The Business Cycle by James Jaeger
A currency should have a direct 1:1 relationship with goods (i.e., GDP). The problem is once you remove the DISCIPLINE of gold from the equation, a government tends to print up more currency than justified by the products being created by that society. Case-in-point: the GDP expands by some 2% - 3% per year whereas the money supply is expanded by some 10 or more percent per year.
If the People allow their governments a one-world fiat currency, the banks and governments will be able to expand the money supply infinitely with no recourse. Who do you think will get first draw on the newly created fiat money? Where is there to run when the currency of every country crashes? There is no redundancy in such a system. This violates the universal principal of redundancy. Why do you think nature is fecund? Why are there so many human being in this world? Redundancy. Why do Space Shuttle missions have redundant systems? Because when one system breaks, you have another system to save your life. A one-world government violates the universal principal of redundancy. A global economic system violates the universal principal of redundancy. Don't let politicians, economists or Federal Reserve apologists or Davos insiders construct such a system or you will be trapped forever. There is no need for countries to cede sovereignty to ANY world body such as the UN, World Bank, IMF, World Trade Organization or World Court. The Business Cycle is one tool used by and popularized by the members of the Counsel on Foreign Relations (and their mouthpiece magazine, Foreign Affairs) who are active in the construction of a world devoid of economic and political redundancy.
Here in the U.S., Article I, Section 8 & 10 of our Constitution requires that the money be nothing but gold and silver and "bills of credit" (i.e., Federal Reserve Notes) are not permitted. In its history, the U.S. has had two previous "Federal Reserve Systems." Both times the People caught on to the scam and caused the dissolution of these central banking systems. Such is the inevitable fate of the current central bank, the Federal Reserve System. The Federal Reserve System was engineered by a member of one of our defeated former enemies: Paul Warburg of Great Britain. This central bank was planned at a secret meeting on Jekyll Island in 1910 and ushered through U.S. Congress three years later in December of 1913. See FIAT EMPIRE at http://www.FiatEmpire.com for details.
Until and unless the American People decide to amend their Constitution, Article I, Sections 8 & 10 remain the highest law in the Land. People like Ron Paul are trying to stimulate a public review of the banking system, a system many feel is unconstitutional. This review is something neither Congress or the New York money center bankers probably want.
Intelligent people should study the Fed and money system and throw their wisdom into Humanity's' pot. Going back to a gold and/or silver standard may NOT be the ultimate way to go, however the U.S. should at least go back to what is Constitutional and then move forward from there through the amendment process provided. If this were to become a major issue, not only with citizens in the U.S., but around the world, many minds should be able to either validate a gold/silver-backed system OR create a new and better system. Because of the math, the current debt-based system is probably headed for a catastrophic event. (See free documentary on Google Video entitled, MONEY AS DEBT)
With a world fiat currency, every nation's currency floats against every other nation's currency. Thus there is no universal, international standard, as when international trade was based on the Gold Standard. Nixon ended this when he closed the gold window in 1971 so France couldn't remove any more gold from Ft. Knox. For those of you with confusion on this issue, read an article Ron Paul wrote in 2006 entitled THE END OF DOLLAR HEGEMONY. It's at http://www.house.gov/paul/congrec/congrec2006/cr02 1506.htm
If the price of money were set by the market, the market would dictate when and how much money was needed to be lent into the economy for legitimate R&D, manufacturing, construction and expansion. Making and using loans for consumption, as so many do with credit cards, is foolish. When the price of money is artificially determined by a deliberative body, as is done in the Fed's "Open Market Committee," errors in judgment are inevitable. A room full of human brains cannot possibly comprehend the billions of financial transactions throughout a nation and thus set the price of money to properly provide the needed liquidity of the nation. This is why most economists agree: the price of goods and services should be set by the free market on a transaction by transaction basis. If the free market is good for products and services, why is it not good for the price of money -- the one commodity that REPRESENTS all products and services? Allowing the free market to set the price of money would allow the law of supply and demand to operate more universally.
People "speculate" more easily when they get "easy money," money lent to them during times of low interest rates. This is WHY the economy BOOMs. But when the "easy" money starts to cause prices to rise in general (misnomered "inflation"), the Fed "tightens" the credit thus curtailing the "easy money." The BUST part of the cycle then happens. Again, apologists of this system have cleverly institutionalized this boom and bust as the "Business Cycle." By using this term, they are attempting to legitimize what is actually a systemic liability.
