Schizophrenic Status Quo: Japan Deliberately Weakens Yen, US Demands Stronger Yuan

ΩΩThe entire and only excuse for running the present floating fiat currency/no gold standard system is that currency values should restrict trade surpluses and deficits.  That is, if a country has a trade deficit, its currency was supposed to decline in value until trade balanced again.  Obviously, this stupid system has been gamed to death by export powers and currency traders working off of the backs of central banks which play currency games via their FOREX holdings and debt buying/creating operations.  And none do this more aggressively than the Bank of Japan, the originator of many of the schemes to keep a currency weaker than it really should be.


ΩΩAs I also have pointed out over the years, Japan has gotten a free ride on the back of the US in being allowed to run a trade surplus that is double the trade rate with the US.  At no time in the last 35 years has the US run more than 50% of Japan’s trade with the US.  This trick is done by various tools and mechanisms which the Japanese developed and honed over the years so this 50% differential would never budge no matter if trade shoots up or drops like a rock.  All other nations have observed how Japan pulls off this neat trick and nearly all have successfully imitated Japan to the point, the US runs trade deficits with nearly everyone.


ΩΩNow, the Japanese Model for Tricky Trade Surpluses is breaking down at last.  This is a good thing but it shows clearly the weakness of the philosophical ‘floating currency’ system which should cause us to come up with a better system.  Since much of the wealth creation system for international dealers, investors and traders well up from this goofy, destructive and stupid floating fiat currency system, it is nearly impossible to alter it even slightly.  The very rich have discovered every possible flaw in this system and of course, as is usual in all economic systems, the flaws are where all the easy wealth comes from so the rich cling to these flaws with greatest tenacity and will fight to the death to prevent any reforms or changes that fix obvious problems.


ΩΩLike helpless passengers on the Titanic as it roars into a field of icebergs at night, workers in various first world countries have given up even the illusion of having some say in the direction things are going.  Well, we hit a major iceberg in the fall of 2007 which was the Japanese Carry Trade behemoth which promptly changed the direction of money flows that supported the status quo back then.  That is, the system which supported the carry trade business crashed.  This stopped the flood of easy credit which carpeted the world’s economy causing huge real estate bubbles all over the first world countries.  EXCEPT FOR JAPAN.


ΩΩThe country which is the basis for any carry trade system by providing a ZIRP lending rate of nearly zero percent while not allowing any lending within itself, that is, no home buyers in the ZIRP country can buy housing at near zero rates, this would travel out of country via currency traders to flood high interest rate countries with stronger currencies.  Now that the US has joined Japan in the ZIRP cellar, we see our own housing market crash just like Japan’s did in 1991 and we see the US being used as the carry trade source so that our money that is lent by international bankers is being used to inflate the Chinese housing market instead of our own.


ΩΩSince we are now the ZIRP carry trade currency, we see China desperately trying to suppress a housing bubble while our own government desperately tries to inflate our own bubble back to where it was in 2006.  This business is hammering Japan since China wants a strong yen, unlike the US, China is a creditor nation and could pull off this trick.  So China now buys Japanese debt and is no longer in the market for US debt and China is also holding more and more yen, infuriating the Japanese no end.


ΩΩThe Japanese have been forced by China to stop pretending they don’t manipulate their currency and now have openly defied the EU and US and are doing exactly that, starting yesterday.  The yen strengthened to 82 to the dollar which is fatal for the perpetual 50% plus trade surplus Japan loves so much.  So, world FX markets were roiled by this obvious and ultimately futile gesture from a very desperate Bank of Japan.  For the problem here is, Japan may be a creditor nation but so is China.  Japan can play these games against debtor nations like the US but not against creditor nations like China!


U.S. Adopts Tougher Stance on China –

The United States brought two cases to the World Trade Organization on Wednesday, accusing China of improperly blocking imports of a specialty steel product and denying credit card companies access to its markets. The move came just hours before House lawmakers demanded action on the currency issue….The currency issue is increasingly likely to be a focus when leaders of the Group of 20 nations meet in November in Seoul, South Korea. A bill with support from 143 House members from both parties would allow the United States to impose tariffs and other penalties on countries that undervalue their currencies….The United States should seek to mobilize the European Union and countries like Brazil, Russia and India to press China to realign the renminbi, and should seek W.T.O. authorization to impose restrictions on Chinese imports if it does not do so, Mr. Bergsten said.


