Unless you’ve been living under a rock the last 3 years, you’ve noticed the economy has entered into a perplexing period. As a society, we need to stop the nonsense and seriously address some of these issues as they are not wished away. Last week, we looked at the seriousness of the national foreclosure fraud crisis.
Yet, we’re continually distracted with the arguments of inflation versus deflation (as if only one is correct) Then, there are the political wars of my party is better than yours. Great change will come in November. Yawn. I gave up following politics many years ago as it’s truly become a grand pissing contest where hardly anything gets accomplished and we’re exposed to the personal lives of people I’d rather know nothing about.
Today, we have gold running at an all time high, foreclosures hitting the floodgates with no end in sight, unemployment over 10% and very little being done to actually change the status quo. Ever wonder why? Has it ever been a mystery why the most obvious solutions are never pursued?
What if what you’re watching on television (CNBC, the nightly news) was just a side show? What if you were a pawn inside a grand scheme that enriched others? No, I am not going into the black hole of conspiracy theories. However, I wonder sometimes if my fellow brothers and sisters REALLY understand the system we live in. Do they really get what debt does to people? Sure, there are countless personal finance blogs that write about getting out of debt. Have people ever really looked into the concept of usury? Do they consider that practically our entire financial system is built on the concept of usury?
In order to understand what is happening in the economy and world around you, you must understand the money system, primarily, how it is set up and what role you play in the system. The following video begins to reveal the hidden problem in the monetary system nearly no one wants to talk about.
Its called Money, Myth and Machiavelli.
Related posts:
Interesting video, Mike! Regarding the “requirement” of the people to suffer exponentially growing debt, Robert Murphy contends that this is not actually true (See: http://blog.mises.org/13670/what-does-debt-based-money-imply-for-interest-payments/). What do you think?
As the lecturer contends, people get easily side-tracked with arguments of hyperinflation, inflation, deflation. There is no “betterment” of oneself to aimlessly argue economic theory for where does it leave you? As the thread on Mises points out, economics is anything but scientific. But you see debates of this vs. that it everywhere in politics, economics and the capital markets. The “kicker” is either one of us can refer to an “intellectual” Keynesian Monetarist, a Austrian, or any combination and argue for countless hours on end. Again, it misses the point. (IMO)
For, there are pieces of each that can work yet no absolutes. Arguing absolutes keeps one’s thinking rigid. “If you don’t fit into my box, you’re wrong” I prefer free markets, property rights AND maybe some intervention or central planning. I see a role for government (of course) The fallacy is that governments are the source/root cause of the problem.
Larger banking interests simply operate under a different set of rules (as the video points out – especially with respect to the balance sheets) This kind of talk is not designed to get people spooked into 2012 talks or nonsense like that. Heck, this goes back to the beginnings of time.
When you take one giant step back and begin to realize that the primary driver of why people like the CEO’s of the Goldman’s JPMs, etc of the world are able to derive incomes of $200-400 million per year is by ADDING debt to the system versus creating value and encouraging real savings, it opens your eyes. I am not talking about the local bank loaning a carpenter $50,000 to buy supplies. I am talking of putting hundreds of trillions of OTC derivatives and then hundreds of billions of worthless MBS securities into the system that are now parked in the states largest pension funds. As a matter of fact pension funds have been Wall Streets trash can for decades. And as a result, we will grind through countless witch hunts coming from foreclosure fraud, etc. for the next 3-5 years.
All the theories in the world are of use – but the reason we’re seeing things “collapse” is that power has been concentrated in the hands of those who ran the financial system into the ground.
Thank god it’s coming to an end. For under the current structure, they really have no consequences. Too big to fail, tax payer bailouts, etc. Collapse also means things change. It’s time for an overhaul – it will happen on it’s own. It’s already happening. Yet, most will not realize they’re being taken to the cleaners until they wake up one day and something like a currency swap has occurred or gold has been revalued to a level not even imaginable. The fortunate aspect of all this is there is great opportunity with radical change. I am ready on all fronts.
Hey Mike,
I also agree that the financial sector is bloated and that they enjoy far too much power and influence and siphon away too much wealth, which they would not be able to do under a more honest system of money. Although I see the problems of the system and the government as problems of information and ignorance rather than a problem of power and evil, I certainly don’t defend the current system.
In one sense, it is easy to see governments as an illegitimate source of power and as immoral for exercising that power over us. On the other hand, much of a government’s legitimacy exists because it is following the will of the people. It cuts both ways.
I’m not sure that I agree that we are seeing things come to an end. Are current times worse than the 70s? How about the 30s? It just doesn’t seem so to me. People have been saying that the system is doomed for decades. I don’t know if fiat is viable for the long term, but it has lasted until now, through a depression and significant stagflation. The US is still a powerful nation, and I am not convinced on that point.
Furthermore, if things collapse, who is to say that things will be better and that the change will be good? Whenever there is revolution or sudden change, things have a great potential to turn for the worse. Fascism, Socialism, Communism… take your flavor of the day, but they are all bad. A severe disruption will either end in one of those flavors or will end in anarchic chaos (and not anarcho-capitalism). Just listen to the voices of the people around you. What are they saying? Very few of them preach libertarian ideals, that’s for sure.
I could be (and I hope) that I’m wrong, though. What kind of changes do you see coming, and how are you prepared for them? This is a pretty interesting thread and I’d love to hear what you think.
