The invasion of Ukraine has exposed the West’s impotence

I stole the following article from the Spectator because it is excellent and should be read as widely as possible. But if you read it, and you can afford to, by all means buy a subscription to the Spectator, the best written English-language publication in the World. 

There is one point, though, on which the author is clearly wrong. He talks about debt, massive state debt, as if it is a bad thing because it has to be paid back. But it is never is paid back, most of it, anyway. State debt is mainly printed money — ink money as it is known to the bankers. It is paid back only in devalued currency that is itself printed thereby ensuring further devaluation. Government debt is thus a tax on the most innocent. The young couple saving to buy a home in a market with house price inflation of 20%, or middle-aged folk saving for their old age. Of course not all savers lose. Those who invest with wisdom or good luck may do well out inflation. But, overall, the cost of inflation is covered by the devaluation of the currency in your pocket or in your savings account. Put simply, inflation is theft.  

By Rod Liddle: 

The Spectator, March 19, 2022: When the Ukrainian President, Volodymyr Zelensky, addressed the House of Commons recently, he was afforded two standing ovations from MPs, both lasting about 40 seconds, before and after he spoke. He was probably used to it, having received a similar reception when addressing the European Parliament a week before. On both occasions, then, he was engulfed by warm, moist waves of adulation and respect. On both occasions he also asked for important, difficult stuff from the people he was addressing and didn’t get any of it – just lots of applause and legislators delicately dabbing their eyes before quickly averting them. 

If Le Creuset saucepans had been allowed into the House of Commons, I dare say our MPs would have carefully banged them together, making sure not to chip the edges. Zelensky may have mused to himself that these western politicians who have courted his country for so long and meddled in its affairs are second to none in their mastery of grandstanding and virtue signalling, of expressing vacuous emotion while saying, in essence: ‘Nice speech, sunshine. But you’re on your own. Good luck.’ 

I cannot think of a moment which more encapsulated the West’s utter impotence than those fulsome and painless ovations. But more than that, they also signalled a comprehensive defeat for an ideology which its proponents once thought would be irresistible to the rest of the world and that we were, therefore, approaching the ‘end of history’. You will remember the phrase with a degree of irony, I suspect – a phrase which in its blithe arrogance also recalls the Marxist notion of ‘historical inevitability’. The term sprang from an essay written by Francis Fukuyama in 1989 in which the author, calling upon Hegel to help him, expounded upon the ‘total exhaustion’ of all those ideologies which were not western liberalism. What we saw in the House of Commons chamber, however, was the total exhaustion of western liberalism, its ineffectuality, its abject failure and capitulation on so many crucial fronts. It was an epic and dangerous delusion. 

For Fukuyama and many similar thinkers, globalisation was the mechanism by which western liberalism would spread, ineluctably, into every corner of the world. It could not but do so, given its obvious attractiveness. For the western liberals, globalisation wasn’t simply a commercial or economic process, but an ideological development which could but serve to diminish that thing they most hated, the nation state (and concomitantly nationalism) through the exchange of labour, multiculturalism and mutual interdependency. It would also serve to reduce inequality. These were all Good Things. But that’s not how it turned out, as the invasion of Ukraine reveals only too acutely.

The countries which have benefited most (for different reasons) from globalisation are Russia and China and neither felt remotely attracted by western liberal democracy. Russia is now exacting its ton of flesh for our naive dependence on its oil and gas, while remaining itself essentially self-sufficient. China meanwhile has used globalisation as a means of building up a network of dependent client states in Africa and beyond. Both countries have the West in hock and in China’s case that includes more than one trillion dollars of US securities.

Far from lending itself to western liberalism, globalisation has been a boon for the most tyrannical countries on the planet and they have exploited it cleverly. We have not. Meanwhile, although absolute poverty may have reduced over the past 30 years, income differentials have widened: according to the World Inequality Database, global inequalities are now ‘about as great today as they were at the peak of western imperialism in the early 20th century’. 

Multiculturalism? Well, yes, we’ve had plenty of that. But it hasn’t noticeably made western Europe a happier continent. The UK’s commitment to that creed ensured we did little or nothing to inculcate in the in-comers a fondness for our way of life and so, reasonably enough, many failed to develop one. Nor have the supra-national organisations, in which the liberals place such faith, done much to advance the cause of liberal democracy. The United Nations abides by a creed of cultural relativism and spends the majority of its time railing against the very countries which pay for its existence – because of their affluence, penchant for welfare capitalism and imperialist past – and the rest laying down resolutions castigating the only democracy in the Middle East, Israel. It is worth noting too that while 141 countries signed a UN resolution condemning the Russian invasion, five countries voted against and 35 abstained. It is still the case that when the superpowers line up, it’s the US and Europe vs the rest. 

