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Posts Archive

August, 2017

Not the briar patch, Brer Trump!

March, 2017

A Serious Case of the DTs

January, 2017

The American Yeltsin
Sunlight Through Troubled Times
Beyond Zealots and Cold-War Warriors

December, 2016

A Vandal at the Gates of Rome

October, 2016

Are you conscious?

September, 2016

Brave New World?

August, 2016

Stop, for a moment.

July, 2016

Rupert's Coup

March, 2016

Between a Shill and a Hard Case

July, 2015

Swimming in a sea of sugar

June, 2015

Information Rich, Attention Poor
Nerds need to get out more ...

March, 2015

There is a homunculus at the end of the garden path

October, 2014

Determination, not dreams
Welcome Home
Addicted to GDP
Irony?Karma? - take your pick

August, 2014

History? Whose story?
Marketing Ebola

July, 2014

As above, so below

December, 2013

A time for tolerance

November, 2013

Thinking out of the xBox
The old ones are the best ones ...
Welcome to the Gulag

October, 2013

A timely response to spying

September, 2013

Obedience and the Machine
Ban the bible?
Fracticide - don't do it.

July, 2013

Serfing, USUK

June, 2013

Deafened by gossip

May, 2013

Who needs words...?

April, 2013

Why would they stop?
It must be true

March, 2013

Beyond belief

February, 2013

RBS: doing Fine, not Time
Pillars tumbling down
Trouble with models
A matter of perspective

January, 2013

Royal Promo
Boiling the Lance
Boson Brains Rule

November, 2012

Burning symbols

October, 2012

Charles and Jimmy's little secret
Beach bums and Magi
A Reality Check
Happy Birthday

August, 2012

A journey through riotous times

July, 2012

Caring for life
Not everyone for Tennis?
A banker lie? Unthinkable!

June, 2012

A cynical ploy
Collateral damage for The United States of Europe
Will you walk into my parlour?
Beams and motes
From one Jubilee to another

May, 2012

Perturbations
A crazy idea
The course of time
Sorry, Harry

April, 2012

Cracks in the Rear-View Mirror
A keeper of sheeple
Principled Policing
Say goodbye to Betty
Lessons learned
Causality and good news
Manufactured irrelevance
Corporate responsibility

March, 2012

Poppycock - without question
Who's pushing your buttons?
Investigate the Blair-Murdoch Conspiracy

February, 2012

In Praise of The Seven Liberal Arts
The real story
When giving is taking
Giving it all away

November, 2011

Poking a hornets nest
Wealth of Nations poured away
Squeaky and the Paedophile Prince
Boiling frogs
Death of an industry
Change blindness
What a world ...

October, 2011

Gifts
Pictures and words
Screeching to a halt.
Taxing noise

September, 2011

Hand over your money
Breeding psychopaths
Mr Fox, is the hen house safe?
A ludicrous Conspiracy Theory
Can you believe your eyes?
Getting eye contact
Partners in Crime

July, 2011

It was the Wettins 'wot won it'

May, 2011

Kevin
Heir apparently

April, 2011

Putting Emergencies in Context
Underground networks travelling First Class

March, 2011

Be careful what you ask for
Water - a tale of two countries
Newspeak
Here we go again ...
Wake up!!!

February, 2011

Priorities
The right stuff
Revolution! ... and yet, and yet.
Follow the money
Shh - don't tell the children
Does the MoD have a Cunning Plan?

January, 2011

Met Office caught in winter weather whitewash
Read between the lines
The new parable of Noah
Banking on People

November, 2010

Wettins don't say sorry
It's just not fair ...
Remember, remember ...

October, 2010

Kindness sees no crime
Pundits in the frame
Killer drones target the middle class
A tale of two Charlies

September, 2010

A failure to discriminate ...
Good Grief
A rent-boy's rent-boy

August, 2010

Size psycho-fancy
Baiting a Wikid Trap?

