Cafe Hayek: Economic Inquiry and its Logic

MD: Cafe Hayek (i.e. Don Boudreaux) doesn’t know what money is. If we have a reset, he and other Mises Monks want to be on the front lines imposing “gold is money” on us. That will strangle trade. It’s hard to think of anything worse than the Keynesian inflation oriented nonsense we have had my whole lifetime (> 70 years) but they want to show us something worse.

I review their articles because they “are” the enemy … and are their own enemy … they just don’t see it!

>Quotation of the Day…

Posted: 08 Aug 2017 03:45 AM PDT

(Don Boudreaux)

… is from page 27 of my late colleague Jim Buchanan’s 1979 paper “General Implications of Subjectivism in Economics,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:

Indirectly, however, and in opportunity-cost terms, the empirical-nonempirical debate is of importance.  The young and aspiring economist who becomes the expert empiricist has necessarily sacrificed training time in learning more about the process to which his highly polished technical tools are to be applied.  These gaps in the training of modern economists are beginning to show up in many forms, not the least of which is the deadly dullness that dominates whole departments in many universities and colleges.

MD: And the pot characteristically calls the kettle black.

DBx: Someone can possess nearly god-like mastery of econometric techniques and still be a poor economist (or worse).

MD: When someone plays the “god” card they are tipping their hand revealing their irrationality. It’s always scary,

At the heart of economics, done correctly and productively, are habits and patterns of thought – namely, the economic way of thinking.

MD: Actually economics is just traders and trading. The co-option of money by the money changers and the governments they institute has added a significant “manipulation” factor that swamps anything rational traders do. A “proper” Medium of Exchange (MOE) process has “no” monetary policy.

There lies, for example, the professional instinct incessantly to ask probing questions (above all, “As compared to what?”); the recognition that reality is always far more complex in its details than even the most detailed ‘model’ can possibly capture (and yet the understanding that that reality is comprehensible only through the lenses of well-crafted models or theories);

MD: How about the reality that “zero is the only right value for inflation of money itself”. That’s provable. It’s not theory. And the Keynesians and the Mises Monks don’t get it at all!

and the stubborn insistence on consistency (such as the sound economist’s refusal to regard human and institutional imperfections as infecting only human interactions that occur in non-political settings – such imperfections also infect human interactions that occur in political settings).

MD: But the insistence on “sound” money (i.e. “gold is money”)? That’s ok according to the Mises Monks … even though it predictably “strangles” traders and trade.

Wow me all you want with your econometric wizardry and prodigiousness at digging up, assembling, and processing data.

MD: You mean data processing like INFLATION = DEFAULT – INTEREST = zero? … that’s not heavy math Don!

If you fail to exhibit the economic way of thinking, you are no economist in my book.

MD: Irrational thought should not be tolerated either!

Unless they are filtered through, and assessed according to, the economic way of thinking, all of your numbers and correlations, no matter how high those correlations might be, tell neither you nor anyone else anything of value.

MD: He says … without defining “economic way of thinking”. Economic way of thinking has always been trivial. As Yakov Smirnoff, the Russian comedian, said “business is simple:  buy low, sell high.”

Managing cash flow

Cash is king, they say.

MD: That’s because of the money changers. Drive them out with a “proper” MOE process and responsible trading is once again king.

As a bootstrapped entrepreneur, managing your cash flow effectively is key to staying afloat while you scale your product. However, many entrepreneurs don’t dedicate time to good accounting practices, sometimes even letting their startup’s money share real estate with personal cash. There’s no surer recipe for disaster.

“A big problem with small businesses that we have that come to us, that have never had a professional accountant, or bookkeeper, or advisor help them with, is that they manage their business out of their bank account,” says CPA Brad Ebenhoeh.

MD: I’ve seen this in friends who have small businesses. When a sale turns into cash, they put a chunk of it in their wallet. They’re always carrying a “wad of cash” … unless they’re dead broke. To me this is a direct indication that they don’t know what they’re doing. When the bills come in they don’t have the cash to pay them. They are soon driven out of business and once again working for someone else.

