Economic Reform Australia€¦ · Web viewSteve Keen's presentation in Adelaide on 24 September "The global financial crisis is far from over" was very well received. The 100-seat

Vol. 3 No. 50 November–December 2010 ERA Newsletter 1************************************************

Economic Reform Australia

For a just and sustainable society.ERA NEWSLETTER ISSN 1324-5929

Vol. 3 No. 50 November-December 2010*********************************************

IN THIS ISSUE PageAdvanced Notices for S.A. Members 3J. Hermann Steve Keen’s Lecture 3-5M. Hudson A Financial Coup d”Etat 5-10P. Lock The Historical Illegality of Modern Banking 11-15D. Shearman The Medical Profession and Economic Growth 15-17B. Kavanagh The Great Australian Real Estate Bubble 18-20E. Brown Economic Shock Therapy for Wall Street 21-25B. Dyson Monetary Reform 25-26E. Brown Basel III: Tightening the Noose on Credit 27-30H. Nome Pen Meets Paper – The Control of Fiat Money 30-31

************************************Disclaimer: The views expressed in these articles are the sole responsibility of their authors and do not necessarily reflect those of Economic Reform Australia.Editor Co-EditorPeter Lock, 4/20 Everard Street, Frances Milne, 14 Gallimore Av. Largs Bay SA 5016. Balmain NSW 2041.Phone-Fax 08 - 8242 0566 Phone-Fax 02 - 9810 7812 Email [email protected] Email [email protected]

ECONOMIC REFORM AUSTRALIA

mailto:[email protected]



ERA is a non-party-political organization, formed in 1993 as a union of the Economics Review Association and other economic reform groups. Its long-term goal is to achieve a socially, environ-mentally and financially sustainable economic system. ERA’s commitment to economic sovereignty seeks to return control of the economic and financial system to the people. This requires full public scrutiny and accountability for all economic processes and a recognition that economic systems must serve the people for the global good. Membership of ERA is open to all who agree with its objectives and overall philosophy, and may be effected by sending A$20.00 per annum to the Treasurer (address below), together with address, telephone and fax numbers, and email address. It would be appreciated if new members would calculate the part of the year remaining and remit the appropriate pro-rata amount, or alternatively pay for the following year as well. All members are entitled to receive the regular 32-page ERA newsletter, and are entitled to vote at monthly meetings and participate in organized activities. ******************************************************ERA Patrons : Professor Stuart Rees, Professor Frank Stilwell, Professor Michael Pusey, Associate Professor Evan Jones, Associate Professor Steve Keen, Professor David Shearman, Dr. Ted Trainer, Dr. Shann Turnbull.****************************************************** ERA (NSW DIVISION) Inc.We are committed to maintaining our links and meet twice a year. All Meetings are normally held at 14 Gallimore Avenue, Balmain 2041. Details : Frances or Bruce Milne Ph. 9810 7812 ERA (SA DIVISION) INC.Meetings are held on the last Saturday of the month at the Conservation Council Centre, Level 1, 157 Franklin Street Adelaide. Meetings start at 2pm with the policy recommendation forum before official business begins. Details - John Hermann Ph. 8264 4282******************************************************ERA Web Site Home Page: www.era.org.au EMAILnetwork editor: Dr John Hermann: [email protected] address: PO Box 505, Modbury, SA 5092, AustraliaNational Treasurer and Membership Officer: Victoria Powell :PO Box 505, Modbury, SA 5092, Australia

ADVANCE NOTICES FOR S. A. MEMBERSThe Annual General Meeting of ECONOMIC REFORM AUSTRALIA S.A


http://www.era.org.au/


will be held on Saturday November 27 at the Conservation Council Centre, Level 1, 157 Franklin Street Adelaide. Meeting starts at 2pm

The End of the Year Togetherness will be held in THE COTTAGE,25 Everard Street, Largs Bay on Monday December 27

from about 2 to 8 pm. More details in the next Newsletter.Steve Keen's lecture

Steve Keen's presentation in Adelaide on 24 September "The global financial crisis is far from over" was very well received. The 100-seat lecture theatre was full, and a video recording was made of the proceedings. This video may be accessed from the meetings section of the ERA website www.era.org.au We were pleased to discover that the most recent modelling work of Steve and his collaborators bears out virtually everything that both ERA and its Canadian associate COMER have been saying for the past 20 years about the urgent need for financial reform. Steve has graciously accepted a recent invitation to become a patron of ERA. A brief Commentary from John Hermann (a) The banking system is inherently a creditary system, and the economy is driven by debt creation. Neoclassical economists as a class do not recognise the central role of credit and debt creation. Many of them believe that the economy is driven exclusively by productive activity, and that in the aggregate debt does not matter. (b) Monetary circuit theorists and many populists have the wrong take on how the financial system operates. Steve's position is that the modern financial system operates endogenously. That is, the reality is that commercial financial depositories (mainly banks) create money out of nothing, and central banks then create base money in response to the activity of the commercial banking sector sector and the needs of the growing economy as a whole. (c) The creditary deposits of both the public and businesses in banks and other depositories are never on-loaned (nor, for that matter, are reserve funds on-loaned to the public or businesses). (d) There are good theoretical reasons, as well as sound empirical evidence (Kydland and Prescott, 1990), for believing that the order of causality in an expanding economy is bank lending as the primary

driver with bank deposits as the secondary process. In other words, loans always precede deposits. (e) A common myth is the widely-held belief that capitalist economies are not stable because individuals and firms cannot repay the interest on their debts, and are therefore obliged to go ever further into debt. This myth is believed by many populists and a few


post-Keynesian economists, and is sometimes described as the debt-virus hypothesis. However Steve pointed out that in principle the system can stabilise, as revealed by the results from his dynamic modelling (i.e., financial flows "in" can equal financial flows "out"). The real cause of instability in capitalist systems has been described by Hyman Minsky, and is now widely referred to as Minsky's financial instability hypothesis. (f) Minsky's description explains how asset bubbles (particularly bubbles in land prices) develop, using various feedback mechanisms. Within an inadequately regulated economy such bubbles grow unchecked, until they burst - plunging the economy into recession. (g) Economics has been (somewhat cynically) described as the science of confusing stocks with flows. In the context of the above discussion, one can identify "stock" with the size of an initial bank loan, and "flow" with the subsequent turnover of economic activity.,_._Another important statistic to emerge from Steve Keen's recent Adelaide lecture (also appearing in his other presentations) is the comparative debt to GDP ratios for various components of Australia's debt. Take a look at the comparison, in graphical format:

It can be easily seen that government debt is only around 3% of GDP, while personal (mostly credit card) debt is around 10%, business (largely corporate) debt is around 60%, and mortgage debt is a whopping 80% +. This comparison brings into stark relief the difference between government debt and all other forms of debt. It also puts into proper context the recent stimulus spending of the Rudd/Gillard


governments and the associated increase in public debt. Considering that the increase in public debt has served to partially offset the reduction in corporate debt (i.e., corporate deleveraging) in the wake of the GFC, in order to ameliorate any potential increase in unemployment, one is forced to conclude that recent criticisms of the magnitude of Australia's stimulus spending are little more than political spin and humbug. The elephant in the living room is, of course, mortgage debt. Australia's housing bubble is yet to burst, although it has levelled off and there are signs that a significant fall in house prices (more correctly, domestic land prices) cannot be too far away. ■

