Council on Spiritual, Psychological, and Economic Renewal Discussion Thread

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Council on Spiritual, Psychological, and Economic Renewal Discussion Thread

Like many others here, I've been following the work of Strabes (code name Damon Vrabel) with great enthusiasm. I thought it might be helpful to create a single thread to post and discuss the his articles and video presentations here.

From his Youtube Channel Page:

The name of this site is for my planned Council on Spiritual, Psychological, and Economic Renewal, which will host a multi-perspectival dialogue in hopes of finding Renaissance 2.0, as opposed to the potential dark future we could be facing as a result of the final collapse of economic utilitarianism and post-Enlightenment rationalism.

As of this time, he has posted 5 video presentations:

 

There is also a Two Bears with Steve podcast interview with Damon:

Download/Listen Here

 

And a FT Interview with Damon here:

Most of this material has been previously posted here, but in the interest of fighting thread inflation I thought I would consolidate it into one thread.

Great work Damon and I look forward to the discussions of your work.

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Re: Council on Spiritual, Psychological, and Economic ...

Thanks Jeff.  In my mind, you have become The Great Initiator because you are always initiating new thoughts and directions on this site to the benefit of us all ... and for that I am grateful.

I also look forward to more of strabes' work (I'm using the lower case 's' because he does and I get a sense he does it in the style of an e.e. cummings) which I think is superb.  Just one thing, Damon ... do you think it might be wise in the 4th video to at least give some recognition of personal responsibility on the part of the common folk.  After all, when a bus boy in California making $30K/yr. buys a house for $500K, I don't think we can blame all of the bus boy's problem on those toward the top of the pyramid.  Just a thought, FWIW.

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Re: Council on Spiritual, Psychological, and Economic ...
Quote:

 when a bus boy in California making $30K/yr. buys a house for $500K, I don't think we can blame all of the bus boy's problem on those toward the top of the pyramid. 

Wasn't some of that caused by house flippers being allowed to use their flipping profits as income on mortgage applications? .. I thought I read that somewhere

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Re: Council on Spiritual, Psychological, and Economic ...

thanks Jeff!  I just added parts 3 and 4 of lesson 4.

ao, yeah I'm trying to focus on the system itself rather than people because as you point out we all contribute, but I can't help but get some digs in at the elite.  just can't help myself...and I do think it's deserved and justified in some cases.  people with blinders on need to get a little bump on the head to take the blinders off. 

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Re: Council on Spiritual, Psychological, and Economic ...

Thanks JAG; thanks strabes - great post and super videos!

I love the pyramid examples and have always visualized that we the people are standing shoulder to shoulder along the bottom layer, supporting this system of evil above us, for it can not exist without our compliance. All we have to do is stop supporting it, but this means serious events like stopping debt payments and withholding income taxes (IMHO).

Don't know if the vid's are finished or a 'work in progress', but would hope for a final one showing a return to the original circular and constitutional model which is presented in vid. 1 (from whence the country began), and showing a new money system, interest and debt-free as outlined in the constitution.

There has been many debates on this site about how that new money system might look, as clearly the constitution refers to a gold and silver standard (minting and regulating the value there of), yet members like DrKiryLuv have pointed out flaws with such a model for various good reasons, one being that the current 'owners' from the top of the pyramid own and control much of the world's supply of bullion. Yet, this would be a 'happy problem' to overcome faced with the potential liberation from this current system of economic slavery.

So the two major issues would seem to be; how to stop supporting and change the pyramid of evil, and what to replace it with?

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Re: Council on Spiritual, Psychological, and Economic ...

Strabes, Nate has a really nice post on your videos at http://economicedge.blogspot.com/2010/03/damon-vrabel-renaissance-20-lesson-4.html.  I liked where he quoted you as saying:

"I think this type of content is important to help people understand WHY we need to move beyond debt-based money at the federal level and fix the Federal Reserve monetary system without only relying on math and spreadsheet models."

Agreed!

-pinecarr

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Re: Council on Spiritual, Psychological, and Economic ...

hi John, yes we'll be getting to those types of topics you mention.  I decided to do this series to try explaining to the millions who don't yet care about our monetary system's problems why they should care, and in order to do that I need to spend a lot of time describing our current system in different ways than have already been tried.  I know a lot of that is rehashing old stuff for the people who are already aware of the problem. 

regarding gold, I suppose there could be a wealth-based version of it, but the gold standard we had in the early 20th century was just another debt-based system that was used to vacuum up most of the gold into bank vaults...it wasn't a standard that said "the people get gold" it was a standard that said "bank reserves had to be gold."  well, since the accounting of money is basically banks vs. people because bank assets are the people's liabilities, then by definition a standard that said banks need to accumulate gold to grow, meant that the people would lose gold in return for bank paper. 

thanks for pointing that out pinecarr...I didn't realize he posted it.

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Re: Council on Spiritual, Psychological, and Economic ...

John99 wrote:

There has been many debates on this site about how that new money system might look, as clearly the constitution refers to a gold and silver standard (minting and regulating the value there of), yet members like DrKiryLuv have pointed out flaws with such a model for various good reasons, one being that the current 'owners' from the top of the pyramid own and control much of the world's supply of bullion.

Thanks for the mention of my monetary reform suggestions.  You bring up an important issue, the constitutionally specified manner for creating and controlling our national money. 