A “proper” MOE process won’t allow them to bail themselves out by creating new money. This would be a rollover, and if allowed would result in irresponsible traders competing with responsible traders. This is exactly what we have with “all” governments. They never deliver … they just rollover their trading promises. A competing “proper” MOE process will drive the money changers and the governments they institute out of business.

Ebenhoeh, managing partner at startup-focused South Carolina firm Accountfully, explains that the biggest misconceptions behind cash flow is looking at the money coming in as “ready to spend.” For example, if you brought in $20K in sales, it does not mean that you have $20K of immediate, spendable profit.

MD: Confirmation.

“The biggest thing that we do is that we transition them from managing their books out of their bank account, in the business side of the bank account, to actually managing their business from an accrual-based profitability standpoint,” says Ebenhoeh.

MD: In terms our parents gave us … they put them on an “allowance”. It’s amazing how many traders there are out there that can’t impose this self-discipline … really really amazing.

This means switching companies to accrual-based accounting, the process used by most startups. Accrual-based accounting is essentially jotting down revenue when it’s earned versus when the payment is made. “This means that you look at profits and expenses on a period over period basis, which is like month over month basis. And it doesn’t necessarily have to reflect when the money comes in or money goes out,” explains Ebenhoeh.

MD: All accrual based accounting does is remove epochs. It just makes common sense. It should be the “only” kind of accounting anyone would use. When you run your business with monthly, quarterly, or annual statements (which is what our governments do), you get way behind the 8-ball before you know it. This isn’t rocket science.

I’ve been using Quicken since it was created in the late 80’s. I have known my net worth in real time ever since. It’s fun. Actually I knew it before Quicken by using programs I wrote myself for an 8085 micro-computer (Processor Technology SOL … with a whopping 4K of memory) in 1977 … but Quicken was better in many ways and I had other things to do.

MD: We’ve now gotten what we’re going to get out of this article. Read on if you have time or still don’t get it.

That means that if you hired a subcontractor in July for $5K and you don’t pay them until September, the expense goes on the books in July versus when it happen versus in September, says Ebenhoeh. “Migrating a client over to that perspective of reviewing their books on an accrual basis and profitability standpoint is step one in having that business become mature.”

Ebenhoeh dives into three cash flow metrics you need to keep in mind as you grow your startup.

Operating Cash Flow

This is money that comes in from day-to-day operations. Basically it’s taking your profit losses on a normal recurring basis and including cash that you may have received from accounts receivable, or past invoices, or paid out in bills or accounts payable. Then you can say, during the month you made X amount of money in operating cash flow. That’s key because those core operations are actually going to sustain your business.

Free Cash Flow

Free cash flow is the operating cash flow minus any investment you made in fixed assets or capital expenditures. That includes investing in equipment, computers, furniture, leasehold improvements on a building, building out a space, rent, or buying a vehicle for the business, if that makes sense for your business model.

Capital expenditures are not recurring or not part of your operations; they’re just assets that you buy for your business to help you support the operations of your business. They are typically one-time in nature or very periodic, so that’s why it’s not included in the operating cash flow.

Net Cash Flow

Your Net Cash Flow is the free cash flow minus or in addition of any money flowing out to investors, money flowing in from investors, as well as money flowing in or out from a long-term liability.

You want to subtract any distribution payments you make to the owners of your business, or dividends, outflows of payments to owners of the business, or inflows of money that you’ve received when you’ve raised capital.

So for example, when a tech startup is operating with $500K in seed capital, that $500K is an increase in net cash flow. It is anything that you receive or pay to owners or stockholders of the company, as well as any long-term liability, or long-term debts that you’ve paid out on receipt.

When tech startups are in the early stages when they’re raising money, often instead of getting common stock or preferred stock, money comes in. A convertible note is long-term liability. That inflow of money that they receive would be within the net cash flow section.

Do you know your startup’s Key Performance Indicators (KPIs)? Here are some to keep in mind during those early stages when impressing investors is top priority.

