From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Cc: Stephen Zarlenga ; Frederick William Engdahl ; PGS

Sent: Tuesday, October 24, 2006 6:23 AM

Subject: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

Geoffrey,

 

I have for some time been wondering about what I have seen as an overly statist tint to AMI's proposals, but I have ascribed this to my lack og comprehension of what they really want. I find it interesting that you have the same impression.

 

I am sure that this is done with the best of intentions, but my impression too has been that in the US there is a kind of nostalgia and longing for "the exotic", and therefore many think postwar social-democratic rule in Northern Europe was efficient. Several studies in the past decades has shown that it wasn't. In Norway there was a vaste of invested resources on a grand scale, not so unlike the neglect of common sense economic principles in the former USSR. Paradoxically, at the same time there was a neglect of the role of immaterial resources.

 

Yours,

Arno

 

 

 

----- Original Message -----

From: Geoffrey Gardiner

To: gang8@yahoogroups.com

Sent: Wednesday, October 11, 2006 1:30 PM

Subject: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

'The Road To Serfdom' is being kept in good repair by the AMI.

 

They want to prevent the debts of any private organisation being made negotiable. How does one stop that happening without imposing a Communist/Nationa Soclialist system? Is it feasible?

 

At the moment primary credit can be created in the private sector. Very little primary credit to the state is negotiable because banks are reluctant to hold more state debt as assets than they have to. State debt is almost all funded. If one can make any sense at all of the AMI proposals they appear to be the system which ruled in Britain from about 1940 until about 1960. 80 per cent of bank assets were state debt. Banks referred to such lending as 'White Paper Loans', which means that the rules under which they were working had been published in a government paper, known in Britain as a 'White Paper', but not carried forward into legislation as it should have been. The system may therefore have been an informal one. Private credit creation over £10,000 (equal to £1,000,000 today) was controlled, however, by an Act of 1946, but not forbidden.

 

Of course such a system causes government debt to grow enormously, something the AMI does not appreciate for it states as its purpose not to increase the national debt. Some interest had to be paid, but this was cancelled out by inflation (12 per cent in 1948 when the interest rate on government debt was about 2.6 per cent), so effectively what the AMi wanted was achieved. One reason the interest rate was kept very low was there were huge debts to the 'Sterling Area' countries (almost four billion, equal to 200 billion today at least), especially  to India and Australia, and of course also to the United States and Canada. The British Government was happy to bilk foreigners, even friendly ones. As the state debt of the US is funded by foreigners, one can see that the secret agenda of the AMI is also to bilk foreigner creditors. Good thinking! The situation Roosevelt envisaged in his speech of May 22, 1939 no longer persists. He pointed out that the interest paid on the national debt was paid to the nation. That is no longer so true. Tom Paine was all for a national debt, but preferred it should be interest free (from Common Sense). So he moved from Britian, where on average every family was owed £18 (equal today to the average annual per capita income at least) by the state for its expenditure on defending the American Colonies, to the colonies themselves where the debt was a mere 18 pence. Did not do him much good. He died a pauper and rejected by his adopted country.

 

During the war period the majority of the investment needed by British war industries was provided by the Government, just as the AMI wants now. The system was reinforced after the war by wholesale nationalisation, of transport (road and rail), of steel making, of coal mining, and of the Bank of England, though the latter was only a nominal change.  A huge National Savings system was built up to sterilise government debt. Most personal banking was done through the Post Office (which held only government securities and paid 2.5 per cent interest) or Trustee Savings Banks, whose assets were also government loans, though some, such as the Birmingham Municipal Bank did some mortgage lending.

 

The National Savings movement became the biggest defrauder of the public there has ever been. Eventually even a government report admitted that to hold National Savings instruments was folly. The Enron swindle was peanuts by comparison. But there is nothing new about such fraud; it is the reason why in olden times state debt was 'monnaie faible'. Worst of all is to be a foreign creditor of a government.

 

Almost everything the AMI wants was achieved in wartime and postwar Britain. Did Britain benefit from its adoption of such extreme national socialism. The opinion of most is that it did not. Inefficiency was total. The activities of the Capital Issues Committee became a farce, though they continued until 1984. The very poor performance of an economy (which in 1964 still had the highest proportion of manufacturing workers in the world) was dire. Gradually there was a change of direction, and the equally damaging doctrines of monetarism appeared on the scene. The economy went from the frying pan into the fire. Total inflation from 1937 to present has reached at least 98 per cent, whereas in the days before state control of industry, the inflation rate long-term was negative.

 

Congratulations to the AMI for its skill presenting a communist/national socialist agenda in such skilful disguise to the US Congress.

 

'You can fool the people some of the time; you can fool all the people for some of the time; but you cannot fool all the people all the time.'

 

GWG

Dear Gang,

I am engaged in a discussion on inflation statistics.

The official statistics, and academic studies, seem to refute the idea
that the intro of the Euro caused a price ump. At the same time those
statistics are known to be unreliable and contradicted by much anecdotal
alevidence.

Gang, could you please help me compile the evidence, if there is, for
the idea that inflation statistics are seriously ureliable-  beyond the
normal margin of error -  or, perhaps, fudged to make for a better
picture? Either in the US or in Euroland.

James has drawn my attention to definition changes in the US
statistics.James, I have been searching but am afraid I lost that email.
If you can, could you resend please? Nothing on this could be found on
the internet (by me...)

thanks,

Dirk

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----- Original Message -----

From: Dirk Bezemer

To: gang8@yahoogroups.com

Sent: Tuesday, November 07, 2006 10:23 AM

Subject: Re: [gang8] "America's Suicidal Statecraft"

Dear Gang,

I am engaged in a discussion on inflation statistics.

The official statistics, and academic studies, seem to refute the idea
that the intro of the Euro caused a price ump. At the same time those
statistics are known to be unreliable and contradicted by much anecdotal
alevidence.

Gang, could you please help me compile the evidence, if there is, for
the idea that inflation statistics are seriously ureliable- beyond the
normal margin of error - or, perhaps, fudged to make for a better
picture? Either in the US or in Euroland.

James has drawn my attention to definition changes in the US
statistics.James, I have been searching but am afraid I lost that email.
If you can, could you resend please? Nothing on this could be found on
the internet (by me...)

thanks,

Dirk

> Visit Your Group
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Thanks, James - I am processing!

