The River

Thursday, December 20, 2007

Money matters

It's always refreshing when someone who knows their subject speaks plainly and clearly, using vivid language, especially in dealing with issues of finance, business, politics, and globalization.

Elaine Meinel Supkis is such a speaker. Give her a listen.

As we shall see at the end of today's story here, the thing that matters the most is, Hu has Sovereign Funds and Wen will he use this to buy up all US and EU assets and businesses? No banking system can run for long with out someone saving something and these someones are easy to spot in the news, they are the ones who have a profit a la capitalism or via selling important raw materials needed for the industrial process.

The US is using these things such as oil, to run around and have fun. Instead of using energy to create value-added goods that then earn a profit via selling to someone who has saved money, the system in the West has become a buck-passing party. To sell cars, we get to have discounts and 0% loans which are not really 0% but no one is supposed to notice the fine print. Indeed, we want 0% loans all the time so we can buy things without saving money at all. This means the economy hums but the tune it is humming is, 'The East Is Red.' Madame Mao's favorite ballet, by the way.

The 'gap' we are seeing in interbank rates is due to the utterly false inflation rate numbers so dear to the central bankers clashing with the reality that we must pay the piper since we have no savings anymore. The rotten 'something' in world markets is the rotting corpse of a number of currencies which are supported by fake interest rates that force people to not save but spend recklessly. We see inflation in China due to the people there earning more money and making more profits. In the US, we are like Japan, declining incomes and wretched profits unless the business is outsourcing to China, then they have big profits while driving up the trade deficits of the shocked and awed nations that want to keep playing funny money games while never saving any money.

The cure is simple here: high rates that encourage savings. This will kill the consumer golden goose but that goose is being microwaved anyway so we may as well re-establish old banking rules that have been on the books from 1933 till reckless US mis-spenders dropped back in 1974. What everyone wants right now is some way of papering over the Grand Canyon of mis-spending, free loans and reckless speculations. We want the party to resume, no clean up and no sobriety. And certainly, no savings. If we can get this restarted without saving a penny, all the better.


Tuesday, December 18, 2007

How they get away with it

What I like about this is how it demonstrates how few tools these people have. They have to use the same ones over and over again, now matter what they're selling: trade deals, tax cuts for billionaires, wars.

Another classic from A Tiny Revolution

Monday, December 10, 2007

NIE media dramas aside, the beat goes on

Islamic scholars have been seeking to devise a global banking system that would serve as an alternative to the usury-based scheme now in control internationally, and Iran has led the way in devising that model. Iran is characterized as a democratic Islamic republic, which enforces Islamic principles not only morally but legally and politically. The American-backed Shah of Iran was overthrown in 1979, ending 2,500 years of monarchical rule. All domestic Iranian banks were then nationalized, and the government called for the establishment of an Islamic banking system that would replace interest payments with profit-sharing. Iran's state-owned central bank issues the national currency, with the seigniorage accruing to the government rather than to private banks.16 The Iranian government is among the few to have very little foreign debt. It uses its state-owned banks to make loans and credits available to industrial and agricultural projects. The most unique feature of the Iranian banking system, however, is that it follows the Islamic proscription against usury. That means loans are made interest-free.17

At least, that is true in principle. To make their system work with the prevailing scheme, Islamic economists have had to come up with some creative definitions of "interest." Assuming Iran can develop a workable alternative model, however, it might well threaten the usury-based banking system that now dominates international finance and trade. If governments were to start doing what banks do now – advancing "credit" created out of nothing with accounting entries – they could sidestep the hefty interest that is the principal cost of most government programs today. It has been estimated that eliminating interest charges could cut the average cost of infrastructure, sustainable energy development, and other programs in half.18 Third World economies might finally escape the iron grip of the international bankers, bringing a 300-year global banking empire crashing down.

The size of the stakes was suggested by Tarek El Diwany, a British expert in Islamic finance and the author of The Problem with Interest (2003). In a presentation at Cambridge University in 2002, he quoted a 1997 United Nations Human Development Report which said:

Relieved of their annual debt repayments, the severely indebted countries could use the funds for investments that in Africa alone would save the lives of about 21 million children by 2000 and provide 90 million girls and women with access to basic education.

El Diwany commented, "The UNDP does not say that the bankers are killing the children, it says that the debt is. But who is creating the debt? The bankers are of course. And they are creating the debt by lending money that they have manufactured out of nothing. In return the developing world pays the developed world USD 700 million per day net in debt repayments." He concluded his presentation:

But there is hope. The developing nations should not think that they are powerless in the face of their oppressors. Their best weapon now is the very scale of the debt crisis itself. A coordinated and simultaneous large scale default on international debt obligations could quite easily damage the Western monetary system, and the West knows it. There might be a war of course, or the threat of it, accompanied perhaps by lectures on financial morality from Washington, but would it matter when there is so little left to lose? In due course, every oppressed people comes to know that it is better to die with dignity than to live in slavery. Lenders everywhere should remember that lesson well.19

That could explain the big guns trained on Iran, and the tightening of economic sanctions against it. Dominoes that won't fall into the debt trap must be pushed. Like in the brutal attacks in Lebanon in July 2006, the military targets in Iran are liable to be economic ones – ports, bridges, roads, airports, refining infrastructure.20 The threat posed by Iran's alternative economic model will be obliterated by blasting it back into the Stone Age.


Ellen Brown, November 13th, 2007, The Web of Debt

Wednesday, December 05, 2007

The DUI theory of capitalism

All these organizations 'manage risk' but I assume this means going out at night with Miz Risky and getting plastered and then driving around in the dark with the headlights off, tossing beer bottles out the window.

-- Elaine Meinel Supkis, Money Matters

In 1960, Friedman wrote an essay, In Defense of Destabilizing Speculation, which suggested that speculation would self-organize its own constraints due to the fact that speculations that were inefficient would lose money to people who had bet against those speculations. This is a variant of the efficient markets theory, which should really be renamed the “trust a drunk to get home’ theory.

-- Roger Gathman, Limited, Inc.

Forrest Gump, for example, was the American Candide, chronicling epochal events which total up to restless catastrophe. Vietnam is where this country really went round the bend too fast and got caught by the state trooper with a radar gun.

-- Marc Lord, Adored by Hordes