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Until fate is understood, free
will is not
When younger, Alan Greenspan
wondered if he could have prevented the Great Depression had he been Fed
chairman during the 1920s. Fate, however, was to give Greenspan a far different
future than he expected; instead of preventing a depression, he would cause
one.
After the scare of the 1970s,
central bankers, i.e. Greenspan et. al., focused on containing
inflation and came to believe they had successfully done so, not realizing
that monetary expansion had instead morphed into asset bubbles, e.g. stocks,
property, and bonds, not general price inflation as in the past.
Deluded by his apparent success,
as chairman of the Federal Reserve Greenspan provided Wall Street with
ever-increasing amounts of credit while unleashing market forces that would
someday bring down the markets themselves (not until his Fed tenure ended
would most understand what Greenspan had set in motion).
Receiving an honorary knighthood
from the Queen of England in 2002 for his apparent ability to create growth
without inflation, Greenspan enjoyed the adulation of his increasingly
wealthy followers who had not yet experienced the end-result of his policies,
to wit the catastrophic collapse of global markets on an unprecedented
scale.
Greenspan’s loose credit
policies were to be responsible for the collapse of the two largest bubbles
in history, the US dot.com and the US property bubbles. Their sequential
destruction within a decade would unleash 20 years of Greenspan’s
unprecedented compounding debt upon an unsuspecting world—a vast
deleveraging that would bring down the global economy and push it towards the
edge of another Great Depression.
If fortune was unkind to Alan
Greenspan, it would be no less so to his successor, Ben Bernanke. Bernanke
would be the chairman of the Federal Reserve when Greenspan’s massive
property bubble collapsed in 2007, one year after Greenspan resigned.
But Ben Bernanke, like Greenspan, also
had a date with destiny that was to be far different than expected; for just
as Greenspan wondered if he could have prevented the Great Depression,
Bernanke was certain that he, Ben Bernanke, if appointed chairman of the Fed,
possessed the requisite knowledge to reverse a depression should one occur.
And just as fortune had presented
Greenspan the opportunity to test himself and his theories in real time, Ben
Bernanke was to be afforded the very same opportunity. The outcomes would not
be dissimilar.
Pity should be reserved only for
those deserving
BERNANKE’S TURN AT THE WHEEL
OF FORTUNE
Bernanke believed that University
of Chicago economist, Milton Friedman, had discovered the antidote for
deflationary depressions. Noting that the money supply had contracted between
1930 and 1933, Friedman theorized that if the Fed had then engaged in
sufficient monetary expansion, the depression would have been averted.
The highly intelligent often
mislead others as well as themselves
At Milton Friedman’s 90th
birthday party on November 8, 2002, Ben Bernanke publicly thanked Friedman
for his theories regarding the Great Depression:
Let me end my talk by abusing
slightly my status as an official representative of the Federal Reserve. I
would like to say to Milton and Anna: Regarding the Great Depression. You're
right, we did it. [i.e. the
Fed caused the depression by its monetary tightening] We're very
sorry. But thanks to you, we won't do it again.
In one respect, Bernanke was
right. The Fed had caused the Great Depression but not for the reason
Friedman and Bernanke believed—the Fed had caused the Great Depression
by providing the leveraged credit speculators used to drive stocks to
stratospheric heights prior to the 1929 crash, a crash so spectacular it
would wipe out the savings of the nation, plunging America and the world into
an economic abyss from which it would recover only after WWII had wiped clean
the remaining balance sheets that the Great Depression had not.
Bernanke’s public thank-you
to Milton Friedman in 2002 was as premature as George W. Bush’s
proclamation of a US victory in Iraq. Bernanke, however, was appointed Fed
chairman in 2006 and would soon get his coveted chance at the wheel of
fortune to prove Friedman right.
After the markets collapsed in 2008,
last year, in January 2009 Bernanke set in motion the greatest monetary
expansion in history, an unprecedented government stimulus designed to
prevent a deflationary depression as Friedman forecast.
But nine months later, the US
economy began to again slow; and, now, in 2010, the ECRI, the leading
indicator of economic growth in America, has plunged once again into negative
territory. Put to the test, Friedman’s theory is a resounding—and
costly—failure.