Free State Bitcoin Shoppe: Interview With Co-Owner Derrick J. Freeman

EXCLUSIVE INTERVIEW
Free State Bitcoin Shoppe: Interview With Co-Owner Derrick J. Freeman
By Joe Jarvis – August 06, 2017

MD: Knowing what money really is, you know this Bitcoin nonsense was ridiculous from the get-go. But it just keeps getting up and going … just like Charles Ponzi’s stamp arbitrage scheme got up … and predictably finally went … ending not so nicely for lots of people. Let’s review this article and see what Money Delusions it contains.

This guy looks intelligent and thoughtful doesn’t he. Go figure!

Can you give me the rundown on your shop?

Derrick J: Free State Bitcoin Shoppe is a place for people to level up on their cryptocurrency knowledge and trade their digital cash for unique tech and freedom-themed souvenirs. Our mission is to help people use better money.

MD: BitCoins are going up so fast against the dollar, only money launderers and drug dealers can afford to use it (i.e. to spend them). Just think about it. If you have a choice of buying a hamburger today with Bitcoins worth $6.00, but next month the hamburger still costs $6.00 but the Bitcoin trades for $8.00, what are you going to use to buy the burger … dollars or BitCoins?

We’re a long way from the day people use BitCoins in trade. In fact they never will. Just an instant after it quits rising it will drop like a rock. And only the people pulling the strings know when that instant will be … as it will be when “they choose it to be”.

If we instituted a “proper” MOE process, we could at least give them a better alternative than the dollar with it’s 4% inflation leak. They would enjoy a 0% inflation leak. “Real” money does “not” appreciate or depreciate!

And “freedom-themed”? Perhaps he should be doing something about the 3/4ths of the fruits of his labor that is taken routinely by government. That only leaves him with 1/4th of his original freedom! Perhaps he should have some T-Shirts that depict the stupidity in buying government lottery tickets. Perhaps he should have some T-Shirts revealing the government steals 3/4ths of the fruits of everyone’s labor. That would be constructive.

To a backdrop of dance-punk and electronic music, we offer one-on-one assistance to the bit-curious to help spread the crypto-economy in New Hampshire. It’s packed with seditious propaganda like libertarian art and literature, books on programming, and freedom tech like hardware wallets and USB thumb drives with TAILS Linux loaded on them (the operating system Edward Snowden uses to protect his privacy online).

MD: Maybe Snowden needs to be concerned about his on-line privacy. After all, he did poke the NSA in the eye and they don’t take that lightly. But if most people are doing something on-line, they’re probably not that vulnerable. If they are, you can be sure they’re not doing their nefarious deeds on-line.

When we’re not busy teaching tourists and passers by about Bitcoin, the shoppe is an office for [co-owner] Zyler and me: where we do coding, writing, and video production. The Shoppe is right on the edge of New Hampshire at 56 State St in Portsmouth — so close that both the water and Maine’s coast are visible from our front door.

MD: Do they still call it “teaching” when it is known what they are conveying is absolute nonsense and provably a scam. At least with the Charles Ponzi, there was an identifiable scammer to put in jail. When this thing blows up there is nobody to blame. The winners won without being a party to the scam. And the losers will have no-one to blame but themselves. And neither have any control over whether and when they will win or lose.

What do you sell at the shop? Is there specific merchandise you hope to add?

Derrick J: We sell things you won’t find anywhere else: Doge curtains and pillows, 3D-printed combination locks to protect USB keys, Tesla T-Shirts, laser-cut wood boxes with secret compartments, BipCot Licenses, Bitcoin clocks, an Aztec calendar, build-it-yourself 3D-printer kits, and various New Hampshire-themed gifts. Next week, a unique Bitcoin vending machine will arrive at our store, offering the opportunity for people to trade in their Federal Reserve Notes for Bitcoin, Dash, and Monero.

MD: Ah … the modern version of the slot machine is coming to this store. They can do this at any convenience store right now … anywhere in the country. It’s called the government lottery … and supposedly supports education, but can’t even un-stupid the students enough not to buy a lottery ticket. People who buy lottery tickets are stupid because it’s a 50% instant loss … and even more if you win. But then these same people work an hour for their wage … and that’s a 75% instant loss to the government. So I guess you could say the lottery looks like a better deal than working for a wage. What’s not to love about government and its scams?