That wasn’t supposed to happen. Far from lending itself to western liberalism, globalisation has been a boon for the most tyrannical countries Globalisation is just one example of the way in which the flawed and arguably deluded western liberal view of the world has led directly to our impotence. Money is another. It was affluence which, put crudely, enabled us to win the Cold War, by forcing the Soviet Union into ever more unsustainable levels of spending on weaponry and technology. But that affluence has all but gone. If we were forced to fight a war against Russia now, we couldn’t do it, such have been the cuts to our armed forces, gradually over the past 60 years. In the late 1950s we spent 8 per cent of our GDP on defence; now it is a little over 2 per cent and much lower in the likes of Spain, Italy, Germany and France. Most popular Robert Ginzburg Russian cities are returning to their Cold War state Russian cities are returning to their Cold War state

Globalisation is just one example of the way in which the flawed and arguably deluded western liberal view of the world has led directly to our impotence. Money is another. It was affluence which, put crudely, enabled us to win the Cold War, by forcing the Soviet Union into ever more unsustainable levels of spending on weaponry and technology. But that affluence has all but gone. If we were forced to fight a war against Russia now, we couldn’t do it, such have been the cuts to our armed forces, gradually over the past 60 years. In the late 1950s we spent 8 per cent of our GDP on defence; now it is a little over 2 per cent and much lower in the likes of Spain, Italy, Germany and France.

It is still true that the US and western Europe’s GDP per capita outstrips that of almost all of the rest of the world; the problem, though, is that we spend it all lavishly on ourselves, on our comfort and our sensibilities, and then borrow to spend even more on ourselves again. The National Health Service, for example, has expanded way beyond what was originally envisaged and what was once expected of it and now easily takes up every penny we once spent on defence and then some. There is no end to its ravenous appetite, nor our expectation of it. At the same time we are heavily in debt: UK debt is now 103 per cent of GDP, Japan’s double that amount. The US’s national debt has quadrupled since the 1990s and is now at more than 130 per cent of GDP.

Nothing wrong with debt, the liberals always averred, and so the debt grows and grows… until someone calls time. The US dollar is already resting, increasingly precariously, on its laurels as a reserve currency. Debt cannot continue infinitely. Right now, we have nothing to reach for if we wish to fight a war: not a pot to piss in. But then why would we ever need to fight a war? That was the mindset of western liberalism, the mindset of a credulous 13-year-old, when we decided that – as John and Yoko put it so memorably – ‘War is over if you want it’. And the peace dividend? Spend it. Spend it now. Then borrow some more.

If we could find the money, who would fight? And why would they bother? Here is the real crux of the matter. The same ideology which predicted the end of history is the one which has set about, with great industry, besmirching or literally destroying every-thing about our culture and our history: for the western hip and with-it neoliberal, our culture and our history are not merely Bad, they are Uniquely Bad. Rip it all down and start again. Those things which Europeans and Americans once took as reasons for a certain proxied pride – our contributions to classical music, science, literature, fine art, philosophy, innovation, statesmanship, economics, discovery – are now seen simply as expressions of hideous, privileged, white supremacism: throw them in the river. 

Our past, you see, is one of untrammelled wickedness, a wickedness unmatched by any other civilisation which existed. Everything about us is wretched – our present culture, our past. That these are wholly spurious and indeed stupid allegations does not matter: it is the viewpoint to which our liberal elite cleaves and so it is the view which we are supposed to have of our country, much as the liberals cleave to patent, obvious denials of reality. When nobody in the Labour party can tell you for sure what a ‘woman’ is, you know you are at the end time for a civilisation, a state of utter derangement in which western society is in danger of disappearing, with a shallow ppphutt, way up beyond its own sphincter muscle.

It is not so much that the centre cannot hold, it is that there is no centre at all. Nothing around which we can coalesce, nothing to unite us except for a weird all-consuming self-loathing. That has been western liberalism’s final gift: the creation of a society in which we are enjoined to hate everything we have ever done. The rest of the world looks on quite askance at our Year Zero self-flagellation. Political leaders beyond the Elbe still have a little respect for Shakespeare and Captain Cook – and they know what a woman is, too. If you were asked to fight for your country, what would you be fighting for, now? There is nothing left worth bothering about. They have done away with religion, with our history and with our present and left nothing to put in its place. 

 Western neoliberalism was an undoubtedly well-intentioned creed. But it involved a denial of realities. It is still doing it today. All we have been left with is the ability to emote, to sob, to emote, to whine, to emote, to clap and to clap and to bang saucepans together.

Why Would Trudeau Call An Election?

 Justin Trudeau, it is reported, will tomorrow call a national election. If so, the Liberals will declare their success in fighting the Covid pandemic as proof of their right to a new lease on power. 

