The governance of money

The idiotic ideological battle in Washington over the debt ceiling was yet more evidence of the failure of governance in Western economies, which is the real crisis. Then, after the stock market carnage of last week, the attention was focussed, reasonably enough, on government’s MANAGEMENT skills — how good they are at being efficient bureaucrats pulling levers in the financial system and in keeping debt levels under control.

But this crisis goes much deeper than that. In a sense the Tea Partiers are right. This is a POLITICAL battle over the state’s right to be a state.

That was the lesson from last week’s debacle in the US Congress. It was argued that if no deal could be struck, then the ratings agencies will reduce the US government’s AAA rating. This then happened, with Standard & Poor’s downgrading America’s debt to AA+.

Who exactly are these ratings agencies? Oh, those corrupted, easily deluded companies who are to sane analysis what a croupier at a roulette table is to an insurance policy. They showed in the lead up to the GFC that they go to the highest bidder and that they have little or no credibility. Suddenly these private companies have authority over the US government? And then let’s look at what happens to demand for US dollars if there is a downgrading. Nothing. The $1-2 trillion that they are arguing about is about six hours trading in the greenback. The US dollar is the world’s reserve currency and will be for some time.

So what is really going on? In one sense, it is just nostalgia for a time when America was stronger. It reminded me a little of the Hitchiker’s Guide To The Galaxy where the world is about to be destroyed by Vogons, an alien race. Arthur Dent asks an informed alien, Ford Prefect, what he should do. He is advised that he could put a paper bag on his head and sit in a corner of the pub. “Will that help?” the terrified Dent asks. “No, but you might feel better,” Ford Prefect cheerily responds.

And that is what the Tea Party morons were and are doing. Putting a paper bag on their head to make themselves feel better. While loudly reading the Constitution of the USA, one supposes.

They are nevertheless a symptom of a much deeper, long term issue — the replacement of the nation state with the market state, as historian and professor of law Phillip Bobbitt describes it. The issue is not about big government or small government, although they are certainly issues in a country that is rapidly losing its middle class. The problem is whither government itself? So successful has been the attack of the libertarian market worshippers, there is no government worthy of the name in the Western post-industrial financial system.

Alan Greenspan egged on his Wall Street cronies then scratched his head in wonderment when they turned out to be greedy and rapacious. Obama ducked the real issue, letting the banksters off the hook. Ben Bernanke was so preoccupied trying to fix up the mess, he has been, well, preoccupied trying to fix up the mess. There has been no real leadership about what the system should look like and what is government’s role in it. Yet these fundamental questions must be answered because those who believe markets should rule do not think governments have any role at all (other than to bail them out when the markets fail). They operate under the Ayn Rand delusion that people who make money are the true creators, the Atlases who impel the world, while everyone else is just an evil taker, sucking from the system.

This is nonsense. Not only does government have to set the rules that determine the frameworks of markets, in the case of the monetary system, which consists of rules, they are, by necessity, the only final point of reference (literally where the buck stops). Ratings agencies cannot be that, they are just another private player and an easily corrupted one at that.

So to try to remove government from the financial markets, as the market worshipers wish to do, is to set out to destroy the system itself (something the GFC almost achieved). When people are allowed to invent the rules of money themselves, make money from their invention of new forms of money that exploit the rules of the system, self organisation may work for a while — the competing self interests will for a time balance out — but eventually it will just collapse, as we saw in 2008. Making up new rules of money can be infinite, wealth creation cannot. It must have limits. Hence the necessity of the state’s role.

Now the same kind of bomb is being allowed to build up with high frequency trading in the stock markets, futures markets and foreign exchange markets. Nothing has been learned by governments about the real causes of the GFC. And have derivatives been brought under control? Nope, they have increased in volume.

So, as the high tech Vogons descend and start preparing to destroy the Earth, the Tea Partiers and others are entirely justified, I suppose, in putting paper bags on their head and sitting in the corner.

