.

    All these factors come into play during a debt deflation. Consider this: If one million people pay off $1000 of their credit card debt at the same time, that wipes $1 billion off the money supply.

    It’s gone.

    Normally, there are about one million people borrowing more than $1000 at the same time, making the net effect positive. That’s how governments and central bankers create GDP growth… By fiddling with interest rates. But eventually, an economy maxes out its credit card. And the trend changes… We pay off more debt than we rack up. That implies the money supply begins shrinking.

    All this applies to all personal debt, corporate debt and government debt.

    And here is the kicker: A shrinking money supply implies deflation. That in turn makes debts harder to pay back. Things get really serious when the effects of deflation outweigh the speed at which people are able to pay off their debt.”

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    george,

    I read that guy every day. Most of the time he makes sense. I think he is wrong this time. To pay off the credit card those people had to have the $1000 each. So they transferred it to the card company. How does this reduce the money supply?

    Start with one million people who have $1000 each they can spare. They form a credit card company which then has one billion dollars to lend out. One million people run up $1000 each on the cards and then through their work generate a spare $1000 each and pay off the cards(after paying interest while they had the loan). The card company is then wound up and the $1000 each returned to the original people. Please tell me it works like this!

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    george

    MB

    Point taken, I must admit to having read that bit a couple of times to get my head around his “concept”. I was just “throwing it out there” to seek alternative viewpoints – a la yours!

    Perhaps “money supply” was not the best (ie non-ambiguous) term for him to use – the difference between the Hubble and Borgelt approach on this matter is I think he is making the point of the original billion being, for want of a better term, a conceptual construct of available “on-paper” funds being utilised for, ahem, “growth”, rather than being “money” in actuality. If so, it probably could have been better put.

    Your example, if I understood correctly, was that the billion is actually “there” in the first instance (lookee here, a rational approach) ie
    Loans = Reserves, not Loans = a multiple of Reserves (a la the Hubble example)…the latter being a vehicle for maximising growth – IF nothing goes wrong. And, for a long time, nothing probably will go wrong. But when it does…

    Which is why I think he then relates back to a debt deflation effect – could have been less coversationally addressed in that article, to be sure. I took him to mean that the “money” in question is thus no longer out there generating “growth”. Hope we are not talking at cross-purposes…
    ;)

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    RJ

    brc @ 294

    had a strict economic liberal policy based on balanced budgets

    Balanced budgets only because

    notes and coins use to make up 50% of the money supply
    notes and coins now make up around 3% of the money supply
    New notes and coins use to a credited to treasury revenue not Govt debt.
    The population was much younger and did not need to save as much
    Financial saving always require increased bank credit and the resulting offsetting debt.

    So you have used this example without understanding the full picture

    http://www.correntewire.com/coin_seigniorage_and_irrelevance_debt_limit

    The bottom line is, the Secretary of Treasury already has the authority to create money without debt so there’s no fiscal reason to raise the debt limit. What’s more, since the Federal Reserve began paying interest on reserves in 2008, there’s no longer a monetary reason to raise the debt limit either.

    I understand that Tsy adopted the “other financing source” definition of coin seigniorage years ago, at least since the time of President Johnson’s 1967 Commission on Budget Concepts.

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    RJ

    brc @ 294

    I brought up the Weimar republic

    You brought this up because you are clueless about hyperinflation, what causes it and why examples like this and Zimbabwe will never apply to the US or Aust if they run Govt deficits to mop up unemployment and boost non Govt financial savings as appropriate.

    http://webofdebt.wordpress.com/2011/04/27/cheney-was-right-about-one-thing-deficits-don%E2%80%99t-matter/

    CHENEY WAS RIGHT ABOUT ONE THING: DEFICITS DON’T MATTER

    http://webofdebt.wordpress.com/2010/12/02/is-qe2-the-road-to-zimbabwe-style-hyperinflation-not-likely/

    IS QE2 THE ROAD TO ZIMBABWE-STYLE HYPERINFLATION? NOT LIKELY.

    Professor Michael Hudson has studied hyperinflation extensively. He maintains that “every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts.”

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    JMD

    An article for those interested;

    http://mises.org/daily/5549/Fiat-Money-and-the-British-Riots

    The Mises Institute is big on the quantity theory of money, which is bunk, but this is still worth reading.

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    JMD

    RJ @ 299

    You want to be careful quoting anything by Ellen Brown. She is a clueless monetary crank. I once read part of an article of hers extolling the Commonwealth Bank & its ‘financing’ of the First World War. Of course she doesn’t mention that the war destroyed the lives of tens of thousands of men & bankrupted the nation.

    She also doesn’t mention that this bankruptcy was then passed off on the families of those who died in the form of massive devaluation of the Pound.

