If The Fed Starts A Digital Currency, It Had Better Guarantee Privacy Tyler Durden’s Photo by Tyler Durden Tuesday, Apr 05, 2022 – 08:00 PM
MD: As always, Money Delusions will use the true definition of “real” money to annotate this article. The article appear in ZeroHedge.com as “If the Fed Starts A Digital Currency, It Had Better Guarantee Privacy”. And the title itself reveals confusion about what money is…and what its characteristics are. This begins by knowing what money is (i.e “an in-process promise to complete a trade over time and space”); how money is created (i.e. transparently in plain view by traders like you and me); how money is destroyed (i.e. also transparently by the trader delivering as promised); what happens if the trader “defaults” (i.e. “interest” of like amount is immediately collected); and how money trades in the interim (i.e. anonymously as any other object of simple-barter-exchange). Let’s get started:
Authored by By Andrew M. Bailey & William J. Luther via RealClearPolicy.com,
President Biden’s latest executive order calls for extensive research on digital assets and may usher in a U.S. central bank digital currency (CBDC), eventually allowing individuals to maintain accounts with the Federal Reserve. Other central banks are already on the job. The People’s Bank of China began piloting a digital renminbi in April 2021. India’s Reserve Bank intends to launch a digital rupee as early as this year.
MD: They immediately exhibit that they don’t know what money is. “Banks” have nothing to do with “real” money at all. It is the most obvious corruption of real money. And “digital” is just one of many forms of money.
Most commonly, money is just an entry in a ledger. In some cases it is in the form of coins and currency…both carefully designed to resist counterfeiting. In some cases it is in the form of a check (i.e. against a demand deposit). And we already have a fairly digital form of money in “debit cards”…a link to your ledger records that you carry in your purse. “Credit cards” are not an example of money. Rather, they are an example of “money creation”.
When you charge something on a credit card, “you” are creating money…a promise to complete a trade over time and space. When you use a “debit card” you are merely submitting proof that you hold some previously created money.
A CBDC may upgrade the physical cash the Federal Reserve already issues – but only if its designers appreciate the value of financial privacy.
Cash is a 7th century technology, with obvious drawbacks today. It pays no interest, is less secure than a bank deposit, and is difficult to insure against loss or theft. It is unwieldy for large transactions, and also requires those transacting to be at the same place at the same time — a big problem in an increasingly digital world.
MD: And before cash we had the tally stick…which claims to be the best implementation of money. And tally sticks were “real” money. They represented a promise to complete a trade over time and space. They worked better than gold. In fact, they could claim any kind of “backing” the trader’s agreed to (e.g. pork bellies). But nobody “traded” tally sticks. Thus, in that respect they weren’t money at all. They really were close to “crypto” in that respect…but much cheaper to create. You could create a tally stick with a twig and a knife. Today’s crypto requires insane amounts of electricity waste to create. They call it “proof of work”…which of course is nonsense.
Nonetheless, cash remains popular. Circulating U.S. currency exceeded $2.2 trillion in January 2022, more than doubling over the last decade. The inflation-adjusted value of circulating notes grew more than 5.5 percent per year over the period. And U.S. consumers used cash in 19 percent of transactions in 2020.
MD: Actually, the money changers are revealing the imminent collapse of cash. They hold lots of cash (counterfeited by government) and are doing everything they can to exchange it for real “property”. I get a dozen calls a day from “so-called investors” who want to “buy” my property. It’s a game of musical chairs. They don’t want to holding it when the “reset” comes as they know it will be instantly worthless. And also note, with “real” money, inflation is perpetually zero. No adjusted valuation is ever necessary.
Why is cash so popular, despite its drawbacks? Cash is easy to use. There are no bank or merchant terminal fees associated with cash. And, most importantly, it offers more financial privacy than the available alternatives.
MD: In actuality, cash is “not” easy to use. You almost never see it being used…even in restaurants and bars. I use it in bars just to keep score. I take a certain amount of cash, which when I’ve used it up I know I’m about to have had too much to drink. I spend lots of time explaining to other patrons why I can’t let them buy me a beer.
When you use cash, no one other than the recipient needs to know. Unlike a check or debit card transaction, there’s no bank recording how you spend your money. You can donate to a political or religious cause, buy controversial books or magazines, or secure medicine or medical treatment without much concern that governments, corporations, or snoopy neighbors will ever find out.
MD: With a “real” money implementation, there is no need for banks to be involved. All that is necessary is a “block chain” like implementation that resists the “three general problem” and counterfeiting. And when properly implemented, the “block chain” implementation is cost free. It has no use for “proof of work”. It “knows” it’s keeping track of performance on promises.
Privacy means you get to decide whether to disclose the intimate details of your life. Some will happily share. That is their choice. But others will prefer to keep those details private.
MD: But keep in mind, while “real” money used in trade is “always anonymous”, it’s creation is always “open and transparent”. Awareness of this distinction is crucial.
In a digital world, personal information can spread far and wide. And it can be used to exclude or exploit people on the margins. The choice about what information to share is important. For some, flourishing depends on carefully choosing how much others know about their politics, religion, relationships, or medical conditions.
Financial privacy matters just as much as privacy in other areas. What we do reveals much more about who we are than what we say. And what we do often requires spending money. In many cases, meaningful privacy requires financial privacy.
MD: Again, keep in mind that money is only concerned with the problem of “counterfeiting”. It cares not at all who is using it and for what. But people using it must know and expect it is genuine…i.e. not counterfeited. And of course we all know the principal counterfeiters of money are governments. For a “real” money process to exist, it’s operation must be transparent and impervious to any attempts to control or to counterfeit it. It is simply about record keeping.
Privacy also operationalizes the presumption of innocence and promotes due process. You are not obliged to testify against yourself. If law enforcement believes you have done something unlawful, they must convince a judge to issue a warrant before rifling through your things. Likewise, financial privacy prevents authorities from monitoring your transactions without authorization.
MD: Law doesn’t apply to a “real” money process. But open communication and mitigation is crucial. Again, it’s about making counterfeiting impossible. And when detected it must reveal who did the counterfeiting; see that the counterfeiting doesn’t happen again; and treat the counterfeiting for what it is… a “default”. And thus it immediately mitigates it with “interest” collection of like amount. This must be totally transparent…so the marketplace can ostracize the perps. Who pays the interest? Other irresponsible traders.
The recent executive order, to the administration’s credit, notes that a CBDC should “maintain privacy; and shield against arbitrary or unlawful surveillance, which can contribute to human rights abuses.” But a reasonable person might worry that the government is paying lip service to privacy concerns.
MD: A principle “axiom” must be observed at all times. If you are considering a government solution to any problem, you are still looking for a solution. Government is “never” the solution to any problem. It is just a magnifier of the problem.
A recent paper from the Fed, offered as “the first step in a public discussion” about CBDCs, suggests the central bank has no interest in guaranteeing privacy at the design stage. Instead, it maintains that a “CBDC would need to strike an appropriate balance […] between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity.” The Fed then solicits comments on how a CBDC might “provide privacy to consumers without providing complete anonymity,” which it seems to equate with “facilitating illicit financial activity.” A U.S. CBDC, in other words, will likely offer much less privacy than cash.
MD: No central entity (especially a central bank) is ever involved in a “real” money process. Rather, it is the “process” that is the entity. As such, the process is universally used and totally transparent to all traders at all times.
We do not deny that financial privacy benefits criminals and tax cheats. Such claims tend to be exaggerated, though. In reality, it is a small price to pay for civil liberty. That due process applies to everyone — criminals included — is no reason to scrap the Fourth or Fifth Amendments.
MD: Taxes implies government…so it is a non-starter. If government participation was ever a valid option, it would be the “only” viable option. You would pay taxes (and only taxes) for everything. Your gasoline, your groceries, your clothing…all would be free. You would just pay tax and it would be covered out of that. Some people call this communism. Some call it insurance. It’s all nonsense.
Policymakers may be tempted to compromise on financial privacy when implementing a CBDC. Instead, they should attempt to replicate the privacy afforded by cash. Like non-alcoholic beer, the Fed’s “digital form of paper money” would superficially resemble the real McCoy while lacking its defining feature.
MD: Policy is the the marker here. No process is every properly governed by policy. The closest we should ever come to adopting policy is the “golden rule”. Policy is different from process. Money is a “process”. It cares nothing about policies like full employment and setting inflation at 2% (while continuously failing by a factor of 2).
There is only one “currency” that can’t be improved upon. That is a currency that is the product of a “real money process”. Once this currency is instituted, no further improvement is possible. It begins with knowing what money is.
Attributes of this “perfect” currency, all the time and everywhere are:
Free supply of money
Perpetual zero INFLATION
Zero INTEREST load on responsible traders
Perpetual 1.0 exchange rate among currencies
Zero time value of money
Why don’t we have this perfect money? Because bankers don’t allow it.
First, they claim 10x leverage over you and me. You “save” a dollar with them, they “loan” out ten dollars. Thus, if you make 4% on your money, they make 40% on your money. That’s a pretty big deal. To do this they put in a dollar of capital and get certified by the state (that they create). Their money doubles in just 2 years. Your money takes about 17 years to double. They call that “capitalism”. Neat, huh? Look mom, I’m a capitalist.
They arbitrarily collect tribute (they call it INTEREST). They allow the state (which they create) to counterfeit (states call it Roll Over) the money resulting in higher prices (they call it INFLATION). And they never report DEFAULTs. That’s like an insurance company arbitrarily setting PREMIUMS; never reporting CLAIMS.
Money is provably “an in-process promise to complete a trade over time and space.” It is always, and only, created by traders like you and me. For example, when we buy anything on “time payments”, we are creating money. And as we make those payments were are destroying money.
The proof is in examining trade. Trade happens in three steps: (1) Negotiation; (2) Promise to Deliver; (3) Delivery as promised.
In simple barter exchange, (2) and (3) happen simultaneously…on the spot. With money, (2) and (3) happen over time and space.
For example, we buy a car with 60 monthly payments. We create the $30,000 and give it to the seller…and he gives us the car. Then, each month we recover (earn) and destroy $500. After 60 months, we have recovered and destroyed the full $30,000. We have kept our promise.
But what if we fail to keep our promise? What if we miss a payment or two? This is where the “real money process” comes in. The process perpetually monitors everyone’s performance on money-creating-transactions like this. Missing a payment is known as a DEFAULT. You are now an “irresponsible trader”. That DEFAULT is immediately made up by an INTEREST collection of like amount. Who pays the INTEREST? Irresponsible traders (according to their propensity to default) do. If you make up the DEFAULT, you get the INTEREST back.
Immediately mitigating this DEFAULT guarantees perpetual perfect supply/demand balance of the money itself…i.e. zero INFLATION. Thus, there is no domino effect when you DEFAULT. There is just the automatic negative feedback mechanism of increased INTEREST load.
The operative relation is: INFLATION = DEFAULT – INTEREST = zero.
You are familiar with all these terms. However, you have been taught to believe that INTEREST is the “time value of money”.
