Anatomy of casino capitalism

[Rajiv]

Anatomy of casino capitalism

Four Parts so far -- Will update as more come in.

Jane D'Arista unravels the web of banking confidence schemes

Jane D'Arista is an economist with the Financial Markets Center in Philomont, VA. She is a Research Associate with the Political Economy Research Institute (PERI) and author of the masterful study of U.S. financial regulation, The Evolution of U.S. Finance. For more than thirty years, Jane D'Arista has been one of the country's most insightful analysts of financial markets and regulation.

[Rajiv]

Re: Anatomy of casino capitalism

All 8 parts are in now

[don]

Re: Anatomy of casino capitalism

Great Post. Thanks Guys

[kartius919]

Re: Anatomy of casino capitalism

So why we got to fiat money in the first place was because we don't have enough gold to keep an economy running! Brilliant! Course the Vietnam war had nothing to do with it. Nor Lyndon Banes Johnson's Great Society. If the problem is not having enough money, hell the solution is to print that shit up! Does John Law proud!

[LargoWinch]

Re: Anatomy of casino capitalism

So why we got to fiat money in the first place was because we don't have enough gold to keep an economy running!

I agree; this statement from Jane D'Arista was very disappointing and it does reflect poorly on the remainder of her comments.

So, if there is not enough Gold, then we are simply to trust the governments "responsible behavior"?

If there is not enough Gold, perhaps there is enough Gold and Silver? What about Gold, Silver and Copper? What about Gold, Silver, Copper, Palladium/Platinum, Uranium and Crude Oil?

[Rajiv]

Re: Anatomy of casino capitalism

Actually, D'Arista is correct. Two factors combine to make her correct. First is the charging of interest, and the second is the fact that gold can be hoarded.

The problem comes from the dual nature of money as is currently defined. Money is both a means of exchange, and at the same time it serves as a store of value.

As a means of exchange, money needs to circulate. As a store of value, it needs to be stored (hoarded.) Gold cannot serve both purposes. The need for fiat money arises because of the limitations of gold as a medium of exchange. See the work of Ellen Brown, Margrit Kennedy and also Tom Greco. Fiat money issued as a stamp scrip (as proposed by Silvio Gesell) serves the bill very well. This scrip could well be backed by gold, or for that matter any bundle of commodities.

[kartius919]

Re: Anatomy of casino capitalism

I have trouble with your definition of money. What you consider storing and exchanging deals with the velocity of money rather than money itself. It does not define what money is. By storing money, you are slowing the circulation of money and decreasing the total supply of money. By exchanging the item you are increasing velocity and the supply of money. The flow of money is the sum of millions of transactions. Whether the flow of money is slowed or sped up does not have to do with the money itself, whether it is gold or fiat.

If an item is backed by a commodity, it is no longer fiat. The state may default later on its obligations to exchange the commodity for the paper, but until then it is still backed by a hard tangible asset.

Under your definition, fiat is also a store of value and a means of exchange. There is not much difference in fiat and gold except for the fact that more fiat can be created by the State thus diluting the existing pool of fiat.

Now the idea of interest deals with lending and fractional reserve banking, which further complicate matters. Yet the problem with interest is not inherent to money. Whether it be gold or fiat, the problem will still exist because the problem is with interest itself.

[LargoWinch]

Re: Anatomy of casino capitalism

Actually, D'Arista is correct. Two factors combine to make her correct. First is the charging of interest, and the second is the fact that gold can be hoarded.

The problem comes from the dual nature of money as is currently defined. Money is both a means of exchange, and at the same time it serves as a store of value.

As a means of exchange, money needs to circulate. As a store of value, it needs to be stored (hoarded.) Gold cannot serve both purposes. The need for fiat money arises because of the limitations of gold as a medium of exchange. See the work of Ellen Brown, Margrit Kennedy and also Tom Greco. Fiat money issued as a stamp scrip (as proposed by Silvio Gesell) serves the bill very well. This scrip could well be backed by gold, or for that matter any bundle of commodities.

I see your point Rajiv, makes a lot of sense as always.

