Catherine Austin Fitts on Wall Street's Corruption, the Austrian School and Who's 'Really' in Charge
The Daily Bell is pleased to publish this exclusive interview with financial advisor Catherine Austin Fitts.
Introduction: Catherine is the president of Solari, Inc., publisher of The Solari Report, and managing member of Solari Investment Advisory Services, LLC and Sea Lane Advisory, LLC. Catherine served as managing director and member of the board of directors of the Wall Street investment bank Dillon, Read & Co. Inc., as Assistant Secretary of Housing and Federal Housing Commissioner at the United States Department of Housing and Urban Development in the first Bush Administration, and was the president of Hamilton Securities Group, Inc. She graduated from the University of Pennsylvania (BA), the Wharton School (MBA) and studied Mandarin Chinese at the Chinese University of Hong Kong.
Daily Bell: For those who don't know, give us a rundown of your current business and economic preoccupations.
Catherine Austin Fitts: I publish the Solari Report (solari.com), a private bridge call and blog focused on building personal and family wealth. I also provide investment advisory services through Solari Investment Advisory Services LLC (solariadvisors.com) and Sea Lane Advisory LLC (sealaneadvisory.com)
Daily Bell: Give us a sense of your background and childhood.
Catherine Austin Fitts: I grew up in Philadelphia in the United States. As a child, I witnessed the destruction of wealth by networks engaged in organized crime and financial fraud and the covert operations that supported them. It started a life-long fascination with understanding how money and the financial system work, including in places, and how healthy cultures could prevail.
My mother was an economist who retired from the Philadelphia Federal Reserve to have children. My father was a surgeon and trauma expert who loved caring for people. I watched them struggle with the growing corruption as it ultimately tore our family apart.
I traveled around the world during college, studying Mandarin in Hong Kong, and then graduated from the University of Pennsylvania and received an MBA at Wharton. After graduation, I went to work at Dillon, Read & Co. Inc., a small Wall Street investment bank that is now a part of UBS. I chose Dillon Read as the firm offered me a chance to work in many different areas. I kept moving from one area and type of work to another, trying to understand different parts of the economy and financial system.
Dillon had a tradition of public service. After I became a managing director and member of the board, we sold the firm and after our initial employment contracts ended, numerous members of the firm joined the Bush Administration. I did as well, becoming Assistant Secretary of Housing – Federal Housing Commissioner in 1989. After serving in the Bush Administration for 18 months, and deeply disturbed by the mortgage fraud, I left and started an investment bank, Hamilton Securities Group. My hope was to use software technology and the Internet to help decentralize the capital raising process in a manner that could, in combination with government reengineering, revive the US economy and improve pension fund returns as globalization was shifting significant employment and income abroad.
Decentralizing the economy in a manner that grows decentralized equity ownership was not the direction taken by Washington and Wall Street. Instead, the strong dollar policy was instituted and a debt bubble, led by a global housing debt bubble, financed enormous shifts of capital globally in a manner that aggressively centralized political and economic control. I have described this process as a "financial coup d'état." (See solari.com/blog/financial-coup-d'etat/).
To help facilitate the US housing bubble, the federal government targeted Hamilton. I spent eleven years engaged in litigation. This process forced me to research the US black budget, including related organized crime and financial fraud both domestically and globally.
I have described these events in detail in writings available online. (See the links at www.dunwalke.com/gideon/, including the link to my online book: Dillon, Read & Co. Inc. & the Aristocracy of Stock Profits).
During that time, I had a number of private families request my assistance in protecting their assets from the risks created by the changes underway. I found that I very much liked helping individuals and families directly. Consequently, after completing the litigation, I started Solari Investment Advisory Services.
I had a number of my clients in funds managed offshore. After Dodd Frank, the funds were returned to US investors and I started Sea Lane Advisory with my partner Chuck Gibson of Financial Perspectives in the San Francisco Bay area to provide an alternative.
Daily Bell: Are things getting better or worse from a corruption and freedom standpoint in the US?
Catherine Austin Fitts: Things are getting worse. On a positive note, there are some advantages to have the "beast" come out of the closet.
Daily Bell: Give us a summary of your perspective regarding Wall Street – and what happened to you in a little more detail.
Catherine Austin Fitts: I think Wall Street is the pit bull, not the master. The $64,000 question is, of course, who is really in charge and why are they behaving this way?
I have had the opportunity to operate at high levels in Washington and Wall Street and have never met a person who did not function as if they were a prisoner of the system. Often, that "system" did not permit them to function on a lawful basis. This implies highly centralized governance if this many people are functioning in an insecure, limited or unlawful way.
The people who manage our financial system are also operating with significant double binds. This is what I try to describe with my red button story:
"In the summer of 2000, I asked a group of 100 people at a conference of spiritually committed people who would push a red button if it would immediately stop all narcotics trafficking in their neighborhood, city, state and country. Out of 100 people, 99 said they would not push such red button. When surveyed, they said they did not want their mutual funds to go down if the U.S. financial system suddenly stopped attracting an estimated $500 billion - $1 trillion a year in global money laundering. They did not want their government checks jeopardized or their taxes raised because of resulting problems financing the federal government deficit."
So it is not appropriate to assume that the corruption is just at the top. Indeed, most citizens in the first world have been the economic beneficiary of what James Turk calls "the central banking-warfare model."