Bankers claim that when there is “too much money in circulation”, they can claim higher INTEREST “tribute” from you. And when there is too little, they can claim less. Looking at the relation you quickly see there is no justification for this whatever. This allows them to manipulate the money…they call it the “business cycle”. And they make no mention of DEFAULTs at all. That’s like reporting COVID “cases” and not mentioning COVID “deaths”…which of course government is doing right now!
You can see from the relation that the “time value of money” is perpetually zero. A dollar today is worth exactly the same as a dollar 10 years from now. It trades for the same stuff.
The so-called “sound money” people claim gold (or something rare) is the basis of sound money. Others claim proof of work (Bitcoin…proof of wasted electricity) is the basis of sound money. You are learning here how foolish they are.
Let’s consider the unit of money to be a HUL (Hour of Unskilled Labor)… not a Dollar or Mark or Yen or Euro…or any other arbitrary and meaningless unit. We choose this HUL unit because we are all implicitly aware of its value. It’s what we, as high school students, typically traded for money. It trades for a certain size hole in the ground…regardless of when a high school student digs it.
Contrast that with the dollar. In 1960 when I was in high school, a HUL was worth $1.50. Today it is worth about $15.00 (minimum wage). However, with a “proper money process” we don’t want this to ever change…a HUL is a HUL is a HUL…anytime and anywhere.
Further, in 1964 a quarter contained 90% silver and traded for a gallon of gasoline. In 1965 a quarter contained 0% silver…and still traded for a gallon of gasoline. Obviously, the silver played no role in the trade. And today, you need 10 quarters to trade for a gallon of gasoline. No quarters traded today contain silver. The “sound money” people have hoarded all those. And the government loves it. All those quarters were retired…and they didn’t have to pump any gasoline in exchange. They do the same thing now with “collector” quarters (different stamping for each state). They’ve done it with stamp collecting. And they do it with the lottery…prey on the stupid.
Our HUL can only trade for the same size hole in the ground if we “guarantee” perpetual perfect balance of supply and demand for the HUL itself. And the process guarantees that.
Before you make your car-buying-promise, no money exists for that promise. After you deliver on your promise, no money exists for that promise. In the interim, the HUL you create goes into the mass of HULs we call the marketplace. It is the most common object of simple barter exchange. It enables us to make trades over time and space.
And obviously “all” those HULs represent a “promise to complete a trade over time and space”. And obviously “all” of them are created by traders like you and me.
Ulrich Jurgens
·
Tue
Businessman, expert on governments and politicians.
“Crony Capitalism” Is In Fact Fascist-Socialism
[MD] This is an article I tripped over in Quora. As I scanned it, it seemed to be an example of how a false premise can get a pontificator out of control. Let’s see how this article stands up against what we know money to be. As usual I will intersperse my comments so the context will not be lost. My comments will take on this general unformatted font.
To begin I’ll define the terms: Capitalism: The root of this word it “capital”. The antonym is “labor”. Capital is a substitute for labor. I can make a shovel (create capital) as a substitute for labor (digging with my hands). I can then make the choice to substitute some capital for some amount of labor. I can dig with the shovel. The result is an improvement of both labor and capital…I can produce a hole faster this way. It’s a synergism.
Crony: Crony to me means “privilege”. A common definition is “a close friend or companion.” As it relates to capitalism, I prefer the “privilege”. A banker, in our economy has a 10x leverage privilege over the rest of us. He is a crony capitalist. He’s not employing capital…he’s employing privilege. I’m not privilege after I create my shovel. However, I do have a “fair” advantage. A mortgage banker once said to me: “All I want is a fair advantage.” What he really wanted was a “legal privilege”.
Fascism: Fascism is private ownership of the means of production with government control over this ownership.
Socialism: “To each according to his need; from each according to his ability”. In practice this is a “planned/controlled society”. How the planners are chosen is not very important.
Money: Follow the link above “what we know money to be” for this one.
Now, on to the article.
When Milton Friedman said that the companies’ goal must be exclusively to generate profit (as long as they playing by the rules (meaning, they aren’t scammers)), illiterate people instantly accused him for being greedy, not caring about the nature, the planet, the poor people, etc., aka the usual propaganda.
[MD] Friedman, like all economists, are easily proved wrong. However, like all economists, they will never agree on what constitutes a proof. So here we must resort to “demonstration” and “illustration”. Let the reader decide. I submit that a companies goal is to gain leverage over a problem. It can do this in a number of ways: It can convert labor into capital. It can borrow capital and/or labor and control its production. It can form a collective by giving away or granting a share in the enterprise. And it can do any combination of the above. But it’s about trading. And if you make these tradeoff and don’t come out ahead (i.e. make a profit) as a result, you will fail in whatever proposition you are trying to accomplish. Like money, profit is not a bad thing. But unlike money, profit is essential to survival. You “must” increase your value through trade or you won’t survive.
His statement was the answer to the question whether or not a company should take responsibilities for the community, the society it is in, like “supporting poor people”, “giving charities” or organizing specific events out of the profit territory (because remember kids, profit is EVIL in our new, all-equal commie hellhole).
[MD] What someone does with their excess value has nothing to do with this subject. But when some entity takes control of a portion of your value, what is done with it “is” of importance. For example, government takes 3/4ths of what we earn. With it, it has been able to make 3/4ths of us dependent on government. How? By claiming to be benevolent. If you choose government as the solution to any problem, you are still looking for a solution.
To understand the issue, we must examine what is the economical definition of profit, because many peoples’ understanding is that profit is simply “gaining money”.
[MD] This is the first mention of that magic word “money”. I’ll predict that Ulrich is clueless about money. Let’s see.
But this is only one side of the coin.
[MD] Interesting choice of words (coin). It is, after all, just money in a durable form. I doubt Ulrich will tell us where coins come from. Hint: They trade labor for capital and then have value imposed upon them. Ideally, as regards money, coining consumes no labor or capital.
Suppose you’re a scammer, like Jordan Belfort (I mention him many times simply because he’s famous), only, you’re doing it on a much greater scale, like George Soros.
Now what do you do?
[MD] Jordon Belfort: Jordan Ross Belfort is an American author, motivational speaker, former stockbroker, and convicted felon. In 1999, he pled guilty to fraud and related crimes in connection with stock-market manipulation and running a boiler room as part of a penny-stock scam. Belfort spent 22 months in prison as part of an agreement under which he gave testimony agains…
George Soros: George Soros, Hon FBA is a Hungarian-born American billionaire investor and philanthropist. As of May 2020, he had a net worth of $8.3 billion, having donated more than $32 billion to the Open Society Foundations
I submit that both of these gentlemen accumulated their so-called wealth through trading. I submit that that wealth came predominately through trading for “leverage”. A person running a restaurant trades for leverage with his first hire.
You technically rob people by the means of lying. You gaining money without giving anything in exchange.
[MD] By definition, a trade is a perfect exchange. Both parties benefit by exactly the same amount or the trade doesn’t take place.
It is essentially a money transfer and nothing else.
[MD] It “is” something else. Money need not be involved at all. We who know what money is see “money transfer” as simply “simple barter exchange”. It is value for value. And we know “creation of money” is different. That is making a promise spanning time and space. See how easy it is to discriminate meaning when you know true meaning?
The important thing is that no value has been created through the process, except that your victims now became a little bit more wiser, preventing further scams in their own lives.
[MD] Is Ulrich disproving his own postulate?
Now take it to the extremes: you are the ultimate scammer of the world, there is no limit on how much people you can scam, so you transfer money from millions upon millions of people to your own bank account.
[MD] Taking it to even greater extreme, you get people to “die for their country”. We know money acquired in this fashion (i.e. trade rather than creation of counterfeiting) is just simple barter. Some people are better traders than others. But all trades are perfect…value perceived for value perceived.
Suppose you scammed an entire country, and you wiped off everybody’s bank account, but let’s suppose you live in the same country. People are bankrupted, the economy has been destroyed, nobody produces anything, essentially the whole country is just a big BLM / Antifa protest now.
So you have a big pile of money, only, you cannot buy anything with it, so at the end, you successfully scammed yourself.
[MD] An interest characteristic of money: If you have all of it, you have none of it…your money is worthless.
This is because money consists of two things: the body of it, and the goods and services you can buy with it, in other words: its buying power.
[MD] Here is direct and open evidence that Ulrich is clueless about what money is. If we had a “real money process” and the money was denominated in HULs (Hours of Unskilled Labor), this would be easier for Ulrich to understand…and it would be unnecessary for him to write about it.
Having said that, what profit can you have when you destroyed the buying power of the money you scammed out of the people? Can having a huge pile of colorful papers be considered as “profit”?
I don’t think so.
[MD] Think again Ulrich: In a “real money process”, money never loses (or gains in) its value…INFLATION of the money itself is zero.
So what is profit?
Profit is having the “complete” money, meaning, its body and also its buying power (which emerges from our social law, which many so called “economist” and self-proclaimed “economist” busily ignoring).
[MD] Profit means being able to take the result of a trade and trade it for more value (value as perceived by you…the value to your trading partner is immaterial).
This means you can’t have real profit by scamming the people, only when you provide values in exchange for values. You help me, I help you, because two working guy can achieve more than twice as much as one. This is how the economy works in a nutshell.
[MD] What Ulrich refers to here is “synergism”. An economy is viewed as more efficient the more it involves synergism…that is until it collapses by no longer being an economy. A good way to look at issues is by examining the limits: no synergism…no economic efficiency but a stable economy; maximum synergism…no economy at all.
Now of course the ultimate scammers of this planet are the politicians, and this alone is the reason why they constantly have to print money: because the buying power of money is just constantly has been damaged by them over and over. The economical fallout due to this covid-scam is a fine example of this.
Tell this to anybody who thinks that politicians are useful, and the economy is “more complicated than that”.
[MD] Alternatively, “know what money is”. Institute a “real money process” and this condition cannot exist.
It isn’t. They just pretend that it’s complicated to scare you away from learning it, and if you try, you going to face the government’s “Keynesian”, shaman-economics, which is really more complicated than anything, simply because it’s a scam.
[MD] Keynes was clueless about money… as were Mises, Friedman, von Hayek, Samuelson, and all other economists. What would you expect?
Again, you don’t generate profit while you destroy the buying power of your own money. You just collect colorful papers. This isn’t profit. So the only way to go forward is to generate value through the process, to produce something for which the people pay for you voluntarily. This way, you collect the body of money (colorful papers), and you also collect the buying power of it.
[MD] The only “involuntary” trade is a trade with government. No such trade has been described here.
The reason why so many people have hard time to understand the money concept is because they ignore the idea of buying power. It is because they can only touch the buying power when they exchange money for goods and services, but not before, thus their mind is in the “can’t see, doesn’t exist” mode.
[MD] Anyone who has followed “MoneyDelusions” at all knows that the “use of money” is simple barter exchange; that the “creation and destruction of money” is always done by traders (like you and me buying a house or car on time…or objects with a credit card). The idea that someone can hold “all the money” is not possible with a real money process. Any trader can create new money at any time. And money supply is in perpetual perfect balance with demand for money.
But it is more than obvious that buying power exists, otherwise nothing what the humans make could exist around you.
Now what is crony capitalism?