But here’s an idea. How about some Government? Why not tax these lunatics in the derivatives and HFT markets? It doesn’t have to be a big tax, in fact it can be extremely small. But as soon as there is any tax, the speculation will disappear, because it is all based on highly leveraged marginal activity. Sure, the global character of the capital markets makes it difficult for national governments to have adequate jurisdiction, but they can always act together. Leadership is achievable, if extremely rare. The financial world, and the real world, would become a much safer place.

If that is not possible, as it is surely not, then we can at least have a debate about what is the role of the state in these globalised capital markets. There has been plenty of time to digest the lesson of George Soros, when in 1992 he broke the Bank of England. The question is not about MANAGEMENT, it is POLITICS. Not least because the world’s second largest economy, China, is communist and there are plenty of despots still running countries around the world. Important questions need to be posed about how a democratic market state should operate in the post-industrial world. So far, the silence is deafening.

Comments

  1. Another godd thinking piece SON,
    +1 on the need for strong leadership
    +1 to enforce a basic set of fair rules

    In a democracy I belive in equal oppertunity. A good measure of this is social mobility. However I do not believe every one is equal.

    I no longer see these principles working in financial markets nor for that matter ins Australia or the US

  2. ““Will that help?” the terrified Dent asks. “No, but you might feel better,” Ford Prefect cheerily responds.” I loved the bit where Arthur had to drink six pints of beer and have peanuts I think, before they Hitchhiked on to the Vogon ship.

    I agree with you, but I also think the US can’t go on as they are. How many more years will it be before they can’t possibly pay back the debt. Even now it does not look like they can inflate the debt away. I’m not sure what Shadow Stats came up with on the NFP, but I’ll bet it’s worse. Without the luxury of the reserve currency they’d be on life support IMO.

    Next week is going to be a cracker on the markets.

  3. Excellent analysis. Also an interesting possible solution – put a bit of grit in the oyster, we might end up with a pearl.

  4. SoN – this Prudent Bear post as it is in the territory of your article. I thought of just copying the whole piece here – but would take too much space. Well worth the read I would suggest.

    Destabilizing Speculation:

    “Thinkers” of things economic have for a long time debated the role profit-seeking speculators play in the marketplace. Milton Friedman famously contended that there really wasn’t such a thing as “destabilizing speculation.” On the contrary, he and others viewed speculators as a positive force in the markets – whose “buy low and sell high” profit motive tended to exert a stabilizing force. Today, European policymakers believe they are under attack from speculators determined to bring down their debt markets and currency regime. At this point, I doubt there’s too many that would downplay the integral role speculation plays in our dangerously unstable global markets.

    But let’s give the “no destabilizing speculation” thesis its due. Actually, in largely contained and self-regulating Credit systems, speculation may indeed provide a stabilizing force. Think in terms of a gold standard where an economic system is demonstrating lending and spending excesses – along with attendant current account deficits. If the marketplace appreciates that an outflow of gold would pressure interest rates higher thus imposing system restraint, speculators will be incentivized to place their bets accordingly (short bonds, for example). Their activity will work to assist the system’s self-adjustment process.

    Or, let’s ponder a Credit system restrained not by a gold backing but instead through principled and disciplined policymaking. Here, policy doctrine has credibility in the marketplace. In the event that excess begins to emerge, market participants will factor in the inevitability of a policy response. If the marketplace knows that lending, asset price inflation and a deteriorating current account position will elicit monetary tightening, then speculators will position for such a tightening as the signs of excess begin to emerge. If, on the other hand, signs of lending restraint, economic weakness and risk aversion surface, speculative bets on imminent “easing” (i.e. long stocks and bonds) would similarly work to support the system’s self-adjustment process. In short, if the markets appreciate that there are reliable mechanisms to counter the emergence of overly loose or overly tight financial conditions, then speculators in reality would be expected to place their bets in a manner that would generally be in concert with system stabilization (others would use the word “equilibrium”).