ΩΩFrugal Japan » Blog Archive » Credit Cards in Japan: Cracking the Code: like all things in Japan, this system is deliberately different from the US system and the Japanese way of dealing with credit cards is to make it nearly impossible to get one!  So US companies can operate there but must do so the same way the Japanese companies operate there.  If the US tried to flood Japan with easy credit at low rates, the Japanese government will find other means to stop this.


ΩΩNote here that the US wants everyone BUT Japan to try to force China to rejigger their currency!  HAHAHA.  The US knows this is as cynical and crude as our demands that Iran not have nuclear bombs while openly preventing the UN to even see how many illicit nukes Israel has hidden in its own arsenal!  International coalitions based on lies are fatal.  In this case, the US is running off to trade partners who all run surpluses with us, trying desperately to isolate China and keep the illusion that we lead the ‘free world’ which is ‘free trade’, etc.


ΩΩOf course, we must fight off all countries running trade surpluses with us!  This goes under ‘DUH’ as the obvious thing we must do if we wish to survive.  Instead, we sell our future down the tubes by letting ‘allies’ ravage us in trade.  Of course, everyone will do whatever we want in other areas if we let them destroy our industrial base and bankrupt our country.  They will join our embargoes on Iran and Cuba.  They will happily bark at China in public while kissing ass in private.  They will vote with us in the UN and let us attack various countries with our bloated military so long as we let them destroy our domestic economy.


ΩΩThis pisses me off no end.  The trade off here is highly destructive and will kill our nation!  It is treason.  Yet, it rolls blissfully onwards.  We continue to attack China for imitating South Korea and Japan but lately, both Asian powers are now not barking at China when we demand this.  They know that  if China’s unbalanced trade ends, so will their own unbalanced trade.  That is, they are all in the same boat as China.


Stocks, U.S. Futures Fall on Concern Recovery Is Stalling; Yen Strengthens

Stocks fell for a third day in Europe and U.S. index futures declined as an unexpected drop in U.K. retail sales revived concern the economic recovery is stalling. The yen gained after Japan’s intervention yesterday spurred its biggest slide in 22 months. Gold rose to a record.


ΩΩThe Japanese rescue operation failed.  This shows that once things get totally unbalanced, the floating fiat currency regime does deal with trade imbalances.  But it is a very stupid tool since it takes 35 years to even begin to operate properly and it will take another 35 years for US trade with Japan to come into balance.   Due to Japanese protectionism, this balance will probably be at $0.00 trade as Japan resumes its ancient Hermit Kingdom sort of culture as it did repeatedly in the past.


BOJ Governor Defends Policies As Pressure Builds To Do More

Bank of Japan Gov. Masaaki Shirakawa said Thursday that unconventional monetary easing measures were “highly effective” against “acute pains” during the recent financial crisis, but also spoke of the long-term risks of excessive easing and ultra-low interest rates….Shirakawa has strongly defended the steps taken by the BOJ, which he said have already gone well beyond conventional tools of monetary policy.

Under intense pressure from the government as well as from markets, the central bank expanded a special lending program at an emergency policy meeting on Aug. 30. The bank decided to offer financial institutions Y10 trillion worth of six-month loans at a rock-bottom 0.1% interest, in addition to the Y20 trillion in three-month loans it has been offering over the past few months.


ΩΩThe gold bubble continues to grow as desperate Japanese savers who get 0% interest on savings move to gold.  Ditto, US savers.  Might as well play the gold markets if banks are ZIRPing us to death.  There is gross inflation underfoot.  The insurance I pay to keep my son alive went up $70 this year, for example.  I am on a fixed income and this is terrible since my grocery shopping costs me $100 a week and I remember when it cost half that…less than 10 years ago.  The Bank of Japan admits to going deep into the currency manipulation game but the sumo wrestling game with China means, even heroic cheating won’t work.


ΩΩThat is, if the Chinese want a strong yen, it will strengthen.  This is because, as I pointed out in the past, this year, Japan’s trade with China has surpassed Japan’s trade with the US.  This is a key moment in history.  Japan can’t turn back the clock when it was the US #1 trade partner.  China has been the US top trade partner during most of this last decade.  So Japan’s grip on international currency has declined RELATIVE TO CHINA.  And this matters a great deal.  Japan’s leverage over the value of the yen and the dollar has declined in direct proportion to China’s leverage growing greater.  China now controls the value of the yen versus the dollar since China holds both hostage.