*****************************Economic Reform Australia Information Network

A Financial Coup d'Etatby Michael Hudson Date: Friday, 8 October, 2010

Relayed by: Nadia McLaren <[email protected]>Source: Counterpunch, Weekend Edition October 1 - 3 , 2010 <

http://www.counterpunch.org/hudson10012010.html>

European Neoliberals Raise Ante in War on Labor; Fateful Struggle Will Set Course for a Generation "A Financial Coup d'Etat"

Most of the press has described Europe's labor demonstrations and strikes on Wednesday in terms of the familiar exercise by transport employees irritating travelers with work slowdowns, and large throngs letting off steam by setting fires. But the story goes much deeper than merely a reaction against unemployment and economic recession. At issue are proposals to drastically change the laws and structure of how European society will function for the next generation. If the anti-labor forces succeed, they will break up Europe, destroy the internal market, and render that continent a backwater. This is how serious the financial coup d'etat has become. And it is going to get much worse - quickly. As John Monks, head of the European Trade Union Confederation, put it: "This is the start of the fight, not the end." Spain has received most of the attention, thanks to its ten-million strong turnout - reportedly half the entire labor force. Holding its first general strike since 2002, Spanish labor protested against its socialist government using the bank crisis (stemming from bad real estate loans and negative mortgage equity, not high labor costs) as an opportunity to change the laws to enable companies and govern-ment bodies to fire workers at will, and to scale back their pensions

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and public social spending in order to pay the banks more. Portugal is doing the same, and it looks like Ireland will follow suit - all this in the countries whose banks have been the most irresponsible lenders. The bankers are demanding that they rebuild their loan reserves at labor's expense, just as in President Obama's program here in the United States but without the sanctimonious pretenses. The problem is Europe-wide and indeed centered in the European Union capital in Brussels, where fifty to a hundred thousand workers gathered to protest the proposed transformation of social rules. Yet on the same day, the European Commission (EC) outlined a full-fledged war against labor. It is the most anti-labor campaign since the 1930s - even more extreme than the Third World austerity plans imposed by the IMF and World Bank in times past. The EC is using the mortgage banking crisis - and the needless prohibition against central banks monetizing public budget deficits - as an opportunity to fine governments and even drive them bankrupt if they do not agree roll back salaries. Governments are told to borrow at interest from the banks, rather than raising revenue by taxing them as they did for half a century following the end of World War II. Governments unable to raise the money to pay the interest must close down their social programs. And if this shrinks the economy - and hence, government tax revenues - even more, the government must reduce social spending yet further. From Brussels to Latvia, neoliberal planners have expressed the hope that lower public-sector salaries will spread to the private sector. The aim is to roll back wage levels by 30 per cent or more, to depression levels, on the pretense that this will "leave more surplus" available to pay in debt service. It will do no such thing, of course. It is a purely vicious attempt to reverse Europe's Progressive Era social democratic reforms achieved over the past century. Europe is to be turned into a banana republic by taxing labor - not finance, insurance or real estate (FIRE). Governments are to impose heavier employment and sales taxes while cutting back pensions and other public spending. "Join the fight against labor, or we will destroy you," the EC is telling governments. This requires dictatorship, and the European Central Bank (ECB) has taken over this power from elected government. Its "independence" from political control is celebrated as the "hallmark of democracy" by today's new financial oligarchy. This deceptive newspeak evokes Plato's view thatoligarchy is simply the political stage following democracy. The new power elite's next step in this eternal political triangle is to make itself hereditary - by abolishing estate taxes, for starters - so as to


turn itself into an aristocracy. It is a very old game indeed. So it is time to put aside the economics of Adam Smith, John Stuart Mill and the Progressive Era, to forget Marx and even Keynes. Europe is ushering in an era of totalitarian neoliberal rule. This is what Wednesday's strikes and demonstrations were about. Europe's class war is back in business - with a vengeance! This is economic suicide, but the EU is demanding that Euro-zone governments keep their budget deficits below 3 per cent of GDP, and their total debt below 60 per cent. On Wednesday the EU passed a law to fine governments up to 0.2 per cent of GDP for not "fixing" their budget deficits by imposing such fiscal austerity. Nations that borrow to engage in countercyclical "Keynesian-style" spending that raises their public debt beyond 60 per cent of GDP will have to reduce the excess by 5 per cent each year, or suffer harsh punishment. The European Commission (EC) will fine euro-area states that do not obey its neoliberal recommendations - ostensibly to "correct" budget imbalances. The reality is that every neoliberal "cure" only makes matters worse. But rather than seeing rising wage levels and living standards as being a precondition for higher labor productivity, the EU commission will "monitor" labor costs on the assumption that rising wages impair competitiveness rather than raise it. If euro members cannot depreciate their currencies, then they must fight labor - but not tax real estate, finance or other rentier sectors, not regulate monopolies, and not provide public services that can be privatized at much higher costs. Privatization is not deemed to impair competitiveness - only rising wages, regardless of productivity considerations. The financial privatization and credit-creation monopoly that governments have relinquished to banks is now set to pay off - at the price of breaking up Europe. Unlike central banks elsewhere in the world, the charter of the European Central Bank (ECB, independent from democratic politics, not from control by its commercial bank members) forbids it to monetize government debt. Governments must borrow from banks, which create interest-bearing debt on their own keyboards rather than having their national bank do it without cost. The unelected members of the European Central Bank have taken over planning power from elected governments. Beholden to its financial constituency, the ECB has convinced the EU commission to back the new oligarchic power grab. This destructive policy has been tested above all in the Baltics, using them as guinea pigs to see how


