Jesse with another outstanding article about how the Bankers and their government cronies have destroyed the world in their insatiable appetite for more and more. How long will we put up with this criminal conspiracy to impoverish the many for the benefit of the few? When will confidence in this ponzi scheme run out? When will a leader arise to tell the people the truth?
Hyperinflation and the Pernicious Myth of Modern Monetary Theory: Dollar Vigilantes
“One might argue that when the government has to find a private sector buyer for its debt first, rather than selling the debt directly to the central bank, that imposes a certain degree of market discipline on fiscal policy. But it’s hard to see that there is all that much of a disciplinary bonus here.
When a central bank announces that it is prepared to buy government securities, the announcement automatically guarantees an eager private sector market for the securities – if there wasn’t one already. If dealers know that they can promptly re-sell newly purchased securities to the central bank, at some amount over the purchase price no matter how low, then they know they can make a profit from the purchase…
This is why we have no need to worry about those dreaded bond vigilantes in a country like the US that controls its own currency and monetary operations. To the extent that the Fed signals it is willing to buy US debt aggressively, the Treasury can set almost any price it wants for its debt. So it’s not just that there is no insolvency threat haunting US public debt. There is also not a bond vigilante attack threat – not unless the Fed allows that attack to occur.”
New Economic Perspectives, Neoliberal Mythologies
The limit of the Fed’s ability to monetize sovereign debt is the value of the dollar and its acceptance, at value, for the exchange of goods in a non-compulsory environment. And there is nothing neo-liberal about this. I don’t like the neo-liberal approach, but this notion of pain-free monetization is nuts.
If one chooses to not worry so much about the ‘bond vigilantes,’ history suggest that they may well have a care for what I would call the ‘dollar vigilantes.’
The Fed may be hard pressed to buy dollars with — dollars.
The problem with such an approach is that one can ignore the risk for a time, trusting to probability and chance, but when the possible becomes more likely with repetition, it often results in a disaster. It is sort of like driving while texting, a tourist eating street food in Asia, or a small speculator being a non-insider customer at the Comex.
In a increasingly Machiavellian way, they could set up a reciprocity with another central bank or two, say, the BofE and BofJ, and perhaps even the ECB, and I think this has been done even if informally in the past.
But the limitations are still there, even if hidden in a fog of financial engineering. Such an arrangement, which I think exists somewhat informally today, is merely kicking the can of currency failure down the road.
“This is why we have no need to worry about those dreaded bond vigilantes in a country like the US that controls its own currency and monetary operations.”
Overt monetization only works for a protracted period in a system in which one has political control over everyone who uses that currency. The logical outcome of a global dollar regime with unilateral monetization is an eventual bid for a one world government where a false vision of reality can be enforced with — force. Force and fraud are the perennial instruments of economic tyranny.
Hence we are in what is called ‘the currency war’ wherein the US dollar monetarists are attempting to increasingly impose their will on the rest of the world, and a portion of the rest of the world defers to accept that arrangement.
Blatant exposure is the most dreaded pitfall of any Ponzi scheme. A fiat currency is based on faith and confidence, and the monetary magicians can hardly show their hand, directly monetizing debt without any independent restraint, for fear of provoking a panic, first at the fringes and then at the core of the nation, or empire.
That is the policy error that is also known as ‘hyperinflation,’ a break in confidence in a currency that is analogous to a ‘run on the bank.’ It is the case for hyperinflation which I am watching, and still give a low probability. I am fairly sure that even Zimbabwe Ben would not fall for such an obvious trap. But the craven dissembling of Alan Greenspan was also hard to imagine, until it happened.
Instances of Hyperinflation from Diocletian to Bernanke
There are other ways to deal with unpayable debts than merely printing money. A novel idea is to make the issuers and holders of the bonds bear the negative effects of their bad judgement, as in the case of Iceland. But the Banks will always try to shift the burden, which they have created, to the financially illiterate and the weak.
And the problem is not even so much the Fed’s propensity to stimulation in the manner of Keynes. The problem is that they are pouring the stimulus into an unreformed rathole of corruption, in the manner of sending aid to a country where it is intercepted by thieves and regional warlords, with little reaching the people.