First, I should mention that allowing banks to issue money violates the Constitution (Congress shall have the power to ". . . coin money, regulate the value thereof, and of foreign coin...." Article 1, Section 8).  Second, "No State shall...coin Money; emit Bills of Credit; make any thing but gold and silver Coin a Tender in Payment of Debts (Article 1, Section 10, Powers prohibited of States).

So, we are currently violating the constitution by allowing banks to create money and states are violating the constitution by not paying their bills with gold and silver.  States would default tomorrow if the constitution were applied; this is a problem that should have been dealt with some time ago.  Let me put the state issue on the back burner for now and address congress. 

The question then becomes, does the money that congress creates have to be gold and silver coins since the constitution says "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures" (Article 1, Section 8).  Note that congress is not limited to gold and silver and in fact, copper, zinc, nickel and other metals have been legally used in coins.  And, there is no mention that the coins must have intrinsic value equal to the market value of the weighted metal.    

But can paper money be issued by congress, with or without precious redemption?  Fortunately, there is some precedent to follow.

  Sub-committee of Ways & Means, Chairman Elbridge G. Spaulding, 1862

"In the first place, permit me to say, that my views of the place I hold forbid me to give your question a formal and official answer, but in proof of the high respect which I entertain for you and your honorable Committee, I, as a private man, and a professed constitutional legist, in all frankness will give you my opinion upon the point proposed, and this, with all brevity and without argument, for the time does not allow elaborate consideration.

The bill, after providing for the issue of treasury notes, contains i.e. this clause, “ and which treasury notes shall be a legal tender in payment of all debts, public and private, within the United States,” and you desire my opinion whether this clause is, or is not, constitutional.

Certainly the Constitution contains no direct verbal prohibition, and I think it contains no inferential or argumentative prohibition that can be fairly drawn from its expressed terms. The first article of the Constitution, section eight, grants to Congress specifically a great mass of powers. Section nine contains divers limitations upon Congress, upon the United States, and upon individuals ; and section ten contains restrictions upon the several States. This last section is the only one that treats on tender. “ No State shall make anything but gold and silver coin a tender in payment of debts.”

This applies to a State only, and not to the nation ; and thus it has always been understood with regard to the next preceding clause in the same section—no State shall “ emit bills of credit.” The prohibition to emit bills of credit is quite as strong as the prohibition to make anything but gold and silver coin a legal tender ; yet nobody doubts—Congress does not doubt its power to issue bills of credit. Treasury notes are bills of credit, and I think the one is just as much prohibited as the other—neither is forbidden to Congress."

The bill was passed but it was not unanimous.  The banks were very skeptical and put pressure to limit the amount.  Unfortunately, Lincoln did not have the opportunity to fully issue greenbacks as the country's national currency and it was never tested in court.

Another route that the government could take would be to issue bonds similar to the way that we do now.  The difference would be that they would not pay interest and never mature.  They would be issued as dollars instead of bonds.

Back to the states...they have the prerogative to issue bank charters.  Under this arrangement, the bank monetizes debt or wealth for the state.  For example, the Bank of North Dakota has been operating for over 90 years.  Not coincidentally, North Dakota is in excellent shape financially, a rarity by today's standards.

Larry

 

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Re: Council on Spiritual, Psychological, and Economic ...
DrKrbyLuv wrote:

Back to the states...they have the prerogative to issue bank charters.  Under this arrangement, the bank monetizes debt or wealth for the state.  For example, the Bank of North Dakota has been operating for over 90 years.  Not coincidentally, North Dakota is in excellent shape financially, a rarity by today's standards.

Larry,

Don't state loans from the Bank of North Dakota need to be repaid with interest?  I do not believe it is allowed to be keep these loans on the books as assets forever.  My understandning was by owning the bank, the state could effectively pay interest to itself and therefore lower the net interest charges on its own internal projects.  If so, this seems different than what many "wealth money" supporters are advocating.

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goes211 wrote:

Don't state loans from the Bank of North Dakota need to be repaid with interest?  I do not believe it is allowed to be keep these loans on the books as assets forever.  My understandning was by owning the bank, the state could effectively pay interest to itself and therefore lower the net interest charges on its own internal projects.  If so, this seems different than what many "wealth money" supporters are advocating.

goes,

North Dakota follows the current model of monetizing "debt" and charging interest.  Banks, and North Dakota, enjoy a monopoly to create “credit” with accounting entries on their books.  They use this magic to monetize debt but it has not always been this way.  For example, Lincoln monetized wealth with his greenbacks - the result was that the debt did not need to be repaid.  I think you are referring to Byron Dale's proposed "Minnesota Transportation Act."

Under the MTA, the state-chartered banks would create a pass-through account titled an Asset Monetization Account (AMA), monetizing the bid value of projects. This would be done in the same way banks that monetize collateral, except that the deposit would go on the bank's books as an asset rather than a liability, turning the bid value of the project into "money" without debt. This money would be debited electronically out of the AMA and credited to the State's Transportation Account (STA), from which it would then be debited out and credited in to the contractor's bank account in a state bank, according to the terms of the contract. The contractor would spend this money to complete the project.

Ellen Brown, a California attorney, has argued that States have the right under the constitution in an article entitled "ANOTHER WAY AROUND THE CREDIT CRISIS: MINNESOTA BILL WOULD AUTHORIZE STATE BANKS TO "MONETIZE" PRODUCTIVITY."