Dirk

  wrote:
> Dirk,
>
> I've re-sent what are, I think, the main two messages I sent you on statistics
previously.
> I think most governments - and such authorities as the EU Commission - tailor
their statistics to what they conceive to be a discreet - and sometimes not so
discreet - polishing of their performance.
> The American "polishing" has become more and more brazen. For example, Bush
took to proclaiming the glory of his performance for the workers by highlighting
the lowest unemployment rate in forty years or so, during the just-completed
mid-term elections. The unemployment rate was said to have fallen to 4.4% while
the heavily doctored statistics for new job creation showed that not enough jobs
had been created in the last month even to keep up with the employment needs of
an increasing population.
> (Incidentally, there had been previous publicity about some 840,000 jobs which
the statisticians said had been overlooked before and that had now been "found".
The exact number, it was said, would be calculated later - after the elections.
It's quite possible of course that they will be "lost" again when election fever
is over.)
> Any of these statistics are about as close as you can get to a complete farce
without having the mob burst out laughing. In calculating the number of
unemployed and the unemployment rate, for example, those men and women who have
exhausted their unemployment insurance are, I understand, no longer counted as
unemployed - even though in fact they still don't have a job or any prospect of
getting one!!
> I understand also that a "liberal" definition is given to what constitutes
"employment". If a man or woman works just a few hours a week, he or she is
regarded as employed. To be "unemployed" you need to lie around the whole time -
and you are even then "employed" or at least not "unemployed" if your employment
insurance has run out. The same thing applies if, after years of trying to find
a job, you have at last given up looking for a job. You're taken off the jobless
list, the employment rate goes up and the unemployment rate sinks to a record
low 4.4%.
> What is the real jobless rate? Who knows but if, in the US, it's not at least
twice the official jobless rate, I'd be very surprised. (And many or most even
of those who are fully employed are getting less in real terms that they were
twenty or more years ago.)
> A real rate of unemployment of that magnitude is an enormously heavy burden
for any economy to carry - and the American economy has, for decades, been
accumulating so many other burdens deriving from misconceived economic and
financial policies that it needs to shed all the burdens it can.
> What is the position in the EU?
> I suspect that there's a bit more honesty in some of the EU statistics since
they might be exposed to more critical examination; but I can't be sure of that.
Where they are national, as distinct from EU numbers, the quality will vary
greatly, I should think, from one country to another.
> What about OECD? My experience has been that the OECD tells a story and paints
a picture that is congenial for the particular member government. Numbers and
analyses tend to be of a kind that, after discussions between OECD Paris and the
particular capital, the latter agrees that it can live with - and all of us show
a high sensitivity to anything that reflects on our government.
> I hope that is of some help. A critical analysis of statistics on both sides
of the Atlantic would be very helpful to a real understanding, by the
"democratic public", of where we really stand on a lot of things.
>
>
>
> James
>
>
>
>
>   ----- Original Message -----
>   From: Dirk Bezemer
>   To: gang8@yahoogroups.com
>   Sent: Tuesday, November 07, 2006 10:23 AM
>   Subject: Re: [gang8] "America's Suicidal Statecraft"
>
>
>   Dear Gang,
>
>   I am engaged in a discussion on inflation statistics.
>
>   The official statistics, and academic studies, seem to refute the idea
>   that the intro of the Euro caused a price ump. At the same time those
>   statistics are known to be unreliable and contradicted by much anecdotal
>   alevidence.
>
>   Gang, could you please help me compile the evidence, if there is, for
>   the idea that inflation statistics are seriously ureliable- beyond the
>   normal margin of error - or, perhaps, fudged to make for a better
>   picture? Either in the US or in Euroland.
>
>   James has drawn my attention to definition changes in the US
>   statistics.James, I have been searching but am afraid I lost that email.
>   If you can, could you resend please? Nothing on this could be found on
>   the internet (by me...)
>
>   thanks,
>
>   Dirk
>
>   > Visit Your Group
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Gang,

Stay informed on mainstream analysis of the US deficit at:

http://www.cesifo-group.de/portal/page?_pageid=36,102832&_dad=portal&_schema=POR\
TAL&item_link=forumindex1-05.htm

Good reading.

Dirk


>
>
>
>
>

----- Original Message -----

From: Geoffrey Gardiner

To: Mills, John ; Moore, Michael ; gang8@yahoogroups.com

Sent: Friday, November 10, 2006 10:08 AM

Subject: [gang8] Inflation

Gardiner to Gang8, Michael Moore, and John Mills

 

The Bank of England has again raised interest rates in order to fight inflation. Did they cosider the following press release before doing so?

<<<<<

A three pence increase is on the way for a loaf as the price of flour rises for the second time in a few months.

The UK's largest independent miller ADM Milling said it was "regrettably" heading for its second hike since September, when its flour rose by £28.75 per tonne.

And industry experts said other millers were likely to follow suit.

An ADM Milling spokesman said: "With world wheat stocks being at the lowest level for 25 years, and with global consumption demand increasing, a continuation of upward wheat price costs seems inevitable.

"This is regrettably leading towards a further flour price increase in the next few months."

Anne Bruce, deputy editor of trade magazine British Baker, said it was "exceptionally unusual" for flour prices to rise twice within such a short space of time.

"It will inevitably mean that the price of bread will have to go up by around 3p for an 800g loaf and bakers which supply the supermarkets will have to negotiate with them to get a second price rise," she said.

"The usual situation is that flour prices go up after the harvest in August. Now they are being forced to put them up again. It is exceptionally unusual."

>>>>>>>

 

How can a rise in interest rates bring the price of wheat down? It must increase the cost of production as farming is a heavily capitalised industry and relies on borrowed capital.

At the same time the Treasury is paying farmers in Britain not to grow wheat. Huge areas of land are growing nothing but weeds as a result of a 'set-aside' policy.

I foresaw this situation and last year urged that every bit of land in Britain should be planted up.

Britain is in a very weak position in competing for world supplies of wheat as we have a huge trade deficit and the suppliying countries would have to lend us the money to buy their produce. I think they will prefer to sell their wheat to China in return for consumer goodies.

Another announcement yesterday was that Britain faces a milk shortage, and that in the country of Europe best endowed by nature for milk production. Why? Because pressure from sundry do-gooders, pseudo-environmentalists, and left-wing haters of farmers have made it uneconomic for British farmers to produce milk, and one milk producer is going out of business every week.

We face starvation in the not very distant future.

 

Geoffrey

 

 

 

----- Original Message -----

From: Geoffrey Gardiner

To: Mills, John ; Moore, Michael ; gang8@yahoogroups.com

Sent: Friday, November 10, 2006 9:08 AM

Subject: [gang8] Inflation

Gardiner to Gang8, Michael Moore, and John Mills

 

The Bank of England has again raised interest rates in order to fight inflation. Did they cosider the following press release before doing so?

<<<<<

A three pence increase is on the way for a loaf as the price of flour rises for the second time in a few months.

The UK's largest independent miller ADM Milling said it was "regrettably" heading for its second hike since September, when its flour rose by £28.75 per tonne.

And industry experts said other millers were likely to follow suit.

An ADM Milling spokesman said: "With world wheat stocks being at the lowest level for 25 years, and with global consumption demand increasing, a continuation of upward wheat price costs seems inevitable.

"This is regrettably leading towards a further flour price increase in the next few months."

Anne Bruce, deputy editor of trade magazine British Baker, said it was "exceptionally unusual" for flour prices to rise twice within such a short space of time.

"It will inevitably mean that the price of bread will have to go up by around 3p for an 800g loaf and bakers which supply the supermarkets will have to negotiate with them to get a second price rise," she said.

"The usual situation is that flour prices go up after the harvest in August. Now they are being forced to put them up again. It is exceptionally unusual."

>>>>>>>

 

How can a rise in interest rates bring the price of wheat down? It must increase the cost of production as farming is a heavily capitalised industry and relies on borrowed capital.

At the same time the Treasury is paying farmers in Britain not to grow wheat. Huge areas of land are growing nothing but weeds as a result of a 'set-aside' policy.

I foresaw this situation and last year urged that every bit of land in Britain should be planted up.

Britain is in a very weak position in competing for world supplies of wheat as we have a huge trade deficit and the suppliying countries would have to lend us the money to buy their produce. I think they will prefer to sell their wheat to China in return for consumer goodies.

Another announcement yesterday was that Britain faces a milk shortage, and that in the country of Europe best endowed by nature for milk production. Why? Because pressure from sundry do-gooders, pseudo-environmentalists, and left-wing haters of farmers have made it uneconomic for British farmers to produce milk, and one milk producer is going out of business every week.

We face starvation in the not very distant future.

 

Geoffrey

 

 

 

----- Original Message -----

From: Kevin Donnelly ntl

To: gang8@yahoogroups.com

Sent: Friday, November 10, 2006 1:16 PM

Subject: Re: [gang8] Inflation

Well, yes, of course, but the media generally seem to be in a state of denial.

I rang the Radio 5 phone-in programme yesterday.  Asked what point I wanted to make, I said that raising interest rates tends to increase inflation rather than reduce it.  Asked to explain further, I replied that in my days in industry, the cost of borrowing was a factor in calculating the price of biscuits just as labour and ingredients were, so that any increase in interest rates would increase factory gate prices, and therefore be inflationary.  Ergo...

Um, said the studio anchor man, I'll call my producer and ask him to give you a call.

I waited and waited for about half an hour, with my copy of Geoffrey's FT headline leaflet (bloodletting and fever) in front of me.  Nobody rang.

Radio 5 is on MW 909 693, and the UK phone number is 0500 909 693.  They like to hear from overseas callers.