Besides Bitcoin, what forms of payment do you accept?

Derrick J: Monero is preferred. We take all forms of cryptocurrency and offer 20% if you pay for the merchandise with that currency. Yesterday, a customer bought $85 of doge-themed merchandise with Doge-coin.

We don’t take Federal Reserve Notes, credit cards, or metals. (Sorry, silver bugs. Time to realize the silver thing is never going to happen.)

MD: Offers “20% if you pay with cryptocurrency. ” Now what does that tell you? My local convenience store offers me 10% if I pay with cash for my gas instead of using a credit card. The merchants are using the same logic for their behavior. With the credit card, the merchant is being gouged 10% by the credit card company. With the cryptocurrency, the merchant is guaranteed a 20% gain … unless he’s holding it on the day it explodes. In the case with the gas, the merchant is smart. In the case of this shop … he’s a stupid gambler.

And regarding the silver? I was there in 1965 when they took the silver out of the coins. It proved the value of the coins in trade was never about the silver being a precious metal and of intrinsic value. With or without the silver, a quarter still traded for a gallon of gasoline. Today it takes 8 or so quarters to trade for a gallon of gas … again, whether they contain silver or not.

Since the value of Bitcoin fluctuates, how do you set the prices?

Derrick J: It’s easy. We set prices in Bitcoin. The bitcoin wallet on your phone will convert instantly so you can see how much things cost in terms of dollars or any other currency.

MD: You have to have a computer to use Bitcoins. When the exchange rate for dollars for Bitcoins is exponentially increasing noise you have no idea what to pay for anything … ever. Only the computer knows.

How did you choose the location for your shop?

Derrick J: We had been scouting locations for a retail shop for a month or two. While walking downtown in the Portsmouth Pride Parade this June, we passed some empty windows where a small boutique had been.

We said “This would be perfect!!” It’s 100 feet from the biggest park in town, where musical theater and concerts play daily and nightly, visible by the water, plenty of parking across the street, and adorable tourist-trap stores nearby that attract lots of foot traffic from international guests. It’s one of the busiest corners in one of the wealthiest and most happening places in the Shire. It’s the perfect location to draw in people to learn about Bitcoin.

MD: You’re also likely to find people there with their stupidity magnified by mind altering substances.

(go to link to see a picture of the shop)

You have long been a liberty activist. You have committed acts of civil disobedience (Derrick J’s Victimless Crime Spree), challenged unjust laws in court, and even spent some time in jail. Does this shop mark a shift in tactics for gaining individual freedom?

Derrick J: Yes, totally. I’ve learned through trial and error what works and what doesn’t.

Civil disobedience may be moral and make me feel good, but it is ineffective at achieving more freedom unless others participate en masse. Good luck with that — most people aren’t courageous enough to take any risks and would prefer comfortable slavery to dangerous freedom.

MD: If you can’t beat them, join them. Governments only steal 3/4ths of the fruits of your labor. Returns on Bitcoin will exceed 75% annually … until they crash. Heck, Ponzi’s scheme earned 100% … in just two months. Make hay while the sun shines.

Instead, I am taking the entrepreneurial route: offering political art and freedom-enhancing tools in exchange for cryptocurrency. The mission isn’t as much to “make money selling merchandise” as it is to grow the value of my cryptocurrency holdings by growing the network. As more and more people use bitcoin, the value of the crypto-economy grows, and the power of the central banks shrinks.

MD: Proving once more, Bitcoins are not money. The value of money never grows. And you don’t refer to it as a money-economy, so you can’t refer to it as a  crypto-economy. It’s a trading economy … and with the dollar your trading with something that shrinks 4% per year. With the Bitcoin your not trading at all. It is so deflationary, you can’t afford to give them up. I wonder if they’re going to ask this guy if “he” would trade in his own store. By his very statements, he would be foolish to do so.

This is the best way I’ve discovered to empower myself and others, by taking a small, low-risk baby step toward more financial independence (which is the most important type).