far labor can be depressed before it fights back. Latvia gave free rein to neoliberal policies by imposing flat taxes of 51 per cent and higher on labor, while real estate is virtually untaxed. Public-sector wages have been reduced by 30 per cent, prompting labor of working age (20 to 35 year-olds) to emigrate in droves. This of course is contributing to the plunge in real estate prices and tax revenue. Lifespans for men are shortening, disease rates are rising, and the internal market is shrinking, and so is Europe's population - as it did in the 1930s, when the "population problem" was a plunge in fertility and birth rates (above all in France). That is what happens in a depression. Iceland's looting by its bankers came first, but the big news was Greece. When that nation entered its current fiscal crisis as a result of not collecting taxes on the wealthy, European Union officials recommended that it emulate Latvia, which remains the poster child for neoliberal devastation. The basic theory is that inasmuch as members of the euro cannot devalue their currency, they must resort to "internal devaluation": slashing wages, pensions and social spending. So as Europe enters recession it is following precisely the opposite of Keynesian policy. It is reducing wages, ostensibly to "free" more income available to pay the enormous debts that Europeans have taken on to buy their homes and pay for schooling (hitherto provided freely in many countries such as Latvia's Stockholm School of Economics), transportation and other public services. Many such services have been privatized and subsequently raised their rates drastically. The privatizers justify this by pointing to the enormously bloated financial fees they had to pay their bankers and underwriters in order to get the credit to buy the infrastructure that was being sold off by governments. So Europe is committing economic, demographic and fiscal suicide. Trying to "solve" the problem neoliberal style only makes things worse. Latvia's public-sector workers, for example, have seen their wages cut by 30 per cent over the past year, and its central bankers have told me that they are seeking further cuts, in the hope that this will lower wages in the private sector as well, just as neoliberals in other European countries hope, as noted above. About 10,000 Latvians attended protest meetings in the small town of Daugavilpils alone as part of the "Journey into the Crisis." In Latvia's capital city, Riga, Wednesday's Action Day saw the usual stoppage of transportation and an accompanying honk concert for 10 minutes at 1 PM to let the public know that something was happening. Six independent trade unions and the Harmony Center organized a protest meeting in Riga's Esplanade Park that drew 700


to 800 demonstrators, relatively large for so small a city. Another union protest saw about half that number gather at the Cabinet of Ministers where Latvia's austerity program has been planned and carried out. What is happening most importantly is the national parliamentary elections this Saturday (October 2). The leading coalition, Harmony Center, is pledged to enact an alternative tax and economic policy to the neoliberal policies that have reduced labor's wages and workplace standards so sharply over the past decade. A few days earlier a bus tour drove journalists to the most visible victims - schools and hospitals that had been closed down, government buildings whose employees had seen their salaries slashed and the workforce downsized. These demonstrations seem to have gained voter sympathy for the more militant unions, headed by the hundred individual unions belonging to the Independent Trade Union Association. The other union group - the Free Trade Unions (LBAS) lost face by acquiescing in June 2009 to the government's proposed 10 per cent pension cuts (and indeed, 70per cent for working pensioners). Latvia's constitutional court was sufficiently independent to overrule these drastic cuts last December. And if the government does indeed change this Saturday, the conflict between the Neoliberal Revolution and the past few centuries of classical progressive reform will be made clear. In sum, the Neoliberal Revolution seeks to achieve in Europe what the United States has achieved since real wages stopped rising in 1979: doubling the share of wealth enjoyed by the richest 1 per cent. This involves reducing the middle class to poverty, breaking union power, and destroying the internal market as a precondition. Latvia's Harmony Center program shows that there is a much easier way to cut the cost of labor in half than by reducing its wages: Simply shift the tax burden off labor onto real estate and monopolies (especially privatized infrastructure). This will leave less of the economic surplus to be capitalized into bank loans, lowering the price of housing accordingly (the major factor in labor's cost of living), as well as the price of public services. (Owners of monopoly utility services would be prevented from factoring interest charges into their cost of doing business. The idea is to encourage them to take returns on equity. Whether or not they borrow is a business decision of theirs, not one that governments should subsidize.) The tax deductibility of interest will be repealed - there is nothing intrinsically "market dictated" by this fiscal subsidy for debt leveraging. This program may be reviewed at rtfl.lv, the Renew Task


Force Latvia website. No doubt many post-Soviet economies will find themselves obliged to withdraw from the euro area rather than see a flight of labor and capital. They remain the most extreme example of the Neoliberal Experiment to see how far a population can have its living standards slashed before it rebels. But so far the neoliberals are fully in control of the bureaucracy, and they are reviving Margaret Thatcher's slogan, TINA: There Is No Alternative. But there is an alternative, of course. [Cf. page 32 Ed.] In the small Baltic economies, pro-labor parties are pressing for the government to shift the tax burden off employees and consumers back onto property and financial wealth. Bad debts beyond the reasonable ability to pay must be scaled back. It may be necessary to let the banks go under (they are mainly Swedish), even if this means withdrawing from the Euro. The choice is between who will be destroyed: the banks, or labor? European politicians now view this as being truly a fight to the death. This is the ideology that has replaced social democracy. ■Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, [email protected]

***************************************Malice in Plunderland

The Historical Illegality of Modern BankingTaken from Chapter 3 of Malice in Plunderland by Peter Lock

The first widely recognized metallic currency employed gold and silver coins and the banking industry developed from their use. Fractional-reserve banking arose out of the finance activities of a special group of craftsmen, the goldsmiths. Merchants and other people who had surplus coins deposited them for safety with goldsmiths who were among the few businesses with strong room facilities. By the 17th century, it had become the general practice among goldsmiths to issue receipts for the coins deposited with them and these receipts in turn, were used as negotiable assets which ultimately could be reconverted back into coinage when presented to the goldsmith. The merchants' holdings of cash were originally intended to provide for their bills of exchange, but as a result of this new business relationship with the goldsmiths whose



gold holdings were continually increasing, the latter soon became lenders to the merchants and traders. The goldsmiths found the lending business very profitable. In order to increase their loan funds they began to solicit members of the public to deposit their monies with them and receive a modest interest for doing so. These artisans, now turned financiers, also commenced the commercial practice of discounting bills. Their notes issued for gold deposits, together with discounted bills, became media of exchange. This permitted the goldsmiths' emerging role in fractional-reserve banking. From this simple procedure, the issuing of banknotes took its origin. Initially and subsequently for quite some time, these receipts, these mere pieces of paper could be exchanged when the holder demanded for a fixed amount of real gold, and this gave rise to a Gold Standard which was finally abandoned during the Great Global Depression of the 1930's. Paper currency presents no special problems in regard to its acceptance. Though banknotes are no longer convertible into gold or precious metals, they are accepted currency because people know that they can play their economy-games in the marketplace with this make-believe toy-wealth. The latest contender for acceptance is the ubiquitous but nevertheless quite insidious plastic credit card. An implanted personal microchip may soon replace even this. The goldsmiths' receipts were a great convenience for everybody. They acted as money because everyone had faith that those holding them could, at any time, draw gold or silver to the value of the receipts from the goldsmiths. It is important to understand that a new phase was thus being introduced into the evolution of economic management. It was now the guardian of wealth who was creating what was considered as money, not the owner of the real wealth as was originally the case. The next major development in the history of money took place when goldsmiths observed that their clients left their gold and silver and other valuables with them indefinitely and that it was quite safe for them to issue more receipts than the wealth deposited with them. It was extremely unlikely that all the receipts would be presented at the same time. What started as a dishonest practice became convention, and this far more flexible form of money helped immeasurably with the development of trade and commerce. The goldsmiths were the forerunners of the modern banking system as they slowly emerged as moneylenders, charging interest and often exorbitant at that, on the loan-receipts issued and which for the most part were created simply out of nothing. Today any such


