APRIL2007

The American Monetary Act - “Zarlenga has no clue about money”

From: "Max" <max@mailstar.net> Date: Mon, 2 Apr 2007 01:00:24 +0800

Zarlenga has no clue about money and seems another false prophet and I really wonder why nobody tells him that after so many years. He should know about other concepts like 'debitism'.
http://www.economy-point.org/d/debitism.html. The debitism does not regard the national economy as sum of exchanges, as it is formulated in the neoclassical theory, but as sum of obligations / since we have today a debit based system which is always doomed to fail. (Kondratieff cycle). There is no way to follow the neoclassical setup and just change the ownership of the printing press as Zerlenga suggests.

1. there is no way to avoid inflation if money is sprinkled out without performance. GDP must equal performance. 2. the purpose of money is not to serve welfare but performance. 3. ecological sustainability and quality of life considerations can never arise unless interest is abolished. Interest causes inflation and forces 5 times as much growth (capital gain vs work income) and hence is out for growth, which is never ecological sustainable. 4. classical interest was a share of the harvest. Modern interest is non-created money and hence non existent and never repayable. 5. his description about fractional reserve banking shows that Zerlenga just copies wrong ideas from others. Blind leading blind.

At least since Romulus days, slaves had been too expensive. Free labor was preferred but had to be provided with tools. The smarter concept was to give them landed property and lend them money against this security so that they could buy their own tools. Without land they would not repay loan nor interest. At least since Pharaohnic days money is always only created against debt. Till today credit money is created against security of property.

Any new monetary concept must resolve first this property issue. In my opinion land has to remain communal property that can be used against community fees, which finance all community needs and makes taxes redundant. The community needs to be in charge of their spending and not government. Debit/free money has to be created against performance and we have to allow the sovereign to create money directly against his commitment of performance - without going through a bank or government application. This is how the old Chinese dynasties created money and
survived centuries. This is how Hitler created money via his 'Wechsel' (drafts) where buyer and seller vouched for the amount and used the banks interest free money to finance the deal until the loan was repaid.

6. fractional reserve banking does not work as he describes and if it is a million times described like this on the web or wherever.

It is mostly wrong described that a bank deposits a minor amount of money with the central bank in order to obtain the full amount of cash. In his example he talks about 10%. This is bare nonsense. Any Central Bank (CB) can only issue money against debt of Government bonds (I.O.Us). The Government-IOUs are deposited with the "big boys" who get now the interest for those IOUs. No money has yet been created! If a bank gives cash to the central bank they will say sorry, we want 100% securities. Why would they take their own cash as security when none has been printed yet? Cash is no security, properties are no securities (the centralbank could not even evaluate them), shares are no securities - so what are securities? The answer is simple - only the IOUs! The CB cannot refuse the IOUs from their own government.

How do the IOUs find their way from Gov to the CB Those IOUs are available on special market places like NY or London and they are traded at special rates - LIBOR, EURIBOR etc. The 'big boys' rent them several times out and earn further money with them. Those IOUs can be rented for
a certain length of time and at different rates and have to be returned before their maturity. Longterm IOUs (above 2 years) and above 50 million go way below 1% - shorter maturities go for a little higher price. This is a complex lending game amongst insiders with a complex rule set. Those figures are only ball park. Only against those IOUs will the CB print money - but they are not yet there....

The banks create book-money (which Zerlenga calls 'credit') against security and interest. Long as the bank needs NO cash, they can issue as much book money as they want (here is a limit of 15 times of their share capital in order to secure the Investmentbanking sector for the 'big boys'). If the bank needs cash, they need to go to the CB and request 'cash against securities'! The CB will than create the money against
those IOUs.

We have a debit based money system anywhere in the world and hence no cash without secured debt. When ever one receives cash, they do not get interest. Metal and Notes never paid interest. The moment they return the cash to the bank, the bank will credit this to the customers account and return the cash instant on the same day to the central bank - in order to get it credited against their security deposits (IOU). The CB will than void the money and credit the amount to the banks deposit. The fact that we see often reused notes only means that they are re-issued when the next cash demand is made. The reason why the bank offers a premium for returned cash is only to free their security with the CB. In
older days when money was 100% gold backed they charged a deposit fee to safe keep the gold. Only since fractional reserve banking started did they switch and offer interest for credit. The reason is obvious.

Therefore - there is no money circulation and there is no volume of money and no velocity! This is a fairy tale! There is only a sum/amount of debt or credit!

Any note is a 'transferable coupon' of government debt, good for paying taxes.

Banks are only debiting and crediting money to accounts. Any debit shows on another account as credit and visa versa. Any cash represents always government debt. The more cash - the more IOUs.

THERE IS NO MONEY WITHOUT DEBT!

If money is issued against debt it makes no difference if it is issued against gold or property. Both serve the purpose of 'Global Governance and their Investmentbankers' ! For that matter any power structure was always taken over by the elite. Money has to be issued against performance and not via the banking system - but via the sovereign. Any central system always only supports power structures which lead soon or later to abuse of any system.

