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Sunday, February 17, 2013

Criticism of fractional reserve banking

Criticisms of fractional reserve banking and central banking have been put forward from a variety of perspectives, although the most vigorous and sustained criticism now comes from libertarians and anarcho-capitalists such as economists Jesús Huerta de Soto and Jörg Guido Hülsmann, American politician Ron Paul, and commentators such as historian Thomas Woods, Jim Grant of Grant's Interest Rate Observer and former US Budget Director David Stockman.[1][2][3][4][5][6][7][8] Most in the mainstream (both on the left and right) remain silent on the issue of fractional reserve banking and central banking,[9][10] although past critics have included mainstream economists such as Irving Fisher,[11] and Milton Friedman.[12][13] Within the economics profession, most criticisms are from the Austrian School.[14][15][16][17] There are also critics from outside the economics profession who advocate monetary reform.[18][19][20][21]



[edit] Terminology

Critics of fractional reserve banking and the related fiat paper monetary system may refer to it by the term debt-based monetary system,[22][23][24] or credit-based monetary system.[25][26][27][28] They may also refer to money created in parallel with debt as debt money or endongenous money, reflecting the fact that virtually all new money is currently created by people or businesses or governments further indebting themselves to banks.[29][30] This monetary system is called "endogenous" because the money supply is flexible, expanding in parallel with the demand for debt and stalling or contracting when demand for debt declines.[31] Some consider this a perverse and dysfunctional way of introducing new money into the economy.[29]
The term, "debt-based monetary system," and related terms such as "debt money" are not used by conventional economists. Mainstream economists often refer to "debt money" by its antonym "credit" and distinguish between types of money only after the money is created. The very definition of "money" and the distinction between "debt" and "money" (and their respective economic effects) are still sources of vigorous ongoing debate.[32][33][34][35][36] Mainstream economists rarely if ever discuss the origins of modern money and generally do not actively discuss or comment on the fact that virtually all money is now created through individuals, or businesses, or governments going into debt to government-sponsored commercial banks.[37][38] Discussion around the nature of "debt-based" money and the arguments over its effects on the economy are notably absent from most established mainstream academic economic publications[39] and most mainstream economists instead argue that the origin of different kinds of money (and the volume of their issuance) does not really matter, at least in the long run.[40] This mainstream idea is referred to as the theory of "money neutrality".[41][42][43] Some commentators have speculated that the unusual "silence" around the topics of fractional reserve banking and central banking and the staunch refusal to consider alternative theories of money can be attributed to the simple fact that many economists are on the payroll of the major commerical or central banks of the world and are beholden to those banks for their livelihood.[44][45][46][47][48] Those economists who "dare" to speak about such topics are simply not employed by the banks, by government-sponsored universities or by international financial institutions and are not published in mainstream economic publications and, therefore, their views are not widely disseminated to the general public who are generally taught by government-sponsored teachers and receive their news from the mainstream media.[49][50][51]

[edit] Typical criticisms

On 5 March 1997, in a speech in the House of Lords in London England, the Earl of Cathiness made the following observations:[52][53] is also a good time to stand back, to reassess whether our economy is soundly based. I would contest that it is not, not for the reason to which the noble Lord, Lord Eatwell, alluded, which is that it is the Government’s fault, but our whole monetary system is utterly dishonest, as it is debt-based. “Dishonest” is a strong word, but a system which by its very actions causes the value of money to decrease is dishonest and has within it its own seeds of destruction. We did not vote for it. It grew upon us gradually but markedly since 1971 when the commodity-based system was abandoned.Let us look at what has happened since then. The money supply in 1971 was just under £31 billion. At the end of the third quarter of last year, it was about £665 billion. In 25 years it has grown by a staggering 2,145 per cent. Where has the money come from? Interestingly, the Government have only minted a further £20 billion in that time. It is the banks, the building societies and our commercial lenders who have created the balance of £614 billion. If this rate of growth is projected over the next 25 years, the money supply in 2022 will be over £14,000 billion.
All that new money bears interest paid either by us as individuals, by companies or by the Government. Today the Government pay over £30 billion annually in interest charges — coincidentally about the same as the total money supply only 25 years ago. Governments since then have abdicated their responsibility for producing new money and controlling the money supply so that now they are marginalised. In 1971 government notes and coins accounted for 14 per cent of the money supply. Now it is only about 3.5 per cent. “So what?”, noble Lords might ask.
The problem is that it is commercial lending that has boosted the money supply, thus increasing debt and, as sure as night follows day, inflation follows growth in money supply of this sort...
Conventional wisdom tells us that in order to create new jobs and boost the economy, interest rates have to be reduced. That has happened. People are encouraged to borrow to invest and spend. That has happened. As the continuing flow of new money finds its way into the economy, inflation will follow and up will go interest charges again to reduce the level of borrowing. In order to pay the increasing levels of interest, borrowers will once more have to reduce expenditure in other areas of economic activity. The cycle will continue, but the next time, as before, we will all start deeper in debt and with a burden harder to carry. Personal debt has already increased by nearly 3,000 per cent since 1971. How much more can we take? I hope, for the sake of our economy, without which we cannot finance what we want to see — a good health service and a good social security system among other things — we will question this conventional wisdom.
We all want our businesses to succeed, but under the existing system the irony is that the better our banks, building societies and lending institutions do, the more debt is created. The noble Lord, Lord Kingsdown, said that there is little that can be done about debt. No, I do not believe that. There is a different way: it is an equity-based system and one in which those businesses can play a responsible role. The next government must grasp the nettle, accept their responsibility for controlling the money supply and change from our debt-based monetary system. My Lords, will they? If they do not, our monetary system will break us and the sorry legacy we are already leaving our children will be a disaster.
On 4 November 1999, Lord Sudeley stated in the House of Lords:
The only way in particular to stop inflation is to stop banks from creating credit. The supply of money should be removed from banks and should be assumed by governments, who should issue it on a debt-free basis. Such a view is supported by five disparate quarters: the noble Lord, Lord Beswick, in the debate which he introduced to this House in 1985, Disraeli, the Vatican under Pope Pius XI in his Encyclical Quadragesimo Anno in 1931, the Tsars of Russia in the last century, who prevented the setting up of a privately owned central bank, and, above all, Abraham Lincoln, who said that governments should create, issue, and circulate all currency and credits needed to satisfy the spending power of governments and the buying power of consumers.By adopting those principles, the taxpayer would be saved immense sums of interest. Lincoln’s greenbacks were generally popular, and their existence let the genie out of the bottle with the public becoming accustomed to government-issued, debt-free money. The year after Lincoln’s assassination, Congress set to work at the bidding of the European central banking interests to retire the greenbacks from circulation and to ensure the reinstitution of a privately owned central bank under the usurers’ control.
During the history of the United States, the money power has gone back and forth between Congress and some privately owned central bank. The American people fought off four privately owned central banks before succumbing to a fifth privately owned central bank, at that time essential, owing to the period of weakness during the Civil War.
The founding fathers of the United States knew the evils of a privately owned central bank. They had seen how the Bank of England ran up the British national debt to such an extent that Parliament was forced to place unfair taxes on the American colonies, leading to their loss following, the American Revolution.
I now conclude. Once the fundamental decision is taken to prevent sterling from being debt-based, the Commonwealth could act as the right monetary union to use sterling debt-free as a genuine alternative to the dollar and the euro.
Dr Chris Leithner states in his book The Evil Princes of Martin Place:[54]
The inflation that necessarily results from fractional reserve banking is a “tax” by which the early recipients of counterfeit money expropriate late recipients’ wealth. The tax is particularly insidious because it’s so well hidden. Few people — apparently including banksters and mainstream economists! — understand it (or, if they understand it, certainly don’t draw attention to it); and still less do they discuss its ethical and distributional implications. Obviously, it’s in insiders’ interest to distract outsiders’ attention from the source of the counterfeiting. It’s also in their interest to reverse the order of causality with respect to the cause and consequences of inflation, and thereby further to bamboozle the public. Accordingly, governments and mainstream economists don’t attribute the consequence (rising prices) to its single cause (inflation); instead, they brazenly and diametrically incorrectly insist that rising prices cause inflation! (p. 143)...Gosplan, the Soviet Union’s central planning agency, set targets for the production of steel, cement and myriad other goods and services; Western central banks set targets for the Overnight Cash Rate and the Consumer Price Index. The chaotic consequences of central plans, Soviet and Western, necessarily reverberate throughout the economy … It’s quite comical: people who claim they “believe in the free market” blindly and unthinkingly affirm central banking and its relentless interventions into the market. Elementary logic completely escapes them: if you reject central planning in general, then you must also reject specific aspects like the central planning of money. If you abhor attempted price-fixing, then you must abhor the attempt to fix the Overnight Cash Rate. (pp. 254-55)...
[I]t is highly improbable that the combination of a pure gold standard and a 100% reserve for deposits has ever resulted in a prolonged rise of prices. The historical record is telling: in no year from 1492 to the present has the total supply of gold increased by more than 5%. (p. 552)
Norm Franz states in his Money and Wealth in the New Millennium:[55]
Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.
12th century Chinese scholar Hu Zhiyu stated:[56]
Paper money, the child, is dependent on precious metals, the mother. [Inconvertible paper notes are therefore] orphans who lost their mother in childbirth.
Robert H. Hemphill, credit manager of the Federal Reserve in Atlanta, stated in 1939:[57]
If all the bank loans were paid, no one would have a bank deposit and there would not be a dollar of coin or currency in circulation. This is a staggering thought. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. When one gets a complete grasp of the picture the tragic absurdity of our hopeless position is almost incredible, but there it is. It (the banking problem) is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.
British monetary reformer Michael Rowbotham states the following in his book, The Grip of Death (the title being derived from the literal origin of the word "mortgage"):[29]
It is actually not in the least surprising that nations are chronically in debt, governments have inadequate resources, public services are under-funded and people are beset by mortgages and overdrafts. The reason for all this monetary scarcity and insolvency is that the financial system used by all national economies worldwide is actually founded upon debt. To be direct and precise, modern money is created in parallel with debt. The reason for the failure of economists to question patently invalid monetary data becomes clear - there is a total acceptance by them of the most extraordinary method for supplying money to the modern economy. The creation and supply of money is now left almost entirely to banks and other lending institutions. Most people imagine that if they borrow from a bank, they are borrowing other people's money. In fact, when banks and building societies make any loan, they create new money. Money loaned by a bank is not a loan of pre-existent money; money loaned by a bank is additional money created. The stream of money generated by people, businesses and governments constantly borrowing from banks and other lending institutions is relied upon to supply the economy as a whole. Thus the supply of money depends upon people going into debt, and the level of debt within an economy is no more than a measure of the amount of money that has been created...
All around us, the gross failure of modern economics screams out to be addressed. The towering indifference of those shining offices scraping the sky above the menacing ghettos of Brooklyn; the speculative channelling of billions of pounds of volatile international finance, which can leave a country prosperous one week and plunged into decline the next; the ludicrous production of cheap goods of poor durability, so that jobs are 'protected', and we can recycle the materials and make the goods all over again; the ridiculous export drives by which every country simultaneously attacks the economies of every other nation, under the pretence that such global free trade improves the general wellbeing; the staggering waste of a throwaway, quick-growth, all-new spiral of constant economic change; the outrageous financial debt which Third World countries have actually paid many times over, but which, due to interest, is now larger than ever before - a debt which forces those impoverished nations to compete to supply goods already in surplus; the cynical manipulation of human emotions into buying fashion-obsessed trivia; the burgeoning transport demands of escalating economic growth and centralisation, with identical goods crisscrossing the globe, regardless of environmental cost; the fact that despite the incredible productive capacity of the modern economy, people are obliged to work harder, with ever greater efficiency, forever forced to adapt and retrain or face a life of indignity and misery as one of the unemployed.
Both those in work and out must watch, as the world they know and understand changes almost in front of their eyes like some nightmarish Kafka-esque novel. This is the era of accelerating economic change. The benefits are highly dubious, and no-one even pretends that the economy is responding to what people actually want. The only justification offered for the changes is that this is 'the age of progress', and 'you can't stop progress', even if you are human and the progress you are discussing is supposed to be about people and the lives they might lead in the future. The world of economics has got mankind by the throat and everyone knows it, and no-one has a clue where we are going or why we are going there.
But is this surprising? If a monetary system is invalid or flawed, then the entire economy is based on the mathematics of error, and must be riddled with the effects. If the financial system upon which our economies are built is defective, and yet monetary considerations dominate our economic decisions, should we be surprised if the results are less than satisfactory?
The major role played by bank credit, which forms over 95% of the money stock in most developed nations, suggests that it cannot but be implicated in these trends. This is further suggested by the way that banking has literally become the focal point of modern economic management, through manipulating interest rates. The stargazers of Whitehall and the Federal Reserve hold their councils, trying to tread the non-existent tightrope between growth and recession by debating quarter percentage-points of interest rates. Alan Greenspan, the Chairman of the Federal Reserve, engagingly describes his task in controlling the American economy through adjusting interest rates as a matter of 'taking the champagne away once the party has started'. Businessmen around the world hold their breath, measuring his every word, wondering what he will decide. There could be no greater indictment of contemporary financial economics than this; that a fluctuating financial digit on a single computer system in a single street in a single country should have the ability to dominate the economies of an entire planet...
The past thirty years are almost unique by comparison with the previous three centuries in the lack of attention that has been directed at debt and the financial system. Throughout the eighteenth century, there were repeated calls for reform. During the nineteenth century, excessive banking was held by many to be directly responsible for the waves of appalling poverty that swept Europe and America during a period of increasing industrialisation and agricultural development. In this century, during the depression of the 1930s, the financial system effectively seized up and brought virtual collapse to the economies of the world in an age which was, perhaps for the first time, obviously wealthy, and in which technology offered people real freedom as well as material prosperity. One observer judged that over 2,000 schemes for monetary reform were put forward at that time - all with a common theme in their outright rejection of the debt-based financial system as it then operated. The same system continues to this day, modified in small details, but unchanged in principle; and the recent financial crisis in Asia shows the potential for collapse still exists.
However the issue of economic volatility through booms, slumps, crises, and collapses has never been the sole point of criticism. It is the long-term trends that a debt-based financial system fosters which are most destructive. The most obvious of these is declining personal solvency. Mortgages support over 60% (£420 billion) of the money stock in the UK and over 70% ($4.2 trillion) in the US. Housing-debt statistics for the UK and the US show that there has been a dramatic decline in true home ownership as mortgages become higher and ever more widespread. There can be little question that relying upon housing debt to supply money to an economy lacks economic and political justification. However, taken in conjunction with the marked rise in commercial debt, mortgages have a knock-on effect. In an economy where the price of goods is elevated by commercial debt and consumer incomes are deeply eroded by mortgage debt, there is a persistent and subtle advantage given to low-quality, mass-produced goods, and growth is fostered in this direction. The persistent decline in product durability and the growth-culture of a rapacious consumer society can be directly traced to the debt-based financial system.
The financial system has also generated a serious distortion of agriculture. Excessive farming debt has driven out the most efficient producers - small/medium sized farms. Meanwhile, the relentless pursuit of farming and processing methods oriented towards a low-price market now involves the production of foodstuffs of poor nutritional value, inferior to that which the land can provide and inferior to that which consumers actually desire.
The nature of growth within a debt economy affects not only the quality of output, but distribution and marketing. Intense competition for sales within a debt-based economy results in the use of transport as a competitive strategy by businesses. This has led to a progressive breakdown of local and regional supply networks, and marketing over ever-greater distances, leading to escalating commercial traffic demands.
At the international level, trade is deeply affected by the debt-based financial system. The aggressive pursuit of maximum export revenues, rather than seeking a simple balance of trade, is entirely due to the fact that even the wealthiest nations operate from a position of gross insolvency. International trade has degenerated into a competition between nations to alleviate their indebtedness, rather than a process involving a mutually beneficial exchange of goods and services.
Endemic Third World debt is also directly attributable to the reliance upon debt and banking to supply money. The theoretical model of borrowing from the World Bank/IMF, investing in development and repaying loans from export revenues, is one of the great failures of contemporary economics. The persistent inability on the part of debtor nations to repay these loans suggests strongly that the nature of the indebtedness suffered by the Third World has absolutely no actual legitimacy or validity...
The more one explores the broad impact of debt, the more apparent it becomes that bank-credit constitutes a dysfunctional form of money. An economy based almost entirely upon bank-credit and debt experiences an intense drive for growth, regardless of need or demand. Bank credit engenders financial dependence, injects instability and fosters growth-distortions, both within an economy and throughout the international arena.
Reform of the debt-based financial system is clearly not a minor issue. It is not a matter of fiddling around with taxes, incomes and allowances to make things apparently more equal, more efficient, or perhaps more straightforward. Changing the debt-based financial system involves gradually altering the very foundations upon which national and international economics is based. Monetary reform is concerned with attempting to determine a new principle for the supply of money to an economy - the purpose being to create a supportive financial environment in which more constructive economic trends are allowed to emerge, and in which more benign systems of overall economic management become possible. In view of the rapacious onslaught on the environment, the waste of natural resources and the social and political friction caused by de-regulated commerce and capital flows, this is at once a promising, but a sobering prospect.
Ron Paul states in his book End the Fed:[58]
American presidents actually worked to implement and defend the gold standard, which put a brake on the ability of the largest banks to expand credit without limit. The gold standard worked like a regulator in this way. Ultimately, banks had to function like every other business. They could expand and make risky loans up to a point, but when faced with bankruptcy, they had nowhere they could turn. They would have to contract loans and deal with extreme financial pressures. Risk bearing is a wonderful mechanism for regulating human decision making. This created a culture of lending discipline.In the jargon of the day, the system lacked "elasticity." That's another way of saying that banks couldn't expand money and credit as much as they wanted. They couldn't inflate without limit and count on a centralized institution to bail them out...
The banking industry has always had trouble with the idea of a free market that provides opportunities for both profits and losses. The first part, the industry likes. The second part is another issue. That is the reason for the constant drive in American history towards the centralization of money and banking, a trend that not only benefits the largest banks with the most to lose from a sound money system, but also the government, which is able to use an elastic system as an alternative form of revenue support. The coalition of government and big bankers provides the essential backbone of support for the centralization of money and credit...
Consider the Soviet case: to my knowledge, no business ever went under with the Soviet system but society in general grew ever poorer. Think of that Soviet system applied to the banking industry and you have the Fed.
In the foreward to Fiat Money Inflation in France, Mr John McKay wrote the following:[59]
The story of "Fiat Money Inflation in France" is one of great interest to legislators, to economic students, and to all business and thinking men. It records the most gigantic attempt ever made in the history of the world by a government to create an inconvertible paper currency, and to maintain its circulation at various levels of value. It also records what is perhaps the greatest of all governmental efforts—with the possible exception of Diocletian's—to enact and enforce a legal limit of commodity prices. Every fetter that could hinder the will or thwart the wisdom of democracy had been shattered, and in consequence every device and expedient that untrammelled power and unrepressed optimism could conceive were brought to bear.But the attempts failed. They left behind them a legacy of moral and material desolation and woe, from which one of the most intellectual and spirited races of Europe has suffered for a century and a quarter, and will continue to suffer until the end of time. There are limitations to the powers of governments and of peoples that inhere in the constitution of things, and that neither despotisms nor democracies can overcome.
Legislatures are as powerless to abrogate moral and economic laws as they are to abrogate physical laws. They cannot convert wrong into right nor divorce effect from cause, either by parliamentary majorities, or by unity of supporting public opinion. The penalties of such legislative folly will always be exacted by inexorable time. While these propositions may be regarded as mere commonplaces, and while they are acknowledged in a general way, they are in effect denied by many of the legislative experiments and the tendencies of public opinion of the present day. The story, therefore, of the colossal folly of France in the closing part of the eighteenth century and its terrible fruits, is full of instruction for all men who think upon the problems of our own time.
C.J. Maloney wrote of the desperation of Henry VIII of England to counterfeit gold by engaging charlatan-alchemists:[60]
Despite his formidable education and great historic reputation, the disastrous interventions into the economy, the lifelong dishonesty with the currency in his care and, most of all, his laughable attempts to bring a sorcerer into his court to conjure gold, mark the great King Henry VIII as a fool. Yet there is no reason, be warned, for anyone to feel superior to the King; one only needs to pick up a newspaper to see that though alchemy may be a dead science, it has merely taken up new forms. This has always been and always will be, for its immortality is powered by economic man’s most dangerous, fondest wish, the one that will drive us to endless imbecilities and repeated destruction – the ardent desire to believe that you can get something for nothing. His adherence to that belief made King Henry VIII a man of his times – and ours.
In his treatise, The Ethics of Money Production, which was published by the Mises Institute in October 2008, Jörg Guido Hülsmann presents (at pages 238-239) the following description of the perverse rise of fiat money and fractional reserve banking:
There is no tenable economic, legal, moral, or spiritual rationale that could be adduced in justification of paper money and fractional-reserve banking. The prevailing ways of money production, relying as they do on a panoply of legal privileges, are alien elements in the capitalist [i.e., true free market] economy. They provide illicit incomes, encourage irresponsibility and dependence, stimulate the artificial centralization of political and economic decision-making, and constantly create fundamental disequilibria that threaten the life and welfare of millions of people. In short, paper money and fractional-reserve banking go a long way toward accounting for the excesses for which the capitalist economy is widely chided.We have argued that these monetary institutions have not come into existence out of any economic necessity. They have been created because they allow an alliance of politicians and bankers to enrich themselves at the expense of all other strata of society. This alliance emerged rather spontaneously in the seventeenth century; it developed in multifarious ways up to the present day, and in the course of its development it created the current monetary institutions.
…The driving force that propelled the development of central banks and paper money was the reckless determination of governments, both aristocratic and democratic, to increase their revenue, if necessary in violation of good faith and of all established rules of commerce.
Many monetary reformers claim that a fiat money/fractional-reserve based banking system is inherently destructive and inevitably generates debasement of the currency, extreme inequality, the destruction of the middle class[58] and wrenching business crises.[61][58][62][63][64][29][65][66][67][68][69] Vladimir Z. Nuri has analyzed fractional reserve banking and considers it a form of economic parasitism.[70]
These views are not accepted by mainstream government-supported economists. For example David Andolfatto, Vice President in the Research Division of the Federal Reserve Bank of St. Louis, has openly called Dr. Ron Paul a "pinhead" for holding such views.[71] He later tried unsuccessfully to delete or retract his statements and expressed his regret over making the comments.[72]
Critics of fractional reserve banking frequently argue that since money creation requires loans from the banking system, people are required to go further into debt in order for any new money to be created. They theorize that this eventually causes credit cycles (or business cycles) and debases the means of exchange.[73] They also argue that if debts were ever paid back, there would be no money and the economy would collapse in a debt-deflation trap.[74] They therefore argue the system is inherently unstable, requiring constantly increasing injections of debt just to avoid deflationary collapse.[75] They claim this is ultimately unsustainable.[76][77]
Many critics find it problematic that banks "create money out of nothing" and consider this fundamentally immoral, akin to counterfeiting[78] and/or embezzlement.[79][58][80]
Some also link the alleged negative effects of fractional reserve banking with central banking[81] and a government-enforced "paper" or fiat currency,[82] which they claim allows the practice of fractional reserve banking to continue without a "natural" limitation on the growth of the money supply, thereby causing inherently unsustainable "bubbles" in asset and capital markets, which are vulnerable to Ponzi-like speculation by highly leveraged hedge funds and other bank agents.[58][83][84][64][29][65][85][86][87][69][88]
Reformist economists such as Murray Rothbard support a "full reserve" banking system and criticize fractional reserve banking as inherently fraudulent.[89]Murray Rothbard held this view very strongly throughout his life.[58][90] Other reformist economists are more tolerant of fractional-reserve banking and support free banking instead of full reserve banking.[91]