Japan Likely Sold Y1.7-1.8tln In Intervention Wed

Japanese monetary authorities apparently sold 1.7-1.8 trillion yen in intervening in the foreign exchange market Wednesday, data released Thursday by the Bank of Japan suggests.


ΩΩJapan is on the cusp of ushering in hyperinflation.  The desperate moves to weaken the yen will work if Japan suddenly prints tons of yen a la Zimbabwe!  And they will do this if this is the only way to get the US/Japanese 50% differential trade back on track for the rich owners of Japanese corporations!  The nature of Zero/Infinity is a classic yin/yang situation.  The goddesses of Inflation and Depression are twin sisters or maybe, the same Gorgon creature that can take off to the heavens or crush you into the earth.


ΩΩAvoiding both Infinity and Zero is vital for all banking systems and they, in turn, are based on land and trade.  The very first banks lent to land owners and enabled trade.  This has been true since the city of Ur was founded thousands of years ago.


ΩΩJapan’s Solo Run on Yen Exposes Flaw in World Export Strategy:  Bloomberg news is most amusing.  Of course, everyone wants to export their way to wealth.  It works!  The obverse side of the coin is, all nations must protect themselves from everyone who are trying to export their way to wealth!  Countries like Japan who succeed in protecting themselves while ravaging others are now in trouble as world trade hits a brick wall: the US has been the dupe all these years and is now pretty much going bankrupt.


ΩΩJapan can’t export to China in a one way fashion because the Chinese know this is the Japanese plan and have turned Japanese systems back on itself: they figured out how to use FOREX holdings and buying government debt to force trade in their favor!  And guess when they figured this out!  In the mid-1980’s when they cooked up their 50 Year Plan.  True, it began very small and slow in 1990 but picked up speed in 2000 and by 2007, thanks to immense US trade deficits, it shot to the forefront and China is on track to be the world’s #1 economic power by their target date of 2020.


ΩΩJapan has to begin negotiations with China over how to do world trade.  Already, by openly declaring currency war on the US dollar, they have moved towards a position whereby they MUST join China in fighting US currency demands.  I keep telling everyone the fix for us is simple: we give up on world export trade and the impossible dream of exporting our way to a trade balance and we put up severe protectionist barriers and hunker down until we have some sort of FOREX holding.  Our present one is the smallest on earth, most of our holdings are in US $ which is insane.  We need to hold yen, yuan and euros.


ΩΩThe way we can do this is to restart the gold standard and dump the US dollar.  This means no more oil imports but then, this will happen anyway by 2020 so we may as well do this now when we can survive it. But the US public loves cars and won’t accept this draconian move.  So we will motor happily onwards until the Chinese buy up all the oil and leave us high and dry.


Kan Hones `Fighting Spirit’ in Authorizing Yen Intervention to Disarm Foes

“The debate with Ozawa may have honed Kan’s fighting spirit,” said Jesper Koll, Tokyo-based head of equity research at JPMorgan Chase & Co. “This hopefully signals the end of complacency, and the best sign of that is in the currency market, because Japan lives and dies with the yen.” The DPJ, which took power for the first time in September 2009, has struggled to meet campaign promises to improve social welfare without adding to the world’s largest public debt, which is approaching 200 percent of gross domestic product.


ΩΩNote how floating currency rip off artists at JP Morgan applaud this obvious and hostile manipulation of the yen!  The Japanese were ‘complacent’ when letting the yen float to its real value based on Japan’s trade profits.  The debts owed to the Japanese taxpayers should not exist.  The rich industrialists and currency traders and bankers in Japan all got much, much better while the condition of Japanese workers and taxpayers declined dramatically.  The once-egalitarian society has now the same gaps between rich and poor as the US and UK.  The rich want a weak yen, the poor need a strong yen.  The rich want no cheap imports, the poor need these desperately.


ΩΩInstead, half of Japan is now going into social destruction unable to create families, feed themselves or live in homes larger than a postage stamp.  Schools and hospitals are falling apart.  More than half of present students in Japan are now listless in school since they have little to no job prospects upon graduation except to live at home and work part time jobs at a minimum wage.