But in reality, it is the imminent and obvious failure of the Government's response to Covid that will explain an election call. This feeble-minded Liberal government wants to snatch another term in office before they roof falls in, and the failure of their Covid response becomes clear to all.

Since promising in 2019 to reduce the Federal Government budget deficit to zero, the Liberals will have, by the end of this year, run deficits totaling half a trillion dollars. That's half a trillion in a one point seven trillion dollar economy. All in the name of Covid.

What does a half trillion dollar budget deficit mean? 

It means inflation, not the Bank of Canada's ludicrous 2% target inflation rate, but real inflation you cannot pretend does not exist, like ten, twenty percent, or more. It is a looting of your savings. And for what? To fund the Government's ludicrous conceit that it could, and should, control a virus with zero point zero something mortality rate, and that mostly among the very old who are about to die anyway.

But now the futility of the Government's response to Covid, both Federal and Provincial, is about to be exposed. 

Protect the vulnerable failed big time. More than half the Canadians who have died of Covid died in care homes, many of them horribly badly run.

As for mandatory mask wearing and near mandatory universal vaccination, LOL. 

The chief consequence of mask wearing is that ignorant people gain a false sense of confidence that allows them to crowd others in public spaces and needlessly expose themselves and others to the risk of infection. 

And, as is increasingly obvious, the vaccines are of limited and short-lived effectiveness: effectiveness that with the emergence of new Covid variants will likely soon be indistinguishable from zero. 

There is no way forward except to follow the example of jurisdictions such as Sweden, South Dakota and Florida. Which means, sooner or later most of us will get Covid, and the focus of medical attention will be on effective treatment, particularly early treatment with cheap and effective supplements such as Vitamin D and zinc, and medications such as Ivermectin. 

So if Trudeau goes for a public vote of confidence, thank him for thus demonstrating his confidence in the judgement of the public, and boot him and the rest of the incompetent pack of spendthrift Liberals out.

Related:

Alex Berenson: Gaslighting, a Covid love story

"I’m old enough to remember when vaccines were the miracle that would put Covid behind us. So are you. It's less than six months ago."

Epoch Times: Coercing People to Get COVID-19 Vaccines Is Damaging Trust in Public Health: Harvard Med School Professor

"why do you coerce people who are immune, or people who are young, who have very small risk? ... I think it’s very unethical to do so"

ZH: Vaccine Expert Vanden Bossche Calls For "Immediate Halt" To Vaccinations, Says They Encourage "Escape Mutant" Variants

"Mass vaccination in the middle of a pandemic [promotes] selection and adaptation of immune escape variants [with increased] infectiousness and resistance to spike protein (S)-directed antibodies (Abs), thereby diminishing protection in vaccinees and threatening the unvaccinated."

CBC: Canada's Coming Vax Dictatorship

G-WP: Tyrannical Philly Mayor Orders All Unvaccinated City Employees to Wear Two Masks Starting on Sept. 1 But why no masks for the vaccinated who, according to the Director of the CDC, can spew Covid as well as the unvaccinated? Answer: because its getting to inject some untested stuff with unknown (to you, at least) effects into your bloodstream. 

When Tragedy Become Farce: Doctor says man who died of Covid would have been worse if not fully vaccinated.

Fauci says he can't rule out Americans having to have booster shots forever

Why Globalists Hate Calls for Covid Herd Immunity

Covid19, says Prince Charles, "provides the unique but rapidly shrinking window of opportunity to reset ourselves on a more sustainable path," which is to say an opportunity for the "Great Reset," meaning the great lowering of the standard of living for all but the elite who yearn to enjoy a world unpolluted by the teaming masses, the hoy polloy. Yes, dear reader, it is you Prince Chuckie and his Davos friends are gunning for.

And down that "more sustainable path" of a much lower standard of living for you, is where we are headed.

For now you will be cushioned from the fall in standard of living by stupendous monetary inflation, cash bailouts for all. But when the ballooning money supply -- yes money is just digits and can be inflated without limit -- and the fall in output in goods and services touches off an accelerating rise in prices, then watch out.

There will be an explosion in demand as people seek to rid themselves of currency of rapidly diminishing value. The result will be shortages and panic. As in Germany's great 1923 inflation, folks will be forced to trade the grand piano or the second car, the only car, even a child, for a basket of groceries. In no time, most folks will be entirely cleaned out: no money, no food, desperate.

Wages can then be adjusted: down.

"A Truly Orwellian Culture"
- Amazon Removes COVID
Skeptic's Book For Violating
 Content Guidelines. Source

Maybe, as during Germany's 1923 inflation, the corporate behemoths, the FAANG stock companies and other big boys that survive the great downsizing, will pay wages in their own currency. Amazon, for example, might pay its workers in Amazons, each redeemable by Amazon for one US dollar. 