    Alan Greenspan was a major proponent of the hedge fund community. He repeatedly asserted that the burgeoning leveraged speculating community was a positive force, enhancing the efficiency of the free market process and generally improving marketplace liquidity and the allocation of precious savings. The 1994 bond market rout and 1998 LTCM fiasco should have – but did not – dissuade this view.

    Over the years, the “leveraged speculating community” became a critical factor for monetary policy. I have referred to “the most powerful monetary transmission mechanism in the history of central banking.” And I do believe that the Greenspan/Bernanke Fed has been quite cognizant of the role of leveraged speculation. Through pegging short-term borrowing costs and clearly telegraphing how policy would respond to heightened systemic stress, the Fed was instrumental in the incredible growth in global leveraged speculation. And with a brief statement or a little 25 bps rate reduction, the Fed had attained the power to immediately incite risk-taking, leveraging, higher asset prices and, accordingly, loosened financial conditions (not your granddad’s monetary mechanism). The interplay between central bankers and the leveraged speculators (hedge funds, proprietary trading desks, etc.) has been instrumental to the expansive global Credit Bubble.

    Central to my analytical framework has been the thesis that the current extraordinary global Credit backdrop is unique historically. For the first time, global finance operates with no limits to either the quantity or quality of new credit creation. There is no gold standard; no Bretton Woods currency management regime; nor even an ad hoc dollar-reserve system to anchor Credit expansion.

    Unconstrained finance is nirvana for speculation. Importantly, boundless Credit completely abrogates a system’s capacity to self-adjust. As we saw with the Bubble in mortgage (and Greek, Portuguese, Irish, Spanish, Italian…) Credit and now with Treasury debt, an enormous jump in the demand for Credit can be easily accommodated in the marketplace at even declining interest rates. Why? Because unrestrained finance allows the supply of Credit to easily inflate to match heightened demand – with the cost of finance (the interest rate) determined much more by monetary policy than through a functioning market pricing (supply vs. demand) mechanism. In a variant of the old “Say’s Law,” contemporary finance enjoys the extraordinary capacity for the demand of Credit to create its own (highly elastic) supply – at a price chiefly determined by central bankers.

    Importantly, unrestrained finance creates a backdrop where speculation will tend towards being destabilizing. Credit excess begets Credit excess. System Credit growth supports higher asset prices and stronger economic activity, which then promote additional Credit excess. Credit expansion will entice speculation on higher asset prices that, especially in a world of unrestrained finance, promotes additional trend-reinforcing Credit and speculative excess. Instead of speculation working alongside the system’s self-adjustment process, it decisively exacerbates the system’s proclivity for runaway excess. And if “activist” policymaking works to ensure that excesses are not allowed to be wrung out the system – well, you’ve fomented a very serious “destabilizing speculation” problem.”

    And there is a whole lot more.

    Scroll down to Destablising Speculation:
    http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10560

  5. The Fascist military never defaulted when in Charge of Argentina and Greece. The economic Acheivements of the Nazis in Germany were quite remarkable in the 30s. Yet bar Germany, most Southern European societies have been pushed to the brink of economic collapse and not been served well by democracy.

  6. I completely disagee with this as well. It seems MB is increasingly becoming more and more about regulation to solve the worlds problems. Regulation doesn’t do it – its too specific and the system is too dynamic. It manages to find its way around regulation and regulation doesn’t normally catch up in time.

    Instead of more government who I will remind everyone bailed out the banks and let a private debt crisis become a public one, who set up central banks to lower interest rates when credit is hard to come by (instead of the usual market behaviour to raise them thus tempering the boom).

    I think government has been the only real reason why the debt pile was able to grow so large. The market system doesn’t exist in reality – it only exists when it is rigged for banks profits. A real market system without government would of punished the large debt takers a long time ago and provided some fear to people that – saving is a good thing, borrowing 100% for a house is a bad thing, the government won’t save you by buying mortgage debt and taking on your debts if your irresponsible and so much more.