To understand money you have to understand capitalism which can only survive in a democracy. (can also be a controlled democracy as in places like Tigerstates, India etc.) Nations need a claim on land which they establish via taxes. To mark their claim they need fund which they get since always from the money lenders. i.e. money lenders setup Nations to serve their interest. To hold power over nation and sovereign they enslave them via credit against their personal property claim. This cycle must end.

There is nothing wrong with free capitalism as we seen it 50 or 100 years ago in Hongkong (where it survived longest). The trouble is that free capitalism is soon taken over by government regulations who give an unfair advantage to capital intensive industries, which distorts the market and turns it into a 'preferential capitalism' for the big boys against the small guys.

Looking at the beautiful cities in Europe or Asia we can see townships with endless charming streets of shop-lots cum residential places where families worked downstairs and lived upstairs. This changed fast over the last 100 years when the money masters flooded the world with cash and destroyed the livelihood of small-scale operations which did not have access to fast cash.

REPLY (Peter M):

Max,

Zarlenga is no fool; he even was invited to give a talk to the US Teasury:
http://www.monetary.org/treasurytalk.htm

In reply to you, I would like to quote Richard A. Werner, Professor of International Banking at the University of Southampton, from his book Princes of the Yen.

At the end of the quote, I put a question to you.

{quote}

The Power of Money

Going back in history, we find the oldest advanced monetary system in China. It lasted for several hundred years, until the era of Mongolian rule. It is at this time

{p. 40} that a detailed description was delivered to Europe in the form of Marco Polo's report of his twenty years spent in Kublai Khan's China in the late thirteenth century. Marco Polo was a trained merchant, and his book The Travels is full of information and insights concerning the Chinese economy. He did not fail to give an account of the most advanced
monetary system at the time.

The world's first paper money was launched in the tenth century in China by the ruling Sung Dynasty. In this advanced monetary system, there was no doubt about what money was: the paper money issued by the emperor and
stamped by his seal. He was the central bank. No other institution was allowed to create money, on penalty of death.5

The emperor was directly in control of the money supply. This meant that he could stimulate demand by creating more paper money, or cool the economy by taking paper out of circulation. He also determined who could gain control over food, raw material, weapons, and the latest technology, by creating and allocating paper money at will. He was an
absolute ruler in every sense, in control of all the resources of his empire.6 Marco Polo vividly describes this advanced monetary system, which had been in place when he visited China under the rule of Kublai Khan:

{quote} It is in this city of Khan-balik that the Great Khan has his mint; and it is so organized that you might well say that he has mastered the art of alchemy. I will demonstrate this to you here and now. You must know that he has money made for him by the following process, out of the bark of trees - to be precise, from mulberry trees (the same whose leaves furnish food for silkworms). The fine bast between the bark and the wood of the tree is stripped off. Then it is crumbled and pounded and flattened out with the aid of glue into sheets like sheets of cotton paper, which are all black. When made, they are cut up into rectangles of various sizes, longer than they are broad.... And all these papers are sealed with the seal of the Great Khan. The procedure of issue is as formal and as authoritative as if they were made of pure gold or silver. On each piece of money several specially appointed officials write other names, each setting his own stamp. When
it is completed in due form, the chief of the officials deputed by the Khan dips in cinnabar the seal or bull assigned to him and stamps it on the top of the piece of money so that the shape of the seal in vermilion remains impressed upon it. And then the money is authentic. And if anyone were to forge it, he would suffer the extreme penalty.

Of this money the Khan has such a quantity made that with it he could buy all the treasure in the world. With this currency he orders all payments to be made throughout every province and kingdom and region of his empire. And no one dares refuse it on pain of losing his life. And I assure you that all the peoples and populations who are subject to his rule are perfectly willing to accept these papers in payment, since
wherever they go they pay in the same currency, whether for goods or for pearls or precious stones or gold or silver. With these pieces of paper they can buy anything and pay for anything.7 {endquote}

Marco Polo also describes what today we would call open market operations conducted by the Great Khan through purchases of gold, silver, precious metals, or other supplies from his subjects:

{p. 41} {quote} Several times a year parties of traders arrive with pearls and precious stones and gold and silver and other valuables, such as cloth of gold and silk, and surrender them all to the Great Khan. The Khan then summons twelve experts, who are chosen for the task and have special knowledge of it, and bids them examine the wares that the
traders have brought and pay for them what they judge to be their true value. The twelve experts duly examine the wares and pay the value in the paper currency of which I have spoken. The traders accept it willingly, because they can spend it afterwards on the various goods they buy throughout the Great Khan's dominions. ...

Let me tell you further that several times a year a fiat goes forth through the towns that all those who have gems and pearls and gold and silver must bring them to the Great Khan's mint. This they do, and in such abundance that it is past all reckoning; and they are all paid in paper money. By this means the Great Khan acquires all the gold and silver and pearls and precious stones of all his territories.8 ... And all the Khan's armies are paid with this sort of money.