[edit] Basic debate

The economic, environmental and social effects arising from money creation through fractional-reserve banking have been subject to much heated political debate for well over two centuries.[92][64][29][69][93][94][95][96][97]
Many Austrian economists and monetary reformers focus on the combined use of fiat currency, fractional-reserve banking and central banking as a negative feature of modern monetary systems.[98][99][100] These commentators use the term "debt-based monetary system" to refer to an economic system where money is created primarily through fractional-reserve banking techniques, using the banking system.[101][102][24] This form of money is called "debt-based" because as a condition of its creation someone must go into debt in order for the money to be created and it must be paid back plus interest at some time in the future.
To some commentators, this implies that as the money supply and the economy grows, the general populace becomes increasingly indebted at the same time due to the fact that debt grows in parallel with money supply growth, and increasing interest payments (from either taxpayers or indebted consumers) are needed to pay bondholders as the money supply grows.[103][29][69][92]
One argument posits that since debt and the interest on the debt can only be paid in the same form of money, the total debt (principal plus interest) can never be paid in a debt-based monetary system unless more money is created through the same process.[104][105] For example: if 100 credits are created and loaned into the economy at 10% per year, at the end of the year 110 credits will be needed to pay the loan and extinguish the debt. However, since the additional 10 credits does not yet exist, it too must be borrowed. To some, this implies that the money supply must grow exponentially at the same rate as economic growth and compounding debt in order for the monetary system to remain solvent, as economic activity would be stifled with a static volume of money when interest became due, because in a static-money world no new money could be found to be taken out of circulation to allow debtors to pay outstanding interest to creditors.[29][69][106][107]
Others argue that there is in fact no mathematical necessity for the stock of money in a debt-based system to grow, as the "turnover" or "flow" or "velocity" of money can increase to allow for compounding interest payments.[108][109][110][111] However this does imply that population growth would need to be positive to encourage increased spending rates or some individual consumers would have to increase their rate of spending (and decrease their savings) to expand GDP sufficiently to allow the fixed stock of money to turnover sufficiently to pay for the interest compounding on top of the debt.[112][113][114][115] This may mean that Ponzi-like dynamics bubble up in "pockets" of the economy with interest payments being allowed in a fixed money economy, but these debt-fuelled bubbles of higher spending or speculation would pop and die out relatively quickly as there would be no central bank to keep the bubbles alive with further money creation.[116][117][118]
Gold, silver and other precious metals have in the past been used as money.[119] Because of the difficulty in increasing the supply of precious metals quickly, some monetary reformers believe a return to the gold standard, or a similar system of "hard" or "real" asset-backed currency, is the only way to stabilize the growth of the money supply. These monetary reformers often refer to the gold standard and silver standard as "sound money" or "honest money".[120]

[edit] Main criticisms

In a 2003 statement to the U.S. House of Representatives, Ron Paul stated "if unchecked, the economic and political chaos that comes from currency destruction inevitably leads to tyranny".[121]
Some economic thinkers (primarily members of the Austrian School) and political commentators believe that a debt-based monetary system amounts to a subtle form of monetary "fraud" in that it creates money "costlessly" through the use of fractional-reserve banking techniques.[122]
Michael Rowbotham is an active proponent of monetary reform, and argues that this system of money supply is perverse and inherently monopolistic and "anti-democratic", as it creates an inflationary exponential growth imperative in the economy which leads to over-centralization and environmentally damaging and unstable over-consumption. Critics such as Rowbotham argue that the indebted are forced to induce new consumers to spend their way into debt so existing loans can be repaid with new debt-created money. Failure to achieve this goal results in foreclosure for those businesses and insolvency in the banking system that leads to economic collapse due to the sudden contraction of the money supply.[29][123] This failure is inevitable due to the fact that, eventually, debt-saturated businesses and governments will no longer be able to force individuals into further debt due to the fact that they are already debt-saturated themselves. Once this point is reached, economic collapse is inevitable without wholesale debt repudiation.
Mark Anielski as well as some political thinkers such as Rowbotham and some economists (such as Hyman Minsky, Steve Keen and Mike Shedlock) argue that this system of money supply has characteristics similar to a pyramid scheme, where the newly indebted are compelled to induce others into debt to pay off their own debts.[124][125] It is therefore argued by a number of monetary reformers that fractional-reserve banking and the associated exponential growth of money in the economy "forces" the economy towards indebted consumerism.[64]
Rowbotham argues that a major negative side-effect of the debt-based monetary system is its effect on agriculture, claiming that residential development produces by far the greatest continuous injection of debt money into modern debt-based economies because banks secure loans primarily with developed property and are therefore willing to issue more debt-money against property development than any other asset class. Therefore, significant super-normal profits can be generated by re-zoning agricultural land and replacing it with low-density housing.[29]If this is correct, this trend will lead to the destruction of fertile arable land, as farmers cannot compete to retain fertile arable land from property developers at the periphery of major population centers, and as this land is then progressively re-zoned for speculative new residential development. Rowbotham predicts that the global supply of fertile arable land will systematically and catastrophically decline as perverse monetary incentives inherent in the current debt-based system favor short-term speculative land development over long-term food security, leading to a broad decline in the quality and nutritional value of agricultural produce and, eventually, a dramatic increase in the prices of many "soft" commodities - which could then lead to actual food shortages for poorer segments of the world population.[126][127][128][29][129][130] This has been referred to as the problem of "Peak Everything".[131][132]
If for any reason the monetary system broke down, urban populations (nominally "rich" but poor in terms of direct access to food supply) could find basic foodstuffs either rationed or contaminated with lower quality products - or even unavailable at any price, ultimately resulting in food security becoming a major public policy issue - particularly if combined with oil supply shortages or an oil price spike,[133][134] as major population centers worldwide are almost entirely reliant on mass transportation of food from distant (or even foreign) locations to survive day-to-day.[135][29][136][137][138][139][140][141][142] In addition, fresh water (an essential commodity that is state-controlled in virtually every country around the world) appears to be rapidly diminishing through pollution and over-use, further threatening the global food supply in coming decades, resulting in what some commentators are describing as a global water crisis of "horrific" proportions.[143] Recent "scandals" involving the supply of horse meat sold as beef in Europe,[144] Mad Cow Disease in Britain[145] and rat poison found in Polish dairy products[146] could be seen as the logical conclusion of Rowbotham's analysis, as economic pressures build to systematically debase the quality of inputs throughout the food chain as producers fight the effects of cost-push inflation and try to satisfy the need for ever-increasing productivity in the industrialized food industry by systematically debasing their products until they are not fit for human consumption, but are allowed to be consumed by the authorities anyway because of the urgent need to feed the general population within their shrinking incomes.[147][148] For example, it is alleged that Mad Cow Disease was caused by British authorities reducing heating standards in the waste meat rendering process to reduce the cost of food production in Britain. If Rowbotham's analysis is correct, these food contamination and food debasement scandals will increase in coming years, but may be censored by the authorities in future to avoid widespread protests.[149][150][151][152] This has already occurred in China with authorities trying to censor reports of toxic melamine in Chinese milk products.[153]
Others consider that the core problem is not food security, nor overpopulation, nor environmental destruction, nor excessive carbon emissions due to non-pricing of energy producing externalities, nor excessive "specialization" of labor in the midst of monetary dysfunction, but excessive government regulation, causing capital destruction.[154][155]
The fundamental problem with the current monetary system that all Austrian economists agree on is that in the midst of constant credit creation and monetary dysfunction is it impossible to know what unsustainable malinvestments are taking place in the economy, except to acknowledge that they must be taking place somewhere in the midst of unsustainable credit growth.[156]

[edit] Effects on economic health: Ponzi scheme dynamics

According to Michael Rowbotham and many Austrian theorists the expansion of money through debt is unsustainable and necessarily fuels and creates economic bubbles.[157] This concentrates wealth in the hands of private banks as the populace is forced into debt simply to own a home and educate their children, hoping that the loans can be repaid by others going into debt in greater amounts later to purchase the assets they themselves have purchased through incurring large amounts of personal debt.[29] However, debt expansion leads to price appreciation of assets through speculation as the financial market becomes riskier and this process is unsustainable in the long run, with the last cycle of indebted being wiped out when they cannot find anyone to buy the assets they themselves have purchased by going into massive debt. Doug Noland, Steve Keen, Edward Chancellor, Bill Bonner and many others have compared this type of market to an enormous State-sponsored global monetary Ponzi scheme.[158][159][160][161][162][163]
The bust phase of this Ponzi-like business cycle occurs when "debt-based" money growth cannot continue because the debt levels are already at saturation levels, meaning growth in debt money slows or contracts, catching newly indebted businesses and consumers who are left out of the growth cycle, triggering a combined liquidity and solvency crisis when markets seize up due to a collapse in the artificially-supported prices in financial markets.[29][123]

[edit] Effects on the environment

There are also critics in the left-wing and environmentalist camps who contend fractional reserve banking (by creating a necessity for indefinite economic growth) leads to environmental destruction and a sudden, catastrophic depletion of the earth's natural resources as the unsustainable, exponential consumption of the world's scarce natural resources reaches its inevitable limits.[164][165]

[edit] Inherent problems with the system

Some monetary reformers predict that there will be an increased incidence of financial crises in the developed world, as economic and population growth inevitably slow and as the success of financial sector lobbying results in increased tax loopholes and a reduction in effective redistributive taxes which, combined with the debt-legacy of the welfare state, allows an intense and unsustainable concentration of wealth and political power in the financial services sector.[29][166]
Some monetary reformers argue that perverse incentives in the financial services industry lead to collusive relationships between governments and bankers which are economically and socially destablizing in the long run.[167]
Given that the financial system requires ever higher levels of indebtness from the general populace for its solvency, it is vital that the indebted "victims" who must sink deeper into debt for the system to survive do so voluntarily and willingly and are not made aware of the consequences of purchasing consumables with debt money.[29] Some isolated politicians have previously highlighted the fact that mainstream media organizations appear to downplay or minimize the seriousness of deficit spending by government and debt-sourced spending of all kinds.[168] Euphemisms for debt and personal and national bankruptcy associated with debt have been developed to delay a mass panic away from government bonds or debt. For example, the associated growth of debt-based derivatives during the upward phase of the debt money cycle was referred to as "innovation" in financial markets.[169]
Bankruptcy laws differ to a small degree in different jurisdictions but in all developed economies unpaid debt results in legal penalties, property confiscation on behalf of the creditor and income sequestration. Although in Christian, Jewish and Muslim religious practice there have been traditions of debt relief or laws against usury, in no modern Western jurisdiction are any debts periodically forgiven or cancelled in recognition of the inherent impossibility of repaying debts in circumstances where the debt-based monetary cycle has inevitably resulted in too little new debt money being injected into the money supply to pay for the currently outstanding debts.[170]
On a national level, if the issuance of government bonds becomes unsustainable, sovereign bankruptcy can occur - and has occurred many times in history.[171][172][173]Sovereign debt crises due to the inability of nations to pay interest on government bonds have occurred frequently and regularly in the third world and less frequently (every 30 years or so) in the first world as a result of high levels of unsustainable public debt - often because private debts are assumed by a corrupt government through large private bank bailouts.[174][175] The Latin American debt crisis is an example of sovereign debt levels becoming unsustainable, resulting in a currency crisis and economic collapse, as interest rates rise precipitously due to the inability of the national government to attract financiers to purchase new government bonds to inject new debt money into the ailing economy.[175]
At such times, it is the responsibility of the IMF to come in as a kind of supranational central bank to mediate between the national government and international financiers.[176] The role of the IMF as central bank to the world has similar responsibilities and risks inherent in central banking which are described below in relation to the role of the Federal Reserve. If the IMF repeatedly intervenes to save financiers from loss when sovereign bankruptcy occurs, this has a tendency to induce moral hazard and can encourage the financing of reckless government spending and borrowing.[177][178][175]
A single currency regime such as the Euro can mask national liquidity or solvency crises, by ensuring that a national currency is not quickly exchangeable for another, thereby restricting the ability of national governments to depreciate their currencies and cutting off the possibility that the real value of government bond interest repayments could decline relative to other currencies.[179][180][175][181][182] This may however increase the risk of bond default where indebted national governments cannot pay back the interest payments in the denominated common currency.[183][184]

[edit] Types of downturns

Main article: Austrian Business Cycle Theory
Austrian Business Cycle Theory states that artificially low interest rates set by any coercive price-fixing entity will inevitably stimulate malinvestment in the wrong capital projects which will inevitably lead to an unsustainable boom followed by a bust.[185] However, the precise nature of the downturn and the way in which losses are allocated within the economy are both dependent on the actions government and bankers take to forgive debt or control credit and there are two main kinds of debt money contraction that can cause a collapse in the value of inflated assets.
A "credit squeeze" occurs where new debt money is difficult to access without a high credit rating. At such times marginal borrowers, or those who have borrowed at the end of any debt-induced asset bubble, get "squeezed" out of further borrowing and a contraction in the growth of new debt money occurs, triggering a slow down in the growth of inflated assets. Those assets can then be "harvested" by the private banks through widespread foreclosure or bankruptcy and re-sold to those with the money to buy the distressed assets.[186]
A "credit crunch" occurs where new debt money is not available at any interest rate - even for those with previously acceptable credit ratings - due to widespread insolvency in the banking system. At such times, it is the banking system itself that is insolvent and other financial institutions (including overseas financiers) become reluctant to lend to the domestic banking system, resulting in the domestic banking system being unable to issue loans even to credit worthy borrowers.[187]
At any stage during the downward spiral of a "credit crunch", the central bank in a modern economy can try to save the system from complete economic meltdown by purchasing (either indefinitely or temporarily) the failed debts of the private banks.[188][189][190] This involves swapping depreciating "failed" assets with hard cash, thereby allowing the banks to maintain their net asset position and continue to give the impression of solvency to their auditors and depositors. However, doing so results in cash being transferred to the private banks in exchange for bad debt, thereby violating the general economic precept to avoid moral hazard and effectively makes liquid the failed lending decisions of the private banks.[191][192] In the U.S. banking system this is called "opening the Fed discount window", where the Federal Reserve temporarily purchases the failed investment portfolios of distressed private banks in exchange for cash. However, this rescue measure may only delay, rather than avoid, the realization of losses in the banking system, as the central bank cannot "force" new borrowing into the system to inject new debt money into the money supply. Somebody has to be a counterparty to borrow the debt money that is being offered. If all market participants realize a "bubble" has formed in assets markets, there will be few (or no) buyers for new debt money, as no one wants to borrow to buy inflated assets no one else will buy. Money markets can therefore remain illiquid even with intense central bank support.[193]
Furthermore, banks can go bust even with intense central bank support, if the issue is not one of liquidity, but one of solvency.[194][195][196][197]

