News & Analysis
Internet Erodes Faith in Western Economies
Bill Gross, the manager of the world's biggest bond fund and co-chief investment officer at Pimco, gives the credit rating agencies Moody's and Standard & Poor's another good hiding in his monthly commentary out Wednesday. He says investors should ignore their ratings, because the agencies have shown little intelligence or common sense in recent years. The comments come as the agencies are coming under fire for their role in the subprime crisis as well as a bubbling crisis in Europe, where downgrades of several financially stressed Southern European nations have sent markets tumbling. Gross writes that the rating agencies have managed to escape scrutiny despite their leading role in enabling Wall Street to peddle junk to investors around the globe. The firms, despite a glaring conflict of interest, slapped their supposedly gold-plated triple-A rating on all sorts of housing-related dross ginned up by investment banks – all in the name of expanding their lucrative fee streams. Gross, calling this arrangement "sordid" and "nonsensical," notes that his colleague Paul McCulley likens the rating agencies to the guy who hands out fake ID's at a drinking party. And as drunk as the ratings agencies acted in the housing bubble were, this was hardly the first time, he adds. "Their warnings were more than tardy when it came to the Enrons and the Worldcoms of ten years past," Gross writes, "and most recently their blind faith in sovereign solvency has led to egregious excess in Greece and their southern neighbors." – Wall Street Blog/Fortune
Dominant Social Theme: The system must be rationalized!
Free-Market Analysis: Ripples of information and anger spread. Blogs rant about fundamental economic building blocks (see above) and contrarian news aggregators provide information to millions. We wrote an article some time ago that said the incredible bailouts that took place in front of average Western citizens had removed the moral authority of Western governance. The average American or European seeing (and reading about) the "money" doled out to banks and financial institutions to "save the system" was provided an object lesson in unfairness.
Click here to read article: Have the Immoral Actions of Central Bankers Precipitated the Decline of the West?
The same process is at work with the rating agencies. People (average people, not just Gross), scratching their collective heads, wonder why ratings agencies (both financial and consumer) have such clout over their lives when some of the same agencies have entirely misread the larger economic scene. By itself, it may not seem like much. But we believe the entire edifice of trust and awe that the powers-that-be has inculcated regarding the monetary system is eroding. People have seen for themselves that the system is not a fair one and is in fact manipulated.
This is not a quick process, but it is one that has ramifications. Like a rock thrown into a pond, the electronic ripples widen. The process is quiet and personal. People receive their monthly bills. And then they sit and ponder. They read the increasingly frantic mainstream reports extolling an economic bounce-back in the US and Britain, but they don't feel it and they don't see it. Their bank accounts are low, their pension plans are shattered and they live in fear that their jobs will be the ones terminated next.
They turn to the Internet. For the Internet is the rock that has been tossed in the pond. The Internet itself has circumvented the explanations of the power elite. Their promotions have been overwhelmed by the quiet, relentless, unstoppable, spreading phosphorescence of Internet communication. The American government was worried about revolution during the Depression. But the Internet's messaging has made this financial crisis inexorably worse for those who want to retain the current system.
Of course, if the system itself were healthy, it would be a different story. But the Western fiat money system virtually collapsed several years ago. There have been plenty of attempts to resuscitate it by printing money (from nothing). But when you have poured trillions of unbacked paper-ticker markers into an economic system you may end up with such tremendous distortions that the economy itself simply cannot respond anymore.
We think that's where we are now. The distortions run all the way through the system, from the unabated banking bubble (lovingly tended to by central banks that will salvage their distribution system no matter what) to the industrial economy that has been pushed deliberately by lending and regulatory policies toward ludicrous green industries, to "sovereign entities" themselves, failed states that have promised citizens fantastic benefits that are unrealizable. This is what happens when you print money from nothing. After a while the marketplace asserts itself.
Lately, we have been reading that the American economy is starting to grow aggressively once again, and Britain's too. But we also read that the entire Southern hemisphere of Europe is essentially bankrupt (along, actually, with Britain) and that Chinese inflation (which we have written about in the past) has not been tamed by aggressive government action. We don't see this "recovery." The hard-money bull market has at least another several years to travel. The paper that central banks have injected into the marketplace has yet to turn into price inflation. The blow-off has hardly begun.