As the below ECRI chart shows, the
powerful economic expansion beginning in January 2009 resulted from
Bernanke’s application of Friedman’s expensive patent medicine
that month, a prescription that would cost US taxpayers more than 700 billion
dollars.
But economic growth indicators
peaked abruptly that same year in October 2009, beginning a year-long
detumescence to a present reading of -10.1%. Ben Bernanke shot Friedman’s
mighty wad and it missed.
It is rare that human beings admit
to having failed. In this, Ben Bernanke is no different than the rest of
humanity and although Friedman’s theory failed, do not expect Bernanke
to admit it. Bernanke is a one-trick pony. He’s going to try it again.
On August 28th, Bloomberg News
reported: Federal Reserve Chairman Ben S. Bernanke said the central
bank has the tools to prevent the U.S. economy from slipping back into a
recession… Should further action prove necessary, policy options
are available.
Note: Milton Friedman, John
Maynard Keynes, Alan Greenspan, Ben Bernanke, et. al. share the
intellectual failing common to all modern economists, i.e. a collective
denial that paper money brings in its own time its own destruction.
THE CASINO OF PAPER MONEY
Capitalism is similar to a giant
casino where capital, i.e. paper chips, are issued by the house, i.e. banks,
as interest-generating loans. The longer the chips remain in play, the more
debt is created which accrues to the house as profit.
Most of those in the casino, i.e.
workers, producers and savers, must “invest” their savings with
professional gamblers, e.g. investment banks, insurance companies, and pension
funds, who arbitrage the odds at various tables and are given additional
credit by the house in order to do so.
The professional gamblers offer a
small return to the workers, producers and savers and pocket the difference
between their winnings and the returns offered; and, as long as the velocity
and amount of capital bet increases, the house is profitable and can pay what
is owed to the professional gamblers who pay what they owe and keep the rest.
Problems happen when the velocity
of capital slows and the aggregate amount bet diminishes. This explains the
obsessive concern of the house bookkeepers (central bank economists)
regarding the velocity of money and the overall money supply.
After 1900, the velocity of money
steadily fell until 1913 when America officially became a casino to be
managed by the Federal Reserve, i.e. the house. The house fix, however, was
temporary and lasted only 5 years. Note what happened to the velocity of
money after 1971 when the casino’s chips are no longer backed by gold.
When the historic 1920s US stock
market bubble collapsed in 1929, the money supply contracted 25 % by 1933;
and, as a consequence, the US made the private ownership of gold illegal that
year.
The US confiscation of gold was
enforced by the casino to prevent Americans from taking their paper chips off
the table to instead buy gold; as gold buying diminishes the overall money
supply, i.e. the amount of paper chips in play, and the velocity of capital,
i.e. the volume of paper money being bet with the house.
That the US could again confiscate
gold is a possibility as America is still operated by the same managers, the
Federal Reserve. However, there are differences between the 1930s and today
and I discussed this possibility previously on a youtube video, see
http://www.youtube.com/user/SchoonWorks#p/u/9/5o36Dj-ukPo.
If the US does outlaw the private
ownership of gold, it will erode the ability of Americans to recover after
the collapse. The US government, however, is primarily concerned with the
ability of the Fed to loan the government money, not the well-being of its
citizens. This should be obvious to most Americans. Unfortunately, it
isn’t.
Capitalism is similar to a
Ponzi-scheme where earnings and winnings must be constantly re-cycled, i.e.
“re-invested”, in order to keep the scheme going. This is why the
US is so upset with Asian nations with high savings rates—earnings in
Asia are not being recycled as quickly as the West requires.
To Asians, savings are a sign of
healthy economies and balanced living. To US and Western bankers, high Asian
saving rates constitute a “savings glut”, causing the velocity of
money and amount bet in the West to slow and threaten its global Ponzi-scheme
This is why China, Japan, Korea,
and Middle-Eastern oil-producing nations are pressured to recycle their
savings back to the US and/or other Western economies. By so doing, they
become captive to the West as their increasingly indebted economies become
dependent on the West’s paper driven demand.
In Asia, however, savings are
still considered a virtue, not an under-leveraged asset as in the US and
Europe. Gold, too, is held in high regard in Asia. Recently, Chinese
households have more than doubled the percentage of their savings invested in
gold.
