The Flight of Reason
By Simon Davies and Donald Hunt
SOTT.net
The Enlightenment brought with it the idea that Reason should govern the affairs of man thereby ensuring Liberty. That Reason and Liberty have been hijacked by the banking and corporate elites who engage in open war and genocide with impunity has never been clearer than today.
Reason has fled, all rationality is gone, we are therefore called to act in defiance of the genocidal murderers in Palestine. In just the same way as the economy is being used to control us, we can exert similar pressure on Israel by boycotting all Israeli goods, all Israeli services and any company that does business with Israel however small.
Reason was held to be the supreme guiding principle of man in the age of Enlightenment, sweeping aside superstition, ignorance and tyranny.
No sooner did the human spirit grasp the idea of Liberty through Reason than another force was hard at work subverting and perverting it - 'free market capitalism', the wealthy tradesmen, skilled artisans, merchants and small industrialists of the bourgeoisie, dominated from behind the scenes by the bankers, the true Money Power. The bourgeoisie manipulated the common people of the 18th century into supporting political reforms which solely benefited the bourgeoisie and the Money Power at the expense of the monarchy and the landed aristocracy. Instead of delivering the liberty so dearly sought by all men and women the bourgeoisie and the Money Power used the common people to challenge and subvert the power of the British monarchy and the landed aristocracy ushering in the age of industrial servitude.
Thus began the destruction of true Reason and the dream of true Liberty. The words were retained, their meaning annulled, such that today freedom and liberty are but hollow parodies. We find ourselves in an age where Reason has fled leaving diseased minds and hearts bereft of all humanity; an age where the bestiality of Israel is supported by those unable to think with Reason or feel with compassion and empathy.
We feel the anger and frustration felt by many at the genocide of the Palestinians, the connivance of our politicians and our inability to stop the slaughter. In seeking some small redress of the evils being perpetrated by Israel, a friend ventured into a supermarket last week, picked up a basket full of items from Israel, took them to the Information and Help desk and politely asked that these items be removed from the shelves and that the company cease to trade in Israeli goods. The receptionist said she would pass the message to her management but that the company didn't take political positions. Our friend responded that genocide is not a political but a moral matter.
When genocide becomes 'political' we have to face the fact that our societies have lost their moral compass, that most people regard politics as boring or irrelevant, something that they "don't follow". The mind control machine has worked its pernicious magic to wipe the minds of most people clean of all reason, all rationality, all balance, all common sense. In the resulting void, bereft of real education and the ability to think, endless loops of propaganda and meaningless drivel are played.
It is no wonder that people are left confused and either retreat into believing whatever they are told to believe or switch off completely. Being in the UK this week, it is staggering to see that the big issues of the week are the politically incorrect terms used by members of the royal family in relation to their Pakistani friends and colleagues; whether an atheist advertisement stating that there is probably no god is legal; whether a police force with already existing draconian powers have sufficient powers to protect the Olympic venues being constructed in London for 2012; and the mathematics of Gordon Brown's job creation scheme which seeks to create 100,000 new jobs each year in a country welcoming 130,000 migrants a year in addition to EU immigration.
On top of this the people of Britain have to contend with evermore invasive powers being granted to the petty tyrants in local, regional and national government; powers that are being used to link databases, read emails, listen to phone calls and monitor web usage. The ancient protections once considered the bedrock of liberty have been swept aside including the one against forced entry into the home. The rights that Pitt the Elder declared, in 1760, thus:-
Like much of the draconian legislation enacted in Britain under the Blair governments, the provisions that swept away this fundamental protection against tyranny were slipped into unrelated legislation, the Domestic Violence, Crime and Victims Bill 2004, at the very last stage of its progress through the parliamentary process. The contempt in which the people of Britain are held by their government is not new, although it is becoming starkly obvious to many who did not acknowledge it previously. If the British feel the contempt in which they are held by their political leaders it is difficult to perceive, for they act like the victims of Trans-Marginal Inhibition, too confused and shocked to be of any threat to the established order. The same contempt and flight of Reason is exhibited throughout the world and in no case more clearly than in relation to the actions of the elite in contrast to the worldwide disgust at Israel whose daily war crimes go unpunished and unremarked by the supposed leaders of the world.
The Israeli propaganda machine was well prepared months in advance of the slaughter in Gaza with a five day TV show of Anne Frank on British TV last week plus another holocaust documentary and numerous flattering articles on Tzipi Livni the Israeli foreign minister. Of course no airtime or column inches were devoted to the Palestinians or to examining the truth of the history of the state of Israel.