We will go out on a limb and make a prediction that this bear market in fiat money is unlike any other of the past one hundred years. It may be so bad that there is no coming back from it. We've written in the past that we believe it possible that a new monetary system could emerge from the shattered shards of the current one. We continue to think it is certainly possible.
What's going on is part of a cycle. But the damage to the current fiat money system has been devastating. And from the Bell's point of view, the control the power elite once exercised over its dominant social themes has been eroded by the 'Net, so the populace itself is beginning to get agitated.
The promotions aren't working anymore, or not nearly as well as they did in the 20th century. Read about the Greek protests: The rhetoric that the Greeks protest-leaders are using is not merely socialist or communist. They're not blaming capitalists – they're blaming their own leaders and the European banking system. They're putting the blame where, to a degree, it actually belongs.
The Greeks in aggregate (like most Western populations) may not fully understand that the current system is based on fraud – from merely creating money from electronic digits at the touch of a button. But people aren't idiots. And many have seen the trillions disbursed to the banking community while their own lives are correspondingly reduced and even ruined. They wonder why their pensions, their jobs, their lives have to be so dramatically constrained while the elites spend trillions to prop up a system that doesn't work.
The ripples spread. They spread and spread. Ripples cannot be arrested. Certainly, they cannot be thrown in jail. They cannot be censored or unplugged. They are soundless but unstoppable. People wonder about the rating agencies now. They wonder why their credit cards are cancelled while mortgage companies went bankrupt with AAA ratings. They wonder why busted banks can borrow again at top dollar when they are struggling to put food on the table. They see the rise in the prices of gold and silver and perhaps after a while they stop believing in paper money entirely. As we were finishing this article, we received the following report from MoneyNews:
David Rosenberg: Euro Breakdown Could Drive Gold to $3,000 ... Gluskin Sheff analyst David Rosenberg says the breakdown of the euro could well drive the price of gold to $3,000. ... "The case for gold heading to $3,000 an ounce is getting stronger by the day," Rosenberg writes in a note to investors. "The euro has already broken below 1.30 to the U.S. dollar and there is plenty of room for additional decline going forward. It's only at a one-year low — wait until it moves to a decade low."
The European Central Bank, Rosenberg notes, has been forced to water down its charter as it permits sub-investment grade Greek bonds as collateral. "Sadly, the central bank is not a remake of the Bundesbank and the Euro is less of a "hard currency" than its architects could have ever envisaged a decade ago," Rosenberg says. "Now there is talk that the ECB is contemplating a quantitative easing plan."
"Contagion risks" from the Greek financial crisis loom, "and there are simply not enough trees on the planet that can provide enough paper currency to backstop countries like Portugal and Spain," Rosenberg says. "And let's not forget about Italy — its public finances are less dire but still fragile"— all of which make this a great time to buy gold.
We wrote more than a year ago that the bankers at the US Federal Reserve had no idea how to explain their bailouts or the trillions that they had printed from nothing to give to a foundering financial services industry. The Federal Reserve – and the entire central banking meme – we predicted would come under grievous attack. Eventually it did. Now we wonder if the entire sociopolitical compact of the West is not in jeopardy.
Let gold continued its rise. Let the EU continue to desperately print money to bail out its Southern flank. Let China founder while the Western banking system refuses to lend. Let the Anglo-American power elite insist on belt-tightening for Western citizens while the larger financial system continues with its business as usual. Let the system continue to function with its relentless and mercilessness while anger builds ... and we think there may come a crisis point.
Conclusion: We wonder if paper money itself – unbacked by gold or silver or both – will survive long into the 21st century. We wonder if there will be, eventually, increased civil unrest as authorities load up Western economies with tax hikes and inflation. We wonder if, at the end of the day, there will be a spontaneous emergence of barter, free-banking and a private gold-and-silver standard as the power elite continues along the current path of authoritarianism, profligacy, warfare and arrogance. We wonder. And ripples spread.
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Posted by Facundo on 05/11/10 09:40 PM
Spencer, Herbert. The Man Versus the State :)
The reading list contains lots of books which are my favourites. (I was hoping to find something of Spooner or De Molinari...).