Hey Kevin,
Thanks for the well thought out response (as usual). I always appreciate your comments as they add a lot to the discussion. I really need to be more careful how I word things at times. I say this because I realize the word “collapse” conjures up ideas of people rioting in the streets. Let me just say that personally I do not want this and I don’t expect that. So, I need to explain…
What makes or made the U.S. the safe haven of the world is that when we said we’d pay you back we meant it. This is required in a fiat based system, of course. What makes our system tick, what makes it run, what makes it viable, is that people trust what we sell them in terms of financial instruments will perform at least to the ability it was intended. (Remember that word intended)
With the scandals occurring over the past few years, many have called this trust into question. The US banking and global banking system literally underwrote hundreds of billions of Mortgage Backed Securities that never had any chance of performing. Yes, we all took a bite of the apple. Behind these mortgage products (and this is where the heart of the matter lies, also what did Bear Stearns in) is the pile of unregulated OTC derivatives market. The “engineers” of these products, their bosses and all of Wall Street for that matter had a green light to create these products of financial mass destruction. Regulations were passed year after year to accommodate this. They literally made trillions personally. True we as a people took part. But don’t you expect more from a car manufacturer, for example when you buy a car? Shouldn’t we expect more from our financial architects. Do we REALLY believe these people created as much value as they picked from the system? If we want to talk examples, Look up the actions of people like Joseph Cessano of AIG. He literally brought down AIG and not only did he walk away with $315 million, he says it was the regulators fault. He sat on conference call after conference call and assured investors AIG’s balance sheet was squeaky clean/pristine. It LOOKED that way b’c OTC derivatives are well, OTC out of sight of mind….Nuff said there. But seriously look up his story. There are dozens.
To have Chris Dodd and Barney Frank “oversee”/chair the Banking and Financial Services industry while they are receiving campaign contributions from those they need to be coming down on only begins to explain the conflicts of the system we live under. How can we expect anything but deceit?
In the business I am in, ANYTHING I do and I mean anything has to be in the best interests of the beneficiaries I am responsible for. And, it should be this way.
Hank Paulson, Ben Bernanke, and Tim Geithner have TREMENDOUS power. They do not have the American people’s best interest at hand. Ben Bernanke’s #1 job is to protect the banking system. It is his mandate. From the powers bestowed upon him through our government, he can go out and buy bad loans off the balance sheets of banks where these most insidious, over bloated, corrupt fraudulent schemes were hatched. Why? To protect the banks from going under. Yet, we as a society are unable to audit the Federal Reserve. Is that evil? It’s not my place to say.
Remember this though; who gets stuck cleaning up the mess? Where and how are these toxic assets handled? We call these things Quantitative Easing, Financial Stimulus, etc. The MBS (mortgage backed securities get dumped into the state pension funds and the American Tax payer ends up eating the rest.) Meanwhile the Joseph Cessano’s of the world walk free http://www.nydailynews.com/money/2009/03/17/2009-03-17_pin_aig_woes_on_brooklyn_boy_joseph_cass-1.html
This is what I am referring to when I said the system as we know it will collapse from the inside. When I say collapse, I am also saying replaced. I am not cheering that we return to a gold standard as so many people like to criticize. (As a side note, when you plot the dollar vs. gold on a 10 year chart, you will see we’re already on a quasi gold standard) Here’s the crux of the issue and I will end with this b’c I am getting wordy:
Unless we have somewhat of a spiritual rebirth nothing else I’ve mentioned matters. We as a whole have to realize the system we’re living under is not working as it should be. What you see happening in the foreclosure market is the people saying they’ve had it. I will leave you with a link below to an article that so well sums up the results of all I have just written. So, this is why I say I welcome the change that is coming.
I really do.
http://www.businessinsider.com/coming-middle-class-anarchy-2010-10
Caution: The following article has adult language!
Thanks for letting me know, Mike. I’ve love to see a post about this where you see things going in the next couple of years, and how you believe our monetary system will be changing.
I personally don’t want to see a return to the gold standard or to a new currency or to any monopolized standard; instead, I prefer that the government get out of the business of controlling the banks and the currency and bailing out the banks entirely, and stop interfering in the supply of money. Let there be free choice in currencies, with the government stepping in only to protect the taxpayers and the consumers from fraud. I agree with you about fiduciary duty, and this is something that we are sorely lacking.
Thanks for the great response, Mike!
1. He says he’s taken a lot of economics courses and has never come across a balance sheet. Ask him to find one Money & Banking text that does not have a balance sheet.
2. He claims there is no “net savings”. Well saving comes from not consuming. The factories, transportation system, computer infrastructure that this country has built up, which incidently leads the world, is the net savings. It is the result of forgoing consuming resources in the present to use resources to produce goods that will be used to produce goods in the future.
3. The wealthy class is not just private elite school graduates.
IMHO this is what he misses – debt is not necessarily bad. If you take on debt to increase productivity it is a valuable part of the economic system. The U.S. has the best developed capital markets system in the history of the world which has enabled it to provide a standard of living for the average person that our ancestors could not imagine. If the nation is borrowing to buy t-shirts from China that is not such a good thing.
Hi Robert,
Thanks for your comments. There are balance sheets in any business. What I got from this is the awareness of how banks actually prosper the more debt they create. It’s not that way for a consumer. There aren’t the same consequences.
I don’t think he’s arguing there is a better system. He says “the US is entering a very dangerous period” and explains some of the reasons for the debt/currency crisis. Specifically that there are reasons why 100 year old financial institutions failed, reasons for the current record unemployment, foreclose crisis, housing debacle. I don’t see these things as just coincidence but things we can learn from. IMO, this has nothing to do with technology or innovation, because it’s true you and I are lucky to be living in such times.
I agree with you that debt isn’t necessarily bad. But the financial crisis, housing crisis, foreclosure crisis, etc. Is something we need to learn from, regardless how great we believe our financial system or our progress is to date. I have said I believe we need a spiritual rebirth of sorts. Many past generations would argue with you that we’ve lost touch with values that matter and confuse them with technology, materialism and temporary pleasures.