The US does not have a spending problem so much as it has a ’corrupt financial system problem,’ a ‘wealth inequality problem with a stagnant wage base,’ an ‘unsustainable healthcare model problem,’ and ‘a free trade without adequate domestic policy based boundaries problem.’ It was not all that long ago that the US was holding a small annual surplus. What changed was financial deregulation with the financialization of the economy, the easing of trade conditions, concentration of corporate power, tax cuts for the wealthiest, a corrupting political campaign bubble, and unfunded discretionary wars with their associated profiteering.
Forcing small business and workers to compete with state directed slave labor while maintaining a social system founded on private business and median worker wages is insane. The capitalists are not yet selling them the rope, but they are certainly selling them the 97%, and with them the bulk of their customer demand over time.
Perhaps the biggest problem is, as Lord Acton observed, that when you have a concentration of power, men with the mentality of gangsters have taken control. And the US financial system and corporate structure are highly concentrated based on historical standards, resembling the worst of the gilded age of robber barons, or some third world oligarchy in which the people live in voiceless misery.
In summary, I call this ‘just monetize the debt without restraint’ alternative the “pernicious myth of modern monetary theory.” There are quite a few examples of how this sort of other worldly myth, like the efficient market hypothesis, the Black-Scholes risk model, and the benefits of unrestricted trade, have turned out in the past. When you crush the reality out of a model with a few key assumptions that allow you to obtain a license to do what you will, you often open a Pandora’s Box.
The real shame is that an economic tragedy is not outside the plans of some of the worst of the country’s elite. Crisis provides opportunity if one is powerful enough, positioned for it, and egotistically twisted enough to think that they can control the madness once it is unleashed. I suggested that the Bankers would make the country another ‘offer that they think it cannot refuse’ as they did in the manner of TARP. The so called fiscal cliff may be the wrapping paper for it.
I am not suggesting that the current debt based currency system is optimal, not at all. The continual theme here is that the financial system is broken, and that it is based on an unsustainable US dollar regime, and the excesses of money creation through credit expansion by private banks. But to merely shift the corruption from the banks to their partners in the government Treasury is hardly a viable solution.
The answer, as I calculate it, is transparency and reform, and equal justice for all, with malice towards none, in the rule of law. That is an ideal never fully achievable, but that is the benchmark, and one that is worth pursuing, It is sustainable if held close, and continually renewed. That is the spirit of the American experiment in equality and freedom, and is something worth fighting for.
“The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced. The manners of capitalism improve. The morals may not.”
John Kenneth Galbraith, The Age of Uncertainty
“Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.
When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!
Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out.”
Andrew Jackson, Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels
“Do not forget that every people deserves the regime it is willing to endure!
Please make as many copies of this leaflet as you can and distribute them.
The White Rose, First Leaflet, Munich, 1942
TeresaE says:
I’m learning the lesson of living amongst short attention span, linear thinkers this year. Probably the single most important truth I’ve learned this year, now to figure out how to capitalize it.
I’ve read a few articles about a bill that currently sits on Barney Fife’s, er Franks, desk. This bill will force 401(k) investors into government treasuries. Only fair if all the gold-plated unionists and lifetime disability suckers get their money from the gov, only fair for those that have to sacrifice – oh I’m sorry, “invest” – to save on their own help pay for the poor unionist and under-served huddled, injured, masses. We’ll be asked strongly, or forced by penalty, to help our benevolent government “invest” in those that have sacrificed so much by “serving” the public, or being blind. Or fat, drunk, lazy, connected, criminal, union boss. Us “lucky” ones need to “help.”
I believe – but it has been a long time – that I first saw this suggested around 2005. I’ve kept an eye out for word of it since. I’ll admit I don’t know if it is true, but it truly makes logical sense in the world we live in.
So hub and I were talking and some comment some thieving politician said on tv led to bringing this up. I asked him, knowing that taxes have nowhere to go but up, our dollar has no where to go but down in REAL purchasing power (and with all the mandated “needs” we have, our discretionary income erodes by the minute). What he would do if the gov demanded he relinquish his (decent, not adequate) 401(k) to gov bonds at 2% (or less) ROA?
“I wouldn’t touch them, I’d leave them be. They’ll eventually give a greater return.”
I.Shit.You.Not.