At the same time, we have all been limited by suppression or control of knowledge and technology that could significantly improve global living standards. The spiritual, environmental and cultural costs of this model are enormous.
What my experience helped me to understand is that we are governed by a group of people who have the power to kill, and otherwise break the law, with impunity. As the Secretary of HUD once said in my presence, "I don't have to obey the law, I report to a higher moral authority."
This power appears to come in part from the ability to use deeply invasive digital systems to gather intelligence, transact and monitor as well as from invisible weaponry, including satellites and weaponry controlled or delivered from space.
As Western countries move investment into the emerging markets, their satellites and military move to police this global investment. Investors do not invest where they cannot enforce. So in a sense, financial globalization is pressuring the United States to become a global military empire.
Daily Bell: Can Wall Street be cleaned up?
Catherine Austin Fitts: Of course it can. However, before it can, the question is: What is the investment and financial model that will replace the central banking-warfare model and how will it be implemented? Part of the economic warfare that is raging throughout the financial markets relates to the squabbles between the different countries and factions that want to come out on top. The greater the uncertainty about the model and the greater the change, the uglier the process will be.
Depending on the politics, market forces and new technology have the potential to significantly reduce Wall Street's market share in the global financial system.
Daily Bell: Is the SEC the regulator to do it?
Catherine Austin Fitts: Our society has integrated warfare with financial markets. So, for example, if we want to checkmate the Chinese, the oil price is driven up. Or when Treasury wanted to bubble the dollar, the gold price was suppressed. Yelling at the SEC or the CFTC to regulate more is not going to solve the problem. In a sense, to regulate in these markets you need the SEC to team up not only with the CFTC but also with DOD and ONI. And they need to coordinate with their counterparts around the world. And you need greater literacy in the investing public about how financial systems really work.
Our political class believes that dumbing people down and using controlled media, entrainment technology and subliminal programming to manipulate is the way forward. I am from the Winston Churchill school, "Tell the people." The greatest waste in our society is the broad-based intelligence that is not being unleashed because our markets are not truly free markets.
Clearly, the political class has been instructed to make sure they do not work.
Daily Bell: Does financial regulation work? Will more work better?
Catherine Austin Fitts: The Tao Te Ching says:
The more restrictions and prohibitions there are, the poorer the people become
The sharper the people's weapons are, the more national confusion increases?
The more skill artisans require, the more bizarre their products are?
The more precisely laws are articulated, the more thieves and outlaws increase
More laws or regulation will not address the underlying failure of enforcement and the need for a new investment model.
Daily Bell: Would markets be better off if they were MORE free and private watchdogs were allowed to take over from public ones?
Catherine Austin Fitts: Not necessarily. Again, we need to address the question, "Who is the breakaway civilization, what are their weaponry and surveillance systems and what systems will work successfully to shift their behavior in a positive manner?" This, of course, leads to additional questions, such as, "What do they know that we do not know and how would we behave if we had that knowledge?"
Setting private watchdogs to regulate these guys is a bit like landing on Normandy Beach with a water pistol.
This enforcement question is one of the reasons I focus on the power of transparency combined with individual intention and action to bring positive change.
A few regulators are an easy target. Millions of private citizens and investors shunning dirty players in the markets are not. Globally, they become a mighty force. However, that means that as a cultural matter the human race must become deeply committed to respecting everyone's individual rights, not just one's own.
Daily Bell: Are central banks responsible for much of the current chaos?
Catherine Austin Fitts: This takes us back to the central question – who is in charge and why are they behaving the way they are behaving? I don't think we know the answer to those questions.
Daily Bell: Would you like to see central banks shut down? Or do you think banks like the Fed ought to be nationalized, as Ms. Ellen Brown wants?
Catherine Austin Fitts: I agree that a Federal Reserve System under the ownership and control of the US government would better serve us in a system in which the information and clearance systems are owned, controlled and operated by government employees NOT by private defense contractors and where the rules regarding access to information are strictly observed and enforced.
Of course, that means we would have to return the Treasury and US agency information systems back to government employee management.
If you map out the information systems and databases at the US government, including at the Department of Justice, the SEC and the US Treasury, you will understand why I say that there has been a financial coup d'état. There has also been a financial data coup d'état.
During the hearings on Enron, I pointed out that the Department of Justice had not asserted control of Enron's documents. However, as the chairman's of Enron's finance committee was a key investor and board member in a company that was running information systems for the Department of Justice and the SEC, it would appear that Enron insiders had asserted control of the government's documents.
Can you imagine investigating someone who is a controlling investor in a company running the information systems for your enforcement division? How is that supposed to work?
Financial sovereignty requires information sovereignty.
Daily Bell: Let's switch gears. If the United States is an empire, will this century see another power rise to challenge it? China perhaps?
Catherine Austin Fitts: The greatest threat to US hegemony in Asia is Japan. Or at least it was Japan until Fukushima happened.
I don't underestimate the threat that Germany poses, particularly if we get a real split of the Anglo-American alliance from the continent as a result of the re-arrangements around the euro and Germany grows closer to Russia. Remember, one of the reasons that the European Union happened was that the rest of Europe, with bitter memories of WWI and WWII, wanted to integrate Germany into the whole of Europe.
China is formidable, but they are checkmated by the need to feed and employ such a large population.