"Congress has been given the power to coin money, but minting coins is not the same thing as issuing paper money, checkbook money, accounting-entry money, or electronic money – the forms of money used most often today. Arguably, "to coin" money was an archaic way of saying "to create" money, but then what is to be made of the clause stating, "No state shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debt"? "Coin" here clearly means precious metal coins, period...The Constitution obviously needs to be amended to suit the times. Meanwhile, the Tenth Amendment to the Constitution (part of the Bill of Rights) provides:

X - Rights of the States under Constitution: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that "No State shall . . . emit Bills of Credit"? According to "the 'Lectric Law Library," "bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day." Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as "legal tender" – the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money – whether in paper, electronic or accounting-entry form – so under the Tenth Amendment, this right is reserved to the States and to the People."

The MTA and similar bills, would go a long way towards mitigating the "unbalanced equation" that Damon mentioned in "Renaissance 2.0: Part 1 of 4 - The Culture of Empire" as P < P + I  (where: P=Principal, I=Interest). 

A subtle but important benefit derived from "monetizing wealth" is that it establishes a "permanent" money supply in that it is not extinguished through principal repayment.  It can be used to pay existing principal and interest but it is not extinguished as a function of it's creation process.

P + W = P + I  (where: P=Principal, I=Interest & W=Wealth Money) helps balance the equation.

Would this be inflationary?  Not if the money were used to create new goods and services.  Price inflation results only when “demand” (money) exceeds “supply” (goods and services). When they increase together, prices remain stable.

Larry

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Re: Council on Spiritual, Psychological, and Economic ...

Oooops, I wrote the wrong formula above.

P + W = P + I  (where: P=Principal, I=Interest & W=Wealth Money) 

Is WRONG...it should be:

P + W  > o r =  P + I  (where: P=Principal, I=Interest & W=Wealth Money)

And, I should note that the equation would be balanced through incremental time periods.  For example, annually; without the need to balance the entire equation at one time.  Currently, we have a money supply (M3) at under $15 trillion and total private and public debt of around $57 trillion, which represents a shortfall of around $42 trillion.

The $42 trillion does not have to be met or exceeded with wealth money in just one year.  It may be that $3 trillion would be adequate for the coming year. 

Larry

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Re: Council on Spiritual, Psychological, and Economic ...

Larry, sometimes I'm in awe of all the stuff you dig up. Thanks for the efforts :-)

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Re: Council on Spiritual, Psychological, and Economic ...

Larry,

A few things bother me about your ideas with regards to "wealth money".

1) Many of the ideas seem to ignore the fungibility of money.

Creating checkbook money is not specifically delegated to the United States, so it must be delegated to the States, unless it is specifically prohibited to them. What about the provision that "No State shall . . . emit Bills of Credit"? According to "the 'Lectric Law Library," "bills of credit are declared to mean promissory notes . . . . Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day." Bills of credit are promises to pay later rather than what is being discussed here: checkbook money issued as "legal tender" – the sort of dollars banks issue every day when they make commercial loans. The Constitution does not say who is authorized to issue this sort of money – whether in paper, electronic or accounting-entry form – so under the Tenth Amendment, this right is reserved to the States and to the People."

As long as various types of money are fungibile, Ellen Brown's points seem like symantic song and dance.

The fungibility of money is also what bothers me about laws like the MTA.  You claim that government creating money out of thin air to spend on newly created infrastucture will not inflationary.  I am much more sceptical that this will be the case.  I know of very few cases where the government spent money wisely or came in under budget.  Now you are proposing governments create money for these projects and somehow the limited number of government contractors will not raise their prices when faced with large amounts of work and effectively, unlimited budgets.  This sort of folly will end quite badly and it won't take 100 years to see it happen.

Now if Minnesota wants to jump off a cliff, that is fine.  However due to the fungibility of money, anyone with a license to print will destroy the value for everyone else.  This seems like a classic commons problem to me and I predict that each state would be in race to out spend its neighbor, to the destruction of us all.

------------------

2)  I agree that the problem we have right now is we have too much debt but many wealth money advocates seem to believe that things will be rosy if we just create money to pay off that debt.  This seems silly to me and I must question any system to which adding a counterfeiter would improve its working mechanics.  We are in need of a great reset (debt repudiation) and I don't believe that simply trying to stabilize the status quo will work in the long run.

------------------

3) At times wealth money advocates claim that interest is inflationary.  I know I have heard Byron Dale say this.  It seems to me that it is the inital creation of credit money by the banks that is inflationary.  This is somewhat balanced by deflationary forces of credit destruction when loans are paid back.  Wealth money advocates seem to look at this credit destruction as a negative, but I think it may be critical to keep the system from imploding in an orgy of inflation.  I see no similar mechanism (that is likely to actually be used) to control the quantity of money if wealth money were in use.  This is especially true when I hear some people advocating that we can continue our current government largess without taxes if we just allow the government to print money to meet its needs.

------------------

4) To me " P +W >= P + I " is far to simple to caputre the problem we face.  Yes, in the current system there is never enough money to pay back the principle + interest but what does that imply.  Simply that the system must keep growing or someone must default to allow the others to pay off their debts.  We seem to be approaching debt saturation levels and that is stopping the current system from working the way it has in the past. 