banking, as based on Capital Adequacy Guidelines which tie bank lending to its capital-plus-reserves in the ratio of 8%, can create and issue more than 1200% more make-believe credit money in exactly the same way as the goldsmiths of old issued more receipts than the real wealth deposited with them. The rapid and dramatic evolution of the role of the goldsmith- now-turned-banker merits further investigation. The merchants initially deposited their gold and other monies with the goldsmiths who were merely engaged as hired custodians. Their gold was deposited in commercial trust and originally was not to be used at the whim of the paid and trusted custodian. Because the notes issued in receipt represented actual claimable gold and because of their obvious convenience, merchants began to use them in the course of trade. It would seem that their negotiability had not yet been legally determined. With the advent of solicited funds from the public, new aspects arose. The goldsmiths, with the full authority of the depositors, were not mere custodians but were bankers paying interest on these deposits and employing them in turn for their own purposes of extending loans to others. The notes which the goldsmiths issued as receipts for these deposits guaranteed repayment on demand, but this guarantee was intrinsically flawed if at the same time, the same gold or money was to be lent out to other people. It was fraudulent and deceitful to promise to redeem all the receipts for deposited gold when that same gold was no longer in the goldsmiths' possession but on loan now with interest to borrowers. As only a fraction of their gold holdings were involved in an ordinary day's transactions, this false promise went unobserved. It was not long before these receipt-notes ceased to be associated with a specific deposit as were those of the former gold-custodians, and were made out to bearer, resembling now a general promissory note. From the public's point of view, these receipt-notes which were seen as corresponding to actual deposits and could be converted into gold on presentation, became a convenient medium of exchange. Meanwhile the merchants who formerly had paid the goldsmiths for the custodianship of their gold, now reversed their relationship and required their gold in the goldsmiths' vaults to be treated as interest-bearing deposits. In circulation now were both the receipt-notes of depositors and also the receipt-notes of the on-loaned gold of these depositors. Actual gold reserves soon became only a fraction of the notes in circulation. If all the note-holders had presented their claims for repayment in gold at one and the same time, the goldsmiths could never have fulfilled their fraudulent promise.


The final step in the evolution of fractional-reserve banking came about when the goldsmiths became fully aware that only a relatively small number of note-holders ever presented their notes for redemption at the same time, and hence their fractional gold-holdings were generally more than adequate for any eventuality. They took the bold step of producing their own deposit notes, unbacked by any deposit of gold or other monies. Literally, they created money out of nothing. Banking legislation did not yet exist and so the goldsmiths were perfectly free to use the notes of their fictitious money-creation for any profitable purpose. They could buy assets, goods and services. They could speculate in the marketplace and make usurious loans to borrowers. These notes representing make-believe money were circulated along with the existing receipt-notes of depositors and being indistinguishable from the latter were accepted in the marketplace. Because most of these notes remained in exchange circulation and were never presented for redemption into cash, the goldsmiths' deliberate deceit and calculated false representation went easily undetected. The guaranteed redemption of the notes in cash was false, since their total issue could well have been up to ten times the ability of the moneylenders to pay back at once. Some extraordinary redemption demands did occur from time to time, with the resultant ruin of both bankers and their unfortunate clients. If the notes had not had the legal obligation of redemption in cash, their circulation would have been greatly restricted. It was absolutely necessary that the notes gave this guarantee even though those who issued them knew that it was not legitimate and could never be fulfilled. Meanwhile the bankers continued for the most part to thrive on their unjust gains. Without producing anything of real intrinsic value, they had the means to create purchasing power out of nothing and use it for their own personal profit and greed. It was only a matter of time before the whole financial estimate of the wealth of the community would exist as a usurious debt to the banking institutions. The legal, economic and social effects of this magical, quasi- alchemical turning paper into gold, were not anticipated at this stage. How could the Natural Law and Common Law be interpreted so that any profit-seeking individual or institution be given or claim the power to create money or financial instruments of real purchasing power out of nothing at virtually no cost to themselves? By the time later philosophical minds came to discuss and assess the ethics of the resulting situations and economists formally developed


their theories on finance and the role of money in society, fractional-reserve banking was a well-established and unassailable institutional reality with the purchased blessing of governments. The modern money system has made the prevailing complex economy possible and it has been a great blessing for mankind in one sense and also a self-destructive curse when manipulated for power and greed by those who control it. The latter, for the most part are either lacking in understanding of the positive feedback nature of the system or are so drunk with its power that they blindly pursue it to the point of self-destruction. The fact that our present monetary system developed by fraudulent and usurious practices cannot gainsay its usefulness though it does account for the stranglehold it exerts over the whole of society. Some kind of banking system is indispensable in industrialized societies and for their freed enterprise to flourish, but at the same time some very radical reform is required to remove the monopoly of make-believe credit held by banks and other financial institutions, and to change our increasingly bank-indebtedness economy into a truly efficient national-credit reality based on the real wealth of natural resources and personal expertise. For all practical purposes, money has ceased to have any inherent value in the sense that gold and silver have a value related to the effort entailed in discovering them and bringing them into use. Apart now from the very small amount of money represented by metallic coins, money in general has virtually no intrinsic value at all. Printed paper notes, circulating in the community like coins, are still only a very small part of what is now generally called the money supply. The great bulk of this money does not circulate at all. It is represented by figures in account books or data in a computer memory and has its origin in credit entries initiated in the overdrafts and loans made by banks. It is the devious action of banks in increasing or withdrawing the created-out-of-nothing make-believe wealth of these overdrafts and loans which provides the possibility of varying the money supply. ■

******************************************** The Medical Profession and Economic GrowthFrom Dr. David Shearman ERA [email protected] www.davidshearman.org Hon. Secretary, Doctors for the Environment Australia Inc. www.dea.org.au In our educational role DEA [www.dea.org.au ] is increasingly mentioning that economic growth has adverse health impacts. We

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tend to encompass this within articles on other topics which probably gives it a wider readership. The independent parliamentary members have delivered some reforms but the poor election performance of the major parties demands more - an education revolution for politicians. The grasp of the important issues - renewable energy, tariffs, climate change, and loss of agricultural land affecting food supplies, population and health education in rural areas - by the independents and delivered without bull dust, contrasted starkly with the ignorance of the party leaders on the simpler points of broadband technology. Can society have confidence in politicians who are to spend billions of dollars on issues they do not understand? Certainly governments receive departmental advice but they then have to use judgement which requires sufficient basic understanding if poor decisions are to be avoided. The problems facing Australia and the world are increasingly complex and require significant knowledge if elected representatives are to use their input and influence effectively. Do they have the ability and experience to do this when the career structure of an increasing number is that of staffers on the party ladders? The public increasingly recognises that their daily media opinions are based on belief and ideology rather than on the careful sifting of knowledge. In the words of Nobellist and NYT columnist Paul Krugman, "When I was young and naive, I believed that important people took positions based on careful consideration of the options. Now I know better". It is relevant to ask why our representatives do not aspire to improve their standing for example to that of a profession. Morgan indicates that doctors have an 82 per cent rating for trust and ethics, Federal Parliamentarians have 22 per cent. The medical profession is compelled to undertake life-long continuing education. Doctors are committed to this in the interests of their patients who expect it. Doctors for the Environment Australia (DEA) has proposed to Parliament's Standing Committee on Procedure ongoing education for elected representatives. As in the case of the medical profession this will enhance trust with the public. The understanding of complex problems, not least climate change, is vital to Australia's future yet many of the important ones were barely mentioned in the election. The Labor campaign lacked vision and focus. The Coalition campaign seemed to consist of carpet bombing Labor policy and we were frequently reminded that their role is to oppose. However oppositions have three years to do their