    • The GFC, and my own situation opened my eyes to a problem.

      As lending growth slows, we will begin to see the debt mountain where all the blue sky used to be. Most are yet to find that a 30 year loan is a life sentence. Especially in a depressed economy.

      It will not be anyones fault, as the system has run its intended course.
      However hopefully we will understand that letting banks loose is like letting a wolf loose in a chicken coup, they need to be seperated from the market and regulated so that lending practices are determined by the “greater good” not by speculative pursuits.

      • Banks are facilitators of the system – admittedly they seem to want to dabble a bit into anything that gives them a profit nowadays. The core banking system is a major part of the design of the current economic system and as such I don’t consider banks a business. i.e is it really a business if I can control the system to encourage people to buy my product? Rather they are licensed by the government to issue credit and in some ways are delegated power by governments to create credit and hold people’s money.

        So I think you are right here. In other ways I don’t know why something so crucial as the system in which we live is trusted to these large corporations. The profit motive shouldn’t drive banks – after all maximum profit case for banks is done by over leveraging the economic system (i.e changing the composition of the economy’s balance sheet) and putting the economy in a systemic crisis. i.e should the government delegate this power to them when this is what they will do? They need to temper it with risk if they do so the profit motive works. Banks know they will be bailed out. Moral hazard is rife everywhere it seems.

  7. The problem is that the same governments and elected representatives who are supposed to regulate financial markets are so corrupt and influenced by them that it is virtually impossible to institute any change. The Dodd-Frank Wall Street Reform Act is a case in point. With Obama’s presidential campaign funded by Wall Street and people like R. Rubin among his chief advisors how can you expect that he can change the rules of the game? The system requires a complete reset and replacement of political elites. The way I view the Tea Party is that it’s the only political force in the US that has the potential to keep the bastards honest.

    • Agreed. I’d love to see Michelle (or Sarah but that won’t happen – too hard and the money’s not good enough) win the presidency. Let the wingnuts really unleash the crazy and let’s see what happens!

  8. the speculators caused the debt problem??? huh? I cant beleive what im reading.
    I think the derivatives have something to do with some problems, how about they look there. And the bailouts dont help be shifting losses to taxpayers. Am I missing something here, can some 1 explain how derivatives and bailouts are not the problems and cheap interest rates?

  9. China Fanboy, I mostly agree with prudentbear, but the point is surely that the problems arise when money is increasingly referring to itself and not to the real world value of the underlying asset (algorithms chasing algorithms, derivative plays trading derivative plays). Prudentbear hints at that, to be fair. Mark, I have a problem with your comment: “Regulation doesn’t do it – its too specific and the system is too dynamic. It manages to find its way around regulation and regulation doesn’t normally catch up in time”. Money IS rules; you can’t separate the “dynamic” rule invention and the “regulation” because the former relies utterly on the latter for its existence. This is why the logic of a financial market is so different to the logic of a consumer product market, where regulations are an external (framing) force. Yes, governments have been poor managers, but that is not a reason to replace government with markets, it is a reason to fix the management. What is happening now, however, is going a lot further than that; questions are being posed about the state that are perilous because too much is being taken for granted (such as the role of the state, for instance). In other words, the serpent is devouring itself. Does anyone seriously believe any more that the free play of greed cancels itself out to a general good? (Answer – yep, just about all of Wall Street, every investment banker in the world, all the devotees of Adam Smith who have never actually read Adam Smith, much of the US right etc. etc.)

    • Ouroboros.