There are a few real problems with this system.  First is growth is a requirement.  This may have worked well in the past when the world was full of new places to settle and new resources to utilize but that is no longer the case today.  Second and I think more importantly is the moral component of the current system where the people that prosper are the dealers in money as opposed to the entrepreneur's that actually make the world a better place.

------------------

Please don't take my criticisms of wealth money personally.  There are some features that I do like but if it was ever implemented I don't think it would even last as long as our current system did.  The temptations for corruption would just be too great.

Also I don't claim to have answers to these problems.  My current fear is that all monetary systems are predestined to fail because they are all based upon an illusion and have internal conflicts between their use as a "means of exchange" and a "store of value".

------------------

Question - Anyone have an opinion on Paul Grignon's Digital Coin proposal?  I don't like the central control and the lack of anonymity, but other features of this system seem to be much closer to a system that I could imagine working.

http://www.digitalcoin.info

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Re: Council on Spiritual, Psychological, and Economic ...

goes211 wrote:

You claim that government creating money out of thin air to spend on newly created infrastucture will not inflationary.  I am much more sceptical that this will be the case.  I know of very few cases where the government spent money wisely or came in under budget....Now you are proposing governments create money for these projects and somehow the limited number of government contractors will not raise their prices when faced with large amounts of work and effectively, unlimited budgets. This sort of folly will end quite badly and it won't take 100 years to see it happen.

Government would not be creating money out of thin air; every penny is backed by the good faith and credit of the people.  The government has sovereign credit which is being used by the private banking system when they lend the government money.  Private credit enables banks to create private debt.  So, in both cases the banks are using the credit of other entities to take profit that they do not earn with credit they don't have. 

I think I am on firm ground when I say that the Constitution stipulates that only congress should issue new money.  If the framers wanted banks to create and control our money, I suspect they would have said so.  I don't think we have 100 years under this system.  Gerald Celente predicts that there will be a major problem in 2010 and I strongly suspect he probably isn't more than two years off.

I agree that if large amounts of money were spent on infrastructure, prices would go up for labor and materials.  I don't see this as a problem if the money is wisely spent.  I trust the people and local/state government (more than banks) to use the credit to help transition our society for the difficult times ahead.  The premise of our republic is that people are able to govern themselves.

goes211 wrote:

We are in need of a great reset (debt repudiation) and I don't believe that simply trying to stabilize the status quo will work in the long run.

No doubt we are hostage to odious debt that should be legally lifted.  And, there is a good argument to be made that collectively, debt contracts are unenforceable since there is so much more debt than money.  These are both theoretical arguments that I don't think will ever be heard.  When we default on our private and public debt, assets will be taken and sovereignty lost.  I think the plan is to take much of our private and national property and to destroy our sovereignty.  John Perkins "Economic Hit man" details how this has happened over and over in many other nations.

goes211 wrote:

At times wealth money advocates claim that interest is inflationary.  I know I have heard Byron Dale say this.

I'm not certain of that but I will ask him.  My gut feeling is that Byron does not subscribe to inflation in our terms, instead he seems to view much of what is taking place as debauching the currency.  BTW, during the 1930's inflation meant an increase in the money supply while now, it is viewed as an increase in prices.

goes211 wrote:

To me " P +W >= P + I " is far to simple to caputre the problem we face. Yes, in the current system there is never enough money to pay back the principle + interest but what does that imply. Simply that the system must keep growing or someone must default to allow the others to pay off their debts. We seem to be approaching debt saturation levels and that is stopping the current system from working the way it has in the past.

There are a few real problems with this system. First is growth is a requirement. This may have worked well in the past when the world was full of new places to settle and new resources to utilize but that is no longer the case today. Second and I think more importantly is the moral component of the current system where the people that prosper are the dealers in money as opposed to the entrepreneur's that actually make the world a better place.

I agree on all all accounts.  Your second paragraph was really hard hitting with precious few words spent.  I can't add or detract from that so I'll focus on the first paragraph.

Yes, the P < P + I and P +W >= P + I equations are very simple broad brush strokes.  But they do serve to make a point.  In actuality, other variables are involved, for example:

  • Much of the interest payments are spent back into the economy.
  • It is not a closed system as "leakage" occurs from a number of sources. For example:
    • Trade deficits take money out of our domestic money supply.
    • Generated interest wealth may leave the money supply for extended periods of time as investments.
    • Defaults return at least a portion to the money supply.

I wonder what you think of the Bank of North Dakota which is a legal going concern.  I also wonder what you think about the fact that "banking" services are wiping out competition.  For example, large private corporations are acting as banks.  Walmart and other "big box" retailers finance their products by creating money for free.  I think this is leading to cartels in every sector that will be impossible to compete with by "un-connected" and smaller competitors.

Cheers,

Larry

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A benefit of debt-backed money?

Strabes (and others),

I see the fact that our money is created from debt as being advantageous in one regard:

It means the money stock self-extinguishes as debt is paid back or defaulted on. Without this design component, wouldn't inflation be a much, much bigger problem than it already is? What am I missing here?

Best...Jeff

 

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Re: Council on Spiritual, Psychological, and Economic ...

Speaking of exponential curves, following these threads can be a bottomless pit of enlightenment.

