Podcast

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Mike Maloney: This Is The Peak

To be followed by 'one hell of a crisis'
Sunday, August 28, 2016, 2:09 PM

Precious metals dealer and monetary historian Mike Maloney is quite confident the liquidity-driven 'recovery' created by the world's central banks is now over. In his estimation, the path ahead is one of accelerating descent into inevitable currency destruction:

What the central banks are doing has never worked and they keep on trying – you just hit that nail a little bit harder each time because it isn’t working. They have these theories and they think that the theory is correct that this – and no matter what the results are they say well, we just didn’t do enough of it. Japan has been trying this for 30 years now and it hasn’t worked. These people are just absolutely dangerous. They are going to drag the entire world economy down. You talked about the helicopter money that is now happening in Europe and so on. That is going to be coming to the United States soon. Coming to a Central Bank near you.

It always has damaging results. They don’t look at this. It is a huge wealth transfer. The immorality of an entity and everywhere I go I take a look at – when I would go speak in Singapore or Australia, New Zealand, Malaysia, Colombia, Peru doesn’t matter – Russia – everywhere I go I take a look, I go on the websites of the central bank for that country and I start gathering information. I haven’t found a central bank that is part of the government. They are all private. Here is a private entity that is allowed to create currency and now they are buying bonds from corporations? They can buy stocks.  When they write a check and they buy something, currency is created and it enters circulation. A very large portion of it is Fanny Mae and Freddy Mac stuff. It is the mortgage backed securities. And so that means that they own real estate. This private corporation is able to counterfeit and purchase real estate legally. The morality of this is insane.

Keynesian economics isn’t even remotely plausible. But it's what is taught all over the world. They don’t understand fundamental economics. This is the problem that we have: all economies on the planet are being run by economists that don’t understand economics.

The purchasing power that is contained in currency is basically the agreement that we have as a society that we are all going to use that currency and we trust that currency and we store hours of our lives. We trade hours of our lives for currency. We work. That is the purchasing power. Then that currency measures the goods and services in a society. The true wealth. They think that they can actually print wealth. When they print new units of currency, the only way it can get purchasing power is the moment that it is spent in the circulation -- it has to steal it from somewhere else because it is empty when it comes into existence. There is no work that went into it. There are no hours of life traded for it. There is no product or service that it represents until it is spent in circulation and then it steals that purchasing power from all other units of currency. It is fraud. It is theft. They can’t actually stimulate an economy. All they can do is warp it. They can steal purchasing power from some areas of the economy and transfer it to another area of the economy pushing that area into a bubble. It is very, very disruptive.

Now we've got bubbles in stocks, real estate and bonds. This is going to be one hell of a crisis.

This is the peak – we have passed the peak of the bubble. It's now deflating. There is usually a little tiny roll over and then a huge crash. And the little tiny roll over is just starting right now. We are seeing it first in the top end (like luxury real estate), where the currency that was created by the central banks went to that 0.1% first.

Within the next few years you are going to see probably the greatest crash in history. I have often said that the crisis of 2008 was just a speed bump on the way to the main event. We are in the process right now of seeing this unwind.

Click the play button below to listen to Chris' interview with Mike Maloney (46m:37s).

Transcript: 

Chris Martenson:     Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. It is August 24th, 2016. Well, listen the monetary experiments, or should I say, the madness just continues. Here we are in August. We are looking at stock markets around the world either near highs or in the United States case hitting all time highs or near it. This morning, here we are August 24th and what do I see this morning, but gold took a big shellacking by one minute resolution on my screen. It is not nearly enough to detect what happened, 10,148 contracts dumped in that one minute window. Probably took 100 milliseconds to actually execute if I had the resolution – meaning, we’re still looking at shenanigans in the gold markets, but we are seeing shenanigans in all kinds of markets. And it starts here. 180 billion dollars of freshly printed liquidity courtesy of Japan and the European Central Bank now coming into the market on a daily basis.

In the case of Europe we are seeing the European Central Bank preferentially printing up money and now handing it to corporations through direct private placements, meaning money gets printed out of thin air and a corporation that has a bond they would like to sell, doesn’t even have to go to the open market it just goes straight into the European Central Bank. This is direct helicopter money from the European Central Bank to select preferred corporations. Who knows how they get picked, but if you believe it is an open, free, fair transparent process I have a bridge to sell you.

Here we are, we are living under regime of extreme financial repression. It’s global. It’s larger than any attempted before. Pensions are suffering really badly. Savers are getting killed; endowments are bleeding but speculators and big trading outfits with insider connections – the closer the better – they have advantages and they are having a field day. But how do we protect? How do we protect our financial wealth during such times? Now that is always one of the bigger questions I field. It is a really large one and I am glad to have us have an expert today to help us make some sense of this. I can think of nobody better to invite back to the program than a good friend of mine, Mike Maloney the founder and owner of GoldSilver.com. He is the man who funded and produced the absolute gem of a series called The Hidden Secrets of Money. Let’s just get started.

Mike, it is so good to have you back on the show.

Mike Maloney:         It’s great to be back, Chris.

Chris Martenson:     Alright, Mike.

Mike Maloney:         Thanks for having me.

Chris Martenson:     Oh, it’s great to have you. Hey, here is a softball. How much do you trust what the Central Banks are up to?

Mike Maloney:         Well, I think that laugh says it basically that you know, the thing is what they are doing has never worked and they keep on trying – you just hit that nail a little bit harder each time because it isn’t working. They have these theories and they think that the theory is correct that this – and no matter what the results are, they say well, we just didn’t do enough of it. Japan has been trying this for 30 years now and it hasn’t worked. These people are just absolutely dangerous. They are going to drag the entire world economy down. You talked about the helicopter money that is now happening in Europe and so on. That is going to be coming to the United States soon. Coming to a Central Bank near you.

It always has damaging results. They don’t look at this. It is a huge wealth transfer. The immorality of an entity, and everywhere I go I take a look at – when I would go speak in Singapore or Australia, New Zealand, Malaysia, Colombia, Peru, doesn’t matter – Russia – everywhere I go I take a look, I go on the websites of the central bank for that country and I start gathering information. I haven’t found a central bank that is part of the government. They are all private. Here is a private entity that is allowed to create currency, and now they are buying bonds from corporations? If you look at the – what they are allowed to do, they can buy stocks. They are actually buying up - -if you look at the Fed balance sheet very large portion of the assets that they purchased to be able to create currency – that is how they create it. They buy an asset. When they write a check and they buy something currency is created and it enters circulation. A very large portion of it is Fannie Mae and Freddie Mac stuff. It is the mortgage backed securities. And so that means that they own real estate. This private corporation is able to counterfeit and purchase real estate legally. The morality of this --  there is insanity going on.

Chris Martenson:     The point I try to make – that the largest land-owner or real estate holding entity in the United States today is a private growing concern that prints money out of thin air and now owns about $1.3 trillion worth of US residential real estate.

Mike Maloney:         Yes. It’s crazy. This is insane. The average person - this stuff does come out on mass media, but the average person can’t connect the dots. They don’t know it is this corporation that is owned – the stock in the Federal Reserve is owned by the world’s largest banks and so –

Chris Martenson:     Wait, wait, wait, wait. The average person might be catching on. I know you produced a video about this I loved. The Federal Reserve did something crazy foolish. Even as foolish as the money printing they started up a Facebook webpage – I loved the comments that showed up under that. I loved it.

Mike Maloney:         Aren’t’ they great? I mean the jig is up, basically. Everybody knows that the Federal Reserve does more damage than good. Yea, the comments – one of them was, “Quick question – I am trying to take over a country through enslavement and currency debasement. Have you got any pointers for me?” I loved that one.

Chris Martenson:     I posted my own under there, and I said along the lines of, “Hey, guys at the Fed. I’m sure you know this, but you are attempting to create infinite exponential expansion of monetary claims on a finite planet. I know you have done loads of studies to show how you can do this sustainably. I haven’t been able to find them. Could you please point me to them. Thanks in advance. Anxiously awaiting your response.

Mike Maloney:         Excellent.

Chris Martenson:     I haven’t heard from them yet. I am waiting.

Mike Maloney:         It is a question they can’t answer. Keynesian economics isn’t even remotely plausible. This is what is taught all over the world. But you know, there is a fundamental – the purchasing power that is contained in currency is basically the agreement that we have as a society that we are all going to use that currency, and we trust that currency and we store hours of our lives. We trade hours of our lives for currency. We work. That is the purchasing power. Then that currency measures the goods and services in existence in a society. The true wealth. They think that they can actually type wealth. When they type new units of currency the only way it can get purchasing power is the moment that it is spent in the circulation it has to steal it from somewhere else because it is empty when it comes into existence. There is no work that went into it. There are no hours of life traded for it. There is no product or service that it represents until it is spent in circulation, and then it steals that purchasing power from all other units of currency. It is fraud. It is theft. They can’t actually stimulate an economy. All they can do is warp it. They can steal purchasing power from some areas of the economy and transfer it to another area of the economy, pushing that area into a bubble. And so, it is very, very disruptive.

They don’t understand fundamental economics. This is the problem that we have. All economies on the planet are being run by economists that don’t understand economics.

Chris Martenson:     It is absolutely true. The shorthand version and I love what The Hidden Secrets of Money does for this and anybody who watches that or takes a tour through the Crash Course hopefully you come away with the mechanisms of money creation because it is all gobbled gook until you strip it away. Then we can say things like you can’t print your way to prosperity. And so that is shorthand for the idea of what is under that is what you are suggesting and eluding to and stating even more directly is that when monetary printing happens you literally take from somebody and you give it to somebody else. The Soviet Politburo Crop Reports and command and control economy said, hey that doesn’t work having a small committee of people deciding who should win, who should lose and how much investment should be made in a specific area. Turns out that is not the right way to go about that. We reject that when we call it Communism, but we accept it when we call it the Federal Reserve. I don’t understand why. Let’s look at it simply.