Anyway, I will try to follow this list, it seem great. Thanks!
Reply from The Daily Bell
Our pleasure. Happy reading!
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Posted by Facundo on 05/08/10 01:54 PM
"men go mad in herds and regain their senses on by one, alone." Weeble
Fantastic. I read a book about that, "Mobs, Messiahs, and Markets" by Bill Bonner. I would like to read more on that, which else?
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Posted by Weeble on 05/08/10 12:27 AM
I need to clarify my last post. Being touched by the "man" was not a reference to a catholic priest, but by being deluded (in surround sound) for 5.1 years by the mainstream media about the facts of the 2.5 towers that fell. I was encouraged by someone to watch a few videos in 2006. Since I keep an open mind on most topics, I watched them.
This is what I do when someone like David Ike hits me with a Whammo:
1) Believe something to be true for just a few minutes.
2) If it is not true, you will find an inconsistency rather fast. Toss it and move on.
3) If it is true, then other things must also be true. Look for parallels such as: if 2.5 towers fell due to these people, then what else are they capable of, and do they think we are animals that can be dipsosed of with a flick of the wrist?
4) Grieve for your fellow humans.
5) Learn to live with positive and negative things happening all the time; that is the way God planned it. Most poeple do not see the negatives, they want to stay positive at all costs, so they accept their leaders and their lies. Most people have a pretty shaky value system, as the state keeps changing right from wrong, making it extremely difficult to accept your value system being shaken to the core, then re-building it from scratch. Most people are on the edge. They need to keep it glued.
That is why I do not try to convince anyone anymore. It may ruin a life. You have to want to ruin it yourself, because something seems very wrong here (e.g. murder is illegal unless sanctioned by the state).
I read a quote somewhere on your site recently that men go mad in herds and regain their senses on by one, alone. Forgive me for not searching, so I paraphrased it.
Now I feel clarified. Please don't call Pope The Benedick on me.
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Posted by Weeble on 05/06/10 11:18 PM
I am not a pessimist. I have tried to convince others, but to no avail.
My personal quest for the truth began only 3 years ago when I was touched by the "man". Once I changed my premise on the way things were working, the inconsistencies all began to fit together logically. Finding DB has been the icing on the cake. Intelligent feedbackers. Stimulating subjects. I never used to feedback on other sites. That is why my writing is poor (but hopefully getting better).
I am optimistic that people are now reading sites such as yours, but they need to widen their scope of thinking to a more philisophical level.
If these evil people are willing to kill others by the million, so they can line their pockets, then printing money is a symptom, along with socialism being a symptom. The cause of the the disease is shallow thinking and laziness, as well as greed. Wanting something for nothing. The kind of person that steals something because they will not be caught (they think).
Each person has to convert him/herself. That was the point I was trying to make.
The numbers are growing.
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Posted by F. Beard on 05/06/10 10:58 PM
Oops! Make that "Jonah" rather than "Noah".
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Posted by F. Beard on 05/06/10 10:53 PM
"Does the struggle between good and evil have a "winner" (on earth anyway?) " The Daily Bell
Well, Nineveh got a 120 year reprieve because of Noah's reluctant preaching. If we can buy that amount of time it would be nice to see real capitalism work for a change.
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Posted by Weeble on 05/06/10 09:50 PM
The article you wrote was right on the money, so to speak. I got a call from a rating agency a few days ago; I told them to stick their Dunn up their Bradstreet.
I watched the Robert Steele video and was less than impressed. "Blog that". What is happening in this world has been going on for 6000 years, not the last few decades. And the solution is not a new system, but a new systemless, spontaneous, free life.
The coming pivotal moment in history will happen as a result of 6 billion personal or individual revolutions only. A communal revolution, like the sort found on Click to view link and their feedbackers, will only result in a new Che Guavara type, or Josef Stalin type. These people are followers. They get stuck in a loop. There are many loops to daisy chain together. We are all connected. But you can only figure it out for yourself. We don' need no stinkin' gurus!
I gleaned a neat factoid from one of your "DB replies", which was that this world is being run by 1000 people. Hmm, I believe that there is only 1 leader and 999 minions that feel close to the supreme immortal "caring" being.