He, and most that I talk to/meet, truly, completely, entirely, believes that they are going to wake up and things will be “normal.” If you were born after the mid-50s, “normal” was tons of opportunities, a chance at a world class education, and an ever-encroaching government under the guise of “keeping us safe.” And the fucking children. And tax “cuts” that just moved the burden of taxation from one line to another.
As the doom draws nearer, those that COULD protect themselves and their families are choosing to believe tomorrow HAS to be better than today and somehow, magically, they will be allowed to stay in business and the gov will retreat out of their offices.
The delusion of equality and fairness feeds this tomorrow is a better day bullshit. And linear thinking, if CONgress managed to kick the can and avert disaster before, if Benny managed to print trillions and things still ain’t all bad, then OF FUCKING COURSE things are going to work this way, this time.
We left equal, fair, the Truth, the Constitution, and our integrity, a long time ago. Life is not linear, it is circular and we seem to be doing our utmost best to refuse to see the truth – this nation is devolving and it will take thinking against the tide of the masses & government to survive it.
Someone hear (KB maybe?) said that “that which is unsustainable, will not be sustained.” This insanity and continuous erosion of our standard of living is taking its toll.
Karma is going to be a bitch, then the real nightmare begins.
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30th November 2012 at 9:39 am
ThePessimisticChemist says:
@TeresaE –
“He, and most that I talk to/meet, truly, completely, entirely, believes that they are going to wake up and things will be “normal.” If you were born after the mid-50s, “normal” was tons of opportunities, a chance at a world class education, and an ever-encroaching government under the guise of “keeping us safe.” And the fucking children. And tax “cuts” that just moved the burden of taxation from one line to another.”
This is the issue I face as well. People feel that what is happening is little more than a blip on the radar, and that the great US of A will soon begin chugging along in maximum overdrive to make up for lost time.
They don’t believe it could all come down. They don’t believe that our current situation is indicative of a greater problem.
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30th November 2012 at 9:49 am
TeresaE says:
Freaking frustrating isn’t it TPC?
I’m not special, I’m not paranoid, I am one of the hardest sells you would ever meet (there are car salesman still burning from the smacks I gave them over the years).
But ALL the facts, along with a good dose of revisiting history and trying to uncover the truth (instead of the bullshit fed to us in high school US History courses), does not point to ‘blue skies ahead.’
I’m married to a guy that could, if he so chose, set us up for the coming shitstorm. We could buy a small farm and set to work turning it into a self-sufficient homestead. We would not be rich, life would require more physical work, but we would be in a place we owned if the worst happens and the bank or government take his business. Or the roof caves in, I’m being literal.
Anyway, instead he plows money into his 401k and stocks, ignoring the ever-increasing government intrusions into our business, ignoring the outright warnings – not rumors, but notices! – that the feds & locals are coming, and we are going to be in a world of hurt. He refuses to fix things until they break and we lose thousands of dollars in have-to-be-scraped products every year.
And he is more like the masses than I ever imagined. I thought I got a free-thinker whom saw the government coming and would help me hunker down and avoid it. I didn’t get that, nor did I get the handyman personality that would get off his ass and keep what we have nice. Led to believe I was. so it goes.
Which makes me soooo freaking frustrated. My best friend, my dad, my siblings, my hub, his siblings, my friends that own businesses or are in sales, all of them.
Nobody wants to be told the truth. All they want is the easiest path and to be left alone.
Pretty ironic, the way to be left alone is to let go of all this pill popping, shot getting, materialistic, suburban, exotic vaca taking, ostrich-spending crap, and return to old fashioned priorities like finding joy in taking care of your home, not paying the gardener to move your roses and eating processed, chemical laden crap shipped to us from China. What is ironic is that these self-indulged, lazy, linear thinkers, are going to wake up and find they gave it all up anyway, just not on their own terms.
Freaking Frustrated Friday for me today. Sorry. But trust me, I so feel your pain.
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30th November 2012 at 10:13 am
AKAnon says:
TeresaE-Good thing you have the TBP support group at least until Big Sis locks down the web). We are here for you. Testify!
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30th November 2012 at 10:52 am
MuckAbout says:
A fine article that repeats almost all of what all of us (you especially, TE) know about what’s going on. I personally think Jesse’s “fix” is a bit “goodie two shoes” in voting for equal under the law, apple pie and Moms’ titty, after all, wouldn’t we all like that..