Perhaps it is no wonder then that ordinary people are not able to apply Reason and compassion to their daily lives and raise themselves above their own concerns to rail against genocide. Ordinary people in Britain and the US haven't had the courage to fight for their own rights, so it should not surprise us that they cannot be brought to fight for the rights of the victims of genocide in Palestine.
A recently released CD by Thievery Corporation, Radio Retaliation, which we can recommend for the timeliness and sharpness of the political and moral message of its lyrics and album artwork has this to say:-
and
It is this same wide-awake thinking, this total absence of Reason, that is driving the current economic phase, commonly called the Financial Crisis. We know that this is not a crisis for the ruling elite but a carefully engineered Shock; a shock to the global economy to achieve global ends.
While we may feel powerless to resist we can in fact make a substantial difference. If we are to have any right to hope for a better future for ourselves and our children we must stand up for the people of Gaza, we must stand up for them today. We must continue to protest where possible but just as importantly we must implement our own sanctions against Israel, we can fight back with our economic power. Naomi Klein has called for us all to boycott Israeli goods and force divestment and sanctions upon all those who deal with Israel, these are the small ways in which we can all isolate Israel just as we need to educate people to isolate psychopaths the world over. The sum of the parts of our individual action is a potent force, a force whose power is acknowledged by the extent to which the ruling elite fear it and the tyranny to which they have stooped in seeking to neutralise it.
In taking individual action against psychopathy and pathocracy we have the power to change the course of history.
Germany has buckled under the mounting pressure to join the bailout approach to the 'crisis', announcing a €50 billion 'stimulus package' which Gordon Brown the UK Prime Minister, himself an avid spender of other people's money, praised. Brown's praise comes after months of pressure on Germany. Quite why Brown felt the need to apply such heavy pressure for Germany to do as he has in the UK is not clear on economic grounds but is clear when one considers the UK Defense Minister's comments that NATO countries that did not join in the Afghan and Iraq wars were hiding behind the 'security' provided by Britain, the US and France. It is the same tactic, create a lie and have those that refuse to believe it cast by your media as cowards, irresponsible, not showing solidarity or seeking a free ride.
All those still possessing Reason know the truth about Afghanistan and Iraq just as they should know the truth about the banking and other economic bailouts; they are a scam, planned and executed for the benefit of parties hidden in the shadows. Brown's insistence that Germany provide the €50 billion 'stimulus package' illustrates the central importance of these bailouts, not in their stated aim, in which they will fail, of rescuing the banking system and small and medium size businesses but in the other effects they will have.
Quite what these other far more important but unspoken of effects will be is of course a matter of speculation. What is apparent is that governments that use bailouts and fiscal stimulus will end up with immense mountains of debt. This will leave each of these nations in the same position vis-à-vis their bankers as developing countries have found themselves vis-à-vis the IMF. Just as IMF debtor nations have found that all domestic political power has been ceded to the IMF and those that dictate the Washington Consensus, so too will the governments of the world that are currently piling on the debt find that domestic political power has been ceded to the bankers.
These bankers will determine, by virtue of the economic reins that they hold, the entire activity of government of every nation. They have in fact been in this position since at least the end of the 19th century but now their power will be even greater, if that is possible to believe. It is these same bankers that constitute the modern Money Power that has its direct inheritance from the Money Power of the 18th century.
This Money Power controls men such as Gordon Brown, Barack Obama, Nicolas Sarkozy, Vladimir Putin and Hu Jintao. These men will do exactly as they are told by the Money Power. The financial bailouts are no exception. They may even believe that the actions they are taking are needed to save us from the 'crisis' so inured are they in the illusion of their own power and importance.
However, the actions being taken today by world leaders are wholly antithetical to the needs of the majority of the people of this planet.
With this in mind it is staggering to see the explosion in US government borrowing as calculated by the St Louis Fed:-
As many have pointed out, the various bank bailout plans haven't worked because they are essentially pushing on a string. However, such commentators miss the point that the bank bailouts are not intended to 'work' in the way proposed; the property and other asset values that have been inflated by the supply of excessive credit are unsustainable so pumping cash and quasi-capital into the system in an attempt to sustain these values is unworkable.
The unworkable nature of the bailouts is illustrated by Karl Denninger's analysis of the 'velocity of money' in the US which has precipitously dropped below "1" as shown in this graph:-
The importance of the 'velocity of money' or the M1 Multiplier is that it is the measure of how much economic benefit is obtained by adding new money to the system. A ratio of "1" means that for every $1 of new money added you get $1 of benefit. Normally, as can be seen on the graph, each new dollar has an effect of 2 to 3 times. However, under the Bush administration this effect has fallen below 1 which means that the effect of each new dollar is less than a dollar. All the new money that is being pumped into the system is therefore being wasted as it is no longer achieving even its own face value in economic benefit.