[edit] Pushing on a string

Some monetary economists describe the opening of the Fed discount window after the bursting of an asset bubble and swapping of "junk" with new money as "pushing on a piece of string", as this measure does not solve the key problem – creating new credit (or debt money) to keep up the growth in the money supply and maintain the required level of liquidity in credit markets.[198][199] This is because unlimited central bank money and low interest rates allow credit creation, but cannot force it into the system. In order for any new debt money to be created, someone has to borrow the excess reserves in order for the money to be injected into the system. With an endogenous money system, money is only created if someone wants to borrow money from a bank. If corporations and individuals are already heavily indebted (or insolvent after the bursting of a debt-induced bubble) there are no credit-worthy borrowers to lend to. This means there are no new buyers at the margin to keep asset prices at high levels. If there are no new marginal buyers, "liquidity" - or debt growth - dries up and volumes and prices drop suddenly, forcing liquidation and creating a sudden cascading effect in highly leveraged markets very similar to the end of an unsustainable Ponzi scheme. The only ones able to stimulate the economy are the tiny minority of bankers who have been bailed out by the central bank and even if they spent lavishly to try to "help" the economy, this would in no way compensate for the lack of spending in the general economy.
To encourage fresh borrowing, central banks generally combine these rescue measures with an interest rate cut to encourage more new borrowing to allow the existing (failed) debts to be liquidated at or close to their original value. When Alan Greenspan repeatedly resorted to this tactic to revive illiquid money markets this became known in the market as the "Greenspan put", as the effect of these repeated reductions in interest rates was similar to a put option in the stockmarket, insuring banks' lending mistakes would be covered up by the Federal Reserve.[200]
When interest rates cannot go any lower (the so-called "zero bound" monetary problem) and people still will not - or cannot - load themselves up with more debt, then to stave off a collapse of market prices due to the drying up of marginal buyers at inflated debt-saturated prices central banks have resorted to "Quantitative Easing" which is the abandonment of interest rate setting and the targeting of bulk purchases of bank assets to artificially pump up their price and keep the banking system solvent.[201] In addition, the Keynesian solution is to run large public deficits and indebt future generations (who, they hypothesize, are more likely to be able to pay through increased future growth).[202][203] Fabian socialists, and Keynesian economists such as Paul Krugman and Robert Shiller, argue that governments must take charge of the responsibility of spending more (and taking on more debt) on behalf of the public (who are too fearful to take on more debt themselves) in order to compensate for the immediate and urgent present insufficiency in total private consumption.[204][205][206][207] Paul Krugman and Robert Reich are prominent advocates of the policy of spending trillions of government money to help stimulate the economy, if spending billions does not work.[208][209][210][211] For economists such as Paul Krugman, if the "more and more government spending" solution does not work initially, it is a sign that not enough government money has been spent.[212][213][214] It is his view that the "deflationary" Japanese recession from 1991/2 could have been cured by the Japanese government going into even more debt than the current net debt to GDP ratio of 110%.[215][216] Although some commentators have puzzled over exactly which group Krugman blames for the crisis, Krugman repeatedly calls for the government "to do more" and "spend more" as the "responsible" way out of the crisis, regardless of the true culprits or cause of the crisis.[217][218][219][220] When pressed to find culprits he identifies "extremist" Republicans and, somewhat paradoxically, those who call for fiscal restraint to be the real source of the debt crisis and the downgrading of US sovereign debt.[221] How increasing the debt load will solve the debt problem is never explained, apart from Krugman repeatedly stating that the "long-term" debt problem is not as important as the immediate and urgent "lack of spending" problem.[222] Paul Krugman has yet to clearly identify a country or a time when government spending became excessive or was out of control and resulted in too much accumulation of debt and malinvestment during an economic slowdown. He has intimated that, perhaps, the Greek government may have spent too much, but he treats that as an isolated case and not applicable to the rest of Europe or the United States, despite some countries having comparable debt levels to Greece's.[223] He has also never explained or written about what happens after government stimulus spending inevitably stops, which Austrians argue would inevitably result in an even bigger slump if it is not continually replaced with something similar or bigger. If further attempts at artificial government-induced "stimulus" are attempted, Austrians argue that this pointless exercise would simply further distort capital structures throughout the economy. They therefore see the slump as curative, even if it results in bank runs and financial crises. They see light at the end of the depression, once the re-pricing of capital goods and financial assets returns the economy to a sound, stable footing.[224][225][226][227][228][229][230][231][232]
Although there is active debate as to whether Krugman's recommended "stimulus" policy (spending money and thereby indebting future generations, with the government spending debt-sourced money on projects the private sector would not touch) can actually help the economy long term,[233][234][235][236][237][238][239][240][241][242] there is no argument that this would undoubtedly help the present group of private bankers, as increased income from the interest payments on new government bond issuance offsets the decline in private sector debt and allows banks to survive when otherwise they may face collapse due to the fatal impairment of their balance sheets through private debt write-offs after an unsustainable debt-fuelled bubble bursts.[243][244]
As government debt is effectively an asset on the books of the banks, increasing Treasury bond issuance necessarily increases the profitability and net asset position of the debt-issuing banks - at least until government insolvency or mass tax evasion renders the value of those bonds worthless.[245][246]
Perhaps in recognition that increasing debt to solve a debt crisis does not work even in the short term, in early 2013 Krugman resorted to advocating the coining of a debt-free trillion dollar platinum coin to solve the debt crisis and revive the economy.[247][248] Some Austrians have argued Krugman's support of the trillion dollar coin is the logical reductio ad absurdum of Keynesian economics.[249]

[edit] Inequities in the debt-based monetary system

Many inequities arise because of the damage an overly leveraged financial system and big spending government can have on the real economy.[250][251] The standard government strategy to help the banks out of the "tailspin" of an insolvency crisis follows a standard chronology:
The government first tries to stimulate the economy and spend money into the markets directly without individuals needing to borrow and spend, thereby "inflating" its way out of economic crisis by causing asset prices to rise and bank balance sheets to appear solvent. It currently does this principally by borrowing newly created money from the central bank and then spending this new money on projects that the private sector is not already engaged in.[252][253]
Unfortunately, there is no easy solution to an economy-wide insolvency crisis caused by excessive credit expansion.[254] Although superficially and politically appealing, government spending only further distorts the economy through widespread malinvestment and makes things worse over the medium term.[255] Later, after the immediate crisis, when bond yields rise, governments are often forced to reduce basic social services or welfare to the poor to pay for the increased bond payments to bankers and other wealthy investors, making those least responsible and least able to pay for the crisis suffer wrenching economic hardship.[256][257]
Antal E. Fekete compares quantitative easing to the repeated supply of opium by an immoral drug dealer to a dependent drug addict:[258]
The explanation for this self-destructing behavior is the addictive, debilitating and mind-corrosive nature of paper money, in direct analogy with that of opium. The high caused by administering the opium pipe to the patient (read: administering QE) had to be repeated when the effect faded by a fresh administration of more opium (read: more QE2).
Aside from the moral hazard issue, the key risk with quantitative easing is that the central bank exposes the financial system to disruptive inflation, as the growth in the money supply spirals out of control due to the need to save the banks from themselves.[259][260] This eventually tends to precipitate a currency and/or government bond crisis, as the debt-based currency becomes completely dysfunctional when either the currency becomes worthless or when debtors - including government debtors - cannot even pay interest on the debt money.[261][262][263][264][265]
For these reasons, a collapse in confidence in the solvency of the domestic banking system (and the central government) is one of the most complex and difficult policy issues any central government can face.[266] If central bank continues to try to save the current players in the banking sector by continually printing money and inflating its way out of the crisis, at some point hyperinflation suddenly appears, and has appeared many times in history.[267][268]
Some commentators have observed that the media and the Fed have to constantly come up with new terms (such as "quantitative easing") to hide the fact that they are simply repeating the same failed policy of monetary inflation that corrupt sovereigns have deployed at the end of failed regimes many times over the millenia.[269] This is also now referred to by some monetary reformers and economists as "socialism for the rich and capitalism for the poor", as many indebted consumers will still lose their houses and be declared bankrupt regardless whether or not the central bank intervenes to save marginal lenders who have been made insolvent through their mis-timing of the credit cycle.[270][271][272] Future generations of innocent taxpayers may ultimately finance any bail out of reckless lenders, as the money used to fund any bail out will be funds diverted from the general revenue of the central government.[273]
In times of crisis, some bankers still refer to Walter Bagehot's 1873 commentary on monetary crises, Lombard Street, in an attempt to gain insights into the way in which central bankers should revive illiquid banking systems.[274][275] However this old text may be outdated in circumstances where the community's debt limits have been reached and where the banking crisis arises from insolvency or environmental depletion rather than illiquidity.[276][175][277] A prime example where aging demographics combined with reckless bank lending in a purely fiat debt-based monetary system resulted in economic problems which no amount of money printing or government spending could fix can be found in the case of the Japanese asset price bubble.[278] Some believe the West will repeat the mistakes of the Japanese and the result will be worldwide monetary disorder and instability and economic decline.[279][280][281][282][283]

[edit] Debt Saturation and the Keynesian Endpoint

Keynesians often refer to Keynes' dictum "In the long run we are all dead" to justify artificially low interest rates and short-term stimulus spending by government to "kick start" a stalled economy where pre-existing private debt levels have caused spending to collapse. Tyler Cowen has responded to this Keynesian rejoinder with the following response:[284]
The famous Keynesian rejoinder, “In the long run we are all dead,” is less comforting when that long run comes into sight. Short-run planning is a hard carousel to stop, especially when there are frequent election cycles, but the federal government must act soon...The technocratic Keynesian recommendation was to run deficits in bad times and surpluses in good times. But except for one stretch during the Clinton administration, this notion has been broken since the early 1980s. In the United States, at least, Keynesian economics has failed to find the necessary political institutions to enact and sustain a wise version of the theory.
Now that fiscal constraints are starting to bite, many politicians are afraid to reform or even to discuss changes in the largest problem areas...
Fiscal austerity may sometimes sound like a dogmatic religion, but fixed principles often help us do the right thing, especially when temptation beckons. Professor Buchanan argued that the real choice was between a religion of budget balance and a rule of illusion.
...the rigor of the numbers will soon sweep away the fiscal illusion. The only question is whether we will end the charade on our own terms or continue to play the fool.
Nassim Taleb posits that with increasing debt comes increasing fragility as markets end up standing on a "knife-edge" between precipitous currency devaluation/bond crisis due to money printing and widespread insolvency/depression due to slowing organic money supply growth.[285] It therefore becomes increasingly difficult for central banks to control volatility in heavily indebted world markets, until it ultimately becomes impossible to control.[286]
No current commentator predicts bankers, politicians or government employee unions will spontaneously reform themselves.[287] Noted commentator Bill Bonner and others have described politicians, welfare recipients, bankers and other tax beneficiaries as economic "zombies" obsessed with preserving their own coercively acquired incomes and unable to adapt to new economic realities. He has predicted that the "zombies" will continue to "steal" as much as possible and parasitically live off the productive efforts of others until the whole monetary system collapses.[288][289][290][291] Some commentators have criticized so-called "zombie" bureaucracies such as the TSA as not only deadweights on the real productive economy, costing millions of tax dollars each year; their very existence hinders economic productivity.[292] It is alleged that once these organizations are created and fed by government fiat, these "zombies" never die because there is no natural market mechanism to provide the necessary feedback signalling that they are unwanted by consumers. They grow only because they survive through government bureaucratic support and largesse - which comes from coercively acquired tax dollars or central bank produced fiat money. It is argued that the richest parasitic "zombies" (such as the CEOs and shareholders of the private security firms servicing the TSA's multi-million dollar government contracts) will continue to suck as much wealth from the productive economy as possible and then move on to the next host country with their real wealth converted into land, precious metals and jewels and other real assets.
The difficulty with any attempt at reform measures is that the "Ponzi" elements of finance are inextricably tied to pension funds and "real" elements in the economy, making it impossible to eliminate the "cancer" without damaging the wealth-creating structures as well.[293][294][295][296][297][298] Commentator Max Keiser has also referred to "zombie" bankers as "The Walking Dead"[299] and has coined the term "Suicide Banking" to describe the paradoxical situation where virtually every politician and economist acknowledges that "Too Big To Fail" is a dysfunctional policy but no one has a viable solution, given that the banking system is "rigged to blow" if threatened.[300] He also refers to the current crisis as a fight to the death not between countries or ethnic groups or political ideologies but between future-oriented, prudent and conservative "Savers" on one side and present-focused, imprudent and overconsuming "Speculators" on the other.[301]
Many non-mainstream financial commentators believe the U.S. and the E.U. will soon experience terminal financial crises, but there is vigorous on-going debate amongst numerous commentators regarding whether this terminal currency crisis will end in hyperinflation and currency destruction (making government bonds worthless) or repeated bouts of deflation and depression (making government bonds more valuable).[302][303][304][305][306][307][308][309][310][311][312] Most - but not all - Austrian commentators now believe the denouement will inevitably result in hyperinflation and render the U.S. dollar near-worthless in real terms, as U.S. bond and dollar holders compete to offload excess holdings in the face of massive ongoing issuance.[313][314][315] Mike Shedlock and Antal E. Fekete are amongst a small group of deflationists who believe contracting credit will continue to have a deflationary impact on the economy, causing government bonds to become even more valuable over time.[316][317][318][319]
It should be noted that few hyperinflationists can explain the precise mechanism by which massive amounts of new credit money will be injected into the economy. There has been no detailed explanation from the hyperinflationists regarding how, with so few potential credit-worthy borrowers (including governments), the new money (via the issuance of new debt) will be injected into the economy in sufficient volume to trigger hyperinflation in the absence of extreme government policies (such Congress authorizing every citizen to be issued with $30,000 vouchers, or a civil war, or other natural catastrophe).[320]
Gary North is one of the few Austrians who does not predict the extremes of either hyperinflation or deflationary depression, but rather expects a continuation of steady, moderate price inflation encouraged and controlled by the Federal Reserve, against a background of ongoing extreme boom-busts in the real economy and the slow but systemic impoverishment of the middle class.[321]
Leaving aside the debate between deflationists and hyperinflationists, and in stark contrast to the predictions of deflationary or hyperinflationary catastrophe from the Austrians, monetarist, Keynesian and neo-classical economists regard the current financial system as benign and the current financial distress as temporary and not structural in nature.[322] Most advocate "tweaking" of government policy (such as temporary increases in government spending) to get us out of the current crisis. No mainstream economist identifies the problem as fundamental or structural and no mainstrean economist advocates a return to full reserve banking, the gold standard or free banking. Indeed, most financial analysts still use the normal distribution - or "Bell Curve" - to represent the likely distribution of future returns in financial markets.[323] This continues despite extensive research demonstrating that the normal distribution does not apply to financial market returns, which display so-called "fat tail" distributions, with much more volatlity at the extremes than the normal distribution would predict.[324] The Austrian view - that the economy will either slide into depression or hyperinflation under the stresses of the current debt-based monetary monetary system - may be supported by more recent analysis of actual financial market behavior under conditions of high debt and extreme stress.[325][326][327] And recently even mainstream economists, such as senior IMF advisor Dr Robert Shapiro, now openly acknowledge that the inter-dependencies created by the issuance of Credit Default Swaps and other risk-related financial products by reckless under-capitalized banks has created a situation of extreme global financial vulnerability, where the world is only weeks away from a complete and total financial "meltdown".[328]
Regardless whether the government chooses hyperinflation or periodic deflationary depression as the way out, throughout history, only two real alternatives occur in the midst of economic or financial crisis: ever greater centralization (often on a "higher level") or disintegration of the core power structures and (eventually) rejuvenation.[329][330][331][332][333][334][335][336][337] Accordingly, many of the more extreme monetary reformers and conspiracy theorists anticipate repeated and ever more desperate attempts at higher-order centralization,[338][339] as the existing co-ordinated state-based central bank architecture becomes discredited through repeated economic failure and environmental crises caused by the need for unsustainable exponential debt-driven economic "growth" within the current debt-based financial architecture.[340] This centralization is anticipated to include the empowerment of the UN to increasingly intervene in the domestic political affairs of nations,[341] the IMF and EU to increasingly intervene in the domestic financial affairs of member nations,[342][343][344][345][346] and the declaration of martial law and the imposition of fascist-style restrictions on civil rights[347][348][349] and freedom of speech by the political Establishment to physically protect it from anarchy or military coup when the bubble of debt completely bursts, through a precipitous currency crisis, debt-created depression, environmental crisis or oil shortage.[350][351][352][353][354] Ultimately this is anticipated to yield either repressive world government[355] or chaos (or most likely both), with a world central bank stationed in Basel, Switzerland.[356][357][358][359][360] During this transition period, some analysts and conspiracy theorists anticipate multiple wars to force governments into the BIS financial "net",[361][362][363][364] impotent and counterproductive price controls,[365][366] repeated sell-offs of monopoly state assets in a desperate attempt to feed private domestic banks with steady, coercively acquired income to keep the value of government bonds collapsing,[367] and then, once this attempt (to feed unsustainable compounding debt with any remaining basic infrastructure) destroys any remaining parts of the productive economy, there will be in the end coercivly enforced rationing of basic essentials to ensure continued supply of food and oil to senior government officials, bankers and their associates amidst widespread general starvation and chaos,[368][369] as the coalescence of a corrupt banker-government coalition solidifies[370][371] to eliminate potential dissent and ensure the forced elimination - by any means necessary - of any actual or potential competing currencies that could threaten the viability or legitimacy of the monopoly currency, which could include war against any country considering using any currency other than US dollars to price essential commodities such as oil [372] and the compulsory confiscation of all privately-owned gold (gold being the ultimate reserve currency, still used by central banks as a universally accepted medium of exchange for the settlement of international debts).[373][374][375][376][377][378][379][380][381][382][383][384]
Some have speculated that the overthrow and attempted assassination of Col. Gaddafi and his family in 2011 Libyan "civil war" was triggered by Col. Gaddafi's open (and unwise) attempt to price Libya's oil in gold, which is the reaction many would expect for a country that "dared" to price an essential commodity in anything other than a Western paper currency.[385][386]
There have been many monetary crises throughout history,[387][388][389][390][391][392][393][394] and there are a number of standard warning signs of impending depression or hyperinflation caused by a complete breakdown of trust in any monetary system.[395][396][397][398] Just prior to the complete collapse of the pyramid scheme of public and private debt, the economic system tends to feed on itself, and in the past, where debt-created depressions or periods of hyperinflation have occurred in Europe,[390] the U.S. and China, there has been a sustained spike in predatory economic behavior, as the heavily indebted central government and producers are forced to find more extreme (previously considered unethical) methods to extract any remaining wealth from increasingly desperate and impoverished consumers, who are either unwilling or unable to go into further debt without forceful coercion.[399][390][400][401][402] Long-term investment and sustained capital investment are almost impossible in this environment because the "measuring stick" of return on investment (the real value of money) is so uncertain at times of debt-induced credit crunch, depression or hyperinflation.[403]
As potential new borrowers and international financiers are scared away from participating in the pyramid scheme of debt and borrowing further, the monetary system seizes up, starved of the fresh injections of debt money it needs for its survival, thereby precipitating economic anarchy,[390][404] widespread lawlessness[390] and insolvency of the monetary and banking system.[405][406][302][407][390] Some have described the moment when governments cannot borrow any more from banks to keep up the growth in debt money as the "Keynesian Endpoint" or "Keynesian Endgame" or point of "Debt Saturation" - which is the point in time when in extremis "emergency" measures by the government to kick-start the economy by increasing total gross debt have no lasting positive effect on GDP.[408][409][410][411] Antal E. Fekete identifies this "crisis" point as the point when the marginal increase in total gross debt has no positive marginal effect on GDP.[412] According to Professor Fekete, once the marginal productivity of debt turns negative, a disastrous depression is inevitable.[413]
Recent studies have indicated that debt turns toxic at between 80 and 100 percent of GDP. Beyond this, further increases in debt reduce GDP rather than stimulate it.[414]
This final denouement is triggered when borrowers cannot be found to buy depreciating, already-indebted, assets, and international financiers reduce lending as they experience losses on pre-existing loans either through asset or currency depreciation.[415] Some analysts predict that the monetary system will seize up due to a deflationary depression[416] or a sustained period of stagflationary hyperinflation resulting in a "final and total catastrophe of our fiat monetary system."[302][417][418][419][420]
Examples of debt and monetary crises can often be found after failed wars, when international financiers realize the heavily indebted government they funded will not gain the resources it planned to seize as a result of the waging of aggressive war. When this pay-off does not materialize, the losing government is left with the debt of war without the ability to offset this government debt through the imposition of reparations on the defeated nation and the acquisition of the defeated state's resources, thereby boosting the victorious state's GDP and tax revenues. This sudden monetary collapse occurred to Germany after the First World War and Japan after the Second World War.
Whatever the trigger, the key warning sign of any impending monetary crisis and economic anarchy is a sudden currency crisis, or a sudden spike in domestic interest rates, or a sudden credit crunch.[302] Early warning signs that the private banks themselves are aware of an impending breakdown in the solvency of the financial system would be any combination of some or all the following: a spike in the prices for oil (which is an internationally accepted, inherently limited, store of value, and therefore can act as a modern form of hard currency, oil sometimes being referred to as "black gold"), gold,[421] silver[422] [423] and other stable, non-perishable, inherently limited natural resources essential for non-discretionary industrial production;[424] a spike in the futures contracts for vital agricultural commodities[425][426] such as sugar,[427] corn, wheat, soybeans and rice, as investors realize the debt-based monetary system has squeezed supplies of arable land;[428][429][430] a sudden flight of money to Treasury bills and/or a sudden spike in the interest rate differential between short-term Treasury bills and asset-backed corporate paper (or a sudden spike in the LIBOR rate in London)[302][431] - and then, in the very late stages of a credit crisis, a sudden and disorderly flight of money away from government bonds and a "shock" or "panic" collapse in government bond prices, as banks perceive that some governments will ultimately find it impossible to pay interest on their debt from coercively acquired taxes.[432][433][434]
Shortly thereafter, some monetary reformers predict that there would be desperate, but ultimately futile central bank intervention involving massive, repeated bouts of "quantitative easing",[435] then a currency crisis,[436] then a panic run on a number of marginal, insolvent banks and hedge funds as desperate wealthy investors try to get cash out before the pyramid scheme[437] collapses to invest in inherently limited, non-perishable, in-demand commodities such as oil and gold[438][439][440] (and undeveloped agricultural and industrial land in areas of the world with strong economic growth),[441] followed by a recession or depression in the broader heavily indebted economy as credit contracts but base money continues to rise exponentially.[442][302][443][444][445][446]
Historically, during periods of monetary disorder, a predator-prey mentality generally grips society, with parasitic or predatory activity being witnessed, eating away at the last vestiges of the middle class.[447] In such circumstances the following activities continue to be profitable and proliferate during monetary disorder: international banking and financial services to the wealthy elite, to assist in secreting their assets outside the jurisdiction; drug trafficking and distribution to ease the psychological stress on those slipping down the social ladder into poverty and homelessness; security and protection services to the wealthy; entertainment services to the wealthy, including gambling, prostitution (male, female and child) and "exclusive" nightclubs and bars servicing the wealthy; luxury imported goods and services; military and defense contracting and procurement (as a form of high-level security services for elite government employees), propaganda and media services defending and glorifying and legitimizing the State; and all forms of coercive government activity generally (as the tendency towards fascist-style controls feeds on itself in a positive feedback loop around a triangle of increasing government employee numbers scared away from the shrinking private sector, a banking industry supporting government jobs and big business and defense contracting supporting and feeding both).[448][449][450][451]
It should be noted that in 2011 banks started paying police directly, presumably to ensure protection from the public should widespread protests commence against their alleged embezzlement activities.[452]
In 2010 Ireland and Greece experienced similar financial crises along the lines described above and many financial commentators and politicians expect more countries to go through the same debt crisis.[453][454][455] In 2011, Tunisia experienced a financial and political crisis that was almost identical to those already experienced on the poorer European periphery, except that in this case the pre-existing political establishment quickly fled the country in fear for their safety - with some allegations that the wife of the deposed leader, Leila Trabelsi, ordered the country's central bank to transfer 1.5 tonnes of gold to Zine El Abidine Ben Ali and his family.[456][457] The Egyptian uprising resulted in Hosni Mubarek fleeing after desperate attempts were made by him and his associates to preserve his family's wealth and power.[458] Several newspapers have reported that, once again, appropriating the nation's gold reserves was a major priority for the fallen leader.[459] Following the overthrow of the ruling elites in Tunisia and Egypt, other North African countries have experienced similar uprisings - all attributable to higher food prices, according to some noted commentators,[460] who have accused Fed Chairman Ben Bernanke of literally having "blood on his hands" due to the encouragement of food price inflation via sustained inflationary loose-monetary policies.[461][462][463][464][465][466][467] The central banker has denied that his inflationary loose-monetary policies have contributed to food inflation and Chicago Fed President Charles Evans has called for even more quantitative easing and inflation as a way out of the on-going crisis, despite previous attempts having failed to stimulate the economy.[468][469] Implicit in Mr Bernanke's and Mr Evan's argument is the assumption that the central bank can create "good" inflation in some markets and avoid "bad" inflation in others. This alleged central bank power to direct good inflation and abate bad inflation is derided by a number of commentators.[470][471][472][473][474][475][476]
Noted British Telegraph commentator Ambrose Evans-Pritchard has called these the first Malthusian "Food Revolutions" of the modern era, as "agflation" causes political instability on the periphery of major economies worldwide - particularly those countries that have already denuded their agricultural base and have to import grain and other foods to survive.[477][478]
It is also reported that very complex, delicate negotiations are taking place between debtor and creditor nations to swap government bonds with gold at prices far in excess of the declared "market price" of gold.[479] These so-called "off-market" deals - and possible diversions of government-owned gold to corrupt bankers and political leaders - are signs the Keynesian Endpoint has arrived and the politicians and bankers recognize they have lost control of the economic system and must focus on saving themselves.[480][481] Max Keiser reports that it appears powerful nations will negotiate repatriation of their gold and smaller nations will either have to accept their gold is lost or face war if they attempt to repatriate their own gold home.[482] Germany and other countries have started to slowly repatriate their gold in anticipation that gold may not be available at any price in future.[483][484]
Finally, it should be noted that, with the collapse of Tsarist Russia, the establishment of the fifth and final central bank of the United States, the destruction of the fiat-issuing fascist regimes in Italy, Germany and Japan post-WWII, and the collapse of communism in the 1990s, there no longer exists any major economy where the banking system is fully government-owned or has any strictly enforceable social responsibilities beyond pure profit motive. All major world economies have now adopted essentially the same monetary system, with profit-driven private banks (government-licensed institutions legally permitted to engage in unlimited credit creation) able to pocket profits during upswings and socialize losses during downswings by use of central bank asset swaps. If critics are correct that all such systems are doomed to severe boom-bust cycles because of excessive expansion of speculative credit and endemic moral hazard, it is to be expected that all major economies will also experience essentially the same kind of environmental and food crises, and even allegedly "strong" economies such as China will experience severe economic downturns at some stage.[485][486] However, equally, if critics are correct that fractional reserve banking, excessive credit expansion and artificially low interest rates are at the root of all financial crises, then higher reserve ratios and capital requirements for domestic banks (or the existence of heavily controlled nationalized banks) should reduce the severity of economic crises in those economies with higher reserve requirements for their own banks.[487][488]