Why? did you ask? 

Because when shortages are growing and the supply of money is exploding, the value of the US dollar will fall so fast that between the time Amazon issues its currency and the time those who have sold goods for Amazons receive dollars in return for the Amazons, the US dollar will be worth no more than four-fifths of flip all. At that point, wages will be at the level that Bezos and Zucks are happy with, which is to say next to nothing.

That's the great, but "rapidly shrinking window of opportunity" that the globalist traitor, Prince Chuckie, is working to push you out of.

What's the alternative. Herd immunity, achieved by ending the the shutdown of the Western economies now. The result? Kids, university students, and other young adults, the most socially active element in the population will mostly get Covid19, survive it and acquire immunity. Then the incidence of the disease will collapse due to a shortage of susceptible individuals. The disease will remain in circulation but at a low level. Older people or people otherwise susceptible to serious complications from the corona virus will then be comparatively free to engage in normal social activity as their chance of contact with an infected person will be low. 

Herd immunity is thus precisely what the elite seek to prevent at all cost. It is the one thing that can protect your job, and your current prosperity. What the globalist "Great Resetters" want, instead, is a crisis so prolonged as to destroy the consumer economy and permanently lower the standard of living of the 99% to the massively lower level that they, the sheltered elite, call "sustainable." 

Related:
The Spectator:

A medic’s case against another lockdown

... In August, the Lancet published an analysis of data from 50 countries. The researchers found that full lockdowns were 'not associated' with decreased mortality from Covid-19. These are hard outcome data; reality cannot be waved away with theories or projections.  So much for the purported benefits. What about the risks? We cannot answer this question fully because a worldwide lockdown experiment has never been run before. However, evidence for the harms of lockdown is now piling up. In the US, homicides are up 50 per cent compared to last summer. In France, domestic violence calls are up 30 per cent. In Canada, almost three times more people are contemplating suicide compared to last year; and in British Columbia, overdose deaths have tripled from pre-pandemic levels. When you deprive children of their education, adults of their livelihood, and elderly people of their social connections, desperation and despair quickly set in. While a thoughtful person might have predicted this, the mathematical models did not.  All of these numbers fit with what I see in my clinical practice. I have personally admitted dozens of elderly people to hospital with illness resulting from social isolation and neglect. Some were literally starving to death. One patient, in her eighties, lived in a retirement community but relied on family members to feed her meals. When they were socially distanced (banned) from the premises, she couldn’t feed herself and her health quickly deteriorated. Another patient, a 92-year-old woman, simply gave up on life and started refusing her meals once her family stopped coming to visit. Both these scenes were catastrophically inhumane and will stick with me for a long time. Neither is captured in the government’s Covid-19 statistics. ... ...As a medic, my verdict is clear: mandatory government lockdowns amount to a medical recommendation of no proven benefit, of extraordinary potential harm, that do not take personal values and individual consent into account. Physicians who call for their use should hearken back to these core planks of their ethical training.

. 

AIER:
Is Cowen Right about the Great Barrington Declaration?
Off Guardian:
Why we should seek Covid19 herd immunity not suppression

EClinicalMedicine: 

A country level analysis measuring the impact of government actions, country preparedness and socioeconomic factors on COVID-19 mortality and related health outcomes

Inflation, consumer prices, house prices, stock prices and gold

The following are titles of recent articles appearing at Zero Hedge:

5 Reasons The Fed's New Policy Won't Create Inflation

and

Inflation - Running Out Of Road

The first contends that however much money the US Federal Reserve prints it will not succeed in creating a substantial rise in the consumer price index. The second asserts that far from there being no price inflation, an honest consumer price index would show inflation running at an annual rate of 10%.

So how to resolve the contradiction? First, it is necessary to be clear as to what inflation is. As Milton Friedman put it shortly:

Inflation is a monetary phenomenon -- always. 

This of course was not an original insight. Adam Smith wrote at length of the process whereby monetary inflation was achieved by re-minting gold and silver coinage in increased quantities through the addition of base metal.

But the supply of money is not unrelated to prices. As Samuel Johnson observed in 1775, during a visit to the Western Isles of Scotland, eggs were a half-pence a dozen not because eggs were abundant but because pence were scarce.

But the effect of monetary inflation on prices is not necessarily uniform. Thus, inflation does not necessarily affect the consumer price index directly or even at all. In Western economies today, money is chiefly created by banks, central or private, that create money out of thin air by making loans.

These loans are, in the case of the commercial banks, made primarily to facilitate the purchase of big-ticket items, particularly houses and cars, to support speculative stock investments, or to allow corporate stock buy-backs.

Such lending has little effect on the consumer price index, since it does nothing to increase consumption of items, the price of which determine the level of the price index.