However, it is creating vast government debt and making governments the bankers of the world thus concentrating vast amounts of direct economic power in these governments - governments that are controlled by the bankers. It seems to us that the scheme is amazingly simple in this respect, the bankers are using the economic rescue to consolidate unprecedented power that is absolute.
The broader economic news paints the picture of a world unable to save itself from the trap it has fallen into.
Markets
United States
The big news last week in the United States was the release of December job numbers. They were bad. The U.S. lost more than half a million jobs in December, the biggest loss since 1945.
Many have pointed out that the financial system of the past generation works like Madoff's Ponzi scheme. The cartoonist Ruben Bolling makes the point that the United States has worked that way since its founding:
Canada
Canadian unemployment rose to 6.6% and its dollar slumped as it is being hit lower demand from the United States and lower commodity prices. Alberta, for example, previously booming from oil and gas development, lost the most jobs of all Canadian provinces (15, 800).
Western Europe
Industrial output is collapsing throughout Europe.
Such numbers helped the Euro fall against the dollar which is pressuring the European Central Bank to lower interest rates. Prospects of interest rate declines in the Euro Zone prompted the Euro to fall against the dollar last week.
In the U.K., Prime Minister Gordon Brown announced a half trillion pound stimulus plan while Spain, Ireland and Portugal have been threatened with having their credit ratings downgraded and Greece has already suffered this fate.
It is interesting to note that Greece has seen the beginning of what is likely to become widespread social unrest as a result of the financial crisis and the methods of oppression of the ruling elites. The reduced credit rating has pushed up the cost of borrowing for Greece which is holding off refinancing in the hope of the situation improving. Greece is at the mercy of its creditors who, as we stated above, will now dictate the domestic political agenda. The Greek government can now be squeezed so as to implement the policies of the Money Power. If the money power wishes there to be widespread civil unrest in Greece it will prevent refinancing and steadily push up the cost of what finance there is until the Greek government has no choice other than to cut back on essential public services, people will take to the streets after which the politically isolated and generally right wing police can be relied upon to inflame the situation and 'do the rest'. It is all in the hands of the Money Power.
Every sovereign nation in the Eurozone is in the same position having lost economic power to the bankers as soon as the Euro was introduced.
Eastern Europe
The dispute between Russia and Ukraine on natural gas shipments was resolved last week, with Ukraine agreeing to European monitors of gas pipeline flows through the country. This led to a rise in Russian stock prices. Despite the fact that the resolution of the dispute seems to support Russia's contention that Ukraine was stealing gas you'd be forgiven for thinking otherwise if you rely on the British press for your news. In the UK the propaganda machine has been in full anti-Putin and anti-Russia mode.
Africa
Congo raised interest rates to 40% in an attempt to halt a currency collapse.
Latin America
In a further example of the imbalance of economic power, a U.S. court ordered Argentina to pay holders of bonds that defaulted in 2001 $2.2 billion.
In Conclusion
As Chris Floyd eloquently stated:-
Anatole Kaletsky writing in The London Times did at least grudgingly admit to being "wrong about so many aspects of this crisis - as have most conventional economists and policymakers". Indeed, "most conventional economists and policymakers" have been spectacularly wrong because they base their opinions and analysis on illusions. As if to illustrate the depth of these illusions Kaletsky continues:-
Matthias Chang, in a well argued article demonstrated that the power behind the political façade is that of the Secret Money Lenders; much as we have just seen in our discussion of Circles of Power and the Money Power. However, Chang said that the abandonment of free market principles by Bush and Brown in seeking to "save" free market capitalism will result in a Socialist, for which he seems to mean Communist, world government. We do not agree, the World Government which is indeed being implemented is no more socialist than Soviet Russia was, it is Pathocratic.
All this in a world that values a football player at £107 million and wishes to pay him £500,000 a week.
SOTT.net
The Enlightenment brought with it the idea that Reason should govern the affairs of man thereby ensuring Liberty. That Reason and Liberty have been hijacked by the banking and corporate elites who engage in open war and genocide with impunity has never been clearer than today.
Reason has fled, all rationality is gone, we are therefore called to act in defiance of the genocidal murderers in Palestine. In just the same way as the economy is being used to control us, we can exert similar pressure on Israel by boycotting all Israeli goods, all Israeli services and any company that does business with Israel however small.
Reason was held to be the supreme guiding principle of man in the age of Enlightenment, sweeping aside superstition, ignorance and tyranny.
This period [the Enlightenment] is also known as the Age of Reason.Reason was meant to guide man into the future to a better world, a world free of Totalitarianism; reason was meant to rid the world of the clear and present evils of tyranny; reason was meant to prevail.