[edit] Proposals for monetary reform

[edit] Potential solutions

Many consider it too late to reform the financial system.[489][490][491][492][493][494][495]
The "Icelandic Solution" (where private banks were allowed to fail and social security measures for the poor and indebted were increased) is unlikely in all other Western democracies given the power of the financial services sector over government.[496] The UK went so far as to trigger anti-terrorism legislation against Icelandic banks in a bid to pressure Iceland to pay out claims against its private banks.[497]
The simplest and cleanest solution for any debt-fuelled crisis is simply to default and not attempt to pay back the loans - particularly if the debt has been created unethically or fraudulently.[498][499][500][501] If, as Paul Krugman and other Keynesians have argued[502] "we owe it to ourselves", then there should be no problem repudiating that debt.[503] This was the solution chosen by Iceland, even in circumstances which involved powerful international creditors. Despite enormous pressure from the UK government to try to force the Icelandic government to bail out its banks, it chose not to do so and allowed the private banks to default.[504] The Greek government also partially defaulted on its debts in 2012.[505] Particularly where government debt default is involved, bankers generally do everything to avoid this outcome because it (a) reduces the value of their asset (debt-based government bonds) (b) reduces or even destroys their income stream (interest on bonds) and therefore may affect their retained earnings in future (and their credit rating and compliance with Basel III rules on Tier 1 capital) (c) can result in a systemic crisis as many banks will be using that government debt to satisfy their liquidity requirements under Basel III (which requires a minimum proportion of "liquid" assets to be held by the banks - and those "assets" mainly consist of government bonds) and (d) signals to other countries that it is possible to escape debt without consequence and so potentially reduces the value of government debt in surrounding countries.[506] Self-interested bankers are therefore often desperate to avoid government debt default, and generally much prefer an economy to be strangled by debt rather than be freed of it.[507]
As an example of the consequences of the two alternatives, Iceland did not try to save its private bankers but instead permitted them to default on private bond payments.[508] Ireland on the other hand guaranteed private bank debt and in doing so subjected the taxpayers of that country to decades of payments for debts that were not incurred on their behalf or for their benefit. Many commentators have observed that in 2010 Iceland recovered much faster than other countries such as Ireland.[509][510] In his extensive analysis of the aftermath of the banking panic in Ireland, Michael Lewis wrote of his puzzlement that the timid Irish government thought it was beyond the bounds of acceptable political discourse to consider default on privately issued Irish bank bonds, when Iceland successfully defaulted and only after this did they nationalize their banking system.[511]
In the absence of outright default, some governments simply delay addressing the issues of debt and default, with the central bank buying government bonds and manipulating the stockmarket and other asset and commodity markets to keep solvency in the banking system and government alive.[512][513] Time may allow re-inflation of the markets through the gradual injection of new debt money into the system through new borrowings. It is a rare "black swan" event for a cluster of private businesses or banks to default at the same time and governments often hope that this will not happen again once it has happened already. However, if the crisis is one of national solvency, waiting passively for recovery may only delay - and exacerbate - the final catastrophe as the debt-based monetary system pushes all businesses slowly towards the next crisis by confusing and misleading market participants with false price signals, particularly as they relate to interest rates. Once the next crisis hits because of even more confused price signals due to government interference in the market for money, time is something panicked financiers and investors are least likely to want to give up when the threat is never getting their money out of the imploding investment bubble. In extreme cases banks could set up "independent" corporate investment vehicles to buy the assets associated with the bad debt,[514] thereby allowing borrowers to liquidate their investments and allow time for the markets to re-inflate. Alternatively, these "sour" loans, that have gone bad through too much debt overwhelming the markets, could be dumped or "hidden" on the central bank's balance sheet, and swapped for more secure government debt (financed through compulsorily acquired taxes, which are immune from the risk of private bankruptcy). However the holding costs involved in these measures would be extremely high and would not guarantee that the losses could be averted if no new gullible investors could be found to offload these distressed assets.[515] More fundamentally, these short-term "parachutes" used after bubbles burst do not save ordinary borrowers from foreclosure and bankruptcy, nor do they address the pernicious long-term dysfunctional aspects of fractional reserve banking described above. These problems are temporarily averted, only to be dealt with yet again by the next generation of indebted governments and peoples.[516][517] Simply deferring the crisis and repeatedly bailing out the banks may simply entrench misallocation of resources within the financial and governmental sectors, starving private businesses of the savings needed to invest and produce.[518]
The preferred long-term free market solution (a return to free market gold and silver money and the abolition of central banks) is also extremely unlikely.[519] In addition, given that bankers and central banks "stole" most of the people's gold, with mass confiscations dating back to the 1930s in the US[520] and earlier in Europe,[521] an immediate and uncompensated[522] return to the gold standard now would simply further enrich bankers and impoverish workers through crushing deflation, as the value of the assets the middle class had previously saved in (housing and mutual funds) collapsed and gold (the "elite banker's money") suddenly soared in value, allowing bankers yet another generation of largesse from past theft. It should be noted that one of the principal financial assets of both the IMF and the US central bank is confiscated gold (the other being government bonds).[523] Less than 1% of all pension fund assets held by the general public are currently allocated to physical precious metals and many mutual funds have mandates effectively prohibiting them from holding physical precious metals.[524] If the gold price were to soar, the very institutions most responsible for financial disorder would be those most likely to benefit from the chaos, having already positioned themselves to benefit from any price explosion in gold.
Given that both the Icelandic and free market solutions are effectively impossible to implement to any significant extent, some analysts of the current debt-based monetary system consider that, after decades of excess debt and fiat money, the current capital structure is so distorted and malinvested, the food supply so industrialized and vulnerable to shocks, and the environment generally so polluted from government-protected mining and mass industrialization that there is no hope for the vast majority of the middle class and indeed the mass of humanity in the coming decades.[29]
Getting back to a market-based banking system would require, at minimum: (1) abolition of all deposit insurance; (2) eliminating the doctrine of "Too Big to Fail" by prohibiting the central bank from buying any assets from insolvent banks; and (3) allowing the market to set interest rates by removing this price fixing power from the central bank and allowing the real inter-bank market to set interest rates.[525] However, such changes to the global monetary system would likely trigger immediate bank runs on the weakest banking institutions and (most likely) a systemic crisis, resulting in a sudden deep depression in the short term and a period of minimal or no capital investment in the medium term as access to lending dried up from suddenly illiquid financial institutions. Although in the minds of many Austrians, the resulting system would be greatly preferable to the current dysfunctional and unsustainable system, the transition period would likely be so traumatic that no democratic government (or no government at all) would likely countenance such deregulation, nor would they likely be allowed to by the banks themselves.
Government and banking have become so intertwined there is virtually no difference between them, as banks bail out governments who in turn bail out banks in Ponzi scheme fashion.[526]
Coercive, rule-bound government, by its very nature, can only perpetuate itself if it constantly maintains a monopoly of force and is widely respected as the final arbiter of disputes between any two parties within its jurisdiction.[527] Governments do not obtain their revenue through donations or voluntary payments but rather either tax the populace or print fiat money to spend on projects the government deems worthwhile. There is therefore an inherently dangerous power in government spending. Good government exists to provide public goods, regulate externalities and protect and enforce property rights.[528] However, if government force is used not for public purposes but to protect and enhance the power of a tiny political and financial elite, parasitic thieving forces can take over monopoly government and destruction of the economy can occur without the ability of the people to revolt or defend themselves against the depredations of government force.[529][530] Destructive policies can therefore continue for longer than the survival of the economy itself, especially if people have been lulled into complacency by a long history of relatively benign government whilst parasitic forces slowly take over power from behind the scenes.[531] Some consider that modern democracy has been subverted and that the two-party choices being presented today are a charade, with little real difference between duopoly political parties, which are just shams to cover the slow but inexorable takeover of the levers of power by the financial "elite", who do not respect nor care about the will of the people, who they consider too stupid or powerless to be treated seriously.[532][533][534][535] Since the mid-1990s and even earlier it has been argued by many commentators that the gold default of August 15, 1971 would inevitably lead to economic disaster due to the distorting and parasitic effects unlimited fiat money and credit creation would have on the productive private economy.[536][537][302] The relentless exponential growth in retirement and welfare benefits will now be enough to bankrupt many Western governments (including the United States).[302][538] No one in power today appears willing to tackle either the corrupt banking industry or government largesse.[539][540][541] Too many in power have a vested interest in the continuation of the system of spiraling inflation and debt to stop it, even if it could be stopped.[542][543] Whilst the general economy suffers, old infrastructure collapses, man-made environmental crises abound, retailers go bankrupt, millions are foreclosed upon and are left homeless (whilst at the same time hundreds of thousands of houses lie empty and decaying) and real average incomes are decimated, perversely, banking bonuses and lobbyists' incomes have skyrocketed and the powers of the Fed and other central banks have increased because of increased regulatory duties despite their previous failures.[544][545][546] Despite this obvious incompetence and despite repeated failures of policy at the highest levels, anyone advocating solutions beyond those approved within failed mainstream two-party thought is commonly labelled "insane", "crazy" or an "extremist".[547][548][549] Noted gold investor, Jim Sinclair, has publicly stated that the chaos has one cause - bankers have bought governments around the world and today's bankers are little more than irredeemably shallow "sociopaths", unable to grow a conscience and unable to foresee or care about the broader societal consequences of their actions beyond their own incestuous social groupings.[550][551] Leading British specialists in the pathology of the psychopath, Professors Robert Hare and Paul Babiak suspect the banking industry does indeed attract psychopaths and probably has a much higher proportion of mentally unstable psychopaths as executives compared to other industry sectors, although their comprehensive test (determining the degree of psychopathology in the workplace) has yet to be applied to the banking sector or to senior government officials or politicians.[552] Michael Price, co-director of the Centre for Culture and Evolutionary Psychology at Brunel University in London agrees that the characteristics that make for good traders and investment bankers are very similar to those that define psychopaths. Therefore, given their likely sociopathic mind-set and culture, provided they themselves are acquiring a greater share of gross national income, many bankers simply do not care about the consequences and will continue to label others as "crazy" or "insane" or "terrorists" for so long as it gives them cover to engage in their own criminal conduct and for so long as it permits the in-bred corruption to continue at the highest levels.[553][554] If the charade collapses and the elite are threatened, they will simply kill anyone who threatens them and continue in their remorseless efforts to acquire (or steal) gold, oil, and other vital resources, as they have proven to do repeatedly in the past.[555]
It should be noted that average bankers still earn around US$370,000[556] (or around £236,000 in the UK)[557] and this has steadily increased even in the aftermath of the financial crisis. Those who head up the "Too Big To Fail" banks earn around US$18 million per year, with some executives doubling their own pay in 2010.[558] Lawyers who service and support the international banking and business community are reported to be earning up to US$2 million a year even in small peripheral countries such as Australia.[559]
Given many of these people are not actually producing services people would voluntarily pay for in a genuine free market economy, many of these service providers associated with the issuance and distribution of monopoly currency would be made redundant or be rendered unemployable almost immediately upon a return to a true free market gold standard. It is to be expected that these people would be violently opposed to any change in the status quo given the dramatic change in lifestyle that this would necessitate. In particular, it is to be expected that these people would specifically oppose the abolition of legal tender laws and fight against any formal declaration by any government that fractional reserve banking is a form of embezzlement or counterfeiting, or that the current financial system is a Ponzi scheme (which are generally illegal in most Western countries if they are not government-supported).
Jim Sinclair suggests that many senior participants in the international banking and derivatives industry should be jailed[560] to protect the public from repeatedly being "raped"[561] by their scams and has the following conclusion on his website:[562]
For years I have been telling you that there is NO PRACTICAL SOLUTION to the total of all the mistakes that have been made since Roosevelt, in a depression, started it all.
Jim Sinclair considers it too late to save the system[563] and recommends people become self-sufficient and buy gold to await the inevitable collapse of the political and economic system and the associated breakdown in the division of labor.[564]
Max Keiser has stated that the culture of actual physical sexual coercion and harrassment allegedly exhibited in the financial services industry is simply symptomatic and an outgrowth of a culture of financial rape and exploitation.[565] In order to be part of the system, you must be blind to its consequences. Therefore, no one with a conscience can become powerful enough within the system to fundamentally change trajectory from its current catastrophic path.[566]
Ironically, many victims of rape and abuse come to blame themselves and never fight back, preferring to adapt to a life of abuse or enslavement. This is called "learned helplessness" in psychological terms. Doug French finds a direct analogy between the dynamics of physical rape and financial abuse, with many indebted individuals blaming themselves for their predicament and refusing to default on their debts, even though it would be in their clear financial interest to do so.[567]
John Perkins, author of Economic Hitman, has openly stated that the U.S. government is merely a front runner for major corporate interests and has brutally assassinated leaders of countries where reform has been attempted.[568] The zealotry and extremism against genuine and honest monetary reformers on the one hand and the payoffs and largesse given to unprincipled and corrupt supporters of the current monetary regime on the other ensure there is no path of reform left for those potential leaders with a conscience.[569]
Dimitry Orlov, author of Reinventing Collapse, has written extensively about the striking similarities between the collapse of the USSR and the multiple environmental, economic and social crises facing the USA. He also predicts economic, political and social collapse in much of the West and in particular predicts that peak oil will result in some countries being cut off completely from oil supplies resulting in sudden social upheaval and starvation and believes that it is too late for any kind of meaningful reform:[570]
(US military adverturism overseas) is just a very striking example of being unable to stop, even though what you're doing isn't actually working...By demolishing as much of the social infrastructure as exists in the country... you will end up with an even less literate population that will be unable to oppose the government, unable to stand up for themselves and demand that their rights and needs be met...
People who think they can somehow skirt the financial system are wrong. They will be dominated by the Bernankes of this world and others. There isn't really a way out except to make do without money. And that's kind of what I try to explain to people is: Reduce your needs for any kind of interaction with the official economy and you will do better.
Given these repeated financial crises arising from the fiat monetary system, many monetary reformers predict that there will inevitably be widespread default or hyperinflation or depression - or most likely all three simultaneously in what Ludwig von Mises predicted would be a "final and total catastrophe" of our unsustainable, Ponzi-like, fiat monetary system.[571] After this "catastrophe"[302] in which a significant proportion of the population may die through starvation or war[572][573][574][575][576][577] a spontaneous market-induced return to the gold standard is anticipated to be the most likely result.[578][302][579] Other possible solutions following the catastrophe include a return to legally enforced full reserve banking combined with the issuance government-issued debt-free fiat currency, or free banking and the issuance of private coinage and private money. If these solutions are not initiated soon, it can be expected that a complete financial "meltdown" will ensue at some stage, as environmental crises and destruction of arable land slow GDP growth in developing nations and fewer young people in developed economies can be found who are willing to go into debt in sufficient magnitude to pay off the debts that have already been accumulated.[390][302] As extreme inequality increases, foreclosures mount and financial crises repeatedly erupt, many believe a political crisis will eventually result in calls for revolution and fundamental monetary reform.[580][581][302] However, as noted above, some commentators consider that it is already too late to avoid a combined financial, environmental and demographic catastrophe even if reform is now attempted.[582][583][584]
Even if worldwide economic catastrophe cannot be averted at this stage of the metastasizing financial crisis, choices will still need to be made by each government in response to the crisis. On-going, worsening, debt-created crises in the economy and society (and the unsustainable damage to the environment caused by debt-created overconsumption) are likely to turn monetary and economic policies either to the extreme left or to the extreme right, as there are a number of competing solutions to the debt-based monetary "problem".[585] It should be noted that some commentators consider that Western governments have in recent years chosen a combination of the "worst" of all possible options: bailing out banks and increasing government spending and indebtedness whilst periodically trying to enforce austerity against the middle class and the ordinary working class.[586] Some have called Western government policy reactions to the financial crisis as a decisive move towards "Crony Capitalism" that is neither "free market" nor "socialist" but rather the last desperate acts of a corrupt banker-government cabal of "counterfeiters".[587][588][589][590][591] If this is correct, the destruction of economic capital in those countries adopting the Crony Capitalist model in response to the financial crisis will likely result in the descent into quasi-Third World status.[592][593][594]