Japan slips in global university rankings, overtaken by China

On the country ranking table, the United States was in first place, with China at eighth and Japan 10th.


ΩΩJapan falls relative to the rest of Asia in education figures.  Japan is being beaten by Korea and the various Chinese nations in all sorts of areas from winning Go games, collecting gold medals in the Olympics, winning math contests, etc.  The US is still #1 in many areas but internally, this is due mostly to sucking in Asians who now are filling many university positions.  The US main population has gone down the tubes, going for easy solutions instead of hard work.  That is, we want to gamble our way to wealth or eke out a living on the economic fringes.  You don’t need a college degree to work in a auto factory but wages there are collapsing and more and more are working for foreign countries like Japan.


ΩΩRelative rankings matter a lot.  China was nowhere on this list a mere 20 years ago.  Now, China is highly represented and I know first hand how heavily the Chinese invested in their education system.  Of course, the lack of freedom of speech is a major, major barrier to further triumphs but as the US and Japan and EU muzzle scholars, this matters less and less over time.


Walter Kasper, Top Pope Adviser, Calls UK ‘Third World’

Kasper made the remarks in an interview with the German magazine Focus.  “When you land at Heathrow you think at times you have landed in a third world country,” the German-born cardinal is quoted as saying by the Telegraph.


ΩΩHAHAHA.  And the German is correct!  Indeed, when moving from US airports and train stations to Chinese ones, it is obvious who is a third world country and who will be the first world country by 2020!  Maybe this Cardinal can come here and tell us how we can’t make our trains run on time.  Germany has a big trade surplus with the US.

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43 responses to “Schizophrenic Status Quo: Japan Deliberately Weakens Yen, US Demands Stronger Yuan

  1. Otto Bismark

    “Let me introduce you to Chermany, a composite of the world’s biggest net exporters: China, with a forecast current account surplus of $291bn this year and Germany, with a forecast surplus of $187bn.
    —Martin Wolf, “China and Germany unite to impose global deflation,” Financial Times, March 16, 2010 ”

    Yah, Mein power ess still felt around zee world.

    I have implemented my policy of Military Power and Welfare State in the United States by giving the Military task to the ‘Republicans’, and the Welfare job to the ‘Democrats’.

    The CIA works for the ‘Right’ and the State Department for the ‘Left’.

    Zee peasants watch it like zey watch zee WWF wrestling thinking it ess real.

    I have sent Kissing German to herd your hapless politicians.

    “During the late 19th century, Sino-foreign trade was dominated by the British Empire, and Otto von Bismarck was eager to establish German footholds in China to balance the British dominance. In 1885, Bismarck had the Reichstag pass a steamship subsidy bill which offered direct service to China. In the same year, he sent the first German banking and industrial survey group to evaluate investment possibilities, which led to the establishment of the Deutsch-Asiatische Bank in 1890. Through these efforts Germany was second to Britain in trading and shipping in China by 1896.”

    Chermany will rule zee world — thank you for your ignorance of Hiztory.


    Yah All Rights Reserved.

  2. emsnews

    Ich wohnte im Deutschland in 1968. Ja, das is wahr, Deutschland ist auch sehr beliebt im Japan.

    Germany has had a big love affair with both China and Japan going back to Bismark. Japan’s education and military systems are based on German systems, not British nor US. I love seeing US movies making believe that the Japanese wanted to imitate us.

    Industrial policies: very much ditto. This is why I predicted years ago a Japan/China/Germany troika in trade and international banking in contrast to the US/UK/France troika.

  3. zip

    lately I have been reading the next blog.
    The author comes up with this very sharp analysis.

    Citi get another $12 billion bail out…

  4. jermz/Nashville

    Elaine, you need to create a profile on Facebook!

  5. Joseppi

    China, in contravention to its WTO commitment to open up its credit card market, is shutting out Visa and MasterCard Inc. from the country’s $723 billion payment processing business in favor of China UnionPay Data Co. The Shanghai company, owned by China’s major banks and state-owned enterprises, operates in more than 90 countries, according to its website. Under Chinese rules, all foreign credit cards, including Visa, must be co-branded with China UnionPay.

    Read more:

  6. Tony

    Good call on the next blog zip, he’s like a razor.
    We got love for you too E 🙂

  7. Joseppi

    China ups the ante on the squabble over the gas field with Japan….