The intellectual and philosophical developments of that age (and their impact in moral, social, and political reform) aspired towards greater rights & liberties for common people based on Self-governance, Natural Rights, Natural Law, central emphasis on Liberty, Individual rights, Reason, common sense, and the principles of Deism. These principles were a revolutionary departure from Theocracy, Autocracy, Oligarchy, Aristocracy, and the Divine Right of Kings. [1]
No sooner did the human spirit grasp the idea of Liberty through Reason than another force was hard at work subverting and perverting it - 'free market capitalism', the wealthy tradesmen, skilled artisans, merchants and small industrialists of the bourgeoisie, dominated from behind the scenes by the bankers, the true Money Power. The bourgeoisie manipulated the common people of the 18th century into supporting political reforms which solely benefited the bourgeoisie and the Money Power at the expense of the monarchy and the landed aristocracy. Instead of delivering the liberty so dearly sought by all men and women the bourgeoisie and the Money Power used the common people to challenge and subvert the power of the British monarchy and the landed aristocracy ushering in the age of industrial servitude.
Thus began the destruction of true Reason and the dream of true Liberty. The words were retained, their meaning annulled, such that today freedom and liberty are but hollow parodies. We find ourselves in an age where Reason has fled leaving diseased minds and hearts bereft of all humanity; an age where the bestiality of Israel is supported by those unable to think with Reason or feel with compassion and empathy.
We feel the anger and frustration felt by many at the genocide of the Palestinians, the connivance of our politicians and our inability to stop the slaughter. In seeking some small redress of the evils being perpetrated by Israel, a friend ventured into a supermarket last week, picked up a basket full of items from Israel, took them to the Information and Help desk and politely asked that these items be removed from the shelves and that the company cease to trade in Israeli goods. The receptionist said she would pass the message to her management but that the company didn't take political positions. Our friend responded that genocide is not a political but a moral matter.
When genocide becomes 'political' we have to face the fact that our societies have lost their moral compass, that most people regard politics as boring or irrelevant, something that they "don't follow". The mind control machine has worked its pernicious magic to wipe the minds of most people clean of all reason, all rationality, all balance, all common sense. In the resulting void, bereft of real education and the ability to think, endless loops of propaganda and meaningless drivel are played.
It is no wonder that people are left confused and either retreat into believing whatever they are told to believe or switch off completely. Being in the UK this week, it is staggering to see that the big issues of the week are the politically incorrect terms used by members of the royal family in relation to their Pakistani friends and colleagues; whether an atheist advertisement stating that there is probably no god is legal; whether a police force with already existing draconian powers have sufficient powers to protect the Olympic venues being constructed in London for 2012; and the mathematics of Gordon Brown's job creation scheme which seeks to create 100,000 new jobs each year in a country welcoming 130,000 migrants a year in addition to EU immigration.
On top of this the people of Britain have to contend with evermore invasive powers being granted to the petty tyrants in local, regional and national government; powers that are being used to link databases, read emails, listen to phone calls and monitor web usage. The ancient protections once considered the bedrock of liberty have been swept aside including the one against forced entry into the home. The rights that Pitt the Elder declared, in 1760, thus:-
"The poorest man may in his cottage bid defiance to all the force of the Crown. It may be frail, its roof may shake, the wind may blow through it. The rain may enter. The storms may enter. But the king of England may not enter. All his forces dare not cross the threshold of the ruined tenement."
Like much of the draconian legislation enacted in Britain under the Blair governments, the provisions that swept away this fundamental protection against tyranny were slipped into unrelated legislation, the Domestic Violence, Crime and Victims Bill 2004, at the very last stage of its progress through the parliamentary process. The contempt in which the people of Britain are held by their government is not new, although it is becoming starkly obvious to many who did not acknowledge it previously. If the British feel the contempt in which they are held by their political leaders it is difficult to perceive, for they act like the victims of Trans-Marginal Inhibition, too confused and shocked to be of any threat to the established order. The same contempt and flight of Reason is exhibited throughout the world and in no case more clearly than in relation to the actions of the elite in contrast to the worldwide disgust at Israel whose daily war crimes go unpunished and unremarked by the supposed leaders of the world.
The Israeli propaganda machine was well prepared months in advance of the slaughter in Gaza with a five day TV show of Anne Frank on British TV last week plus another holocaust documentary and numerous flattering articles on Tzipi Livni the Israeli foreign minister. Of course no airtime or column inches were devoted to the Palestinians or to examining the truth of the history of the state of Israel.