[edit] Libertarians, Austrians and commodity money

Libertarians and Austrian School supporters envision a voluntary society of free markets (where banks - however large - are allowed to fail if they cannot perform their obligations),[595] small government[596] and the abolition of monopolistic legal tender laws,[597][598] allowing money backed by a free market[599][600] gold standard or silver standard to come back in circulation.[601][602][603][604][605] It should be noted that even a partial return to the gold standard (allowing foreign central banks to redeem US government bonds in US gold) would result in the gold price having to rise to approximately $20,000 per ounce.[606]
It must be emphasized that a necessary pre-condition in establishing a true free-market order would be the complete abolition of all legal tender laws[607] and the abolition of monopolistic central banking, including repeal of the Federal Reserve Act of 1913.[608][609][610][611][612][613][614][615][616][617] "Capitalism" or "the free market" cannot be blamed or held responsible for current dire economic conditions given this coercive government prohibition against competition in currency creation.[618] Some Libertarians would also support experimentation with full reserve banking,[619][620][621] recognizing that when fractional-reserve banking is combined with the gold standard a strong cyclical bias (and the systematic transfer of real wealth to the banking system) is normally inevitable.[622][623] Those Libertarians who support full reserve banking would strongly support more flexible and forgiving bankruptcy laws in a fractional reserve banking environment, recognizing that no stigma should be attached to bankruptcy given the anti-Libertarian "unjust acquisition" of real wealth implicit in central banking, compulsory legal tender laws, fractional reserve banking and taxation.[624][295][625][626]
In the absence of sound money, over time private corporations become mere extensions of powerful government and banking fiat.[29][627][628] Libertarians such as Murray Rothbard argue that in such a toxic monetary environment resource allocation is perverted by some or all of the following factors: corrupt alliances between so-called "private corporations" (which are often extensions of government or banking interests) and regulators; increasingly intensive business structures to suit the needs of a concentrated and cartelized banking system; and the constant overriding of small communities and local government planning with central government directives to satisfy the needs of big business.[629][29] In such a corrupted monetary system, libertarians argue that financial and man-made environmental crises cannot legitimately be blamed on "private" corporations but rather blame must fall squarely on the true source of the problem - centralized government control of credit and money, which in turn dilutes private property rights (especially in relation to traditional owners and farmers) and creates massive distortions in scarce resource allocation, with environmental crises being the predictable consequence.[29][630][631][632]
Regarding the current accumulation of government bonds and private debt, many Libertarians believe that the creation of the Federal Reserve under the Federal Reserve Act of 1913 was unconstitutional and consider that at least some of this accumulated debt should be canceled or forgiven prior to a return to the gold standard in recognition of its fundamental illegitimacy.[633][634][635][295][636][637][638] Arguably this would be supported by the "just acquisition" jurisprudence of legal philosopher Robert Nozick and Libertarian advocate Murray Rothbard.[295] As Murry Rothbard states:[639]
Many libertarians fall into confusion on specific relations with the State, even when they concede the general immorality or criminality of State actions or interventions. Thus, there is the question of default, or more widely, repudiation of government debt. Many libertarians assert that the government is morally bound to pay its debts, and that therefore default or repudiation must be avoided. The problem here is that these libertarians are analogizing from the perfectly proper thesis that private persons or institutions should keep their contracts and pay their debts. But government has no money of its own, and payment of its debt means that the taxpayers are further coerced into paying bondholders. Such coercion can never be licit from the libertarian point of view. For not only does increased taxation mean increased coercion and aggression against private property, but the seemingly innocent bondholder appears in a very different light when we consider that the purchase of a government bond is simply making an investment in the future loot from the robbery of taxation.
In late 2010, financial commentator Max Keiser started the Buy Silver Crash JP Morgan Campaign 2010 in an attempt to expose the flaws underlying the fractional reserve banking system.[640][641][642]
Spontaneous protests against the Federal Reserve and the current financial system commenced in September 2011 across the United States and current protests can be found on the website.
This speech by an anonymous protester exemplifies the concerns being voiced by the people.

[edit] Free Banking and Full Reserve Banking

On the issue of the required level of bank reserves, Austro-libertarians are sharply divided on the optimal solution to eliminate the parasitic and destructive forces inherent in fractional reserve banking.[643][644]
Some Austrian scholars advocate "free banking", where banks are legally permitted to engage in fractional-reserve banking activities provided they comply with the standard laws against fraud and are not supported in any way against the possibility of bank runs and are forced into bankruptcy should they not be able to pay their debts as and when they fall due.[644] Provided depositors are clearly made aware that their demand deposits are being lent out and are not universally available for immediate withdrawal and provided there is no way in which such banks are propped up in the face of bank runs, free banking advocates do not support outlawing fractional reserve banking as embezzlement per se.
Advocates of this system of banking include Lawrence White, Steven Horwitz, George Selgin, and Kevin Dowd, amongst others.[644] F.A. Hayek also advocated the de-nationalization of money production and implicitly supported a free banking financial system in some of his works on monetary reform.[645]
Other Austrian scholars advocate "full reserve banking", considering fractional-reserve banking and the associated issuance of irredeemable paper money to be inherently fraudulent, unethical, unjust, disruptive and dysfunctional, akin to embezzlement and counterfeiting.[646][647][648]Full reserve banking would require banks to retain in reserve all deposits that are legally available for immediate withdrawal, and permit lending only from longer-term deposits.
Advocates of this system of banking include Murray Rothbard,[649][650] Jesus Huerta de Soto,[651] Jörg Guido Hülsmann,[652][653][654] amongst others.[655][656]
Most recently, in late 2010, two British MP's, Douglas Carswell and Steven Baker, sought to introduce legislation into the British Parliament that would allow depositors to decide if their money should be lent out and for what period.[657] If this legislative reform were to pass, British depositors would have the option to elect to save their money in full reserve bank accounts.

[edit] Neo-Chartalism and Modern Monetary Theory

Neo-Chartalists and associated advocates of Modern Monetary Theory (MMT) also accept that the current bank-dominated monetary system is dysfunctional, but advocate reform within the strictures of a fiat monetary system rather than looking to return to a commodity-based monetary system.[658]
Most advocates of MMT support deficit spending to support the economy, believing governments can never go bankrupt in a fiat monetary system.
Austrians and sound money advocates criticize supporters of MMT not in their description of the current monetary system (which many Austrians consider reasonably accurate) but for their "shallow" understanding of the dangers of unfettered government spending through fiat money creation and their "naive" support of deficit spending and inflationary policies as an "easy" way out of economic crises.[659][660]

[edit] Debt-free money

The concept of debt-free money is most notably represented by Michael Rowbotham, Stephen Zarlenga of the American Monetary Institute, Bill Still producer of the well-known Money Masters videos and Ellen Hodgson Brown.[661] They advocate various forms of "pure" fiat money issuance by government, without the need for the government to issue a bond to print or issue the fiat money. More recently, mainstream economists have begun to seriously consider the issuance of debt-free money as a policy solution to the current ongoing crisis.[662][663]
Currently virtually all money issued in modern economies is sourced from debt; in other words, it is "debt money". "Debt money" is money created in parallel with debt or credit via the process of fractional reserve banking.
"Debt-free money" is a "true" or "pure" fiat currency issued by the Treasury of a central government, where there is no requirement for its eventual return as a condition of its creation (except by way of payment of taxes).[29] It is argued by Rowbotham and others that this would allow for the substantial lowering of tax rates, would allow public works projects to be funded cheaply, and would stimulate economic development, if the fiat money is spent sensibly on inflation-lowering long-term capital projects.[29]
Michael Rowbotham seeks the cancellation of "unjust" debts (such as third world debt), and, crucially and most importantly, a social security safety net involving a guaranteed minimum debt-free income (sourced from government-issued debt-free money independent of any central bank) for all citizens in the debt-based economy. Under this proposal, every adult citizen would be given a livable debt-free income transferred electronically into their bank account, simply by virtue of their citizenship. They could then use this debt-free money to pay off their mortgages or to live, debt-free, without being compelled to work as a wage slave in the market economy if they chose not to. The government would finance these payments simply by ordering the private banks to accept their electronic instructions as legal tender. It would therefore not result in the expansion of government debt.[29]
Ex-U.S. Treasury Department analyst Richard C. Cook also supports the issuance of debt-free money and zero-interest credit by the central government and has provided a detailed blueprint of monetary reform recommendations to transition to a debt-free money supply.[186]

[edit] Properties

According to its proponents, government-issued debt-free fiat currency (such as debt-free notes and coins) can circulate perpetually in the economy as "stable" money and although not as secure as hard currency, government-issued debt-free notes and coins (such as United States Notes and silver certificates) do not have the same effects of debt-based money (which require pertpetual interest payments to be tied to the creatin of new money).[664] It should be noted however that fiat currency can be a source of hyperinflation if its production is not controlled, as the government has the potential to issue unlimited amounts of fiat currency - provided it is accepted as "money" by the private banking system.[665] Notably, the Federal Reserve reportedly threatened not to recognize the trillion dollar platinum coin should the Obama Administration try to mint one.[666][667] Debt-free notes and coins in circulation (being defined as M0) now account for a tiny fraction of the total debt-based M3 money supply in all modern debt-based economies (and debt-free M0 is also generally less than 10% of the total M2 money supply in most developed economies).[668]
Instead of money being created "indirectly" and "furtively" at the point of loan creation by the private banking system, with periodic bailouts to already-rich bankers and a "boomerang" boom-bust cycle as debt levels expand and contract, this debt-free "pure fiat" money would be created directly and openly by the democratically elected government and permanently issued to its citizenry by way of instruction to the private banking system. An example would be the coining of a trillion dollar platinum coin by the US government to pay off some of the Federal debt and continue its deficit spending in times of recession or depression. There would be no requirement for this money to returned (plus interest) and be extinguished as a condition of its creation, which is the central feature of all debt money systems.
Michael Rowbotham and Ellen Hodgson Brown both argue in their books that this system of "debt-free" money issuance would not dramatically raise consumer prices (or at least would not be as inflationary or as dysfunctional as the current compounding debt-based system).[669] They argue that this would also reduce overconsumption and the associated environmental damage associated with debt-based consumerism. It would also give individuals the free time to engage once again in non-marketable religious, artistic and recreational activities if they chose to do so.[29]
It is acknowledged by both writers that, in the absence of tax rates which ensure the return of this "pure" fiat to government coffers, this would be "inflationary" in the traditional sense, but they argue that if this "pure" government spending is directed to capital works projects and other long-term projects, this "pure" fiat money issuance would not result in excess price inflation, although it would dramatically increase base money. Michael Rowbotham argues that if bank reserve and capital ratios were increased and bank regulations on derivatives were imposed at the same time as the increase in "pure" base money was occurring, the two policies would balance each other out and no appreciable price inflation would be felt by the public at large.[29] The increase in base money would be inflationary, but the increase in reserve requirements would be deflationary, resulting in no significant net increase in the total money supply (assuming the government was sufficiently skilled in balancing these forces through the transition to a predominantly debt-free monetary system).
It is to be expected that these policies would be violently opposed by the private banking "elite", as it would render impotent their control over the money supply, dissipating this crucial decision-making power away from its current power base, from private banks to elected governments.[670][671] It would also be likely to reduce economic growth, dramatically increase the cost of labor and, potentially, result in an exacerbation of price inflation and malinvestment.[672] However, Rowbotham, Zarlenga, Brown and Still all argue that this proposal would address the problem of inequality inherent in a debt-based monetary system and reduce the devastating impact of personal bankruptcy and allow individual citizens to quickly recover from financial hardship.[29] They also argue that this social security measure (and government spending in general) would not have to be paid for by future generations from future streams of income tax.[29]

[edit] Related proposals and Nationalized Public Banks

Stephen Zarlenga and Ellen Hodgson Brown also call for the nationalization of the private banking system once the full losses on the banks' portfolios are recognized.[673][674][675][676][677] Ellen Hodgson Brown has repeatedly called for the creation of publicly-owned banks similar to the North Dakota model, where the interest earned by these state government-owned banks could be ploughed back into local economies financing public works and local government services instead of being sucked out of local communities into the major commercial banks.[678]
Brown also supported "QE2" - which she described as a necessary and desirable funding of government spending via money printing rather than by the indirect means of issuing of interest-bearing government bonds, which simply allows private bankers to profit from costless money creation.[679][680]
Many monetary reformers who call on the government to take back the money creation function from debt-supplying private for-profit banks also call for full reserve banking to remove the bank's alleged "embezzlement" and "counterfeiting" abilities.[681][186][682]
It should be noted that if Austrian claims that fractional reserve banking produces business cycles is correct, public ownership of banks will not stop periodic economic crises from occurring, unless very high reserve ratios are imposed on those publicly-owned banks.

[edit] Criticism of "Greenbacker" debt-free money issuance

In late 2010, Ellen Hodgson Brown and Austrian School commentator Gary North engaged in an intense debate over the direction of monetary reform, with gold-standard supporter Gary North accusing Brown of going down a path that inevitably leads to the economics of fascism and hyperinflation.[683][684] Government deficit spending funded with either paper money or compliant public bank lending is not a substitute for private consumption due to the inability of coercive goverment to invest rationally long-term, given the economic calculation problem inherent in socialized economies and the interests of governments and politicians being very different from the average consumer.[685] North argues that it is not possible to trust a coercive, non-market entity - government - to limit its spending in circumstances where pure fiat money is in the hands of politicians and that inflation, being an invisible tax, is much harder to resist than regular taxes. Greedy, corrupt, short-sighted politicians could buy off special interest groups to get elected and the general public could only watch on the sidelines as the purchasing power of their dollars steadily declines; this decline would be blamed on currency speculators and eventually foreign currencies (including "natural" monies such as gold and silver and copper) would have to be banned and confiscated from the public to ensure continued use of depreciating fiat.[686] The fundamental error of Brown's analysis, according to North, is that Brown expects the source of the problem - corrupt governments bought and paid for by bankers - to be the source of the solution. She calls for a move away from war spending, whilst recoginizing that the current fiat monetary system favors government spending on war.[687] To date, she has yet to reconcile these inconsistencies in her writings.
Mike Shedlock agrees with the abolition of fractional reserve banking, but criticizes the concept on similar grounds as North. Commenting on a bill to end the Fed introduced by Representative Dennis Kucinich, he wrote: "Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thin air for the purpose of full employment and/or any other absurd ideas Congress has."[688]
Peter Schiff also believes getting rid of the Fed and returning money issuance to Congress would be worse than the current system.[689]
Austrians criticize leftists' inability to see that printing money and spending distort the capital structure and does not result in lasting economic growth.[690][691] They also avoid or ignore the fact that historically governments have often acted in their own self-interest and concentrated power in themselves and their corrupt associates and families rather than benignly ruling for the benefit of the populace and their long-term interests. Every sovereign - without exception - that has been given the unfettered power to print fiat money has eventually printed too much debt-free money and in the end had to ban competing currencies (such as foreign currency or metallic money), and face revolt, revolution, hyperinflation or other social catastrophe.

[edit] Debt-free money issuance: Support from free market Austrians

In contrast to Gary North's attacks on "Greenbacker" Ellen Hodgson Brown, and Mike Shedlock's criticism of debt-free money printing by Congress as the worst of all choices, noted Austrian monetary economist Joseph Salerno has voiced his support for the idea of debt-free money issuance in comparison to the current debt-based system, if a choice is to be made between the two.[692] In his defense of the trillion dollar coin idea, he states the following:[693]
Let me be clear: my intention is not to deny that the trillion-dollar coin is a ludicrous and dangerous idea; it is rather to point out that the Fed is a more ludicrous and dangerous idea.
In relation to the "dangers" of Congressional control of the money supply, Salerno responds as follows:[694]
Obviously, congressional control of the fiat money supply is far from the ideal monetary system, which involves the complete separation of government and money through the establishment of a commodity money, such as gold, the supply of which is determined exclusively by market forces. Nonetheless, there is much merit in replacing the opaque and pseudo-scientific control of "the money supply process" by the entrenched bureaucrats of the Fed with overtly political control of money by elected officials and partisan Administration appointees.

[edit] Left-leaning ideas

The highly successful "Icelandic Solution" of debt relief for the poor and criminal sanctions against corrupt bankers was implemented by a left-wing government[695] although some question whether the policies truly reflected left-wing ideas given the constraints on Icelandic policy-making at the time.[696]
Some left-leaning social democrats would also support additional longer-term measures such as raising minimum wages immediately after a financial crisis (rather than reducing wage rates - which they argue only prolongs the depression through reduced spending), taxing the banking system and the implementation of strongly redistributive income and land taxes to ensure the financially dispossessed are "replenished" with income. They would also support a social security safety net involving the provision of unemployment benefits and government-supplied free medical care, education and other essential services and public goods.[697] It is to be expected however that this coercive regulatory regime would result in the systematic destruction of the entrepreneurial class as profits are squeezed by rising costs. In addition, without the issuance of debt-free fiat currency the result of these programs would be the persistent, exponential, accumulation of government debt, financed by the private banking system by the issuance of government bonds. If not properly managed, this could result in a progressively higher tax burden and may result in higher interest rates in the long term, as financiers require higher interest rates to lend to the increasingly indebted central government. Without the issuance of debt-free money these policies can be self-defeating, with the net result simply being that a larger stream of guaranteed income goes to the private banking system via the issuance of interest-bearing government bonds (which are purchased by the private banks "out of nothing" through fractional reserve banking techniques). This government debt must then be financed in perpetuity by compulsorily acquired taxes from future generations.
It could be argued that the early success of extreme so-called "right-wing" (but socialist government-guided) fascism in Nazi Germany and Italy in the period after World War I was a response to the economic chaos created by the debt-based monetary system in early 20th century Europe. Some of the economic policies introduced by Hitler and Mussolini were in direct response to the economic collapse and social anarchy caused by soaring government and personal debt levels in both countries in the post-Versailles Treaty era, and (indirectly) arose from the writings of Silvio Gesell and others on the nature of the problems associated with a debt-based monetary system. Although many historians justifiably criticize many of the non-economic policies of the fascist governments of Germany and Italy during this period, the economics of fascism seemed to provide a degree of prosperity to the populace, and arguably achieved the government's stated objective of restoring economic and social order during the pre-World War II era.[698] These economic policies and their results are the subject of vigorous debate even today.[699] (See also Inflation in Nazi Germany.)
Similarly it could be argued that socialism and communism were movements inspired by the inequalities caused by the intense (and in Karl Marx's view unsustainable) concentrations of monetary wealth, power and influence inherent in the practice of fractional reserve banking in a laissez-faire, monopoly capitalist environment (particularly when fractional reserve banking is combined with a gold standard or other hard currency monetary system).[700]
The communist/socialist solution to the problem of fractional reserve banking is simple: re-enfranchising workers through widespread organization and unionism, complete removal (and if necessary, violent non-democratic removal) of the allegedly "parasitic" financial, capitalist and upper classes, wholesale repudiation of government debt resulting in complete debt default; forced expropriation of land and wealth from the upper classes to the dispossessed and needy working classes; nationalization of the private banks (which has required armed coups by the military in some past revolutions); and the return of the banking function from a dominant, speculative to a subordinate, administrative institution, where the banking system is reduced to a subservient arm of the centralized Leviathan. In this system, government-owned banks are directed by government policy; often provide different kinds of loans to different industry sectors at different interest rates depending on the perceived "needs" of the economy and the community; normally have a significant proportion of non-performing loans due to weak or non-existent bankruptcy laws; and periodically "forgive" failed debts in recognition of the impossibility of some businesses in paying this debt money back. In addition, individuals are prohibited from possessing large property holdings, in excess of their individual needs.
It is to be expected that the profitability of the government-owned banking system would be more stable - but dramatically lower - than that in a debt-based capitalist economy. It is also to be expected that a significantly higher misallocation of resources could occur in this system, where lending decisions are "infected" by political considerations and are not made on the basis of expected return on investment. The risk of corruption in the banking system is also expected to be higher where there is no separation between the political and monetary systems in an economy. Market-oriented monetary reformers and neo-classical economists therefore do not support nationalization of the private banking system.
It should be noted that partial nationalization of the private banking system would only be temporary, as any remaining private banks could still engage in unlimited fractional reserve banking and facilitate the eventual acquisition and control of any strategic assets in a partially socialized economic system. It is to be expected that in the absence of complete nationalization of the banking system, the private banking system would eventually dominate the financial system in any nominally socialist society.