MD: … as he creeps over the cliff. Surely he’s not that stupid. He knows exactly what he’s doing. But then again, many religious people look just like him. Stupidity can be hard to recognize by looking at someones face..

Do you consider Bitcoin and other cryptocurrencies the best hope for freeing individuals from the unjust power of the state?

Derrick J: Oh, lord no. Philosophy is the best hope for freeing individuals from the power of the state, because the power and the state only exists in their heads. Without philosophy, people are doomed to continue on whatever path their ancestors’ trajectory put them on.

MD: Philosophy? How about logic? The whole power of the state comes from philosophy. It is that philosophy (brain washing) that has put people on the pied piper’s path in the first place. You just can’t make this stuff up can you!

Fortunately for New Englanders, our ancestors placed us on a slow vector toward ever-increasing respect for property rights, which continues today (in New Hampshire especially).

MD: Massachusetts is in New England isn’t it? It was the first state to cave to the money changers. John Adams (of Salem) was the greatest proponent of making the USA into the image of Great Britain … with himself as king. True, New Hampshire was one of the last to sign on … but they signed on. And now people are migrating there to form critical mass to effect secession from the union.  It is small and has a port.  See the Free State Project.

Bitcoin is packed with philosophy, whether users are aware of it or not. Bitcoin empowers the individual with privacy over their money (if they want it), reduces the power of international central banking cartels with every dollar that exits into the crypto-economy, and ultimately helps end wars as people quickly become accustomed to a deflationary currency (rather than the inflationary currencies used to finance the wars of the 20th century).

MD: A proper MOE process has absolute privacy for everyone who “uses” it. It has absolute transparency to everyone who “creates” it. And that’s as good as you can do.

Would you say a “proper” MOE process is backed by philosophy … logic … or plain ole’ common sense (we have to say ole’ because there doesn’t seem to be any common sense these days … it’s been government educated out of us). A proper MOE process guarantees zero inflation. You can’t do better than that. It guarantees free supply of money (and thus no restriction to trade). You can’t do better than that. Responsible traders enjoy zero interest load. You can’t do better than that.

A proper MOE removes “all” the power of central bank cartels by employing simple competition … which destroys their criminal business model. Crypto currency really doesn’t offer any competition at all. It’s trying to solve the wrong problem … the problem of privacy. The problem with the dollar is inflation. Crypto currency swerves in the other direction by guaranteeing trade killing deflation. It does this because of the nonsensical belief that “sound and honest” money is “rare”. It is not!

A mug depicting Bitcoin smashing the Fed.

Do you have any advice for people who want to be free, but feel it is impossible? What can people do to free themselves in your opinion?

Derrick J: Read books that inspire you. Fill your brain with ideas that energize you. Pursue happiness through a virtuous life. Challenge yourself. No matter my current situation, behind bars or on a deserted island, my journey to freedom has been one of personal growth.

MD: I wonder if I filled Derrick’s brain with the simple truth of a proper MOE process he would change his opinion. I predict he would not. Just like showing people the mysterious collapse of WTC7 does not make them question the government’s 9/11 fairy tale about the 19 cavemen with box cutters flying 767’s like they were fighter planes when they couldn’t even land a Cessna. Cognitive dissonance is a tough nut to crack.

So far, what is your favorite part of running the shop?

Derrick J: My favorite part of running the shop is seeing libertarians walk in and watching their faces light up as they realize what the store is. They see Ayn Rand, Ron Paul, and Ludvig Von Mises, a Bitcoin symbol, Gandhi, Thomas Jefferson, and “Live Free Or Die” signs plastered everywhere, and they all say some variation of “I’ve never seen a store like this before!”

MD: But they can’t (won’t) be buying his goods. He’s only accepting crypto-currency. Only really stupid people would be giving up the perpetually deflating crypto for his goods. It won’t be long before he’ll have to resort to accepting dollars and credit cards … just to liquidate his inventory. Mark my words.

Those interactions make my day.

MD: Pretty soon he’s going to realize interactions don’t make his day … trade makes his day. There aren’t enough stupid people to make his day. He has to change his model. He’s trapped, because when he changes his model, he abandons his philosophy. You just can’t make this stuff up!