    Kevin

----- Original Message -----

From: Geoffrey Gardiner

To: Mills, John ; Moore, Michael ; gang8@yahoogroups.com

Sent: Friday, November 10, 2006 9:08 AM

Subject: [gang8] Inflation

Gardiner to Gang8, Michael Moore, and John Mills

 

The Bank of England has again raised interest rates in order to fight inflation. Did they cosider the following press release before doing so?

<<<<<

A three pence increase is on the way for a loaf as the price of flour rises for the second time in a few months.

The UK's largest independent miller ADM Milling said it was "regrettably" heading for its second hike since September, when its flour rose by £28.75 per tonne.

And industry experts said other millers were likely to follow suit.

An ADM Milling spokesman said: "With world wheat stocks being at the lowest level for 25 years, and with global consumption demand increasing, a continuation of upward wheat price costs seems inevitable.

"This is regrettably leading towards a further flour price increase in the next few months."

Anne Bruce, deputy editor of trade magazine British Baker, said it was "exceptionally unusual" for flour prices to rise twice within such a short space of time.

"It will inevitably mean that the price of bread will have to go up by around 3p for an 800g loaf and bakers which supply the supermarkets will have to negotiate with them to get a second price rise," she said.

"The usual situation is that flour prices go up after the harvest in August. Now they are being forced to put them up again. It is exceptionally unusual."

>>>>>>>

 

How can a rise in interest rates bring the price of wheat down? It must increase the cost of production as farming is a heavily capitalised industry and relies on borrowed capital.

At the same time the Treasury is paying farmers in Britain not to grow wheat. Huge areas of land are growing nothing but weeds as a result of a 'set-aside' policy.

I foresaw this situation and last year urged that every bit of land in Britain should be planted up.

Britain is in a very weak position in competing for world supplies of wheat as we have a huge trade deficit and the suppliying countries would have to lend us the money to buy their produce. I think they will prefer to sell their wheat to China in return for consumer goodies.

Another announcement yesterday was that Britain faces a milk shortage, and that in the country of Europe best endowed by nature for milk production. Why? Because pressure from sundry do-gooders, pseudo-environmentalists, and left-wing haters of farmers have made it uneconomic for British farmers to produce milk, and one milk producer is going out of business every week.

We face starvation in the not very distant future.

 

Geoffrey

 

 

 

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Sent: Saturday, November 11, 2006 5:51 PM

Subject: Re: [gang8] Inflation

Geoffrey,

 

Interestingly, this tool is omnipotent and should indeed be a study of the most knowledgeable experts on snake-oil remedies.

;-)

 

Across the North Sea, in Norway we still struggle with too LOW inflation, and the Bank of Norway again raised the interests rate. Why? To cool down the housing market. Newspaper headlines therefore read "Caught in the splits".

 

I once again would like to raise the issue that the consumer-price index does not include any elements of the asset-price inflation, where the cost of housing  indeed is one of the most important issues for most people, especially the young.

 

The effect here of an interests rate hike here though, is to lower asset prices.

In other words, the effect of a hike produce different effects on different markets.

Right?

 

Arno

 

 

 

----- Original Message -----

From: James

To: gang8@yahoogroups.com

Sent: Saturday, November 11, 2006 7:58 PM

Subject: Re: [gang8] Inflation

Arno,

 

The effect here of an interests rate hike here though, is to lower asset prices.

In other words, the effect of a hike produce different effects on different markets.

Right?

 

Right!!

You need to distinguish between consumer-price inflation and asset-price inflation.

A hike in interest rates will tend - depending on its "severity" - to reduce asset-price inflation or inflationary pressures

and may kill it or them stone dead. Note that the housing asset-price bubble in the United States is rapidly losing its steam - or its air!

The effect of a hike on other real-estate markets is probably the same in underlying trend but each market seems to have its own particular characteristics, for example, in Japan, Britain and Australia.

At the same time as interest-rate hikes let air out of the asset bubbles, they intensify consumer-price inflation, which expresses itself either in domestic price rises or in deterioration in the external balances. That seems to have happened/is happening again in the United States at the moment. The housing bubble seems to be deflating rapidly and other bubbles might follow soon. Consumer-price inflation has risen since 2002, despite the long run of interest-rate hikes for about two years since - was it May? - 2004.

One interesting feature is that - though not always; it depends on the particular demographic and other circumstances - a speculative housing bubble will be accompanied by a collapse or at least a reduction in rents. The supply of housing units rises in excess of real - as distinct from speculative - requirements and the emergence of inventories can depress rents quite markedly. As a consequence, asset-price inflation brings about an actual decline in one of the important elements in the calculation of consumer-price inflation.

Nothing is absolutely simple, is it?

The trouble is that , not merely for years but for decades now, we - and the central banks - have tended to raise and lower interest rates in an eternal yo-yo financial dance.  The central banks predilection has been to RAISE interest rates at the drop of a hat and that has been an enormously debilitating recourse for economies like the United States and Australia for the past thirty-seven years.

Our economic strength has ebbed away.

However, in the last few years, the tendency of the Fed has been to raise interest rates but then, dismayed at what it has brought about, to lower them with a precipitateness that has caused a whole bunch of asset bubbles to form.

In addition, in all this, we have to bear in mind that the interest rate is one lever and easy credit is another. In recent policy in the United States, while the interest rate has been raised seventeen times in the last two years, credit has been handed out on a plate to just about everyone - including those who had no hope of affording it - for almost any useful or not-so-useful purpose.

Just as one thought, put briefly, the way to confront asset-price inflation is to watch and have some sort of effective pre-emptive control of credit flows. The "Window of Guidance" of the Japanese and the "Special Accounts" of the Australians were devices within this genre in the past. The way to control consumer-price inflation is quite different and consists of managing supply to harmonise with a demand which tends upward but which also needs constraint. In an open economy where this is not the effective approach - and the emphasis is on "effective" - the consumer-price inflation gets shifted into the external balances and results in a whole host of largely but not entirely speculative disequilibria. After all the years of misconceived policies, those disequilibria are now going to be desperately hard to correct without a painful transition probably all around the world. The intensity of the pain will probably vary from one economy to another; but my guess is that the misery, of one kind or another, will be virtually universal.

 

 

 

 

James

 

 

 

 

 

 

 

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Sent: Saturday, November 11, 2006 5:51 PM

Subject: Re: [gang8] Inflation

Geoffrey,

 

Interestingly, this tool is omnipotent and should indeed be a study of the most knowledgeable experts on snake-oil remedies.

;-)

 

Across the North Sea, in Norway we still struggle with too LOW inflation, and the Bank of Norway again raised the interests rate. Why? To cool down the housing market. Newspaper headlines therefore read "Caught in the splits".

 

I once again would like to raise the issue that the consumer-price index does not include any elements of the asset-price inflation, where the cost of housing  indeed is one of the most important issues for most people, especially the young.

 

The effect here of an interests rate hike here though, is to lower asset prices.

In other words, the effect of a hike produce different effects on different markets.

Right?

 

Arno

 

 

 

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Sent: Sunday, November 12, 2006 11:25 AM

Subject: Re: [gang8] Inflation

Yes, and when an interest hike lowers rents it also causes business costs to decline, thereby counteracting the increase in capital costs that the hike itself produced. The net effect would vary from company to company, depending e.g. on their circumstances of debt and rent. Stipulating the aggregated net effect is a matter far beyond my intuition.

;-)

 

>raise and lower interest rates in an eternal yo-yo financial dance.  ... and that has been an enormously debilitating recourse ... Our economic strength has ebbed away.

 

James, you are I suppose, referring not only to the resulting buildup and bursts of bubbles, but also to to the effects of the resulting lack of predictability and stability that business investements require? Good point.

 

>credit has been handed out on a plate to just about everyone ...

 

"Funny", it has been so for centuries - all around the globe.

- and once again this is a hot theme - also in Norway right now.

 

The irresponsibility of bankers almost makes me want to hug AMI and Stephen's suggestions.