Central Bank –

Mike Maloney:         We reject it when it’s called Communism, but we accept it when it is called Keynesianism.

Chris Martenson:     Here it is – it is simple. Like Japan, Japan says oh we got a – we need a weaker currency because that will help us somehow. We got to keep this Ponzi scheme going so weaker currencies could. So they debase their currency badly, starting in November 2014 and they jam it down about 26, 30% compared to the dollar. Next thing you know stock price of Sony or other exporters is going up. Right? The problem is that all the people of Japan who rely on imports, and it is an importing for a lot of its food, all of its fuel, etc. they were just getting killed by this process. It was really just saying all of you people of Japan, we are going to take purchasing power out of your pockets and we are going to give it to Sony. We like what Sony is going to do with it. That is what the transfer was. It is as direct as that. Every tick down in the yen helps somebody down in Japan let’s call it a corporation and it hurts somebody else, we will call them an elderly person on a fixed income who has to live off of imported food and fuel. It’s just a transfer. How does anybody think that a transfer is helpful to the system?

Mike Maloney:         Well, it’s beyond that transfer the government their whole existence is redistribution of wealth, right, through taxation and so on. You have got the central bank doing this evil think basically – warping the economy creating bubbles and taking through fraud and theft; they are stealing purchasing power from the average person like you said, transferring it to Sony and making exports a little bit more attractive, but making all imports to Japan a whole lot more expensive. It has nothing to do with the free market balancing imports and exports so one day it will crash. When you look at government redistribution of wealth it is a little bit more efficient for a central bank to do this redistribution of wealth that you can’t see. A smoke and mirrors redistribution by printing currency. Devaluing currency and so on. When the government taxes and spends they have to run it through all of these frictional layers where there is lots of purchasing power. There is no possibility that there is anything that the government can do for anybody that is a net positive society because there is a whole bunch of people that aren’t producing something that you would open your wallet and purchase. When you pay the IRS, all the people at the IRS have to get paid. They have got to make a living. They have to eat. They have to support their families and they all get a little tiny fraction of what you have paid. Then it goes to the Treasury. Then Congress votes on some bill. By the time they create a department and everybody in the department gets paid – then finally there is somebody that teaches your kid; that comes at an expense that is twice as high as if you can just pay the person directly, the teacher directly the way the free market would do it.

Everything the government does for us comes at a net loss for society and the redistribution there is frictional forces that absorb this economic energy on the way there. I mean the people at the Fed have to get paid. Not only does it just redistribute the wealth, there is a loss in that redistribution. Not letting the free market work actually it shortens life spans. It makes us all poorer. It makes for a dirtier environment. If you look at economicfreedom.org or – economicfreedom.com or freetheworld.org you will see that the reports on economic freedom clearly show that the less regulation you have, the smaller the government is, the greater the integrity of the court system, the protection of property rights and the soundness of money – the soundness of the currency that they  use, whether they manipulate it or debase it or not if they just leave it alone when you have very little regulation, small government and sound money, it creates maximum prosperity. The countries 157 countries annually now. The results go into a spreadsheet. When they sort the spreadsheet, the countries that have the greatest economic freedom that flowed up to the top the people lived 20 years longer than the countries where they are trying to take care of everybody, where they are trying to redistribute everybody’s wealth. Where they are trying to – it is –

When you do these manipulations - the central banks - they are not committing murder because they don’t know that they are shortening people’s life spans. But they are committing manslaughter.

Chris Martenson:     That is certainly very direct. Now I want to – listen, in this podcast I would love to direct people to - the systemic issues are really well laid out in the Hidden Secrets of Money. I have got some in the crash course. Those are the two best ones I know of. Yours is hands down I think the best description of the monetary process that exists out in the world today. It is just fantastic. The quality, the detail, the level of insight that went into it. Without going into it now I want to direct people to that because you took the time to really look at how it is playing out worldwide and also historically how it has played out in the past. The  summary, if I could be so bold as to say, this time is not going to be any different. We have tried this thing many, many times as humans. We want that free lunch. We want to think we are clever enough to sit around a mahogany table with a dessert trolley nearby and make a command decision that will play out for everybody. It just doesn’t really work that way.

The systemic issues they are out there they are recorded. I want to turn now to why the jig might be up. We know the jig is going to be up sooner or later. And we know that every time the jig is up for different reasons. The crash of 29 happened for a very different set of reasons than the land speculating crashes that have happened throughout or the railroad crashes or the housing bubble that started bursting in 2006 and 7. This time, what is different this time the central banks have printed all these giant gobs of money – 16, 17 trillion dollars at last count. Handed it over to the speculators in the top end of the financial markets. They pretended to be confused by why there is this amazing wealth disparity that popped up. No surprise to anybody who understands that that is how these things work. It is a feature, not an accident. So, I think my theory here Mike is that we have to look at the tippy, tippy top. Not the 1% but the .1% because they were the major recipients of this largess. That is where we need to look for the first signs that the jig might be up. I have recently noted that the Aspen real estate markets have rolled over. The Vancouver market, London property prices, Trophy in particular, New York City. We are seeing now some signs that say the tippy, tippy top, for whatever reason, is retracting its horns. Are you seeing this?

Mike Maloney:         It is very different. Every bubble pops differently. The manipulation that the world’s central banks did after the crisis of 08 has caused extreme bubbles. The bubbles this time the first bubble that popped this century was the NASDAQ bubble, so stocks. The next bubble was stocks and real estate. This bubble is stocks, real estate and bonds, because for the central banks to create currency their major purchase is some sort of bond, some sort of debt instrument. When they purchase something, like I said, it creates currency. They have been doing this extraordinary stimulus, and when they purchase bonds they are adding to a market. So, that pushes that – that is one of the mechanisms that pushes a market into a bubble is when a central bank gets involved in that market, starts buying.

And so, now we have got bubbles in stocks, real estate and bonds. This is going to be one hell of a crisis. What was the question again? I went off on a tangent.

Chris Martenson:     Well about how we might be detecting the jig is up.

Mike Maloney:         Yea, I did a report on the New York real estate recently and I think the Vancouver dropped 20% in one month. This is the peak – we have passed the peak of the bubble. It is now deflating and, the thing is, there is usually a little tiny roll over and then a huge crash. And the little tiny roll over is just starting right now. But we are seeing it in the top end as you said where the currency that was created by the central banks went, to that .1% And we are also seeing some problems in China. You know I went to China to film an episode for Hidden Secrets of Money that is not out yet. I hope to get it out before the bubble pops because the bubble there was a government mandated bubble. Those bubbles can persist a lot longer than a bubble that comes from a manipulation of the free market, where the free market is still allowed to exist. When it is a government directly creating the bubble and they were creating – the building that was going on, government mandated building, was creating a real estate bubble there that was just unlike anything you have ever seen.

We are going to see in the - -within the next few years you are going to see probably the greatest crash in history. I have often said that the crisis of 2008 was just a speed bump on the way to the main event. Yes, you are right. It has gone to the top 1/10 of 1% we are in the process right now of seeing this unwind.

Chris Martenson:     I agree. I think that a lot of people get their signals from the stock market. I believe in my heart of hearts that the US stock market and many others are fully manipulated at this point in time, meaning that because of the overt level of computerization it is really child’s play to get into a leveraged market, say, through futures or options and throw a few million, 10s of millions maybe 100 million and really stop the direction if the market is falling or put a bid under it or really goose it the other direction. It is really child’s play and I know that in my heart of hearts these are being manipulated, because that is what I would be doing if I had created these frankenmarkets. They really can’t fall at this point in time. They are really not a good place I think to look for the early signals. I think the stock market ends up falling on its own at some point, because it is going to have to. The early signals, that is the question – where do you look to see that the jig is up. For me, I connect my anecdotes – collect them. One is going to these big wealth conferences with you know high end pension, endowment and family office money. They are nervous. They get it now. I used to a contrarian at these things. Now, I am uncomfortably not. I am just another guy going yea, this monetary stuff is crazy, right?

That is where I am starting to collect those anecdotes in the real estate market. This is going to come in a completely different way. If what you said is really critical here this isn’t a stock bubble. This isn’t a real estate bubble. It is not a bond bubble. It is all free. It is really an experiment that began somewhere in the late 70s that is coming to its final conclusion. This is the mother of all bubbles.

Mike Maloney:         Yes. Another one of the warning signs that tip off – right now, the stock market is up. But I am looking at a chart of the Dow Jones Industrial Average divided by the price of gold. The Dow Jones – one share of the Dow was worth 17 ounces of gold at the end of November of last year. Today it is worth about – let me see it is 13.78 was the close yesterday. It has gone from 17 down - -the Dow has gone from 17 ounces of gold to 13 ounces of gold. You got an invisible crash going on. Everybody thinks the stocks are rising. Stocks are not rising in all forms of money. In precious metals stocks are falling, because precious metals have been rising at a faster pace than stocks. Now during some forms of economic collapse, the stock markets appear to be doing very well. But if they are not rising at a faster rate than the inflation rate, it is called an invisible crash, because you can be invested in a stock market and it can go up 100 fold, but if prices go up 200 fold you have lost 50% of your purchasing power. That is exactly what happened during the Weimar Hyperinflation. We have seen it. It is happening now in Venezuela.