[MD] We know what crony is … a friend. And we know what capitalism…substituting capital for labor. So crony capitalism is choosing capital over labor among friends. I see nothing wrong here. Let’s see what Ulrich sees.
They say crony capitalism is when the CEO bribes politicians to fuel himself by tax money (which appears to be free money to him), simply because this is one way to gain more profit. But as we said, this is money transfer, so it hurts money, therefore it isn’t profit (or at least, not on the long term).
[MD] “All” tax money goes to the money changers in the form of INTEREST payments. Governments (instituted by money changers for their own protection) are sustained by counterfeiting (i.e. INFLATION). With a real money process, this isn’t possible.
Has value been generated through the money exchange? No? Then it’s robbery, not capitalism.
[MD] Counterfeiting is essentially robbery. In a real money process, when detected, counterfeiting (purposeful DEFAULT) is met immediately by INTEREST collections of like amount. It is immediately exposed and the perp is ostracized.
Is the whole thing voluntarily? No? Then the same holds true.
You don’t really generate profit when you accept tax money. You cannot hurt money for profit, because it is like saying you have to wreck your car to make it better. It is insane.
[MD] In a real money process, government “must” be sustained only by fees and taxes. Fees are direct payment for services received (with government usually with no competition and no alternative). Taxes are trades demanded by government for the general good. I can think of very few general goods. But I do view recording (and protection of such records) of property ownership to be a general good. Interestingly, while county clerks and courthouses have this duty, it is really effected through private title companies. The old method of “abstracting” became unworkable long ago. Traders created an alternative to which the government could not compete. The same is true of “a real money process”. Government cannot compete real money processes.
Therefore those companies whose goal exclusively is to generate profit are the only companies who helping to the economy. Those who offering free stuff by the means of charity are damaging themselves, thus their profit making ability, therefore at the end, the economy. Why would you give money to charities when you can make more money with that money which going to help everybody on a level when you inject it into the economy?
[MD] Companies have a perpetual profit motive. It’s like running downhill. Once you start, it takes “work” to stop. But virtually all companies trip and fall eventually. It usually happens when they get so top heavy they can no longer stand.
I mean what can be a bigger charity than producing buying power?
The answer is: nothing.
[MD] Does Ulrich’s meaning change if we say “trading” power instead of “buying” power? I submit that your sole purpose for living is to “be of value”…i.e. to have something to trade and be able to trade. Without that, “you cannot live!”
By making new goods and services (or making the same in new places where they don’t existed before), you upgrade the money, because that money now can buy more things, thanks to you. This is what we refer to when we say “you making money”. In reality, you make the buying power of money.
[MD] This is very sloppy use of the word money. “Making money” comes from the misunderstand of what money is. To “make” is to “create” and to “unmake” is to “destroy”. Money is never everlasting. It is perpetually being created and destroyed. If you “make the buying power of money”, what do you do when you destroy money (i.e. deliver on your promise that created the money in the first place). Know what money is and the above paragraph is silly.
And guess what? How many people have money in their pockets? Well, almost all of them. And you just upgraded their money with them having nothing to do with it. They didn’t help you, yet, you helped them, since they can now use another goods and services, thanks to you.
[MD] Is this the tail wagging the dog? With a real money process INFLATION is perpetually zero. You can trade it now for a certain size hole in the ground. Or you can hold it and trade at any later time for a hole in the ground of exactly the same size. What others do with their money matters not at all.
Charity – compared to this – is an amateur approach.
[MD] There is no such thing as “altruism”. Thus, there is no such thing as charity. All traders are making perfect trades (in their own eyes) at all times.
So there is no such thing as “crony capitalism”. That is socialism, because it’s a mandatory money transfer without creating value.
But it’s still not the whole truth.
Have you ever wondered why already successful people need government (tax payer) founding? I mean, why would already billionaire companies need free money, like Google, Twitter and Facebook? They are on the top already. And it is not as if they can’t make more money on their own.
[MD] There are conflicting issues here. “Government founding” is done by money changers for their own protection and advantage (e.g. 10x leverage). With a real money process there is no reason to found government. With a real money process “all money is free…any responsible trader can create it any time he sees clear to completing a trade over time and space”. In actuality, in a real money process, the larger the entity, the more difficulty they would have “creating” money. Further, the more difficulty they would have becoming large. A level playing field for money creation would contain them through natural competition.
Now let’s get back to the profit making business-approach for a moment.
If you create a social platform like Twitter for profit, your goal is to have there as much people as possible. You want them to have conversation with each other, and it absolutely doesn’t matter what kind of conversation is that. You just want people to talk on your platform about anything. This will attract companies who can advertise through your platform, thus you going to gain profit.
[MD] It’s a well known axiom: If a product is free, “you” are the product.
The more the people, the more the profit.
So what is the point of censoring or banning them in your platform? You make them to stop having conversations, thus you loosing money.
Having said that, Twitter’s goal is not purely to make profit, and we explained why it is a bad thing.
Banning somebody is an important feature on a platform. But it has to be executed by individuals, not by the company. If you don’t like what somebody says, you can ban him or her from your account, so YOU don’t see him or her anymore. But what if others are still want to see it? Nothing. It is their business.
[MD] Thought experiment: A competitor to all the entities you deplore exists. The reason you deplore them is not found in the competitor. Who are you going to trade with? Let the traders make the rules. And remember, laws won’t fix what troubles you. Laws merely dilute principles…and that’s not a good thing.
Suppose there is a group on Twitter which is openly advocating ritual sacrifice.
If you ban them, you just simply not going to see what they’re doing, but they going to do it anyway.
On the other hand, if you let them to do whatever they want to do in your platform, you expose them to the whole world, so the world has a chance to take them down.
Are they Nazis? Good. See, there are a bunch of Nazis, and you can check who’s with them, and therefore you can avoid them and / or attack them. But silencing them only makes them hidden from the public view, which is a bad thing, since you don’t want Nazis to lurk around you without you knowing it.
[MD] The Nazis were revered…until they were ganged up on. History was rewritten and they are now reviled.
So it is not just bad in terms of profit, but also bad in regards to the society we live in.
[MD] A company as a societal object is a figment of your imagination…planted their by someone gaining in that initiative.
Do you really think that such an intelligent person like the CEO of the Twitter who made such a giant company, can’t figure this on his own already? It is not me who has to explain this to him. He already knows it.
So why he’s doing it?
[MD] It’s very simple. He’s making a trade which he sees as benefiting himself. However, his trading partners don’t see the benefit in his censoring them. So what will they do? They’ll trade with the competition.
Now back to the track: why an already billionaire company would need free (tax) money? It is because they are that greedy, right? It is “easy” money.
[MD] A company is made up of many individuals being leveraged by a smaller collection of individuals being leveraged by yet a smaller collection of individuals. Everyone in the company is making trades in their own best interest. The higher you move up the food chain, the greater the leverage. Wealth is about gaining “leverage”, not money.
Well, no. As we said, this way they damaging the economy, thus their own money. And they are pretty awesome in making money, so they don’t need anything for free. It is entirely the unskilled slackers who constantly need free money, not the millionaire and billionaire entrepreneurs.
[MD] With a real money process, all responsible traders (those who don’t DEFAULT) can create money freely. That makes them all equally powerful in that regard…and thus not powerful at all.
So what really happens is that it is the government who blackmails the company when they reach a certain amount of power (influence).
[MD] Remember, government is “of the money changers, by them, and for them.”
Think about it: government takes money from the people by force, giving nothing in exchange but the illusion if civility.
[MD] The people are like sheep. They have no illusions. And the Ulrichs of the world aren’t much help. They are clueless…but loud.
On the other hand, companies producing stuff for which the people pay voluntarily, because that good or service is just awesome.
So companies and the government are two completely opposite things. In fact, they are each others enemies. The more buying power you have, the less you need “free stuff” from the government, so the government becoming more and more “obsolete”. And this is exactly why the government are trying to stop the company.
[MD] As an exercise to the reader: Knowing what you know about “money” and a “real money process”, dissect the above paragraph.
It does it by offering the company an ultimatum: you either work for us, or we drive you out of business.
And they can do it, because they are the lawmakers.
[MD] And a move to the “rule of principles” rather than the “rule of law” dilutes that advantage by 40,000 each year. That’s how many laws are created to define the only real principle needed…that being the golden rule.
Companies don’t need governments, but governments need companies to stop being free because they need you to need them.
So it is like saying that Hitler, Stalin, Mao, Pol Pot were all controlled by the super rich people in the shadows, whereas in reality, THEY were the people who controlled and / or destroyed the companies.
[MD] This is easily proven empirically to be wrong. It just takes time and examination of the “real” history to see where power originates and hides.
And what about kings and queens? What about the emperors? Were they all subject of capitalist manipulation? Where they in the hands of the “oil interests”?
[MD] Read about Genghis Kahn for the answer. He just went from day to day and dealt with his issues. He built an organization from scratch.
In reality, nobody has more money than the government. They have that much tax income that they can spend $50 million in every seven seconds, not to mention their infinite ability to print money (no, the FED is not a different institution than the government, they just pretending to be).
[MD] And so the enterprising will find ways to be a part of government. And they will find ways to be at a higher and higher level of government. And they will actively fight those who suggest alternatives to government. With 3/4 your earnings taken by government and 3/4ths of us dependent on government, we are past the tipping point. Let those ratios grow to 100% and government self destructs.
Do you really think you can bribe key politicians with your ridiculous billions in these circumstances?
[MD] As everyone knows, everyone has their price.
Oh come on now..
[MD] The version I get was “taxes are the price we pay to be civilized”. I am over civilized.
So essentially governments are gaining control over the company by blackmailing them, thus they don’t have to be afraid of them anymore.
[MD] It’s interesting. The further and further you go the less you know who “them” is. Those who many regard as “them” weren’t even born when I recognized this problem. How did they become “them”?
The biggest mistake these entrepreneurs making is that they let this to happen. Except in the Atlas Shrugged novel, they hardly do anything against politicians. This is because they are businessmen, and not some kind of freedom fighters. They don’t have the intention, nor the guts to do it. They just enjoying their money, and surrender to the forces of government when the time is coming.
[MD] Everyone is a trader. Everyone always acts in their own self interest.
The other big problem they face is that the public aren’t on their side. Criminals like AOC, Sanders and all the communists are doing everything to make you believe that rich people are greedy robbers, Christianity helps you to understand that they going to the hell anyway, and the Greenpeace explain to you that they destroying the planet completely, whereas nobody can be more greedy than who asks for money which isn’t theirs, poor people are already in the hell of poverty on Earth, and nothing can be more polluting than the cheap Chinese garbage the world’s poor people buy which ends up in the trash days after.
[MD] Remember, all religions are just forms of government. And remember, all things lead toward globalization (and maybe later solar systemization). The antidote is always “iterative secession”. A real money process is the only process I know that has a natural negative feedback mechanism. That’s what keeps things from blowing themselves up.
Who would stand up for them in these circumstances? That’s why Ragnar Danneskjold in Ayn Rand’s novel described himself as the friend of the friendless.
Sad, very sad, but true.
[MD] Just another trader acting in his own self interest. It’s interesting that Ayn Rand had so little control over her own behavior.