Right now, the United States's lead in satellites, weaponry and control of the sea lanes makes it dominant. The question is how long that can continue if America itself devolves into a barbaric country. Force and technology alone do not result in greatness and the invasiveness of the model has become not just financially oppressive but deeply perverted.
As China is burdened with a large population, the United States has an aging population that is not prepared for the changes underway. How the US is going to manage their expectations and fund their retirement is an unanswered question.
Daily Bell: The invention of the Gutenberg Press was, in our opinion, the proximate cause, eventually, of the Thirty Years peasant war that raged across Europe – a war generated by an elite that had the most to lose from the Gutenberg Press's ability to bring literacy to the masses. Are we seeing a similar paradigm today?
Catherine Austin Fitts: Yes. Digital technology permits higher learning speeds generally. However, it also makes highly centralized management and manipulation possible, aka "the matrix."
Daily Bell: Is war necessary for those in charge of the US Empire to maintain control?
Catherine Austin Fitts: Yes. The US Empire is financially dependent on the violation of individual rights globally and access to cheap natural resources. This requires various forms of covert and economic warfare as well as overt military wars.
Daily Bell: Once the Empire topples, or as it does, will another take its place?
Catherine Austin Fitts: I do not assume that the Empire will topple. It has the ability to NOT topple. Whether it does or not is a political and military question – not an economic or financial question. The Empire's challenge is how to maintain liquidity without trust and how to maintain productivity without markets. It is trying to do too much with force and covert methods.
If it does topple, the competition to become the regional hegemons will accelerate and organized crime will move into the power vacuum.
As ugly as the Empire can be, there are uglier forces at work. Ask yourself: Does the Russian mafia have nuclear weapons? I assume so.
Daily Bell: What would be the result of more global centralization?
Catherine Austin Fitts: It would be more of the same – including increases in poverty, slavery and depopulation. Aaron Russo knew what he was talking about when he said warned us that these folks want spy chips in everyone and everything.
Daily Bell: Is a gold standard, or a gold and silver standard, the normal outcome of a peaceful, market-based society?
Catherine Austin Fitts: Not necessarily. Currency systems are part of governance systems. We should look at the currency question integrated into the question of who is going to govern and manage and in what process with what kinds of disclosure.
For example, there are many attractive features of a gold and silver standard. However, the ownership of precious metals is limited to a small group of the global population. If we suddenly adopt gold and silver as our currency standard, it will benefit a small group of people in a manner that could make things worse.
Nevertheless, I would far prefer that to a digital system working through the Internet and hand-held devices that allow all financial data to be centrally accessed and controlled.
Bottom line: Don't fall into the trap of proposing currency systems on a stand-alone basis. You want to know who is going to run things and with what processes and disclosure. Then you get into the aspects of the different financial tools that help us do that.
When I look at a company, the first thing I look at is the quality, experience and networks of the people who govern, manage and own it. It is the same with the global financial system. Without high quality people who are free to govern in the best interests of all concerned or as stated by law, charter and contract, there are no solutions. Put excellent people in charge throughout society and I assure you they can run things remarkably well, even if forced to struggle with lousy currency systems.
Along with better currency systems, we also need to shift out of dependency on debt and into an equity based financial system. Equity tends to build alignments and cooperation. Debt facilitates warfare with "buy now, pay later" economics that makes sure the financiers can win no matter the outcome.
Daily Bell: Does the Internet have a role in a new monetary system?
Catherine Austin Fitts: Yes. However, the Internet is the ultimate surveillance "op." Which means we have to have monetary systems that offer us robust transactions and value storage options in the material world that offer complete privacy without debasement. That means we need systems that function offline between private parties.
Daily Bell: Is the Austrian School making substantial inroads?
Catherine Austin Fitts: Yes, thank heavens. Let's hope they make more. However, as the centralizers want to use social media and online systems to help centralize transactions and move to digital control of currencies, anticipate lots of "woo-woo" proposals about "new money systems."
I was just at a wonderful conference in Switzerland and heard some of the most terrifying proposals for "a world without money." Having the Austrians by my side did me a world of good. I kept trying to explain to the most wonderful people that after you have turned over trillions of dollars of bailout money to one group who has now centralized tremendous ownership and power, to voluntarily swear off money means to decrease your power in a way that increases theirs. Is that a good idea?
We need to look at all these ideas through the prism of economic warfare. An eco-village can be a wonderful idea if the people who participate choose to create it and grow it well. However, that idea in the hands of the wrong people can be a design for labor camps.
So be careful with monetary ideas. The best monetary reforms are ones you will do in your life, today, now. Change starts with me and what works for me right now in my day-to-day transactions. For example, check out the calculator we made with Franklin Sanders of the Moneychanger to support people who want to use silver and gold to conduct transactions: http://silverandgoldaremoney.com. Otherwise interesting ideas can turn into weapons in the hands of those who do not have our best interests at heart.
Again, one man's eco-village is another man's labor camp. One man's gold standard is another man's plan to reduce a population to a feudal state to his advantage.
Daily Bell: What about the EU and the euro? Will either or both survive?
Catherine Austin Fitts: Force can make any system go, if you apply enough force and are willing to tolerate sufficient wealth destruction and depopulation. Witness the dollar. Numerous benefits come to the average American as a result of the dollar being the reserve currency. At the same time, the force used to make the system go and the debasement of both the currency and the culture that results is destroying America.
The same is happening in Europe. My expectation is that the euro will survive for some time with fewer countries subject to the Lisbon Treaty.