Venezuela - I did a video back in 2013 showing some of the problems of Venezuela and I wrote an article in 2013 or 2014 about Venezuela - that the medical care is breaking down. The middle class is gone, and the next steps are hyperinflation and revolution. In the Hidden Secrets of Money you know, we interviewed Max Kaiser one time. He was talking about the risk reward of revolution. When it comes to not being able to feed your family; when the price of food and the scarcity of food gets to a point where you can’t feed your family the risk of being killed in a revolution, the reward of having a revolution and potentially being able to feed your family again is greater than the risk of being killed.

Chris Martenson:     And that is Venezuela today, certainly.

Mike Maloney:         Venezuela today what worries me is we are going to be seeing this in a lot more economies. This next – this bubble that is going to pop; I sure hope that people eventually see. What is going to happen is the Keynesians are just going to continue doing what they do. The only thing that they can do is print currency and try and manipulate interest rates. They are going to continue doing that. It is going to become more and more extreme.

When I updated my book one of the things that I found recently when I was on the Fed’s website; I looked at the tax revenues that come into the government. I saw a chart that looked to me very similar to the stock market. I started comparing them. I discovered that before the year 2000, when the stock market fell, it did not really affect tax revenues in the United States unless you go all the way back to the Great Depression. After the 29 crash tax revenues fell dramatically. This time we have all these tremendous levels of debt, the Federal debt. There is private debt and everything else. We are so leveraged out that deflation - they just cannot allow that to happen. And during this next crash, the amount that tax revenues are going to fall is going to threaten the survivability of our own government. At that point, the Federal Reserve has to print and print and print to try to get – if the tax revenues follow the stock market, which they do now since the year 2000, in order for the government to survive the Fed has to come to the rescue.

Well, you know, they had to create about I can’t remember 3, 400% more base currency than existed before the crisis of 2008 to get us out of that crisis. Well, now we have base currency, instead of .8 trillion, we got around 4 trillion. So you know, you quadruple that and now we have 16 trillion of base currency, and that is about equal you know, you are talking about printing as much currency for base currency that currently exists in M2. We are up to about 18 trillion dollars worth of debt, and 18 trillion dollar currency supply – something like that. I haven’t checked in the past few weeks.

This is what the Keynesians, the trap they have gotten us into.

Chris Martenson:     Right. For those following along at home – the theory involved here is that well we have this crisis. We have to fight it, but the trajectory is that the story is it was a little crisis met with a little significant response. I will call that 1994, 95 and then there was a 1998 crisis a little bit larger. So a little bit larger response 2000, bigger yet. 2006, 7 bigger yet. So here we are. The responses that we are getting are larger and larger. The trajectory of the story is, and I think you would agree with this, Mike, they are going to keep doing this until it just breaks on them. When it breaks we would agree it is going to be fast, furious, a little bit ugly. A little nasty brutish and short. We get to this part which is well how do people protect themselves. You and I agree that gold is a way to do that. It is really a hedge against monetary madness and systemic risk.

Mike Maloney:         Gold, silver, emergency food.

Chris Martenson:     Yea, those are the basics there. But, this is something you and I have talked about I would love to get here recorded, because that is also proven risky or really close into the business and risky because there have been some notable failures in the gold and silver dealer network, and so this is something I want people to buy gold and silver, but I don’t want them to be exposed to either scams or just inadvertently poorly run businesses that they get caught into. Let’s talk about that a little bit. I think it all began with Tulving going under a while back. I know some people who got caught in that.

Mike Maloney:         You know, the problem here is there is a whole lot of people, when they first learn about gold and silver they try to find a dealer. They go around and they shop. They are looking to save that last one quarter of 1%. The problem with that is all of the dealers purchased their precious metals at very, very close to the same price. This is – if it is bouillon, if it is not collector coins, if it is bouillon, there is a worldwide spot price. You pay a premium for physical. The spot price is determined by paper contracts that are traded on the exchanges. There is a little premium for physical that the dealers have to pay. Then they have to make enough, not only to survive, but to ensure that they have a well run business. There are certain insurances that they have to purchase. There are certain accounting methods. If you are not spending 20 to 50,000 dollars per month on your website to make sure that it stands up to industry best practices, that it is not likely to be hacked and such, you are putting your customer in danger. You have to have a certain amount of cash flow, and you have to have a certain profit margin.

There are dealers out there that a merchant account, when people make a credit card charge, the merchant services from the bank takes about 3% if you are a bullion dealer. That is what the bullion dealer pays for anything that is charged on a credit card. Well, if you – people – a lot of retail people do not know, the customers do not know, that when there is fraud on a credit card, they get to look at their credit card statement and say oh these charges weren’t mine and they don’t have to pay anything. Well, the bank doesn’t lose any money. It all comes out of the vendor’s pockets. The dealer that has sold the merchandise is the one that ends up taking the loss. If you don’t have insurance to cover that, which is another 1%, then you are exposed to those potential losses. And what happens is you go along and everything is fine for quite a while. Then the fraudsters, all the internet the thieves on the internet the people that buy stolen credit card information, they figure out some new scam. Suddenly, there is a flurry of charges that go bad. The thing is, as a dealer you don’t find these things out for 60, 90 or even 120 days. Because you don’t find out that somebody charged gold on a credit card and you shipped it to them until after the person that had their credit card number gets their bill 30 days later and then catches that there is a fraudulent charge on her bill and disputes it. They got time to do that. You find out when the bank comes and rips that currency out of your account. If you don’t have the insurance to cover that, it can put you out of business because these fraudsters discover a new method and suddenly there is a whole bunch of charges that go bad.

I know there are dealers out there that aren’t making – we have gone through a period of margin compression right now. What happened was when gold was going up toward $1900 and silver going up toward $50 back in 2011, a whole bunch of people jumped into the business. A lot of them are small and they are run very lean. And running lean is a good thing unless you are putting your customers at risk because you are not running it properly. It takes a certain amount of profit margin to be able to have all the security that a properly run business needs.

Through this period of margin compression we went through some periods where there are shortages of precious metals. The spreads rise, the dealers are allowed to make a little bit more. Then through a period that we have been through through the last couple of years here there has been – there is supply, the dealers start fighting for market share and they do that by dropping prices. If you are not buying from one of the big dealers out there, you can be putting yourself at risk, and shopping to try to save that last half percent – between Tulving, Bullion Direct and Northwest Territorial Mint you are talking about more than $50 million worth of gold that people paid for that never got delivered. So people got hurt to the tune of $50 million. You want to make sure that you are not exposing yourself to that. You got to choose a large, strong dealer. And it may cost a quarter percent more to ensure that you are going to get your gold and silver.

Chris Martenson:     Absolutely. So that margin compression a really important idea and it is important for people to realize that even though you are spending I don’t know 50, 100, 250,000 dollars on gold, it is a big ticket item. It is not like purchasing a car. The margins on these in most businesses that I have looked at is about 2% between the bid and the ask. 2% is –

Mike Maloney:         Depending on the size of the order it can be as low as one quarter of a percent a dealer is making. Yea. With this fight that is going on, the margin compression is making it – I know that there are dealers out there that are going to be going out of business. This is just what happens during these periods. I just worry – caution the listeners to – and another thing you should know who you are buying from. If you can’t find out who owns the corporation, who is running that dealer, then you probably shouldn’t be buying from them, because there is no reason for anybody to hide. You should always know the proprietor of the business that you are dealing with.

Chris Martenson:     Let’s add it up for people then. Obviously, a larger corporation that has been around for a while, that would be good. You want to know who owns it. You just said that. If it is too good to be true, it probably is. So, if there is an extra special deal out there maybe a yellow caution flag ought to go up. But the red caution flags need to go up when people are starting to report long wait times associated with a purchase. What else should people be looking for?

Mike Maloney:         Long wait times, though, can also happen to some of the larger dealers when there is a shortage. There is going to be shortages again. There will be rushes on gold and silver. There are, periodically.

Chris Martenson:     Yea, that is a good point. I was talking about right now. There probably shouldn’t be any long wait times today.

Mike Maloney:         No, there aren’t. There aren’t. So what was that question again?

Chris Martenson:     What are the things on the checklist for people to ask and perform due diligence and apply a little common sense to? Knowing who owns it. If it is probably too good to be true it probably is. Long wait times. What else?

Mike Maloney:         Well, there is some corporations that are much, much larger than others, and very financially stable. I don’t want to particularly name them. There is – it is how long they have been in business and how big they are; how many customers they have got. This helps. But just be very, very wary if you are looking for the absolute lowest price. There is a middle range. There are people out there that are too expensive but there is also people that are too cheap. You want to be careful with - that is the biggest red flag for me is if they are the lowest - -Tulving was the lowest price out there. He was not operating his business with all of the checks and balances required, and the insurances required to make his business robust enough to withstand certain forces and downturns and so on. Bullion Direct was a fraud that was going on. They never made a profit. They were in business, I think, for 15 years or something. They never made a profit. They had an exchange going on where people would leave their precious metals in storage. There was about $25, $30 million lost with them. And so, it is just something to be very wary of, for your customers – for your listeners, I mean, because I want your listeners to be safe.

Chris Martenson:     Me too, of course. The summary here is that selling gold and silver bullion. It is a business. Just apply the common sense you would apply to any business. It is like you are walking into a storefront and you could normally detect these things by observing you know by looking around. It is a little bit different online. A little extra due diligence. I think this is good to understand. If it is too cheap it is – there is going to be a risk there. Just understand there is a risk. The risk has caused $50 million lately, as well. And then there is other – if it is too expensive it is too expensive. There is a middle range and there is a way to parse that. Yea, apply the due diligence.

