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The engine used to run on premium, e.g. gold and
silver; now it’s being run on credit which over time will destroy the
engine and everything else.
The euro,
the yuan, the yen, and the dollar are The
Four Tires Of The Apocalypse, an event that recently appears to have come
out of nowhere. It didn’t. Its apparently sudden appearance is new only
to those who wished to see otherwise.
The
destructive juggernaut now bearing down on the financial house of cards
constructed by central bankers contained within it the seeds of its own
destruction from its very beginning. Over time, those seeds would turn into
Cerberus, the hound of hell, on whose mercy Bernanke et. al. now depends.
Epochs, like
movies, need time to reveal protagonists and antagonists, as well as victims,
villains and victors. We are now at the end of an epoch and as the final
scene opens, the program notes are becoming disturbingly clear.
We find
ourselves participants in the last and final act of capitalism and its credit
based capital markets—or more correctly, credit and/or debt markets
masquerading as free markets.
THE BIRTH OF CERBERUS
THE GENESIS OF THE JUGGERNAUT
Capitalism
did not appear until the Bank of England began issuing its debt-based paper
money in 1694. The issuance of credit as money gave rise to capital markets
where debt-based money replaced savings-based money
The Bank of
England’s debt-based money drove out gold and silver coinage as Gresham’s
Law clearly illustrates—bad money drives out good. No one would
willingly pay gold or silver for what paper coupons would just as easily buy.
Capital
markets are debt-markets made possible by the fiat issuance of central bank
debt-based money. After central bankers’ faux money replaced gold and
silver coins, commerce appeared to change forever; but that too is now about
to change.
The rise of
central banks parallels the substitution of paper debt-based money for gold
and silver. When a disease spreads, so, too, do its symptoms. Replacing gold
and silver with debt-based money was to eventually cripple commerce itself,
albeit after a three hundred year run at the table.
Previous to
central banking, commerce was founded on currencies composed of gold and
silver. But with the advent of central banks, credit was substituted for gold
and silver and after three centuries, credit-based economies are now on the
verge of collapse, the juggernaut is in the shop and the long awaited
apocalypse has arrived.
SOMEBODY BETTER CHECK THE TIRES
The euro,
the yuan, the yen, and the dollar—the four major fiat
currencies—are The Four Tires Of
The Apocalypse; and although the economy’s engine, the credit
markets, have seized up and are receiving most of the attention, somebody
should take a look at the tires.
The
mechanics, the central bankers, are instead focused only on the engine. Their
solution again proves that good mechanics are hard to find. Like hacks at the
corner garage, they’re pouring more credit into an already flooded
engine, a sure sign they don’t know what they’re doing.
They’re
not even looking at the tires. They should because the tires are fiat made of
paper. The front tires are the Japanese yen and the Chinese yuan. The rear
two are the euro and the US dollar; and it’s the two rear tires that
now pose the greatest threat, the driver’s side rear, the US dollar, in
particular—and the spare in the trunk, the British pound has a leak.
Of the four,
the Chinese yuan is the newest, which in credit-driven economies is a plus,
as usage in such economies equals more debt. Nonetheless, the Chinese yuan is
not capable of carrying more than its present load although it is presently
holding its own.
The other
front tire, the Japanese yen, unlike the Chinese yuan, is well-worn and its
tread is almost gone. Its debt load is enormous (the highest ratio of debt to
GDP of all major economies) while its pressure, sic interest rate, is the lowest of all, incapable of handling
more.
Currently at
only 0.5 % because of an almost fatal blowout in 1989, the Japanese yen still
hasn’t yet recovered—that the tire is still in service after its
severe blowout is in itself something of a miracle.
But the two
rear tires, the euro and the US dollar, are the source of our future trouble
as they are particularly vulnerable to the continuing collapse of credit
markets. The euro and dollar, like all fiat currencies, are dependent on the
strength of their underlying economies, economies addicted to credit from
increasingly insolvent banks, banks which are in far more trouble than
presently believed.
Like someone
who has HIV and has only confessed to having the clap, the money-center banks
in Europe and the US are holding assets both on and off their balance sheets
that are virtually worthless, with actual losses totaling $1.6 trillion, four
times what the banks have yet admitted; and because the value of fiat
currencies are a function of their economies, the collapse of the US dollar
and euro may be ahead.
PUBLIC MONEY
PRIVATE BANKS
It is now
clear that central banks are using national treasuries to indemnify losses
incurred by private banks. This should come as no surprise. Once private
bankers and public government colluded to debase the currencies of their
nations in order to enrich themselves, the joining of the two was inevitable
and it is happening as we watch.
The last and
final act of capitalism will be characterized by the looting of what little
remains in our national treasuries as central bankers bail out the banks that
caused our present problems. The only thing new is our surprise that it is
happening.
The
consequences, however, will not end there. The consequence of the public
bailout of private banks will be the collapse of fiat currencies, currencies
which have been the very basis of government and bankers’
power—power which will be swept away when fiat currencies collapse.
THE END GAME
Capitalism
and credit markets—the bastard offspring of fiat money and central
banking—are now in their final stage; and the default of fiat money
will herald the end of the reign of central bankers in our affairs. No fiat
system has ever survived. The present fiat system will be no exception to
that rule
For those
worried about private property, have no fear. Capitalism has nothing to do
with the private ownership of property as maintained by private bankers and
their corporate sponsors. The private ownership of property existed long
before capitalism and will exist long after.