The Crash Course + Renaissance 2.0 should be required curriculum for every citizen, but the only way we will see this happen is to mislabel them as something like "The Fed is Your Friend" and "The United States, Land of the Free".

Very valuable post Jeff, thanks.

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Re: Council on Spiritual, Psychological, and Economic ...
DrKrbyLuv wrote:

Government would not be creating money out of thin air; every penny is backed by the good faith and credit of the people.  The government has sovereign credit which is being used by the private banking system when they lend the government money.  Private credit enables banks to create private debt.  So, in both cases the banks are using the credit of other entities to take profit that they do not earn with credit they don't have. 

I think I am on firm ground when I say that the Constitution stipulates that only congress should issue new money.  If the framers wanted banks to create and control our money, I suspect they would have said so. 

I agree that if large amounts of money were spent on infrastructure, prices would go up for labor and materials.  I don't see this as a problem if the money is wisely spent.  I trust the people and local/state government (more than banks) to use the credit to help transition our society for the difficult times ahead.  The premise of our republic is that people are able to govern themselves.

At least to me the statement  "Government would not be creating money out of thin air; every penny is backed by the good faith and credit of the people" is a distinction without a real difference.  How would this be different than if they just printed paper legal tender?

I will agree that the constitution gives congress "the power to coin money and regulate the value thereof" but there seems to be some dispute what the original intent of this was.

As for trust in government, I must admit that you seem to have more than I do.  I think our history clearly shows that even a system designed solely to constrain government, overtime will be subverted and distorted until those constraints become meaningless.  Bastiat's "The Law" and HayeK's "The Road to Serfdom" do a good job explaining why this happens.

As for your state solutions like the MTA, I still can't tell if these are serious or just a gimmick to demonstrate the absurdity of the whole system.  It still really bothers me that because all money is fungible, one bad actor can have negative effects on everyones purchasing power.

DrKrbyLuv wrote:

When we default on our private and public debt, assets will be taken and sovereignty lost.  I think the plan is to take much of our private and national property and to destroy our sovereignty.  John Perkins "Economic Hit man" details how this has happened over and over in many other nations.

I don't think the US will go down in the same way as some banana republic.  We will only loose our sovereignty if the American people allow it.  It seems to me that more people are slowly waking up to the reality that is around us and hopefully that will save us in the long run.

DrKrbyLuv wrote:

I wonder what you think of the Bank of North Dakota which is a legal going concern.  I also wonder what you think about the fact that "banking" services are wiping out competition.  For example, large private corporations are acting as banks.  Walmart and other "big box" retailers finance their products by creating money for free.  I think this is leading to cartels in every sector that will be impossible to compete with by "un-connected" and smaller competitors.

I am no expert but from what I understand about the Bank of North Dakota, it seems like a reasonably good solution for working within the current system.  The problem I have with some state proposals is that the money is not paid back and the loan stays on the books as an asset forever.  This seems completely ridiculous to me.  If we have to work within the system we have now, I think a state chartered bank that makes loans to the state at low or zero interest is a reasonable solution as long as this bank is required to remain solvent like other banks.  It may be a problem if a state like California abused the system and effectively offloaded its obligations onto a bank with the intention of writing off the debt and then just recharted another bank to start the process over.

I am unfamiliar with how big box retailers finance their products by creating money for free.  Can you explain?

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Re: Council on Spiritual, Psychological, and Economic ...

Goes211,

Maybe this can help clarify byron position on what causes all the price inflation.  I think its basically this simple.  If you run a business and sell a product and if you have to operate on borrowed money (there is no other money out there) then wouldn't your debt load have to be factored into the prices of your products?  It wouldn't be to bad if your debt load was small but with a $59 trillion dollar interest bearing debt having to be serviced its no wonder why we are having economic problems isn't it?

If you ran a business and had to pay $1000 dollars a year in interest would you have to raise the prices on your products to service that debt?

Would if it was in the billions (think the big auto guys).

Some people are going to say that the more money you make just devalues the rest, and thats true with commodity money like gold and silver but isn't true with modern money (numbers). The more money that is created just adds to the pool.  Now do we want to have more interest bearing debt added to the pool or more money added to get rid of the interest bearing debt?

 

I've attached Byron's article about inflation below.

 

http://www.wealthmoney.org/articles/Theory-Of-Inflation.html

Webster’s New World College Dictionary states: Inflation – (a) an increase in the amount of money and credit in relation to the supply of goods and services. (b) an increase in the general price level, resulting from this, specif., an excessive or persistent increase, causing a decline in purchasing power.

Let’s assume for the moment that Webster’s definition is correct. If it is, we need to address the issue of how and on what basis did the amount of money and credit increase without there being an increase in the goods and services. This increase in money and credit could not arise due to the need to pay for any existing goods or due to the need for more money or credit to purchase any increase in goods or services.

Black’s Law Dictionary defines Credit as: - “Time allowed to the buyer of goods by the seller, in which to make payment for them.” –“The right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.

According to this definition there would need to be an increase in the amount of goods and services coupled with a shortage of money needed to obtain those good or services before there would be any need for credit at all. Almost every one has the lawful authority to create goods or to provide a service. At this time, only banks have the lawful authority to create money. As a general rule the goods are created and the services are rendered before payment is made for the goods and services.

