Wednesday 26 January 2011


A very interesting article explaining the current economic crisis.

Fractional Reserve Banking has had a Reality Crunch.

Credit given to the bank was used to enrich the bankers, instead of being injected into the capital flow of the global banking system.

The corporations were killed of by the greed and incompetence of the bankers, with a hundred years of future capital wasted on the contemporary luxuries and lifestyles of a profligate global banking class, resulting in a capital choking that has led to unemployment and stagflation.

Some good graphs are imbedded in the article, including one that shows the differential between financial transactions in the real economy and the financial economy - showing that a vampyric class of financial experts are creating 'sales' or trades of shares that profit only them and that are utterly unrelated to sales in the real world.

It is this fat, malevolent maggot of global finance that leeches away true profit in the name of financial speculation.

This pustulent wyrm feeds upon the blood and tears of ordinary people all over the world, as it sucks ever more profit from the fake financial sales transactions, corrupt financial instruments, insider dealing and banking conspiracies.

This worm must be crushed.

The vampyre bankers have fed upon the flesh of the last four generations of our people, and they are as powerful today as they were then.

Empires rise and fall, only banks remain.

The entire global banking system must be reformed.

An entire new economic model for the future must be developed that replaces the financial economy.

Ii suggest what I have been advocating for years , AN ENERGY ECONOMY, replaces the financial system.

The present real economy remains as it is, but the financial economy is subservient to the demands of an economy predicated not on the free flow of capital in false transactions, but on energy production.

A nations financial strength would be based not on fake credit produced as a result of fractional reserve banking, but on its ability to satisfy its own energy needs.

The more energy self sufficient a nation is, then the more efficient, productive and competitive in relation to cost to the consumer are the commodities produced by that nation.

The primary cost factor in commodity production are energy prices, direct and imbedded.

Take Saudi Arabia.

It produces nothing but oil.

It is so rich as the oil it produces is the basis of the global economy.

Cheap oil = cheap goods.

The world needs that oil to keep the global consumerist system alive and to manufacture fake credit.

The printing presses of the Federal Reserve that pump out the tens of millions of dollars a minute of fake credit for the bankers to waste on luxury jets, cocaine, high class prostitutes and ponzi schemes need Middle East oil companies to keep pumping out the black stuff.

Our addiction to cheap oil is the basis of the power of the Military Industrial Corporate Complex of Boeing, BAE, the Carlysle Group, Al Qaeda, George Bush, the Bilderbergs, bankers and oil corporations.

911 was the blow back from the wests addiction to oil.

An Energy Economy would create a radical new model for global action, and predicated on a co-operative NATIONALIST model and perspective.

Since the start of the Credit Crunch in Sept. 2008, a fierce debate has raged over whether we will face deflation or inflation. We can now conclude we will have a toxic combination of both, known as stagflation.

Stagflation is the phenomenon of rising prices and falling demand and production. It was first experienced in the late seventies and although it eventually disappeared, there was never a good explanation for it.

Proponents of both sides of the aforementioned debate had strong arguments.

Deflationists said the banks were insolvent and would not be able to provide credit, leading to a diminishing money supply and declining prices.

Inflationists said Central Banking and Governmental policies of bail outs, QE1,2,x and stimulus would lead to more money in circulation, with rising prices as a result.

Both were right, but they missed a crucial point. There are two economies. One is the real economy, where you and I operate. We work and make stuff. Cars, food, all sorts of services.

And there is also the financial economy. This is the shadowy world of finance, FOREX, stock exchanges, commodity exchanges. The graph below shows the vast scale of this financial economy, which is many times bigger than the real economy.

margrit-kennedy-bernard-lietaer.jpgGraph by Margrit Kennedy and Bernard Lietaer, based on BIS figures

The transaction volume for the financial economy is in red and the real economy is in green. At this point we are talking about 5 trillion worth of transactions per day in the financial economy, many times more than in the real economy. We can also see that while the real economy grows in linear fashion, the financial economy grows exponentially. The unexpected decline we see around 2000 is explained by the introduction of the euro, which diminished FOREX speculation. A small price to pay for that giant leap towards World Currency.

It also shows that the financial sector began only in the early seventies. This is explained by the rise of the computer. Most people don't realize that even in the early sixties, most wages were paid cash. It is the computer that made it possible for banks to connect everybody to their system. It also explains why stagflation had not been around before the late seventies.

The financial and real economies to some extent interact, primarily via commodity exchanges. But the financial economy is largely isolated. Most of the hot money never reaches the real economy.

Thankfully, otherwise the dollar wouldn't even be worth the 1% of its 1913 purchasing power it has now. This is so, because for instance, FOREX is just an eternal ping pong of transactions within the banking sector, leading to an eternal wealth transfer from the not-so-savvy to the "usual suspects."

The two parallel economies also explain why price rises have not kept up with the expansion of credit. A lot of the newly created money was siphoned off to the financial economy.

We have a deflation in the real economy but a massive inflation in the financial economy. Stagflation is coming because a portion of this hot money is now entering the commodity markets, leading to inflation in the primary sector (agriculture and mining). These rising prices will be passed on by producers in the secondary and tertiary sectors (industry and services.)

An example of this process were the skyrocketing oil prices in 2009. It has been established that Goldman Sachs was using TAARP funds to drive up prices.

Another example is the current rise in food prices. Or what do we think of JPM cornering the copper market?

The deflation in the real economy is caused by the credit crunch, and by the new Capital Reserve Requirements that were foisted upon the banking system by the Bank of International Settlements.

Meanwhile corporations are choked by lack of credit and going out of production, resulting in rising unemployment.

So what does the future look like? We will be facing rising prices while the economy will be depressed, i.e. declining production and high levels of unemployment. This will result in volatility in the commodity markets, something we are now seeing with commodity stocks correcting by as much as one third.

I would like to express my appreciation for Dick Eastman's courageous and groundbreaking thoughts on the parallel economies and its implications.

Anthony Migchels' Website


Financial Times on Stagflation

The Guardian on Stagflation

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1 comment:

maxedout said...

Look at this too -

Their answer to everything is more debt, based on impossible repayment of non-existant money.
The usual game by the usual suspects.