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    RJ

    JMD @ 300

    http://mises.org/daily/5549/Fiat-Money-and-the-British-Riots

    You criticise Ellen. And then post this garbage (on money)

    And my preference is MMT. They are clearly in front of Ellen (by some distance) but Ellen is not too bad at all.

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    As has been pointed out before the so called progressive left ALWAYS choose the wrong over the right, the evil over the good, and practices that fail over those that succeed. MMT (Modern Monetary Theory) isn’t even false because it has NO connection with reality. It all works just fine in its theoreticians fantasies however, it fails to deliver in practice.

    The primary reason it fails is that it evades the reality of real people creating real wealth and trading freely to mutual benefit. It believes that magical incantations (their dissociated theory) and mystical talismans (fiat money) are the true creators of wealth. While people choosing to think, learn, and act based upon what they learned TO THEIR OWN BENEFIT are the ONLY creators of wealth need not be considered as at all important.

    MMT is also based upon the gun of government because we are to be forced to use the worthless money because the government REQUIRES that taxes be paid in the blighted scrip. THIS is how the gun of government comes out to force its arbitrary whim upon us – as in try not paying your taxes. Hence the real motivation of MMT becomes clearly evident: it is a grand wish to reduce the population to the level of slaves and to elevate the prancing, dancing, posturing, vacuous, political elite to masters of the globe.

    Isn’t it interesting, though, how they need us more than we need them. It is we who create the guns they plan on using against us. It is we who create the luxuries they plan to buy with their stolen wealth. It is we who keep the “system” running, the toilets flushing, the floors clean, and the broken windows replaced and on and on. The fact is, we don’t need them for a damn thing. We would be much better off without them and their psychotic delusions of grandeur.

    We have one implacable force on our side: reality. All they have is fantasy, wishes, and demands backed with the guns we build for them. All they can do with their precious guns is destroy. THAT is their ultimate intent – the destruction of all that is good BECAUSE it is good. They are few. We are many. They don’t have a chance once we get moving on it. It is way past time for we adults to take back our power and put them out of our misery. At the very least, let’s stop building the guns for them.

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    RJ

    MMT (Modern Monetary Theory is neither left or right. The key is Govt deficits to fund bank credit not big Govt spending

    Govt debt (from deficits) can be achieved by large tax cuts and spending decreases

    Key components driving MMT are shown below. The are monetary and financial facts not theory

    http://moslereconomics.com/support/

    Government $deficit = non government $surplus (net financial assets)

    Operationally, government spending is not inherently revenue constrained. Any such constraints are necessarily self-imposed.

    In the banking system, the causation runs from loans to deposits, that is,‘loans create deposits.’

    The Fed is the monopoly supplier of net reserves to its banking system, and,therefore has no option but to set at least one interest rate.

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    RJ spouts the same old bullshit while still evading the reality of what it takes to create wealth and to sustain the ability to create wealth. MMT is what it is without regard to what he or they say it is.

    A valueless piece of paper (fiat money aka counterfeit money) is only a means of theft of wealth no matter who prints it and for what reason. This is its only connection to the wealth creation process. It transfers already created wealth from those who produced it and saved it to those who did not. More importantly, it makes it increasingly more difficult to create wealth in the first place. THAT, I contend is the purpose of the entire scam of MMT supporters. Their ACTIONS and RESULTS tell the truth. Their words do not.

    Like it or not, reality is real. That is what they don’t like. They want their whims to rule and if whims can’t do it, they will destroy the entire economy, technological civilization, and the vast majority of living humans along with it. They are NOT innocent in the matter and have oceans of blood on their hands.

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    RJ

    Lionell

    Whether you like it or not MMT is growing strongly (the critical mass of support has now been achieved) and will be the future.

    Because it is based on logic and evidence not flawed beliefs and unbelievable misunderstandings. And will be massively beneficial for the majority of the population. Not the small minority who currently benefit from credit scarcity.

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    Lionell Griffith

    MMT having a critical mass of support is rather like the AGW’s “the debate is over” and their so called “consensus” of scientists. The support is irrelevant the consensus contributes nothing. The process of trying to have your cake and eating it too will end. The only question will be how ugly the ending. The one thing I am certain of is that MMT contains the seeds of its own demise and they are sprouting all over the place.

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    RJ


    MMT having a critical mass of support is rather like the AGW’s “the debate is over” and their so called “consensus” of scientists.

    No it’s not. Because evidence and logic is on the side of MMT. The opposite applies to CAGW. The more open minded intelligent people look at MMT the more sound the theory and reasoning is. And what’s more the basics are easily provable and reasonably understandable for anyone with a logical mind.

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    Lionell Griffith

    So prove it.

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    MaryFJohnston

    Re RJ & Lionell and others

    While I haven’t followed the “money ” post that closely I did say at the start that RJ was against usual thinking.