The euro as a currency system makes no sense. Europe has different people, with different languages, in different economies. There is no "we" here.
Different currencies would allow markets to work. So Europe would be wealthier with different currencies. But then the people centralizing the economy would not be able to pick up equity cheap in the PIGS with disaster capitalism tactics. Do they have the force to keep the system going? Yes, at least until enough people can see the game for what it is and are prepared to act in the face of force.
Daily Bell: Do you have an opinion on China? We believe it's headed for a crash landing.
Catherine Austin Fitts: China is struggling in the shift from exporter to the West to a country with more significant internal consumption. Their political challenges are formidable – including keeping one billion people employed and managing a new generation that is dominated by too many single male children.
However, China has an extremely productive culture and people. They think strategically, are very hard-working and love to learn and invest. The Roman Empire and the British Empire went broke trading with the Chinese, until the Brits turned to opium.
I think a growing China is here to stay. Yes, they may slow down as, like the rest of us, they choke on misallocations of capital that occur in bubbles. I don't think they will crash unless the currency wars lead to a global meltdown and war. Their long-term outlook is quite positive. Remember that our success is very much tied to their success.
Oversimplified, if the young people of this world are not successful what would happen to all of us? Elders need youngsters. In part, that is what the shift of capital to the emerging markets is all about.
Daily Bell: What are some of the most important issues pertaining to free markets, in your opinion?
Catherine Austin Fitts: The most important issue is transparency. The second is integrity of contracts and agreements.
Daily Bell: What are the fundamental obstacles to recovery?
Catherine Austin Fitts: We are experiencing an ongoing financial coup d'état that is centralizing power. Symptoms include an absence of transparency, deteriorating integrity of contracts and agreements, environmental deterioration, a "breakaway civilization" that appears "out of control." I would add to this the use of financial markets for warfare as opposed to facilitating the allocation of capital and trade.
The ultimate codification of things like transparency and integrity of transactions is not the law; it is the culture. A variety of forces are systematically breaking down our physical health and our culture. That cultural corruption is the greatest obstacle.
Daily Bell: What are the fundamental issues pertaining to a healthy recovery?
Catherine Austin Fitts: We have to get to the bottom of who has been centralizing and why, what is the technology they have and where it is they are planning to go with this.
Daily Bell: Is there a power elite that is trying to create one-world government? If so, is it succeeding?
Catherine Austin Fitts: Yes, there is a concerted effort to create a one-world government and evolve to a one-world currency. It has been succeeding. As the "financial coup d'état" becomes more obvious, centralization is entering a critical stage as more and more people globally react negatively to the effort and related tactics.
Indeed, our current currency wars reflect a natural pulling away from centralization that is healthy.
Daily Bell: What endeavors are you involved in that you want to point out to our audience? What's most important to you that you would like our audience to be aware of and support?
Catherine Austin Fitts: My focus is on the preservation and growth of family wealth. If you study the economy bottom up, it is built by people. Successful economies are built by family enterprises that ultimately contribute significant amounts of financial and civic capital and provide environmental stewardship, not to mention raising our future leaders.
Family wealth is threatened by centralized control. Specific issues that I tend to focus on include the centralization of the seed and food supply in combination with the patenting of life. Others include environmental pollution, financial fraud and insufficient transparency to support individual investors and erosion of property rights and individual liberties.
Daily Bell: What are the most important – seminal – works of yours that you would encourage everyone to read? Where can they be found?
Catherine Austin Fitts: I have spent quite a lot of time thinking about how we could shift the management of institutional capital to a new model. You can read more about the Solari Investment Model here: http://solari.com/blog/the-solari-investment-model/ .
Daily Bell: Finally, give us your best estimate of where is gold headed, pricewise, over the near- and long-term.
Catherine Austin Fitts: Gold is still in a long-term bull market. I anticipate the high for 2012 being somewhere between $2000-2200. Where the price ends up long-term is very much a function of monetary policy in the long-run. Gold is not increasing in value so much as fiat currencies are debasing.
I believe that inflation will continue to be the policy choice to manage global debt positions.
One of my greatest concerns is the push for a Constitutional Convention in the United States. If such a process were hijacked in a manner that fundamentally altered the Constitution, it would create the conditions to make it much easier to manage through deflation. That could have a significant impact on the relationship globally between financial paper and tangibles, including precious metals.
The amount of new technology that could be integrated over the next decade is quite significant. In a more positive scenario, a combination of the global rebalancing and new technology could cause the equity markets to shake off the debt burden and leave precious metals in the dust.
That still leaves the question of how people are going to access the necessities of life if technology provides what labor used to AND the centralizers continue to handicap or disallow small business and entrepreneurship and force hundreds of millions of farmers off their land and into the cities.
If hedge funds can borrow at 1% or less in a carry trade but I have to pay 30% to finance the local farm or meat market, the transition to devalue labor can offset the monetary inflation, but it can also make for a very ugly world.
Daily Bell: On behalf of all of our readers we thank you for sharing your views with us, and hope to hear from you again soon. And we encourage all readers to visit Solari.com and consider learning more about your work. Thank you.
Catherine Austin Fitts: Thank you! I enjoy reading the Daily Bell and am honored to have this opportunity. Thank you for all you and your readers do in this world.
Daily Bell: Thank you.
Thanks to Catherine Austin Fitts for this generous interview. There is much in it that merits study, and we hope viewers take a close look at it.