;-)

 

 

> In an open economy ... inflation  ... results in .. disequilibria. ... hard to correct

 

I guess the lesson is that efficient markets in the long run need governance, however inefficient that may seem in the short run.

 

It seems to me that may economist and politicians are grasping for that simple tool that will fix all worries, a financial snake-oil - be that as mathematical models or as interest rate regulations.

- Instead of coming to grips with the reality that these matters require careful and continuous hands-on regulation by very competent, experienced and intuitive people.

 

Arno

 

 

----- Original Message -----

From: James

To: gang8@yahoogroups.com

Sent: Saturday, November 11, 2006 7:58 PM

Subject: Re: [gang8] Inflation

Arno,

 

The effect here of an interests rate hike here though, is to lower asset prices.

In other words, the effect of a hike produce different effects on different markets.

Right?

 

Right!!

You need to distinguish between consumer-price inflation and asset-price inflation.

A hike in interest rates will tend - depending on its "severity" - to reduce asset-price inflation or inflationary pressures

and may kill it or them stone dead. Note that the housing asset-price bubble in the United States is rapidly losing its steam - or its air!

The effect of a hike on other real-estate markets is probably the same in underlying trend but each market seems to have its own particular characteristics, for example, in Japan, Britain and Australia.

At the same time as interest-rate hikes let air out of the asset bubbles, they intensify consumer-price inflation, which expresses itself either in domestic price rises or in deterioration in the external balances. That seems to have happened/is happening again in the United States at the moment. The housing bubble seems to be deflating rapidly and other bubbles might follow soon. Consumer-price inflation has risen since 2002, despite the long run of interest-rate hikes for about two years since - was it May? - 2004.

One interesting feature is that - though not always; it depends on the particular demographic and other circumstances - a speculative housing bubble will be accompanied by a collapse or at least a reduction in rents. The supply of housing units rises in excess of real - as distinct from speculative - requirements and the emergence of inventories can depress rents quite markedly. As a consequence, asset-price inflation brings about an actual decline in one of the important elements in the calculation of consumer-price inflation.

Nothing is absolutely simple, is it?

The trouble is that , not merely for years but for decades now, we - and the central banks - have tended to raise and lower interest rates in an eternal yo-yo financial dance.  The central banks predilection has been to RAISE interest rates at the drop of a hat and that has been an enormously debilitating recourse for economies like the United States and Australia for the past thirty-seven years.

Our economic strength has ebbed away.

However, in the last few years, the tendency of the Fed has been to raise interest rates but then, dismayed at what it has brought about, to lower them with a precipitateness that has caused a whole bunch of asset bubbles to form.

In addition, in all this, we have to bear in mind that the interest rate is one lever and easy credit is another. In recent policy in the United States, while the interest rate has been raised seventeen times in the last two years, credit has been handed out on a plate to just about everyone - including those who had no hope of affording it - for almost any useful or not-so-useful purpose.

Just as one thought, put briefly, the way to confront asset-price inflation is to watch and have some sort of effective pre-emptive control of credit flows. The "Window of Guidance" of the Japanese and the "Special Accounts" of the Australians were devices within this genre in the past. The way to control consumer-price inflation is quite different and consists of managing supply to harmonise with a demand which tends upward but which also needs constraint. In an open economy where this is not the effective approach - and the emphasis is on "effective" - the consumer-price inflation gets shifted into the external balances and results in a whole host of largely but not entirely speculative disequilibria. After all the years of misconceived policies, those disequilibria are now going to be desperately hard to correct without a painful transition probably all around the world. The intensity of the pain will probably vary from one economy to another; but my guess is that the misery, of one kind or another, will be virtually universal.

 

 

 

 

James

 

 

 

 

 

 

 

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Sent: Saturday, November 11, 2006 5:51 PM

Subject: Re: [gang8] Inflation

Geoffrey,

 

Interestingly, this tool is omnipotent and should indeed be a study of the most knowledgeable experts on snake-oil remedies.

;-)

 

Across the North Sea, in Norway we still struggle with too LOW inflation, and the Bank of Norway again raised the interests rate. Why? To cool down the housing market. Newspaper headlines therefore read "Caught in the splits".

 

I once again would like to raise the issue that the consumer-price index does not include any elements of the asset-price inflation, where the cost of housing  indeed is one of the most important issues for most people, especially the young.

 

The effect here of an interests rate hike here though, is to lower asset prices.

In other words, the effect of a hike produce different effects on different markets.

Right?

 

Arno

 

 

 

Hello, Arno,

thought the attachment maybe food for thought for your critical readers.

The original paper originated here:

http://www.iksf.uni-bremen.de/symposium/papers.html

Regretably the English version came late.

The best

Uwe

----- Original Message -----

From: Gunnar Tómasson

To: Gang8

Sent: Tuesday, November 14, 2006 1:39 AM

Subject: [gang8] Apres nous, le deluge - Anno 1972-2006

 Dear Gang.

 

Here is something which I posted today on an Icelandic Internet forum - in translation.  The subject matter is Lawrence Summers' Los Angeles Times Opinion article, which James forwarded the other day. 

 

Nothing new in this for the Gang - but the stage would seem to be set for an economic and financial reckoning of sorts. 

 

Gunnar 

 

***

 

Summers:

There are no easy answers. The economic logic of free, globalised, technologically sophisticated capitalism may well be to shift more wealth to the very richest and some of the very poorest in the world, while squeezing people in the middle.

Comment: 

 

I agree with Summers - the problem is not easily resolved.  In fact I consider it beyond resolution so long as the "globalised, technologically sophisticated capitalism" as it has evolved after the end of the Bretton Woods system after 1970 commands center stage - I have just as long been of the view that developments in international financial markets during the past three decades are the equivalent of what I have termed "the structural disintegration of the international monetary system". 

 

It is self-evident that, concurrently, monetary feet of clay have been evolving under the world economy - for "structural disintegration of the international monetary system" cannot be separated from the ultimate collapse of the "globalised, technologically sophisticated capitalism" which has developed with amazing speed during the past thirty years or so. 

 

The Icelandic authorities are not the only ones to have treated the obvious precursors of the monetary fimbulvetur [stormy winter, three of which are held to herald the advent of Ragnarök or Twilight of the Gods in Icelandic Edda/Saga Myth - insert] which has been brewing as mere wind blowing by their ears [an Icelandic saying - insert] - academic economists, mainstream and monetarist alike, who welcomed the demise of the Bretton Woods system at the time, know only the kind of monetary economics which is the root of the problem ahead. 

 

The International Monetary Fund was established at the end of World War II with a mission of ensuring that mistakes in the field of monetary affairs analogous to those which caused the world depression of the 1930s would not be repeated. 

 

For the past thirty years, those who call the shots at the Fund have chosen to float sleeping to the mouth of the river of death [another Icelandic saying - insert] - the chances are that history will judge the "mistakes" in the field of monetary affairs in the 1930s to have been as mere child's play compared to the consequences thereof in the period ahead. 

 

The problem is not easily resolved - but necessity is the mother of invention. 

 

When "the structural disintegration of the international monetary system" has run its course, then - and only then - will the academic and political "leaders" who have served as godfathers to the Hrunadans [dance of collapse; yet another Icelandic term - insert] of the "globalised, technologically sophisticated capitalism" awake from a bad dream. 

 

I will let this suffice.

----- Original Message -----

From: James

To: gang8@yahoogroups.com

Sent: Wednesday, November 15, 2006 5:56 AM

Subject: Re: [gang8] Apres nous, le deluge - Anno 1972-2006

 

Dear Gunnar,

 

You have put the situation dramatically - and therefore very effectively - as indeed you have done over the years.

There has certainly been a "structural disintegration of the international monetary system".

The blindness of so many to this "structural disintegration" is just another - enormously important - aspect of the obsession we have had for so long, not only to declare, suggest or imply that what is happening is no cause for alarm, but that it is actually the right and glorious way to proceed.

Floating currencies are a splendid thing. Speculation is good - good for our pockets and for our souls. As you say so powerfully -

 

"The International Monetary Fund was established at the end of World War II with a mission of ensuring that mistakes in the field of monetary affairs analogous to those which caused the world depression of the 1930s would not be repeated. 