    US strategists probably think that this disagreement is beneficial and will induce Japan to seek protection from the US – thereby giving the US an acceptable excuse to thwart China hegemony in Asia. The reality may be quite different as Elaine has said – It could be the cataylst that quickens the Japanese realization that the future lies with working with China. Or it may be a Japanese strategy to get the US involved in the dispute to postpone the day of reckoning with China.

  8. melponeme_k

    Just rewatched “The Curse of the Golden Flower” and had a realization.

    We, the US, represent the Empress who is slowly being poisoned by the Emperor. She fails in her coup and all her sons die.

    Its long past the time where we can win this war. We’ve already been outplayed. Our leaders need to think about how to survive not create more wars. I don’t believe Japan thinks for a moment we have enough power to do anything now. They are just trying to save face and discover a way to submit with a few shreds of honor.

  9. JT

    @Otto Bismark

    America has to shocked back to consiousness, blood must flow back to vital organs, we must the ones to save her
    think of it not as a revolution but as a game, america loves games..
    let the race begin..

    masters of propaganda

  10. Billibaldi

    Whatever the Japanese are planning, this is not the weekend for them to take a hard line with the Chinese.

  11. Otto Bismarck


    You are absolutely correct that anyone selling the need for a ‘revolution’ is dangerous. The game must simply be changed to remove the rigged rules.

    Games are the perfect analogy for how free enterprise should be run.

    Imagine if Football were run by the rules of global monopoly. There would be one team who had all the best players and any team that got better would be immediately purchased, destroyed and merged into the mega team.

    True free enterprise is when there are rules that apply equally to everyone and prevent domination of many by one.

    When super fascists talk about ‘Free Enterprise’ they mean the freedom to be the British East India Company, and have your own military, and the ‘freedom’ to grow opium in India and ship it into China using your private military.

    Read this article about Mon-satan-to using private military contractors if you have any doubts.

    What ‘Freedom’ means to the Fabian Socialists is freedom from getting the rewards of your hard work.

    Like the Chinese government owning all their largest oil, banking, and mineral companies, and doling out the money as they see fit.

    Imagine one or two government soccer teams playing with each other and tie games assured every time.

    What ‘Free Enterprise’ means to the worshipper of Ba’al at the BIS in Switzerland is the ‘freedom’ to enslave mankind with fake paper money.

    Imagine you are playing the Game of Monopoly with your friends, but one of your friends wins the right to print all the money for the game on his laser printer and you have to borrow all money you need to play the game from him.

    You might feel like you won, but guess who really owns everything at the end of the game?

    The ‘Friends Who Lose’ the game will be angry and the ‘Monopoly Money Printer’ will say ‘There should be a revolution – kill the ‘Friend Who Won’ and owns Boardwalk!’ when in fact he owns that person’s debt.

    In true free enterprise, the players of the game can form a rules of laws on how the money gets created, and they can all vote on when to create more or less.

    There is no need for your sleazy ‘Monopoly Money Printer’ friend with the laser printer.

    This was indeed exactly how the US constitution was written.

    But the relentless ‘Monopoly Money Printer’ will always worm their way into the body of laws the players create to given themselves the keys to the laser printer.

    So like the referee to a football game, the government should just firmly enforce rules to keep many teams competitive and free from domination, and never get involved with playing the game telling the teams how to play.

  12. wb

    So people who sell organic foods are terrorists now ?

  13. Wu Wei

    Lots of the usual economic jibberish to distract us from the real issue: the privatization of money creation, creating money as debt and charging interest over it.

  14. Wu Wei

    A British Member of Parliament said this about the Bank of England in 1810: “There is something so consummately ridiculous in the idea of a nation’s getting money by paying interest to itself upon its own stock, that themind of every rational man naturally rejects it. It is, really, something little short of madness to suppose, that a nation can increase its wealth; increase its means of paying others; that it can do this by paying interest to itself. When time is
    taken to reflect, no rational man will attempt to maintain a proposition so shockingly absurd” (William Cobbett, M.P.,
    Paper Against Gold, p.83).