For us, the most important statement she makes is when she says: "I think Wall Street is the pit bull, not the master. The $64,000 question is, of course, who is really in charge and why are they behaving this way?"
This simple statement puts Wall Street into context. And it is one that people ought to reflect on, in our view, as the hysteria over Wall Street corruption mounts. The same forces that organized Occupy Wall Street are still at it, agitating for a new "Pecora Hearing" of a sort. We've written about this before: The Real Reason Bloomburg Sued to Open Up Fed Records?
We figure the new Pecora Hearings shall begin sometime after Barack Obama is reelected (if he is). The apparently false-flag OWS protestors shall be turned loose once more to cry out for the heads of the one percent. It is reminiscent of a second French Revolution writ small.
Cutting off the heads of the Wall Street captaincy shall not reduce the system's abuses. Regulation shall only concetrate power and make them worse. It's been tried before.
Honestly, the way to deal with Wall Street and its appendages is to withdraw patronage from them. Education is necessary as well because the reality is that Wall Street in its modern form would not exist without the larger money system that is now in place.
Call the larger system of monopoly-privileged central banks Money Power. And the families that control these banks the "power elite." When Ms. Fitts speaks of the "$64,000 question" she is making a point about the way the world REALLY works.
She has acted on this knowledge for her own clients. And in this interview we can surely see why she has amassed a sizeable business and continues to create success for her readers and subscribers.
Posted by Summer on 01/10/12 07:21 PM
pm: "Indeed, the difference is not so much in the commodity underlaying the bills of exchange (paper money, in other words) - gold, silver, other metal or goods. The difference is whether these bills enter circulation via credit and bear interest, or not... "
Nice post. Agreed, the biggest problem is interest!
pm: "Can You please elaborate the difference between hoarding and saving? Is the difference in emotional attitude, or something more substantial?"
In my view, the difference is hoarding vs. investment producing income, rather than hoarding vs. 'idle' saving. Traditional 'saving', in real terms, diminishes substantially via inflation - not much *real* saving anyway. I'd prefer something like buying property and putting it on rent - an investment, producing future income, whilst circulating money, offering protection from inflation and providing a home - not hoarding money in an account etc. In an anti-interest environment with zakat/demurrage (See Silvio Gesell) this kind of investment/circulation of wealth would be the norm, and inflation would largely be an irrelevant factor.
For a different anti-interest perspective:
Click to view link
Posted by memehunter on 01/10/12 05:48 AM
Very interesting comments, especially in light of the discussion about interest we had on the "Austrian economics" thread.
For global warming, I agree that it is important to make a distinction between "global warming" and "anthropogenic global warming" (the thesis that humans are responsible). The second idea is almost certainly false. As for the first, I am skeptical but I agree that it is more debatable.
Posted by pm on 01/10/12 04:43 AM
OK, what I am trying to say, is:
1. Not only gold can serve as money. Quite possibly, there are other, some probably even better solutions. I do not believe in dogma that only gold is money:)
2. Gold as money leads to concentration of power. This is not good, if power is unchecked.
I am not against gold per se. It has its due use, especially as measurable exchange between untrusting, even hostile parties. Commerce during previous wars has proved it.
As already said, gold does not not deteriorate over time, contrary to other merchandise. It is also liquid. Therefore people tend to convert their surplus goods to gold and then earn interest doing relatively nothing when everybody else works harder.
Interest charging is not sustainable in the long term, even if there is no fractional reserve banking. Every golden piece lended must come back with earned interest. Is there enough gold for interest payments? Apparently not, if there is not sufficient amount of gold even for trade, as was recognized previously. This leads to a fierce competition for gold between borrowers, therefore concentrates power in the hands of gold lenders. Indirectly, this is a significant reason for wars and resource grabs. When one cannot live from his work, he changes trade, seeks a place where he can, or resorts to violence for survival. Social revolutions tend to "restart" society by leveling the playing ground and cancelling unbearable debts, unfortunately with much destruction of life and property.
'Only when governments get into the business of creating irredeemable "paper currency" are people cheated when they are forced to use "paper currency".' - If a redeemable currency is used, this can serve as some limit for government power, namely, government has relatively limited resources for wars and cronies. Irredeemable currency relaxes limits for governmental spending. Likewise, it relaxes the limits for lending for bankers, and therefore increases interest gains and increases the rate of concentration of money power. As both sources of power, the one backed by violence (government) and the one backed by money (bankers) seek to increase their power, both argue against gold.
What I want to point to specifically, is that every interest bearing currency concentrates wealth and power in the hands of issuer and therefore leads to increased inequality, exploitation and wars. Gold, in many ways beneficial to trade, savings and financial independence, is not the ideal solution for prosperous and sustainable economy because of the interest payments that come with it. Interest-bearing paper money more efficiently does the same what gold does - namely, concentrates power and wealth, creating idle lenders and overworked borrowers.
Indeed, the difference is not so much in the commodity underlaying the bills of exchange (paper money, in other words) - gold, silver, other metal or goods. The difference is whether these bills enter circulation via credit and bear interest, or not. Likewise, if we have electronic money, the difference of interest or no interest remains. Quite probably, gold became money in antiquity and is recognized as such today exactly because it concentrates power and wealth via interest payments.