http://www.aph.gov.au/house/committee/proc/committees2/submissions/Sub17.pdf

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homework and develop policy. Let us examine two of many complex issues. Is there a politician who does not support the need for economic growth? The word is used daily by all elected representatives; it is embedded in our political culture. Growth is sacrosanct in government because our economic system functions in providing employment and avoiding recession only when it is expanding. To deny growth is to risk social and economic collapse and political demise. Yet an increasing number of economists recognise the need for, and have defined alternative, sustainable systems. For the practicing doctor, "growth" has a connotation of cancer and indeed there are many emerging similarities between damage to the earth from economic "progress" and a metastasising cancer in the human body. Many doctors now recognise that while economic growth in the 20th century lead to great advances in health, growth is now a health hazard for it threatens the future of humanity by conflicting with the necessity for us to remain within ecological limits. Doctors for the Environment Australia's most recent poster Lets pretend - no limits to growth promotes this as a health issue in many doctors waiting rooms. If doctors can read the literature and come to terms with the unsustainability of growth then why cannot the politicians? Before the election Julia Gillard said:"I don't believe in a big Australia... I think we want an Australia that is sustainable." If Julia Gillard truly understood this issue then she may be a visionary among unbelievers, but the election suggested that this was no more than personal opinion. A sustainable Australia is one in which the population numbers will depend upon available resources of water and productive land and one which comes to participate fairly in the control of green house emissions. Globally, the Millennium Ecosystem Assessment Synthesis Report by 1,360 scientific experts from 95 countries showed that approx-imately 60 per cent of the ecosystem services that support life on earth are being degraded or used unsustainably. Since that report, these services have deteriorated further and this is related mainly to the footprint of Western consumption which if attained by the rest of the world would require us to live on between three and four planets. There is a widening gap between the need to understand the complex systems and the ability of governments in Western democracies to make correct decisions. Parliament as an institution is revered. Yet all institutions survive by ongoing reform to

http://www.dea.org.au/node/334


encompass change. The parliamentary reform agenda needs extending to ongoing education- more sensitively let's call it "briefing" which could commence through expansion of the committee system. DEA develops this concept in its parliamentary submission. ■David Shearman is a practising doctor, E/Professor of Medicine and Hon Secretary of Doctors for the Environment Australia, which concerns itself with the with links between the environment and human health.

********************************************Media Release Monday 4 October 2010

Land Values Research Group

LVRG confirms ‘The Great Australian Real Estate Bubble’ By a number of objective measures Australian property is in a bubble, exposing landowners to the imminent prospect of a once-in-a-century price collapse, the Land Values Research Group confirmed today. “Sober cautionary voices from within Australia and overseas have been ignored in a frenzied headlong rush to profit from the surge in prices,” LVRG Research Associate Bryan Kavanagh said. “It is now too late. The profits have been made. Canny investors have already sold up and left the market. The LVRG today released its annual assessment of real estate sales for the financial year ended 30 June 2010. It includes the aggregated residential, commercial, industrial and rural real estate sales from all Australian states and territories. “The 2010 property turnover figure is 3.74 times that at the peak of the 1989 real estate bubble. The 2010 figure of $327.447 billion (for 664,816 sales) is a new record. It compares with 2009 financial year sales of $272.997 billion (612,975) and the 2008 figure of $309.604 billion (665,982). Only the real estate sales for Queensland were less in 2010 than those in the previous year, $50.5 billion in 2010 compared to $53.3 billion in 2009.

http://www.abc.net.au/unleashed/stories/s2817722.htm


“The growing build-up of inventory with agents, particularly in residential real estate, will almost certainly ensure a drop in turnover during the current financial year – setting the conditions for the first Australian recession in twenty years. The LVRG has tracked real estate sales data since 1972. It defines a real estate bubble as anytime total sales exceed 18 per cent against seasonally adjusted gross domestic product. During the period of the current bubble (1999 to 2010) Australians spent $2.767 trillion on real estate of which 29.1% ($805 billion) is in the bubble and will need to be deleveraged.

“Measuring the current level of real estate prices against GDP takes into account both the growth in population and in the economy. Despite difficulties in getting the data together, the picture they paint is clearly one of a bubble which must correct,” Mr Kavanagh said. The argument that population increases and the shortage of supply explains away the current exceptionally high real estate prices does not stand up to scrutiny, Mr Kavanagh said. He noted property agents in the USA tried to justify high prices in just these terms before the bursting of its residential bubble.

http://blog.lvrg.org.au/2010/10/more-transparency-needed-in-property.html


Our studies show the housing market alone is over-valued by 45%. “I cannot give a date for the Australian bubble burst – this depends on spontaneous motivation, “animal spirits” – but it is clearly looking us in the face. Although turnover represents a record, Australian Bureau of Statistics figures show total land prices had already turned down in 2009 when the federal government primed them with the First Home Buyers Boost. “The GFC has reset expectations around the world. Australians are now focused on reducing their record high household debt to a more manageable level, making it unlikely any similar government intervention will induce another buying surge in the residential market, Mr Kavanagh concluded.

http://blog.lvrg.org.au/2010/10/40-years-of-housing-bubbles-and.html


Economic Reform Australia Information Network Economic Shock Therapy for Wall Street: Mortgage Lenders Could Soon be Falling like Dominos

JP Morgan suspends 56,000 foreclosuresby Ellen Brown [email protected]

Global Research, October 3, 2010 webofdebt.com - 2010-10-02

[Another article pointing to the need for American legislators to grasp the nettle. In short, they should refuse to fall for the spin that failed commercial financial institutions need to be bailed out yet again, and instead should insist that the failed institutions be fully nationalised in the interest of the country as a whole. J. Hermann]