 

"For the past thirty years, those who call the shots at the Fund have chosen to float sleeping to the mouth of the river of death [another Icelandic saying - insert] - the chances are that history will judge the 'mistakes' in the field of monetary affairs in the 1930s to have been as mere child's play compared to the consequences thereof in the period ahead."   

 

 

You and I have always had a very large measure of agreement on these issues. Consequently, I keep my fingers crossed and nourish hopes that you will find some merit in what I have to say in "America's Suicidal Statecraft", about the Bank and Fund, exchange rates, floating and fixed currencies, and the rest. Please let me know if you have any difficulty in getting a copy and I will arrange for one to be sent instantly to you.

 

I like to be optimistic but again I agree with you that "The problem is not easily resolved - but necessity is the mother of invention." That Icelandic "Dance of Collapse" may well be what we are in for.

 

 

 

James 

 

----- Original Message -----

From: Gunnar Tómasson

To: Gang8

Sent: Tuesday, November 14, 2006 1:39 AM

Subject: [gang8] Apres nous, le deluge - Anno 1972-2006

 Dear Gang.

 

Here is something which I posted today on an Icelandic Internet forum - in translation.  The subject matter is Lawrence Summers' Los Angeles Times Opinion article, which James forwarded the other day. 

 

Nothing new in this for the Gang - but the stage would seem to be set for an economic and financial reckoning of sorts. 

 

Gunnar 

 

***

 

Summers:

There are no easy answers. The economic logic of free, globalised, technologically sophisticated capitalism may well be to shift more wealth to the very richest and some of the very poorest in the world, while squeezing people in the middle.

Comment: 

 

I agree with Summers - the problem is not easily resolved.  In fact I consider it beyond resolution so long as the "globalised, technologically sophisticated capitalism" as it has evolved after the end of the Bretton Woods system after 1970 commands center stage - I have just as long been of the view that developments in international financial markets during the past three decades are the equivalent of what I have termed "the structural disintegration of the international monetary system". 

 

It is self-evident that, concurrently, monetary feet of clay have been evolving under the world economy - for "structural disintegration of the international monetary system" cannot be separated from the ultimate collapse of the "globalised, technologically sophisticated capitalism" which has developed with amazing speed during the past thirty years or so. 

 

The Icelandic authorities are not the only ones to have treated the obvious precursors of the monetary fimbulvetur [stormy winter, three of which are held to herald the advent of Ragnarök or Twilight of the Gods in Icelandic Edda/Saga Myth - insert] which has been brewing as mere wind blowing by their ears [an Icelandic saying - insert] - academic economists, mainstream and monetarist alike, who welcomed the demise of the Bretton Woods system at the time, know only the kind of monetary economics which is the root of the problem ahead. 

 

The International Monetary Fund was established at the end of World War II with a mission of ensuring that mistakes in the field of monetary affairs analogous to those which caused the world depression of the 1930s would not be repeated. 

 

For the past thirty years, those who call the shots at the Fund have chosen to float sleeping to the mouth of the river of death [another Icelandic saying - insert] - the chances are that history will judge the "mistakes" in the field of monetary affairs in the 1930s to have been as mere child's play compared to the consequences thereof in the period ahead. 

 

The problem is not easily resolved - but necessity is the mother of invention. 

 

When "the structural disintegration of the international monetary system" has run its course, then - and only then - will the academic and political "leaders" who have served as godfathers to the Hrunadans [dance of collapse; yet another Icelandic term - insert] of the "globalised, technologically sophisticated capitalism" awake from a bad dream. 

 

I will let this suffice.

----- Original Message -----

From: Gunnar Tómasson

To: gang8@yahoogroups.com

Sent: Wednesday, November 15, 2006 4:05 PM

Subject: Re: [gang8] Apres nous, le deluge - Anno 1972-2006

Dear James,

 

First, I checked out Amazon and Borders last week and your book was not yet available.

 

This morning I checked out Amazon again - the book is now available and I ordered a copy.

 

Look forward to reading it.

 

As for developments in world monetary affairs during the past three decades, it was a telling indication of things to come that no sooner had the Nixon Administration pulled the plug on the Bretton Woods System than ALL economists in the IMF's Research Department discovered the merits of floating exchange rates - the self-same system which ALL (as I recall it) previous research papers of the Research Department's economists had found wanting relative to the Bretton Woods arrangements.

 

Nor, to the best of my knowledge, have we heard ANYTHING recently from Paul A. Samuelson and Milton Friedman (both of whom were Newsweek columnists at the time and welcomed the advent of the post-Bretton Woods NON-system of world monetary arrangements) on the state of their brain child which by now is into its 30s.

 

Intellectual cowards, one and all.

 

Gunnar

 

----- Original Message -----

From: James

To: gang8@yahoogroups.com

Sent: Wednesday, November 15, 2006 5:56 AM

Subject: Re: [gang8] Apres nous, le deluge - Anno 1972-2006

 

Dear Gunnar,

 

You have put the situation dramatically - and therefore very effectively - as indeed you have done over the years.

There has certainly been a "structural disintegration of the international monetary system".

The blindness of so many to this "structural disintegration" is just another - enormously important - aspect of the obsession we have had for so long, not only to declare, suggest or imply that what is happening is no cause for alarm, but that it is actually the right and glorious way to proceed.

Floating currencies are a splendid thing. Speculation is good - good for our pockets and for our souls. As you say so powerfully -

 

"The International Monetary Fund was established at the end of World War II with a mission of ensuring that mistakes in the field of monetary affairs analogous to those which caused the world depression of the 1930s would not be repeated. 

 

"For the past thirty years, those who call the shots at the Fund have chosen to float sleeping to the mouth of the river of death [another Icelandic saying - insert] - the chances are that history will judge the 'mistakes' in the field of monetary affairs in the 1930s to have been as mere child's play compared to the consequences thereof in the period ahead."   

 

 

You and I have always had a very large measure of agreement on these issues. Consequently, I keep my fingers crossed and nourish hopes that you will find some merit in what I have to say in "America's Suicidal Statecraft", about the Bank and Fund, exchange rates, floating and fixed currencies, and the rest. Please let me know if you have any difficulty in getting a copy and I will arrange for one to be sent instantly to you.

 

I like to be optimistic but again I agree with you that "The problem is not easily resolved - but necessity is the mother of invention." That Icelandic "Dance of Collapse" may well be what we are in for.

 

 

 

James 

 

----- Original Message -----

From: Gunnar Tómasson

To: Gang8

Sent: Tuesday, November 14, 2006 1:39 AM

Subject: [gang8] Apres nous, le deluge - Anno 1972-2006

 Dear Gang.

 

Here is something which I posted today on an Icelandic Internet forum - in translation.  The subject matter is Lawrence Summers' Los Angeles Times Opinion article, which James forwarded the other day. 

 

Nothing new in this for the Gang - but the stage would seem to be set for an economic and financial reckoning of sorts. 

 

Gunnar 

 

***

 

Summers:

There are no easy answers. The economic logic of free, globalised, technologically sophisticated capitalism may well be to shift more wealth to the very richest and some of the very poorest in the world, while squeezing people in the middle.

Comment: 

 

I agree with Summers - the problem is not easily resolved.  In fact I consider it beyond resolution so long as the "globalised, technologically sophisticated capitalism" as it has evolved after the end of the Bretton Woods system after 1970 commands center stage - I have just as long been of the view that developments in international financial markets during the past three decades are the equivalent of what I have termed "the structural disintegration of the international monetary system". 

 

It is self-evident that, concurrently, monetary feet of clay have been evolving under the world economy - for "structural disintegration of the international monetary system" cannot be separated from the ultimate collapse of the "globalised, technologically sophisticated capitalism" which has developed with amazing speed during the past thirty years or so. 