  15. nah

    floating currency makes bad money… at some point it becomes a ‘inside joke’ that most people are stuck paying for

  16. nah

    not saying that we arent wealthy… the world is vastly wealthy… its the insidious inside joke that is pretty clear that hey well, WTF are we doing if not just sucking up with it all, trained to see both sides of a ‘coin’
    if industry, government, and freedom is important we should have secure, real, financing… imean what are we doing getting people on board or ‘what’… why all the deciept
    as i see it these guys are not geniuses, just nuanced caricatures of what power considers the best about ourselves…. FUCKING ELVES or whatever… that does not mean that we should let every 2bit CEO play reality on TV… that shit is dangerous man, people think the venezualans can really just go pop a hole in the gulf and pollute it ‘like we dont OWN and LEASE the technology’ so they ask themselves WHY DOESNT THE US DESTROY THE GULF BEFORE THE STUPID MEXICANS or whatever
    subsidies are dangerous
    the government owns the parks, banks, birds, highways, money, rivers, police, health care, deer, wolves, trees, military, and CARBON… why? they don’t care
    it looks good on paper

  17. nah

    you guys know there alot of great cigars out there you know… you betcha, and you can get all these cigars for quite a nice price… as i see it, tobacco is a real treasure ladies and gentlemen

  18. nah

    Soros: Gold “not safe” (1:18)
    LOL i thot treasury’s were in a ‘bull market’ homeboy… imean how many garbage can a man sell for infinate returns

  19. wb

    Use a credit union instead of a bank

  20. nah
    “Mistakes have been made here, right?” Mr. Patzek said. “That is the reason that this reservoir did what it did.”
    OK everyone it was just a mistake… everything is back to normal… water, fish, fisherman 1/100,000 failure rate
    god knows fisherman cant fish without oil BACK TO WORK
    personally i think they should wait and see what is up with the fish population before they risk another 1in20 year event… the fish ARE more important than the oil just based on future revenue
    if another rig makes a MISTAKE its obvious the plan is to pump millions of gallons of solvent into the water and wait for the FDA… i think we owe the fish YES THE FISH time to clue us in on what is up down there… let the fish give the all clear, oil men make mistakes ‘see iraq’
    they poisoned the bejeesus out of that water, i dont care what ‘Americas truth detector’ lush limbaugh says

  21. JT


    “It is, really, something little short of madness to suppose, that a nation can increase its wealth; increase its means of paying others; that it can do this by paying interest to itself. ”

    The interest is paid by advance in economic efficiency.
    Inflation is just another tax.
    But if you have a reserve currency you can tax the whole world.

  22. Aussie

    @ Otto Bismarck
    Re When super fascists talk about ‘Free Enterprise’ they mean the freedom to be the British East India Company, and have your own military, and the ‘freedom’ to grow opium in India and ship it into China using your private military.

    I agree.
    We have come full circle.
    The American Revolution started with the Boston Tea Party that was motivated, in part, by fear of the rapacious economic rent impost of companies such as the British East India Company and Dutch East India Company of their time.

    Elaine’s favorite “people” the King of England wanted to remain rich by monopolizing exports to their American colonies and controlling investments.
    Now the US are starting to experience the pain from their own “British East India Company” that have started to treat its citizens as “free Enterprise” treated Iraqi’s and Afghani’s as well as how the Indian subcontinent was by the “British East India Company” previously.

    Yin and Yang implies there needs to be a balance…..the US simply lost the balance envisioned by their found fathers.

  23. nah
    Chinese geneticist Du Yutao peers at an ultrasound monitor scanning the underbelly of a pregnant sow — one of China’s latest technological tools to feed its people better.
    CHINAS gunna lead the world this…. chinas going to lead the world that… dude, chinas going to lead the world… dont forget to educate the children

  24. nah

    tea party sniffs poop and thinks it stinks big deal

  25. Pingback: Anonymous

  26. DeVaul

    “The interest is paid by advance in economic efficiency.”

    This seems to be in a nutshell the standard answer to the question that rational people ask about where the interest comes from to pay back the original loan PLUS interest.

    Umm… again, from a rational point of view, and that is what is at stake here, there does not appear to be any real difference between saying that “expansion of economic efficiency” will take care of the interest due or saying “magic” will do it.

    This only makes sense if interest due can be paid back using whatever the increased economic activity or efficiency creates, whether it be a health insurance policy, a time-share on some beachfront condo, a silk shirt, fresh mushrooms, goats, or “stocks” in a gold mine that may or may not exist.

