Things No One Ever Tells You About The Economy

(This article originally appeared in Salient a week or so ago.)


Things No One Ever Tells You About The Economy
by and (c) Billy the dancing moose 2007 (www.undulatingungulate.com/blog)

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
– Henry Ford

Each day we are told that we must obey as the economy – or rather, her priests, the economists – dictates. It is claimed our wellbeing as a nation, as people, rests paramountly upon our economic health. But almost no one understands how the economy works. The proof of this is simple: if everyone understood how the economy actually works, it would stop working instantly, because we would refuse to continue doing as we are, and the economy relies upon our belief in it to function.


Money Out of Nothing

Money is created out of nothing. This right was stolen from governments by the international bankers they became indebted to in wartime – wars in which the bankers funded both sides. Economies can be expanded or contracted by controlling the money supply. In 1790, Amschel Rothschild, head of the richest banking family ever, declared he did not care who made the laws of the land so long as he had the right to print the money.

Money (at least in America; I’m curious as to whether the situation is the same with our own Reserve Bank) is created by the purchase of government bonds, which are a “promise to pay”. Bonds are paid for electronically by the Federal Reserve – completely out of nothing – the money exists because they say it does. This money is then transferred to banks who lend it out at interest. However, due to fractional reserve lending, the bank can lend ten times as much money as they hold. (If you tried to do this, you would be arrested for fraud.) Banks thus create money when they lend it.

Now, if a bank has one million dollars worth of bonds, it can lend ten million dollars. (None of which has any material reality.) Say it lends at ten percent. So a year later it gets back eleven million dollars. But the first ten million never really existed, and the extra million that gets paid back represents real productive labour which has been co-opted by the banks. They did nothing for this except steal the monopoly over the creation of money.

Money does not have to bear interest. There is no necessity for this. It is simply theft. There’s a reason Jesus threw out the money-changers from the temple. Interest free money can be issued, and has been done often throughout history. (e.g. Abraham Lincoln did during the US civil war.) Actually, anyone can print money, too, as it is just a promise to pay. All that backs money is the belief that the issuer will someday pay.

The Economics of Illusion

Essentially we are enslaved by debt to money created out of nothing. Money used to mean such and such an amount of gold or silver, but in the 1970’s the US dollar – the currency every other currency was measured against – went off the gold standard. Now money is a tradeable commodity. (This happened around the same time as the era of deregulation and the removal of restrictions to movement of capital across borders began.)

Trillions of dollars worth of speculative capital travels the world each week, seeking to turn a quick profit on fluctuations in exchange rates. These sums of money dwarf the world’s GDP. Organised attacks on a currency by enormous hedge funds can sink a country’s currency.

Money is worth only what we believe it is worth. The methods by which this belief is established have increasingly little to do with any physical reality.

Barring a plague or drought, what is the difference in material resources – people and raw materials, physical stuff that exists – between a depression and a boom? Absolutely none. The only difference lies in or beliefs about what is happening; or in the availability of capital. But the availability of capital depends only on how much is arbitrarily created; this is controlled by central banks.

Ain’t that a bit weird? Think about it for a minute. What is actually being made, real stuff that people are doing, no longer runs the world. The financial markets – speculation on speculation about what does not exist – and those unaccountable private individuals who control the money supply – are running the real things.


The Biggest Con Job Ever

(This section is largely an edited chunk from one of my unpublished novels :P)

The con is the individualisation of profit and socialisation of risk. An easy example is the government – that is, the public – paying billions for research and development costs for military, pharmaceutical and biotechnology companies who then make private profits from discoveries based on that research. But that’s small fry compared to the real con.

Speculative capital can go almost anywhere, and it will be invested wherever it will get the highest return, which is likely as not the place with the highest risk. As you can imagine, that can have major destabilising effects on a local economy which may already be volatile.

At some point investors lose confidence in a country or a currency and panic, trying to get their money out before it collapses, which worsens whatever crisis the country’s economy faces. The currency devalues, and they end up in massive debt to their overseas creditors. The IMF offers to bail them out, but only if they follow the prescription set out for them. Now, part of the trick is the IMF is funded by taxpayers from its member nations – the public. Remember that.