Perhaps it is no wonder then that ordinary people are not able to apply Reason and compassion to their daily lives and raise themselves above their own concerns to rail against genocide. Ordinary people in Britain and the US haven't had the courage to fight for their own rights, so it should not surprise us that they cannot be brought to fight for the rights of the victims of genocide in Palestine.
A recently released CD by Thievery Corporation, Radio Retaliation, which we can recommend for the timeliness and sharpness of the political and moral message of its lyrics and album artwork has this to say:-
The Apocalypse is not something which is coming. The Apocalypse has arrived in major portions of the planet and its only because we live in a bubble of incredible privilege and social insulation that we still have the luxury of anticipating the Apocalypse. If you go to much of the Third World then it appears that the Apocalypse has already arrived. (Terence McKenna.)
and
Modern man likes to pretend that his thinking is wide-awake. But this wide-awake thinking has led us into the mazes of a nightmare in which the torture chambers are endlessly repeated in the mirrors of reason. (Octavio Paz.)
It is this same wide-awake thinking, this total absence of Reason, that is driving the current economic phase, commonly called the Financial Crisis. We know that this is not a crisis for the ruling elite but a carefully engineered Shock; a shock to the global economy to achieve global ends.
While we may feel powerless to resist we can in fact make a substantial difference. If we are to have any right to hope for a better future for ourselves and our children we must stand up for the people of Gaza, we must stand up for them today. We must continue to protest where possible but just as importantly we must implement our own sanctions against Israel, we can fight back with our economic power. Naomi Klein has called for us all to boycott Israeli goods and force divestment and sanctions upon all those who deal with Israel, these are the small ways in which we can all isolate Israel just as we need to educate people to isolate psychopaths the world over. The sum of the parts of our individual action is a potent force, a force whose power is acknowledged by the extent to which the ruling elite fear it and the tyranny to which they have stooped in seeking to neutralise it.
In taking individual action against psychopathy and pathocracy we have the power to change the course of history.
Germany has buckled under the mounting pressure to join the bailout approach to the 'crisis', announcing a €50 billion 'stimulus package' which Gordon Brown the UK Prime Minister, himself an avid spender of other people's money, praised. Brown's praise comes after months of pressure on Germany. Quite why Brown felt the need to apply such heavy pressure for Germany to do as he has in the UK is not clear on economic grounds but is clear when one considers the UK Defense Minister's comments that NATO countries that did not join in the Afghan and Iraq wars were hiding behind the 'security' provided by Britain, the US and France. It is the same tactic, create a lie and have those that refuse to believe it cast by your media as cowards, irresponsible, not showing solidarity or seeking a free ride.
All those still possessing Reason know the truth about Afghanistan and Iraq just as they should know the truth about the banking and other economic bailouts; they are a scam, planned and executed for the benefit of parties hidden in the shadows. Brown's insistence that Germany provide the €50 billion 'stimulus package' illustrates the central importance of these bailouts, not in their stated aim, in which they will fail, of rescuing the banking system and small and medium size businesses but in the other effects they will have.
Quite what these other far more important but unspoken of effects will be is of course a matter of speculation. What is apparent is that governments that use bailouts and fiscal stimulus will end up with immense mountains of debt. This will leave each of these nations in the same position vis-à-vis their bankers as developing countries have found themselves vis-à-vis the IMF. Just as IMF debtor nations have found that all domestic political power has been ceded to the IMF and those that dictate the Washington Consensus, so too will the governments of the world that are currently piling on the debt find that domestic political power has been ceded to the bankers.
These bankers will determine, by virtue of the economic reins that they hold, the entire activity of government of every nation. They have in fact been in this position since at least the end of the 19th century but now their power will be even greater, if that is possible to believe. It is these same bankers that constitute the modern Money Power that has its direct inheritance from the Money Power of the 18th century.
This Money Power controls men such as Gordon Brown, Barack Obama, Nicolas Sarkozy, Vladimir Putin and Hu Jintao. These men will do exactly as they are told by the Money Power. The financial bailouts are no exception. They may even believe that the actions they are taking are needed to save us from the 'crisis' so inured are they in the illusion of their own power and importance.
However, the actions being taken today by world leaders are wholly antithetical to the needs of the majority of the people of this planet.
With this in mind it is staggering to see the explosion in US government borrowing as calculated by the St Louis Fed:-
As many have pointed out, the various bank bailout plans haven't worked because they are essentially pushing on a string. However, such commentators miss the point that the bank bailouts are not intended to 'work' in the way proposed; the property and other asset values that have been inflated by the supply of excessive credit are unsustainable so pumping cash and quasi-capital into the system in an attempt to sustain these values is unworkable.