[edit] Crony Capitalism: A continuation of current trends

Assuming current trends continue, "Rigged Market Capitalism"[701] or so-called "Crony Capitalism"[702] will continue.[703] This means ongoing "immunity" for market manipulating banks on the basis that they are "too big to jail",[704][705] and the continued collusion of central banks with private banks to manipulate an increasing number of financial and commodity markets in a futile effort to control capitalism for their own survival, eventually destroying any semblance of functioning capitalism.[706] Some believe we have already reached this point where world financial markets are completely artificial and prices in many markets no longer reflect reality.[707][708] Ongoing purchases of government bonds by central banks continue every month, keeping interest rates artificially low and allowing government spending to continue to expand, along with a volatile heavily indebted private economy.[709] If these "emergency" QE measures continue indefinitely this will eventually result in indefinite depression as markets are manipulated beyond the control even of the central banks, prohibiting market "clearing" and prohibiting the reallocation of resources away from the government and financial sectors.[710][711][712][713]
Without reform or revolution, this perverted Keynesian[714] "upside down" combination of "socialism for the rich and capitalism for the poor" will inevitably result "supply" crises in commodity markets as price signals no longer "work" due to market manipulation and price "smoothing" stifling price rises that must occur for production of essential commodities to remain profitable, thereby ultimately resulting in actual supply and demand mismatches in many essential commodity markets (such as the gold and silver markets).[715][716] This will ultimately produce a tiny (but massively wealthy) speculative banker class,[717] a bloated and ineffective government sector, a private sector that mainly services lucrative government contracts (or is otherwise starved of capital and funding) and the complete destruction of the middle class, resulting in a steadily increasing disenfranchised, desperate, intergenerational underclass.[718][719][720][721][722]

[edit] Status under current systems

Whatever their political leanings, nearly all monetary reformers agree that the current financial and economic system imposed on the populace by governments worldwide, involving coercive legal tender laws,[723] the perpetuation of government-protected private banks (organizations legally permitted to engage in unlimited and inherently speculative fractional-reserve banking activities during boom times, with recourse to monopoly central banks - and in some cases corrupt governments[724][725] - to provide bail outs of fiat money during downturns), "deregulated" labor markets (which have the effect of increasing the marketization and commodification of human activity), strictly enforced bankruptcy laws (which permit the periodic transfer of assets from failed bankrupt investors caught at the end of "Ponzi-scheme" cycles to the private banks and their associates) and personal income tax (which, combined with periodic economic collapses, dispossesses the majority of the populace from their accumulated income and wealth and transfers this wealth to the owners of illicit government bonds) amounts to an inherently unstable, unjust and dysfunctional financial system resulting in environmentally damaging over-consumption and massive worldwide malinvestments, the systematic and irredeemable destruction of fertile arable land,[726] and the government-sponsored (and ultimately unsustainable) oppression of the indebted, impoverished and economically enslaved majority.[727][728][729][730]