Mike Maloney:         Another thing I would caution your customers against is, when I wrote my book, there was a section on beware of the pitfalls. Almost all scams, the vast majority of them, come from – it involves numismatic coins. Collector coins. Collector coins we were talking about these small premiums of one, two, three percent basically is what the premiums are on bouillon. On very large orders it can be a whole lot less than that. As I said it can be basis points. But when it comes to collector coins premiums are typically somewhere between 15 and 50% profit margin. One of the things that I said in my book; if you are getting into collector coins as an investment and expecting to make money on them you should know more about them than your dealer. And if you don’t, then my suggestion is to steer clear of collector coins. I do know people that have been hurt on collector coins, even while the price of gold doubled, as they bought back when gold was $700 an ounce. They ended up losing on their investment of gold coins, because profit margin on them evaporated. If you are buying bullion from a bullion dealer that is making 2% ,the buy/sell spread to the customer, there has to be a profit in both directions to keep the business alive. There is going to be maybe a 3 or 4% difference between what you buy the product for and what you sell it back to the dealer for. That means that gold has to rise three, four, five percent and you are in profit. But if the spread is 15% or 50%, then gold has to rise that much to be able to get into profit.

Chris Martenson:     Well, all fantastic advice. I love your wisdom and your experience in all of this. In closing, I have to know, when is the next installment of Hidden Secrets coming out? What do you have planned?

Mike Maloney:         Well, we have it scheduled to come out within the next couple of months. Then we should have about three a year. These are – my passion is the education. That is what – we have started serving banner ads and things like that. For the past several years – well, since the inception of my company, what we have done is give people information for free. That is basically our marketing. We give something to the customer first. If they like us and trust us, then they come to us and purchase. We take those profits and we plow it back into education. All of our competitors create ads, instead. Producing these episodes is not cheap. It is a very expensive endeavor, and there are periods of time where there is a greater reward than others that comes out of it. We got – we should be producing about three per year. There is one coming out within the next few months.

Chris Martenson:     Well, excellent. I am looking forward to it. I hope that everybody listening is looking forward to it. They are a real service. They really are. They are a service, I think, to humanity. And if I can be that broad – it is for anybody who takes the time to view them, they get smarter and they learn something. This is – context is so important right now. About context, it is like we are in a cage being shocked and we don’t know where the shocks are coming from. That is very maddening. Get the context. Watch the Hidden Secrets of Money. We have been talking to Mike Maloney. Mike, such a pleasure as always.

Mike Maloney:         Thanks a lot for having me, Chris. It was great.

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47 Comments

New_Life's picture
New_Life
Status: Silver Member (Online)
Joined: Apr 18 2011
Posts: 188
Gold price swings..

Been watching Harry Dent's interviews with Mike M, adds interesting perspective on the discussion of deflation then inflation (after more "stimulus")

climber99's picture
climber99
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Posts: 176
Three initial points.

Three points.

Firstly: money is a token for energy/resources and not a store of work we have done in the past.  ie you may have worked hard and hoarded lots of money but this is worthless if the energy/resources are not there when you want to spend it.  During our energy descent people are going to be very disappointed in the purchasing power of their savings/pensions/entitlements because the energy/resources simply won't be there in the future in the quantities promised by the Cornucopians.

Secondly:  95% of all money in circulation is borrowed into existence.  Therefore it has to be paid back eventually.   Central banks will force you to spend your money into circulation so that outstanding debts can be repaid. No one has the right to save (hoard money) indefinitely and If you think otherwise be prepared to be disappointed.  It will either be inflated away, incur negative interest rates or just be confiscated outright.

Thirdly: Energy/resources will preserve purchasing power not money in the long term.  ie productive land, commodities and mining

 

pat the rat's picture
pat the rat
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Posts: 99
pension

If the bond market collapse,then the pensions will collapase also, nobody will have any money then ! 

dryam2000's picture
dryam2000
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Posts: 279
The Fed has not made any "mistakes"!!!!

Just because the Fed says its goals are such & such, and their rationale for what they are doing is such and such doesn't mean that's what the Fed is really up to.  I propose that what they put forth in public is just a huge smoke screen for what they are really up to.  The Fed went from owning virtually nothing to being the largest land owner in the U.S.  I wish people would stop thinking and saying "how stupid & ignorant the Fed is".  The Fed is getting wealthier & wealthier (by doing virtually nothing) while you and I are not.  I ask, who is the stupid and ignorant one?  They are not trying to "fix" anything.  The Fed is doing what's best for the Fed (ie, the private bankers).  

If your business has become the most successful business in the country, how can anyone say they have made any "mistakes"?  To the contrary, the Fed has been hitting it out of the park.  They are the most successful private entity in the history of the world.  Clueless is the last thing the Fed should ever be called.

 

sand_puppy's picture
sand_puppy
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Posts: 1756
Dumb Central Bankers

Edit:  dryam2000 and I are channeling the same voices here!!

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

The great debate is whether 1) the central bankers are egalitarian at heart and have just "misunderstood economics" and accidentally created a system that shifts wealth into the hands of the already very wealthy, or 2) realize that this system that shifts wealth from the commoners into the hands of the ultra-elite is great (for them) and deliberately continue it.

A couple of quotes from a facebook posting of this podcast.

"The powers of FINANCIAL capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences." -Caroll Quigley

"Bankers own the earth. Take it away from them, but leave them the power to create money, and with a flick of the pen they will create enough money to buy it back again ... if you want to continue to be slaves of the bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit." - Sir Josiah Stamp, Former Head Of The Bank of England

Time2help's picture
Time2help
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Regarding Dumb Central Bankers

They may be many things but dumb is not one of them.

Not with respect to the real goals and aims of their policies.

davefairtex's picture
davefairtex
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Posts: 5062
that's always the question

Is the Fed evil, or just stupid?

Duck is moving across the surface of the water.  Is he paddling furiously underneath, effort unseen by the observer, or is he simply drifting with the current?

Certainly mainstream view says "Fed saved the day in 2008 and they are doing their best now."

Now we hear rumblings from major financial players (Bill Gross, for instance) who say "Fed is now making some huge mistakes."  (And the non-mainstream has been saying this forever.)

And of course the non-non-mainstream people take it a step further, saying this alleged "failure" was really the plan all along, and the folks at the Fed are super-clever con men, and are just treating us like chumps and suckers.

Some thoughts:

  • "Never ascribe to malice what can adequately be explained by incompetence."
  • "Generals (and the Fed) always fight the last war."
  • "In for a penny, in for a pound."
  • "[The Fed's understanding of economics] advances one funeral at a time."
  • "Mainstream economic models don't include banks, debt, or money."

Fed is staffed by the best and the brightest who have all be trained in this particular brand of economics.  To abandon or even question their basic theories 40 years into a career is psychologically impossible for most people to successfully do.

My sense - there may well be a plot going on in the background, and I'm sure much of the top 0.1% are laughing all the way to the [money storage facility], but I really don't think the folks at the Fed are part of the plot.  Or really, even in the loop.

Ultimately, the people who work for the Fed don't get well by "becoming the largest private landowner in the US."  They're paid like bureaucrats-plus, not like CEOs of large banks.  There's no "cui bono" smoking gun here.  At least not inside the Fed itself.  [I'm sure Yellen will do well once she leaves her job - but at least she's not making time for "Yellen Foundation" donors in her weekly meeting schedule.  Sheesh.]

http://time.com/money/3516794/janet-yellen-salary-fed-staffers/

climber99's picture
climber99
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Posts: 176
A religious gene maybe

This idea of finding someone, some thing or some entity (like the Fed) responsible for our predicament is quite amusing to me.  I guess it is a Human trait we have, a religious gene maybe, to have someone, supernatural even, somehow responsible for what we see around us. 

We are talking about complex issues revolving round the interaction between Capitalism, markets, evolution of our money system, pursuit of growth,  planetary limits to growth,  peaking and eventual terminal decline of Net energy from fossil fuels amongst many other things.  To blame the Fed or the evil 1% or who ever is just lazy thinking, very convenient and easy to convey to the general public who just wants easy answers to why the world has not turned out as promised by the Cornucopians.

Folks, bottom line.  All fossil fuels will be burnt by the end of this Century and an Agrarian lifestyle awaits us all.  No one is responsible.  It just is.

Carlos P's picture
Carlos P
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just a couple of notes on your points

In regards to your point nº1: Money is a claim on energy/resources as much as on labor. This distinction is irrelevant. Money is first of all a medium of exchange. In itself it is worthless. What it can buy is what matters, and that´s why the supply of money relative to goods and services available is important. As Chris as pointed out numerous times, a money system that requires continued growth will most likely not be suited to our future economy. Of course the availability of energy and resources will influence the amount of goods and services available, but this is a separate issue from the current illness of the money system. Even with a gold standard the same holds true for the future of the real economy, except that with a gold standard the transition should be easier and less disruptive

In regards to point n.º2: The problem here is that what you are describing and what the planners aim to achieve is actually impossible in accounting terms. I the current system it is impossible to paid back the debt without default (outright or through inflation), because every unit of debt you pay back is a unit of money you eliminate. In the end there will never be enough money (this kind of money/currency.. not real money=gold/silver or any other kind of commodity money) to pay back the debt.

newsbuoy's picture
newsbuoy
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Is the FED eviL?

Oh, Behave!

climber99's picture
climber99
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Hi Carlos

Hi Carlos.  Thanks for your response.  I would argue that our money system doesn't require continued growth.  I could be wrong of course but I feel our money system has evolved and will evolve again to serve our coming new reality of contraction.  Perhaps other ways will be introduced to provide money in circulation which is not debt based ie. a flat living wage given to everyone perhaps or some other method.