 

The Icelandic authorities are not the only ones to have treated the obvious precursors of the monetary fimbulvetur [stormy winter, three of which are held to herald the advent of Ragnarök or Twilight of the Gods in Icelandic Edda/Saga Myth - insert] which has been brewing as mere wind blowing by their ears [an Icelandic saying - insert] - academic economists, mainstream and monetarist alike, who welcomed the demise of the Bretton Woods system at the time, know only the kind of monetary economics which is the root of the problem ahead. 

 

The International Monetary Fund was established at the end of World War II with a mission of ensuring that mistakes in the field of monetary affairs analogous to those which caused the world depression of the 1930s would not be repeated. 

 

For the past thirty years, those who call the shots at the Fund have chosen to float sleeping to the mouth of the river of death [another Icelandic saying - insert] - the chances are that history will judge the "mistakes" in the field of monetary affairs in the 1930s to have been as mere child's play compared to the consequences thereof in the period ahead. 

 

The problem is not easily resolved - but necessity is the mother of invention. 

 

When "the structural disintegration of the international monetary system" has run its course, then - and only then - will the academic and political "leaders" who have served as godfathers to the Hrunadans [dance of collapse; yet another Icelandic term - insert] of the "globalised, technologically sophisticated capitalism" awake from a bad dream. 

 

I will let this suffice.

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Sent: Monday, October 16, 2006 6:40 AM

Subject: Fw: [gang8] monopoly on the world's food supply

I forgot to forward this comment from Peter,

 

 

----- Original Message -----

From: peter snowdon

To: d.j.bezemer@...

Cc: Geoffrey Gardiner ; Arno Mong Daastoel ; Helen Holder ; William Engdahl

Sent: Wednesday, September 27, 2006 10:35 PM

Subject: Re: [gang8] monopoly on the world's food supply

dear dirk,
i hope you will excuse me intervening. i feel there are a few points
missing, or not addressed, in your remarks. the particular passage to
which i am responding is this one:

> Second, do farmers really not have to use GM seed if it is made
> unprofitable for them, or if they wish not to use it for some other
> reason? In fact they do have to. In the new situation they can probably
> not compete anymore unless they use the new crop because innovations
> typically make the old product obsolete. As a producer, you follow the
> new technology or you exit. Again, this in itself is not necessarily a
> bad thing for society (although it may be hard on the farmer); but to
> suggest that farmers will have a choice goes against all we know about
> innovations.
>



I think you are missing part of the point here: or maybe i am
misunderstanding you? Farmers, in my experience, do not act as free
agents making simply rational choices. Their effective options are
constrained by a number of factors, most important of which are,
perhaps, access to credit, and access to public support mechanisms of
all kinds, not exclusively financial. So the effect of 'innovations' is
not simply due to their innovative nature.
Most Indian peasants technology-adoption choices, for instance, are
determined by the requirements of their moneylenders. And since the
credit is often extended by the agribusinesses themselves, then the
farmers effectively become a captive market for whatever products the
firm wishes to sell them. But the same is true in Europe too. Most
farmers I have met are enormously in debt, and their business plans have
to be approved by the bank. Some are also in debt to their suppliers. I
remember a French chicken farmer, operating batteries on a huge scale,
who only remained in business because his feed supplier was making him
loans to enable him to buy food to keep the chickens (temporarily) alive.
And in that situation, farmers are also subject to parallel pressure
from public bodies, which reinforces any innate tendency to conformism.
A friend who farms in the Drome went to an 'extension' evening organised
for organic farmers by the Departement a few years ago. The public
agronomists introduced three types of organic potato, one of which had
one kind of 'drawback', the second another. Result: the following year,
everybody was planting the third variety. This may be partly herd
instinct. But it also, IMO, a sign of a more immediately material
structure which makes independent thinking disproportionately 'expensive'.
Whether farmers are free to choose the non-majority (non-monopoly) seed
variety is therefore, IMO, open to question, if the people who sell the
monopoly seed have the capital to provide credit, and the visible
support of the state (not only for promotion, but also research). And
that is before we start looking at purely legal mechanisms which impose
an effective 'tax' on otherwise common goods, such as the French
prohibition on saving seeds from one year to the next. Whether such
markets are 'free' is, perhaps, a linguistic question. But what is clear
is that they will not produce rational decisions from the point of view
of any agent other than the agent who wields the monopoly power.
Some times I feel that free markets are a bit like Western civilisation,
as Ghandi would have said: they may seem like a very good idea, but I
see little evidence of them operating in any of the areas of life of
which I have direct experience, including agriculture. What we have
instead is the rhetoric of the free market serving as cover for
governments whose cumulative actions objectively serve to reinforce
private monopolies, rather than to undermine them. But then, perhaps any
theory of economics which refuses to define and analyse relations of
power as such (i.e. in non-quantitative terms) is unlikely to have much
genuine explanatory value?
Good wishes
Peter

----- Original Message -----

From: Arno Mong Daastoel

To: PGS

Cc: gang8@yahoogroups.com

Sent: Wednesday, October 25, 2006 2:16 PM

Subject: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

Geoffrey,

FYI.

Arno

 

 

----- Original Message -----

From: PGS

To: Arno Mong Daastoel

Cc: Stephen Zarlenga ; Frederick William Engdahl

Sent: Tuesday, October 24, 2006 10:45 AM

Subject: AW: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

Arno,

 

let me throw in a short remark pertaining to the subject

of statism. As an avid reader of Stephen`s money book

I have recently discovered a brilliant study by Wilhelm Hankel

(you know one of the gang of four in Germany who have been

continuing their guerilla fight against the Euro system from

its inception) on the Roman empire world economy after Caesar

and Octavian. - Not a super-imperialism, but certainly kind of

a historical blueprint for what the American century was supposed

to become.

 

His investigations on the Roman monetary system based on

brushing again through the original sources and historical

reconstruction is most revealing.

 

"Caesar - Weltwirtschaft des Alten Rom" (ca 1986) is still obtainable

in archive bookstores.

 

There is no more illustrating description of state money without

any permission of private money creation.

 

Hankel describes and explains why this worked for three hundred

years and why it declined in the first hyper-inflation of history.

 

I would very much recommend this book to German-readers.

 

Regards

Peter

 

 

-----Ursprüngliche Nachricht-----
Von: Arno Mong Daastoel [mailto:amd@...]
Gesendet: Dienstag, 24. Oktober 2006 08:23
An: gang8@yahoogroups.com
Cc: Stephen Zarlenga; Frederick William Engdahl; PGS
Betreff: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

Geoffrey,

 

I have for some time been wondering about what I have seen as an overly statist tint to AMI's proposals, but I have ascribed this to my lack og comprehension of what they really want. I find it interesting that you have the same impression.

 

I am sure that this is done with the best of intentions, but my impression too has been that in the US there is a kind of nostalgia and longing for "the exotic", and therefore many think postwar social-democratic rule in Northern Europe was efficient. Several studies in the past decades has shown that it wasn't. In Norway there was a vaste of invested resources on a grand scale, not so unlike the neglect of common sense economic principles in the former USSR. Paradoxically, at the same time there was a neglect of the role of immaterial resources.

 

Yours,

Arno

 

 

 

----- Original Message -----

From: Geoffrey Gardiner

To: gang8@yahoogroups.com

Sent: Wednesday, October 11, 2006 1:30 PM

Subject: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

'The Road To Serfdom' is being kept in good repair by the AMI.

 

They want to prevent the debts of any private organisation being made negotiable. How does one stop that happening without imposing a Communist/Nationa Soclialist system? Is it feasible?

 

At the moment primary credit can be created in the private sector. Very little primary credit to the state is negotiable because banks are reluctant to hold more state debt as assets than they have to. State debt is almost all funded. If one can make any sense at all of the AMI proposals they appear to be the system which ruled in Britain from about 1940 until about 1960. 80 per cent of bank assets were state debt. Banks referred to such lending as 'White Paper Loans', which means that the rules under which they were working had been published in a government paper, known in Britain as a 'White Paper', but not carried forward into legislation as it should have been. The system may therefore have been an informal one. Private credit creation over £10,000 (equal to £1,000,000 today) was controlled, however, by an Act of 1946, but not forbidden.