Have you read "Isaiah's Job" by Albert Jay Nock? Click to view link
I personally agree with Nock that there is no convincing the masses...
Reply from The Daily Bell
"I personally agree with Nock that there is no convincing the masses..."
But Nock didn't know about the Internet. Don't be a pessimist, Weeble.
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Posted by F. Beard on 05/06/10 08:40 PM
"How can libertarians be optimistic about the progress in technology?
It gives more power to individuals, that's for sure but, alas, at the same time to sociopath individuals too..." Facundo
Because good is stronger than evil, because the truth will set one free, because innovators can invent faster than copiers can copy, because our enemies are bogged down in obsolete modes of thought, because God is sovereign?
One of the reasons I like the Daily Bell is its upbeat message. We can win. I hope we do win.
Reply from The Daily Bell
Ha, see our other response. We just wrote there are no winners. Sorry. Does the struggle between good and evil have a "winner" (on earth anyway?) Of course, even believing there cannot be a "winner" doesn't preclude one from trying ...
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Posted by Facundo on 05/06/10 07:00 PM
Thanks for your message.
Still, if it's posiblle, I would like someone to help me find an answer to my question: How about internet potentiating the mob-thinking process? How about empowering sociopaths? Imagine powerful companies like google turning to be the big brother.
Putting it in a broad sense:
How can libertarians be optimistic about the progress in technology? It gives more power to individuals, that's for sure but, alas, at the same time to sociopath individuals too... When I think about it, and all the potential damage I wish to emigrate... from the earth.
Reply from The Daily Bell
This is a basic ongoing dialogue at the Daily Bell. There is a struggle between the Internet and power elite promotions. We don't know who is going to win. Probably there can never be a "winner." So in answer to your question, like any technology, the Internet empowers both the good guys and the bad guys. The humanitarian geniuses and the sociopaths. If you find another answer, let us know.
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Posted by F. Beard on 05/06/10 06:32 PM
"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." George Washington via the Daily Bell
Gee wiz. Is the choice of money to be limited to fiat or precious metals? Ben Franklin was a big supporter of colonial script which appears to have worked very well. Talley sticks seem to have worked well too in England before the Bank of England.
My point? Let's not be maneuvered into a choice that empowers the central banks who hold vast amounts of gold in addition to their unlimited amount of fiat. Let's choose liberty and leave the central bankers holding gold that has decreased in value to its mere commodity value.
Yes, chances are that under liberty gold and silver would be chosen as private forms of money. But there are other forms as well that might merely depend on the rule of law such as common stock.
Sorry George.
Reply from The Daily Bell
The Daily Bell has often mentioned the viability of free-banking which would allow the market to decide on money - fiat, precious metals, etc.
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Posted by Facundo on 05/06/10 04:41 PM
The bloodiest human behaviours were leveraged by technology (WWII). How about internet potentiating the mob-thinking process?
(While I use the net to read DB and form my own opinions, a lot of people, hot girls most notably, think I have a mental problem because of my opinions, here in Argentina a lot of bloggers idolize "Che" Guevara gaining respect and popularity from they peers, and of course seducing young and not-so-young girl because of their charming and revolutionary way of thinking!!)
Thanks DB to help me understand the scams that my teachers force to swallow
Saludos
Reply from The Daily Bell
Congratulations on being a free-thinking Argentine. And thanks for reading. May you get girls anyway.
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Posted by Imhotep on 05/06/10 03:54 PM
I do not trust " any experts"! No amount of economics gymnastics represented by curves and graphs can compete with 100,000 years of commodity money and "GOLD"! The fact that the entire 7 billions individuals who live on this planet exchanges and buy their goods with paper money is one of the greatest scam in the history of Humanity! The bankers and their accomplices in 'democratic governments" have established a system of bondage and wealth transfer that the Roman empires and all the greedy blood thirsty conquerors of the past could have never imagined in their wildest dreams! It is about time people in the US and around the world realize the insanity of our present monetary system and awake from this nightmare! End paper money, end FIAT money NOW!
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Posted by Paul on 05/06/10 02:50 PM
Thank you so much gentlemen, for answering my questions. Perhaps I should have been more clear on question#3.