Thanks so much for sharing your experience!

Derrick J: Thank you for asking!

MD: I’ll bet the interviewer didn’t trade for anything in his shop. What do you think?

Amazon over valued (draft)

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

The Amazon Con: Bulls May Be Crying A River One Of These Days

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126 comments

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About: Amazon.com, Inc. (AMZN), COST, HD, TGT

DoctoRx
Special situations, growth at reasonable price, value, micro-cap

Summary

AMZN is a stock one has to believe in to justify its price, yet current quarter results are improbably bad once again.

MD: Anyone who has used Amazon’s services is likely to be a believer. What the richest person in the world is a big holder in the company, doesn’t that say something about “his” belief in the company?

Its acquisition of Whole Foods is a case of a 200X P/E stock buying a 30X P/E stock, showing the former stock is overvalued.

The entire move from mail order (or e-mail order) delivery to stores was done 90 years ago, but there is no first-mover advantage now for AMZN.

MD: Now that is abject nonsense. Amazon began by making it easier and more efficient for buyers to find sellers and vice versa. It was just a “classified advertising” implementation on the WWW … and it wasn’t the only one. Bezos sees business as three days: day one it develops; day two it rides the wave; day three it dies. Bezos will never leave day one if he can help it.

As competition ramps in e-commerce, with big box chains with the advantage of pick up in store, AMZN may see worsening losses in its core retail division.

MD: Pretty amazing someone can see the big box chains with the advantage. “Pick up in store” is no enticement for me. Save me the trip is my enticement. I think there is a middle ground. Deliver to my nearby convenience store and I’ll pick up there … and enjoy lower shipping cost of course.

Thus, while timing is impossible and there are no certainties, risk-reward for AMZN looks poor, while many other stocks trade normally and are therefore priced for positive returns.

MD: This guy would have thought Standard Oil looked poor … and of course Microsoft and Apple and Oracle (both of which were on the ropes at one time) and Google.

Introduction – rationale for another bearish article

When the facts change, I change my mind (per Keynes). But when the facts get stronger, I carry on with a bullish or bearish thesis, and that’s the case in my humble opinion with Amazon.com’s (AMZN) stock price. This article happens to propound a bearish hypothesis, but as an example of sticking with a bullish hypothesis that is not working, on September 15, 2015, Seeking Alpha published my final Apple (AAPL) article. The stock was going nowhere, hanging around a pitiful $100, yet the title of the article was a straightforward:

Mr. Market Errs: Apple Is Unlikely To Be Stopped In Its Rise To Further Heights

In the bullet points, I argued that:

  • … facts suggest that the iPhone (and therefore Apple) may in fact be on the verge of a major, historic victory.
  • Even if that does not occur, AAPL remains an undervalued stock with strong total return potential for patient investors.”

As it happened, 8 months later, AAPL was down another 10%, and as late as July, it was below $100: but look at it now. So – I was early but (so far) basically correct.

MD: I wouldn’t touch Apple with a long stick. How in the world can they compete with a Linux based system? How can they compete with Open Source? They have to keep innovating … or they are killed by commodity providers.

I look at AMZN that way, in reverse. Timing things like this even to the year is impossible. (And, of course, sometimes I am simply wrong.)

MD: I wonder what he thinks about BitCoin. That who concept is laughably wrong on its face … the the price of a BitCoin continues to go up exponentially.

Next, a few introductory clarifications. First, the “con” referred to in the article is about the stock price, more specifically the resurrection of the 1997-2000 con game that eyeballs, or in AMZN’s case, eyeballs plus sales at near-zero profit margins, mattered to the exclusion of earnings.

MD: If you pour all your earnings into building infrastructure, are you creating a worthless company? If you expense everything instead of capitalizing it, are you creating a worthless company? If you only had to look at earnings, a financial statement would be just one line instead of may pages and many many lines.

I’ll end my comments here. This guy is going nowhere! You can read the rest of the article by going to the link at the top … repeated here.

https://seekingalpha.com/article/4092561-amazons-stock-looks-headed-waterfall#alt1

What is money?