Therefore, an increase in money needed only to gain a profit off of money in and of itself, without any ties to an increase in goods, is the only reason and the only way money could be created without there being an increase in goods or services.

The only way an increase in the money supply would increase prices would be if almost everything was bought and sold at auctions where the price is determined by the bidding process. Personal observation and experience has shown me that very few buyers offer to pay more than the seller’s asking price.

This fact is proven by the fact that so many things are now sold with the words 'on sale' preceding the asking price. This leads the buyers to believe they are buying the goods at less than the regular selling price. The fact that there is a shortage of money to buy all the goods that are for sale is proven by the fact that there are so many ads promising 'no money down' and 'no interest for a certain length of time' if one will only buy the goods right now.

Many writers use the example of a king taking the metal money he acquires through taxes and other means, then re-coining and debasing it by substituting less valuable metal for the more valuable metal. Therefore, the king is able to issue more coins with the same amount of the more valuable metals, thus inflating the money supply, resulting in increased prices. This only proves that the king believed that he had a shortage of money.

There could only be truth to the idea that the king caused inflation by creating more coins if a person was used to dealing in metal money where it would be possible to recognize that the new coins did not have the same metal composition as the old coins. The seller, upon realizing that he was not receiving as much of the more valuable metal as he was expecting for his goods or services clearly might raise his prices to obtain the same amount of the more valuable metal he was expecting.

Those facts are no longer in play today. We do not use metal money. In fact, we don’t even use paper money. We only use bank-generated numbers as our money. Everyone I know, when given the amount of bank-generated numbers that he’s expecting, is happy with his deal. No one can tell the difference in numbers like they can tell the difference in metals.

Not one person in ten million truly understands how our money system works, the principle under which it functions or how money gets into circulation so people can use it. Even fewer care. I doubt if one man in two million has any idea what the money supply is or whether it has increased or decreased. So, why would people raise or lower there prices due to an increase or a decrease in the money supply when they don’t even know if there’s been an increase or a decrease?

If we were using gold as money it is possible, and in fact likely, that in the area of a gold rush there could be a temporary rise in prices on the goods the gold miners needed. That rise in the prices of goods would only last till people found out it was easier to get the gold by supplying the miners with goods rather than trying to find more gold or when most of the new gold was mined out, harder to find, or already owned by a few.

Webster’s Dictionary also states: Inflationary spiral - a continuous and accelerating rise in the prices of goods and services, primarily due to the interaction of increases in wages and costs.

A continuous and accelerating rise in the price of goods and services is clearly what we are experiencing. The question is, “Why do costs keep increasing?” To answer that question we have to truly understand how our money gets into circulation. Today, all new money goes into circulation as interest-bearing loans. When money is created as interest bearing debt, the debt owed goes up and the interest on that debt always drives up the cost of doing business. When governments borrow, its interest cost increases followed by an increase in taxes. Interest always increases the cost of doing business. Interest also causes the debt to increase but it does not increase the money supply nor does it increase goods or services. Interest on debt also increases the need for an increase in the money supply to pay the added cost of the interest or someone must suffer a loss of money. Additionally, when the principal of a loan is repaid, the money is extinguished causing a decrease in the money supply until someone borrows more money. When money is loaned into circulation at interest, interest is the only cost that can’t be eliminated without stopping the increase in the money supply.

There are only three increases in the cost of doing business that courts will force you to pay: interest, taxes and rent. When one suffers from a rise in interest, taxes or rent they must raise their prices or cut their living standard. When one’s standard of living starts to suffer, most people try to get an increase in wages.

Add greed and growing governmental regulations to interest and taxes and you have the true cause of price inflation. Do you really think that the price of gasoline went up to over $4 a gallon because there was a sudden increase in the money supply? It is clear that when the cost of gasoline went up over $4 a gallon, the price of everything that was shipped had to go up or someone’s profit had to go down. The continuous increase in the nation’s interest bearing debt is the cause of our continuous and accelerating rise in prices.

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The Spiritual Context

Damon,

I really enjoy the fact that you added a spiritual context to your presentation. I dedicated a decade of my early adulthood to developing a spiritual framework for my life and would love to have a discussion about that subject here. I sense that many here could contribute to such a discussion, but I have no doubt that fractures in our community would ultimately result from that exchange. Thats too bad.

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Re: Council on Spiritual, Psychological, and Economic ...

Thomas, thanks for the link to Byron Dale's article on inflation.  It makes too much sense so economists and pundits will ignore it.

To a large degree, inflation is a humbug; a red herring to make people think the Fed is needed to keep a close eye on the money supply and tweak it as needed.  Everyone seems to be obsessed with the big bugaboo - dreaded hyperinflation.

If you go back in history you will find that deflation is the killer and that inflation; defined as rising prices, usually stems from shortages.  For example, during and after wars there are typically some rising prices. 

Have we ever had a "great inflation"?  Every major financial problem throughout our history was the result of drastic deflation that led to depressions:

  • 1930's "Great Depression"
  • The Panic of 1907
  • The "Long Depression" 1873 - 1896 (it was called the "Great Depression" until the 1930's)
  • The Panic of 1837

Every one of these depressions was intentionally caused by private banks and rest assured, the "greatest depression" coming our way will be intentionally caused by private banks.  But yet, inexplicably, people don't trust the government to issue and control our money because it might create too much and cause inflation.  