Rather, mortgage debt and car loans will tend to suppress the consumer price index by forcing borrowers to divert an increased share of income to interest and capital repayments.

What such loans do affect is the price of houses, cars and stocks that are bid up by the loan-based spending. Thus, if we want to gauge the effect of monetary inflation on prices, we need to look at home prices and stock prices as well as the prices of bread or milk. 

When we take that broader view, we see that the US and many other countries are in the midst of a rapid money-printing-induced price inflation, which greatly enriches the already rich, i.e., the owners of stocks and real estate, while making the poor, relatively speaking, much poorer.

As for gold, the price reflects fear of the consequences of monetary inflation--which is to say fear of the loss of purchasing power of the unit of currency--among those with money but no desire to invest it in stocks or real estate.

Central Banking Explained

Source

How the Banks Rob Your Savings of Value by Printing Money and Creating the Inflation that Drives Up Housing Costs that Force Millions Into Debt Slavery

The end of democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations.  Thomas Jefferson

Banks create money out of thin air by creating loans.

You get a mortgage for, say, half a million, and the bank adds $500,000.00 to the balance in your account. Where'd that money come from? Nowhere. The bank just created it with a book-keeping entry, and now it's charging you interest on the strength of that book-keeping entry. Let the banks keep creating their own money and soon you've got real inflation.

From the graph below, you can see that the Canadian money supply has grown at the rate of around 7.5% a year for the last 30 years. The Canadian economy, however, has grown at the rate of only around 2.5% a year. So monetary inflation has exceeded economic growth by about 5% a year, meaning, very roughly and ignoring many complications, that what cost a dollar in 1990 will cost around four dollars today.

Image Source

Good business, banking, innit. Create money at no cost and lend it to the suckers at interest. The suckers spend the money, thereby driving up prices, which creates the need for more borrowing, so more money creation and ever bigger bank profits.

Why Both Liberals and Conservatives Hate Trump and How Their Antagonism Hurts Canadians

Everyone hates Trump: Democrats and Republicans, Liberals and Conservatives. Paul Ryan, Justin Trudeau, Theresa May. They hate Trump because he is the enemy of the elite factions, aka, the Deep States, that rule the Western nations.

The Deep State despises the people, who they see as cattle to be controlled and exploited. The Deep State  rules not in the interests of the people, but to serve as  agents of the global Money Power.

Thus, as Justin Trudeau declared to the New York Times, the Canadian nation is defunct.

‘‘There is no core identity, no mainstream in Canada’... There are shared values* [which are] what make us the first postnational state.’’ Justin Trudeau — New York Times. *Such values to be dictated by the elite by means of school and media brainwashing, social media and search engine censorship, and by legal enforcement of political correctness through pseudo human rights tribunals, and other mechanisms of fake social justice.

Trump is a throwback. He is a King and Country ruler. The King protects the People, the People defend the King. Thus were nations long ruled by wise monarchs, Elizabeth I of England, for example, and later by aristocratic elites, as in the early days of Britain's parliamentary democracy.

To the globalist, Treason-Party elites that run the Western nations, nothing more catastrophic that the election of President Donald Trump can be conceived. What use to the International Money Power is a US Congressman if Trump can just slap a 25% tariff on any imported good he chooses, steel, machinery, computers and car parts, shirts and shoes and a thousand other things? Such actions disrupt the profitable employment of trillions invested in a world headed for global governance and the unrestricted international movement of capital, technology, goods and labor. What use are contribution to the Pierre Elliot Trudeau Foundation, or the appointment of former Canadian Prime Ministers to the boards of international companies if the Government of Canada caves to the Trump agenda?

For the Canadian people, however, what is bad for the elite in the Trump agenda is clearly good for them. Were Canada to seek a place within the American trade ring-fence, investment would boom as it is already booming in the US, labor markets would become tight, wages would rise. Inflation would pickup, as would interest rates, and Canada's grotesquely inflated housing market would slump. Houses would then be cheap again, young people would form households earlier, the national fertility rate would, heaven forbid, rise, and the need for mass replacement immigration would subside, as the  globalist-battered Canadian nation revived.

Related: 

IWB: Schweizer Exposes More Joe Biden Corruption — It’s ‘Going to be a Central Issue’ in 2020. “Corruption is being globalized.”

The Trump Stock Market Slump — Just Started?

US stock markets are off by more than one and a half percent today (actually tw and a half percent by the close), which coincides with realization that Hillary lost the Commander-in-Chief tele-thingy whatever it was. I didn't watch, but I see one poll indicating that Trump was judged the winner by a margin among viewers of two to one.