      SoN, I enjoy your posts – get my lazy brain thinking. Stuck at the algorithms chasing algorithms stuff. What more can we truly expect when this is all that is understood. Cherry-picking the brightest mathematical minds at college, offering mind-bloggling remuneration, what do you end up with. A cohort that only really understand numbers, get pleasure from numbers, from mathematical complexity and finesse. And algorithms chasing algorithms, derivative plays et al make big money. Money is the way.

      http://moneyistheway.blogspot.com/

      Money is money in this world. Nothing else applies. What to think when it becomes a sport to leave random ATM receipts

      http://www.economicpolicyjournal.com/2011/06/9986473194-atm-receipt.html

      We’re all human and slightly mad I think!

    • Money is rules I agree. But whose rules? It doesn’t necessarily have to be government that makes the rules. My point was that if it is Government that makes the rules – it should be government that owns the creation of money and credit. If you delegate power to the private sector then there should be no backstops to “bailout” these people, and no government control of money (i.e I would prefer free banking to the current system only because eventually the people will force a correction by not accepting a bank’s notes).

      Right now we have a hybrid system where its private if things are going well and not when it isn’t. It doesn’t matter what management you have for governments – with the way the current monetary system is structured the incentive for governments to do the wrong thing right up to the point of systemic crisis in inevitable. Governments aren’t economists – they trust their numbers when the debt is growing and when it stops they treat the symptoms of the problem not realising they contributed to the cause. There will always be too many vested interests giving the government an incomplete picture if they know they will get bailed out anyway (i.e relaxing regulation pressure)

  10. “But here’s an idea. How about some Government? Why not tax these lunatics in the derivatives and HFT markets? It doesn’t have to be a big tax, in fact it can be extremely small.”

    Well then what’s the point? Maybe stop reaching for the tax hammer and stick to your original point about the necessity of the rule of law (even) in free market transactions.

    HFT *is* institutionalized insider trading. How is that a free market transaction?

    It’s not a free market transaction. Hence, we shouldn’t be taxing it, we should be abolishing it.

    ie., Sorry, Goldman Sachs. You lose. (Maybe there’s a reason this criminal cabal has infiltrated the government?)

    Think, please! Not everything is a nail.

    • Sorry Goldman Sachs? HFT in the US Equity markets is dominated by a number of extremely small companies who arose when new rules leveled the equities playing field. They’ve totally displaced the big Wall Street firms. They did it by processing information faster and better than the big boys, not by cheating or criminal behavior. The result, according to the leader of Vanguard funds, is that small investors’ 401K’s will be about 30% bigger at retirement due to the decreased cost of trading. Don’t be a fearful Luddite in the face of things you don’t understand. It’s not magic, it’s using machines to process publicly available information. Prices are more accurate, and costs lower, because of it. Goldman couldn’t be happier that clueless folks like you deflect attention from the true source of their profits, opaque markets with monopoly characteristics, expensive wide spreads, and no competition (e.g., the fixed income markets, which are much bigger than equities, and completely dealer run). Transparent regulated exchanges work very well indeed, and in equities’ case, those open, competitive exchanges have transmitted the benefits of modern technology to each and every stock investor. You really don’t have the faintest idea what you are talking about.

  11. Just like people, every currency has a timeline of its life. Some are short, and some endure over centuries. Eventually, they all
    die and are replaced with something else, as the system re sets.
    The United States, where I live, has had many currencies during
    its lifetime, from the continental, to the greenback of the North
    and the Confederate currency, to countless private bank currencies, the federal reserve note backed by gold, the fiat
    dollar post 1933 for INTERNAL transactions, the silver certificate,
    silver coinage until discontinued in the 60’s, and the pure
    fiat currency post 1971 and the closing of the gold window.
    It remains the global reserve currency out of both past
    momentum and the network effect benefits to world trade
    of a single unit of account. It will die because that unit of
    account has for many years no longer been a store of value.
    As someone much wiser than me has said, “The changeover
    from one global reserve currency to another is a seismic event in world politics and commerce”. We are just feeling the
    rumblings of the quake to come.