[edit] See also

[edit] Notes

  1. Jesús Huerta de Soto Speech
  2. Life with the Fed, Thomas Woods
  3. Over to you H Parker Willis, Jim Grant
  4. James Grant Interview with James Turk
  5. The End of Sound Money and the Triumph of Crony Capitalism, David Stockman, Henry Hazlitt Memorial Lecture, Austrian Scholar's Conference
  6. Crony Capitalism Strikes Again, David Stockman
  7. David Stockman Interview - Blame the Fed
  8. The Social Imperative of Sound Money, Lew Rocwell
  9. Naomi Wolf Interview with Lew Rockwell, Lew Rockwell: "I've frankly never understood why people on the Left are not upset about the Federal Reserve. If you look back to the history..." Wolf: "We probably don't understand it!" Lew Rockwell:"...but you know the founding of the Fed before the law was, you know, with bipartisan support signed in 1913, the Federal Reserve Act was drafted at J.P. Morgan's private club - it's sounds like a conspiracy story, but I guess it sort of is - on Jekyll Island Georgia...Big bankers wrote the Federal Reserve Act for their benefit!"
  10. The Social Imperative of Sound Money, Lew Rockwell: "I find it sickening that there are so few voices outside the Austrian School that will stand up to this policy [of fiat money, fractional reserve banking and central banking]."
  11. 100% Money, Irving Fisher
  12. Friedman, M., A Program for Monetary Stability, New York, Fordham University Press, 1960, pp. 65
  13. The Social Imperative of Sound Money, Lew Rockwell: "I find it sickening that there are so few voices outside the Austrian School that will stand up to this policy (of fiat money/fractional reserve banking/central banking)".
  14. The Economics of Legal Tender Laws, Jorg Guido Hulsmann (includes detailed commentary on FRB)
  15. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  16. Meltdown, Tom Woods, Regnery Press ISBN: 9781596985872
  17. The Faults of FRB, Thorsten Polleit
  18. End This Fed, Matt Stoller
  19. For an example of the writings of these groups, see this contribution from
  20. Max Keiser
  21. The Global Debt Crisis, Ellen Hodgson Brown
  22. Obama’s Trillion-Dollar Coin Exposes Federal Reserve Scam, Alex Newman, New American
  23. Is Our Money Based On Debt?, Robert Murphy
  24. 24.0 24.1 For an example of the public use of the term, see the speech of the Earl of Caithness in the House of Lords on 5 March 1997
  25. For example of the public use of the term, see this speech given by Zhou Xiaochuan, Reform the monetary system, 23 March 2009 (BIS), and this article, Roving Cavaliers of Credit by Steve Keen (with commentary by Yves Smith)
  26. Myths, MISH
  27. Deflation, MISH
  28. Deflation In A Fiat Regime?, MISH
  29. 29.00 29.01 29.02 29.03 29.04 29.05 29.06 29.07 29.08 29.09 29.10 29.11 29.12 29.13 29.14 29.15 29.16 29.17 29.18 29.19 29.20 29.21 29.22 29.23 29.24 29.25 29.26 Rowbotham, Michael (1998). The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive Economics. Jon Carpenter Publishing. ISBN 9781897766408.
  30. Endogenous Money, Steve Keen
  31. Endogenous Money, Steve Keen
  32. David Graeber's Interview with Max Keiser
  33. Daily Bell Interview: Dr. Joseph Salerno
  34. Money Is Not Credit, Robert Blumen
  35. Fiat World, MISH
  36. What's Economically Important, MISH
  37. The Social Imperative of Sound Money, Lew Rockwell
  38. For an example of the mainstream use of the term "credit" instead of "debt-money" see this example from the Financial Times, 1 May 2008
  39. Paul Krugman, writing at, stated that the Austrian theory of business cycles was "about as worthy of serious study as the phlogiston theory of fire".
  40. Senior Fed Economist Calls Ron Paul a Pinhead
  41. Senior Fed Economist Calls Ron Paul a Pinhead
  42. Is Inflation Harmless or Even Good?, Robert Murphy
  43. Free Banking and the Structure of Production, Dan Mahoney
  44. Economists on Fed Payroll, MISH
  45. Priceless, Ryan Grim, Huffington Post
  46. Ten Reasons The Banksters Got Away With It, Danny Schechter
  47. Corruption in Academic Economics, Charles Ferguson
  48. Currency Dead End Paradox, Jim Willie CB
  49. Priceless, Ryan Grim, Huffington Post
  50. Ten Reasons The Banksters Got Away With It, Danny Schechter
  51. Corruption in Academic Economics, Charles Ferguson
  52. Our debt-based monetary system will break us, Earl of Cathiness, House of Lords, Wednesday, 5 March, 1997, Hansard, Vol. 578, No. 68, columns 1869-1871
  53. See also the additional House of Lords speeches contained here
  54. The Evil Princes of Martin Place
  55. Money and Wealth in the New Millennium, Norm Franz
  56. Ralph T. Foster, Fiat Paper Money, The History and Evolution of Our Currency, page 19
  57. Preface to 100% Money, Irving Fisher
  58. 58.0 58.1 58.2 58.3 58.4 58.5 Ron Paul. End the Fed, Mises Institute, September 03, 2009. Chapter 2 of the book End the Fed. Referenced 2011-03-16.
  59. Fiat Money Inflation in France, Andrew Dickson White, 1912
  60. The Desperation of King Henry VIII, C.J. Maloney
  61. The Faults of FRB, Thorsten Polleit
  62. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  63. Murray Rothbard, The Mystery of Banking
  64. 64.0 64.1 64.2 64.3 Brown, Ellen H. (2007). Web of Debt. Engdahl Publishing. ISBN 0979560802. Retrieved 2007-12-15.
  65. 65.0 65.1 Stephen A. Zarlenga, The Lost Science of Money AMI (2002)
  66. Sound Money, Lew Rockwell
  67. Our Money Madness, Lew Rockwell
  68. The Case for a Gold Dollar, Murray Rothbard
  69. 69.0 69.1 69.2 69.3 69.4 Antal E. Fekete, The Twilight of Irredeemable Debt
  70. Fractional Reserve Banking as Economic Parasitism
  71. Senior Fed Economist Calls Ron Paul a Pinhead, LRC
  72. Fed Economist in Retreat, Robert Wenzel
  73. The Faults of FRB, Thorsten Polleit
  74. Money As Debt
  75. Money As Debt
  76. Money As Debt
  77. Rich Dad Advisors Discuss Food Storage
  78. Stacy Herbert and Max Keiser: Flaming Banks Max Keiser Quote: "Banks counterfeit money. Bernanke, Geithner... anyone in the banking business is just a... just an out of control, rogue, counterfeiting, naked short selling weasel."
  79. Ron Paul video - fractional reserve banking is fraudulent
  80. The Faults of FRB, Thorsten Polleit
  81. QE Is The End Of America, ZeroHedge
  82. The Federal Reserve Note Is Dead, Jeff Berwick
  83. MISH on the Fictional Reserve System, Steve Keen
  84. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  85. Sound Money, Lew Rockwell
  86. Our Money Madness, Lew Rockwell
  87. The Case for a Gold Dollar, Murray Rothbard
  88. The Faults of FRB, Thorsten Polleit
  89. The Need for 100% Reserves, Frank D. Graham
  90. The Faults of FRB, Thorsten Polleit
  91. Microfoundations and Macroeconomics: An Austrian Perspective, Steven Horwitz, pp. 223-232.
  92. 92.0 92.1 America's Forgotten War Against the Central Banks, Mike Hewitt
  93. Antal E. Fekete, Fractional Reserve Banking Revisited
  94. China Inflation and Gold, Darryl Robert Schoon
  95. The Good, the Bad and the Ugly, James Quinn
  96. The Collapse of Paper Money, Darryl Robert Schoon
  97. Venetian Bankers and the Dark Ages
  98. The Fed Unspun
  99. The Economics of Legal Tender Laws, Jorg Guido Hulsmann
  100. Meltdown, Tom Woods, Regnery Press ISBN: 9781596985872
  101. What Does Debt-Based Money Imply for Interest Payments?, Robert Murphy
  102. Is Our Money Based On Debt?, Robert Murphy
  103. The Global Debt Crisis, Ellen Hodgson Brown
  104. The Global Debt Crisis, Ellen Hodgson Brown
  105. The Trillion Dollar Coin: What You Really Need To Know, Rudy Avizuis
  106. Exponential Credit, MISH,
  107. Not Enough Gold, Robert Blumen
  108. What Does Debt-Based Money Imply for Interest Payments?, Robert Murphy
  109. AMI Conference 2010, Steve Keen
  110. Solving the Paradox of Monetary Profits, Steve Keen
  111. Occam's Gold
  112. The Credit Impulse, Steve Keen with commentary from MISH
  113. What Does Debt-Based Money Imply for Interest Payments?, Robert Murphy
  114. AMI Conference 2010, Steve Keen
  115. Solving the Paradox of Monetary Profits, Steve Keen
  116. What Does Debt-Based Money Imply for Interest Payments?, Robert Murphy
  117. The Credit Impulse, Steve Keen with commentary from MISH
  118. Occam's Gold
  119. Occam's Gold
  120. Money: Sound and Unsound, Mark Thornton commentary on Joseph Salerno's book
  121. Paper Ron Paul, Paper Money and Tyranny, Speech in U.S. House of Representative, September 5, 2003
  122. Taking Money Back, by Murray Rothbard
  123. 123.0 123.1 Ponzi Nation
  124. The Credit Impulse, Steve Keen with commentary from MISH
  125. Fertile Obfuscation: Making Money Whilst Eroding Living Capital, 34th Annual Conference of the Canadian Economics Association, Mark Anielski
  126. Horrific Global Food Crisis is Looming, Michael Snyder
  127. Inflation and Bacteria, Michael Rozeff
  128. The Corporate State and the Tapeworm Economy, Catherine Austin Fitts
  129. Naomi Spencer, World Socialist Website, "Severe food shortages, price spikes threaten world population", 22 December 2007
  130. Food Shortage Series,Kellene Bishop
  131. Peak Everything?, MISH
  132. "Peak Everything", Jeremy Grantham
  133. Horrific Global Food Crisis is Looming, Michael Snyder
  134. Collapse
  135. Horrific Global Food Crisis is Looming, Michael Snyder
  136. Food Shortage Series,Kellene Bishop
  137. Severe food shortages, price spikes threaten world population
  138. Inflation in China
  139. The Corporate State and the Tapeworm Economy, Catherine Austin Fitts
  140. Collapse
  141. Bee Die Off
  142. Peak Everything?, MISH
  143. 25 Signs That a Horrific Global Water Crisis Is Coming, Economic Collapse Blog
  144. Horsemeat a global conspiracy
  145. History of Rendering
  146. Scandals Rock Polish Food Exports
  147. Horse meat scandal: the economics
  148. Horsemeat a global conspiracy
  149. More Stealth Inflation
  150. Horse meat scandal: the economics
  151. Hidden Inflation Everywhere
  152. Chinese Milk Scandal
  153. Chinese Milk Scandal
  154. When Capital Is Nowhere In View, Jeffrey Tucker
  155. Population Growth as Propaganda, Gary North
  156. Saving the System, Robert K. Landis
  157. Hayek's Ghost Haunts the World, Jeffrey Tucker
  158. The World's Biggest Ponzi Scheme, Steve Keen
  159. Ponzi Nation,"Who is Hyman Minsky?", para 6
  160. One Gargantuan Ponzi Scheme, Paul Hallyer
  161. How Could Irving Fisher Have Been So Wrong?, Doug Noland
  162. Mishkin, MISH
  163. Warning, Bill Bonner
  164. David Korten, Agenda For A New Economy, Berret-Koehler, 2009
  165. George Monbiot, about five sixths of the way down
  166. Andrew Sheng, INET presentation
  167. The Economics of Legal Tender Laws, Jorg Guido Hulsmann
  168. Speech by Senator Kent Conrad (D-ND) on October 20, 2005 regarding the "misleading" reporting of deficit spending by the mainstream media
  169. Innovating Our Way to Financial Crisis, by Paul Krugman
  170. Bankruptcy law backfires
  171. Can the Fed Become Insolvent?, Robert Murphy
  172. Greenspaniel and U.S. bankruptcy
  173. Dee-Fault!, Martin Hutchinson, Prudent Bear
  174. Ireland Bailout, Alex Brummer
  175. 175.0 175.1 175.2 175.3 175.4 QE2 and the Great Economic Misdiagnosis, Jim Willie, November 24, 2010.
  176. Time to Dissolve the IMF, MISH
  177. IMF Reform and International Lender of Last Resort, RGE Monitor
  178. Banking Bunkum, by Henry C.K. Liu
  179. Irish Meltdown, UK Mail On-line,
  180. Ireland Bailout Consequences for Britain, Portugal Next?, Nadeem Walayat
  181. The Mogambo Theory of Currency Relativity
  182. Putin ditches dollar, RTTV
  183. Irish Meltdown, UK Mail On-line,
  184. The Tragedy of the Euro, Philipp Bagus
  185. The Cure (Low Interest Rates) Is The Disease, Thorsten Polleit
  186. 186.0 186.1 186.2 Market Fundamentalism, by Richard C. Cook
  187. Credit crunch, Wikipedia definition
  188. Quantitative Easing Explained
  189. Does the Fed Create Money? Michael Pento
  190. ECB's mind-numbing cash injection
  191. Prudent Banks Victimized, MISH
  192. Privitizing Profits and Socializing Losses, by Nouriel Roubini
  193. Favorable or Unfavorable, Doug Noland, Prudent Bear
  194. Central Banks have No Plan
  195. Central Banks get desperate
  196. $20 Trillion in Bad Debt, Max Keiser
  197. Bernanke's QEx Money Printing Box, Gordon T. Long
  198. Don't Discount the Fed Discount Window
  199. Monetary Policy in Deflation: The Liquidity Trap in History and Practice
  200. Moral Hazard and the "Greenspan Put"
  201. QE for Dummies, Dr Martenson
  202. "Kick the Can Down the Road"
  203. Stimulus Without More Debt, Robert Shiller
  204. "Kick the Can Down the Road"
  205. The Fatal Distraction, Paul Krugman
  206. Stimulus Without More Debt, Robert Shiller
  207. Is the Need for Stimulus "Undeniable"?, Hunter Lewis
  208. Reich: Government Has To Spend More To Get Out Of Debt
  209. Budget Deficits, Paul Krugman
  210. Krugman, MISH
  211. The Inflation Prisoner, William Anderson
  212. Fed Up With the Fed?, Thomas Sowell
  213. When Zombies Win, Paul Krugman, NY Times
  214. Krugman, MISH
  215. Budget Deficits, Paul Krugman
  216. Japan's debt-ridden economy, The Economist
  217. "Kick the Can Down the Road"
  218. Credibility, Chutzpah and Debt, Paul Krugman
  219. Shock Krugman Turns on Elites, The Daily Bell
  220. Obama Is Missing, Paul Krugman
  221. Credibility, Chutzpah and Debt, Paul Krugman
  222. "Kick the Can Down the Road"
  223. An Impeccable Disaster, Paul Krugman
  224. Keynesian Solutions Total Failure
  225. The Pain of Restoring Investor Confidence, Bill Bonner
  226. Government Spending and the path to Money Printing, Bill Bonner
  227. Krugman Is Eating America Alive, Neeraj Chaudhary, Prudent Bear
  228. Keynesian models, Robert Murphy
  229. The Inflation Prisoner, William Anderson
  230. Yes, Virginia, There Really Is a Free Lunch, Gary North
  231. They Want Us to Love the Fed, William L. Anderson
  232. The Many Collapses of Keynesianism, Lew Rockwell,
  233. Mainstream Fallacies, Frank Shostak
  234. Keynesian Solutions Total Failure
  235. The Pain of Restoring Investor Confidence, Bill Bonner
  236. Government Spending and the path to Money Printing, Bill Bonner
  237. Krugman Is Eating America Alive, Neeraj Chaudhary, Prudent Bear
  238. Keynesian models, Robert Murphy
  239. The Inflation Prisoner, William Anderson
  240. Yes, Virginia, There Really Is a Free Lunch, Gary North
  241. They Want Us to Love the Fed, William L. Anderson
  242. The Many Collapses of Keynesianism, Lew Rockwell,
  243. QE won't help the economy
  244. QE won't save the economy
  245. Asset Speculation and Capital Destruction, Jim Willie
  246. Krugman Is Eating America Alive, Neeraj Chaudhary, Prudent Bear
  247. Obama’s Trillion-Dollar Coin Exposes Federal Reserve Scam, Alex Newman, New American
  248. The Trillion Dollar Coin, Ellen Hodgson Brown
  249. Trillion Dollar Coins and Alien Invasions, Daniel Sanchez
  250. Ten Reasons The Banksters Got Away With It, Danny Schechter
  251. United States of Denial, James West
  252. QE is Nothing New, Mike Hewitt
  253. Mainstream Fallacies, Frank Shostak
  254. Favorable or Unfavorable, Doug Noland, Prudent Bear
  255. Rollback, Thomas Woods
  256. Ten Reasons The Banksters Got Away With It, Danny Schechter
  257. Rollback, Thomas Woods
  258. Silver and Opium, Antal E. Fekete
  259. Tiger, Gary North
  260. The Fed Obliterates the Savings Ethic, Douglas French
  261. QE is Nothing New, Mike Hewitt
  262. Asset Speculation and Capital Destruction, Jim Willie
  263. Exchange Rates and Macroeconomic Policy
  264. Central Bank Intervention
  265. Financial Instability and the Federal Reserve as a Liquidity Provider, by Frederic S. Mishkin
  266. Ireland's Debt Servitude, Ambrose Evans-Pritchard, UK Telegraph
  267. Can the Fed Become Insolvent?, Robert Murphy
  268. Quantitative Easing Explained, YouTube video
  269. Many Euphemisms for Money Creation, Thorsten Polleit
  270. Blood Starts Flowing on the Streets, Max Keiser interview with Gerald Celente
  271. Privatizing Profits and Socializing Losses, by Nouriel Roubini
  272. Regulatory Debauchery by Satyajit Das
  273. A run on the bank
  274. The Evils of Crony Capitalism, Martin Hutchinson
  275. History Lesson from Lombard Street, Roger Farmer,
  276. Eco Eco Disaster, Keiser Report
  277. Favorable or Unfavorable, Doug Noland, Prudent Bear
  278. The Japanese and American Bubbles: Been There, Done Some of That
  279. Destiny is Demography, Bill Bonner
  280. The Japanese and American Bubbles: Been There, Done Some of That
  281. Monetary Disorder, Doug Noland
  282. Crumbling Pillars, Doug Noland. Quote: "Whether it’s monetary or fiscal policy - at home or abroad – there seems to be confirmation everywhere that policymaking has become largely ineffectual and, increasingly, incapacitated. This is fundamental to my bearish thesis. With each passing market day it seems to take a greater leap of faith to believe that additional monetary and fiscal stimulus will ameliorate a sovereign debt crisis fomented by ultra-loose monetary and fiscal policies. Increasingly, it appears impossible for policies that fomented monetary instability to now somehow engender a return to market stability. Liquidity-challenged global markets are convulsing through a problematic period of de-risking and de-leveraging, and once such a process commences it basically has to run its course. Efforts to intervene in the marketplace, as we’ve been witnessing, are likely to beget only greater uncertainty and instability."
  283. Rigged bank rates
  284. The Fiscal Illusion, Tyler Cowan
  285. Nassim Taleb Interview on Anti-Fragile
  286. Nassim Taleb Interview on Anti-Fragile
  287. Gerald Celente interview with Lew Rockwell: Lew Rockwell: "When do you see social unrest coming to this country?" Gerald Celente: "I see more crime happening in this country, and social unrest at a much lower level. The people in this country don't have what it takes... This is a country of soccer mommies boys. We're prescription drug-addicted and we're junk food fat... Look at the way they dress, look at the way they talk, look how the Nation's become so Snooki-stupid."
  288. The Coincidental Rise of Oil and the Monetary Base, Bill Bonner
  289. California: The Greece of the U.S., Bill Bonner
  290. Zombies Born of Government Spending, Bill Bonner
  291. Pillage Before Bankrupcty, Washington's Blog
  292. TSA and Unproductive Labor, James E. Miller
  293. The term "cancer" is specifically mentioned in Laissez-faire, investment banks and policy makers, Pytheas Market Focus, August 2009
  294. We must call the bluff of the big banks, Jeff Randall
  295. 295.0 295.1 295.2 295.3 Repudiating the National Debt, Murray Rothbard
  296. Max Keiser Interview with Alex Jones
  297. Economic Rape of America
  298. Rigged bank rates
  299. Resident Evil Zombie Banks!
  300. Suicide Bankers, Max Keiser
  301. US flashing Orange
  302. 302.00 302.01 302.02 302.03 302.04 302.05 302.06 302.07 302.08 302.09 302.10 302.11 Fiat's Reprieve: Saving the System, 1979-1987, Robert K. Landis, August 21, 2004.
  303. How to Keep a Damaged Financial and Economic System Afloat?, Bob Chapman
  304. Winning in the Hyperinflation/Deflation War, Deepcaster LLC
  305. Compound Inflation, John Mauldin
  306. Rick Ackerman Defects, Gary North
  307. Impossible to Inflate Out of this Mess, MISH
  308. The Big Inflationist Scare, MISH
  309. Debating the Flat Earth Society About Hyperinflation, MISH
  310. Peter Schiff Was Wrong, MISH
  311. Deflation Threat is Still Alive, EWI
  312. Can We Give The Hyperinflation Thing a Rest?, Mike Whitney
  313. US Dollar Supply and Demand, Jim Willie CB
  314. Deflation or Hyperinflation?, FOFOA
  315. It's all over! Rick Ackerman Concedes!, Max Keiser
  316. Hyperinflation Nonsense, MISH
  317. No Miracle Cures from Inflation, MISH
  318. The Federal Reserve as an engine of deflation, Antal E. Fekete
  319. Falsehoods from Gary North, MISH
  320. Bernanke's Waterloo, Mike Shedlock
  321. Mass Inflation, Yes; Hyperinflation, No, Gary North
  322. Who do You Trust?, James Quinn
  323. Rethinking Alpha and Beta, Paul Amery
  324. The Misbehavior of Markets, Ian Kaplan
  325. What Mises Can Teach the Quants, Daniel James Sanchez
  326. The Next Financial Crisis, Gary North
  327. Where's My Recovery?, Steve Keen
  328. IMF Advisor Says We Face a Worldwide Banking Meltdown, BBC. Quote, Dr Robert Shapiro: "If they (EU governments) cannot address this in a credible way, I believe that in perhaps two to three weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system - we're not just talking about a relatively small Belgian bank - we're talking about the largest banks in the world - the largest banks in Germany, the largest banks in France - that will spread. It will spread to the United Kingdown - in part through sovereign debt problems in Ireland - it will spread everwhere because the global financial system is so inter-connected they are each counter...all those banks are counter-parties to every significant bank in the United States and in Britain and in Japan and around the world! This would be a crisis that would be, in my view, more serious than the crisis in 2008."
  329. The European dream lies in ruins, Janet Daley, UK Telegraph
  330. Greece's Ultimatum, ZeroHedge
  331. Wealth Through Decentralization, Gary North
  332. Rollback, Thomas Woods
  333. Crisis and Leviathan, Robert Higgs
  334. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  335. Meltdown, Tom Woods, Regnery Press ISBN: 9781596985872
  336. The Economics of Legal Tender Laws, Jorg Guido Hulsmann (includes detailed commentary on centralization during crises)
  337. Warwolves of the Iron Cross, Veronica Kuzniar Clark
  338. The European dream lies in ruins, Janet Daley, UK Telegraph
  339. A New World Currency?, Ellen Hodgson Brown
  340. The Economic Abyss, Brandon Smith
  341. World Government, Mike Rozeff
  342. The European dream lies in ruins, Janet Daley, UK Telegraph
  343. Greece's Ultimatum, ZeroHedge
  344. Terms of Enslavement, MISH
  345. Can the IMF help anyone?, MISH
  346. Ireland forced to take IMF bailout package, Telegraph
  347. The U.S. Monetary System and Descent Into Fascism, Dr Edwin Vieir
  348. Global capitalism and 21st cenury fascism, William I. Robinson
  349. Jesse Ventura on the TSA' Sexual Abusers
  350. Population Reduction, Chris Kitze
  351. Collapse
  352. Death of American Freedoms, Naomi Wolf, LRC interview, Dec 14, 2010
  353. New security legislation threats freedoms
  354. Bank Credit Ends in Catastrophe, Richard Daughty, The Mogambo Guru
  355. The Linchpin Lie
  356. Max Keiser
  357. The Global Debt Crisis, Ellen Hodgson Brown
  358. A New World Currency?, Ellen Hodgson Brown
  359. Libya War All About Oil or Gold and Banking?, Ellen Hodgson Brown
  360. Crisis and Leviathan, Robert Higgs
  361. Max Keiser
  362. The Global Debt Crisis, Ellen Hodgson Brown
  363. A New World Currency?, Ellen Hodgson Brown
  364. Libya Ware All About Oil or Gold and Banking?, Ellen Hodgson Brown
  365. Chinese inflation, MISH
  366. Too Late!, Charles Goyette
  367. Who's the Bigger Socialist?, MISH
  368. Food prices and Riots
  369. Population Reduction, Chris Kitze
  370. The Linchpin Lie
  371. Blind Cult of America. Quote: Max Keiser: "Yes, it's beyond religious fervor. That's the point. It's become this echo chamber, cult-like 'America can't fail' which is very endemic when you see suicide cults. Remember Jim Jones. Remember him. The Kool Aid. He made the idea of drinking Kool Aid... he popularized that notion. Everyone committed suicide in Guyana. Or the Hail-Bot Comet Cult. Here you've got 300 million Americans who are worshipping this idea of 'American-style' Free Market Capitalism that doesn't exist. They support market manipulation on Wall Street and they're all gonna die as a result. Now that's less than 5% of the world's population. It is 25% of the world's garbage so the world will breathe a sigh of relief, but, as far as those living inside they don't really understand that they're being used as cult fodder." Stacy Herbert: "The equivalent of drinking the cyanide-laced Kool Aid would be purchasing a McMansion with a sub-prime mortgage. This is them committing suicide. It's the equivalent of drinking cyanide-laced Kool Aid." Max Keiser: "It's financial suicide. As we've talked about. Financialization of the economy has turned into this hybrid reality that combines political malfeasance with financial larceny and that's the combination between Obama's White House and Wall Street merging together into something even more insidious than fascism. It's a Klepto-F*@kingSh*tism. It's a... it's a Klepto-Sh*tism is the current political-financial school of thought in America today and it's not working. It's unsustainable."
  372. Anglo-American Deception, Ron Holland
  373. The "Crime" of Private Money, Robert Murphy
  374. Liberty Dollar,
  375. Gold Clause Cases
  376. America's Trade Debts Lead to a Likely Gold Confiscation
  377. FBI Raids Liberty Dollar
  378. The Solution
  379. US Mint Suspends Gold Coin Sales
  380. Why a Gold Standard Now?
  381. Bank of America an arm of US government policy
  382. Bank Credit Ends in Catastrophe, Richard Daughty, The Mogambo Guru
  383. Bernanke is the domestic terrorist, Sovereign Man
  384. DSK Was Trying to Torpedo the Dollar, Mike Whitney
  385. Gaddafi: Gold for Oil?, RTTV
  386. Welcome Home German Gold, Max Keiser
  387. Fiat Money Inflation in France, Gold Money video featuring Max Keiser, James Turk and Pierre Jovanovic
  388. Dying of Money, Jens O. Parsson
  389. Dying of Money, Jens O. Parsson
  390. 390.0 390.1 390.2 390.3 390.4 390.5 390.6 Revolution in Egypt and Black Swans, Bill Bonner, February 15, 2011.
  391. China Inflation and Gold, Darryl Robert Schoon
  392. Early Speculative Bubbles and Increases in the Money Supply, Doug French, Mises Institute ISBN: 978-1-933550-44-2
  393. Advice to Financial Authorities, Bill Bonner
  394. Bank Credit Ends in Catastrophe, Richard Daughty, The Mogambo Guru
  395. Fiat Money Inflation in France, Andrew Dickson White, Mises Institute
  396. Asset Speculation and Capital Destruction, Jim Willie
  397. The Economic Abyss, Brandon Smith
  398. Argentina: A Case Study, Chris Martenson and FerFAL
  399. The Ethics of Mortgage Loan Default, Greg Lemelson