That follows a series of polls of voting intention showing Trump either even with Clinton or marginally ahead. Considering the anti-Trump media bias and the incentive the media therefore have to skew the poll results, the implication is that Trump is now well out in front. And that's ignoring the shy Trump supporter phenomenon, which manifests as Trump supporters telling pollsters that they support one of the no-hope third-party candidates, although in the event they intend to put their X next to Trump's name.

For investors, the message is clear. It's time to pay attention to Trump's economic plan, which is that: Interest rates have to go up.

Is the US Fed Truly Evil? A Dialog Between a Goldbug and a Bank Apologist

In response to an earlier post about the operations of the US Federal Reserve, Harry raised the following question, which I paraphrase: Is not the Federal Reserve the creature of the monied interest, and if so, how does it serve that interest?

In answer, I have to admit that I don't know. However, I gained some insight into the question from the following dialogue between an advocate of gold as money (Goldbug), and a defender of the Fed (Fed Apologist).

Goldbug: Gold has been money for thousands of years and it has always held its value.

The price of an ounce of gold today will buy a suit fit for a United States senator, two thousand years ago, an ounce of gold would have bought a toga fit for a Roman senator. But in the span of the mere 99 years since the passing of the Federal Reserve Act, the United States dollar has lost 96% of its value.

It's time to return to gold, and time to abolish both the Fed with its freedom to print limitless quantities of fiat currency and the fractional reserve banking system that allows sociopathic banksters to print their own money. We will then once again have sound money that does not rob widows and orphans of their means of existence or deny savers the rewards of thrift.

Apologist: It is true that the dollar has lost much of its value since 1913, but to put that in perspective, 99 years exceeds the normal span of a man's life, and a devaluation of 96% in almost 100 years amounts to an inflation rate of only 3.1% per year, which, according to the economists, is almost ideal.

Moderate inflation is necessary as a stimulus to economic expansion. Without it, people will be inclined to hoard money, so driving the economy into a recession or depression for want of demand.

But, under the wise monetary policy set by the Federal Reserve to promote maximum employment, stable prices, and moderate long-term interest rates, US GDP per capita has increased in constant dollars from around $10,000 per person in 1913 to more than $48 thousand today.

Goldbug: That's all twaddle and bunkum, the idea that ...

Apologist: Wait a minute. Let me finish. When you talk of abolishing fiat money and fractional reserve banking, you display your ignorance of the history of money. There never was, what shall we call it, a golden age, when gold was the only medium of exchange -- at least not in the last thousand years or more.

Chinese merchants during the 8th Century Tang Dynasty used bills of exchange, or promissory notes, to finance trade, as did the Arabs of the tenth century and, a little later, the merchants of Europe. Even though backed by gold, the quantity of such paper could, and was, expanded far beyond the gold monetary base. And governments issued coins, whether of gold or other metals, with a face or fiat value far in excess of the value of the metal of which the coins were minted. For example, in the early 16th Century, Henry VIII of England doubled the money supply over a period of around 20 years by debasing the coinage, thereby creating one of the greatest bouts of inflation in England's history.

Goldbug: Yes, yes, we know that where there's a will to rob the citizenry of the value of their labor, the government will find a way. But the use of gold as money should severely limit the ways of government and bankster theft. If a bank loses all its money in reckless speculation, there will be no bailouts with freshly printed cash from the Fed because any fresh money must have a base in real money, which is to say gold, which cannot be conjured out of thin air, but is essentially fixed in quantity.

Apologist: So now you acknowledge that fractional reserve banking is a necessity, but bankers should be held more closely accountable for their mistakes? If so, then we are in complete agreement. The financial meltdown of 2008 exposed weaknesses in the system of bank regulation and the need to impose stricter discipline on bankers who may be so highly motivated by the existing system of remuneration as to take undue risks with their shareholders' capital.

Goldbug: In no way are we in agreement. Far from it. I do not concede a necessity for fractional reserve banking. What we need is a system that combines the stability of gold with a cashless, digital currency one hundred percent backed by gold. Such systems already exist: Gold Money, for example. All that's needed is to establish such a system on a nation-wide and international basis with secure, distributed gold storage and an equally secure, distributed computerized administration.

Under such a system, physical cash would not exist. All payments would be by the use of a cash card employing highly secure bio-identification (e.g., a retinal scan). Payments would instantaneously transfer the registration of the specified quantity of gold from one account to another.

Apologist: So under that system, how could the US economy continue to function? At present, consumption accounts for 73% of the US economy, and most of that consumption is financed with credit.

With no bank credit creation, there'd be no economy!

Goldbug: What you mean is, there'd be no Fed- and bankster-induced booms and busts. There would still be credit. But it would be based on real money. Thus, if you had cash, which is to say gold, surplus to your immediate requirements, you could lend it to a bank at interest, thereby providing the bank with funds for car loans, mortgages, etc.