    Have to agree with Lionell that in the best world his ideas should prevail.

    Unfortunately we are in a phase of economic melt down where millions of older Americans (Australians caught too) will have no possibility of economic freedom inside 15 years if we go back to ground zero.

    Whether we like it or not, the great satan is the biggest share market in the world by a long way and in some sense they can do what they like.

    IF printing money gets USA back and moving maybe (I dont know) economic prosperity will be returned in some measure to older US cits.

    True, the rest of the world may get screwed, but that’s not the point.

    The point is what they can do and get away with.

    I dunno, we are in new territory.

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    Bulldust

    You don’t understand Lionell, he has consensus on his side so he doesn’t have to prove anything. That’s the beauty of the post modern MT. He just forgot to put the P in front of the MMT.

    You’re not going to convince this joker of anything. He only looks at half the story and has no idea of what creates real wealth in an economy. He, like his hero linked a dubious number of times in this thread, focuses only on fiat money completely ignoring physical reality.

    Let them dream, they are of no consequence. Remember, Mr Wonderful only got <1% of the vote when he ran for Senate. The real politicians are listening to the likes of John Mauldin, who actually has a grasp on what is going on.

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    RJ

    @ 310

    IF printing money gets USA back and moving maybe (I dont know) economic prosperity will be returned in some measure to older US cits.

    The key is Govt deficits. (people get up tight by calling it money printing which it is not really).

    These deficits can be financed by Govt bonds, central bank credit or notes and coins. It makes no difference as long as Govt debt increases (a Govt liability) until the (exactly $ equal) non Govt financial assets are built up to the required level ie for our retirement savings. The spin off benefit is it will also stimulate the economy as Govt debt is exchanged for real goods and services (it will create jobs and reduce unemployment in theory close to zero).

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    Jazza

    Scary thin is with the Jones, that eventually they won’t be able to afford the repayments due to adding to debt and falling behind in % repayments,whereupon their banker refuses to extend any more credit!

    What happens when it is the USA?Do they “do a Greece?”

    BTW, I’d like to see Australia’s figures so schemed as our feds have also lifted their debt borrowing level at least once or twice with Labor in charge

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    JMD

    RJ if you think Ellen Brown is ‘good stuff’ then you are as clueless as her. Do you also post comments as Adam Smith?

    Give it a rest man.

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    Jazza

    I meant “scary thing” OOPs!

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    JMD

    Mr Griffith, you seem to have an interest in the true nature of money, have you been introduced to Melchior Palyi?

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    Lionell Griffith

    You have only given assertions of what you think MMT is and will do. What you have done so far is not proof even in the same universe as proof. It is not even a comprehensible explanation.

    You have proven nothing yet – at least about your “idea”. I will give you some help.

    1. State the idea simply and clearly so that it can be understood what you are holding to be true
    2. State the major consequences or your idea equally simply and clearly
    3. Show how the idea can logically result in the consequences in CONTEXT of the real world rather than the world of your fantasy
    4. You do 3 by showing the full chain of logic between each part of the idea to their proposed consequences and then on to facts of reality
    5. Finally give at least one well known HISTORICAL example if the idea actually working as you say – in the long run

    Then and only then will you have begun to prove your so called theory.

    Up to now I see you calling it what it is not and expecting it to do something by some means not evident in reality. In particular, the creation of credit out of thin air is supposed to galvanize the economy into full production BECAUSE it was government doing the creation.

    How? As near as I can tell the how consists mostly of the use of government force (the gun) making the producers of wealth produce the goods and services that provide the real value to fill the empty credit. The fact is that the government is doing NOTHING but treating its citizens as chattel to be used, abused, scammed, and consumed at whim and the citizen’s produced and saved wealth as a treasure to be looted without concern.

    It is clear that you have absolutely no idea of what wealth is nor how to create it. Much less have any inkling of what kind of social/political/ethical conditions that necessary for the creation of wealth. All you have shown is how you and others plan to steal other people’s wealth and to cover up that theft with a pile if incoherent words holding no relationship to the real world.

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    Mark D.

    JM is beginning to leak: @304

    MMT (Modern Monetary Theory) is neither left or right.

    For once I agree. MMT is not right.

    Apparently there is a new political force we are being introduced to.

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    JMD said: Mr Griffith, you seem to have an interest in the true nature of money, have you been introduced to Melchior Palyi?

    Actually, I am not really interested in money. I am interested in wealth, how to create it, how to build it, and how to keep it. A proper money system is only one means to that end. My primary focus and sill is making things that work. Hence, I am interested in what makes an economy work or fail. As a consequence I have acquired an understanding of the difference between real money and fiat money.