In a way, the last 500 years of the western civilization can be viewed as a process of power and resource grabs by money power via interest payments. Borrowers are squeezed at home, therefore colonize other lands to live more freely or to repay debts. Lands that do not participate in golden economy, are occupied to do it. Money-wise, there is no use of indigenous population it they do not participate in trade, therefore they are eliminated or enslaved. The same today with neo-colonialism and paper currencies. Interest is evil. But I digress.
Can You please elaborate the difference between hoarding and saving? Is the difference in emotional attitude, or something more substantial?
Now to the notion of unit if energy as a unit for exchange and value. Of course, it does not matter, what we use as unit of exchange, as long as it enters circulation via debt with attached interest payments. The one who issues the units and collects the interest controls the system.
Therefore, issue of money as a unit of exchange should be distributed, not monopolized by anybody. Energy unit could serve in this purpose very efficiently. It is not possible to counterfeit energy nor there is over-competition for it as for interest-bearing currencies. Such a system could very closely resemble the one in nature and allow us to see the real value of many things. For example, the value of fresh air and good food.
However, while we have not a system of exchange of energy units, we can do with one where the exchange is done via reliable units of information about energy. For example, units of electrical energy produced.
Carbon tax is an attempt to control the ones who are not controllable in other ways, at least conveniently. Namely, to prevent people in the 3rd world from using coal deposits or other resources for their own interest. Or continue the economy of debt, using seemingly eco-friendly names.
By the way, global warming exists (or it can not easily be denied). Hoax is that "the humans made it". The most elegant refutation to the man-made global warming so far is the fact that other planets of Solar system are warming too (see Click to view link
Posted by Agent Weebley on 01/08/12 10:56 PM
My friends are talking about you.
Click to view link
Posted by Agent Weebley on 01/08/12 02:01 AM
What are you doing, Ingo . . . having a Turkish with me?
I believed your pony . . . and look where it got me!
You seriously believe a labour saving device costs the same amount of labour to make as the labour the device saves? You said it again today . . . what are you . . . ginger beer?
Please recant your statement, Ingo . . . free me from your NetZero nothingess!
I hope you're happy with yourself, Ingo . . .
We've been trying for year to explain what a Meritocracy is like . . . how it is funded . . . how the money would be created for free . . . and distributed for free . . .
But now . . . I let myself get suckered into YOUR world . . . I trusted you . . . now I'm stuck here.
How many others have let themselves suckered in by you?
I thought you were my friend!
Please help me by going here: Click to view link
Posted by Bischoff on 01/07/12 06:20 PM
Interesting reply. Very much in line with the common paradigm, but well expressed.
"Value of gold rests largely in our minds. In society, where gold is seen as money, gold in fact is an universal barter commodity, existing almost only for its exchange value. If people do not recognize the value of gold, or there is only one man on a pile of gold, it is of no use."
Gold as a commodity has unique features:
1. It is rare
2. It has great density
3. It is malleable
4. It doesn't oxydize
5. It doesn't spoil
6. It is chemically stable
7. It is dimensionally stable
8. It cannot be mass produced
These features possessed by the commodity known as "Gold" undoubtedly contributed to its choice as "Money".
Whether you believe me, or not, I am telling you that Gold is not conceived to be Money only by isolated societies. It is unoversally conceived to be Money by people the world over. This is so, despite the endless propaganda to the contrary which eminates from central government banks.
To maintain that the value of gold is a subjective fix generated by an individual's mind, is fallacious. Let's see why not...
How did Gold obtain its value... ??? Why is Gold not a "barter commodity", but "Money"... ??? To answer these questions, one has to understand how "Money" evolved.
The "barter" economy evolved when there were surpluses as the result of agriculture and husbandry. Barter greatly enhanced living standards over the basic subsistence of the "hunt and gathering" economy. However, barter is confined to direct trade. It is a one-to-one transaction in which value for value is dertermined. Barter became greatly limiting when trade expanded over space and time.
The solution to the limitation of barter trade, was the use of an intermediate commodity to effect exchanges. The commodity which proved to be most liquid over time was GOLD. It has been Gold as a commodity which has been universally recognized as MONEY for 2,500 years. Regardless of all the anti-gold propaganda, misinformation and derision, Gold and only Gold is MONEY.
Many people will not agree with this statement, because they have been propagandized against it. However, let things fall apart, and those very same people will prove to themselves, that they'd rather hold gold than anything else.
The commodity "Gold" as the intermediate commodity in facilitating exchange (currency) is synonymous with the term "Money". Because of the unique characteristics of Gold, Gold emboddies the standard of value and the standard of measure while also being used as currency.
The advancement from the "barter" economy to the "money" economy expanded trade hugely. The high demand for goods, brought on by the "money economy", required that more and more Gold to be available as currency. The lack of sufficient quantities of Gold for currency led to curtailment of the "money" economy.
The solution to the shortage of "Gold Currency" was the development of redeemable "Paper Currency". This was accomplished by the development of "Bills of Exchange" to function as clearing instruments which could be discounted and against which paper currency, redeemable into gold, could be created.
The benefit of the redeemable paper currency eliminated the problem resulting from the shortage of Gold, while at the same time this paper currency maintained the "standard of value" and the "standard of measure" which gold represents.
The standard of value of gold rests in the fact that the work (joules) expended in mining and refining of gold has stayed relatively constant over centuries. The joules required to obtain a specific amount of refined gold serve as the standard against which the joules required to produce any other commodity or service are judged.