    An expansion of economic activity (and that is what happens when someone borrows a large sum of money to start a business) does not print or create units of currency. It does tend to create more loans and debt with interest attached at various arbitrary rates.

    Those that control or oversee the printing of the currency units do not match the amount printed to the amount of the loans and interest due in the economy at any given time. Instead, they always contrict the amount of units so that some or many of those who borrowed money to “expand” their activity can never pay back the loan plus interest, thus leaving them in perpetual debt or relieving them of any and all real property they might possess.

    Here is a down-to-earth example for consideration: when I was 15, I worked at a Kentucky Fried Chicken store. My two co-workers, Shady and Thurman (their real names), were always “short” on money, so they would borrow from Cecil, the owner of the joint. They never could pay him back, only borrow more money to pay back previous loans from him or have him extend (roll over) the previous loans (with additional interest I suspect). Since he controlled their hours and pay, they could not increase their economic income. They also had to work off their debts at his home.

    I often wondered why Cecil would loan hard cash to two irresponsible young men like Shady and Thurman with FULL knowledge they could never pay him back. Only now do I understand. It was not about money, but about power. Cecil CONTROLLED them. They were his serfs. For life.

    Sometime after I quit rather than be cheated by Cecil after I had walked through a snowstorm to get to work, Shady and Thurman robbed the store and made off with all the cash Cecil had stuffed in his big safe.

    I suspect that this was an act of desperation on their part. A kind of “rebellion” against their serfdom. Multiply this micro series of events by millions of people and it is easy to see why we have World Wars.


    ELAINE: yes, this is capitalism in a nutshell: by exploiting labor and commodity goods, this ‘value added’ process pays for borrowing money to do this process. Using debt for mere consumption is the road to ruin.

  27. Aussie

    @ DeVaul
    Re: It was not about money, but about power. Cecil CONTROLLED them. They were his serfs. For life.

    You have described the banks.

    Re: “The interest is paid by advance in economic efficiency.”

    Your comment here describes delusional economics when the US has eviscerated its manufacturing industry and incurred unprecedented debt levels.

    It is also a sign of desperatation to buy time and pass the problem to the future.


    ELAINE: There is nothing delusional about the Industrial Revolution and the way humans and machines create wealth. Money ‘growth’ that isn’t inflation reflects this (a value added of about 3% a year, in general).

  28. JT


    “The interest is paid by advance in economic efficiency.”

    Let me correct myself. Interest CAN be payed by advance in economic effiency.
    There is no guarantee that your government doesn´t decide to tax you a bit more than that 🙂 .
    Inflation is a tax.
    Some countries honestly tax and some don´t and print money (US).
    It is a smart strategy for the reserve currency holders since they can tax everyone.

    Government overspending is the source for almost all our inflation.

  29. Wu Wei

    “So you would say that the design of money is actually at the root of much else that happens, or doesn’t happen, in society?

    That’s right. While economic textbooks claim that people and corporations are competing for markets and resources, I claim that in reality they are competing for money – using markets and resources to do so. So designing new money systems really amounts to redesigning the target that orients much human effort. Furthermore, I believe that greed and competition are not a result of immutable human temperament; I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using. For example, we can produce more than enough food to feed everybody, and there is definitely enough work for everybody in the World, but there is clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. The direct consequence is that we have to fight with
    each other in order to survive. Money is created when [private] banks lend it into existence. When a bank provides you with a $100,000 mortgage, it creates only the principal, which you spend and which then circulates in the economy. The bank expects you to pay back $200,000 over the next 20 years, but it doesn’t create the second $100,000 – the interest. Instead, the bank sends you out into the tough World to battle
    against everybody else to bring back the second $100,000.”

    Bernard Lietaer (former Belgium central bank employee) in an interview with Sarah van Gelder.

  30. Wu Wei

    President James A. Garfield 1831-1881: “Whoever controls the volume of money in any country is absolute
    master of all industry and commerce.”

  31. Wu Wei

    Hey you, you studied economics right?

    Tell me, what is money and how is it created today?

    WAIT, are you trying to tell me that in 4 years of study they NEVER EVER taught you anything about that?