I often wonder if the world ends before the people realize that capitalism is the one and only way to live, and rich people are their biggest friends, instead of their biggest enemies as the scammers claim. Because believe it or not, our entire future as human species are depending on this simple realization.
[MD] People can’t tell you what capitalism is, let alone that is is the “one and only way to live”. Think about it. Capitalism is choice of a trade between a machine and labor. That’s a very wide spectrum of trades. Socialism is making the same trade. There is no difference.
If the government control the companies by force, this is called fascist-socialism. This is exactly what Hitler did in his time, using the very same methods as the politicians nowadays.
[MD] Brilliant. Ulrich understands the meaning of fascism. But socialism is different from fascism. In a commune, socialism is a choice. Taken globally that choice disappears.
Thomas E. Woods: Hitler’s Economics:
[MD] I have had written debates with Woods. They’re very short. He runs away.
It is so sad that even bright-minded people like Yaron Brook who openly advocates Ayn Rand’s ideas are fail to notice this. He says Twitter has a right to do anything on his platform, because it owns it.
[MD] Which begs the definition of a “right”. I submit that a right is a “defended claim”. Make no claim, you have no right. Make a claim and fail to defend it, you have no right. That’s why I think things like “god given rights” and “human rights” are on very shaky grounds. I don’t recognize either of them. And the Constitution gave up total defense of it’s Bill of Rights with its “commerce clause”. Some defense!
Well, if they are fueled by tax money, then Twitter isn’t really owns itself. It is more likely YOU who have a share of the company, like it or not.
[MD] … reinforcing the reality: If a product is free, YOU are the product.
Again, a capitalist doesn’t want to censor his own platform. And what Twitter does is that it let anybody to talk about killing police, being a pedophile, being racist against white people, looting and killing, if they’re Antifa or BLM members. So their censorship is highly selective.
[MD] Earth to Ulrich: “All” censorship is highly selective.
[MD] I keep wondering what gives white people this huge advantage. Africa was once populated exclusively by black and dark brown people (we are all people of color) with nappy black hair and full lips. Alternatively, Scandinavia was populated primarily by fair complected people with blue eyes and straight blond hair. On average, Africa has more abundant resources and bountiful environment than Scandinavia. Conjecture leads me to believe strength (and superiority) comes from adversity. Empirically, it is obvious to me that we are not all created equal. I am white and given a choice would choose to be. Is that not the case for these so-called people of color? And shouldn’t we be allowed to choose to live together…or chose to live separately and trade together…or choose not to trade with each other at all? Shouldn’t the golden rule apply universally?
This creature has more than 100k followers and probably never going to be suspended ever, despite the craziness he or she advocates.
[MD] Is not the number of followers a measure of value? I have just a couple of followers. My source of value is different than this “creature”s.
[MD] Start your own Twitter and make your own rules. Personally, I don’t even understand Twitter. I therefore don’t use it.
The other insanity is when they say the owner has the right to require its customers to wear masks.
Sure, except if he says you can enter without masks, his shop going to be closed tomorrow, probably forever, by the very same fascist-socialist methods.
[MD] As I’ve noted before, a “right” is a defended claim. I claim masks don’t work and I don’t wear one. If someone disputes that I say the mask is for my protection (and thus my choice). I tell them they are safer if they wear two. A mask is to a virus as chicken wire is to a mosquito. I choose not to be openly stupid. But if I need to buy food, in most places I “must” wear a mask. But in these same places I may call my order in and they pick it…I have an alternative to wearing a mask. You might be interested to know: when I started my life, this is how “all” grocery stores worked. There were no “super markets”. Things change. Work with these changes. Embrace them or resist them as you choose. In some places religion is a choice…in others are requirement. Nowhere is it non-existent…ridiculous as the concept is. If I had my way all religion (and government) would be banned. I will never have my way as I will never embrace banning of anything.
[MD] Frankly, discrimination is a key component to my being able to survive. If I can’t distinguish between a poisonous snake and a non-poisonous on, I stay away from all snakes. And when I can’t do that I kill them.
Think about how many people consider BLM as an aggressive Marxist, anti-Trump, anti-capitalist organization. Apart from corrupt politicians (all of them) and rotten rulers, conservatives are the wealthiest people of the planet. And they are those who not going to buy Lo’real products anymore. As a “for profit” capitalist, do you think this is the proper way to raise your gains?
[MD] It’s all about leverage. Most people are influenced by someone standing on a stump yelling through a megaphone. A few of us (including the yeller) are not.
Isn’t so interesting that these companies doing nothing when taxes are rising, for instance?
[MD]As I’ve said, 3/4ths of your earnings goes to government…and that ratio is rising exponentially. Any taxes companies pay is in the price of the goods and services they sell. They don’t care as long as they can trade their stuff for your stuff. If they can’t do that they try a different angle (e.g. bribe a politician). With a real money process this all becomes more difficult. Governments are ostracized by traders and thus can’t exist.
Someone should tell them that Trump supporters also use tires. And probably the more expensive ones.
[MD] Remember. Companies are just traders with lots of leverage. They maximize their leverage by maximizing their markets. In this instance, someone coming up with anti-gravity puts them out of business.
[MD] Large companies have lobbyists and PR departments because they work. Without them they are not competitive and likely will be driven out of business or eaten up by other, more compliant companies. But Chick Filet still has their religious rule closing them on Sundays. And they are thriving. There are alternatives. There are choices.
So what do you think why companies doing things which causes them losses?
[MD] Because they also cause them gains…and the gains they expect to be greater. Try opening a hot dog stand and sell your “Nazi Franks” product today. Try it in 1937. Big difference. No distinction in the product.
Simply because they forced to do it!
Do you think productive companies support looting, killing, and Marxist ideas which eventually leads to the collapse of the economy, thus their businesses, as it happened always, without exception through the history of communism?
[MD]For the most part, what you see as an economy, these companies see as an obstacle. When people don’t have choices, marketing costs can be cut dramatically.
Someone builds a huge company, then risking it entirely by supporting people who are completely out of their mind, and who are the puppets of some shady powerful people behind the scenes?
[MD]The people who build these companies typically don’t have any control over them at this point. Some like Sam Walton gave positive direction…his surviving family, not so much. Some like Jack Dorsey march to a different drummer. So be it. Some like JD Rockefeller openly broke the golden rule and benefitted. You might be surprised to know his personal contribution to that wealth spanned only about 10 years. His brother ran the company.
Well, yes, because the company ALSO the puppet of the same shady people. It is either you do it, or we collapsing your business. And if you do it, your business going to collapse on the long run anyway.
[MD] To this day NYC operates under heavy mob influence. The mob couldn’t survive in a small town like Plantersville, TX. If you don’t like the mob, move to a small town.
But as Keynes said, on the long run we are all dead, so who cares?
[MD] I do. I’m not religions. This is all I get. I’m not into wasting it because of Keynes’ stupidity. Ignorance is a choice. Stupidity is a defect.
These companies are fueled by tax money (your money) as long as possible, then they going to collapse with the economy, and this is exactly what fascist-socialism is.
[MD] By now you should recognize that assertion as openly false and stupid. Companies are fueled by trading. Stop trading and begin consuming the fruits of earlier trades…until they consume themselves out of existence.
Yet, some people still think that communism and fascism are two opposite things.
[MD] Because they are. Fascism has private (i.e. no government) property. Communism, as it has been described to me, does not. I include that caveat for those who say “Communism is the right process. It just fails because they’re not doing it right.”
So at the end of the day, companies are really should care about profit, and profit only, otherwise they should be considered as corrupt, evil institutions in the hands of corrupt, evil people.
[MD] Companies should care about their own survival. Many companies sell at a loss and try to make it up with volume…that is many “no longer in business” companies.
Funny how the people think the exact opposite, right?
[MD]Some of us are actually able to think.
Well Ulrich, I think I’ve gotten through it. It’s not worth review and checking for typo’s. I’m open to your rebuttal if you see this. You are likely to be the only one to have read this far.
MD: Note: There are charts
embedded in this article
which link back to the original. In time they will likely get
broken.
MD: A proper MOE (Medium of Exchange or Money) Process
treats all “traders” equally. But this instance does bring on to
the stage an important case. What limits should be placed on the
size of “promises” it will embrace…and why?
The case is fairly simple for individuals. It easily embraces
the case for viable shelter (buying a house). It easily embraces the
case for viable transportation (buying a car). It easily embraces
the case for unanticipated medical needs (supplementing insurance).
But how does it deal with the case for highly leveraged promises?
I will answer this question as I read the article and
intersperse my comments. Hopefully it will address these issues. The
most important issues are regarding “leverage” and detection of
“rollovers”.
The only way to get really wealthy in any society is through
unusual leverage.
Banks grant themselves 10x the leverage you and I have. As
individuals we have no leverage. We work an hour…we make some
number of HULS (note: HULs…Hours of Unskilled Labor… are the
ideal MOE measure). We must be really really good at what we do
(e.g. neurosurgery) to be worth 10x what we were in high school).
The mom and pop shop has almost no leverage. They “are”
the business. But as they grow they hire help. And that is the
beginning of their leverage growth. They take a piece of their
workers’ labor as if they performed it themselves. As they grow they
retain earnings but may also take on debt (i.e. they make money
creating promises) or they take on partners (sell shares in their
company). The money creating case is problematic. You can’t just say
I want to create a car company and create $100B (or 10B HULS).
Then we have the financial wizards. They claim to be able to
deploy surplus HULs better those who earn those HULs. And they take
a piece of the action if they succeed. They don’t suffer if they
fail; their clients do the suffering. They use options, derivatives,
high speed trading, and myriad other tricks to multiply the natural
leverage this game brings them.
Selling shares is not problematic. Each shareholder has to
decide how he’s going to come up with the money to pay for his
share. And the business itself decides how it will reward his
participation. There are many games being played in this space to
help mom and pop keep control as they grow. For example, they can
give themselves options to buy shares as payment. They can mix debt
and equity instruments as warrants. The options have proven to be
inexhaustible…their consequences unknowable and unsupportable.
Such tactics are of no concern to the MOE process. Its only
interest is in the “reasonableness” of the money creation and
tracking its return and destruction. That means assessing the
trader’s propensity to default and monitoring his performance in
real time. And we know how to address such issues. We call them
actuaries. They have great experience in the mutual casualty
insurance business.
So now lets see how we address this very unusual but real
instance of a threat to the MOE process. More importantly, we see
how the MOE process places the responsibility exactly where it
belongs…with the promise maker and with the process behavior. This
characteristic gives some assurance of self discipline.
If the trader screws up, the trader must back his failed
promise or he must pay the consequences (i.e. be banned from
creating money…as we know all governments will be banned if they
don’t change their behavior).
If the process screws up (i.e. supports an irresponsible
trader), it must penalize oncoming traders (responsible or
irresponsible) immediately. They pay INTEREST (which is returned if
they prove to be responsible).
Now to the article. My interspersed comments appear formatted
as this pretext is formatted. And please bear with me…I’m thinking
through this as I write and it’s worth at least what you’re paying
for it.
==================
Well, with everyone and everything else getting a bailout, may as
well go all the way.
MD: What a remarkable opening. Is that like “if rape
is inevitable, relax and enjoy it”?