Anyone who says banks aren't in the real estate business is naive. The main idea behind fiat money banking is to lend so much "easy" money into the economy, overly-encumbered and unqualified borrowers are "able" to buy real estate. When they default -- because they were not really "able" to service the loan in the first place -- the banks, often through their "straw buyers," snap up the real estate in foreclosure. Thus the banks get to inventory your real estate for future sale when the Business Cycle, which they cause, makes it a "seller's market" again.
In summary: as "easy money" is injected into the economy the price of homes rises because competition to buy them WITH the "easy money" becomes more intense. As homes rise in price, banks and their straws sell off their real estate at the top of the Business Cycle. They then take a profit. Then credit is tightened. This causes fewer loans to be made, thus people have less money to bid up real estate prices. Real estate prices fall. In such a market condition, who has the only power to buy? Wealthy individuals, the banks and their straw buyers. As the market crashes, the banks, their straw buyers and agents snap up distressed properties for pennies on the dollar and hold them in inventory. Then, at the up side of the next "Business Cycle" they sell them off and take another profit. This system allows the accumulation of almost infinite wealth while the poor and sick become increasingly dependent on "social safety nets" provided by ever bigger government. This is the road to full blow socialism and AWAY from the "General Welfare" promised by the U.S. Constitution -- if only we would follow the advice of the Founders.
Again, the Federal Reserve System facilitates the Business Cycle by facilitating the artificial rise and fall of the money markets, hence the real estate market. The Fed does this not for the purpose of STABILIZING the markets -- as stated in their Mission Statement -- but in order to make the markets more volatile thus making it possible to whipsaw assets from the hands of ordinary people and into the clutches of the Insiders.
Who exactly are these Insiders? In a sentence, they are anyone who knowingly profits from this system. The most serious Insiders include the highly-paid executives of Fed-member banks and the entities that own major or controlling blocks of stock in the MEMBER-banks that own the 12 Federal Reserve regional banks -- especially the Federal Reserve Bank in New York. Insiders also include real estate agents and the "straw buyers" that hide the transactions as well as the hoards of legal and accounting professionals that live off both the banking and real estate industries. It's truly a system under which the rich get richer, the poor get poorer and the middle class slowly erodes away.
What is happening on a broad basis is this: fiat money -- money created by the Federal Reserve System through the monetization of debt in collusion with Congress -- is used to acquire the assets of borrowers in an endless flow of imprudent lending in an environment purposely made volatile. This volatile environment is then called the "Business Cycle" in order to make the public think it's all a "natural" part of life. Little do victims of the Business Cycle realize: it's part of the plan. Banks are in the real estate business big time.
As the above described upside selling and the fire-sale purchasing happens, the public is getting screwed in another way -- by paying their mortgage payments. A mortgage payment consists of a portion paid to principal and a portion paid as interest. The portion to principal pays down the loan and creates equity for the borrower. The portion paid as interest is, in essence, a rental fee for use of the money, the principal, and once paid is gone forever, just like a rental fee paid for an apartment. More than 50% of the money paid on a typical 30-year mortgage (i.e., 30 years x 12 months per year = 360 payments) goes to INTEREST until about payment 280. These interest payments are generated from income earned on REAL labor (i.e., people work at their slave jobs earning money from their slave-master employers). Thus, people are paying REAL money for the use of FIAT money. FIAT money is, in essence, money created out of nothing. People are thus paying REAL money earned from SWEAT to bankers as interest payments on FAKE money created out of THIN AIR. This is why Ron Paul wants to talk about the Federal Reserve System, a system that's an economic liability to anyone who is NOT an Insider
The dot com crash was bolstered by the U.S. Fed lowering the Fed funds rate to almost zero. This injected hundreds of billions of dollars of credit into the U.S. economy allowing unqualified borrowers to get loans for real estate and credit cards. Much of this excessive credit has been used for consumption, consumption that neutralized the dot-comm debacle somewhat (a band aid on the wound), however consumption that we are paying for. We are now paying the price for this excessive credit with the current sub-prime debacle; we are paying for this easy credit with a $9 trillion national debt and $50 trillion in long-term liabilities; we are paying for this easy credit with record bankruptcies; we pay for it with 4,000 dead in Iraq and much more suffering of its people; we pay for it with an unprecedented trade deficit. The world will pay for this excessive credit if the U.S. economy melts down. Of course, the fiat-money addicted gov's "solution" to the problem is always to inject more FIAT money into the economy. This is what is happening right now with the current Bush tax-cuts (i.e., fiat money handouts). All this money will be monetized thorough the Fed and it will just make the situation worse. A DAY OF RECKONING is coming, as Pat Buchanan says in his book of same title.