Can anyone point me to a time period where too much money was available?  What evidence is there to support that claim as opposed to having a shortage of products/materials?

Larry

Note: In each of the above listed "depressions" the U.S. was using gold and silver backed money - that's another humbug!

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Re: Council on Spiritual, Psychological, and Economic ...

LOL at Larry....

 

The Great Inflation....

 

I'm laughing about this one.  That's a good point.

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Re: Council on Spiritual, Psychological, and Economic ...
DrKrbyLuv wrote:

Have we ever had a "great inflation"?  Every major financial problem throughout our history was the result of drastic deflation that led to depressions:

  • 1930's "Great Depression"
  • The Panic of 1907
  • The "Long Depression" 1873 - 1896 (it was called the "Great Depression" until the 1930's)
  • The Panic of 1837

It seems to me that each of these events had a major bubble that proceeded them.  I am no expert but I belive that Austrian Business Cycle theory would argue that the damage was done during the bubble and it is only after the bubble has burst that the underlying problems are reveled and the need to restructure the economy becomes apparent.  To complain about these depressions without acknowledging the preceeding bubble, seems like complaining about a hang over without admiting that it was caused the previous nights binger. 

This brings me back to another thing that I am bothered by with "wealth money", the belief that it will solve all of our current problems.  I think that most people will acknowledge that for the past 30 years we have been living larger that we have any reasonable right to expect.  Somehow many people seem to believe that "wealth money" will make for a painless switch from our current consumption based debt money system.  If it were this simple, there will be no ramifications to our last 30 years of excess.  I am sorry but I believe if it sounds too good to be true, it probably is.

NOTE:  This is not to say that the banks did not play their part in causing the depressions.  I dislike the current system just as much as you, but possibly for different reasons.  I just am just fairly skeptical of most of the proposed "wealth money" solutions.

DrKrbyLuv wrote:

Can anyone point me to a time period where too much money was available?  What evidence is there to support that claim as opposed to having a shortage of products/materials?

I have herd this argument from Byron Dale several times and I am still amazed it is used.  It is hard for me to take a monetary system seriously in which adding counterfeit notes actually improves its function.  To make this argument seems to imply that money is equal to wealth and therefore we can increase wealth simply by increasing our money.   This seems painfully naive to me.

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Re: Council on Spiritual, Psychological, and Economic ...

goes211 wrote:

It seems to me that each of these events had a major bubble that proceeded them.  I am no expert but I belive that Austrian Business Cycle theory would argue that the damage was done during the bubble and it is only after the bubble has burst that the underlying problems are reveled and the need to restructure the economy becomes apparent.

You are free to believe that but it is simply not true.  I'm not an expert either but I know enough American history to document the fact that those depressions were brought on intentionally by private banks.  I'd be glad to do that but I don't think it would make any difference.  The United States fought the international banking cartel (was headquartered in the sovereign city of London via the Bank of England) from the day of our "Independence" until they eventually won in 1913.

Here are two quotes for you to consider:

"I believe that banking institutions are more dangerous to our liberties than standing armies.  Already they have raised up a moneyed aristocracy that has set the government at defiance.  The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."  - Thomas Jefferson  

"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation."  - John Adams

Regarding inflation and hyperinflation...the Wiemar republic is a good example of how hyperinflation takes root.  Hjalmar Schacht, currency commissioner, wrote "What drove the wartime inflation into hyperinflation was speculation by foreign investors, who would sell the mark short, betting on its decreasing value."

If you look you will find the same predatory practice took down Argentina, Russia, Mexico, etc.     

Larry

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Re: Council on Spiritual, Psychological, and Economic ...
DrKrbyLuv wrote:

goes211 wrote:

It seems to me that each of these events had a major bubble that proceeded them.  I am no expert but I belive that Austrian Business Cycle theory would argue that the damage was done during the bubble and it is only after the bubble has burst that the underlying problems are reveled and the need to restructure the economy becomes apparent.

You are free to believe that but it is simply not true.  I'm not an expert either but I know enough American history to document the fact that those depressions were brought on intentionally by private banks.  I'd be glad to do that but I don't think it would make any difference.  The United States fought the international banking cartel (was headquartered in the sovereign city of London via the Bank of England) from the day of our "Independence" until they eventually won in 1913.

Here are two quotes for you to consider:

"I believe that banking institutions are more dangerous to our liberties than standing armies.  Already they have raised up a moneyed aristocracy that has set the government at defiance.  The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."  - Thomas Jefferson  

"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation."  - John Adams

Regarding inflation and hyperinflation...the Wiemar republic is a good example of how hyperinflation takes root.  Hjalmar Schacht, currency commissioner, wrote "What drove the wartime inflation into hyperinflation was speculation by foreign investors, who would sell the mark short, betting on its decreasing value."

Believe it or not I agree with both of those quotes.  I also believe that you may be right and that the immediate cause of those depressions could have been the behavior of private banks.  The point I am trying to make is that there is some sort of balance in the economy.  When we go through a bubble of growth and the economy over expands or expands in the wrong direction, there will come a time when it will need to rebalance.  This rebalancing will not be pain free.  Even if these depressions were caused by or made worse than they needed to be by private banks, there was going to be some sort of economic rebalancing at some point and no amount of wealth money was goint to stop it.