I can't see, mathematically, why my point no.2 is wrong.  5% of money exists as coins and notes.  The other 95%  in circulation is borrowed into existence and comprise of numbers on computerized ledgers.  Therefore it is out there somewhere to be repaid.  I cannot see a mathematical flaw in this reasoning.  Obviously if the money stays in people's bank accounts for very long periods of time instead of circulating then the system has a problem, as I stated originally.

davefairtex's picture
davefairtex
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money theory

climber-

Firstly: money is a token for energy/resources and not a store of work we have done in the past. ... During our energy descent people are going to be very disappointed in the purchasing power of their savings/pensions/entitlements because the energy/resources simply won't be there in the future in the quantities promised by the Cornucopians.

I think the second part will probably be right (absent "free energy"), but I don't agree with your theory of what money is.  One of those theoretical things.

To me, money is not a token of energy or resources, it is a marker for foregone consumption.  Its stuff that you could have bought, but didn't.  Because money is fiat, its just a strange cultural agreement we've made - it is an agreement not to consume today, in exchange for the ability to (probably) consume something else at hopefully near the same rate tomorrow.

However, the specific amount of stuff you can get for your foregone consumption changes as time passes, so if you want to consume at a much later date, your "exchange rate" could be quite a bit more - or less.  Example: if you wait, you will (on average) probably get less tuna, and more DRAM, for consumption you forego today.

Savings = foregone consumption.  Taking on debt = "living better than your income would support."  Repaying debt = "living worse than your income could support."

Secondly:  (1) 95% of all money in circulation is borrowed into existence.  Therefore (2) it has to be paid back eventually.  

I agree with (1) - except its more like 90%, and if you add in base money, then its more like 75% but that's a nit.  However I disagree with (2).  Many people never pay down their credit cards, only paying minimum balance, dying owing money to the bank, leaving the debts for their heirs to deal with.  Likewise, people who buy a new home, and move every 5 years, never end up paying down their mortgages.  In death it must either be paid down via an asset sale, or if the heirs wish to keep the asset, they must assume the debt. 

The only way you pay back debt is to live a little less well than you otherwise could from your current income - to forego consumption, just like savings.  But paying it off is absolutely not required, expected, or even encouraged.  Its not a systemic requirement, and at least from observation, it only happens when people start to get really worried about remaining employed.

Thirdly: Energy/resources will preserve purchasing power not money in the long term.  ie productive land, commodities and mining.

The trick is figuring out which of the "energy/resources" bucket is overpriced right now, avoiding it, and buying the one that's underpriced.  Ratios help with that: "ounces of gold per acre of productive farmland", gold/silver ratio, gold/copper ratio, oil/home-price ratio, and so on.

Arthur Robey's picture
Arthur Robey
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Assumptions need to be ferreted out.

 

  • We are assuming a closed financial system.  What if it's not? Catherine Austin Fitts.  (An obvious appeal to Authority. )
  • We are assuming that we have a firm grasp of Reality. We don't. Physics is in disarray.  Who knows what will be discovered, and blithely ignored, next.
  • We assume that the economic unit is the flesh and blood consumer. It is more likely to be the Company or other entities that don't require oxygen nor love. 
  • We are assuming that our assumptions matter. What if we are not the smartest kid on the block or that we are soon to be deposed? Quantum Computers spring to mind. We have already ceded the floor to algos.
  • Other hidden assumptions. 

Our Models of Reality are far too inflexible in my august opinion. 

Carlos P's picture
Carlos P
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Starting by the end: Well

Starting by the end: Well yes, 5% of the money supply is in physical form. Still, what matters is the asset that backs the coins and notes. For every time you repay a loan or other kind of debt instrument you extinguish the same amount of currency. At the limit.. to extinguish all debts you could have to redeem the notes and coins with the central bank. Anyway.. this is more of an academic discussion since it has a very low chance of ever occurring.. collapse would be reached much sooner than that. But the math holds.. and this is simple accounting. To liquidate a liability you need to consume an asset of the same amount. That is what happens when you pay back a loan.. you extinguish a deposit (and vice versa). Only in a a commodity based money system is this not true.. because the asset that backs the liability (coins, notes or  bank deposits) is tangible and not just a financial claim.

Our current system requires continued growth because if you wish to ever pay back the loans + interest.. there will never be enough bank deposits to do it. You have have always to create additional units of currency = more debt.. or default. This is why debt has been growing exponentially in the last 40 years.. and when at times it didn´t.. economic and financial crises have ensued.

AKGrannyWGrit's picture
AKGrannyWGrit
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Posts: 433
I Disagree

Gerald Celente has a saying, it goes something like this, "when people lose everything they have nothing left to lose"!  Perhaps the Fed IS stupid and ignorant because when Americans lose everything they too will have nothing left to lose.  What's the one thing we have left to lose?  An inhabitable planet, and the rich greedy bastards and their children have to live on this planet too.  There is no way to go back 100 years, our environment polluted and our weather unstable so either we change together, adapt or die.  I suspect revolution and mass die off are in the cards and when the grim reaper appears the Fed will cease to count their riches and bask in their power and instead reach for their environmental monitors, cans of beans and declare "oh shit, didn't see that coming".  No civilization of masters and slaves has endured.  

Smart and successful, not so much.

AK GrannyWGrit

badScooter's picture
badScooter
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Posts: 152
there is a difference

I think that there is a difference between "intelligent" and "cunning".  The savants running (and profiting from) the system are cunning, and very very clever about how they do what they do.  Doesn't make them at all smart.  I wish I could read a history book from 200 years in the future, about the current era.  We're living in the pivot, right now.

 

David Allan's picture
David Allan
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Right on Granny

 

Granny wrote ...and the rich greedy bastards and their children have to live on this planet too.

Indeed.

If the Fed are in fact evil geniuses masterminding a financial catastrophe, and if they can manage to control events as they unfold in all their unpredictable complexity (extremely improbable) they will find themselves (at best) in the position of mideval kings - which is still a big step down from where you and I and Joe Bloggs are today!

I have absolutely no doubt special interests are exerting their influence. Maybe I'm biased because I've always found win;win to be such an effective strategy but the 'world domination by financial destruction scenario' is unconvincing to me.

climber99's picture
climber99
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That old chestnut.

I was waiting for that old chestnut to reappear, namely that there is no way to pay back interest. 

Banks create money to pay wages, bonuses, capital expenditure, dividends, investments and any other expenses that they incur.  In effect they borrow from themselves.  This money thus created enters circulation into the economy and eventually comes back to the bank as 'interest' and the loan to themselves is wiped out. Banks aim to balance their books.

Debt has been growing exponentially because GDP has grow exponentially.  As more goods and services get traded you need more money in circulation and with it debt because 95% of money in circulation is created as debt.

Lets be very clear here.  Growth in GDP requires growth in debt. The crisis, when it occurs, will not be because of debt directly but due to a much deeper cause, it will be because we have reached the limits to growth.

 

 

davefairtex's picture
davefairtex
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how bank credit is repaid

Carlos-

So how can someone possibly manage to pay both principal and interest, when only the principal gets created in a bank credit loan?

Its actually pretty simple.  First we assume that the money supply is much greater than the size of the loan, and there is sufficient base money to enable the current economy to operate regardless of what happens with this particular loan.

Given that circumstance, P&I are both repaid, in small bits, from the money that flows through your account every month, from your income sources - the flow enabled by the pre-existing base money + bank credit.  No flow => you cannot repay, regardless of "how much money got created" when the loan was initiated.  Lots of flow => you can repay, even if NO money was created when the loan was initiated.  Corporate debt is an example of the latter; when a company issues bonds, no new credit money is created by that act of borrowing.  LIkewise, if you loan money to me, no money gets created there either.  Yet if I have a sufficient income stream, I can pay you back using a portion of my income stream, and the system doesn't go haywire or collapse.

Repaying loans via flow is what we all do every month.

The big caveat:

This assumes that the flow of money doesn't get "stuck" in someone's account - that money (in aggregate, over the long haul) is recycled.  Note: all money systems assume this also.  If money gets "stuck" in a bank credit system, it will cause big problems - but those same problems will occur in a gold-coin-only money system, in a "fully reserved gold standard" money system - in fact, in any money system, once an important actor decides to switch from spending to hoarding, the flow through the economic system itself will fall off, and a large number of people will not be able to repay.

They call that a Great Depression.

Last point.  Most people don't store the majority of their wealth in bank credit.  Mostly, they put it in houses, cars, bonds, stocks, and land.  This tendency of people to convert bank credit into other asset classes helps to recycle money too.

Carlos P's picture
Carlos P
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Dave I have to respectfully

Dave

I have to respectfully disagree. You can pay back the P+I of the loan if the total money supply keeps increasing, because somewhere, someone else borrowed a loan and new money was created. Then, that additional money will somehow flow to your account and when you repay the principal, that money is extinguished. the bank debits your bank account (liability) and credits the loan (asset). This is just accounting 101. The flow is just the same money going back and forth between different holders.

Regarding this statement "even if NO money was created when the loan was initiated" , I think you´re missing that the money that someone used to buy the bonds, already existed and had to come into existence by the only mean that new money is created, that is through a bank loan.

I stand by my reasoning. The key for me is this: Money is created through bank loans (either central banks or commercial banks), and is extinguished when you pay back the principal. The net interest collected by the bank becomes part of the bank equity, through profits. But no additional money is created by the interest earned.

I do agree when you say that the faster the money supply flows through different holder (velocity), the easier it is to keep paying the P+I without default, but this doesn´t change the basic premise that I described in the previous paragraph.