The unworkable nature of the bailouts is illustrated by Karl Denninger's analysis of the 'velocity of money' in the US which has precipitously dropped below "1" as shown in this graph:-
The importance of the 'velocity of money' or the M1 Multiplier is that it is the measure of how much economic benefit is obtained by adding new money to the system. A ratio of "1" means that for every $1 of new money added you get $1 of benefit. Normally, as can be seen on the graph, each new dollar has an effect of 2 to 3 times. However, under the Bush administration this effect has fallen below 1 which means that the effect of each new dollar is less than a dollar. All the new money that is being pumped into the system is therefore being wasted as it is no longer achieving even its own face value in economic benefit.
However, it is creating vast government debt and making governments the bankers of the world thus concentrating vast amounts of direct economic power in these governments - governments that are controlled by the bankers. It seems to us that the scheme is amazingly simple in this respect, the bankers are using the economic rescue to consolidate unprecedented power that is absolute.
The bad news is that when the multiplier is less than one the more money you spew into the economy the worse the impact, as you get less for each additional dollar.
If you remember the "GDP for each dollar of debt" graph....
M1's multiplier going below 1 strongly implies (but does not yet prove) that we have reached that "zero hour".
Why? Because all money is in fact debt; this is inherent in all modern monetary systems.
When Bernanke "creates" money he is doing so against an asset - that is, he is issuing debt. A Federal Reserve Note (whether electronic or paper) is in fact effectively a bond of zero maturity and indefinite expiration against the future tax collection capacity of The United States.
That is, it's a treasury bond (via a circuitous route).
The paradox that Bernanke is in danger of discovering (the hard way) is the paradox of a pilot who finds himself in a flat spin. As the ground approaches he wants to pull back on the stick but if he does so, the spin simply tightens as the wings are not producing lift - the angle of attack is too high, not too low. As such if he does what his brain screams at him to do instinctively, he dies.
Or the scuba diver who sucks on the regulator and gets nothing. Your instinct is to hold your breath and kick for the surface. If you do it you die.
In both cases your only hope of survival is to do exactly the opposite of your instinct. In the case of the pilot you must not only give counter-rudder (to stop the rotation) but also push the stick forward. In the case of the diver you must exhale that last breath you have in your lungs, knowing there are no more in the tank, while you kick to ascend.
If you succumb to instinct you are dead. Really dead, as in splat (or exploded lungs.)
Bernanke is effectively in the same box. The foundation of his entire thesis as a banker is that a central bank can always reverse a deflation by printing money. Unfortunately, as he has done so velocity has fallen and the multiplier has now gone below 1. If this induces him to do even more of what caused this decrease there is a very real risk that the actual market reaction will be to tighten the monetary flat spin.
This is because the underlying problem in the economy isn't the lack of debt (money) in the system. It is that there is too much debt of all sorts, and since money is in fact a form of debt, you can't fix the problem by playing helicopter drop!
As I have said for more than a year the only way out is to force the bad debt out into the open and default it. Yes, this will produce bankruptcies - lots of them, including some for "inconvenient" people like Paulson's buddies on Wall Street.
But until and unless that happens adding more debt to the system depresses the multiplier effect of that debt on circulation further, and harms, rather than helps the situation.
I don't expect our government officials to understand the math on this, nor would trying to go through it help 99% of the readers, but unfortunately, mathematics is the only true science - and you can't twist it, no matter how hard you try.
Bernanke knows this at an intellectual level, just as the diver - or pilot - knows that if he holds his breath (or pulls the stick) he is going to die.
The question now becomes whether Bernanke can overcome not only instinct but also political pressure to do the wrong thing and instead use his intellect - and the math - to do the right thing.
What is the right thing? Paradoxially, it is to withdraw liquidity and by doing so force the bad debt into the open where it does (and must) default.
How far can the above ratio contract before we cross an "event horizon" from which there is no escape?
I don't know.
But I do know that there is a "too late" point, as there is for all such things, and that we are approaching it, as I have been saying for months.
BTW, evidence that Bernanke's Monetary Flat Spin is already impacting the economy in ways that may do critical (if not fatal) damage was found this morning in the Case-Schiller numbers. Everyone, including Bernanke, was expecting the rate of home price declines to start to slow in the second half of the year. Instead, they accelerated.
We're in uncharted territory folks, and the forecast is for dark-and-stinky storms.
Buckle up.
The broader economic news paints the picture of a world unable to save itself from the trap it has fallen into.