The standard of measure of gold rests in the fact that gold has all the unique characteristics I outlined. Gold does not deteriorate. It is therefore ideal as a standard of measure.
Only when governments get into the business of creating irredeemable "paper currency" are people cheated when they are forced to use "paper currency".
With redeemable paper currency, people have a chance to hold gold as savings. It is the willingness of people to give up their gold for interest earnings which sets the "interest rate". Is there a need to have actual physical gold on hand. No... It only requires an ability to redeem currency for gold to influence the interest rate.
Gold is not hoarded when a redeemable currency exists. Gold is SAVED. It is not hoarded. "Hoarding" is a totally different concept. People and businesses do hoard commodities other than gold when they perceive a problem with "irredeemable" currency.
Astute savers, in a world where only irredeemable currencies exist, hold their savings in the form of gold. That there are so few astute "savers" is very much lamentable.
THE MAIN POINTS:
There are only two type of currency, redeemable or irredeemable.
Redeemable currency is created by the productive business sector, and the interest rate is determined by the willingness of the saver to give up the use of his gold for interest earnings. Redeemable currency created against "Bills of Exchange" is non-inflationary, and it has a positive value.
Irredeemable currency is created by monetizing government debt. The interest rate is established by a central bank committee over which savers have no control. Irredeemable currency is the circulation of debt. Irredeemable currency has negative value.
Gesell makes many good point, but he fails to see the difference between redeemable and irredeemable currency.
"An ideal system of exchange could use a widely recognized unit of work, the already mentioned joules."
You mentioned energy in this context... What do you think the "carbon tax", justified by the global warming hoax, is all about... ??? It's the one world currency system supported by the "taxes" of energy users. This system essentially exercises control over the world's energy resources. The question is, who will control the system... ???
Posted by pm on 01/07/12 09:02 AM
Ok, gold is convenient as money because it can be distinguished as one without computers, governments enforcing something etc.
However, the drawback, as You say, 'The problem is that GOLD as currency does not work in a modern economy. There is not enough GOLD to serve as currency for financing production and consumption, and to also facilitate savings and investments.'. It seems, that its rarity is the factor that does not allow it to be used more widely. If it would not be so, and gold could be found everywhere and the work was needed only for the concentration of golden particles, then every unemployed man could improve his situation by gold mining. The workforce that could not find employment, would enter money mining.
However, this is not the case. Due to its rarity, gold is hoarded. As it can be stored in hoard indefinitely, it is possible to ask for premium on its use, which leads us to interest. This, in turn, leads to an economic system where the largest owners of gold can easily concentrate the remaining gold in circulation, and thus power. This is the point of Silvio Gesell.
Value of gold rests largely in our minds. In society, where gold is seen as money, gold in fact is an universal barter commodity, existing almost only for its exchange value. If people do not recognize the value of gold, or there is only one man on a pile of gold, it is of no use.
An ideal system of exchange could use a widely recognized unit of work, the already mentioned joules. Ideally, it could be electrical energy - it is divisible, fairly easily measured, and can be used up for work. Unfortunately, we do not have yet the technological means for efficient, long term and convenient storage of electrical energy.
Contrast electricity with gold: if people do not recognize it as valuable, this does not prevent it to be converted into units that are of value. And lone man could also use it if he has some knowledge. There is no rarity in electricity, only work necessary to 'make' it.
Before the invention of cheap electricity, aluminum was the substance close to the possibility of 'energy as money'. Aluminum is almost everywhere, and the main factor needed to refine it is electricity, which can be achieved by different means. Aluminum could also be converted back to electricity and used up in the process. Pretty stable and can be stored sufficiently long.
In nature, the main "currency" is organic matter, that can be used up for sustenance of life. Plants produce it from solar energy, animals destroy (this is simplification). There is no hoarding without storage expenses, because it rapidly becomes unusable. Up to the advent of the abstract notion of "money", exchange between people was also in the form of organic matter. Perhaps, our minds are hard-wired in this mode of thinking... .
Posted by Agent Pete 8 on 01/07/12 04:43 AM
Hi Ingo, here's a short clip for you:
Click to view link
Posted by Agent Weebley on 01/07/12 01:04 AM
Think [Agent] Weebley . . .
What the Fig, Newton? Ingo's torque was confusing, and metred incomprehensibly.
At first, I could not believe what was laid out in front of me . . . my buddy, Ingo, was asking me to believe the unbelievable.
Labour saving devices save no labour! The industrial revolution has been a scam! Every labour saving device ever created, eventually robs the labour savings from the creator . . . how?
He was also asking me to forget that I am Energy!
I figured that it was time to enter Ingo's world today. That is why I disappeared.
Click to view link
I wanted to meet James Burke, the science guy, after I left the Shire, on my Hunt for answers.
The car I drove to find James Burke suddenly stopped, as the energy expended to make the car was unexpectedly used up. I kicked myself, as I should not have used the car that was 10.2343561 years old . . . the additional fuel I put in the tank for the trip had no effect . . . the car's use-by date had expired, but there was no sticker to that effect on the car. I had been robbed of the money I paid for that car. The worst part is that Ingo knew how much energy it took to make that car, and how much energy was expended in using the car, but didn't tell anyone.
So I got out and walked. Feeling tired, I decided I needed a bite, but it too had no effect.
I suddenly find I am floating in space . . . completely drained of the energy I thought I had, but don't.