  12. Good article. A couple of points- The corporatists have already won. What you are seeing is the consolidation of power. Again, there is no struggle here fundamentally. It’s just a matter of who and how the spoils are divided up. There still is a remote chance for the sheeple to revolt but things have to be much worse than they are now for that to happen. Most people fail to see implications that we are seeing the foundation being laid for the eventual enslavement of the human race. Expect corporate prisons to eventually own the justice system and we will see corporate prison factories here (which will be all the rage for investors) to compete with the Chinese on labor costs. This will happen a lot sooner than you think.

  13. ceteris paribus

    What a wonderful article.

    Let’s try to remember we live in a mixed economy, not a laissez-faire economy, the ultimate end of which is the law of the jungle, armed warlordism and the exclusion of the powerless.

    In our failing mixed economy, however, government has increasingly ceded most of its responsibility and authority to the money players, the industrialists and their propagandists.

    Why has this happened? Firstly, insatiable greed and self-interest are rampant. Secondly, politicians themselves have been corrupted by short-termism and their own re-election.

    It is my humble opinion that both Chifley and Curtain had the character to march proudly into opposition rather than betray what they felt was the national interest.

    That sort of integrity is absent today- but I am hopeful, when we least expect it, ethical leadership may walk in from the wilderness.

    Will it get a folllowing?

    • a few points.. no economy in the post industrial world is either 100% free market or 100% central planned, there is always elements of both. For example in soviet Russia, 1% of agricultural land was held in private hands (small hobby farms) and produced 30% of the national agricultural output. So when people paint ‘tea party’ libertarians as anarchist it really sheds light on the authors own prejudices or perhaps lack of knowledge as 99% of libertarians believe in limited but some form of govt (property rights, individual rights, promote competition, national defence etc).

      Yes our economy world over is failing but instead of going on what sounds good and seems like a good idea look at the state of matters empirically. Since the start of last century, has it been the growth of govt/govt programs or private firms/industrialists as a proportion of workforce/GDP/whatever metric? Is a country where every 4 working people have to support one person on welfare benefits (Aus) an example of growth in private sector? Is that the dystopian free market in action?

      Why do so many people have a few of society/govt whereby we need a great Bismarck type leader to swoop in and save us from ourselves? Economies didnt grow becuase of the wills and self interest of politicians it did so in spite of this. I only hope more people develop a rationale where the role of govt is essentially to provide the framework and get the hell out of personal, economic and family affairs. I guess that makes me an anarchist.

      The self interest and greed line is a cop out, its only ever the other man thats greedy or self interested, people are all greedy for talent, knowledge, love, money and if you arent working in ones own self interest that whos interest are you then?

  14. Its not often that i completely and utterly disagree with an article on MB, but thats my view of this one.

    A lot of the financial market innovation that occurred in the 1990’s was pioneered by govt agencies (ie the RTC sold the first complex, tranched RMBS that included sub-prime and delinquent loans…oh and they influenced rating agency modelling because they felt the rating agencies were “too conservative”)

    http://www.fdic.gov/bank/historical/managing/history1-16.pdf

    http://www.fdic.gov/bank/historical/managing/sym1-06.pdf

    The decades and decades of govt bailouts created the TBTF entities which are supposedly so greedy. That is the the true govt failure, not “de-regulation”. If the market wasnt interfered with the likes of Citibank would have failed decades ago.

    You claim that “libertarian” attacks have been successful? Have you not seen the mountains of regulation that has to be dealt with by businesses? You focus on one bill here and there as evidence and ignore the continued increase in red tape faced by almost every single industry that simply increases the barriers to entry and compliance costs. If anything any “libertarian attacks” would have to be considered an abject failure.

    I have had executives at big US firms tell me that the regulations are so complex it helps them because it prices their potential competitors out of the market (the big boys have the resources to deal with regulation, the small guys do not). That aint free markets at all, that is a system designed to enshrine and protect a select few through govt policy.