“Maybe this is like shock therapy. Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody.” – Economist Karl E. Case, quoted in the New York Times The hits are coming fast and furious. Major Wall Street mortgage lenders could soon be falling like dominos – and looking again for handouts. On September 20th, Ally Financial Inc., which owns GMAC

http://dealbook.blogs.nytimes.com/2010/10/01/foreclosures-slow-as-document-flaws-emerge/

http://www.webofdebt.com/articles

http://www.globalresearch.ca/



Mortgage, the nation’s 4th largest lender, halted evictions and resale of repossessed homes in 23 states. This was after a document processor for the company admitted that he had signed off on 10,000 pieces of foreclosure paperwork a month without reading them. The 23 states were all those where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois. On September 24, Representatives Alan Grayson (D-FL), Barney Frank (D- MA) and Corrine Brown (D-FL) directed a letter to Fannie Mae questioning its use of “ foreclosure mills,” which were described as “law firms representing lenders that specialize in speeding up the foreclose process, often without regard to process, substance or legal propriety.” The letter followed a report by the Florida attorney general’s office in August that it was investigating three law firms that had allegedly fabricated documents in thousands of cases to obtain final judgments of foreclosure. On September 24, California attorney general Jerry Brown asked GMAC to halt foreclosures in his state until the lender could prove it was complying with a law that prohibits lenders from taking steps to foreclose a home before making an effort to work with the borrower. California is a non-judicial foreclosure state, meaning foreclosures do not require the prior approval of a court. On September 28, JPMorgan Chase said it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions were in the 23 states where foreclosures require court approval. On September 29, the Washington Post reported that a top federal bank regulator had directed seven of the nation’s largest lenders to review their foreclosure processes, after learning about widespread mishandling of homeowner evictions. Besides JPMorgan Chase, they included Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo. The Washington Post reported: The paperwork problems range from potentially forged documents to bank employees who never read borrowers' files before signing off on an eviction. "While we don't expect our review to find that consumers were harmed, we will take appropriate action if we find any impact," JP Morgan spokesman Tom Kelly said. No harm perhaps except the illegal taking of thousands of homes without due process… On September 30, Rep. Alan Grayson posted a devastating seven-minute video, in which he gave four real-world examples of such travesties of justice, including a man who was foreclosed on when he didn’t have a mortgage and paid cash for the home; a home that

http://news.firedoglake.com/2010/10/01/alan-grayson-explains-the-foreclosure-fraud-crisis/

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/30/AR2010093006563.html

http://voices.washingtonpost.com/political-economy/2010/09/jp_morgan_chase_freezes_56000.html


http://news.firedoglake.com/2010/09/24/grayson-frank-brown-send-letter-to-fannie-mae-on-foreclosure-fraud/


had two foreclosure suits against it because both servicers claimed ownership of the title; and a couple foreclosed on over a contested $75 late fee. Grayson blamed the massive foreclosure problems largely on the electronic shortcut called MERS. “The banks simply digitized mortgage titles into a privatized system, called the Mortgage Electronic Registry System (or MERS),” he said. “And it did the transfers by trading Excel spreadsheets among the banks and trusts, rather than endorsing the notes as required by their own contracts, by state real estate law and by IRS rules.” He stated that 60 million properties are recorded in the name of MERS -- 60% of the mortgages in the USA, and 97% of the loans made between 2005 and 2008. On October 1, Bank of America announced that it was delaying foreclosures in 23 states. The same day, Connecticut Attorney General Richard Blumenthal took the radical step of putting a halt to all foreclosures from all banks in his state.

A Box Even Houdini Couldn’t Escape From All of this is a major headache for the banks, but according to the New York Times, “The companies say they are reviewing their procedures to take care of any violations.” They seem to think they can correct the problem by redoing some paperwork. But if the holdings in recent court decisions are upheld, it will not be just a question of hiring extra staff to clean up some files. For all those mortgages filed in the name of MERS, say these courts, the chain of title has been irretrievably broken. Humpty Dumpty has had a great fall and cannot be put together again. MERS is simply an electronic data base. On its website and in assorted court pleadings, it declares that it owns nothing. It was set up that way intentionally so that it would be “bankruptcy-remote,” something required by the credit rating agencies in order to turn the mortgages passing through it into highly rated securities that could be sold to investors. MERS not only has no assets; it has no employees. The thousands of people enlisted to sign affidavits on its behalf are merely conduits. The arrangement satisfied the ratings agencies, but it has not satisfied the courts. Increasingly, judges are holding that if MERS owns nothing, it cannot foreclose, and it cannot convey title by assignment so that the trustee for the investors can foreclose. MERS breaks the chain of title so that no one has standing to foreclose. The homes are effectively owned free and clear.

http://www.webofdebt.com/articles/homeowners.php


http://voices.washingtonpost.com/political-economy/2010/10/connecticut_halts_all_foreclos.html

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/01/AR2010100105392_pf.html


That does not mean the homeowners don’t owe money to someone. They do. But the claim for relief is not in “law” (by virtue of an enforceable contract or rule) but in “equity” (a remedy provided just because it is fair), and MERS is not the proper plaintiff. Every MERS case involves a securitization, which means the real parties in interest are a group of investors somewhere; and before the homeowners can be made to pay, the investors have to come forward and prove not only that they are the parties owed the money, but the actual sums they are owed. In some cases they might already have been paid; for example, by insurers on credit default swaps held by the investment pool. The investors are entitled to recover in equity only so much as they are actually out of pocket, not the full amount of the original promissory notes, since they were not parties to those notes and there is no way to establish again the chain of title. What About the Non-judicial Foreclosure States? Foreclosures have been suspended by JPMorgan, GMAC and BOA in 23 states, but what about the rest? The others are non-judicial foreclosure states, which means they allow foreclosure through a power of sale clause in a deed of trust without going to court. The presumption is that if the lender doesn’t have to prove his standing to sue before a judge, he can proceed. State laws in non-judicial states allow the sale of a property to satisfy a foreclosure as long as the trustee follows the regulations concerning notice. That would seem to violate Constitutional due process, but the United States Supreme Court has held that due process protections apply only when the government is involved in the taking of property. When a deed of trust and promissory note are executed between two private parties (homeowners and lenders), there is no automatic due process protection. The homeowners agreed to it in writing; case closed. But here’s the catch: what if the lender signing the original documents is not the party foreclosing on the property? Then it becomes a question of fact whether the foreclosing party has authority to proceed, and that makes it a judicial issue - a question of fact for the courts. If the foreclosing party can show a clear chain of title - an assignment or progression of assignments from the original lender to himself - he is home free. But courts have increasingly been holding that MERS breaks the chain of title. Foreclosure expert Neil Garfield argues that even in non-judicial foreclosure states, that means the investors have to go to court to prove their case. And when they do, they will run up against the brick wall of MERS. He concludes:

http://livinglies.wordpress.com/2010/09/01/if-you-have-a-mers-mortgage-here-is-their-deposition/

http://www.foreclosurefish.com/blog/index.php?id=830

http://www.foreclosurefish.com/blog/index.php?id=830


There will be a head-slapping moment when title carriers, attorneys, judges and administrative agencies and clerks suddenly realize that the monster created on Wall Street has its equivalent in the public records of counties across the nation. I doubt if more than 6-7% of all the foreclosures in the past 10 years have resulted in clear title delivered to anyone. And the only corrective instrument can come from the original owner. That homeowner is sitting in the catbird seat and doesn’t know it. Millions of people who THINK they have lost their homes still own them and if anyone wants a signature from those people to clear title, they are going to be required to pay dearly, which is at it should be. Eventually the purse gets returned to the victim from whom it was snatched.