Apologist: But under the system you propose, the quantity of credit would be totally inadequate to the need. Moreover, the quantity of money would be fixed, not by the needs of the economy, but by the amount of gold, a purely accidental quantity. Under such an arrangement, there would be persistent deflation as the economy grew. That is to say there would be deflation if the economy grew.

But in fact, the economy would likely go into a never ending depression as people hoarded money as its value rose, the effect of which would be to make the value of money rise even further.

Goldbug: If Americans have such an insatiable appetite for consumption that under the Fed's "wise" monetary policy they borrowed their brains out during the housing boom, why are we to believe that in the absence of credit, they will refuse to spend even what little cash they actually have. In fact, one can assume just the reverse, that as debt is greatly reduced, so also will be the tendency to save.

Furthermore, we know that the Great Depression resulted from the failure of Fed monetary policy. The monetary expansion during the Twenties, which the Fed failed to check, resulted in the Great Crash, which caused a collapse in money supply, which the Fed also failed to check. Only a World war, it seems, and the near total destruction of the industrial base of all of America's competitors, was sufficient to restore American prosperity.

Apologist: It cannot be denied that the Fed made mistakes in the Twenties and Thirties, but that was due to inadequate information and the primitive state of economic models of the era. Today, the Fed is much better equipped to handle booms and busts as it has demonstrated since the credit crisis of 2008 by bailing out the World's banking system with an infusion of $16 trillion, all of which, incidentally, has been repaid.

Goldbug: Oh well done! The Fed saved the World from a disaster of its own making. It was the Fed that allowed credit to expand without limit, until a true Ponzi economy was achieved, when money was borrowed primarily not to finance consumption or investment but to invest in assets that were rising in price because people were borrowing money to invest in assets that were rising in price.

The Fed created this mother of all bubbles by driving the Fed Funds rate from 6.5% in 2000 to a low of 1% three years later, with Alan Greenspan claiming all the while that you can't recognize a bubble before it's burst. Well Ol' Al must have had his suspicions about a bubble since he set about deliberately sticking a pin in the economy with 17 consecutive Fed Funds rate hikes from 1% in 2003 to a high of 5.25% in June 2006, when the property crash and the consequent global financial meltdown, began.

During the early years of this century, bank deregulation, predatory lending, mortgage derivatives combined with Greenspan's injection of low interest stimulant, drove America's private indebtedness to an insane all-time high in excess of 300% of GDP.

And you congratulate the Fed for saving the World from the inevitable bust. LOL.

And we're nowhere near out of the woods yet. Unemployment according to the metrics of the 1930's is still as high as during the Great Depression. Black youth unemployment approaches 90% and folks think blacks are especially prone to crime: no, they're especially prone to unemployment in a system that educates black youth poorly and then denies them the right to work for less than the minimum wage.

Apologist: You're just ranting. The Fed has nothing to do with black education, which I agree is deplorable in its failure to prepare the average black youth for productive employment. And the Fed has nothing to do with minimum wage laws, which I agree are damaging in their impact on those at the margin of employability.

Goldbug: But as for the Fed's role in the creation of booms and busts, I note that you have nothing to say.

Apologist: Far from it. I was just pointing out ...

At which point, I fell asleep and can, therefore, report no more of the conversation. However, the comments of others would be appreciated.

Europe: The Perils of Complacency

Source: The modern typewriter

The UK urgently needs to wean itself off international finance and get back to what it did well 150 years ago, making and selling quality things and services. That will mean an attitudinal revolution in the UK ...

That's a quote from a discussion at the Slog, which prompted some reflection.

One thing the above-quoted remark brought to mind was a cartoon, in the style of the 19th Century Punch Magazine, which seemed to exemplify the thinking of many Europeans during the present moment of financial shock. It portrayed a fat man watching a cricket match on the village green and wearing a look of astonishment at the moment of being struck in the stomach by the ball.

Sadly, I was unable to find the image on the Internet, which raises the interesting though irrelevant question of whether I retain in memory more images than Google has stored on its servers. But Google did provide a link to the image of the sinking Titanic and a note by the Modern Typewriter:

On April 14th, 1912, the RMS Titanic hit an iceberg at 11:40 pm. ... the Captain ordered the lifeboats to start leaving the ship. The passengers were frightened. They thought that leaving such a safe ship into a[n] “unsafe” lifeboat wouldn’t be smart. So they refused to enter the boat[s].

The insistence of some in Europe on clinging to the past, and on assuming that what Europeans did better than the rest of the World 150 years ago they can do better than the rest of the World today with little more than an adjustment in attitude, is reminiscent of the belief of those on the Titanic who apparently thought that if they kept a stiff upper lip and refrained from panic they could stay aboard the warm, comfortable sinking ship indefinitely, without need to brave the cold ocean in a tiny lifeboat.