    Here in Australia, business sees the govt as the enemy because the govt is continually imposing higher and higher compliance costs on industry, often without regard to consequences. Just wait and see what will happen to the super industry, the new regs will come out and force consolidation in the market because of MySuper (only the big boys will be able to deliver a MySuper default product, so no default money will flow to smaller funds).

    I suggest that have a bit more thinking to do on the true role of govts in financial innovation and creating our supposed ‘free-markets’ and in the crisis as a whole. There is a whole load of hurt caused by the unintended consequences of govt policy.

  15. I agree with the criticism of this article…its horrible. It actually is very similar to the tone used by Mad Adam…total denial of the facts that contradict your article. Its as if you sat down to write it before you heard that S&P downgraded the US and so you just kept on plugging away and just noted this new development.

    Yes the rating agencies stuffed up with the sumprime mortgage ratings etc…and they have made some other bad calls too – but this is historic in the sense that they have never had the balls to downgrade the USA, and now, they have shown they have no choice.

    This has nothing to do with speculation…it has to do with the unwillingness of our poltiical leaders to make the hard decisions and admit to the people that we are headed for a long period of economic decline due to excessive private and now soveriegn debt levels.

    As I have said on another thread, the Austrians are the only ones left standing now. They have warned of this for years and now its happened, its impossible to not heed their warnings.

    You cannot give Government control of a fiat currency without expecting them to promise too much at elections and establish a strucutural bankruptcy. You cant trust central bankers who do not factor in asset price inflation and are buddies with the banker buddies creaming profits through asset price deflation to exercise sound monetary policy.

    And now it seems you cant trust people on MB to actually know what is going on.

    This is the worst piece I have ever read on MB…sorry, it has to be said! Which is a shame, as Sell On News is usually a lot better than this

  16. Sorry, meant to read:
    “…and are buddies with the banker boys creaming profits through credit-fuelled asset price INflation to exercise sound monetary policy”

  17. What we are witnessing in the West is the failure of debt democracy, the Western Socialist Model.
    http://www.thedailybell.com/2747/Ron-Holland-The-Fiat-Dollar-Debt-Democracy-Experiments-Have-Failed

    Operationally, we can add some more arrows to our quiver.

    Inflation in all that you owe.
    Deflation in all that you own.

    To the above we may add (to the lense):

    Inflation: the creation of liquidity.
    Deflation: the failure of financial instruments.

    Price inflation: the result of the creation of liquidity.

    Currency induced cost push inflation.

    h/t jsmineset.com.

  18. ” The question is not about MANAGEMENT, it is POLITICS.”

    1.The power over money. Political.Money owed.
    Vs
    2.The power of money. the banks-money creation.Money owed.
    Vs
    3.No counterparty risk money.individual money. Gold. Money owned.

    It’s a three-way split.

    Don’t forget, in the non West, the CB’s are controlled by the government. So their prefered model would be 1+3. Why? Because it is what the West is not.

    Anglosphere: 1+2. With 2 in control at present.

    EU: Preferred model: 1+3.

    China/non West opting for a divide strategy.
    That is if you want 1 and also want to negate 2, then you adopt 3, as the negator of 2.

  19. Governments have failed. If governments have a primary role, it isn’t collecting the rubbish, or building the roads or feeding the poor. Their primary role has been to make and adjudicate the law and it’s here that the governments have failed. Certainly when it comes to financial and monetary matters, our governments have failed to provide just law. They have also failed to make just judgements e.g. the bank bailouts.

    SoN, I agree with much of the criticism above however, you have a point that libertarian rhetoric has been used to deregulate an already an already corrupt system, making it even more a “free for all” full of moral hazard.

    You call for “some government”. I say let’s have some justice. I hope you’d agree — we’re probably talking about the self same thing. However, since the status quo is so far and away from a just system that I fear that democratic left/right squabbling and unprincipled muddling will never get us there.