Markets
The markets this week (to Jan 9th)
| Previous week's close | This week's close | Change | % change | |
|---|---|---|---|---|
| Gold (USD) | 876.80 | 854.00 | 22.80 | 2.60% |
| Gold (EUR) | 629.79 | 634.71 | 4.91 | 0.78% |
| Oil (USD) | 46.35 | 40.62 | 5.73 | 12.36% |
| Oil (EUR) | 33.29 | 30.19 | 3.10 | 9.32% |
| Gold:Oil | 18.92 | 21.02 | 2.11 | 11.14% |
| USD / EUR | 0.7183 / 1.3922 | 0.7432 / 1.3455 | 0.0249 / 0.0467 | 3.47% / 3.35% |
| USD / GBP | 0.6874 / 1.4548 | 0.6593 / 1.5168 | 0.0281 / 0.0620 | 4.09% / 4.26% |
| USD / JPY | 91.830 / 0.0109 | 90.359 / 0.0111 | 1.471 / 0.0002 | 1.60% / 1.83% |
| DOW | 9,035 | 8,599 | 436 | 4.82% |
| FTSE | 4,562 | 4,449 | 113 | 2.48% |
| DAX | 4,973 | 4,784 | 189 | 3.80% |
| NIKKEI | 8,860 | 8,837 | 23 | 0.26% |
| BOVESPA | 40,244 | 41,583 | 1,339 | 3.33% |
| HANG SENG | 15,043 | 14,377 | 665 | 4.42% |
| US Fed Funds | 0.06% | 0.07% | 0.01 | 16.67% |
| $ 3month | 0.08% | 0.06% | 0.02 | 25% |
| $ 10 year | 2.37% | 2.39% | 0.02 | 0.84% |
United States
The big news last week in the United States was the release of December job numbers. They were bad. The U.S. lost more than half a million jobs in December, the biggest loss since 1945.
Many have pointed out that the financial system of the past generation works like Madoff's Ponzi scheme. The cartoonist Ruben Bolling makes the point that the United States has worked that way since its founding:
Canada
Canadian unemployment rose to 6.6% and its dollar slumped as it is being hit lower demand from the United States and lower commodity prices. Alberta, for example, previously booming from oil and gas development, lost the most jobs of all Canadian provinces (15, 800).
Western Europe
Industrial output is collapsing throughout Europe.
...Industrial output in Germany, the euro area's largest economy, fell a seasonally adjusted 3.1 percent from October, extending the worst decline since data for a reunified Germany was first compiled in 1991, the Economy Ministry in Berlin said today. In France, production tumbled 2.4 percent in November, the fourth monthly decline, the statistics office in Paris said.
Companies are scaling back production and cutting jobs after the global financial crisis pushed Europe into a recession last year. Interest-rate cuts of 175 basis points and billions of euros in stimulus measures have failed to reverse a slide in consumption and confidence. The 16-nation euro area will shrink in 2009 for the first time since the single currency began a decade ago, according to forecasts from ECB staff and the International Monetary Fund.
"The ECB still has room for maneuver," said Dominic Bryant, an economist at BNP Paribas in London. "There's not much point in waiting when you know that you'll get bad data. It doesn't take a genius to work out that the fourth quarter will be extremely weak in the eurozone."
Industrial production in November also declined in Spain, Greece, Slovenia and the euro area's newest member, Slovakia, reports released today show. It also fell in Britain, which has resisted pressure to ditch sterling for the euro...
Such numbers helped the Euro fall against the dollar which is pressuring the European Central Bank to lower interest rates. Prospects of interest rate declines in the Euro Zone prompted the Euro to fall against the dollar last week.
In the U.K., Prime Minister Gordon Brown announced a half trillion pound stimulus plan while Spain, Ireland and Portugal have been threatened with having their credit ratings downgraded and Greece has already suffered this fate.
It is interesting to note that Greece has seen the beginning of what is likely to become widespread social unrest as a result of the financial crisis and the methods of oppression of the ruling elites. The reduced credit rating has pushed up the cost of borrowing for Greece which is holding off refinancing in the hope of the situation improving. Greece is at the mercy of its creditors who, as we stated above, will now dictate the domestic political agenda. The Greek government can now be squeezed so as to implement the policies of the Money Power. If the money power wishes there to be widespread civil unrest in Greece it will prevent refinancing and steadily push up the cost of what finance there is until the Greek government has no choice other than to cut back on essential public services, people will take to the streets after which the politically isolated and generally right wing police can be relied upon to inflame the situation and 'do the rest'. It is all in the hands of the Money Power.
Every sovereign nation in the Eurozone is in the same position having lost economic power to the bankers as soon as the Euro was introduced.
Eastern Europe
The dispute between Russia and Ukraine on natural gas shipments was resolved last week, with Ukraine agreeing to European monitors of gas pipeline flows through the country. This led to a rise in Russian stock prices. Despite the fact that the resolution of the dispute seems to support Russia's contention that Ukraine was stealing gas you'd be forgiven for thinking otherwise if you rely on the British press for your news. In the UK the propaganda machine has been in full anti-Putin and anti-Russia mode.