Two months after we
reported that the state of California is trying to turn
centuries of finance on its head by allowing businesses to walk away
from commercial leases – in other words to make commercial debt
non-recourse – a move the California Business Properties Association
said “could cause a financial collapse”, attempts to bail
out commercial lenders have reached the Federal level, with the WSJ
reporting that lawmakers have introduced a bill to provide
cash to struggling hotels and shopping centers that weren’t able
to pause mortgage payments after the coronavirus shut down the U.S.
Economy.
MD: Well, the concept of “throwing good money after bad” is well known. And this likely falls into that category. Shopping malls have become a thing of the past. They had their 50years in the sun and have now been made obsolete by a better idea (.e.g. Amazon). The handwriting was on the wall way before the COVID-19 hoax and government lock-down suspended trade. COVID-19 is a neutron bomb attack. It kills people but doesn’t destroy things. For those still alive, a restart should be a simple process. Suspend the delivery on existing money creating promises until the external restrictions have been lifted. Continue to support new money creating promises using regular actuarial principles. Such principles will detect “rollover” attempts and reject them.
I think the obvious solution is to recognize the situation and do an “automatic extension” of promise time terms (the “time” part of the time and space spanning trade) of all affected promises, and move painlessly on down the road. Nobody gets hurt.
The bill would set up a government-backed funding vehicle which
companies could tap to stay current on their mortgages. It is meant
in particular to help those who borrowed in the $550 billion CMBS
market in which mortgages are re-packaged into bonds and sold to
Wall Street. What it really represents, is a bailout of the only
group of borrowers that had so far not found access to the Fed’s
various generous rescue facilities: and that’s where Congress comes
in.
MD: The problem as expressed here does not exist with a
proper MOE process. Money is not “backed” by anything but the
process. So there is no such thing as a CMBS market or
mortgage-backed securities and bonds. If we had a proper MOE
process, such techniques could still exist for those who want the
risk of non-responsible traders. But that is no concern or
responsibility of the money process. And the phrase
“government-backed funding vehicle” is a marker. This is not a
viable proposal with the word “government” in it.
To be sure, the commercial real estate market is imploding, and
as we reported at the start of the month, some 10% of loans in
commercial mortgage-backed securities were 30 or more days
delinquent at the end of June, including nearly a quarter of loans
tied to the hard-hit hotel industry, according to Trepp LLC.
MD: And if those leases were taken on by trader created
money, then an automatic 30 day extension would have already been
applied to their promise. Such extensions could go on indefinitely.
There are no so-called investors involved at all. Mom and pop
created the money (they created money for the full lease as if it
was a purchase…but is paid out to the seller monthly) and this is
one of those unavoidable occurrences that the money process
naturally accommodates. Loan sharks anticipate this too. They take
the property. Moving these leases into the MOE process space stops
the domino effect such instances create.
MD: The above curve illustrates the superiority of the
MOE process solution. In April, the COVID-19 hoax lock down
occurred. Up until then the market was healthy and getting more
healthy. Then wammo!. With the MOE process, the above curve would go
flat…or maybe even continue to go down. And a new curve would
start up. That curve would be the automatic extensions of the time
component of the money creating promises. There is no pain to anyone
anywhere…and everyone is still responsible for their promise.
Note, this concept also applies to floor plans purchased in
anticipation of normal business sales performance…now interrupted
by the lock down. Such provisions are now provided by banks through
lines of credit or compensating balance loans…and they profit
exorbitantly.
“The numbers are getting more dire and the projections are
getting more stern,” said Rep. Van Taylor (R., Texas), who is
sponsoring the bill alongside Rep. Al Lawson (D., Fla.).
MD: In our system “sponsoring a bill” means “bowing
to a lobbyist”. That’s how our corrupt system works. That’s what
gives the wealthy so much leverage over the mom and pops. A proper
MOE process levels the playing field…at no cost or risk to anyone.
Under the proposal, banks would extend money to help these
borrowers and the facility would provide a Treasury Department
guarantee that banks are repaid. The funding would come from
a $454 billion pot set aside for distressed businesses in the
earlier stimulus bill.
MD: You’ve got to love that phrase “banks would extend money”. Folks. The banks don’t have money. They have a 10x leverage privilege. A proper MOE process makes that privilege unnecessary. Let the banks continue to exist if they want to. But the 10x privilege is an anachronism.
Richard Pietrafesa owns three hotels on the East Coast
that were financed with CMBS loans. They have recently had occupancy
of around 50% or less, which doesn’t bring in enough revenue to
make mortgage payments, he said.
MD: And here is a case where we have to ask: where does the money come from? When you buy a house over time you can securely make that money creating promise. You know what you expect to make and purchase a house accordingly. But if the income is interrupted its your problem to find a replacement for it.
But Pietrafesa has no way of replacing his interruption. Such deals are heavily leveraged (OPM…other people’s money). He couldn’t get the MOE process to allow this money creating trade in the first place. He would have to rely on forming a collective to get his hotel deal done. And if the collective fails, well, as individuals in the collective, they have an incentive to keep it from failing or they lose their share. The MOE process may allow their trading promise to Pietrafesa…but would not allow Pietrafesa’s promise to the owner of the hotel he purchased. For example, just like buying a house with time payments, they could actuarially show they could buy a piece of a hotel with time payments…and be responsible if it fails.
He said he is now two months behind on payments for one
of his properties, a Fairfield Inn & Suites in Charleston, S.C.
He has money set aside in a separate reserve, he said, but his
special servicer hasn’t allowed him to access it to make debt
payments.
MD: Here we have the domino effect. He’s paying a “special servicer” to cover this risk. He’s buying insurance. It’s an actuarial problem. And insurance companies are the ultimate leveragor. In insurance CLAIMs = PREMIUMS. The money is made on the investment income. But with a real MOE process which guarantees zero INFLATION, investment income can’t benefit from the leverage INFLATION gives. The insurance business becomes a risk mitigation business with a proper MOE process…as it should be.
“It’s like a debtor’s prison,” Mr. Pietrafesa
said.
MD: An MOE process does not have a provision for penalizing. It only has a provision for naturally ostracizing. Pietrafesa would have to pay INTEREST if he DEFAULTs and tries to create money again. And he has to make up that DEFAULT to become a responsible money creating trader again. It’s the natural negative feedback stabilizing loop of the process.
Those magic words, it would appear, is all one needs to say these
days to get a government and/or Fed-sanctioned bailout. Because in a
world taken over by zombies, failure is no longer an option.
MD: These days are no different than other days. In the
olden days the zombies were taken over by the Rothschilds…through
their J.P.Morgan agency. It was and is a protection racket…just
like the mafia runs. A proper MOE process removes the leverage and
drives them out of business…kind of like legalizing drugs drives
those dealers them out of that business. Ultimately, people need to
be responsible for their own stupidity…but not for the stupidity
of others.
While any struggling commercial borrower that was previously in
good financial standing would be eligible to apply for funds to
cover mortgage payments, the facility is designed specifically for
CMBS borrowers.
MD: Thus, the leverage is in the ability to lobby. Such
advantage needs to be eliminated…in a very natural, not
legislative, manner. A proper MOE process goes far in enabling that.
It gets better, because not only are taxpayers ultimately on the
hook via the various Fed-Treasury JVs that will fund these programs,
but the new money will by default be junior to existing insolvent
debt. As the Journal explains, “many of these borrowers have
provisions in their initial loan documents that forbid them from
taking on more debt without additional approval from their
servicers. The proposed facility would instead structure the
cash infusions as preferred equity, which isn’t subject to the
debt restrictions.“
MD: The taxpayers are not on the hook. Our current
process with no stabilizing negative feedback will just keep
escalating until it blows itself up. Then most people (not in the
inner circle with advance warning) lose; it resets; and starts all
over again…with the insiders picking up the pieces for pennies on
the dollar. We now pay over 3/4ths of what we earn to governments.
Where does communism begin? Where does slavery begin?. It’s not a
good system folks. We’ve been duped. And praising the constitution
and wrapping ourselves in the flag is not going to fix it. It was
broken when it was installed…the anti-federalists got it right but
lost the argument.
Yes, it’s also means that the new capital is JUNIOR
to the debt, which means that if there is another economic downturn,
the taxpayer funds get wiped out first while the pre-existing debt –
the debt which was unreapayble to begin with – will remain on the
books!
MD: When a building collapses, it’s kind of immaterial
whether the lower floors or the upper floors collapse first. When
this calamity happens, the dirt this house of cards stands on is the
only thing of value.
Perhaps sensing the shitstorm that this proposal would create,
the WSJ admits that “the preferred equity would be considered
junior to other debt but must be repaid with interest before the
property owner can pull money out of the business.”
MD: And this is how we get 40,000 new laws every year.
They start with a bad process (i.e. principles diluted by laws) and
are stuck with a huge maintenance problem.
What was left completely unsaid is that the existing impaired
CMBS debt will instantly become money good thanks to the
junior capital infusion from – drumroll – idiot taxpayers who won’t
even understand what is going on.
MD: “will instantly become money”: Let’s examine
this. We know what money is. So somehow he’s saying that some trader
instantly makes a promise spanning time and space here. Who’s the
trader, the taxpayer? Well that’s no different than what we have now
with government doing perpetual rollovers of their trading promises.
That’s not money creation. That’s counterfeiting. We already know
that.
How did this ridiculously audacious proposal come to being? Well,
Taylor led a bipartisan group of more than 100 lawmakers who last
month signed a letter asking the Federal Reserve and Treasury to
come up with a solution for the CMBS issues. Treasury Secretary
Steven Mnuchin and Fed Chairman Jerome Powell have indicated that
this may be an issue best addressed by Congress.
MD: “asking the Federal Reserve and Treasury to come
up with a solution”? They’re the problem. Institute a proper MOE
process and we drive out the problem. That allows us to address
issues in a “proper” context rather than an “opportunist”
context.
In other words, while the Fed will be providing the special
purpose bailout vehicle, it is ultimately a decision for Congress
whether to bail out thousands of insolvent hotels and malls.
MD: The malls have no future. They are the buggy whip
of a previous era. They need to be plowed under and reseeded. But
the hotels are viable. They are just suspended in time. If they’re
collectively owned they are the responsibility of the members of the
collective. They are suspended in time. They are not failing. And
suspension carries no cost in this instance except maintenance.
Remember, with a propper MOE process, money has zero time value.
Failure? That’s something else again. It all get’s back to the
individual traders’ responsibility and recourse. A proper MOE
process should allow small traders to create money to tide
themselves over the temporary situation. It should not support large
highly leveraged traders to do so. It’s an actuarial problem.
And if some in the industry have warned that an attempt to rescue
the CMBS market would disproportionately benefit a handful of large
real-estate owners, rather than small-business owners, it is because
they are precisely right: roughly 80% of CMBS debt is held by a
handful of funds who will be the ultimate beneficiaries of this
unprecedented bailout; funds which have spent a lot of money
lobbying Messrs Taylor and Lawson.
MD: Handful of “funds”. What is a fund but a
collective… where the manager gets the gains and the participants
get the losses. People who buy into a fund roll their own dice. When
the fund is a pension fund, only the pensioner should have control.