To Subsidize or Nationalize? Where does that leave JPMorgan, GMAC, Bank of America, and the other major lenders? Investors have massive claims against these banks, and so do homeowners. A major title insurance company has already said it will not insure title to properties foreclosed upon by GMAC until further notice. Moody’s has placed the servicer ratings of GMAC and JPMorgan Chase on review for possible downgrade, and the Treasury is asking regulators for an investigation. Investment adviser Christopher Whalen thinks we could soon be looking at more Wall Street bankruptcies. If so, hopefully we won’t fall into the trap this time of underwriting the losses while letting the banks keep the profits. If we the people are picking up the tab, we should insist on owning the banks. ■Ellen Brown is an attorney and the author of eleven books. In Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free, she shows how the Federal Reserve and "the money trust" have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are webofdebt.com, ellenbrown.com, and public-banking.com.Ellen Brown is a frequent contributor to Global Research. ****************************************************** Forwarded by Ned Iceton Monetary Reform (MR)

Proposer: Ben Dyson, UK member, International Simultaneous Policy Organisation (simpol)

http:// www.simpol.org.uk<[email protected]> [email protected]

Background:

http://www.public-banking.com/

http://www.ellenbrown.com/

http://www.webofdebt.com/

http://www.powells.com/partner/23116/biblio/9780979560811





http://news.firedoglake.com/2010/10/01/alan-grayson-explains-the-foreclosure-fraud-crisis/


All the money in your bank account was created by private companies. Through a loophole in the law and some clever accounting, these companies (commonly known as banks) create new money whenever they make a loan. This means that every pound or dollar in your bank account was created when someone went into debt. For every £1 in your account, someone else has to be £1 in debt. If you want to get out of debt, someone else must sink further into debt. This system of banking is used in nearly every country in the world. It explains the huge levels of debt affecting every country, and effectively subsidizes the banking sector at the expense of ordinary people and businesses.

Proposal Summary:1. Private banks should be prohibited from creating new money when they make loans (and via any other accounting process).2. The central bank should create any new money that is needed in the economy and give this as a debt-free grant to the government. 3. The government will be able to spend this newly created money in accordance with its democratic mandate (for example, reducing taxes, increasing public spending, or making direct payments to citizens)4. The decision over how much money should be created should be taken by a committee that is completely separate and insulated from the elected government. 5. Banks will be able to continue making loans, but only with money that depositors have handed over to the bank specifically for the purposes of lending and investing. Customers who wish for their money to be invested will put it into an Investment Account, and lose access to it for the duration of the investment. 6. People who wish to keep their money 100% safe will be able to keep it in a separate type of account (a Transaction Account) where the bank will be unable to lend it. Why can't this policy be implemented by a government acting alone? CAll FOR REFORM have made a strong case why UK MR, via the Bank of England Act, could be implemented without causing a nation any economic competitive disadvantage. However, the Act may find resistance, especially from vested interest which may slow its national implementation. Also, once a critical mass of support for M.R. had been achieved in the UK via Call for Reform, the call for MR in many other countries is also likely to be in full swing. This need will be exemplified as the global debt crisis deepens. Therefore, having MR as part of Simpol's policy process may help to drive the simultaneous global implementation of M.R. Further Information:


Http://www.BankofEnglandAct.co.uk/ http://www.bendyson.com/Comments, questions & seconders welcome. <[email protected]> <[email protected]>

*****************************.

The capitalists have solved the production problem but not the distribution problem, the communists solved the distribution

problem but not the production problem. Arthur Cordell***********************************

Economic Reform Australia Information NetworkBasel III: Tightening the Noose on Creditby Ellen Brown <[email protected]> 19 September, 2010 The stock market shot up on September 13, after new banking regulations were announced called Basel III. Wall Street breathed a sigh of relief. The megabanks, propped up by generous taxpayer bailouts, would have no trouble meeting the new capital requirements, which were lower than expected and would not be fully implemented until 2019. Only the local commercial banks, the ones already struggling to meet capital requirements, would be seriously challenged by the new rules. Unfortunately, these are the banks that make most of the loans to local businesses, which do most of the hiring and producing in the real economy. The Basel III capital requirements were ostensibly designed to prevent a repeat of the 2008 banking collapse, but the new rules fail to address its real cause. Why Basel III Misses the Mark Two years after the 2008 bailout, the economy continues to struggle with a lack of credit, the hallmark of recessions and depressions. Credit (or debt) is issued by banks and is the source of virtually all money today. When credit is not available, there is insufficient money to buy goods or pay salaries, so workers get laid off and businesses shut down, in a vicious spiral of debt and depression. We are still trapped in that spiral today, despite massive "quantitative easing" (essentially money-printing) by the Federal Reserve. The money supply has continued to shrink in 2010 at an alarming rate. In an article in The Financial Times titled "US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus," Ambrose Evans-Pritchard quoted Professor Tim Congdon from International Monetary Research, who warned: The plunge in M3 [the largest measure of the money supply] has no precedent since the Great Depression. The dominant reason for

http://www.bendyson.com/

http://www.BankofEnglandAct.co.uk/


this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly. In a working paper called "Unconventional Monetary Policies: An Appraisal," the Bank for International Settlements concurred with Professor Congdon. The authors said: The main exogenous [external] constraint on the expansion of credit is minimum capital requirements. ("Capital" means a bank´s own assets minus its liabilities, as distinguished from its "reserves," which apply to deposits and can be borrowed from the Federal Reserve or from other banks.) The Bank for International Settlements (BIS) is "the central bankers´ central bank" in Basel, Switzerland; and its Basel Committee on Banking Supervision (BCBS) is responsible for setting capital standards globally. The BIS acknowledges that pressure on banks to meet heightened capital requirements is stagnating economic activity by stagnating credit. Yet in its new banking regulations called Basel III, the BCBS is raising capital requirements. Under the new rules, the mandatory reserve known as Tier 1 capital will be raised from 4 percent to 4.5 percent by 2013 and will reach 6 percent in 2019. Banks will also be required to keep an emergency reserve of 2.5 percent.Why Is the BCBS Raising Capital Requirements When Existing Requirements Are Already Squeezing Credit? Concerns about the credit-tightening effects of Basel III were reported in a September 13 Huffington Post article by Greg Keller and Frank Jordans, who wrote: Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers. European savings banks warned that the new capital requirements could affect their lending by unfairly penalizing small, part-publicly owned institutions. “We see the danger that German banks´ ability to give credit could be significantly curtailed,” said Karl-Heinz Boos, head of the Association of German Public Sector Banks. Insisting that French banks were “among those with the greatest capacity to adapt to the new rules,” the country's banking federation nevertheless said they were “a strong constraint that will inevitably weigh on the financing of the economy, especially the volume and cost of credit.” Juan Jose Toribio, former executive director at the IMF and now dean of IESE Business School in Madrid, said the rules could hamper the fragile recovery.