 

Of course such a system causes government debt to grow enormously, something the AMI does not appreciate for it states as its purpose not to increase the national debt. Some interest had to be paid, but this was cancelled out by inflation (12 per cent in 1948 when the interest rate on government debt was about 2.6 per cent), so effectively what the AMi wanted was achieved. One reason the interest rate was kept very low was there were huge debts to the 'Sterling Area' countries (almost four billion, equal to 200 billion today at least), especially  to India and Australia, and of course also to the United States and Canada. The British Government was happy to bilk foreigners, even friendly ones. As the state debt of the US is funded by foreigners, one can see that the secret agenda of the AMI is also to bilk foreigner creditors. Good thinking! The situation Roosevelt envisaged in his speech of May 22, 1939 no longer persists. He pointed out that the interest paid on the national debt was paid to the nation. That is no longer so true. Tom Paine was all for a national debt, but preferred it should be interest free (from Common Sense). So he moved from Britian, where on average every family was owed £18 (equal today to the average annual per capita income at least) by the state for its expenditure on defending the American Colonies, to the colonies themselves where the debt was a mere 18 pence. Did not do him much good. He died a pauper and rejected by his adopted country.

 

During the war period the majority of the investment needed by British war industries was provided by the Government, just as the AMI wants now. The system was reinforced after the war by wholesale nationalisation, of transport (road and rail), of steel making, of coal mining, and of the Bank of England, though the latter was only a nominal change.  A huge National Savings system was built up to sterilise government debt. Most personal banking was done through the Post Office (which held only government securities and paid 2.5 per cent interest) or Trustee Savings Banks, whose assets were also government loans, though some, such as the Birmingham Municipal Bank did some mortgage lending.

 

The National Savings movement became the biggest defrauder of the public there has ever been. Eventually even a government report admitted that to hold National Savings instruments was folly. The Enron swindle was peanuts by comparison. But there is nothing new about such fraud; it is the reason why in olden times state debt was 'monnaie faible'. Worst of all is to be a foreign creditor of a government.

 

Almost everything the AMI wants was achieved in wartime and postwar Britain. Did Britain benefit from its adoption of such extreme national socialism. The opinion of most is that it did not. Inefficiency was total. The activities of the Capital Issues Committee became a farce, though they continued until 1984. The very poor performance of an economy (which in 1964 still had the highest proportion of manufacturing workers in the world) was dire. Gradually there was a change of direction, and the equally damaging doctrines of monetarism appeared on the scene. The economy went from the frying pan into the fire. Total inflation from 1937 to present has reached at least 98 per cent, whereas in the days before state control of industry, the inflation rate long-term was negative.

 

Congratulations to the AMI for its skill presenting a communist/national socialist agenda in such skilful disguise to the US Congress.

 

'You can fool the people some of the time; you can fool all the people for some of the time; but you cannot fool all the people all the time.'

 

GWG

"This (the American declaration of war) is what I dreamed of, aimed at and worked for and now it has come to pass." - Winston Churchill, 15th February 1942

----- Original Message -----

From: Kevin Donnelly ntl

To: gang8@yahoogroups.com

Sent: Thursday, October 26, 2006 6:32 PM

Subject: Re: [gang8] Fw: Report on AMI2006 Monetary Reform Conference

Dear Gang,

    Here in the UK we are about to commemorate the 20th anniversary of the Big Bang, the deregulation of the City of London financial markets which was supposed to be good for us all.  Generous to a fault, as I usually am, I have yet to see that much public good ensued.

    However I can see a huge surge in property prices which experts say is explained by "supply and demand", even for fairly basic ex-council houses going for many times their original construction cost. It occurs to me that this demand is fuelled by an apparently unlimited availability of finance, but which is not available to erstwhile borrowers on average incomes, even though the rules now seem to allow loans of up to five or six times the borrowers annual earnings, criteria unheard of before Big Bang.  Now I hear that 100% loans of ten or more times earnings loans are available from high street banks for selected applicants and suitable properties.

    The logic of such policies defeats me, while "explanations" such as "market forces" are also unconvincing.  However I do find encouragement in the words of Thomas A. Edison "It is absurd to say that our country can issue 30 million dollars in bonds and not 30 million dollars in currency. Both are promises to pay. But one promise fattens the usurer and the other helps the people".

    Maybe Edison was some kind of anarcho-syndicalist, which I am not, but his argument seems persuasive.  And of course the 1914 Bradbury notes were not BoE notes but were Treasury notes bearing the head of George V which gave them validation.  The Bradbury notes were legal tender until the mid 1920s before being quietly withdrawn.  Surely if they worked then they could work now?  Edison seemed to think that the US could issue 30 million dollars in currency.  Frederick Soddy eventually investigated the financial system of his own day and found it sadly inadequate.  The powers-that-be got their revenge its seems.  His Nobel prize for physics should have gained him also a knighthood, customary for such outstanding achievers, but he was overlooked, and his last years were clouded by a legal run-in with the Inland Revenue.  A friend who has read the Soddy archive at Cambridge tells me that it contains evidence for his case against the money men and the Inland Revenue story

    So I also find much encouragement in Geoffrey's words - 

'You can fool the people some of the time; you can fool all the people for some of the time; but you cannot fool all the people all the time.'

    Then this morning's Guardian (26 Oct) at the bottom of its leader page quotes a leader from the old Manchester Guardian for 26 October 1929, with an incisive comment on the foolish Gadarene rush of that time.  Somebody's dropping hints?
    (Sorry about the varying fonts, by the way.)

    Kevin

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Cc: PGS ; Frederick William Engdahl ; Stephen Zarlenga ; David Chiang ; Peter Myers (Mailstar) ; Wendell W. Solomons

Sent: Thursday, November 16, 2006 7:40 PM

Subject: Re: [gang8] "America's Suicidal Statecraft

James, you asked for comments...

 

- so, a few minor points... so far (100 pages)....

 

VERY interesting themes !!!

 

- The references in the notes are written in an inconsistent form, different from note to note.

(Sometimes the author is noted, sometimes the title of the book sometimes both etc)

 

- p.102: You mention the peaceful transfer if power from Britain to America. Britain did not accept contenders such as Germany or Russia. You forget to mention two world wars + numerous other wars. Even the wars in South Africa were noting but rehearsals for the great showdown most informed people knew was forthcoming. It is generally known that WW I was a contest for markets etc, so let me quote Winston on WW II: "The war was not just a matter of the elimination of Fascism in Germany, but rather of obtaining German sales markets." - Winston Churchill. Fulton speech, March 1946

- p. 97: You mention 1979 two times, and I guess you mean 1969 the first time.

 

- p. 46: Precisely!!!

"When manufacturing moves abroad, engineering follows. R&D follows engineering, and innovation follows R&D. The entire economy drains away."

 

 

- p. 65-66. James, this is brilliant!

 

Re: "BOJ purchases of government debt "

 

Thanks for pointing to the fact that Fed chairman Bernake has seen the light!

Also, I am delighted by finally noticing the wisdom of George Bush in appointing this man.

;-)

 

We have discussed this policy many times on this list, and pointed to the possibility that inflation would be halted if "this policy of Bernanke" would be combined with the additional policy of channeling credit to productive purposes.

 

"BOJ purchases of government debt " also points to another issue, namely the ensuing status of this debt. State money followers argue that is no longer debt, but "money". I would still argue that it is both, but that such "debt to the public" in practice will not have to be repaid, unlike private debt.