    I did take a brief look at Melchior Palyi and did read “The Man Who Called the Financial Crisis—70 Years Early” Interesting. He appears to be an economist of the Austrian persuasion similar to Von Mises. I have studied quite a few Von Mises works but had not encountered Palyi to any significant extent. He starts with developing an understanding the nature of a given situation and then reasons to an explanation of its ending. Hence his predictions are more akin to logical deductions rather than the wishful thinking of modern so called economists. Thanks.

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    Oops. “sill” = “skill”

    Tired eyes and a hungry body. Haven’t had supper yet.

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    Roy Hogue

    If printing money is so great why don’t we all just sit back and let the government print money? I could use a few real easy years before I kick off.

    Oh! Wait a minute. I can think of one good reason not to do it. Every country that has ever tried that has come to grief. Every single one has failed at it, bar none. But why bother to learn from history when you can simply sweep it under the rug or rewrite it?

    If you don’t believe Lionell that’s fine with me. But you really should believe Standard and Poors because they also know what they’re talking about and their responsibility is to borrowers who want to know what risk is involved in buying a given financial instrument (as in lending money to the issuer). And with the government printing more money the risk in owning long term U.S. Treasury Bonds just went up. And with it the interest the U.S. taxpayer must pay the lender who buys those bonds also went up. And then they have to print more money to pay the added interest. Thank you, Uncle Obama! Thank you Congress!

    It can’t last.

    Did I ever tell you the story of the man who fell off the top of a tall building? At every floor as he went by they heard him saying, so far, so good; so far, so good; so far…splat.

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    Crakar24

    Mark D et al,

    Sorry for leaving the debate for a few days.

    I just wnated to clarify a couple of things as my posts were heading in a certain direction for a reason so here it is.

    If we look at the actions of the US and most European countries i think it is safe to say that the people of those countries have been screwed. These governments knew what the money junkies were doing and some cases assisted them. When it all went pear shaped these governments did three things.

    1, They turned a blind eye to the fraudulent activities
    2, They bailed the money junkies out at left the people with the bill through higher taxes, slashed pensions etc (Austerity)
    3, Enslaved its populace to never ending debt via the IMF

    But not all countries did this, does anybody here remember Iceland? Yes thats right Iceland was the first country to fall but what of them now? Well Iceland does not make the news anymore because they put the money junkies in jail, refused to bail out the banks and rejected enslavement by the IMF. Iceland is now doing OK.

    The question is which of these sounds like a democracy? US/Europe or Iceland? I will now declare Iceland to be the democracy in the western world. Which reminds me, Mark D have you ever heard of the symmington agreement? Check it out, it is very interesting to see where a lot of your taxes go and to who.

    Oh and by the way Australians dont live in a democracy either, we dont even get the RIGHT to vote, we have a government that says one thing and does another, joins hands with all the nut job independants and fascist greens and calls itself a government.

    Remember you are not free without the freedom to say NO. (Mike Reviro whatreallyhappened.com)

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    Crakar24

    Sorry should read

    I will now declare Iceland to be the only democracy in the western world.

    Emphasis on the word only

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    MaryFJohnston

    Crakar24:

    Australia needs to be democracy like ICELAND.

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    Crakar24

    MFJ,

    We once were but that was a long time ago, most democracies are nothing but an illusion. Here we have a choice between Labor and Liberal, is there any difference? Sure there may be some differences at the peripheral but beyond that they are the same. The greens are different simply because they are honest about it.

    Look at the states, what is the diff between Republican and Dems? Short answer is nothing, Ron Paul who is running for the GOP again talks about going back to what the founding fathers first talked about, get rid of the FED reserve etc he came second by a handful of votes in the IOWA straw poll to a local candidate (Bachmann) but he was ignored both prior and after the vote by the MSM. They dont like what he has to say so they marginalise him.

    If Syrian troops march through the streets belting the crap out of protesters the west says shame on you syria for trying to supress freedoms of the people but when it happens in Britain the people getting belted are nothing more than mindless thugs.

    The joke here in SA is that instead of seeing a “welcome to South Australia” sign when you enter the state you see “welcome to Rannistan” named after the premier Mike Rann.

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    Tel

    My primary focus and sill is making things that work. Hence, I am interested in what makes an economy work or fail.

    There’s a simple answer to that one! “Trust” is the answer. If people can trust each other then they can make deals with each other. I guess a bit of freedom also helps (otherwise nothing new ever gets done) but trust is the biggie, and freedom is the next in line.

    Problem for governments is that you can’t force people to trust one another. Hmmm, since force is the only thing they understand, that leaves them in a quandry. Oh well, it’s not like the answer is a big secret or anything.

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    Tel

    Remember you are not free without the freedom to say NO.

    As the saying goes, “you can’t push a wet noodle”. Everyone has the freedom to say NO, we just all say it in our own personal ways.

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    gazza

    yes jo, a great article , this Global Warming scam, is the bankers next bubble they hope to inflate to keep the system going , tx for the read

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