The question these people need to ask is how can Britons get back to making things, quality or otherwise, when competing with those in Asia and elsewhere who are earning a tenth or less of what UK workers earn?

150 years ago, Britain was the workshop of the world because she had the world’s most advanced industrial technology powered by the World's largest coal industry.

Today, energy is available everywhere and the most advanced technology is moved to wherever labor is cheapest -- and that includes not only factory labor, but much white collar labor including design, software engineering, all kinds of R & D and back office work in financial services, publishing, marketing, etc.

There appear to be only three ways Britain (or any Western nation) can revive its manufacturing sector, these being to: (1) construct a massive tariff wall that excludes cheap products from low wage economies, (2) print massive amounts of money, while keeping a tight lid on nominal wages, thereby driving real wages to the Asian level, or (3) subsidize wages to create a work force that can be employed at internationally competitive rates, i.e., by wealth transfers from the 1% to the 99%.

It seems that the inflationary route (plus mass immigration of third world labor to help drive market wages down) is the route that, without public acknowledgment, has been chosen. To be effective, it will take many years, possibly a decade or two, and it will cause much social conflict in a period during which multinational corporations that can take advantage of opportunities for wage arbitrage continue to reap huge profits by off-shoring production and services.

In the meantime, something like one quarter of the Western world's workforce continue to be treated as so much useless baggage to be kept alive in a demoralized and degraded condition on food stamps or other forms of welfare including residential programmes in prisons and mental hospitals.

Don't worry: The US aint going broke til the Fed runs out of digits

Moody's place US on downgrade watch, warns the Drudge Report.

Moody's, that's the privately owned ratings agency that gave triple-A ratings to all those crap mortgage bonds.

In fact, Moody's are so useless, they even downgraded themselves.

LOL.

The truth about this and all financial news was revealed to me when I was a kid, and a friend, the son of the CEO of a well-known multinational corporation, explained to me that the only reason any sensible person attends a cocktail party is to hype stocks they intend to sell in the morning and trash stocks they want to buy in the morning.

That, chiefly, is the function of the financial news. Plus it fills the space between the ads on the business pages of the newspaper and creates market volatility, which drives up market volumes, which keeps the brokers in funds.

The truth about the US Government's credit status is that it cannot default on its debts as long as they are denominated in US dollars, because the US Government, with the collaboration of the Fed, prints its own money. That means US Government debt will always be redeemed at full face value, either with crisp newly printed US dollars, or with funds raised by rolling over the debt through the issue of new bonds.

But what about the "debt ceiling?"

In theory, Congress has the power to deny the US Government the freedom to print money, aka, quantitatively ease. But this they will never do, unless they wish to create a financial crisis, which will help fill the space between the ads on the business pages of the newspaper, and creates market volatility, which -- oh, but I said that before.

Of course there are folks who don't like to see the US print money, but so what?

The Chinese see that printing dollars lowers the value of those already printed, of which the Bank of China owns a trillion or more. But again, so what?

If the Chinese don't like seeing the value of their dollars depreciated, they know what to do: spend 'em now, which of course would be great for the US economy.

Let's see, how could America's foreign creditors, who own about four-and-a-half trillion dollars worth of Treasury debt instruments, spend their dollars?

I'd suggest the stock market. At current prices they could pick up America's top 20 corporations, including Exxon, Apple, Microsoft, Chevron, GE, IBM, Berkshire Hathaway, etc.

Or they might consider farm land. The US has about a billion acres, so at an average of $4500 per acre, America's foreign creditors could pick up the entire cultivable portion of the United States.

But they might prefer urban real estate, in which case they might pick-up all of the 14 million empty houses in the US (estimated value around $2 trillion), or some other component of America's $20 trillion worth of commercial and residential real estate.

A serious attempt by America's foreign creditors to do any of the above  would obviously have a variety of interesting repercussions.

With all that cash flowing into circulation, the US economy would experience an explosive boom.

Stocks would zoom: Dow 35,000 here we come.

Real estate would rebound. Crap mortgage bonds would soon be fully valued. Bail-out funds loaned by the Fed to banks would be repaid.

Inflation would roar as happy home-owners and stockholders once again enjoyed the wealth effect.

The dollar would fall, curbing imports, boosting exports.

Unemployment would fall. Government welfare expenditures would fall. Government revenues would rise. Deficits would be eliminated and the Fed would engage in repeated action to slow the boom.

Yes, as long as the US remains mired in the recession, raising the debt ceiling and printing more money is the only way to go. For those with US dollars, the best bet is to invest them in real assets (stocks, land, oil, etc.) or spend them now, which is good not only for those who spend but for the US economy too.