  400. Widdig, Bernd (2001). Culture and Inflation in Weimar Germany. University of California Press. ISBN 0520222903. Retrieved 2007-12-16.
  401. John Law and the Invention of Modern Finance, Doug French (
  402. The Saga of John Law and Richard Cantillon, Sean Corrigan (
  403. Asset Speculation and Capital Destruction, Jim Willie
  404. The Economic Abyss, Brandon Smith
  405. Inflation is There, Peter Schiff
  406. Empire of Debt
  407. Asset Speculation and Capital Destruction, Jim Willie
  408. The Economic Death Spiral, Gordon T. Long
  409. Keynesian Endgame, ZeroHedge
  410. Keynesian Endpoint, Wikipedia definition
  411. U.S. Debt Saturation and Money Illusion, Gordon T. Long
  412. Gotterdammerung, Antal E. Fekete
  413. Gotterdammerung, Antal E. Fekete
  414. When Debt Levels Turn Cancerous, Ambrose Evans-Pritchard
  415. Inflation is There, Peter Schiff
  416. The Con of the Decade, ZeroHedge
  417. Asset Speculation and Capital Destruction, Jim Willie
  418. Inflation is There, Peter Schiff
  419. Deflationists Blind to Inflationary Storm, Jim Willie
  420. Compounding Debt
  421. Permanent Gold Backwardation: Why a "Crack Up Boom" Is Inevitable, Keith Weiner
  422. $400 Ounce Silver, $8000 Ounce Gold, James Turk
  423. Inflation is There, Peter Schiff
  424. Asset Speculation and Capital Destruction, Jim Willie
  425. Fed dictator Bernanke needs to be toppled, Paul B. Farrell
  426. January 27, 2011 – Financial Times (Javier Blas and Chris Giles): “Governments across the developing world are stockpiling food staples in an attempt to contain panic buying, inflation and social unrest. But the hoarding is driving agricultural commodity prices even higher. The cost of wheat, the world’s most important staple, reached a fresh two-and-a-half-year high on Thursday, after countries from Algeria to Saudi Arabia announced extraordinary purchases. High food prices have been a contributing factor to the recent wave of social unrest across North Africa and the Middle East. In Algeria earlier this month, young rioters chanted ‘Bring us sugar!’ The cost of the sweetener in the wholesale market is at its highest in 30 years. Earlier this week, Algeria bought 800,000 tonnes of wheat – much more than usual – and Saudi Arabia announced plans to double the size of its wheat stockpile. Bangladesh and Indonesia joined the rush on Thursday, placing extraordinary on rice orders.”
  427. 2010 Portugal Sugar Crisis
  428. Banks and investors are starving the Third World, Ellen Hodgson Brown
  429. Food Shortage Series,Kellene Bishop
  430. World hungers for more food, Sydney Morning Herald,
  431. Pleas for rate cut as interbank loans dive
  432. S&P Rating on US Sovereign Debt not Low Enough, Peter Schiff
  433. Global bond rout, Ambrose Evans-Pritchard, UK Telegraph
  434. When Will The U.S. Become Greece?, Michael Hutchinson
  435. Doubling Down, ZeroHedge
  436. Jim Grant on Inflation, ZeroHedge
  437. Inflation is There, Peter Schiff
  438. A Golden Tipping Point, ZeroHedge
  439. Inflation is There, Peter Schiff
  440. Asset Speculation and Capital Destruction, Jim Willie
  441. Price of Farmland NYTimes
  442. Why QE has NOT brought back inflation, EWI
  443. Asset Speculation and Capital Destruction, Jim Willie
  444. Hedge Funds, Financial Intermediation and Systemic Risk
  445. Collapse
  446. US Accelerating Inflation Mega-Trend, Nadeem Walayat
  447. When Money Dies, Adam Fergusson
  448. When Money Dies, Adam Fergusson
  449. Culture and Inflation in Weimar Germany, Bernd Widdig
  450. London Banker explains how to order cocaine from London restaurant
  451. Inside the Underground Economy
  452. Banksters Running Scared
  453. Greek protests
  454. "Who the Hell do you think you people are?", Nigel Farage, UKIP leader
  455. Asset Speculation and Capital Destruction, Jim Willie
  456. We are all Tunisians, Yvonne Ridley
  457. Tunisia missing 1.5 tonnes of gold, Herald Sun
  458. Mubarak's final hours, Associated Press
  459. Mubarak's Rush to Hide Billions, SMH
  460. How the Fed triggered the Arab Spring uprisings, Andrew Lilico
  461. Blood on Bernanke's Hands, MISH
  462. Marc Faber calls Mr Bernanke a Murderer of the Middle Class, King World News
  463. Max Keiser - Bernanke is a Murderer
  464. Lessons from Egypt, Charles Kadlec
  465. Fed dictator Bernanke needs to be toppled, Paul B. Farrell
  466. QE2 Fuels a Global Fury, Mark Thornton
  467. Is Bernanke To Blame?, Tyler Durden, ZeroHedge
  468. Ben Bernanke Denies US Policy Behind Food Price Inflation, UK Telegraph, 3 February 2011
  469. Chuckie Evans Goes Full QEtard
  470. Max Keiser - Bernanke is a Murderer
  471. Blood on Bernanke's Hands, MISH
  472. Lessons from Egypt, Charles Kadlec
  473. Fed dictator Bernanke needs to be toppled, Paul B. Farrell
  474. Is Bernanke To Blame?, Tyler Durden, ZeroHedge
  475. QE2 Unmitigated Failure, James Quinn
  476. The Great Misdiagnosis, Jim Willie CB
  477. A New Era of Food Revolutions, Ambrose Evans-Pritchard
  478. Collapse
  479. China Buys European Gold, Jim Willie
  480. Fort Knox Gold, Robert Wenzel
  481. China Buys European Gold, Jim Willie
  482. Welcome Home German Gold, Max Keiser
  483. What if the Fed is Short Germany's Gold?
  484. The Disappearing Gold
  485. Bust Looms, Markus Bergstrom
  486. Bloodstained Property Map, MISH
  487. China increases bank reserves to curb inflation, Bloomberg
  488. Lex's John Authers and Richard Stovin-Bradford discuss how to regulate banks better and how to handle those that are just too big to fail
  489. Is Greece the Future of America?, Mike Rozeff
  490. Financial Slaughterhouse, Ashvin_Pandurangi
  491. The Big QE2 Shakedown, Mike Whitney
  492. Simon Johnson INET
  493. Too Little Too Late, UK Guardian, 14 Sept 2010
  494. Fed Reckoning Day Realities for Investor Pains and Gains, Deepcaster LLC
  495. Fake It Till You Make It
  496. Interview with Iceland's President Olafur Ragnar Grimson
  497. Iceland Shows Other Europeans How to Survive Bankruptcy, Reason
  498. There Is Life After Default, Peter Klein
  499. Endgame, Zeus Yiamouyiannis, Ph.D.
  500. Default Best Option for Ireland, MISH
  501. Defaulting on the Fed's Bonds, Robert Murphy
  502. Do We Really 'Owe It to Ourselves
  503. We Only Repudiate It to Ourselves
  504. Icelanders hit back at Brown
  505. Greek Default
  506. Trichet Goes Ballistic, MISH
  507. Trichet Goes Ballistic, MISH
  508. Interview with Iceland's President Olafur Ragnar Grimson
  509. Iceland Bounces Back
  510. When Irish Eyes Are Crying, Michael Lewis
  511. When Irish Eyes Are Crying, Michael Lewis
  512. Are the Federal Reserve and Its Primary Dealer Banks Manipulating the Stockmarket?
  513. Market Manipulation
  514. Citigroup looks to lend money
  515. A Wikileaks for the Fed?
  516. The Era of Global Financial Instability, by Mike Whitney
  517. A Wikileaks for the Fed?
  518. Interview with Iceland's President Olafur Ragnar Grimson
  519. 4 Reasons the US Will Never Return to a Gold or Silver Standard
  520. The Great Gold Bait-And-Switch Jeff Nielson
  521. Buyers of Gold, Gary North
  522. 10 Things That Would Be Different. Note: "uncompensated" in this context means "without allowing widespread debt default with minimal punishment" or "without the issuance of debt-free money to the general populace prior to a return to the gold standard"
  523. The History of Money
  524. Gold, Silver and Pension Funds
  525. Misesians in Mordor
  526. European banks saving Greece or themselves?
  527. Hans Hermann Hoppe on why limited government is impossible
  528. James Wilson on the purpose of government, James Galles
  529. One World Government, Hans Hermann Hoppe
  530. Matt Tiabbi Interview on UBS Scandal
  531. One World Government, Hans Hermann Hoppe
  532. Matt Tiabbi Interview on UBS Scandal
  533. Vote for Whoever You Want, MISH
  534. Stop Clinging to False Hope, Anthony Wile
  535. United States of Denial, James West
  536. Armageddon Can Wait, Bill Bonner
  537. Deal May Avert Default, but Some Ask 'Is That Good?'
  538. Boomergeddon, James A. Bacon Jr
  539. Matt Tiabbi Interview on UBS Scandal
  540. Vote for Whoever You Want, MISH
  541. Sayonara, Washington, Martin Hutchinson
  542. Matt Tiabbi Interview on UBS Scandal
  543. Global Economy Burns, While Its Leaders Fiddle, Nomi Prins, ZeroHedge
  544. Banks given go-ahead to pay unlimited bonuses, Guardian UK
  545. Bank Cheats Will Always Prosper,
  546. The Expanding Industry of US Government, Bill Bonner
  547. Who are the real "crazies"?, Glenn Greenwald,
  548. Extremism is the New Race Card, Tom Mullens
  549. Global slump warning if US triggers 'insane' default, Ambrose Evans-Pritchard
  550. OTC Derivatives, Jim Sinclair
  551. Alex Jones on Bohemian Grove, RTTV
  552. Alfred Hitchcock' 'The Bankers', James Makintosh,
  553. Banking and the State
  554. Joe Biden compares the Tea Party to terrorists, Nile Gardiner, UK Telegraph
  555. Confessions of an Economic Hit-Man, John Perkins
  556. Anger as JP Morgan bankers get $10bn pay and bonus pot
  557. Barclays investment bankers see average pay rise to £236,000
  558. Goldman Sachs CEO's pay nearly doubles despite slump in profits
  559. Anger as JP Morgan bankers get $10bn pay and bonus pot
  560. Debt Burden Being Transferred, Jim Sinclair
  561. EU Ministers Said To Plan Meeting Over Ireland, Jim Sinclair
  562. There is no practical solution, Jim Sinclair
  563. Jim Sinclair Interviewed by James Turk Quote: "Who needs enemies when we have the financial leadership we have?"
  564. The System Has Failed, Jim Sinclair
  565. Savers vs Speculators Quote: Max Keiser: "Munich Re, a financial terrorist responsible for creating ghettos. Financially disadvantaged folks who are on the short end of the 'ghettoization' of the financial terrorist schemes...are forced to wear yellow armbands and be sex slaves for their German hosts." Stacy Herbert: "Yes. And be stamped on their arms afterward to prove that they were used." Max Keiser: "Yes. Let's not forget the little serial code-stamp on the wrist as part of the package." Stacy Herbert: "But Max, the story here is that this goes from the very bottom. These are just agents going door-to-door selling insurance products in the financial services industry. The top of the pyramid of the banking Establishment is Dominique Strauss-Kahn." Max Keiser: "This is a culture. Dominique Stauss-Kahn is part of the banking culture. There's Dominique Strauss-Kahn, Lloyd Blankfein, Jamie Dimon, this guy Pandit over at Citigroup, the CEO just paid himself $42 million for stealing $420 million - they have a culture of predator behavior where once you - like a serial killer - once you steal money from people with mortgage fraud or with banking fees that are illegitimate or with collateralized debt obligations you get a taste for serial financial killing. You graduate to these higher crimes and you become a Dominique Strauss-Kahn or a Lloyd Blankfein or a Jamie Dimon where serial financial murder is part of your day-to-day life. That's the culture you live in."
  566. Nothing Stops Banks, Matt Taibbi
  567. Battered Homeowner Syndrome, Doug French. Quote: 'Lenore Walker is the pioneer in the field of battered-spouse syndrome, with her book The Battered Woman. She believes that experiencing the repeated cycles of violence can result in a spouse developing "learned helplessness," a psychological state identified by psychologist Martin Seligman. The abused believe they lack control over their situation and are convinced escape is impossible. Their motivation to escape diminishes as they become increasingly passive. Walker explains that the constant cycles of violence and reconciliation result in the following beliefs: The abused believes that the violence was his or her fault, has an inability to place the responsibility for violence elsewhere, fears for his/her life and/or the lives of his/her children, and has an irrational belief that the abuser is omnipresent and omniscient. These beliefs are strikingly similar to what underwater homeowners feel. The abused believes that the violence was his or her fault. "It was my own fault for buying a house at the top of the market in the first place and borrowing too much money to do it." "I made my bed, now I must sleep in it, no matter how much financial pain it causes me." The abused has an inability to place the responsibility for violence elsewhere. "It's nobody's fault but my own," say people with 20/20 hindsight. "Nobody made me sign the mortgage. I'm so stupid. The bank doesn't have to negotiate with me." The abused fears for his/her life and/or the lives of his/her children. "My credit will be ruined. I won't be able to rent an apartment. My low credit score may keep me from getting a job. I don't want to uproot the kids and have to admit that daddy and mommy made a financial mistake." The abused has an irrational belief that the abuser is omnipresent and omniscient. The abuser in this case is the lender or owner of the mortgage. The borrower fears that these lenders can take everything they have, leave them with nothing, and make their lives miserable forever. At the same time, default moralizers reinforce these feelings. They have no sympathy for those making a poor housing and mortgage choice. A person must suffer the consequences of their actions, it's claimed.'
  568. Max Keiser Interview with John Perkins
  569. More Political Capture, ZeroHedge
  570. Dimitry Orlov Interview with Max Keiser - Reinventing Collapse
  571. What's Behind the Currency War, Anthony Mueller
  572. 20 Signs, ZeroHedge
  573. US Agriculture Collapse
  574. Population Reduction, Chris Kitze
  575. Getting the Jump on Food Shortages, Marilyn Ackerman
  576. Venetian Bankers and the Dark Ages
  577. The Road, Ben O'Neill
  578. Mike Maloney interview with Max Keiser, The Keiser Report
  579. US Dollar About to Lose Reserve Currency Status: Fact or Fiction?, MISH
  580. Max Keiser on Alex Jones
  581. Mike Maloney interview with Max Keiser, The Keiser Report
  582. Peak Everything?, MISH
  583. NSSM 200 Directive, Henry A. Kissinger, April 24, 1974
  584. Eco Eco Disaster, Keiser Report
  585. Taste of Freedom E126, Max Keiser, Keiser Report
  586. Daniel Hannan Oxford Speech
  587. All Is Well, Jim Quinn
  588. Banking and the State
  589. Why We Are Bailing Out the Banks, Jesse
  590. How America bailed out the banks rather than its citizens The Economist
  591. Fractional Reserve Banking, Murray Rothbard
  592. How the US is quickly becoming a Third World Country, Seeking Alpha
  593. 10 Signs the US is becoming a Third World Country
  594. Peter Schiff Rips Paul Krugman on Economy
  595. Daniel Hannan Oxford speech
  596. Models of Capitalism, Michael Hutchinson
  597. The Real Solution to the Debt Problem, David D'Amato
  598. Legalize Currency Competition, Ron Paul
  599. Subcommittee Explores Sound Money
  600. The Real Solution to the Debt Problem, David D'Amato
  601. Counterfeit Gold Standards, Gary North
  602. Accidentally Conceived in 1971, Arthur M.M. Krolman
  603. Why Monetary Expansion Must Stop, Patrick Barron
  604. Silver and Opium, Antal E. Fekete
  605. The Faults of FRB, Thorsten Polleit
  606. Mike Maloney Interview with Max Keiser
  607. Ron Paul Upping the Ante
  608. The Real Solution to the Debt Problem, David D'Amato
  609. Silver, Gold and the Last American Hero JFK, Darryl Robert Schoon. Extracted quote from Ron Paul: "The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy." Note: Another argument – that the power to "coin" money precludes issuance of paper money, and that the government must redeem paper money with "precious metal" – was dismissed as frivolous in Milam v. United States, citing the Legal Tender Cases.
  610. End the Fed, Freedom Watch
  611. Money: Sound and Unsound, Mark Thornton commentary on Joseph Salerno's book
  612. Gold Standard Renaissance?
  613. The Gold Standard Never Dies, Lew Rockwell
  614. Gold Standard, Michael Hutchinson
  615. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  616. Goldseek interview with G. Edward Griffin
  617. See also these Murray Rothbard articles: What Has Government Done to Our Money?, The Case for the 100% Gold Dollar; The Fed as Cartel, Private Coinage, Repudiate the National Debt; Taking Money Back, Anatomy of the Bank Run, Money and the Individual
  618. The Real Solution to the Debt Problem, David D'Amato
  619. Money: Sound and Unsound, Mark Thornton commentary on Joseph Salerno's book
  620. Money, Bank Credit and Economic Cycles, Jesus Huerta de Soto, Mises Institute ISBN: 978-1-933550-39-8
  621. Murray Rothbard, The Mystery of Banking
  622. Life With The Fed, Thomas Woods
  623. The Need for 100% Reserves, Frank D. Graham
  624. Money: Sound and Unsound, Mark Thornton commentary on Joseph Salerno's book
  625. Murray Rothbard, The Mystery of Banking
  626. Want to Ruin Your Country?
  627. For A New Liberty, Murray Rothbard
  628. The Fix is In, Peter Schiff
  629. The Fix is In, Peter Schiff
  630. For A New Liberty, Murray Rothbard
  631. Peter Schiff Interview with Max Keiser
  632. Getting Used to Life without Food, F. William Engdahl
  633. Federal Debt As Criminal Scam, Charles Hugh Smith
  634. The Never-Ending Economic Depression, Washington Blog
  635. Antal Fekete's Letter to Ron Paul
  636. Max Keiser Interview with Alex Jones
  637. Federal Debt As Criminal Scam, Charles Hugh Smith
  638. Roubini Confused, Justin Ptak
  639. The Ethics of Liberty, Murray Rothbard
  640. Max Keiser Interview with Alex Jones
  641. Bob Chapman Silver Predictions
  642. Want JP Morgan to crash? Buy silver, Max Keiser
  643. Fractional Reserve Free Banking: Some Quibbles, Philip Bagus and David Howden
  644. 644.0 644.1 644.2 John P. Cochran. Free Banking, Mises Daily, review of Free Banking: Theory, History, and a Laissez-Faire Model by Larry Sechrest
  645. Free Market Money System by F.A. Hayek
  646. Citizen Sues Atlanta Fed, ZeroHedge
  647. Fractional Reserve Free Banking: Some Quibbles, Philip Bagus and David Howden
  648. See for example these Murray Rothbard articles: What Has Government Done to Our Money?, The Case for the 100% Gold Dollar; The Fed as Cartel, Private Coinage, Repudiate the National Debt; Taking Money Back, Anatomy of the Bank Run, Money and the Individual
  649. The Mystery of Banking, Murray Rothbard
  650. The Case for a 100% Gold Dollar, Murray Rothbard
  651. Money, Bank Credit, and Economic Cycles, Jesus Huerta de Soto, First English edition (2006), pp. 98-114
  652. The Economics of Legal Tender Laws, and Jorg Guido Hulsmann (includes detailed commentary on central banking, inflation and FRB)
  653. Free Banking and the Free Bankers, Jörg Guido Hülsmann, Quarterly Journal of Austrian Economics (Vol. 9, No. 1)
  654. Interview with Jörg Guido Hülsmann, The Lew Rockwell Show
  655. Fractional Reserve Free Banking: Some Quibbles, Philip Bagus and David Howden
  656. The Faults of Fractional-Reserve Banking, Thorsten Polleit
  657. The Radical Reform in Banking, Toby Baxendale, Daily Telegraph, 15 Sept 2010
  658. Modern Monetary Theory and Austrian Economics, John Carney
  659. The Upside-Down World of MMT, Robert Murphy
  660. Sean Corrigan Crucifies MMT,
  661. Bill Still on gold reserves
  662. A Breakthrough Speech on Monetary Policy, Anatole Kaletsky
  663. Be Ready To Mint That Coin, Paul Krugman
  664. Honest Money
  665. A Short History of Paper Money in the United States, William M. Gouge, Mises Institute
  666. Trillion Dollar Coin Killed By Fed
  667. The Trillion Dollar Coin, Ellen Hodgson Brown
  668. Global Money Supply Ratios
  669. Weimar Hyperinflation, Ellen Hodgson Brown
  670. Obama’s Trillion-Dollar Coin Exposes Federal Reserve Scam, Alex Newman, New American
  671. The Trillion Dollar Coin, Ellen Hodgson Brown
  672. Fatally Flawed End the Fed Proposal, MISH
  673. Restoring Economic Sovereignty, Ellen Hodgson Brown
  674. Time for a New Theory of Money
  675. Exponential Growth, MISH
  676. Foreclosuregate could force bank nationalization
  677. Austerity Fails in Europe, Ellen Hodgson Brown
  678. Why Aren't Banks Lending, Ellen Hodgson Brown
  679. QE2 and the Looming Threat of a Crippling Debt Service
  680. QE2 and Hyperinflation, Ellen Hodgson Brown
  681. Obama’s Trillion-Dollar Coin Exposes Federal Reserve Scam, Alex Newman, New American
  682. AMI website, calling on full-reserve banking
  683. Criticism of Ellen Hodgson Brown
  684. Ellen Betrays, Gary North
  685. Nazi Germany, Bill Bonner
  686. Gary North. "Economic Error #15: Congress Can Safely Be Trusted to Manage the Money System Without Any Price Inflation.". Referenced 2011-02-24.
  687. More Efficient Ways to Stimulate Economy, Ellen Hodgson Brown
  688. Kucinich's End the Fed campaign fatally flawed, Mike Shedlock.
  689. Doug Casey Interview with Peter Schiff
  690. More Efficient Ways to Stimulate Economy, Ellen Hodgson Brown
  691. Peter Schiff Rips Paul Krugman
  692. The Flipside of the Trillion Dollar Coin
  693. The Flipside of the Trillion Dollar Coin
  694. The Flipside of the Trillion Dollar Coin
  695. Interview with Iceland's President Olafur Ragnar Grimson
  696. Why Iceland President Left-Wing Critique is Right, Reason
  697. Steve Keen interview with Max Keiser
  698. How a Bankrupt Germany Solved its Economic Problems, Ellen Hodgson Brown
  699. Gary North. "Historical Error #27: Hitler's National Socialist Economic Policies Ended the Great Depression in Germany.", GaryNorth.Com. Referenced 2011-02-24.
  700. Roving Cavaliers of Credit, Steve Keen, with commentary from Yves Smith at Naked Capitalism
  701. Rigged Market Capitalism
  702. Note To Fed
  703. Rigged bank rates
  704. Too Big To Jail
  705. Gangser Bankers: Too Big to Jail, Matt Taibbi. Extract: 'At HSBC, the bank did more than avert its eyes to a few shady transactions. It repeatedly defied government orders as it made a conscious, years-long effort to completely stop discriminating between illegitimate and legitimate money. And when it somehow talked the U.S. government into crafting a settlement over these offenses with the lunatic aim of preserving the bank's license, it succeeded, finally, in making crime mainstream. UBS, meanwhile, was a similarly elemental case, in which the offenses­ didn't just violate the letter of the law – they threatened the integrity of the competitive system. If you're going to let hundreds of boozed-up bankers spend every morning sending goofball e-mails to each other, giving each other super­hero nicknames while they rigged the cost of money (spelling-challenged UBS traders dubbed themselves, among other things, "captain caos," the "three muscateers" and "Superman"), you might as well give up on capitalism entirely and just declare the 16 biggest banks in the world the International Bureau of Prices. Thus, in the space of just a few weeks, regulators in Britain and America teamed up to declare near-total surrender to both crime and monopoly. This was more than a couple of cases of letting rich guys walk. These were major policy decisions that will reverberate for the next generation. Even worse than the actual settlements was the explanation Breuer offered for them. "In the world today of large institutions, where much of the financial world is based on confidence," he said, "a right resolution is to ensure that counter-parties don't flee an institution, that jobs are not lost, that there's not some world economic event that's disproportionate to the resolution we want." In other words, Breuer is saying the banks have us by the balls, that the social cost of putting their executives in jail might end up being larger than the cost of letting them get away with, well, anything. This is bullshit, and exactly the opposite of the truth, but it's what our current government believes. From JonBenet to O.J. to Robert Blake, Americans have long understood that the rich get good lawyers and get off, while the poor suck eggs and do time. But this is something different. This is the government admitting to being afraid to prosecute the very powerful – something it never did even in the heydays of Al Capone or Pablo Escobar, something it didn't do even with Richard Nixon. And when you admit that some people are too important to prosecute, it's just a few short steps to the obvious corollary – that everybody else is unimportant enough to jail. An arrestable class and an unarrestable class. We always suspected it, now it's admitted.'
  706. Rigged bank rates
  707. Rigged bank rates
  708. Fed's blueprint for market manipulation
  709. The Fed Unspun
  710. Bernanke's Balance Sheet Ensures Disaster, Michael Pento
  711. Interview with Iceland's President Olafur Ragnar Grimson
  712. All Is Well, Jim Quinn
  713. Rigged bank rates
  714. Two Sides of the Same Debased Coin, Hunter Lewis
  715. Shock Year 2013
  716. US Economy Detached From Reality
  717. All Is Well, Jim Quinn
  718. All Is Well, Jim Quinn
  719. Western Civilization and the Economic Crisis
  720. Max Keiser on the UK Economy
  721. Two Sides of the Same Debased Coin, Hunter Lewis
  722. Rigged bank rates
  723. Legalize Currency Competition, Ron Paul
  724. The Evils of Crony Capitalism, Martin Hutchinson
  725. Ireland's Debt Servitude, Ambrose Evans-Pritchard, UK Telegraph
  726. Natural Resources Being Exhausted
  727. All Is Well, Jim Quinn
  728. Obama’s Trillion-Dollar Coin Exposes Federal Reserve Scam, Alex Newman, New American
  729. The Ethics of Money Production, Jorg Guido Hulsmann
  730. Stacy Herbert and Max Keiser: Flaming Banks Max Keiser Quote: "Well, it's slavery. You know, they had slavery, then they outlawed slavery but in its place were the Jim Crow laws: 'Coloreds Only. Whites Only.' Then the banks got involved and they have financial Jim Crow laws. If you're black and living in the ghetto, you are charged 40, 50, 60% to borrow money. If you're white and you work on Wall Street, you're charged negative 5% to borrow money. That's a financial Jim Crow law that goes down color lines. Now the big corporations who realize America's becoming a new plantation of slaves - they're saying, 'Forget it! We don't even make a pretense that there's a "middle class". Here's a product for those living on the plantation. And here's the product for the man livin' in the Big House!'"

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