July, 2010

... at the gates of Rome
Monday musings

June, 2010

Guilty - but not charged
Psychopaths at the door

May, 2010

ConDemned to the Shock Doctor
Driven by metaphor
Guns and Banksters
Death of Old Conker

April, 2010

Bankster at bay ...
Nuke Iceland?
Smokescreen

March, 2010

It's how you say it ...
Bullying Manner
Quelle surprise!
Iceland - showing the way.

February, 2010

Small steps to a far place
Seeds of silence

January, 2010

Liar
So who needs people?
Late and censored
Freedom for life

December, 2009

Patterns
Testament
Boy-friendly!

October, 2009

Fools served by Zombies
Webs
BBC dogs that didn't bark ...

September, 2009

Taken Hostage

August, 2009

Have a good weekend ...
High Frequency Trading ...
Money money money
Fit for a politician

July, 2009

Inside clouds

June, 2009

Fond thoughts of Tony Blair ...
A good day ...
Midnight musing

May, 2009

aaah diddums
Zal may ...

April, 2009

Echos of a dark past
Sharks in the Shadows
Worlds Apart

January, 2009

Money Matters
Killing History
Magic

December, 2008

Home improvements
Get the Picture?

November, 2008

Barak - the movie

October, 2008

Won't get fooled again
Bankers, all of them!

September, 2008

And The Winner is ...
Light relief
A Financial 9/11
That's Lucky!
On this day

August, 2008

Mark My Words

July, 2008

The Management Myth
Sense Making Questions

June, 2008

Beware this Griffin
42 Day Folly
A Tortured Silence

May, 2008

A new Dawn needed
Is Justin Webb A Neo-Con?
The Puppy, the Mountain and the Fascists

April, 2008

Attention Pays

March, 2008

Fat Cats and Pork Pies
Fed up Darling?
Swearing - it's just not British!

October, 2007

TsarkoMania

Bankers, all of them!   October 11, 2008

We need to find an alternative to the existing monetary economy - not least because it just does not work!! It is a sophisticated pyramid selling scheme, which we have all bought into.

Money itself is a psychological instrument - it does not exist on it's own (see my blog post for 13th March), it is created when you take out credit (therefore money = debt!). Money used to be based on gold - the system then was called the 'gold standard' because a bank note was a 'promissory note' - if you took it to a bank, you could demand it's equivalent in actual gold. This was modified by the Bretton Woods agreement during WW2 (when the dollar became the standard, but it was pegged to gold) then the dollar-gold link was abandoned by Nixon in 1971.

So what? Because money no longer has a physical base, bank deregulation has allowed huge amounts of it (debt) to be created out of thin air! Like an upside down pyramid it is based on and fed by real things like people paying mortgages and working to produce value. But on top of the small, real base of this inverted pyramid has been built an enormous, mushrooming mountain of debt. This debt takes the form of 'derivatives' and is like a huge swirling whirlpool of financial instruments. For example take one kind of instrument: CDS (Credit Default Swaps), of which there are about $67 trillion dollars worth floating around!

They work like this: A bank lends money (which it probably does not have) to people for mortgages. It then takes a bunch of those mortgages and puts them together to create a financial product (or instrument, let's call it product#1) which is used to borrow money (according to fractional reserve accounting rules) from a commercial bank (or, in the USA, Fannie May for instance).

The Commercial bank now has this financial instrument (product#1) and it:

 

a) creates a CDS (lets call it product#2), which is a guarantee (insurance) from a third party in case the first bank defaults on product#1, and
b) bundles product#1 together with other products and creates a new instrument (lets call it product#3) to borrow money against.


This CDS (product#2) itself can then be borrowed against because it too is a kind of financial instrument! And of course product#3 will also be the source of a CDS (product#4)! - and so it goes on with more and more debt being created on the basis of the honest mortgage at the base. This $67 trillion CDS mountain is simply one of the foothills of the total derivative mountain - some say the total is nearer $1 quadrillion - a thousand thousand thousand million dollars.