Where's that Burke?
Posted by Agent Weebley on 01/06/12 12:27 PM
Posted by Agent Weebley on 01/06/12 12:25 PM
Please . . . somebody post something to hide that.
Later today, Ingo. No time right now.
Posted by Bischoff on 01/06/12 12:23 PM
... ."bid" and "ask" are terms used in arbitrage. The producer "bids" (offers) and the consumer "asks". Arbitrage is the method by which a "market prices" are established.
Look up the rest... .
Posted by Bischoff on 01/06/12 11:02 AM
Think Weebley... .
You can create a pick (capital) and use it to mine gold. The amount of work (energy expended measured in joules) it takes to create the pick plus the amount of work (labor) it takes to mine and refine a certain amount of gold, compared to the amount of work (joules) required to create a large piece of mining equipment (capital) and the labor required to mine and refine the same amount of gold, has stayed constant over centuries when you add up the joules on both methods.
FYI, "Joules" are not part of your anatomy. A "Joule" is a term in physics that measures "work". It has to do with Newtons and moving mass over distance... ..but I think that is enough for you to handle right now.
Posted by Agent Weebley on 01/06/12 08:31 AM
You said: "The work required to produce a given quantity of gold has remaind almost constant over centuries."
Ever seen a driller, C4, dump trucks, and processing plants?
I feel like Super Snooper trying to help Gold Pinky see the slurry at the bottom of his very fine bottle of Fractional Reserve.
Click to view link
Kaboom1 mru ha ha ha. Are you dropping the bbbbbbb b-bomb?
Can you edutain new ideas with us, ingo?
Posted by Agent Weebley on 01/06/12 08:06 AM
You said: "The producer however will not bid below his costs."
Why, might I ask, did you say "bid?" Is this a cartel-based scenario of which you speak?
*translation: just sayin', Ingo Bischoff
Posted by Bischoff on 01/06/12 01:06 AM
"And the smart seller would of course ask the same price in both scenarios, right? Otherwise, that would violate the principle that prices are determined by production costs."
No he wouldn't. I already gave you the answer. The price is arbitraged. The producer will try to get as much for his coffee as he can. The producer however will not bid below his costs.
Therefore, a "market price" is the price discovered through marginal utility analysis on the part of the consumer arbitraged against the bid price of the producer who tries to maximize his profit.
Menger doen't make that clear. Who is the blind man that cannot see... ???
Posted by Bischoff on 01/06/12 12:31 AM
Sorry, it won't work. You ask me to think of Money in terms of information about value that can be exchanged, rather than in terms of a mere commodity.
When I do that, I come up with GOLD as "currency". GOLD, as a currency carries with it the infornmation about value, simply because GOLD is the standard of value, as well as the measure of value. The problem is that GOLD as currency does not work in a modern economy. There is not enough GOLD to serve as currency for financing production and consumption, and to also facilitate savings and investments.
The problem of the shortage of GOLD was overcome by instituting paper currencies and digital currencies to convey information about the value which can be exchanged. However, the question is exchange of value by what standard... ??? The answer is by the standard of GOLD.
GOLD became the standard of value due to its unique physical and chemical characteristics, as well as due to its relative rarity. GOLD cannot be mass produced, though alchemists have tried for centuries. GOLD does not spoil nor deteriorate in its quality. It is therefore suited for ones savings.
As a measure of value, GOLD is uniquely qualified to convey information about value over distance and time. Can a mere paper promise by a private or by a government entity convey the same information and assurance as the value standard embodied in physical GOLD... ???
No, it cannot. The next best thing however, is a private paper promise which can be redeemed for GOLD at anytime.
Private paper promises to exchange value are quite suitable, if these promises are immediately called. However, these promises are not suitable to be used for ones savings.
Let me give you a practical example. If the suppliers to and the workers of producers/sellers of consumer goods are paid in kind, all can establish a fairly high living standard by exchanging their excess in the payment in kind amongsr each other. The problem is that goods like bread milk and butter are not suitable to put aside for ones savings to sustain life in old age. That is why people who know how ro save, exchange their payment in kind for gold, gold which was dug up by some miner who needs to eat and drink to survive.
The work required to produce a given quantity of gold has remaind almost constant over centuries. Therefore, GOLD is a superb measure of value, against which the value of all other goods and services can be measured.
While you can replace GOLD as currency with almost anything, you cannot replace GOLD with anything that can function as the "standard of value" and the "measure of value". It is for that reason, that gold has been the most liquid commodity for 2,500 years. The most liquid commodity is also known by the name MONEY.
Therefore, MONEY is GOLD, and GOLD is MONEY and nothing else.
Posted by Agent Weebley on 01/05/12 11:21 PM
But the government is not there to put you in jail . . .
Click to view link
Posted by flying_pig on 01/05/12 07:33 PM
"Where in this system can be a place for government, is not yet clear :)"
I know. They will make it illegal and put you in jail.
Posted by pm on 01/05/12 03:39 PM
If we drop the requirement for anonymous transactions, and make bitcoin emission coupled with some biometric ID, we can make a system where the emission of money is done by each participant as his own personal debt. And if this debt is possible only as imbalance towards some another participant, meaning one's debt is another's surplus, we get a distributed, decentralized, personalized LETS system where money is actually not a commodity, but information about wealth exchanges.
Where in this system can be a place for government, is not yet clear :)