All currencies are an inverse pyramid based on the dollar

The global fiat monetary system is a ponzi scheme, when growth contracts, slows and stops the pyramid collapses. That is why we are in a period of constant quantitative easing, without this liquidity injection the whole pyramid comes crashing down but is that a terrible thing? It would be if there was not a system to replace this one and that is the Real Bills Doctrine. Courtesy of           Alistair Macleod @ Gold Money:

When US money supply measured by M2 stood at $11 trillion in December 2013, I calculate that total broad money of the next largest 50 countries ranked by GDP amounted to the equivalent of a further US$67 trillion at current exchange rates. And that’s only on-balance sheet: we must add in global shadow banking, estimated by the Financial Stability Board to have been an extra $67 trillion in 2011, probably about $75 trillion today, given its recent rapid growth in China. So when we look at US broad money supply, we should be aware there is a further mountain of money thirteen times as big ultimately based on the dollar.

As long as bank lending, industrial investment and consumption are all expanding, the sun smiles. It’s when it stops that problems arise, and why markets reacted badly to the idea of tapering and are increasingly nervous about China’s credit bubble and attempts to rein it in.

More specifically the danger arises from a slow-down and possible reversal of cross-border investment, particularly with emerging economies. Between 2000 and 2007 investment from advanced economies into emerging markets grew at an annual compound rate of about 18%, and between 2008 and 2011 it slowed to about 5% (McKinsey, 2013). The beneficiaries of this investment, global financial assets (all equities, bonds and loans) averaged growth of only 1.9% annually in dollar terms between 2007 and 2011. If we could measure it today the overall return would probably be a big fat zero.

So whatever analysis of individual countries might tell us, it has been easy to miss the threat of a deepening global recession, a risk increased by diminishing cross-border flows. What a time for the Fed and the Peoples Bank of China to decide to reduce the rate of monetary expansion for the two largest economies! These actions are too late to achieve the hoped-for orderly exit from excessive monetary expansion. Continue reading

British Green Party Calls for Public Control of the Money Supply

I always thought of the UK Green Party as a non-starter, not because I disagree with wanting to leave the planet in better shape than what he inherited it as but simply because of policy. They lacked a credible and meaningful direction but to be perfectly honest, they’re getting there and could give the status quo and public something to think about.

Public Credit Creation, Citizen’s Income and Land Value Tax are acting as the trinity of their economic policy, it’s a damn sight more equitable than what we have at the moment. Funny how nothing is mentioned on the 6 o’clock news, don’t want to give people hope or options, it’s just not good for business. Now back to Hollyoaks, Splash, Eastenders and whatever other shite passes as viewing these days. Courtesy of David Bollier @ Bollier.org:

The Green Party of England and Wales really knows how to stake out some fresh territory in their national politics! At the autumn conference, the Greens adopted a resolution calling for “a programme of reform to remove the power to create money from private banks, and to fully restore the supply of our national currency to democratic and public control so that it can be issued free of debt and directed to environmentally and socially beneficial areas.”

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Bold thinking! The Greens explain why the existing banking system is so pernicious:

“The existing banking system is undemocratic, unfair and highly damaging. Banks not only create money, they also decide how it is first used – and have used this power to fund financial speculation and reckless mortgage lending, rather than to finance investment in productive businesses. Through the interest charged on the loans on which all credit is based, the current banking system increases inequality. It also regularly causes economic crises: banks create and lend more and more money until the level of debt becomes unsustainable, boom turns to bust, and the taxpayer bails out banks that are ‘too big to fail.’ Finally, the need to service the growing mountain of debt on which our money is based is a key driver of unsustainable economic growth that is destroying the environment.” Continue reading