You should realise that this is not about sub-prime mortgages, they are not to blame, they are merely one of the triggers. The total mortgage market in the US is worth about $11 trillion. If, say 20% of that was bad, that is still only $2.2 trillion dollars. The worlds central banks have pushed much more than that into the banking system this year without solving the problem.

How did this happen and what to do? If you look back you see that there has been an inexorable move towards the centralisation of financial power and control. For example, in both the UK and the US we used to have straight forward, community based ways of creating mortgages in order to buy a house. In the UK we called them Building Societies and in the US they were called Savings & Loan banks. These were community based institutions whose members (not share-holders) clubbed together and saved money which was made available within the community as mortgage loans - they were literally Societies for Buildings!

In the 1990's in the UK and the 1980's in the US all these fine old institutions were deregulated and their directors persuaded the members that they should become banks. This represented a massive shift in wealth from millions of Society members to the financial community which is dominated by a relatively small number of powerful groups.

In the present crisis we see that consolidation of power accelerating as the number of key financial institutions is reduced and more and more wealth is centrally controlled.

Some people believe that the answer is greater state involvement ('a buy-in') which will lead to a form of public ownership - to the benefit of the public along the lines of the recent UK Government action. I disagree - for several reasons.

1) There is not enough wealth in the world to pay off the enormous debt created. For months the central banks of the world have been creating more and more money out of thin air and it has had no effect. Each time they borrow money from the money market they simply create more and more of these financial instruments, thus making the debt mountain even bigger! The money is created by central government and handed to private financiers while the tax payers are left with the debt. They are inflating (and devaluing) money

2) The Brown Government initiative has simply shoved us further into the 'brown stuff'! The UK is pumping more money (£500 billion) into this unregulated market, but only a tenth (£50 billion) is directed to banks as shareholding, the rest is going to support those financial instruments. Furthermore those shares will be preference shares which have no voting rights and give no control, they simply attract a dividend (if there is one). When it comes to dealing with private sector corporations the UK government is entirely  ineffective.

3) It is the same financiers that created this mess who are in charge of the responses. For example, in the USA the Treasury Secretary is a man called Hank Paulson. He is the ex Chairman and CEO of Goldman Sachs, one of the most aggressive of the voracious Wall Street banks. As Treasury Secretary he now has carte blanche within the US financial sector. If the US adopts the approach of a 'buy-in', he would be in charge of all the USA banks taken into 'public ownership'. By the way he already has the power to take over every bank in the US, without reference to Congress. Like putting that nice wolf in charge of the sheep.

4) The system itself is fundamentally flawed - systemic failure. Therefore, rather than trying to patch it up, we need to ask what it is that we are trying to achieve with our monetary economy and how might we best achieve that goal. That is a big question, for another time!

Given that the financial sector has created these problems (and continues to so do) if we want to help individuals we should recognise that the sector does not work and we can not trust bankers to operate in our interest. There is absolutely no evidence that money given to banks ends up by helping the banks customers (except a tiny, tiny group of billionares).

We have to find a way of getting money to people which by-passes the banks. One solution is that instead of giving £500 thousand million pounds to the banks, a fraction (perhaps £1 thousand million) of that should be used to invigorate the UK Post Office network. (It is currently being reduced in size because it is deemed that the £150m subsidy to rural communities is too much!) The traditional British post office was at the heart of the local community. It was a conduit that enabled the government to channel money to the elderly or poor, and provided many other community building services.

A new form of the National Giro (it was de-regulated and privatised) could be used to help people who are adversely affected by the present crisis. For example, if their savings with Bank X are at risk, then those savings could be transferred to a new post office account; mortgage payment support could be arranged in a similar way. That way funds could be directly channeled to those in need. In the mean time the banks could be left to suffer the consequences of their corrupt practices - and fail publicly.

We need to see the emergence of the Community Company through initiatives like the Grameen Bank and Social Enterprises  which demonstrate aspects of the Gift Economy. The gift economy is the real power which underpins the current monetary economy and will eventually be recognised as such. 

 


Posted by Nicholas Moore    12:52:03 AM
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