With perpetual zero inflation, placing their pension under a rock is
a viable solution.
Of course, none of this will
be revealed and instead the talking points will focus on reaching the
dumbest common denominator. Taylor said the legislation is focused on
– what else – saving jobs. What he didn’t say is that each job that
is saved will end up getting lost just months later, and meanwhile it
will cost millions of dollars “per job” just to make sure
that the billionaires who hold the CMBS debt – such as Tom Barrack
who recently
urged a margin call moratorium in the CMBS market – come out
whole.
MD: Saving jobs “is” the issue. These workers are
suspended in time. It’s their responsibility to provide for
themselves. They can do this by creating money to tide themselves
over (say for a year or two if necessary). A proper MOE process could
actuarially support this money creation.
Say we have the maitre-d of the hotel restaurant. It’s
pragmatic for him to span this interruption and go back to work as if
nothing happened. So he creates a time and space spanning money
creating promise. He creates two years of normal income to be paid
back 1/100th monthly. The payback begins two years hence and proceeds
100 months. When he goes back to work he begins paying back,
essentially cutting his own salary a manageable amount. And while
suspended, he can put up dry-wall and make some pin money.
For the bar-back it’s a little different. He may make a money
creating promise covering 3 months income to be paid back monthly
beginning in three months over a two year span. And he immediately
goes looking for a replacement job…maybe putting up dry-wall. His
job is not his “career”.
“This started with employees in my district calling and saying
‘I lost my job’,” Taylor said, clearly hoping that he is dealing
with absolute idiots.
MD: An idiot institutes processes that have built in
domino effect.
And while it is unclear if this bill will pass – at this point
there is literally money flying out of helicopters and the US deficit
is exploding by hundreds of billions every month so who really gives
a shit if a few more billionaires are bailed out by taxpayers –
should this happen, well readers may want to close out the trade we
called the “The
Next Big Short“, namely CMBX 9, whose outlier exposure to
hotels which had emerged as the most impacted sector from the
pandemic.
MD: The money flying out of the helicopters is
counterfeit. It will go directly to producing INFLATION. It will only
create taxes to the extent the money-changers demand their tribute
payments…that’s where “all” taxes go.
With a proper MOE process the domino effect is mitigated; a
natural stabilizing negative feedback mechanism prevails; and a
pragmatic self controlled recovery is instituted. Remember. When you
have a government solution to a problem, you just have the same
problem multiplied and are still looking for a solution.
Alternatively, those who wish to piggyback on this latest
egregious abuse of taxpayer funds, this crucifxion of capitalism and
latest glorification of moral hazard, and make some cash in the
process should do the opposite of the “Next Big Short”
and buy up the BBB- (or any other deeply impaired) tranche of the
CMBX Series 9, which will quickly soar to par if this bailout is ever
voted through.
MD: And the real character of so-called “investors”
is revealed and amplified. Without a proper MOE process, money is the
chips in an opportunist, privileged casino called capitalism.
Traderism is where real money lives.
MD: So here we have another good example where a proper MOE process doesn’t “treat” a problem; rather it anticipates it and prevents its effect.
MD: I was searching the web for an instance where money was associated with a “promise”. There weren’t many hits. I tried this one. It was a waste of time as you can see.
How to Better Understand The Premise of Money
By: Paradigm Life
On: August 26, 2016
In: Blog
How to Better Understand The Premise of Money
Ever wondered if you could trade your dollar for its value in gold? The answer is maybe, but it won’t come from Fort Knox.
MD: Why won’t it come from Ft. Knox. Isn’t that where all our gold is?
Understanding the original premise behind the power of the almighty “dollar,” and its role in society can help you make better decisions about money.
The Premise of Money
From a historical perspective, money makes perfect sense. In the days of old, people would trade goods and services for other goods and services. However, they were constantly working around the inherent problem of production and demand. For example, if you had milk and I had bread, that was pretty-much all that was available for us to trade. And if I don’t want your milk, but need bread. . . our system breaks down. The concept of money has gotten humans past this problem.
MD: And there is another “more common” problem with trading over time and space. Let’s see if they have a clue about that.
Money was invented as a promise; a means of exchange representing value in goods and services.
MD: And what was the units of measure of that value?
The premise of money is that when I give someone a dollar, it’s a promise of “receipt” tied to something of value; something “better” than the paper it’s printed on.
MD: Not exactly. When you give someone a dollar, they accept it because it trades for a dollars worth of stuff. It’s not a promise. If you gave them a sea shell and it traded for dollars worth of stuff, they would accept that as an object in trade. At the time a dollar is accepted in simple barter exchange, the traders have no perception of it being a promise. However, it does come into existence with a trader making a promise and getting it certified. And it does go out of existence with that same trader delivering on his promise and returning the money.
Any kind of money should have definite characteristics—it’s portable, visible, and durable; it has shared value, and it is widely accepted. Now let’s talk about what our society has agreed on as the value behind the money—gold and silver, mostly gold.
MD: Here the nonsense begins. Gold and silver are just stuff. And in fact a dollar bill is just stuff. They may work to make trades but it’s only because of the universal acceptance. And it is the “real money process” that brings on that acceptance. And since gold and silver are so much less efficient than the dollar in preforming that duty, they are virtually never used.
For over 6,000 years we’ve agreed on gold to back up what we call money.
MD: Who’s “we” Ki mo-sabe? There was clearly no such agreement at the end of the 1800’s as silver gave gold a run for its money. It only failed because of a power play. If “real money” had existed at that time, neither gold or silver would have been in consideration at all.
When people invented money, using metal made sense because metal met all of the right characteristics—but why gold? The metal had to be somewhat rare so that not everyone is producing coins, but available enough so a reasonable number of coins can be created to allow commerce (http://www.investopedia.com/articles/investing/071114/why-gold-has-always-had-value.asp).
MD: I don’t think there’s any point in reading further. He doesn’t have a clue about how money is created and destroyed. He’s just another gold bug. But ours is not the reason why…
That trail leads to gold because of its unique color and resistance to tarnishing. Truthfully, gold’s greatest value is society’s sustained agreement that this is so. And though you’ll never be able to eat gold, it is the most likely bartering tool humans will use to recover from a zombie apocalypse.
MD: Because society says so? What makes gold “the most likely bartering tool”? Just because? Ever hear of the “specie wars” near the end of the 19th century in the USA? It’s this kind of clueless-ness that keeps the scam going.
Fiat Money
MD: And here is the slur we get from the gold bugs. It’s really going to get good now. Just to set the “real” stage: All money is a promise. All promises are fiat. Therefore, all money is fiat. Always has been, always will be.
In the past you went to a bank with your bag of gold and they offered paper currency to use as a value exchange (because gold is super heavy). With gold backing your dollar, you were free to trade that money for whatever was valuable to you.
MD: Looks like his past doesn’t go back far enough. These so-called “banks” he speaks of were just traders who claimed they would keep his gold safe. It was a protection racket. They built a vault…a really really strong one. They put the guys gold in it, gave him a receipt (a claim to get his gold back…kind of like the receipt to get your coat back at a fancy theater). Comes back with the receipt, gets his gold, and leaves (hoping a highwayman doesn’t see him do it). Or, he could trade the receipt to some other sucker, who could then use it to get gold out of the bank. It was later that these banking con-men realized that they could “loan out” somebody’s gold and make money doing it. People would come to their so-called bank for a “loan”. They would give them a piece of paper “backed by gold”. As long as everybody didn’t come back for gold at the same time, all was well in paradise. Then somebody invented the bank run. And we were off to the races.
Jump ahead to the time period between the Great Depression (1930s) and the 1970s. As government expanded its role in peoples’ lives, it needed to “create” its own resources . . . money. Enter the Federal Reserve and what is called fiat money. Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. It’s different than money backed by gold, because the value of fiat money is derived from the relationship between supply and demand rather than literal gold or the value of the material that the money is made of http://www.investopedia.com/terms/f/fiatmoney.asp) .
MD: Ah…the concept of “legal tender”. Again he doesn’t go back far enough. A guy named Robert Morris (we all called him Bob before he got rich), a really rich merchant in the 1700’s “America” started getting sideways with the British…who claimed to “own” America. So he got some PATRIOTs (PeopleAboutToRIOT) to dump some tea into the harbor. As things would, they escalated…and the battle was on. He got Tom Jefferson to write up a “Declaration of Independence”…and it was oh-so-beautiful. “When in the course of human events…”. The timing couldn’t have been better. The Brits had their hands full with the French…and the Indians. Morris again armed some PATRIOTs who lined up against Brits on a couple hills…and they beat that handful of Brits. There’s more to the story, but for the time being the Brits had bigger fish to fry… Suffice it to say this cost Morris a bunch of money and he wanted it back. So he created the Articles of Confederation and Perpetual Union. Earth to Bob. There is no such thing as a “perpetual union”. There’s always a “buy/sell” clause. Bob just never put that clause in. After 10 years and still not able to get his money back, Morris got Al Hamilton (and three of his buddies) to write the Federalist Papers. After about 4 months of this they got a bunch of guys to hole up in the Independence Hall (I guess doing it in Carpenter’s Hall was no longer prestigious enough) and in about 3 month’s of secrecy created the so-called Constitution of the United States. It was really about the same as the “Articles” but this time had teeth…it had the so-called “law” behind it. Bob’s agent Al was made “treasurer”; two years later Al created a bank; and the rest is history. Bob got his money back (only to lose it all later trying to buy Ohio…another story)
Essentially these well intended institutions are saying, “Here. . .here’s some ‘money’. . [wink wink],” when they are really just handing you a piece of paper (or number in an account). Needless to say, when you start to print extra currency, the system gets off balance. Adding even more complication, during the Great Depression people caught on and said, “Hey, I want my gold back!” Unfortunately, they all did this at the same time. When a bank experiences a run, it immediately goes bankrupt or insolvent.
MD: That’s that “run” I was telling you about. With a “real money process” there are no runs. Why? Because it’s out-and-out silly to have a “run on promises”.
Unless. . .they are rescued by a central bank or the U.S. Federal Reserve. These institutions swoop in and give people their well-meaning imaginary money as bail outs. “Don’t worry you’re protected by the Federal Deposit Insurance Corporation (FDIC).” This story is coming together now, isn’t it?
MD: In the beginning there was no such thing as a “central bank”. It wasn’t needed. There was no “Federal Reserve”. With a “real money process” there are no reserves. So you don’t need a federal one. And you didn’t need insurance either. If somebody “defaults”, it’s immediately mitigated by an “interest” collection of like amount…paid by an irresponsible trader creating money.
Because of this technique, our “money” has been off the gold standard since 1971, and every major international currency has followed suit. Now you have to ask yourself, “What is a dollar?” It used to represent a measurement of gold. Now it’s not really definable. As Nobel Prize-winning economist Milton Friedman puts it, “The pieces of green paper have value because everybody thinks they have value.” For now, society is stable in agreeing it has value, but it’s a rather tenuous place to be with consequences that may actually be worse than a zombie apocalypse.
