Seriously. Think about it. What sector of the economy is making serious money right now? The banking industry. And how do they make money? By taking funds from the fed at near 0% interest rates and then doing a couple of things. They can lend it to the Federal Government at interest and make money on the spread. They can trade in the stock market for their own account; a rigged game with their nano second front running at the expense of their retail & wholesale customers. All of the majors had a perfect quarter last quarter meaning they had no trading day losses. Easy to do if you know in advance what everyone else is going to do.
Let’s take it back a step in time. Let’s take it back to the vulture capitalists. Do you know they make their money? By being a brilliant capitalist? That’s what they would want you to believe. No, they make money by using borrowed money to buy family owned businesses, saddling the company with debt, taking a multi million dollar fee from the borrowed money for doing so, operating the company for a while and then selling it on for a larger amount to someone else using borrowed money saddling the company with more debt, and taking out a profit in the transaction. Brilliant, right? Depends. If you are the vulture, you get a nice check. If you are the worker at the company, you eventually lose your job as the company closes because the company could no longer service the debt payments. In other words extracting money from the carcass of productivity. Geniuses, all and they are worshiped as gods of capitalism.
Step forward to the world of mortgage securitization. It is clear from the SEC’s complaint against Goldman Sachs and the Magnetar case out of Chicago exposed by the NY Times and Pro Publica that the brilliant ones came to the conclusion a long time ago that it was more lucrative to feast upon destruction than it was to be constructive. In both those cases, securitized loan trusts were set up designed to fail and then the very ones who created those securitized pools bet against their investors for those vehicles to fail. They made billions by selling credit default swaps based upon their known, guaranteed failure while screwing their customers with their foreknowledge.
In the real estate world, the only thing moving are the foreclosures and the turnover thereof. Some may say this is expunging the system of a bad hangover, I’m not so sure. The whole system is based upon credit – meaning money issued as debt. It takes a productive job to be able to have the money to service debt. If there are no productive jobs, who is going to be left to buy the houses? And even if the ones who have the few remaining money paying jobs buy these houses as rental properties, who are they going to rent to? You have, no doubt, heard about the ever growing tent cities? It’s a shame, all of these houses sitting empty, and all of these people living in tents. In my book, the foreclosure/real estate industry is feeding on the carcass.
And productive work? Forget about it. No one seems to be interested anymore.
A case in point. There is a technology sitting on the shelf right now which quite literally turns you shit into gold. It takes fresh, raw humanure and extracts line grade methane gas from it at volumetric parity. What does that mean? It means for every gallon of poo which is processed, you get a gallon of line grade natural gas. And what would that mean were it implemented in a community? It would mean the municipal waste treatment plant would go from a money sucking, power sucking critical community infrastructure liability, to a money generating, power creating community infrastructure asset. It pays for itself. It pays for its operation, it pays for its replacement.
Is it used? No. And do you want to know why? Because the patents have expired. No one is willing to develop it to a community wide application because it can be done by anyone. Unless it can be protected with patents, no one is willing to “risk” the money to develop it. Productive? Absolutely. Does it make money? Absolutely. Will it be developed? What, are you kidding?
There is the primary economy, the secondary economy, and the tertiary economy. The primary economy is directly tied to the land. Farming, forestry, mining. The secondary economy is what is done to the primary economy. Transportation, manufacturing, distribution. The tertiary economy is the financial services which provides the grease (money) to make the primary and secondary function smoothly.
Up until now, whenever there have been difficulties in the primary or secondary economy, tweaking and tinkering with the tertiary could alter the way the primary or secondary functioned and things would be fine. For a while. But eventually, those tweaks stopped working because the level of complexity became so great, it becomes overbearing.
That’s where we are now. So what is wrong that the tertiary is the only way to create money? It should be the primary or secondary, the productive work, which creates wealth, not the tertiary. How did it get so wrong?
Here is what is wrong. It is money as debt.
Why is there price inflation? Classic economics would tell you it is too much money chasing too few goods. If that were the case, more goods would alleviate the problem. But it doesn’t.
Why?
Very few businesses are self financing. Most use borrowed money. If borrowed money is used, it must be paid back with interest. The only way to cover the interest cost is to raise prices. So if your supplier uses borrowed money, and you use borrowed money (and even if you don’t’ use borrowed money), the interest money needs to be found.
When money is borrowed into existence, the interest money doesn’t come with it so there is more owed back than exists. Everyone screams about how we need to pay off the debt, but the way things are currently set up, if we did that, you wouldn’t have any money to buy groceries, gas, clothes, rent, mortgage. It wouldn’t exist. It would all grind to a halt.
It is the duty of the sovereign to provide the coin of the realm. This duty was abdicated in this country for the fourth time in our history 100 years ago to private hands for their private profit. And profit they have indeed. They are the only ones making money these days. Productive work doesn’t pay. Soft hands pay.
Until this duty is reclaimed by the sovereign, until money becomes the public utility it needs to be, we shall forever be enslaved to the monied class. Productive work will decline, and a financial elite shall feed upon the carcass while the rest starve amongst plenty. The primary and secondary economies are grinding to a halt as the tertiary economy removes the grease from the wheels of commerce. Non productive work, feasting upon the dying carcass of the productive class will be the only thing that pays.
And here’s the kick.
Eventually, the primary and secondary economies grind to a complete halt which means the tertiary economy does too. And it all comes tumbling down. For everyone.
And what is the solution?
The magic number three.
1) The sovereign has the right, nay, the duty, to provide the coin of the realm and must reclaim its duty. The sovereign has no need to “borrow” money. It exists in abundance simply because the sovereign exists.
2) There can be no fractional reserve banking. Fractional reserve banking creates money out of nothing and is counterfeit. It usurps the right and duty of the sovereign and must be met with fierce retribution.
3) All levels of the sovereign, city, county, state and federal, must accept only the sovereign’s coin as payment of taxes. This gives immediate legitimacy and circulation to the sovereign’s coin.
Somewhere along the line, things became horribly mixed up. Money became commerce. Money is not commerce. Money is what enables commerce. Pops told me a long time ago that this country started to go to hell when General Motors got out of the business of making cars and into the business of making money. “They have it backwards” he would say.
Until we can get away from the idea that money is commerce, the primary and secondary economies shall continue to grind to a halt and there shall be immense pain for the country.
No comments:
Post a Comment