The IMF is run by market fundamentalists – people who believe that markets run brilliantly and should be left to run without “interference” from government. And they have one prescription, based on their
faith. Fiscal and monetary austerity, privatise everything, and remove restrictions on capital flow.

Monetary austerity means using the billions received in IMF loans to artificially prop up the local currency long enough for the creditors to be paid back at a better rate, a lot of which is done with the money received from the IMF, so when you look at it, the IMF loan was for the benefit of the international financiers, since they get the money. And if the IMF loan doesn’t get repaid, then the taxpayer bailed out the financiers who made a bad decision. But why wouldn’t they make a risky decision if they knew they’d get bailed out?

Fiscal austerity means raising taxes and cutting spending, which lowers aggregate demand, that is, the total demand from all sectors. When it’s high it is good for workers’ wages and production but less good for profit, when it is low there is less employment and production, which in theory combats inflation. In practice austerity demolishes social programs and increases the ability for creditors to be repaid. This all makes more sense if you take the intentional stance, so to speak, to the policy, and read it as if it is designed to make sure the lenders get repaid. This isn’t the IMF’s job, but it has
been acting like it is.

Meanwhile local companies are going broke. Then, since the privatisation and financial liberalization prescription requires rules about foreign ownership and investment to be lifted, overseas finance – from a certain point of view, the same money – can come in freely and buy up assets at a fraction of their value, in a way that would never be allowed normally. The scale this is on is humongous. Banks, corporations, land, infrastructure, bought up for nothing. The entire shape of the world changes in the hour of the wolf before dawn, a new form of colonialism that most of the colonised are barely aware has occurred.


Why No One Ever Tells You These Things About The Economy

In the New York Times of March 27, 1922, former US President Theodore Roosevelt was quoted:
These international bankers and Rockefeller-Standard Oil interests control the majority of newspapers and the columns of these papers to club into submission or drive out of public office officials who refuse to do the bidding of the powerful corrupt cliques which compose the invisible government.

In the New York Times of March 26, 1922, the Mayor of New York, John Hylan said: “The warning of Theodore Roosevelt has much timeliness today, for the real menace of our republic is this invisible government which like a giant octopus sprawls its slimy length over city, state and nation… It seizes in its long and powerful tentacles our executive officers, our legislative bodies, our schools, our courts, our newspapers, and every agency created for the public protection…
To depart from mere generalizations, let me say that at the head of this octopus are the Rockefeller-Standard Oil interest and a small group of powerful banking houses generally referred to as the international bankers. The little coterie of international bankers virtually run the United States for their own selfish purposes.
They practically control both parties, write political platforms, make catspaws of party leaders, use the leading men of private organisations, and resort to every device to place in nomination for high public office only such candidates as will be amenable to the dictates of corrupt big business.
These international bankers and Rockefeller-Standard Oil interests control the majority of newspapers and magazines in this country.

Interesting how 80 years ago this could be spoken of openly by respected men in positions of power, whereas nowadays those words are only spoken by people stigmatised in the media as “conspiracy nuts”. Maybe the international bankers bought the rest of the media, too? Check out the latest edition of The Media Monopoly by Ben Bagdikian for details on how a handful of people own over 90% of the world’s media.

There is way more to this. Please check out “The Money Masters“, an astonishing history of banking and economics, available free to download online if you look for it. Try Google Video.

And, of course, the real reason no one tells you these things about the economy is that if everyone knew this stuff, there would be a revolution.

So go tell someone.

2 Responses to “Things No One Ever Tells You About The Economy”

  1. April 15th, 2009 | 12:56 pm

    […] Years ago, when I first started reading about economics, I realised that if most people understood how the economy worked, it would stop working the next day. That has become more specific over time. Now I think people fundamentally do not understand the money system, what money is, or how it works. In particular, the credit which funds the banks is our collective credit, but we can only access it through banks at great cost, and this is kind of … stupid. […]

  2. April 15th, 2009 | 12:59 pm

    […] Years ago, when I first started reading about economics, I realised that if most people understood how the economy worked, it would stop working the next day. That has become more specific over time. Now I think people fundamentally do not understand the money system, what money is, or how it works. In particular, the credit which funds the banks is our collective credit, but we can only access it through banks at great cost, and this is kind of … stupid. […]