If the U.S. economy crashes, it will be bad news for the rest of the world. I do hope however, the rest of the world does well and can somehow become independent of the U.S. economy, thus creating a needed redundant system.
Going into a recession is hardly the worst that could happen. If the U.S. dollar crashes, the U.S. could go into a DEPRESSION. The currency could hyper-inflate similar to pre-Nazi Germany and become worthless. All U.S. money flowing to China for consumer goods would then attenuate and China will slow or shut down a significant portion of its manufacturing operations. China might then call in their U.S. Treasury bonds in such great quantities the U.S. would be forced to default -- as we did on gold when Nixon defaulted on gold payments to foreigners in 1971. In typical form of re-defining terms, apologists of the international fiat money system called this default, "closing the gold window." All of these events may complete the movement away from the dollar as the de facto world reserve currency. If this happens, the Euro will probably appreciate infinitely because it will have to fill the vacuum left by the dollar. People will then panic and run from paper money entirely. Gold will shoot up to maybe 10,000 or 20,000 Euros per ounce. In the midst of this chaos, the Insiders will introduce the Amero for the U.S. economy. They have already introduced the Euro for the European economy. Europe's war-torn citizens were in no position to resist! The Bancor, a possible international currency, may then be introduced. Perhaps the Bancor will be redeemable in a certain number of Ameros and Euros. We will thus be on a global fiat currency, and the citizens of the U.S. -- after being torn for awhile over Iraq-type, preemptive wars -- will ALSO be unable to resist. Welcome to the BORG Planet!
Possibly this global BORG system will work, especially if trading regions of similar magnitude can be established and the values of each can be modulated through the global Bancor. The regional currencies could then be ruthlessly maintained at a 1:1 ratio with GDP (PRODUCTS could perhaps be pegged to gold while SERVICES could be pegged to silver) and all the wild credit manipulation (by monetizing debt) could be conducted exclusively with the fiat Bancor.
This may give the best of both worlds: a centrally-controlled elastic fiat currency redeemable in specie-backed regional currencies.
A world fiat currency could regulate international trade and provide systemic liquidity while specie-backed regional currencies could provide a base of stability for the entire system at the local level. We would thus have both a DISTRIBUTED and a CENTRALIZED world financial system ... but these are just my wild speculations on how to achieve redundancy and balance. No one knows what system will work. Maybe you AI geniuses out there should create some computer models to run global what-if scenarios.
One thing seems to be sure: a house of cards is built (entirely) on fiat money.
The USA may have a feeling of a rising civilization to Europeans, but much of that is an illusion.
Europe is a long way behind the U.S. because it spent most of its blood and treasure on a century of fiat-money funded wars. This is exactly what Ron Paul, Pat Buchanan and Alexander Hamilton warn the U.S. against.
The way to boost real world wealth is to stop the Insiders from stealing this wealth from the hard-working citizens of the World.
The market, being huge, allows the Insider criminals to hide their cause and effects. Thus it's to their advantage to make the entire system so complex the average citizen can't comprehend it. It's the same ploy your lawyers and tax accountants use on you. They make your contracts and tax forms so complex you have no choice but to hire them to handle them. Thus citizens cede a part of their ability to manage their financial affairs. When dealing with financial and legal systems, one adage should reign supreme: KEEP IT SIMPLE STUPID.
Some place a lot of faith in Alan Greenspan and call him "one of the brightest lights in political finance in history" and "we need to reduce his skill to an expert system." In the documentary, FIAT EMPIRE, Ron Paul calls Alan Greenspan him "an unbelievable threat." Watch the movie to get the full context.
Fiat money is the ISSUE of the decade, possibly the century.
The money issue is central to all other issues because money is the blood of civilization. If it is not properly routed and used for the benefit of all, it will quickly kill the civilization. If you had too much blood in your body you would die. If you had too little, you would also die. This is the central question: how do you inject the right amount of blood into the body of civilization such that:
A. It IS the exact correct amount;
B. It's not subject to government or Insider manipulation;
C. It can flow unimpeded;
D. Worthy projects get financed;
E. Frivolous projects don't waste it.
Sounds like a job for Dr. Paul and Super AI.
Originated: 25 January 2008
Revised: 28 January 2008
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