Edwardelinski's picture
Edwardelinski
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Princes of the Yen:

This is a financial documentary that breaks down and simplifies the ways in which central banks influence the world we live in not only in Japan,but,around the world.Insanity and evil doesn't begin to cover what they have done to there own people and the rest of the world!After watching,you will be unable to ever look at the country in the same way again."Only power that is hidden is power that endures."Highly recommend for economics teachers,traders and those that look for greater understanding....Brainbox may explode!

Jim H's picture
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CarlosP...

Being myself unable to respectfully disagree with Dave on these monetary matters.. I simply comment much less on PP.com than I used to.  I applaud your work though, and I encourage your voice here - Thank you.  

Chris has argued the same point with Dave recently.  For me this is settled science... we have a money system that has a fundamental flaw - it is dynamically unstable because it creates the money to pay back the principle, but not the money needed to cover the interest obligation (in a systematic sense).  The best the system can do is to keep expanding.. the expansion therefore acts to cover up this instability.  If one simply opens their eyes, it is very, very easy to see that the masters of the system are doing everything they can to keep it net inflating;

-  deflation, although beneficial to savers, has been demonized.  The system has been run in an almost constant state of inflation since the 1950's, in stark contrast to the way the system ran in the 1800's;

            http://www.advisorperspectives.com/dshort/updates/Inflation-Since-1872

-  Central bankers target positive inflation, usually 2%, even though their charter is for, "price stability". Duh.

-  The system has been demonstrably exponential for decades; 

http://www.peakprosperity.com/blog/exponential-money-finite-world/29744

Net:  To think that the central bankers, who have only on trick (i.e. to print more money and do things with it) are going to stop printing money is foolish.  Don't let DaveF fool you into thinking that they don't have to keep printing. 

davefairtex's picture
davefairtex
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retained earnings & accounting 101

Carlos-

I stand by my reasoning. The key for me is this: Money is created through bank loans (either central banks or commercial banks), and is extinguished when you pay back the principal. The net interest collected by the bank becomes part of the bank equity, through profits. But no additional money is created by the interest earned.

I agree with everything you say, more or less.  My conclusion is just different.  It goes back to what underlies "accounting 101" and the details of what "retained earnings" really are.

The retained earnings line on the balance sheet doesn't mean actual bank credit received from interest payments are stuffed away in a (metaphorical) box somewhere.  If that were true, you'd be 100% right, because the interest payments would get "stuck" at the bank and over time, this would gradually run the economy right out of money (and/or require a dramatic additional creation of money over time).

But retained earnings really aren't "retained."  They are actually spent right back out into the economy by the bank - used to buy bonds, build new branches, expand operations, and to buy other assets.  The "retained earnings" on the balance sheet is just the accounting notation that rolls up up the aggregate net profits over the lifetime of the organization which has (presumably) been put to good use by management.

http://www.investopedia.com/terms/r/retainedearnings.asp

Retained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt. It is recorded under shareholders' equity on the balance sheet. The formula calculates retained earnings by adding net income to, or subtracting any net losses from, beginning retained earnings, and subtracting any dividends paid to shareholders.

So given that retained earnings aren't actually retained by the bank, but instead are spent right back out into the economy, no additional money needs to be "created" by the system to pay the interest.  The interest payments can come from normal money flows from the pool of existing money.

My conclusion: we definitely have exponential growth in money supply - that's easy to see just by observation - but it is not for the reason that we "don't create enough money to pay the interest."

JimH-

Net:  To think that the central bankers, who have only on trick (i.e. to print more money and do things with it) are going to stop printing money is foolish.  Don't let DaveF fool you into thinking that they don't have to keep printing.

Eh, Jim, once again you're trying to put words in my mouth.  Of course they'll keep printing, I agree completely with that.  [I put this in bold, so hopefully you wouldn't miss it.]

At some level, the important bit is the exponential growth, and we all agree on that.  We just disagree on the cause.  Steve Keen and I believe the Fed is the direct cause.  You and Chris blame the system design and "not enough money to pay the interest."

Your claim that this is "settled science" is an appeal-to-authority fallacy - without even stating your authority! 

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Jim H
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Climber99...

You said,

Banks create money to pay wages, bonuses, capital expenditure, dividends, investments and any other expenses that they incur.  In effect they borrow from themselves.

Can you please find some documentation or validation for this point?  Banks lending themselves money to pay wages?  Really?  I am sure that banks do take loans at times like any other business.. but I don't think they generally would do this to pay wages or bonuses.  They make money off of interest and fees, which is a net demand on the overall money supply.   

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Settled science

Dave said,

Your claim that this is "settled science" is an appeal-to-authority fallacy - without even stating your authority!

I showed data - data is what settles the science.  The long term chart showing inflation/deflation trends since 1870 shows how a system goverened by hard currency works vs. a system of debt-based fiat (with the understanding that the system has been constantly changing toward more central management since the FED came into being in 1912).  The system is flawed, and FED and the sister central banks will do what they can to keep it alive until such time as they need to find a scapegoat to blame it's demise on.      

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Dave:So given that retained

Dave:

So given that retained earnings aren't actually retained by the bank, but instead are spent right back out into the economy, no additional money needs to be "created" by the system to pay the interest.  The interest payments can come from normal money flows from the pool of existing money.

This is beside the point. The earnings of banks are just like the earnings of every other business. They can be paid back to shareholders or spent on investment or whatever. This has nothing to do with the money supply. And I agree that increased velocity (flow) does improve the ability of servicing the debt. But this mechanism is being exhausted, and the signs are becoming quite clear. The growth in central bank balance sheets through QE, negative rates, rising financial stress are all symptoms of this, I believe. Servicing the debt is becoming harder and harder, as the ability and/or willingness to borrow is just not there in the needed scale, even with the incentives central banks are currently providing (imagine if we had conventional monetary policy.. which is just a distant memory these days)

I keep to my argument. Bank deposits can only be created by issuing debt/loans, specifically bank loans, not corporate or sovereign bonds (unless they are bought by central or commercial banks - in this case it is the same as creating a bank loan -> debit on the asset side and credit on the liability side of the bank´s balance sheet). And bank deposits can only be extinguished when loans are paid back. Every other kind of transaction is just the same deposits changing hands. And to pay back the interest, someone, somewhere, at some given time has to make new money come into existence.

 

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Time2help
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Tertiary wealth

Pull it.

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servicing debt

Carlos-

.... The earnings of banks are just like the earnings of every other business. They can be paid back to shareholders or spent on investment or whatever. This has nothing to do with the money supply. And I agree that increased velocity (flow) does improve the ability of servicing the debt. But this mechanism is being exhausted, and the signs are becoming quite clear. The growth in central bank balance sheets through QE, negative rates, rising financial stress are all symptoms of this, I believe. Servicing the debt is becoming harder and harder, as the ability and/or willingness to borrow is just not there in the needed scale, even with the incentives central banks are currently providing (imagine if we had conventional monetary policy.. which is just a distant memory these days)

Ok, it sounded like your claim was that "retained earnings" meant the bank was consistently withdrawing money from the money supply via "retained earnings" and thus systematically hoarding the interest payments out of the money pool.  Now I understand you aren't saying that.  (Problem was - Chris was making this case previously, and that's probably why I thought you were saying it too.)

Again, I agree with you in every particular about the symptoms: financial system stress, growth in CB balance sheets, overall size of debt, etc.  I just disagree about the cause.

My claim is that the cause of our problem is NOT about "failure to create enough money to pay the interest."   By definition, by placing the blame on "not creating enough money to pay the interest", you must be talking about a money supply problem because creating money (or in this case, not creating it) must be about money supply.  If failing to create the money to pay the interest isn't a money supply issue, then what sort of issue is it?  Money flow is the only other variable left, and we've already eliminated that by agreeing that banks aren't hoarding those interest payments in a box somewhere.

From my understanding of the money system model, we have two choices: flow, and supply.  The problem must be in one area or the other.  Is there a third choice that you see?

And to pay back the interest, someone, somewhere, at some given time has to make new money come into existence.

So Carlos, what is special about paying bank loan interest vs, say, money I borrow from you?  Why must "bank interest money" be created, while "Carlos personal loan interest" can come from the existing pool of money?

This is the key.  If you can tell me why bank interest has to be treated differently from corporate bond interest, or loan-shark interest, we'll be able to nail this down.  That's the piece I'm missing.

If banks don't hoard interest payments, and base money exists, it all works just fine.  That's what I understand to be true.

Its the Fed that causes the systemic exponential growth in money supply, by their short-circuiting of recessions via interest rate policy.  They don't give the system a chance to flush out all the bad debt.  Enough cycles of that, and here we are, at the top of a debt bubble.  And all the money printing is a desperate measure by the Fed to avoid the inevitable pop - since interest rate policy has now failed for the first time in generations.

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data isn't science

JimH-

I showed data - data is what settles the science.  The long term chart showing inflation/deflation trends since 1870 shows how a system goverened by hard currency works vs. a system of debt-based fiat (with the understanding that the system has been constantly changing toward more central management since the FED came into being in 1912).  The system is flawed, and FED and the sister central banks will do what they can to keep it alive until such time as they need to find a scapegoat to blame it's demise on.    

Wait.  What happened to your very specific claim of "not creating enough money to pay the interest" being the cause for all our exponential money growth ills?

Now you are talking about the Fed, and sister banks, and central management, and hard currency.  This all has nothing to do with "not creating enough money to pay the interest."

Or - did I miss something in there somewhere?

BTW, even under a gold standard, assuming you have fractional reserve lending, banks still create bank credit.  They've done this since the world was young.  Even in 1870.  Even before the Fed.  All during the time of your "hard money" nirvana, banks were madly creating money through lending.  All the while, they were "not creating enough money to pay the interest."