Are the mints currently producing coins,(real gold and silver, and the "fake" ones used everyday in transactions) owned by the Fed, or are they private, working under contract?
Reply from The Daily Bell
Believe in the US the Treasury is in charge of the slugs, er, coins.
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Posted by Paul on 05/06/10 01:11 PM
Awesome article, gentlemen. I just have a few questions maybe you or other "feedbackers" could answer.
1) With all the violent unrest in Greece, do you see that happening in the US, being we're in the same situation?
2) Do you really think a "state controlled gold standard" is a possibility? and
3) I think I have a pretty good understanding of the Fed and printing paper, etc, but, how does the US Mints fit in with the making of gold and silver coins? Thanks for your time and consideration.
Reply from The Daily Bell
Here's our take though many of Bell feedbackers might have different opinions or could say it better ...
1) Yes ... to a degree. We are not sure that there will be tremendous violence. The Reformation itself was not a violent event, nor was the Renaissance. The violence in Greece was due to a few anarchists - and we have our suspicions about their provenance. Anyway, people in the millions are less afraid, and increasingly make their feelings known around the world. They are beginning to understand. As we have written before, it is not the 20th century and the Internet and its truth-telling constitute a process not a crisis that the power elite can simply respond to and abate.
2) More likely it may be free banking and a private market gold and silver standard, depending on how much credibility the power elite can muster.
3) State mints generally were supposed to mint coins of pure weight and value. But there is no need for a public mint in a free-banking-gold-and-silver era. Private mints are perfectly acceptable. Or no mint at all - just a scale, or a note from a reputable money-metals warehouse.
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Posted by David on 05/06/10 12:17 PM
Pardon me I did not see it posted. Thank you for being a Daily Bell ringing out clarity and reason.
Reply from The Daily Bell
No problem. Thanks, anyway.
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Posted by David on 05/06/10 12:05 PM
Former CIA Agent Robert Steele - stresses the importance of Blogging.
Click to view link
It is a short video. To see the longer version google Robert Steele and select video as search filter.
Reply from The Daily Bell
Yes, someone else sent us the link as well. He is causing quite a stir.
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Posted by Duane Bass on 05/06/10 11:58 AM
Internet Erodes Faith in Western Economies
We can thank the Daily Bell for the spreading of the elitist memes that propagate fiat money systems. It looks like the end is near, and the beast will die a horrible death, hopefully. . . Thanks and kudos to the Bell for ringing loudly!
Reply from The Daily Bell
Thanks, Mr. Bass.
Please note, however, that we have never predicted the end of either the elite or its endless memes - only that this group would have to take a step back as a result of Internet truth-teling, and thus would not realize its insane goal of global government in the near or medium term.
Certainly, we would argue as you do (and we have), that the fear-based promotions of the elite are less persuasive in the 21st century than in the 20th.
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Posted by Mark on 05/06/10 11:34 AM
And in the meantime, the "power elite" are moving to gain control of the source of the problem (from their viewpoint) - the internet.
Today's Wall St Journal says that the FCC is going to ignore a court order and attempt to regulate the internet via the Communications Act legislation.
This blatant attempt to control the free transmission of information will probably do them more harm than good because it will further anger those that understand the reality of the power elites' scam and additionally, all the attention it will receive will cause more people to awaken from the statist "Ice Queen" spell they are under.....
Click to view link
This piece does a good job of analyzing the reality of what is really happening:
Click to view link
Reply from The Daily Bell
Thanks for the links. We tend to agree with you that it will be a polarizing occurrence. At some point in this modern age, it probably becomes problematic for 1,000 people to try to force several billion to do what they want.
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Posted by Bryan on 05/06/10 10:50 AM
With Gold and silver as money, we would need reliable quick methods to be sure it is the metal as stated. With no paper money, honesty would be much more common. Watch those million(s) dollar bonuses disappear -- bailouts dead in the water ...
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Posted by Bill on 05/06/10 10:49 AM
The rating agencies are an example of the FOX guarding the Chicken House. However the masses are still incredibly ignorant and as time passes and fear subsides old habits will return quickly.
Consumption based on high levels of credit and debt will again dominate the USA economy-at least until the next bubble bursts or some outside event sends fear throughout the system once again causing a huge contraction.
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