MD: Another myth…going off the gold standard in 1971. The French could see the dollar wasn’t trading for as much gold as it did originally…like only for 1/2 as much. The USA owed the French some money. The USA tried to give them dollars, The French said, we’d rather have gold, thank you very much. And bingo, the jig was up.
What You Can Do
If learning the truth about how our gold standard has slipped away and its role in bailouts and banking makes you frustrated, you’re not alone. Anger and frustration are good motivators for action, but all-out protests are not what we’re proposing here at all. You can be so much more effective by applying your influence to educate yourself and others.
MD: Don’t choose stupid people to educate you. That’s worse than a waste of time.
Here’s what you can do:
The only way to ensure our financial system in the U.S. functions well is for all of us to understand not just the premise of money, but how the system has devolved over time.
MD: “Devolved”…good word. I think it means “got worse”. A “real money process” cannot devolve over time…or over space for that matter.
We want you shake up your paradigm and beliefs about money and to see money from a different perspective. Reinstating certainty into the financial make up of Americans is our goal. Let us show you how to apply lasting moral principles to your financial system. Take 2 minutes to sign up for a FREE, extensive eCourse called Infinite 101®. You’ll receive access to video tutorials, articles, and podcasts. It literally costs you nothing to become educated on this ideal financial strategy and start changing your wealth paradigm!
MD: And the blind leading the blind takes another giant leap backwards.
MD: Here at Money Delusions we are constantly comforted with how a “proper money process” makes even enormous problems and issues almost go away. This is a good example.
With the Covid-19 crisis, we have the general class of problems that affects everyone simultaneously in a global fashion. If the solution is for everyone to shelter in place, well, that puts out of work everyone who can’t do their job remotely…they can no longer trade their value to others.
This article takes a case in point where the French government is dictating a solution (e.g. shelter in place). And Amazon is responding rationally. It’s really all about where the buck stops. Here are the steps: (1) Government dictates quarantine. (2) Amazon workers comply. (3) Amazon workers don’t get paid. (4) Government says “that’s unacceptable”.
First, it’s interesting that government acknowledges that some things are not acceptable. I, for one, find that government taking a full 3/4ths of what I earn is unacceptable. If I just declare it unacceptable (which it obviously is) nothing happens. But if I refuse to pay tax … well, the government pulls rank and forcefully takes my stuff.
In the case of government, they seem to think it is acceptable to demand workers be paid for doing nothing when doing nothing is dictated by the government. If the government feels that way, the government should be doing the paying. But in reality, no-body should be doing the paying.
In a free market of traders, traders deliver value and are compensated. Failing to deliver value results in no compensation. It’s just that simple. A calamity like Covid-19 is not the only thing that can tip over trader’s apple carts. There may be severe storms. There may be destruction of their work place. There may be a death or illness in the family. All such things are really the trader’s responsibility…not the responsibility of their trading partners nor of governments (to whom they trade their freedom for safety).
So what does all this have to do with Money Delusions?
Remember, money is “always and only created by traders like you and me”. It is “never created by banks nor the governments they institute”. So if the citizens are going to give government this power they must expect to suffer the consequences.
This represents a perfectly good reason for a trader to make a trading promise spanning time and space … i.e. to create money. The trader knows his trading is going to be inhibited for maybe up to 1/4 or 1/2 a year. He hasn’t planned for this. Once it has happened, he studies the situation and sees this is likely to happen in about 7-1/2 year intervals. So he immediately creates money to carry him over this 1/2 year of making no trades with the promise that he will return and destroy that money over a 7 year period (e.g. 84 monthly payments). That gives him a good cushion.
In this way, all traders take their own responsibility for the problem and initiate a solution. Over that period the trader can adjust his prices or work more hours to make up for this unintended idle time.
As we read this article I think we’ll find that the government claims the responsibility is Amazon’s … not the government’s and not the traders.
Amazon squeezing workers amid Covid-19 crisis is ‘unacceptable’ – French finance minister
French Finance Minister Bruno Le Maire said Amazon’s refusal to pay
wages of staff who walk out over coronavirus fears is “unacceptable” as
the country is considering nationalization of bigger companies at risk.
MD: So it is evident, it is the trader who is refusing to work. Thus, it is the trader who must suffer the consequences.
“These pressures are unacceptable, we’ll let Amazon know,” Le Maire said after several hundred workers protested the company’s policy on Wednesday. The e-commerce giant refused to pay workers who walked out or stayed at home in self-isolation over coronavirus fears.
Le Maire said Thursday that he would soon present a variety of plans to President Emmanuel Macron to assist the country’s biggest companies, such as BNP Paribas, Renault, Air France KLM, through the coronavirus crisis, some of which might include nationalization.
MD: Nationalization? The government just takes one trader’s business to satisfy another trader’s grievance? That’s what you get when you trade liberty for protection!
“We have several options on the table for all of the major industrial companies which could face major threats on the market, it could be us raising our stake in their capital… or it could be nationalizations,” Le Maire said.
MD: And where does the government get its “stake”? By stealing from traders. Government shouldn’t be able to do this. With a “real money process” it wouldn’t be able to do this. Governments never deliver on their promises. They just roll them over and that is default. A real money process would ostracize them.
MD: At Money Delusions we quite frequently come across one of these beauties we just can’t pass up. The only way to deal with this kind of nonsense is to annotate it in place.
MD: He begins with the obligatory flowery writing which is not relevant to the subject.
POITOU, FRANCE – Today, we are packing up, closing the shutters, putting away the lawn chairs and the croquet set.
Everything needs to be stored away; otherwise, rain, wind, and sun will do their damage. The wood cracks; the metal rusts; the curtains fade…
…It is nature’s way. And no matter what we do, nothing resists time.
Dirty War
In preparation for our departure, yesterday we got on our bicycles and rode around the countryside, saying goodbye to old friends.
Our first stop was a visit with a retired colonel, a man who had spent his life in the military – including engagements in the war in Algeria and peacekeeping operations in the Congo.
He is 80 years old and had cancer a couple of years ago; we didn’t expect to find him still alive. But he seems to be recovering and was cheerful and chatty.
“The Algerian conflict was a dirty war. We could have won the war militarily. But it was ruining the integrity of the army, turning it into a ruthless and unruly police force. I asked myself if I should resign. But I stuck with it and did the best I could. I don’t regret it.”
Broken Man
After a cold beer and warm conversation, we got back on our bikes and pedaled along the country road.
The next stop was to see a friend who used to work on our farm until he retired about 10 years ago.
He is in remarkably robust shape. At 79, he works in his garden every day and chops his own firewood.
But his oldest son was killed in a car crash last year – the second of his three children to die. Since then, he has seemed a bit like a broken man.
“How are you, Francois?” we asked.
“Okay,” was the answer from his mouth.
But his eyes told a different tale. He suffered.
After a few minutes and a glass of cold, freshly squeezed apple juice, we mounted up again.
A few miles farther on was the house of another retired couple.
Both are in their late ’70s. The woman is small, lively, energetic, and as friendly as ever. But her husband has multiple sclerosis. He no longer leaves the house, except to go to the hospital.
Still, his mind is alert, and he is keenly interested in China.
We took him a book from our library that we knew we would never read. It was written long ago in Chinese and now translated into French.
“In Chinese, there is no clear separation between writing and the ideas it conveys,” he explained. “Both should be true, beautiful, and timeless. To the eye… and to the mind.”
“Uh… yes,” we replied.
Rare Truth
MD: Ok, hopefully we’re now going to get into our subject matter … money. Look for clues that he knows what money is. We don’t expect to find them… but it’s always fun to look for them in these pontifications.
But our beat is money. And in today’s money world, truth is rare; beauty can be found only in irony and mockery.
Yesterday, for example, the president of the USA came out with this:
Our Federal Reserve cannot “mentally” keep up with the competition – other countries. At the G-7 in France, all of the other Leaders were giddy about how low their Interest Costs have gone. Germany is actually “getting paid” to borrow money – ZERO INTEREST PLUS! No Clue Fed!
MD: So the president is clueless about money too. What’s new.
The president is disturbed because the Fed is not debasing the U.S. money supply fast enough.
“Everybody else is doing it,” he seems to say. “Why aren’t we?”
Of course, “we” are. Our Fed is lending out fake money to member banks at a rate that is about even with consumer price inflation.
MD: Change the word “lending fake” to “counterfeiting” and you have the proper description of what is going on
This “free” money does to the U.S. financial system about what a hurricane does to a South Florida swimming pool; it becomes a greasy swamp with an alligator in it.
MD: In a “real money” process, we know that money is in perpetual free supply. Traders like you and I can create it any time we want to … and we want to when we can see clear to a trading promise spanning time and space. There is no “financial system”. There is only a purely objective process.
But our guess is that other Leaders were not “giddy” about the storm, but puzzled. Why would investors take shelter in a 10-year Italian bond at less than a 1% yield?
Raving Mad
MD: Notice the focus on so-called “investors”. In a real money process, everything is focused on traders like you and me. It’s about trading. It’s not about gaming the process for yield. And no “shelter” is needed. A real money process “guarantees” perpetual perfect balance between supply and demand for money itself … thus perpetual zero inflation and zero time value of money. The time span is not relevant.
There is the smart money. And there is the dumb money. But this money must be stark, raving mad.
MD: In a “real money process” money has no intellect. Money is a promise made by a trader. And a real money process does not allow a broken promise by one trader to affect other “responsible” traders. Defaults are immediately mitigated by interest collections of like amount. These collections are paid by irresponsible traders according to their propensity to default (i.e. risk).
Italy’s economy has been in a slump for more than 10 years. Its native-born population is expected to be cut in half by the end of the century. It owes more than 130% of its GDP.
MD: The “it” referred to here is the government. And the amount it “owes” is simply the amount it has counterfeited. It never had any intention of keeping its promises. No government does.
And its government bumbles from one unstable coalition to another… barely able to govern at all.
MD: That’s the modus operandi of all governments. It’s like the Harlem Globetrotters and the Washington Generals. They pretend to be in a basketball competition … but they work for the same guy.
You’d have to be nuts to lend money to Italy…
…unless you thought the fix was in.
MD: In this context, “lend” assumes new money is not being created. Rather, the control of existing money is being handed over to another party (the government) for some consideration (yield). So what does he mean here by “unless the fix is in”? He’s saying you don’t loan to a “deadbeat counterfeiter” unless the fix is in. I don’t know about you, but I only loan to a deadbeat counterfeiter when forced to … taxed… and I have zero expectation that the loan will be repaid…ever.
That is, buying Italian bonds – or German bonds, or French bonds… or USA bonds, for that matter – makes sense only if you are front-running central banks, counting on them to do something even nuttier than you did, buying your overpriced bonds at even higher prices.
MD: A good example is financial manipulators buying Venezuelan debt for pennies on the dollar. The holders had little expectation of being repaid. But the purchasers knew they could get the USA government to institute “regime change”. After that, the new regime would “make good” on the bonds. They do this by instituting a new money… i.e. they clean the slate.
Which is what Mr. Trump wants the Fed to do – rig up the credit market even more than it is now.
The Fed should print up more fake money, he believes, and lend it to his government at even cheaper interest rates. The idea is to get the economy running hot in time for the 2020 election.