The Chinese are investing in gold
because in the 1940s the value of Chinese paper money plummeted 1,000-fold in
a hyperinflationary collapse and they remember. Europe, too, suffered
extreme monetary distress during the early 20th century, and the Europeans likewise
understand that gold is the money of last resort; and, after global markets
imploded in 2008, it is understandable why the European demand for gold
quadrupled.
In America, however, the house is
committed to keeping America’s savings invested in paper assets and
paper promises, i.e. bonds, in order to keep its Ponzi-scheme alive. How long
the house, i.e. the Fed, can do so is now the world’s quadrillion
dollar question.
The house is now in trouble
Its chips are old and worn
Money’s replaced by IOUs
The management’s looking forlorn
Gamblers are looking elsewhere
For new houses to take their bets
Where payments are made in specie
Not irredeemable debt
Though the wheels of chance are
still spinning
And the croupiers are ready to play
It’s rumored the house is bankrupt
And may not last the day
But the barkers are promising
jackpots
For all who would still believe
That promises are as good as gold in the hand
And that bankers are better than thieves
THE STAGE IS SET
All the world's a stage,
And all the men and women merely players
William Shakespeare, As You Like It, 1599
In August 2007, I spoke at
Professor Antal Fekete’s Gold Standard University Live Session II in
Hungary. That month the global credit contraction began, a contraction that
one year later was to force stock markets to their knees, triggering such
losses that had not governments quickly rescued banks, financial institutions
would have closed on a level not seen since the 1930s.
The previous March, I had
delivered a paper where I predicted housing would fall 40 to 70 %, stocks
would plummet in value and that the world would soon be heading into a
economic cataclysm worse than the Great Depression; and not only would demand
collapse but a currency crisis would accompany the coming rendering.
I have not changed my mind. Much of
what I predicted is still yet to come, although such events are now three
years closer to reality. The truth is I had expected such a crisis for
decades. Long before it happened, I had a sense that something deeply
troubling was awaiting humanity. My sense is that it has now arrived.
Buckminster Fuller foretold such a
crisis and others have also predicted the same. Last year, Collapse, a
movie featuring Michael Ruppert, author of Crossing the Rubicon and a
man much to be admired for his courage in speaking the truth in a time of
lies, was released. The trailer for Collapse speaks volumes about what
is now happening, see
http://www.youtube.com/watch?v=WAyHIOg5aHk&feature=player_embedded
I am a strong believer in destiny.
I have seen it in my own life and have no reason to not believe it operates
in others’ lives as well. Destiny, however, does not preclude free
will. In fact, it includes it.
…there is destiny, all
right. The life cycles are in place. It’s just that there are so many
alternatives which are unclear.
subject under hypnosis, Journey of Souls, Michael Newton, 1995
I believe this crisis was
destined. The writing of my book is evidence of that belief. In the opening
chapter are the words:
… there comes a time when
neither the hare nor the tortoise is the victor. This is when both the bear
and the bull have been vanquished, when the pastures upon which the bull once
grazed are long gone and the bear's lair itself lies buried deep beneath the
rubble of economic collapse.
This is the time of the vulture,
for the vulture feeds neither upon the pastures of the bull nor the stored up
wealth of the bear. The vulture feeds instead upon the blind ignorance and
denial of the ostrich. The time of the vulture is at hand.
Those words came to me in 1992. At
the time, I didn’t know what to make of them. It was, after all, 1992.
However, when I began writing about the coming collapse in 2006, I knew then
why I had heard those words years before.
Last month I delivered the Sunday
talk at the Temple of Universality, a spiritualist church in Tucson. My
message contained a fundamental belief that I also have about money, to
wit that neither what we call “money” or
“reality” are what they appear to be; and that only by
understanding the truth about each can we successfully transit the these
increasingly dangerous times.
The Way Through, a dvd of my talk at the Temple of
Universality, is available at http://www.drschoon.com/media.asp and a video
about The Way Through is on youtube at
http://www.youtube.com/user/SchoonWorks .
In 1981, Buckminster Fuller
described the currently unfolding crisis as
“universally-intended”. I believe the crisis is a cosmic regelungen
so extreme it will change not only our world it will change humanity as well.
That is why we are here.
Buy gold, buy silver, have faith.
Darryl Robert Schoon
www.survivethecrisis.com
www.drschoon.com
Check his Blog
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