  32. Ali

    Walter Kasper, Top Pope Adviser, Calls UK ‘Third World’

    His comment was a racist one, made in reference to the number of immigrants who work at Heathrow. At least 50% of the workers at Heathrow are… er…. lets say.. non-white.
    There’s no way he meant technologically backward because he is coming over from Rome. They don’t exactly have a state of the art airport over there.

  33. emsnews

    Money isn’t ‘real’…it stands as a representative in lieu of barter in trading either one’s labor or goods. It is a marker, an abstraction. And it can drop to zero or rise to infinity in a flash if it isn’t hedged in by something real and solid like gold. Gold is a form of handcuffs on ‘money’ which is designed, via being rare, to keep it ‘honest’ so it doesn’t drop to zero or shoot to infinity by adding too many zeros or debasing it with cheap metals like iron or bronze.

    The ‘creators of money’ have one solid rule to follow: don’t do it beyond a 3% growth rate or you get destroyed. But the temptation to do this faster is too great and leads to a crisis such as the present ZIRP collapse or the future (yes, it will happen) hyperinflation mess that looms on the horizon.

  34. DrKrbyLuv

    Elaine wrote:

    “The ‘creators of money’ have one solid rule to follow: don’t do it beyond a 3% growth rate or you get destroyed.”

    If an economy inflates at a steady 3%, it will reduce the value of money by 50% within 24 years.

    The Fed claims they target between 2-2.5% inflation. One might wonder why inflation is desirable?

    It is required because our debt money system is inherently and mathematically deflationary. Many do not realize that all of our money is temporary – we have no permanent money.

    Money is created as principal debt by banks and as that principal is repaid, the money is destroyed. Every day money is destroyed and the rate of new money created must be at least as great as the amount destroyed to prevent the money supply from contracting.

    Inflation is required to keep the money supply from shrinking. But there is a greater problem…only the principal is created through bank loans, the interest is not created.

    The above provides us with two important axioms:

    1 – Debt based money systems are inherently deflationary.

    2 – There will always be more debt than money. This may be witnessed by the fact that the national debt and private debt combine at over $57 trillion but we only have $13.5 trillion in the broad aggregate (M3). How do you repay $57 trillion with only $13 trillion? We MUST borrow more which establishes a feedback loop that grows exponentially.

    Our monetary system is unsustainable and we are at it’s end. The solution of course is for nation states to take back the creation and control of their money systems.

    Wu Wei wrote:

    Tell me, what is money and how is it created today?

    WAIT, are you trying to tell me that in 4 years of study they NEVER EVER taught you anything about that?

    Touche! It is amazing that concepts like sovereign credit are totally ignored by Austrians, Keynesians and the other neo-liberal economic belief systems.

  35. Wu Wei


    I’m afraid we are the only two people on this blog who understand the problem of our financial system of today.

    How sad!

  36. emsnews

    Money growth at 3% a year WHEN THE ECONOMY GROWS AT THIS RATE means ‘inflation’ doesn’t happen. It is when there is say, negative growth and the money supply is boosted (like under Nixon and Ford) you get sudden hyperinflation.

    You two guys want perpetual depression! Gads. Talk about dangerous.

  37. Wu Wei

    Hi EMS, long live the Satanic private bankers YAY! We should continue creating our money as debt owed to private bankers paying them interest as a little bonus.

  38. Wu Wei

    They haven’t had enough bonuses of course.

  39. JT


    What about the interest that banks pay on your bank savings?
    Where does that money come from?

    Money is created in two ways:
    a central banks
    b in normal banks

    But that is not our problem.
    Derivatives, lack of supervision, too loose capital requirements and government overspending are the real problems.
    Too much is being created.
    But the basic system is ok.

    But blaiming the bank is the normal way of reacting to this.
    When you can´t pay your debts it is the banks fault.

  40. Wu Wei

    @JT, the basic system is OK??!!?

    Please study into this, it is obvious you do not understand the lethal poison that is usury. We are all enslaved by the ones who have the power to create money. We pay for ouw own slavery and that’s fine by you! Because this system is OK. Wars, inequality, poverty, hunger everywhere but this system is OK.

    The power to coin money belongs to the people and the nation they live in, not PRIVATE BANKERS. Once again, WHY ON EARTH ARE WE PAYING INTEREST OVER OUR OWN MONEY TO PRIVATE BANKERS!?!? Please answer.

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