However, the key sentence is, “But the Banks will always try to shift the burden, which they have created, to the financially illiterate and the weak.” and that is the absolute, down to earth, 100%, forever since “banks” were invented, TRUTH…. Remember Willie Sutton who said he robs banks because that’s where the money is?? That’s where it’s at.
Shifting the burden to the financially illiterate and the weak is a v-e-r-y easy thing to do, historically and now as well considering most of the sheeple are not only verbally illiterate and have absolutely no clue what economics means, much less how it works. Emphasis on “most”.
As a result, the masses go with the flow, never thinking, never literate (just like your husband, TE) as far as economics or much else is concerned. As long as their dollar stretches just far enough (with credit) to buy the trinkets and toys, they will stay quiet as their purchasing power slowly leaks away. All the while, some sheeple slip and fall off the bottom of the pole, dropping into super-poverty, homelessness or worse and it will slowly work its’ way UP THE POLE… In the mean time, your fine Goobermint will rob and steal from anyone higher up the pole to try and keep too many from falling off – even if the Goobermint and banks were the very ones that greased the pole in the first place.
By robbing everyone higher on the pole, a lot of the loot gets scraped into the pockets of TPTB, Elites and banks while a little of it is used to bribe the sheeple closest to the business end of the pole to shut up and keep getting their free shit.
But now things are getting tight up the pole. Targets for robbery are slipping into lower wealth retirement, dropping out of middle income into the high-poor and there aren’t nearly enough sheeple making productive money to skin.
As Margret Thatcher once said, “The problem with socialism is that eventually you run out of other people’s money [to spend].” Truer words were never spoken and we are running out — so between the Central Bank (Fed) and the banking system, we print it in oh so many ways.
When this happens, and sufficient numbers of sheeple start falling off the pole – and a lot of others can see the end of the pole below them – then we’ll go Greek, or French or Spanish or whatever and that will be that.
The problem is how to time it! We all know the direction we are headed. We all know the eventual results of the current folly of money printing and free shit. We all see the decline of America from what it was (and may never be again, if we are unlucky). So what to do??
The denizens of TBP know what to do (TE’s hub does not!), it just depends on how much “getting ready” you are willing to do and how many other people you can educate about the situation. Then you assume the position for atomic attack and wait and see what happens because there isn’t a damn thing you can DO about any of it.
Just stay out of the way of the masses when they tip and flow..
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30th November 2012 at 10:57 am
ThePessimisticChemist says:
Occasionally I see a glimmer in someone’s eyes, and realize I get through to them.
I spend maybe half my time in my college classes teaching actual chemistry. The rest of the time I’m fielding questions about politics and economics.
My two largest accomplishments of an instructor are as follows:
I had a gal who desperately wanted to be a marine biologist, and she was a fairly bright young lass. One day she asked if I would giver advice after class and we ended up talking about the realities of our situation. Most notably, that we live in Missouri, and she doesn’t have the money to move to a school where she could get real experience in the field. So next up we sat down and hammered out a list of other jobs she might be interested in. Luckily there were some good ones.
I ran into her recently and she is just finishing nursing school, with an intent to be a certified nurse anesthetist. Not exactly a doctor, but a lot better than ending up with a degree that you essentially cannot use.
The one was far more fun:
One student was an economics major, and challenged me at every turn. By the time he left the class he was convinced that his diehard blue econ advisor was an ass, and we are doomed unless we start scaling back on expenditures but quick.
PS: The other reason the second was more fun was because said econ advisor had given me a B arbitrarily. In order to get a B in his class I would have had to have scored below a 33% on his final, which when I got it back said “you failed to address the topic at hand” and gashed off 70% of my grade giving me a 30% on the final.
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30th November 2012 at 11:00 am
Administrator says:
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30th November 2012 at 11:22 am
ThePessimisticChemist says:
@Admin – Exactly.
She told me she wanted to be a marine biologist and I said “awww you want to swim with dolphins” and she blushed furiously. I laughed and explained that I had seen dozens of “marine biologists” come through that school, either while I was a student or as a professor.
Only one got her degree in it, and of course she doesn’t use it. She works in a microbiology lab for a food manufacturer doing routine QC checks.
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30th November 2012 at 11:27 am
AWD says:
“When will a leader arise to tell the people the truth?”