Free Money
MD: With a “real money process” governments are just traders like you and me. But we know from experience that they never deliver on their trading promises. Then their defaults equal their money creation…and interest collections against them equal these defaults. They can no longer create money. They are thrown out of the game. A real money process cares nothing about “the economy”.
Our guess is that this huge bubble in debt marks a major change in world economic power.
MD: A bubble happens when the preponderance of traders make promises they can’t keep. This happens often in a manipulated money process. After a period of “tight” money, the money changers move to an “easy” money policy. Traders, having been strangled for some period, can now breathe…and they begin trading over time and space … creating money. Then the manipulators tighten the money again (they call the loans and refuse to “grant” new loans). Trades that were sound become unsound … and trades that were depending on those trades become unsound … and on and on. One failed trade cascades into a string of failed trades. A real money process doesn’t exhibit this behavior. If a trader defaults, it doesn’t affect other existing trades. It just serves as an automatic negative feedback … imposing slightly larger interest loads on new irresponsible traders. Responsible traders have zero interest loads because they don’t default.
MD: When did Americans every have honest money, small government, and balanced budgets? The whole idea of forming the USA union was to repay guys like Robert Morris.
Now, those gods forsake them.
Fake money has destroyed real capital, created chaos in the markets, caused trillions in malinvestment, slowed down growth, and resulted in appalling inequality.
MD: Remember, “fake money” is “counterfeit money”. A real money process tolerates no counterfeiting at all.
It has also corrupted the government; the feds use it to avoid making hard – but necessary – decisions.
Fake money finances their fake wars… rewards lobbyists, campaign donors, crony contractors… and has added more than $10 trillion in additional debt in the last 10 years.
And with so much cheap credit available, not a single candidate even suggests balancing the budget or curtailing wasteful spending.
Why make tough choices when you get free money?
The Fix Is In
Germany is actually “getting paid” to borrow, Mr. Trump reminds us.
But people only get free money when the fix is in. And the fix won’t stay fixed forever.
Today’s rigged-up bond bubble will be no exception.
When will it pop? How?
We would love to meet the person who knows the answers to those questions.
MD: Read a history book. It has “rhymed” in this regard innumerable times in innumerable places. It is the money changers principal tactic.
In the meantime, we wait… we watch… and we try to connect the dots. And we wonder: What really matters?
Our final stop yesterday was at the modest house of a woman whose husband had recently died after a long, losing battle with Alzheimer’s disease.
We sat with her for a few minutes and reminisced. We discussed the weather, the small tomatoes in her garden, and what was going on at the local church. But she had her husband on her mind.
“The last words he said were five years ago,” she explained, tears in her eyes. “He said ‘I love you.’”
Regards,
signature
Bill
MD: Beautiful writing Bill … but you’re clueless about money.
*** MD: This article is from ZeroHedge.com. There they are clueless about money, but continue to pontificate with articles like this.
At MoneyDelusions (MoneyDelusions.com/wp) we know that gold is not money … and easily prove it. Lets see how they get around our proof.
A couple of months ago, CNBC’s Josh Brown made a blog post saying that “Permabears are Ridiculous People”. Here’s my answer. Why Gold Is Money: A Periodic Perspective Profile picture for user Tyler Durden by Tyler Durden Fri, 07/05/2019 – 22:25 Authord by Nicholas LePan via Visual Capitalist,
The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money is an artifact of the past. In an era filled with cashless transactions and hundreds of cryptocurrencies, this statement seems truer today than in Keynes’ time.
*** MD: Agreed.
However, gold also possesses elemental properties that has made it an ideal metal for money throughout history.
*** MD: Disagree. It has never been money and never will be money. However, it may be a better money substitute than, say, cement blocks.
Sanat Kumar, a chemical engineer from Columbia University, broke down the periodic table to show why gold has been used as a monetary metal for thousands of years.
The Periodic Table
The periodic table organizes 118 elements in rows by increasing atomic number (periods) and columns (groups) with similar electron configurations.
Just as in today’s animation, let’s apply the process of elimination to the periodic table to see why gold is money:
*** MD: Note, he begins with the premise that money can be stuff (wrong). He then goes through the periodic table to see what the best stuff is for money. With an errant premise, you’re going to come to an errant conclusion. Watch him do it.
Gases and Liquids
Noble gases (such as argon and helium), as well as elements such as hydrogen, nitrogen, oxygen, fluorine and chlorine are gaseous at room temperature and standard pressure. Meanwhile, mercury and bromine are liquids. As a form of money, these are implausible and impractical.
*** MD: So he takes his false premise and hones it down to solids. What if he said music can be found in the periodic table … and the job is to select the best music. See how ridiculous things get when you start with a ridiculous premise?
Lanthanides and Actinides
Next, lanthanides and actinides are both generally elements that can decay and become radioactive. If you were to carry these around in your pocket they could irradiate or poison you.
Alkali and Alkaline-Earth Metals
Alkali and alkaline earth metals are located on the left-hand side of the periodic table, and are highly reactive at standard pressure and room temperature. Some can even burst into flames.
Transition, Post Transition Metals, and Metalloids
There are about 30 elements that are solid, nonflammable, and nontoxic. For an element to be used as money it needs to be rare, but not too rare. Nickel and copper, for example, are found throughout the Earth’s crust in relative abundance.
MD: Ok, here’s another false premise. “Money needs to be rare”. Nonsense. There must perpetually be an equality between the amount of money needed and the amount of money available. No “stuff” will ever meet this requirement. Money logically should be in “free” supply. Something rare will never be in free supply. And we can prove empiracly that he is wrong. In 1963 I was able to trade a silver USA quarter for a gallon of gasoline. In 1964 I was able to trade a composite USA quarter for a gallon of gasoline. Today, I can trade a USA quarter for 1/10th gallon of gas … whether it has silver in it or not. Logical conclusion? The silver (i.e. intrinsic value of the token) has absolutely nothing to do with the trade. Why the factor of 10 difference in trading power of the token? As we know here at MD, it’s because of counterfeiting (i.e. default not mitigated by interest collections of like amount) … predominantly by governments.
Super Rare and Synthetic Elements
Osmium only exists in the Earth’s crust from meteorites. Meanwhile, synthetic elements such as rutherfordium and nihonium must be created in a laboratory.
Once the above elements are eliminated, there are only five precious metals left: platinum, palladium, rhodium, silver and gold. People have used silver as money, but it tarnishes over time. Rhodium and palladium are more recent discoveries, with limited historical uses.
*** MD: They had the specie wars towards the end of the 19th century in the USA. Why? Because, though both gold and silver meet the ridiculous “rare” requirement, the people who had the gold pulled rank on the people who had the silver. They prevailed lawfully (i.e. in an un-principled fashion). Laws only dilute principles as is vividly illustrated in this example.
Platinum and gold are the remaining elements. Platinum’s extremely high melting point would require a furnace of the Gods to melt back in ancient times, making it impractical. This leaves us with gold. It melts at a lower temperature and is malleable, making it easy to work with.
*** MD: Ah … so his wisdom is divine. How interesting!
Gold as Money
Gold does not dissipate into the atmosphere, it does not burst into flames, and it does not poison or irradiate the holder. It is rare enough to make it difficult to overproduce and malleable to mint into coins, bars, and bricks. Civilizations have consistently used gold as a material of value.
*** MD: This is the “can’t destroy it” and “precident” argument for gold stuff as money. Again, he started with a false premise and he brings forth false arguments. What’s not to love about the process?
Perhaps modern societies would be well-served by looking at the properties of gold, to see why it has served as money for millennia, especially when someone’s wealth could disappear in a click.
*** MD: The gold bugs would be well-served to look at societies, both modern and otherwise, for the real definition of money. In “no” society can you point to a case where money is created that a ‘trader” is not involved in its creation. Money is obviously and provably “an in-process promise to complete a trade over time and space.” It is always and only created by traders like you and me … making promises and delivering with time payments … like for a house or a car.
This article on zerohedge addresses the new overture by Facebook to create a new money (Libre). Knowing what you have learned here about money, it is a fun exercise to take articles like this and blow them full of holes.
Money is an “in-process promise to complete a trade over time and space.” It is always, and only, created by traders (like you and me buying things with time payments). It is always properly destroyed by traders delivering as promised. If the trader defaults or if counterfeit money is found, it is immediately mitigated by interest collections of like amount. The operative relation is INFLATION = DEFAULT – INTEREST = zero.
A proper Medium of Exchange (MOE) process monitors the creation of the money and the delivery on the promise. It guarantees a perpetual perfect balance between supply and demand for money while also guaranteeing perpetual free supply of money.
The money creation process and delivery is never anonymous or done in secret. However, in the interim between creation and delivery, the money circulates in private and anonymous simple barter exchange. In today’s technology (block chains) this can be done with great efficiency and robustness. It can employ the greatest deterrent to cheating … that being transparency.
Now all governments are instituted by money changers. They are designed to protect the money changers “banking” operations. These operations just co-opt the trading process, claiming tribute (INTEREST); manipulating supply and demand to keep traders off balance (the so-called business cycle); and funding governments (traders who never deliver as promised) through INFLATION.
If Google (or better yet Amazon) institutes a proper MOE process, they blow this long running conspiracy out of the water. They return the money process to the traders who created it in the first place.
That ain’t gonna happen. Too bad. If it did happen this planet would be a far more pleasant and safe place to waste about 80 years of your time … the only time you will ever get by the way.
MoneyDelusions: We’re going to get this from people who don’t know what money is … and nobody but the money changers seem to know … and they’re liars. It is easily proven: Money is “an in-process promise to complete a trade over time and space.” It is always, and only, created by traders like you and me. For example, when we promise to buy a house with 360 monthly payments … or a car with 60 monthly payments … we are making a promise spanning time and space. To do this we create a “money obligation” and get it certified by the process … which then monitors it for performance. In most cases it is just an entry in a couple ledgers. One ledger (the money process’) keeps transparent track of the performance on your promise. The other ledger (yours) keeps track of how much performing you have done and have left to do.
In the mean time, this money you created exchanges as the most common object in every simple barter exchange.
Should you fail to meet your performance promise (i.e. DEFAULT), a proper Medium of Exchange (MOE i.e. money) process immediately recovers your DEFAULT with an INTEREST collection (from other irresponsible traders) of like amount. In this way it protects everyone using money to make trades.
The operative relation is: INFLATION = DEFAULT – INTEREST = zero
‘So INTEREST is absolutely “objective”. It’s not dictated by the likes of Sanders or Cortez … or the money changers … or the governments the money changers institute to protect their scam. INTEREST is guaranteed to be zero for responsible traders (non-DEFAULTERS) and adjusted according to a trader’s propensity to DEFAULT (i.e. irresponsibility). Past irresponsibility can be cleared away by simply making up the DEFAULT.
The money itself has no intrinsic value … so precious metals are not money. The money itself is not created from waste … so BitCoins are not money. Money maintains a perfect perpetual supply/demand balance, thus also ruling out precious metals and so-called crypto.
The obvious indicators that you are immersed in a defective MOE process is concepts like “monetary policy”; “stimulation”; “unemployment”; “inflation targets”; “usurious interest”; etc.
