January 17, 2013 at 3:52 pm #17632
In a world where the central banks are in a race to print more and more of their fiat currencies, it appears that the losers could be the governements that are acting responsibly.
Since the vast majority of developped economies are taking this same dangerous route, it appears that when the crash happens, it will be a momentous event that will have many losers (the debt holders), but that will be so big that it will require a complete reorganisation of the economic system. Until that moment, the governements who are overheating their printing presses, mainly the US, Europe and Japan, can benefit from this easy money to develop and upgrade their infrastructure (which they are not all doing equally). The governements that are trying to maintain a modicum of sanity in their public finances appear to be the potential losers of this story.
By acting responsibly, they see their currency rise, which is hurting their industrial base now, also in the long run, they will not have benefited of this easy money to invest when the crash comes. Since the crash will most certainly affect everybody, they could have denied their country of hard assets that could have been acquired on the cheap.
By writing this, I know that what I’m suggesting goes against all laws of equity, philosofical or economic, but it would not be the first time in human history that the virtous end up being the losers.January 21, 2013 at 10:23 pm #18027
JAMES K V.Participant
That is my concern too. One possible way around this is to allow – no, actually encourage – the printing and circulation of scrip, by local communities – as I’ll get to in a few paragraphs. Unlike gold-backed currencies, scrip is debt-free – it acts as a pure lubricant for transactions. An illuminating discussion about the difference between debt-based and debt-free money (scrip) can be found beginning on p.225 of Joseph P. Farrell’s “Babylon’s Banksters”. For reviews of Farrel’s book, go to amazon.com. I can forward key pages if you or anyone contacts me: firstname.lastname@example.org.
Farrell begins the discussion by drawing from work by C. Ellen Hodgson Brown. “Brown pints out something that most modern Americans do not know . . . most of the colonies printed their money – debt-free – and made loans
to farmers and businessmen. The result was a booming economy and almost full employment. When Benjamin Franklin went to England prior to the revolution, he was asked about the source of this prosperity ‘by the directors of the Bank of England’, and Franklin responded that the colonies ‘issued paper money ‘in the proper proportion to the demands of trade and industry.’
Continuing: “But what was the ‘backing’ of this money? The colonies, however,had little silver or gold with which to back their issues of paper currency. With what, then, was it backed? The then famous minister in New England, Cotton Mather, made clear what the backing of this colonial scrip was by asking a pointed series of questions:
“Is a Bond or Bill of Exchange fr (one thousand pounds), other than paper? And yet it is not as valuable as so much silver or gold, supposing the security of payment is sufficient? (Italics->Now what is the security of your Paper-money less than the Credit of the whole Country?
Farrell: “As Brown notes, ‘Mather had redefined money. What it represented was not a sum of gold or silver. It was credit: ‘the credit of the whole country'”.
Farrell: ” . . . what Mather had really done is return to the very ancient conception of money prior to the rise of the international bankster class of bullion brokers in ancient times; what he had done was to return the idea of money as a credit bill against the surpluses of the state warehouse, and not (italics)-> an interest-bearing note of private issuance.”
From Brown: ” . . . when gold was the medium of exchange, money determined production rather than production determining the money supply. When gold was plentiful, things got produced. When it was scarce, men were out of work and people knew want. (italics)-> The virtue of government-issued paper scrip was that is could grow along with productivity, allowing potential to become real wealth.
My concern is for export-driven nations like New Zealand that, as you suggest, have been forced to engage in “competitive debasement” of their currencies. In the fall of 2010, Porter Stansberry (www.endofamerica.com) noted that there were already 23 alternative currencies – all legal – in circulation in the U.S. According to two clippings I cut from the Chicago – which I am still looking for – in localities where scrip is circulated, it is accepted by by local merchants. The local and state sales taxes are paid of with U.S. currency.
So long as scrip is circulated within a nation’s borders it is legal. As noted earlier, scrip is a pure “transactional lubricant” in that no debt arises from the transaction. In other words, there is no “frictional loss” when scrip-based transactions are involved.
Farrell (quoting Brown): “Needless to say, England’s banksters were not about to allow this situation to continue, allowing the colonists to gain prosperity without enriching their own parasitic coffers. Thus, the Bank of England parlayed its influence in Parliament to get the 1764 Currency Act passed, which made it illegal for the colonies to issue their own money. And predictably, as Franklin observed, a year later the streets of the colonies were filled with the unemployed and beggars.
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