God already gave us Ron Paul, and like his son that he gave us, he was ridiculed and outcast. We had our chance, but the parasites won, as always. The next gift from God won’t be so pleasant as a Texas doctor that tells the truth and has real answers. We will pay for our sins, and it’s not going to be pretty. We had our chance and blew it.
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30th November 2012 at 11:46 am
TeresaE says:
@AK (and any whom care), thank you.
I really need it today I guess. Christmas does it to me every year. Of course the upcoming anniversary of my ultimate narcissistic stupidity isn’t helping me either.
Watching the doom of the entire country is mind-burdensome enough, watching it through the veil of my personal hell – which is both weirdly entwined with the nation, and in spite of – it reaches occasional levels of unbelievably crushing defeatism. Throw in the fact that I have a growing contingency of people in my life that are outright dying – many decades too early – and there are days (today) when I feel like if I don’t let some of it out, I’m going to blow.
And I can’t blow IRL, my daughter, son and upcoming grandbaby (my life joys), need me. My sick father, best friend, niece, brother, friends, need me. So, you all get it. I’m truly sorry. Kinda powerless to stop it though, so sorry again and bank one for the future.
Thanks for being nice guys, I appreciate it.
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30th November 2012 at 12:23 pm
Administrator says:
OBAMA’S RIDICULOUS FISCAL CLIFF PROPOSAL:
•$100 billion in immediate tax increases by expiring “the rich’s” tax cuts.
•$60 billion more in tax increases by removing deductions from “the rich.”
•$50 billion in additional spending (over 2012 levels) on infrastructure for 2013.
•$240 billion in continued deficit spending by continuing the payroll tax cut.
•$30+ billion in continued deficit spending by continuing EUC 2008 (extended unemployment.)
•$40 billion in promised, unspecified but suspended for one year changes in Medicare and Medicaid.
•A permanent revocation of Congressional oversight of Treasury debt.
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30th November 2012 at 1:49 pm
ThePessimisticChemist says:
A permanent revocation of Congressional oversight of Treasury debt.
Isn’t that kind of supposed to be something they do? Its stated directly in the constitution….
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30th November 2012 at 3:04 pm
John A says:
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30th November 2012 at 3:12 pm
MuckAbout says:
@TE: Lady, you have to be careful about being “needed” by too many people. When does TE take care of TE without the pressure of you taking care of all these other people (joy or not).
You mentioned “need” too many times. Being around “needy” people can wear Teresa down to the bone if you forget to take care of you. Blowing off steam among your peers and friends on TBP is a tiny help – sort of like howling at the moon like I did when I lost my wee Widget dog a few months ago. But it’s not personal help – we are kind of detached corresponding via posts on a web site.
My humble opinion is to back off a bit and see what you really want – and take care of yourself. You are valued here.
MA
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30th November 2012 at 4:57 pm
crazyivan says:
I’m just compassionatly curious TeresaE, but who the heck is IRL?
“And I can’t blow IRL”
Therein seems to be adding to your frusations.
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30th November 2012 at 9:45 pm
TeresaE says:
@Crazy, oops, fingers work faster than brain. IRL = In Real Life, we don’t use the shortcuts as much here, but some have apparently become ingrained in my thought patterns over the internet years.
@TPC, GREAT catch (boy I wish there were more like you and my son in your age group), yep, yet MORE proof that the Bible should have caught fire when O stated his Oath of Office. Which is what I’ve been telling my husband. Due process? Right to liberty? Right to privacy in personal home? Right to keep your assets? ALL gone. We just bandy about the term “Constitutional” as if it is still relevant. It isn’t, hence, this bullshit.
And just think, TPC, this will be the ONE item that the Repukes will cave on. Seems the only time these two adversaries manage to agree 100% of the time is when they are shitting on the Constitution.
@Muck, thank you so much sweet man. I do try to make sure I take care of me. I’ve been the rock for so long that it is just part of my life and isn’t as overwhelming as it is for someone that hasn’t been the family rock for most their lives. My friends and family are fighting for their lives, my problems seem miniscule comparatively. Besides, over the years I’ve perfected my Scarlett O’Hara mindset, and I’ll just “think about that tomorrow.” And take a walk, work out, get a nap, today. Hugs and kisses, Muck. I hope you know how much I care about you and how many smiles you have blessed me with.
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30th November 2012 at 11:32 am