Thursday, September 27, 2012

Of Two Minds, At Least One Not His Own

CHS has claimed to be a free thinker, but he proves time and again that he is ruled by his very own cargo cult.

CHS had a largely good post up today on "Why QE Won't Create Inflation Quite as Expected."  His problem is his reliance upon the fictive Quantity Theory of Money as truth to make his points.

Money is a false commodity.  It's value does not depend upon supply and demand.  This is true under a fiat system or under a gold-backed system.

The value of money depends not upon the supply and demand of money, but upon the supply and demand of credit.

The "velocity of money" is merely a fiction to make the tautology of the Quantity Theory of Money hold together.  Without the fiction, the theory fails, and it has failed in practice.

Nevertheless, CHS gets things mostly right in his post.  His biggest problem is relying on the velocity of money to explain the absence of inflation.

Perhaps one day he will break himself of the blinders that bind him.

UNFINISHED: Putting the Lie In CiviLIEzation

A concept I've discussed previously is that of "Double Truth," i.e., language that speaks one truth to the masses and the opposite truth to the elite.  Nietzsche termed the concept the "Double Lie."

Once you've become aware of the concept- whatever you call it- you learn to recognize its application.

Toby understands the concept, even if he does not tag it with a label at all:
By the way, when I say “the state”, I refer to that dynamic concealed behind the infamous The State vs. The Market Show most left/right wing loyalists and ideologues get so hot and bothered about. I think of that dynamic as elitist exploitation of the majority, as hinted at above.
I generally hate philosophers.  They are so steeped in the manufacture of Double Truths that many of them probably never recognize what it is they do. Still, I try to reserve directing my hatred towards those philosophers (and "applied philosophers") who actively and knowingly engage in duping the masses to benefit the lite.

Because of my aversion to philosophers, I did my best to avoid reading the works of the most famous Western philosophers, Plato and Aristotle.  Much to my surprise, a seemingly unrelated research project ultimately led me to their writings.  But as soon as started reading them, their Double Lies were clear as day.  While Plato spoke far more plainly than Aristotle, both relied on "Hidden Truths," the unspoken/unwritten keys to unlocking their political philosophy as a control mechanism.

Once unlocked by their Hidden Truths, Plato's and Aristotle's writings can only be read as bemoaning the failure of the Athenian version of "democracy" to scale: they determined that the vast majority of Athenian citizens so believed the lie of Athenian democracy that they undermined the ability of the Athenian state to grow beyond a certain size.  Each man reacted differently.  Plato developed utopic visions of authoritarian/totalitarian states.  Aristotle was much more subtle and developed a utopic vision that has ruled us ever since.

Finding Truth, Losing Art

I have found in my journey that the more I understand "truth," the less I can embrace the arts.

Blogging is an art.

Art is inherently manipulative because art stages conflict (or contrast) to evoke emotion.

My music, my graphics, my writing -- all have suffered because I cannot bring myself to manipulate or be manipulated.  The very notion of creating a point of conflict or contrast to make a point sickens me, even when doing so is completely legitimate and warranted.

I need to find a way through this.

Monday, September 17, 2012

A Driving Need to Normalize Terminology

Charles Hugh Smith channels his inner-Austrian and argues that the Fed has "failed, failed, failed".  Yet he recognizes that the Fed exists to serve the banks, even at the expense of the American population the Fed ostensibly serves.  If the Fed is succeeding in its real mission and serving its true constituents, how can anyone argue that the Fed is "failing"?  The Fed is succeeding wildly in its true mission, but CHS can't get past his Austrian-induced cognitive dissonance.

The Automatic Earthers are not similarly burdened, recognizing that "Bernanke and Draghi Are Not Trying to Save Our Economies":

It's time to get this through our heads once and for all: Bernanke And Draghi Are Not Trying To Save Our Economies. Perhaps they would if they could, but the question is moot: they know they can't. Instead, they're trying to save the financial system by stealing our remaining wealth while making us believe that the economy and the financial system - a.k.a. the banking industry - are one and the same thing. They are not, and that's why we see our jobs and benefits and homes go up in thin air and smoke while the S&P looks rosy. 
Those last two things are connected. The first are not, no matter that so far most people fall for the sleight of hand. Which is sad today, and will turn to tragedy tomorrow.
Catherine Austin Fitts reaches conclusions similar to mine on the true purpose of QEternity (the best label for it so far), which is to clear the market of soon to be toxic mortgage backed securities.  Her only error is in assuming that the GSEs are the intended beneficiaries of QEternity, but they only hold 10% of the outstanding MBS, while the TBTF banks hold almost three times that.

Sunday, September 16, 2012


The Fed's recent announcement of $40 billion a month in quantitative easing for the indefinite future is nothing more or less than a declaration of war on the bottom 99.9% of the world's human population.

As the big money piles out of agency mortgage-backed securities into the commodity markets, the real economy will suffer.  The cost of everything needed to live will rise.  The cost of everything needed to make things will rise.  The result will be reduced consumer spending on discretionary items (because the money is needed for food and energy), increased production costs (because precious metals and other industrial base materials are rising in price), and increased unemployment (and overall suffering).

To most people, rising prices means inflation or "stagflation."  That's because most people believe in the fairy tale Quantity Theory of Money.  Prices these days are rising purely on leveraged speculation, and this form of -flation is more properly called "screwflation" because the Fed is screwing everybody in the world to maintain and even inflate fictitious asset values.

Real people must die so fictitious asset values may live.

Here's the Fed's quandary: deflation is no longer manageable.  The collapse of the US housing market is inevitable, and QE-infinity is designed to get soon-to-be toxic assets off the books of the big banks, who own 25% of agency MBS valued at roughly $1.3 trillion a year ago.  See here.  Most commentators argue that the Fed is trying to ignite another housing bubble, i.e., that the Fed's monthly purchase of $40B in agency MBS will cause the banks to further lower mortgage interest rates and increase lending so that there are more mortgages to bundle into MBS.  While we may see interest rates go down, there's no reason to believe that we will see an increased demand for mortgages, even if the banks are more willing to lend.  Certainly, the data show that prior QE efforts that targeted the purchase of MBS seemingly had no effect on the levels of mortgage debt outstanding, which has declined year-over-year since 2009.  See here.  At best, QE-infinity is designed to keep the US housing market treading water so the TBTF institutions have the opportunity to minimize their exposure to it.

The Fed is purposefully turning itself into a "bad bank" that holds all the toxic assets of the TBTF banks.  Of course, once people realize that the Fed is a bad bank, what will happen to the value of a Federal Reserve Note (aka, the US dollar)?

For the first time ever, I believe something akin to hyperinflation is possible here in the USA.

Saturday, September 1, 2012

Money = Force

Interesting post at NC today.

"Money" quote:
Money, it seems to me, is rules. Rules about value and obligation. The rules can be enforced or overseen by government or they can be loosely enforced through private self organisation. The opposing arguments about money being from the state or private sources is really a non-argument. They are just different kinds of rules. What we are seeing in the global capital market is the shifting of the rule making away from governments and towards private actors, but both are typically involved. It is just that the balance over the last decade has been skewed towards traders, leaving governments to fix the mess when it all inevitably went wrong.
Given that definition-- which I think is profoundly insightful-- the real question is not "what is money," but who made the rules?  The folks at NC seem incapable of asking that deeper question.

Anyway, I answer the original question-- what is money-- by considering what money does in a society, while pondering who made the rules that money embodies.   Money equals force.