I have now told you how it comes about that the Great Khan must have, as indeed he has, more treasure than anyone else in the world. I may go further and affirm that all the world's great potentates put together have not such riches as belong to the Great Khan alone.9 {endquote}

Marco Polo's description seemed wildly exaggerated to his fellow Europeans. We now know, however, that he was giving what amounts to an accurate description of the monetary system prevailing at this time in the Mongolian Empire. Even his estimation of the Khan's wealth as far
exceeding that of his counterparts in the rest of the world might well have been accurate.

At the time, European kings and princes could only dream of such wealth or such power over the economy and their dominions. Things had developed quite differently for them in Europe. The rulers there failed to understand the true nature of money. To them, only gold or other precious metals could be money. But if gold is the main currency, it is impossible for a ruler to control the money supply. Gold cannot be created at will. Rulers tried, though in vain. Thanks to their efforts, chemistry got an early start in the form of the doomed attempts at creating gold through alchemy.

Compared to their colleagues in China, European rulers could not really be considered fully in charge. They could not control the resources in their countries. Kings had to compete with their own subjects for resources. A government that does not control the money supply has hardly any influence over its economy. Such a government is not sovereign. The great Kublai Khan, emperor of China and the Mongolian
Empire, would probably have shaken his head in disbelief if he had known that European rulers could not issue money to implement public-sector projects. Instead, European governments had to rely on taxes. Often tax levels were already close to the pain threshold, and money was still
needed for government investments or expenditures. If the kings and princes still wanted to build roads, hospitals, and castles or raise an army to defend their country, more often than not they had to borrow money. No matter how absolutist or all-powerful they may have called themselves, when it came to money most European rulers had to ask for help. ...

{end} This quote and more are at
http://users.cyberone.com.au/myers/werner-princes-yen.html

Question to Max (from Peter M.):

When the Great Khan of Mongol China issued money thus, did he incur debt?

Where was the debt? To whom owed?

This will surely be of interest in Ireland:Cross-border banks require a single regulator

Published: April 1 2007 19:01 | Last updated: April 1 2007 19:01Financial Times

One of my most reliable sources in Brussels warned me some time ago that banking supervision is going to be the next controversial issue in economic policy. I was a little sceptical at the time, since financial regulation tends to be a fairly technical subject somewhat removed from the public debate.

But my interlocutor’s assessment now seems fair as the European Union finds itself called upon to make decisions on the regulation of merged cross-border banks such as Unicredit/HVB or BNP Paribas/Banca Nazionale del Lavoro. Europe’s current approach to this problem is to set up a lot of committees with similar sounding names to co-ordinate national supervisors.

MONEY in art !

Asian art boom mirrored elsewhere

By Tom Mitchell in Hong Kong,excerpts.....

Published: December 1 2006 23:37 | Last updated: December 1 2006 23:37

In a region where a Chinese bank looking to raise $22bn can attract half a trillion dollars in initial public offering of shares orders, $19.4m does not seem that much for a piece of porcelain.

The price paid for an 18th century imperial Chinese “swallows” bowl at Christie’s Hong Kong auctions this week – a world record for a Qing dynasty ceramic – is a reminder that Industrial and Commercial Bank of China’s mega-IPO in October was just one facet of an investment craze that is sweeping Asia.“What’s happening to us is symptomatic of what’s happening to the world,” says Edward Dolman, Christie’s chief executive. “It’s being driven by the extraordinary amounts of cash that are around. It’s a great time to be selling art.”

Mr Dolman credits the nouveaux riches of China and India for the current Asian art boom, but despite their enthusiasm they are still only keeping pace with their western peers.Regardless of whether an auction is held in the US, Europe or Asia, Christie’s calculates regional sales totals based on the addresses registered by buyers, providing a rare window on to global wealth creation and capital flows.

This is because the rich are getting richer everywhere, not just in Asia, and as they do so their capacity for the conspicuous consumption of art is expanding. This year, for example, some 170,000 employees of the big five US investment banks and brokerages – Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns – are expected to pocket bonuses totalling $36bn.

“We’ve never seen so much money coming in from China, Russia, Wall Street, the City, India,” Mr Dolman adds. The last great art craze of the late 1980s is a reminder of Asia’s potential as a consumer of all things artistic.After the stock market crash of 1987 damped demand in the US and Europe, Japanese money supported the market for another two years.

There are more and more anecdotal examples of an eclectic art taste developing in the region.

Last month Joseph Lau, a Hong Kong property tycoon, secured a quintessential piece of modern American pop art, albeit one with considerable Chinese characteristics.Mr Lau’s prize, acquired at a Christie’s auction in New York, was Warhol’s iconic portrait of Mao Zedong. It was the most ever paid at auction for a Warhol, but Mr Dolman seems to reckon it a bargain at twice the price.