Africa
Rand Posts Biggest 5-Day Drop Since October on Growth Concern
South Africa's rand posted its biggest weekly drop in 2 1/2 months after manufacturing sank the most in nine years and house prices grew the least in 12 years, more signs the continent's largest economy is slowing.
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"The declining global growth story and the negative impact it's having on the domestic economy is what's driving rand negativity," said Natheem Alexander, a bond and currency trader at Peregrine Quant, a hedge fund in Cape Town. "Poor growth tends to translate into currency weakness."
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Factory output, which accounts for 16 percent of South Africa's $278 billion economy, contracted for a second straight month in November, slumping 4.4 percent, Pretoria-based Statistics South Africa said this week. Manufacturers including ArcelorMittal South Africa Ltd., the country's biggest steel producer, are scaling back output on lower demand.
South African house-price growth slid to 3.8 percent in 2008, the slowest in 12 years, as interest rates at a five-year high hurt consumers, mortgage lender Absa Group Ltd. said. Growth in nominal house prices eased from 14.5 percent in 2007, Absa said.
Congo raised interest rates to 40% in an attempt to halt a currency collapse.
The rate was increased from 28 percent after a drop in oil, wood and mineral-export revenue, as well as spending on a war against rebels in the eastern Congo, caused the franc to drop against the dollar, according to a government statement given to Bloomberg News today in the capital, Kinshasa. The currency has fallen about 23 percent to 677 against the U.S. currency since Oct. 1, according to Bloomberg data...
Congo's economy depends on exports of metals and minerals such as copper and cobalt, which slumped last year as the global financial crisis sapped commodity demand. Copper dropped 54 percent on the London Metal Exchange, the most since at least 1987 as recessions in the U.S., Japan and Germany curbed demand for industrial metals. Cobalt, used to make rechargeable batteries, was $18.50 a pound in December, down from a record $52.25 a pound in March, according to the cobalt sales Web site from BHP Billiton Ltd.
Many producers in Congo have stopped operating until prices recover.
Latin America
In a further example of the imbalance of economic power, a U.S. court ordered Argentina to pay holders of bonds that defaulted in 2001 $2.2 billion.
In Conclusion
As Chris Floyd eloquently stated:-
Programs to help ordinary citizens, programs to enhance the quality of life for individuals and the well-being of society, will be the first - perhaps the only - areas to feel the budget axe. Whatever you may think of the efficacy of such programs, this ordering of priorities -- war and profits over people -- bespeaks the same depraved sensibility that has prevailed for generations in Washington. It is the same old rancid swill in a stylish new container.
Anatole Kaletsky writing in The London Times did at least grudgingly admit to being "wrong about so many aspects of this crisis - as have most conventional economists and policymakers". Indeed, "most conventional economists and policymakers" have been spectacularly wrong because they base their opinions and analysis on illusions. As if to illustrate the depth of these illusions Kaletsky continues:-
"Britain and (very soon) the US have decisive governments with clear majorities and proactive economic philosophies, in contrast to the slow-moving, reactive governments of Europe and Japan, where policy changes, if and when they eventually happen, will have little impact until 2010 and beyond.The sheer gall of commentators such as Kaletsky is only dwarfed by their infinite stupidity and perfidy not to mention their reckless irresponsibility.
Finally, there is the flow of ideas across the Atlantic, most of it one way. British public opinion will be strongly swayed by the policies of President Obama - even if no one in Wichita pays any attention to what is happening in the UK."
Meanwhile, the central banks in both countries are trying as hard as they can to make people save less. In the US, interest rates on bank deposits have been cut to zero and the Fed has just announced that it may buy long-term government bonds to squeeze five-year and ten-year rates as close as possible to zero. The result is that US mortgage rates are falling to the lowest level on record and banks, which can no longer earn risk-free returns by placing money with the Government, have no alternative but to lend to businesses and consumers. Britain is pursuing the same monetary logic, if a few months late.
The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.
Matthias Chang, in a well argued article demonstrated that the power behind the political façade is that of the Secret Money Lenders; much as we have just seen in our discussion of Circles of Power and the Money Power. However, Chang said that the abandonment of free market principles by Bush and Brown in seeking to "save" free market capitalism will result in a Socialist, for which he seems to mean Communist, world government. We do not agree, the World Government which is indeed being implemented is no more socialist than Soviet Russia was, it is Pathocratic.
All this in a world that values a football player at £107 million and wishes to pay him £500,000 a week.
Labels: financial bailout, Madoff, pathocracy, Reason
posted by Donald Hunt at 4:35 PM
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