Go back far enough, you have warehouse receipts.  That is bank credit.  That causes inflation.  Not because of "not enough money to pay the interest", but because fractional reserve lending allows banks to expand the money supply.  And they're motivated to do this because more loans = more profits, so they push it as far as it will go.

Its really simple.  Its not because of "not enough money to pay the interest", its because banks are greedy (kind of like the rest of us), and ultimately they just can't resist making "just one more loan..."

That's my theory anyway.  I don't claim its "settled science."  Its just my theory.  But it does seem to fit both historical context and human nature.

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Glad we cleared some missunderstandings

Dave, first of all, I´m glad you understood what I meant and we cleared some misunderstandings.

I do get your point regarding the mixing of the concepts of supply and velocity or flow. This I think is a common mistake made by a lot of people when discussing monetary issues. The fact is that the two are tied together and velocity is a way to expand and contract a given money supply = quantity. And this way velocity also allows or improves the capacity of repaying previously issued / borrowed loans, but only if the aggregate amount of loans keeps increasing. If the opposite occurs, then deposits keep getting extinguished and at some point (which I have no idea when that is, but I´m sure there is one), velocity alone cannot allow the repayment of principal and interest.

Let me just comment on some other points you´ve made:

So Carlos, what is special about paying bank loan interest vs, say, money I borrow from you?  Why must "bank interest money" be created, while "Carlos personal loan interest" can come from the existing pool of money?

It´s not that in can come form existing money.. it has to. The difference here is that I cannot create a deposit when I loan you some money.. neither can a non-financial/non-credit company. I merely shift the ownership of pre-existing money to you and you give me an IOU in return. In a sense, this could be transformed into currency, if I could then use your IOU for commerce or saving or paying down my own debt. The catch is that only a bank or equivalent (credit card company for eg.) can issue legal tender IOU´s = currency. You and I cannot and this is, I believe, the key difference.

Its the Fed that causes the systemic exponential growth in money supply, by their short-circuiting of recessions via interest rate policy.  They don't give the system a chance to flush out all the bad debt.  Enough cycles of that, and here we are, at the top of a debt bubble.  And all the money printing is a desperate measure by the Fed to avoid the inevitable pop - since interest rate policy has now failed for the first time in generations.

I completely agree with you that central bank intervention inhibits the cleansing of bad debt by market forces and this has allowed for larger and larger imbalances in the economy and financial markets. But if they had allowed for all the bad debt to be defaulted upon, there would be massive losses for bank depositors and well.. I guess I don't need  to expand much on the effects of something like this happening on a massive and global scale. This is because deposits are backed by those same loans (this I think is clear to both of us, right). In a commodity based system, this would not happen, since deposits would also be backed by the gold/silver or whatever commodity you chose.

In a sense I believe we do still have a commodity based money system (we just don´t believe it), since central banks and/or treasuries are still very large holders of gold, and when the time for a reset comes, they will have to return to some kind of gold standard to restart the monetary / financial markets.

Look forward to your comments.

Cheers

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pat the rat
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$20.00

Twenty dollars = two tens =five four=twenty ones, this how money goes around; twenty dollars gets transfer from one account to the other money stops, terminate hold. New  money dose not go around in a circle.

   

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theory issues vs underlying problems

Carlos-

... velocity also allows or improves the capacity of repaying previously issued / borrowed loans, but only if the aggregate amount of loans keeps increasing. If the opposite occurs, then deposits keep getting extinguished and at some point (which I have no idea when that is, but I´m sure there is one), velocity alone cannot allow the repayment of principal and interest.

Yeah, I agree, they are both important, and that at some point, velocity alone cannot support repayment of P&I.  My sense is, the ability to repay debt roughly follows the equation:

 debt-payment-ability = velocity x money supply

If too many bank-credit defaults happen, money supply shrinks.  If people get too scared, velocity shrinks.  If both happen at the same time, its multiplicative, and we're back to Great Depression-land.  And as you say, there's probably a minimum amount of money supply, below which things get really iffy.  Base money helps to cushion that, and these days base money is not a small number.  I used to think that if we paid down (or defaulted upon) all the bank credit, money would be gone.  But that's just not true.  Base money remains.

... only a bank or equivalent (credit card company for eg.) can issue legal tender IOU´s = currency. You and I cannot and this is, I believe, the key difference.

Sure, that is a key difference.  Borrowing money from a bank increases the money supply.  Borrowing money from a friend leaves money supply unchanged.  And that brings up the following question:

In view of the equation I described above, is repaying a friend easier or harder (from the system perspective) than repaying a bank loan?

1) Borrow $100 from a friend.  Money supply is unchanged.  Repay Friend $110.  Money supply unchanged.

2) Borrow $100 from a bank.  Money supply +$100.  Repay bank $110.  Money supply -100.

In this simple example, it would appear that repayment in case 2) should be easier, if the equation I stated at the top holds true.  Bigger money supply makes repayment easier, and that only happens in the bank-credit money case.

In both cases, you must make an interest payment.  Both interest payments are equally hard.  But the principal payment in case #2 is easier than in case #1.  [The side effect is, case #2 is more inflationary.  Easier repayment, but the cost is a more inflationary economy.]

But if they had allowed for all the bad debt to be defaulted upon, there would be massive losses for bank depositors and well.. I guess I don't need  to expand much on the effects of something like this happening on a massive and global scale...

Surely true.  From where we are right now, the cleansing will be quite the event.

But my claim is, if the Fed had let the cleansing happen way back when the "ponzi loan" defaults would have been relatively small (say, back in 1960), then it would have been like falling off a footstool.  Worst you get is an ankle sprain.   Now, after 50 years of interest rate interventions, it will be like falling off the top of a tall building.

Our goose is pretty well cooked at this point.  This whole discussion is really much more theoretical - "who should we blame, and what should we do next time" - versus any sort of immediate cure for where we are now.

Should we blame "not creating enough money to pay the interest"?  Or should we blame the Fed's "well-intentioned" interest rate interventions that short-circuited the default cycle?  Clearly I think its the latter.

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Do current prices already reflect destroyed currency value?

Both housing and stock prices are inflated. But if you account for the increasing loss of value of the dollar, are they really inflated? Assume that today's dollar is 30-40% less than from 7 years ago. So a house which costs 700k could have been bought for only about 500k 7 years ago. But is it overvalued or just reflecting the deflated dollar?

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Two different realities

Hi David-

   I agree that win-win is a very effective strategy.  But I've also learned through personal experience that not everyone sees life through a lens (worldview) that values mutually beneficial solutions. One author that really helped make me aware of this concept is Patricia Evans.  In her excellent book, The Verbally Abusive Relationship, she introduces the concept of "two different kinds of power":

"As I researched verbally abusive relationships, the most significant and surprising discovery I made was that the verbal abuser and the partner seemed to be living in two different realities.  The abuser's orientation was towards control and dominance.  The partner's orientation was towards mutuality and co-creation.  In many respects they were in two different realities." [bold mine] (p. 24)

Evans goes on to say:

"...Those who feel power through dominance and control (Power Over) are living in Reality I.  Those who feel power through mutuality and creativity (Personal Power) are living in Reality II." (p. 25)

It is easy for those of us who exist in Reality II (Personal Power), and believe in cooperation and win-win solutions, to assume that that is how everyone else sees the world (i.e., we project our worldview on others).  But that is not the case.  People who live in Reality I (Power Over) see the world -and their interactions with the world- from a very different perspective.  They don't care  a hoot about achieving win-win solutions; because their motivations are dominance and control, they are all about  "I win, you lose".

While Evans is writing about these two different realities in the context of verbally abusive personal relationships, she notes their existence in other types of relationships as well:

"...verbal abuse is symptomatic of personal, cultural, and global problems which originate with the misuse of power..." (p. 22)

If the sociopathic elites pulling the strings on the world-stage see the world through the lens of "Power Over", they may be capable of things that those of us who believe  in mutual cooperation and "win-win solutions" could never consider. 

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treebeard
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Multi facetted Problem

Solving the hard money problem is only one very small piece of a much larger problem.  The exact thing the Fed is doing is precisely what our industrial agriculture system is doing in spades.  Each new "solution" creates ever more severe problems, more toxic herbicides and pesticides destroy the fabric of the soil and the natural predators that would keeps pests in check.  Meanwhile ever more toxic resistant weeds and pests evolve that then require more intense toxins.  Now GMO engineered plants to take even more toxic doses of herbicides. On and on the spiral goes, every more toxicity, energy, and water resources to ever more resistant pests, weeds and degraded soils.  Talk about in for a penny, in for a pound.  The thinking is the same.  It is the pervasive way we human beings do business.

Our proposed solutions seem always to be the problem, why?  Perhaps our foundational understanding of reality is off.  Without a change to that, even a gold money standard will be for naught.

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aggrivated
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Money as a claim on energy

Is there a fallacy in "Money is a claim on energy."? It can be energy expended in a product or service or a claim on labor and resource utilization in the future, it doesn't matter.  BUT, if the EROEI (Energy Retured on Energy Invested) has peaked (which is pretty much agreed on) then there will be a declining value in any money no matter what it's type.

Hence, 'printing' much more money keeps the facade going a little longer. It provides more nominal face value currency for paying interest and debts and give the appearance of lots of money for whatever velocity the courage of the world's citizens to trade is willing to use, but its underlying value is at best peaking as we speak or more likely starting to avalanche down the Mt Everest high peak of underlying value that was reached when EROEI actually peaked in the recent past. Kind of a Potempkin Village approach to fooling the world a little bit longer.