 

 

From your book, America's Suicidal Statecraft, pages 65-66

 

    "Bernanke ended his Tokyo address with some intriguing conclusions on cooperation and interaction between fiscal and monetary policies and the financing of government spending.
    He said that, “Potential roles for monetary-fiscal cooperation are not limited to BOJ support of tax cuts. BOJ purchases of government debt could also support spending programs, to facilitate industrial restructuring, for example. The BOJ’s purchases would mitigate the effect of the new spending on the burden of debt and future interest payments perceived by households, which should reduce the offset from decreased consumption. More generally, by replacing interest-bearing debt with money, BOJ purchases of government debt lower current deficits and interest burdens and thus the public’s expectations of future tax obligations. Of course, one can never get something for nothing; from a public finance perspective, increased monetization of government debt simply amounts to replacing other forms of taxes with an inflation tax. But, in the context of deflation-ridden Japan, generating a little bit of positive inflation (and the associated increase in nominal spending) would help achieve the goals of promoting economic recovery and putting idle resources back to work, which in turn would boost tax revenue and improve the government’s fiscal position.”

    There is a great deal to be said for fiscal and monetary policies to be applied in tandem, one  reinforcing the other, rather than in isolation with one possibly working against the other. There is also much to be said for the financing of government spending through the central bank, rather than by adding to the burden of debt and payment of interest charges through the budget. What makes this especially intriguing, however, is that the suggestions were put forward by the – now - Fed Chairman and we do not yet know whether he will, in 2006 or later, face deflation in the United States and whether, in that event, he will reflect on and perhaps adopt the measures that he recommended to the Japanese back in 2003."

 

----- Original Message -----

From: Arno Mong Daastoel

To: gang8@yahoogroups.com

Cc: PGS ; Frederick William Engdahl ; Stephen Zarlenga ; David Chiang ; Peter Myers (Mailstar) ; Wendell W. Solomons

Sent: Thursday, November 16, 2006 7:40 PM

Subject: Re: [gang8] "America's Suicidal Statecraft

James, you asked for comments...

 

- so, a few minor points... so far (100 pages)....

 

VERY interesting themes !!!

 

- The references in the notes are written in an inconsistent form, different from note to note.

(Sometimes the author is noted, sometimes the title of the book sometimes both etc)

 

- p.102: You mention the peaceful transfer if power from Britain to America. Britain did not accept contenders such as Germany or Russia. You forget to mention two world wars + numerous other wars. Even the wars in South Africa were noting but rehearsals for the great showdown most informed people knew was forthcoming. It is generally known that WW I was a contest for markets etc, so let me quote Winston on WW II: "The war was not just a matter of the elimination of Fascism in Germany, but rather of obtaining German sales markets." - Winston Churchill. Fulton speech, March 1946

- p. 97: You mention 1979 two times, and I guess you mean 1969 the first time.

 

- p. 46: Precisely!!!

"When manufacturing moves abroad, engineering follows. R&D follows engineering, and innovation follows R&D. The entire economy drains away."

 

 

- p. 65-66. James, this is brilliant!

 

Re: "BOJ purchases of government debt "

 

Thanks for pointing to the fact that Fed chairman Bernake has seen the light!

Also, I am delighted by finally noticing the wisdom of George Bush in appointing this man.

;-)

 

We have discussed this policy many times on this list, and pointed to the possibility that inflation would be halted if "this policy of Bernanke" would be combined with the additional policy of channeling credit to productive purposes.

 

"BOJ purchases of government debt " also points to another issue, namely the ensuing status of this debt. State money followers argue that is no longer debt, but "money". I would still argue that it is both, but that such "debt to the public" in practice will not have to be repaid, unlike private debt.

 

 

From your book, America's Suicidal Statecraft, pages 65-66

 

    "Bernanke ended his Tokyo address with some intriguing conclusions on cooperation and interaction between fiscal and monetary policies and the financing of government spending.
    He said that, “Potential roles for monetary-fiscal cooperation are not limited to BOJ support of tax cuts. BOJ purchases of government debt could also support spending programs, to facilitate industrial restructuring, for example. The BOJ’s purchases would mitigate the effect of the new spending on the burden of debt and future interest payments perceived by households, which should reduce the offset from decreased consumption. More generally, by replacing interest-bearing debt with money, BOJ purchases of government debt lower current deficits and interest burdens and thus the public’s expectations of future tax obligations. Of course, one can never get something for nothing; from a public finance perspective, increased monetization of government debt simply amounts to replacing other forms of taxes with an inflation tax. But, in the context of deflation-ridden Japan, generating a little bit of positive inflation (and the associated increase in nominal spending) would help achieve the goals of promoting economic recovery and putting idle resources back to work, which in turn would boost tax revenue and improve the government’s fiscal position.”

    There is a great deal to be said for fiscal and monetary policies to be applied in tandem, one  reinforcing the other, rather than in isolation with one possibly working against the other. There is also much to be said for the financing of government spending through the central bank, rather than by adding to the burden of debt and payment of interest charges through the budget. What makes this especially intriguing, however, is that the suggestions were put forward by the – now - Fed Chairman and we do not yet know whether he will, in 2006 or later, face deflation in the United States and whether, in that event, he will reflect on and perhaps adopt the measures that he recommended to the Japanese back in 2003."

 

----- Original Message -----

From: Kevin Donnelly ntl

To: gang8@yahoogroups.com

Sent: Friday, November 10, 2006 12:16 PM

Subject: Re: [gang8] Inflation

Well, yes, of course, but the media generally seem to be in a state of denial.

I rang the Radio 5 phone-in programme yesterday.  Asked what point I wanted to make, I said that raising interest rates tends to increase inflation rather than reduce it.  Asked to explain further, I replied that in my days in industry, the cost of borrowing was a factor in calculating the price of biscuits just as labour and ingredients were, so that any increase in interest rates would increase factory gate prices, and therefore be inflationary.  Ergo...

Um, said the studio anchor man, I'll call my producer and ask him to give you a call.

I waited and waited for about half an hour, with my copy of Geoffrey's FT headline leaflet (bloodletting and fever) in front of me.  Nobody rang.

Radio 5 is on MW 909 693, and the UK phone number is 0500 909 693.  They like to hear from overseas callers.

    Kevin

----- Original Message -----

From: Geoffrey Gardiner

To: Mills, John ; Moore, Michael ; gang8@yahoogroups.com

Sent: Friday, November 10, 2006 9:08 AM

Subject: [gang8] Inflation

Gardiner to Gang8, Michael Moore, and John Mills

 

The Bank of England has again raised interest rates in order to fight inflation. Did they cosider the following press release before doing so?

<<<<<

A three pence increase is on the way for a loaf as the price of flour rises for the second time in a few months.

The UK's largest independent miller ADM Milling said it was "regrettably" heading for its second hike since September, when its flour rose by £28.75 per tonne.

And industry experts said other millers were likely to follow suit.

An ADM Milling spokesman said: "With world wheat stocks being at the lowest level for 25 years, and with global consumption demand increasing, a continuation of upward wheat price costs seems inevitable.

"This is regrettably leading towards a further flour price increase in the next few months."

Anne Bruce, deputy editor of trade magazine British Baker, said it was "exceptionally unusual" for flour prices to rise twice within such a short space of time.

"It will inevitably mean that the price of bread will have to go up by around 3p for an 800g loaf and bakers which supply the supermarkets will have to negotiate with them to get a second price rise," she said.

"The usual situation is that flour prices go up after the harvest in August. Now they are being forced to put them up again. It is exceptionally unusual."

>>>>>>>

 

How can a rise in interest rates bring the price of wheat down? It must increase the cost of production as farming is a heavily capitalised industry and relies on borrowed capital.

At the same time the Treasury is paying farmers in Britain not to grow wheat. Huge areas of land are growing nothing but weeds as a result of a 'set-aside' policy.

I foresaw this situation and last year urged that every bit of land in Britain should be planted up.

Britain is in a very weak position in competing for world supplies of wheat as we have a huge trade deficit and the suppliying countries would have to lend us the money to buy their produce. I think they will prefer to sell their wheat to China in return for consumer goodies.

Another announcement yesterday was that Britain faces a milk shortage, and that in the country of Europe best endowed by nature for milk production. Why? Because pressure from sundry do-gooders, pseudo-environmentalists, and left-wing haters of farmers have made it uneconomic for British farmers to produce milk, and one milk producer is going out of business every week.

We face starvation in the not very distant future.

 

Geoffrey