“These are regulations and burdens on bank results that only make sense in times of monetary and credit expansion,” he said.For smaller commercial banks and public sector banks (government-owned banks popular in Europe), the credit-constraining effects of Basel III are a serious problem. “But larger banks,” said Keller and Jordans, "were quick to praise the agreement and insisted they would meet the required reserves in time." The larger banks were not worried, because "the largest US banks are already in compliance with the higher capital standards demanded by Basel III, meaning their customers won't be directly affected." Their customers, of course, are mainly large corporations. "Small businesses that rely on borrowing from community banks," on the other hand, "may be more affected… They will try to make up for the higher capital requirements by lending at higher rates and stiffer terms." If the big banks that brought you the current credit crisis can already meet the new requirements, what exactly does Basel III achieve, beyond shaking down their smaller competitors? As David Daven remarked in a September 13 article called "Biggest Banks Already Qualify Under Basel III Reforms". Indeed, on the day Lehman Brothers collapsed, THEY would have been in compliance with the Basel III standards.Punishing Your Local Bank for Wall Street´s Misdeeds What precipitated the credit crisis and bank bailout of 2008 was not that the existing Basel II capital requirements were too low. It was that banks found a way around the rules by purchasing unregulated "insurance contracts" known as credit default swaps (CDS). The Basel II rules based capital requirements on how risky a bank´s loan book was, and banks could make their books look less risky by buying CDS. This "insurance," however, proved to be a fraud when AIG (AIG), the major seller of CDS, went bankrupt on September 15, 2008. The bailout of the Wall Street banks caught in this derivative scheme followed. The smaller local banks neither triggered the crisis nor got the bailout money. Yet it is they that will be affected by the new rules, and that effect could cripple local lending. Raising the capital requirements on the smaller banks seems so counterproductive that suspicious observers might wonder if something else is going on. Professor Carroll Quigley, an insider groomed by the international bankers, wrote in Tragedy and Hope in 1966 of the pivotal role played by the BIS in the grand scheme of his mentors: [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in


private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world´s central banks which were themselves private corporations. The BIS has now become the apex of the system as Dr. Quigley foresaw, dictating rules that strengthen an international banking empire at the expense of smaller rivals and of economies generally. The big global bankers are one step closer to global dominance, steered by the invisible hand of their captains at the BIS. In a game that has been played by bankers for centuries, tightening credit in the ebbs of the "business cycle" creates waves of bankruptcies and foreclosures, allowing property to be snatched up at fire sale prices by financiers who not only saw the wave coming but actually precipitated it. ■******************************************************Economic Reform Australia Information Network

Pen Meets Paper - The Control of Fiat MoneyOpinion by Helge Nome <[email protected]> 7 October, 2010 Albert Einstein popularized the notion that the qualities and quantities we use to describe the world around us are entirely relative entities. For example, the speed of an object can only be meaningfully described in relation to some point of reference, like the earth we stand on. Things get a lot more fluid out in the cosmos, where there is no obvious reference point. Thus was born Einstein’s famous theories of relativity. Upon reflection, we also realize that the same principle applies to value. We value something relative to something else: An ounce of gold is worth a lot more, in our mind, than an ounce of lead, or iron, for example. So as to create some kind of order in how things are valued, we have devised units of value, like the dollar, euro, yen, etc., somewhat akin to the meter, kilogram, second in the physical sciences. But there is a problem with our monetary values. Unlike the physical ones, that have some fixed reference point (one meter equals so many wavelengths of light emitted from a gas at a certain temperature), our units of fiat money value are literally floating around in space with relative values changing moment by moment. In the old days, they were tied to the value of gold, the magic


metal of humankind, but that is no longer the case. In the old days the value of a nation’s money also used to be connected to the productive capacity of that nation so that highly productive nations’ currencies were highly valued and sought after by people from all over the world. That has also changed as financial speculators have hijacked control of currency creation and created enough fancy money, by way of debt, to buy the whole world a hundred times over. Have you noticed that people are very reluctant to spend money these days, during bust times? (In contrast to the boom time some three years ago). The reason is that everybody is now busy trying to pay down the debts that were so recklessly gone into during the boom. No money, no jobs, the economy shrinks and the dreaded spectre of deflation appears on the stage because people who have to sell assets in order to meet their financial obligations are forced to lower the price of those assets in order to secure a sale. The central bank fix for this problem is to print money and distribute it far and wide, hoping to get some inflation going again. That effectively devalues that particular currency in relation to those of other nations, giving a competitive export advantage to the nation with the central bank that indulges in this practice. So the other central banks follow suit in order to neutralize this effect. Outcome: Currency wars with unpredictable consequences. And a good way to measure this phenomenon taking place is to keep an eye on that fixed point in the landscape of value: Gold. It is now over $1,300 per ounce in US funds, and the equivalent in other currencies. Gold is not rising in value. It is holding its real value while fiat currencies, created out of nothing are showing their true face as they tumble downhill. You see, gold and silver are literally imprinted on our collective mind as having intrinsic value, based on thousands of years of successful usage. There is nothing inherently wrong with fiat money, though. The problem is that we have allowed a bunch of scoundrels to create tons of it. And in doing so, by way of tricks and deceit as old as the hills, they have shifted control of the bulk of this money from us, the public, to themselves. ■

*********************************** A "derivative" market is one that is "derived" from an underlying asset, but participants don't have to own the asset to play. Like gamblers at a race track, they can bet without owning a horse. This money is not contributing capital to productive businesses and so helping the economy to grow. Rather, it is being diverted into betting on the Global Casino. Money is made by taking it from someone else.


Total world derivatives are $1000 trillion or 19 times the total world GDP of $54 trillion. Over-the-counter derivatives total $684 trillion of which 67 percent are interest rate swaps. Exchange-traded derivatives total $344 trillion. Interest rate swaps are the largest derivative powder keg waiting to blow the world financial markets to supernova. The word algorithm is much in use in big-time financial gambling. An Algorithm or algorism is a step-by-step procedure by which an operation can be carried out without any exercise of intelligence, as for example, by a machine. In Mathematical Logic, it is a specifi-cation of a recursive procedure by which a given type of problem can be solved in a finite number of simple mechanical steps. Simple algorithms familiar in elementary arithmetic are those used in the extraction of square roots and in long division. The problem of how much of mathematics can be described in such terms is the subject of Computability Theory. ■

**********************************The Saga of a Peoples’ BankFrom 1914 to 1924, the Commonwealth

Government itself created whatever finance it needed, both interest and debt free.

IF THEN, WHY NOT NOW?The Story of the Commonwealth Bank

Original text by D.J. Amos F.C.I.SThis booklet (48 pages) may be read at or purchased

direct from the Publisher: Price, TWO copies including GST and postage, A$5.00: FIVE copies including GST and one postage A$10.00

QUEEN OF THE SOUTH PRESS4/20 Everard Street, LARGS BAY S.A. 5016

www.queenofthesouth.net********************************

http://www.queenofthesouth.net/

Documents

Economic Reform Australia€¦ · Web viewSteve Keen's presentation in Adelaide on 24 September "The global financial crisis is far from over" was very well received. The 100-seat