From this perspective, if we focus on net energy available, then we can look past all the central bank smoke and mirrors and have a more accurate look at 'what's' it all really worth'.  Gail Tverberg seems to have taken this approach in her analysis and it provides a clarity of where we really are in this process of declining net worth in the world economy.

So, there is my thinking on 'Money is a claim on energy'.  I would love for those more expert to shoot holes in it and discuss the strength or weakness of this view of money. I am always trying to understand a complex issue from a more simple view.  It may be a hopeless cause, but I would like to hear from this site's more educated what fallacies you see in this view.

Thanks

I remain aggrivated

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Aggrivated: "If the EROEI has peaked..."

Hi Aggrivated,

BUT, if the EROEI (Energy Returned on Energy Invested) has peaked (which is pretty much agreed on) then there will be a declining value in any money no matter what it's type.

That makes a lot of sense to me.

However, Nicole "Stoneleigh" Foss equates peak oil with deflation. Your comment above sounds more like inflation to me. You're right this is complex stuff to try to make sense of.

 

 

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treebeard
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Old Wine in new Skins

Lets not get to deeply sucked into the old paradigm.  Decreasing energy need not be the definition of our lives.  While it is forcing a transition, it is not the end of the road.  Life is not a zero sum game, that is what is so great and terrible about the predicament that we are currently in - it doesn't have to be this way.  Consciousness is an adequate counter balance to entropy.  Joel Salatin has better productivity on his farm while increasing the fertility of his soil.  He is feeding people and building capital at the same time. That is possible, we don't have to behave like parasites, we can do better than this.

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davefairtex
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money is a claim on ....

aggrivated-

I don't think money is a claim on energy at all.  As I said - its just a marker for foregone consumption, which could have happened at a given time and place, but you decided instead that you weren't going to consume.

As time passes you decide to cash in the marker, you may be able to consume more or you may be able to consume less, depending on the conditions of the system at that moment in time, and the item you want to consume.

If you forego consumption prior to peak oil, your implicit exchange rate includes an oil price of $3.00/bbl.  If you then cash the marker in 20 years later and you are looking for an energy product when oil is at $40/bbl, you won't get the same experience.

Exchange rates change depending on circumstance.  That's just how it is.  Expecting any monetary system to fix the exchange rates in stone for everything in perpetuity is just an exercise in fantasy.  Things are always changing.  Sometimes there is a glut, sometimes a shortage - for wheat, for energy, for money, for property - for everything.

Some stuff will get cheaper, some stuff more expensive.   Did anyone expect oil to drop to $27/bbl in 2015?  I sure didn't.  But it happened.  You just never know.

So what is money a claim on?  Whatever happens to be available, at the current exchange rate, which changes over time.  And the only way you can save money is to forego consumption.

Even if we had "sound money", 100% reserved, with everyone using little gold coins for every transaction, there is no guarantee that if you save a gold coin now, you'll be able to buy the same amount of oil in the future that you can buy today.  It might be more, it might be less.  (Didn't 2015-2016 teach us any humility at all about how energy prices can surprise us?)

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pyranablade
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Yes for some of us Treebeard

Hi Treebeard. Our potential is great for making things better. If all of us on this site get busy planting, harvesting, etc. things will be great. But maybe I'm not as optimistic as you are since most people don't seem to be thinking like you or I.

Also, how many times over the years has Chris Martenson advocated for solar hot water heaters? But how many of us have them? I bet we're not as good as implementing our vision-thing as we are at envisioning it.

 

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AKGrannyWGrit
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Posts: 433
Entropy

I would suggest the counter balance to entropy is not consciousness but action. The sage saying is that evil flourishes when good people do nothing.  While people like Dr Martenson and Joel Salatin may be aware of our predicament with respect to the three E's they they aren't just aware they, I suspect, work their butts off.  Only commitments followed by action will create change.  Just saying.

AKGrannyWGrit

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Uncletommy
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Perspective?

When was the last time you saw a bumper sticker that said:

I'd rather be working.

Leisure has sucked more people into a consumer lifestyle than just about any other life goal.

The one with the most toys, wins.

Even Otto Von Bismarck, in his welfare philosophy, targeted retirement age at a whopping 70! Most back then rarely made it that long. Reform theology of the 1600 - 1700's has been an undercurrent of the Protestant work ethic for quite some time. We are long overdue in embracing "meaningful" work as a life goal that is not dependent on a paycheck. Or do we have to wait for a JHK, World Made by Hand, scenario before we wake up and smell the clover? Agrivated, Pyranablade, Treebeard, Granny  -  keep the thread going. Its time we all picked up a shovel and got busy.

God made us gardeners; the fall made us farmers, greed made us moneychangers!

It can't be said enough times  -  money isn't everything. 

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treebeard
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Working Hard

The word consciousness may bring a lot of odd images for some, perhaps a bunch of stoned knuckle heads spouting nonsense theories about the nature of universe, while standing around on their tails, getting a whole lot of nothing done.  On the other hand, it is a fact that the boys down on wall street are working real hard, perhaps a lot harder than Martenson and Salitin.  Just sayin.......

Without right awareness, there is no right action, and you don't get to right awareness without a whole lot of action.  But of course that action has to come with a whole lot of self awareness and reflection.

I don't consider myself an optimist or pessimist. Either leads to wrong action.  To be aware of the fact that we have potential is not to posit an opinion about whether we will ever effectively use or develop that potential.  If one comes to an awareness that nonviolence is a form of correct action, it is not practiced based on an opinion of whether or not such a behavior will be broadly adopted by others, if it is, then it is no longer a form of correct action, but a reaction which will only create more problems.

Everything must done in and of itself, then nothing is left unfinished, otherwise we continue to create disorder in the world regardless of our intentions......whether you are working for green peace, the federal reserve, or teaching inner city kids to grow vegetables.  Life on planet earth..............

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AKGrannyWGrit
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Re - Working Hard

Well said Treebeard.  Your responses give me pause to contemplate further thought.  You are, I suspect, an  old soul.

Find it hard to fathom the guys on a Wall Street working hard though.  My value meter measures work by its  capacity to help people or leave the planet a better place because our feet walked the earth.  Don't see the the definitive value of Wall Street work to the human race.  No doubt many would disagree.

 

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davefairtex
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awareness

Yeah I have to agree with the awareness thing.  If you just work hard, or you get angry, you will put in a lot of effort to possibly no avail, and/or you may just become a tool for someone else to achieve their own ends.

Once you have understanding as to what is really going on, you will only expend energy on the right target, your timing will improve, and you will pick the right battles.

And sometimes it is not-acting that causes the greatest impact.

For instance, if everyone were to suddenly wake up and figure out how dangerous debt was, and how bad certain products were - simply refraining from taking on debt and buying said products would have an immediate, massive, dramatic effect.

Case in point: when people woke up one day and decided not to buy pink slime, companies started falling all over themselves to distance themselves from that product.  There was no violence required, no anger, no "action" required at all.  In fact, non-action was all it took.  "The master does nothing, and yet nothing is left undone."

See, I strongly feel that we do not need to "get people angry" to effect change.  Once people become truly aware of what is going on, they will sort out the right actions to take (for them) on their own.  Seriously.  Awareness is all that is required.  Once you see clearly, your actions change all on their own.  Sometimes slowly, sometimes quickly, depending on your personality.

A small example: my coke consumption has dropped way off since I became aware that they had successfully programmed me!

As for working hard: if you love what you do, is that "working hard"?  Perhaps I've just been fortunate, but I really do love my work.  If I suddenly got 100 million dollars, the only thing I'd change would be to hire a staff to help me do even more of what I'm already doing right now.  Its just that much fun.  :)

treebeard's picture
treebeard
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Posts: 590
work

A lot of odd thoughts have built up around that word, work.  By definition, just about every human activity is work, even having fun:

"1.  activity involving mental or physical effort done in order to achieve a purpose or result"

I have a feeling that the second definition is where the problems come in:

"2.  mental or physical activity as a means of earning income; employment"

Interesting that under the first definition a bunch of synonyms were offered up, "labor, toil, slog, drudgery", that had real negative connotations, while the second definition synonyms were neutral or positive, "employment, a job, a situation, a position, a post."

There was a time when selling your labor for money (a job) was seen as tantamount to slavery, and only better to the extent that it was temporary. The propaganda continues, its built into our language.  If you are doing something to achieve a purpose or a result, hey that is drudgery, but if its for money, well then its just a position or situation.  You may or may not be doing anything productive or anything at all, but you have status, a position!

We really do need to start from scratch, awareness not just of our physical actions, but of every word that casually slips out of our mouths. We must think anew of the very water in which we swim.

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AKGrannyWGrit
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Posts: 433
Work & Awareness

"We really do need to start from scratch, awareness of not just our physical actions but every word that slips out of our mouths."

In Lois Lowrey's book "The Giver" every word people said was monitored and scrutinized. Be carful, governments would like nothing better than to control our speech.

In the highly-controlled society featured in The Giver, the rules govern a strict "precision of language." The irony comes in when the reader realizes that, in a world with no real depth of emotion, many words have become hollow and meaningless. "Love," for example, has no use in this world. Terms like "apology" and "feelings," as well as specific reactions of "anger" or "jealousy" are used daily, though in reality they don't reflect those actions or emotions.

In order for people to be aware of what they do, say and think they need to be allowed and taught to think for themselves.  That would be a terrifying challenge for our government.  I think the awareness gene was perhaps  not passed out equally in our species and understanding will not be sought after or encouraged  with the pervasiveness of entertainment and immediate gratification.  Many benefit from an unaware population.

 

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