What I had in mind however was not gold coins as a medium of exchange (such as paying groceries with Gold Maple Leafs), but a currency backed by something or a basket of tangible things which I firmly believe is possible.

I interpreted D'Arista comments as: "only pure i.e. non-backed fiat is possible"

[ThePythonicCow]

Re: Anatomy of casino capitalism

So why we got to fiat money in the first place was because we don't have enough gold to keep an economy running! Brilliant! Course the Vietnam war had nothing to do with it.

Precious metal backed currency works ok when the economy is growing at about the rate that new stores of the metal are mined, but causes repeated deflationary economic (panics/depressions/crashes/...) due to a shortage of money.

Fiat backed currency works ok when the political powers are honest.

Michael Armstrong's latest post at http://www.scribd.com/doc/22417671/GOLD-5000-11-11-09 considers this in detail. I recommend this one.

We have neither a stagnant economy nor honest politicians.

[kartius919]

Re: Anatomy of casino capitalism

Panics/depressions/crashes occur whether it be fiat or gold. They are a result of malinvestment, poor banking practices, and fraud during boom times. Since none of these practices are sustainable, the boom will eventually go bust and all bad investments are wiped out. This wipe out phase is what people hate and label deflation/panics/depressions/etc. There is no such thing as a shortage of money or a surplus of money. There is credit, there is money, there are derivatives, etc. What happens in the bust is the realization that credit, derivatives and all the other malinvestments made during the boom are worth a lot less than expected. Much less. 100% less at times. Meaning all the productivity in prior years were a sham. Digging and filling holes. So now the amount of money, monetary base being one indicator, remains the same but the value of everything else has fallen substantially.

But understand, this problem has nothing to do with whether it be fiat or gold. It will happen time and again because man is infallible.

GOLD DOES NOT LIMIT PRODUCTIVITY. There is no reason production cannot increase while the monetary base remains stable. Case in point, computer technology has increased dramatically over the last decade. We are able to produce more and better computers at a much lower cost. Productivity grew at a much greater pace than the money supply. This is not a bad thing.

Deflation itself is meaningless if used to describe two different phenomenons.

[ThePythonicCow]

Re: Anatomy of casino capitalism

GOLD DOES NOT LIMIT PRODUCTIVITY. There is no reason production cannot increase while the monetary base remains stable. Case in point, computer technology has increased dramatically over the last decade. We are able to produce more and better computers at a much lower cost. Productivity grew at a much greater pace than the money supply. This is not a bad thing

See that Michael Armstrong post at http://www.scribd.com/doc/22417671/GOLD-5000-11-11-09.

Gold does not limit technology, true. However a fixed monetary basis will limit economic (monetary) activity. Due to the time based nature of many monetary investments, savings and debt, the "value" (convertibility to real goods) of money cannot arbitrarily, effortlessly and rapidly change without causing disruptive economic affects.

I did not and am not claiming that fiat money is free of panics and crashes. I am saying that both fiat and gold have such, for different reasons.

Armstrong explains this far better than I can. You're wasting your time trying to educate cows in economic matters. Go read a master.

[kartius919]

Re: Anatomy of casino capitalism

Its Martin Armstrong. And if you read everything he says w/o a grain of salt, then it is pointless. Believe the master by all means.

[ThePythonicCow]

Re: Anatomy of casino capitalism

Its Martin Armstrong.

Correct - thanks.

Yes, read him (anyone, I presume) with a grain of salt.

But this particular most recent post of his has a particularly fine discussion of the difference between a gold based currency and a fiat currency. Have you read it yet?

[kartius919]

Re: Anatomy of casino capitalism

Finally got a chance to read it. Found the discussion spotty and incoherent at best. Never defines capital and what is running around from country to country. Might be discussing money as he interchanges the two without much thought, but then maybe not. He defines money as all the goods and labors within one nation. Contrary to common usage and his own usage. Argues that money supply must contract or expand with the economy. If the economy is the goods and labor within one nation, and money is the goods and labor within one. Actually I don't give a damn anymore. I think i'm done posting on this board.

[LargoWinch]

Re: Anatomy of casino capitalism

I think i'm done posting on this board.

What for?

Each well-argumented idea benefits all.