WHAT IS MONEY?

Definition: Money is an “in-process promise to complete a trade over time and space”

Proof:

Examine trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery.

In simple barter exchange in the “here-and-now”, (2) and (3) happen simultaneously, on the spot. Any exchange of “value for value” (e.g.corn for piglets;  gold or gold backed exchange for other stuff; etc.) is in this category and does not involve money.

Money enables simple barter exchange over time and space. Thus, money is obviously “a promise to deliver”. It can be nothing else. It doesn’t exist before the promise is made nor after delivery is made”.

Money is only created by traders (like you and me buying things over time). It is not created by banks nor the governments they institute. In fact, “all” governments are just traders. But unlike you and me, they never deliver on their trading promises which create money. They just roll them over. And that is DEFAULT. And purposeful DEFAULT is COUNTERFEITING.

Banks sustain themselves on tribute collections (and all your tax payments go to the banks as tribute collections). Governments sustain themselves on counterfeiting. You give them sustenance through the INFLATION their counterfeiting generates.

We have never had a proper Medium of Exchange (MOE) process. But it is trivial to institute one. And anyone, or any group of traders, can create a “proper” MOE process. And multiple processes can co-exist and compete (by minimizing costs).

DESCRIPTION OF A PROPER Medium of Exchange (MOE) PROCESS:

The trader sees clear to make a trade over time and space and chooses to create “money” to effect the trade. For example, you or I choose to trade 360 monthly payments for a house, which we can take possession of and live in now and over the whole term of the promise and beyond.

The trader gets his promise “certified” (now bankers make you come hat-in-hand begging for what they fictitiously call a loan “of their capital” … that’s the scam). “Certification” means the trader’s identity and the terms of his promise are recorded and performance on the promise are transparently displayed to all lookers.

The certificates … first in the form of a simple ledger entry that creates the money and then transfers it to the seller … then circulate as the most common object in “virtually” every simple barter exchange. We know it as money (it may be a ledger entry; coin; or currency … but only one at a time).

The dollars we use everyday come from a “nearly proper” MOE process run by the banks and their “association”, the Federal Reserve. It has a leakage goal (i.e. INFLATION) of 2% and delivers 4% INFLATION on average. It gives its members privilege to create 10x as much money as they have … earning 4%x10 or 40% annual return … doubling “their” money in less than two years. Thus “a capitalist is simply two years”.

“A proper” process monitors performance on the promise (e.g.: did the trader make his monthly payment). If he did, all is well in paradise. If he didn’t, the process “immediately” makes an INTEREST collection of an amount equal to his DEFAULT … reclaiming the money as if he paid it back.  This guarantees perpetual perfect balance of the supply and demand for the money … it guarantees perpetual zero INFLATION.

The operative relation is: INFLATION = DEFAULT – INTEREST = zero.

Who pays the interest? Non-responsible traders do.  An existing well known model is the Mutual Casualty Insurance Company. Here INCOME = PREMIUMS – CLAIMS = zero. The money is made on the investment income and works to reduce premiums actuarially. Another distinction with the money process is that “all” members of the insurance group pay PREMIUMS. With a proper MOE process, responsible traders  (i.e. traders like you and me who never DEFAULT) experience zero INTEREST load over the duration of their promise.

Note: For any given money creating trade, no money exists “before” the trading promise is certified, nor “after” final delivery (delivery returning the money which is then destroyed). And since “all” money is created in this way, “all” money in circulation is an “in-process promise to complete a trade over time and space”.

With a “proper” MOE process, banks are “competed” out of existence. A “proper” MOE process could be instituted right now (unless the governments they institute outlaw it) and banks would have to change or go out of business. And since INFLATION is perpetually zero, the governments “must” sustain themselves only on tax and fee collections. They cannot counterfeit. Irresponsible traders are drummed out of the marketplace.

What could be simpler and more obvious?

What hoax could be larger than that leveled on virtually all of us by the banks and the governments they institute?

Why did WTC7 fall down?