Capitalism
has everything to do with central bankers’ issuance of debt-based money
and the increasing power of government in our lives and the increasing
profits of bankers at our expense.
Thomas
Jefferson, the author of America’s Declaration of Independence
understood well the threat posed by central banks:
The central bank is an institution of the most deadly hostility
existing against the Principles and form of our Constitution…Bankers
are more dangerous than standing armies…
[and] If the American People allow
private banks to control the issuance of their currency, first by inflation
and then by deflation, the banks and corporations that will grow up around
them will deprive the People of all their Property until their Children will
wake up homeless on the continent their Fathers conquered.
With the
establishment of the Federal Reserve Bank in 1913, the American people
allowed private bankers to destroy the economic freedom the founding fathers
had fought to achieve.
That first by inflation and then by deflation, the
banks and corporations as Jefferson warned are now in the process of depriving
Americans and others of their homes and property by the issuance of credit
and by default on those debts
The founding
father fought a war in 1776; and 137 years later in 1913, Americans ceded
back what they had won when they allowed private bankers to establish the
Federal Reserve Bank in the US, a central bank which would do exactly as
Jefferson said
Since the
establishment of the Federal Reserve System, the US has been a slave to
bankers and those in government who do their bidding, Today, Americans are
bankrupt and indebted to those they allowed to issue their currency.
Today,
America’s once free markets are rigged and government officials lie
openly and with impunity whenever it serves their purpose to do so, their
words no more trustworthy than the statistics they produce in order to pacify
a nation regarding the dangers they have put it in.
Soon,
however, that will change. For the collapse of the fiat US dollar will also
bring about the collapse of those who benefit from its false
issuance—private bankers, corporations and those who govern for their
benefit in our name.
Although we
do not possess the requisite power to successfully oppose those who oppress
us, we can however wait for their inevitable demise, a demise that will
unfortunately be as devastating to us as it will be to them.
The collapse
of the US dollar will be horrific as will be its aftermath. But the price of
liberty is always high. It was high in 1776. It will be high again.
THE UNLEASHING OF CERBERUS
These days
at Apocalypse Auto, the lights are on at midnight as the mechanics wonder
what to do. This is not the first time the once apparently unstoppable US
economic juggernaut has been in the shop.
Just a few
years ago, when the dot.com bubble burst, the US economy was obviously badly
in need of emergency repair. To Al Greenspan, the head mechanic at Apocalypse
Auto, it was a dangerous situation.
In 1989, the
Japanese stock market bubble had collapsed sending Japan into a deflationary
spiral in which it was still mired and if the US suffered likewise, the US,
Japan and world economies would be in deep trouble.
So, Al and
the others at Apocalypse Auto did what they did. The story is best told by
Professor Antal E. Fekete in The Bubble
That Broke The World, June 2003, see http://www.professorfekete.com/articles%5CAEFTheBubbleThatBrokeTheWorld.pdf.
… Aladdin Greenspan let the genie out of the bottle. The genie
is now at large, entirely on its own, roaming around the world, visiting
disaster upon the economies wherever it may go: a depression possibly worse
than that in the 1930s. Aladdin hasn’t got a clue how to put it back in
the bottle because if he tried, the genie would threaten to plunge the world
into another bottomless pit, that of hyperinflation.
Greenspan [explained]
the strategy the Fed has developed to combat deflation. He would climb the
yield curve, that is, go out to buy government bonds of all maturities, if
need be up to and including the30-year Treasury bonds, in an effort to push
interest rates down thereby enlarging the monetary base that would, according
to him, contain the weakness in prices.
It is a long shot from open market purchases of bonds to a buoyant
price level. After all, once in circulation, the new money created by the Fed
is no longer under its control. It is under the control of the speculators.
They will not necessarily deploy it in the commodity or stock markets, as the
Fed is hoping. They may see a better
opportunity for profitable speculation elsewhere, say, in the real estate or
the bond markets [bold, mine].
Just as
Professor Fekete predicted, central bank credit, sic “new money”, went out of central bankers’
control and created an even larger bubble, the US real estate bubble whose
collapse is now threatening economies everywhere.
Central
bankers are again trying to contain the forces they themselves set in motion.
But, irreparable harm has already been done because the genie that Greenspan
let out of the bottle was no ordinary genie, it was Cerberus, the hound from
hell.
Cerberus,
Hades’ three-headed hound, is now on the loose. It is a sign of the
times that many still hope central bankers can save them from what is about
to happen. But hope is as blind as the information upon which it
feeds—for although the bankers let Cerberus out, they are powerless to
put him back in.
GOLD & SILVER
THE BANE OF CENTRAL BANKERS
THE FOUNDATION OF OUR PAST AND FUTURE
FREEDOMS
Note:
Session V of Professor Fekete’s Gold Standard University Live (GSUL)
will held November 11th through the 14th at Australian
National University in Canberra, Australia. I will be delivering a talk
during the session. Inquiries can be addressed to Philip Barton at feketeaustralia@yahoo.com.
Darryl Robert Schoon
www.survivethecrisis.com
www.drschoon.com
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