I must claim some ignorance about the Wiemar hyperinflation.  What I will say is that I hardly find the comments of the currency commissioner of a country that has gone into hyperinflation, where he blames the problems on evil speculators, convincing.

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Re: Council on Spiritual, Psychological, and Economic ...

To make this argument seems to imply that money is equal to wealth and therefore we can increase wealth simply by increasing our money.

We could increase our wealth with an increase of money IF newly created money was SPENT into circulation to pay for basic infrastructure.  This would bring an increase in the money supply with an increase in wealth, both things with are desperately needed.

There is a world of difference between SPENDING money into circulation and LOANING money into circulation, at interest or not.

Its a very basic concept really, and it so basic most people really have a hard time getting past their Emotional Belief System.

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Re: Council on Spiritual, Psychological, and Economic ...

Hi Jeff, yeah I think the only way we can get the monetary system addressed is if we can explain it in spiritual, emotional, social, philosophical, psychological, or whatever other non-monetary way we can think of.  As long as it's just an argument about spreadsheets, finances, accounting it will never be addressed.  That was my goal with CSPER.  But as you say, the spiritual dimension has been stricken from public view and causes fractures.  That makes it tough.  But my point is that, regardless of one's spiritual persuasion or religion, the scale growth of the debt-based monetary system has reached a point where it crowds out everything else, including all forms of deeper meaning and deeper ways to spend our time...all time has been monetized, so anything that doesn't generate wages gets pushed to the backburner.  Everyone except bankers should be able to agree with each other on that point without resulting in religious wars. 

And regarding your other post, I think the nice aspect of the debt-based monetary system is that it's a very efficient method of pricing and allocating money.  If money only gets into existence based on someone agreeing to go into debt and work to monetize it and pay it off, then that's a powerful method of ensuring the money is worth creating.  But of course given the last 10 years, we know even that doesn't really work.  But the solution I'm endorsing at this point (Freedom's Vision at www.swarmusa.com) only replaces debt-based money at the federal level, i.e. the US should create its own asset-based currency, then the state banks and commercial banks would still do their thing with debt-based money but with a different regulatory framework.  So basically this would increase base currency (M0) and draw down M1-3.  I don't believe that's inflationary at all. 

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Re: Council on Spiritual, Psychological, and Economic ...

Goes and Larry 

I am no expert either but in my reading of history I think you are both right. Goes I agree they were preceded by a bubble. In the twenties we had the forerunners of Helicopter Ben ,the 800 pound gorilla jumping on one end of the see saw with bags of money which fueled the bubble. 

Larry the private banks with the fed at the top of the pyramid were the mechanism for flooding the country with cheap money and everyone jumped on board and bought stocks on margin.

The banks pulled the credit and there went the bubble.

We are seeing the same basic scenario played out again.

One of my favorite quotes of recent times is by James Carville when he said if he was going to be reincarnated he wanted to come back as the bond market.

V

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Re: Council on Spiritual, Psychological, and Economic ...

V wrote:

I am no expert either but in my reading of history I think you are both right. Goes I agree they were preceded by a bubble. In the twenties we had the forerunners of Helicopter Ben ,the 800 pound gorilla jumping on one end of the see saw with bags of money which fueled the bubble.

Cheap money and margin purchases no doubt set the market up for a crash in 1929.  But that was not the cause of the depression.  Nobel Prize winner in economics, Milton Freidman explained what happened:  "The Federal Reserve definitely caused the great depression by contracting the amount of currency in circulation by one third from 1929 to 1933."

Louis T. McFadden, Chairman of the House Banking and Currency Committee said: "[The depression] was not accidental.  It was a carefully contrived occurrence...The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all."

Larry

 

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Re: Council on Spiritual, Psychological, and Economic ...
JAG wrote:

Like many others here, I've been following the work of Strabes (code name Damon Vrabel) with great enthusiasm. I thought it might be helpful to create a single thread to post and discuss the his articles and video presentations here.

Great work Damon and I look forward to the discussions of your work.

Thanks for creating this thread JAG.  I have not been following Strabes, but I will be from this point on.  These videos are very informative and helpfull in understanding what has been going on.  I have trouble getting people to watch the Crash Course, but maybe if I can get them to watch these videos first, they'll be more receptive.  Very impressive Strabes.  Thanks.

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Re: Council on Spiritual, Psychological, and Economic ...

Thanks Set.  In the intro video I'm planning to release, I'm going to mention that this series assumes viewers have some understanding of debt-based money, exponential growth, etc. because I say some things that will just be too different from conventional wisdom that it will make some people reject it outright unless they have some sense that the world isn't as we are told.  So in the intro I'm going to refer them to the Crash Course and probably Money As Debt.  But I think you're right that it could work for some people who want a strategic perspective before they're willing to dig into mechanics like the 3E's.

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Re: Council on Spiritual, Psychological, and Economic ...

Have any of you read Survival+ by Charles Hugh Smith?  It seems complementary to many of the topics that are discuss in Damon's videos.  I am only about 2/3rds of the way through the book but, so far I am really impressed.  It is not light reading but I think does a very good job describing the problems we face and why.  I am looking forward to the last 1/3rd where it spend more time on solutions.  I believe there is a shortened version that is available as a free PDF if you want to check it out.

http://www.oftwominds.com/blognov09/survival-plus11-09.html

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