Greg Caravan from The Daily Reckoning Austrailia edition

Greg Caravan's latest post covers a few things of interest including the gold and silver fix (a technical term in the industry).  The process of fixing metals prices has been around for over 100 years and very soon it will be abandoned.  Those involved seem to be trying to distance themselves from the activity.  I can only surmise that it is, for whatever reason, no longer profitable.  Notably, Deutsche Bank first tried to sell its seat on the fixing committee which would imply that there used to be some kind of value associated with it.  Keep in mind, it was supposed to be a service, not a money maker.  It is very typical that things which initially bill themselves as services tend to, over time, turn into scams.  You know, like most of current government.

In any case, there were no takers for this seat and Deutsche Bank didn't even leave it on the market for very long before just deciding to abdicate.  I guess the liabilities of this service are catching up to it now that gold price fixing is starting to be investigated the same as the LIBOR fix.  Maybe the con men running that show could see that what is coming around the corner is not just fines on their criminal behavior but jail time.  It's all part of the coming wave of conservatism IMO.

Greg Caravan's article noted the lack of jail time for any of the major con men of the bankster clan over the past few years.  He noted that fines against companies (which most of the time don't even have to admit to any wrong doing) have just been the cost of doing business.  He considers these government attacks nothing more than a form of taxation by a complicit greedy government.  Greg is right about all of this.

Greg goes on to say that "The fining of Barclay’s for manipulating the gold fix highlights what a degenerate racket the whole financial system has become. It’s a great business model for banks and governments."  "Degenerate racket".   That's Greg's Aussie way of saying "organized crime" folks.  More and more people seem to understand this truth now.  Greg goes on to talk about "degenerate capitalism" which is what I would call crony capitalism.  So Greg's article pretty much reinforces things that I have been writing for years.  Of course, all of the folks at the Daily Reckoning have known all of this for a long time and have been writing about it before I began my blog.  So perhaps I have really just been reinforcing their themes...

The one area where Greg and I differ.  In fact I differ in this way from 99.99% of all the other folks out there who are are otherwise very like minded with me.  That area is pointed out by his words, "Don’t expect any of this to stop. It’s what happens in the latter stages of degenerate capitalism. Critics are quick to point out that capitalism is the problem. It’s not. The chief problem is the constant manipulation of the rate of interest. By holding interest rates for a prolonged period below the ‘natural rate’ (the free market rate where the needs of savers and investors are balanced out) you create distortions on such a grand scale there is practically no fix apart from a system bust up."

IMO, Greg is like everyone else, talking about the symptoms while missing the root cause.  Crony capitalism cannot work with an honest money supply.  It might want to work but it simply cannot.  Government will dictate and mandate and set interest rates all day long to no avail if the money supply is honest.  
Why?  Because it takes debt in order to manipulate the interest rates and without the ability to create more debt, all the fed can do is useless jawboning.  The federal reserve has to rack up a bunch of IOUs to buy government treasuries so that the supply of them on the market is reduced, thus increasing the bond's value and lowering their interest rates.  Without this ability to buy the debt and hide it on the books of the fed, interest rates could not be manipulated AT ALL. 

I hope people will internalize that.  None of this works by magic.  It's just simple supply and demand.  If the US treasury department increases the Treasury bond supply in order to pay for big government, wealth transfer programs (welfare for the poor) and corporate welfare then it has to try to sell these new bonds to someone.  Without the federal reserve buying 90% of them, there would be no buyers at the current interest rates.  Who wants to lock up money for 10 years at 2.5% per annum at a time when the annualized CPI (even by lying government standards) is well over 3%?  If there are no buyers then the con men must sweeten the pot to attract them.  In fact, Greenspan's predecessor Paul Volcker raised short term rates to nearly 16% for a short time in the early 1980s.  He didn't want to, he had to.  People around the world were losing confidence in greenbacks as a result of Nixon having defaulted on gold convertibility in 1971.  High interest rates coaxed them back in.

So how does the federal reserve buy this Treasury debt, seemingly without limit?  It can only happen because we have a dishonest money supply made up of fiat currency and fractional reserve banking.  With fiat currency, the federal reserve is unrestricted in how many new dollars it prints up.  And since 2008 we have learned that it can basically use them for any purpose it wants to: anything from propping up US and foreign banks to bailing out influential corporations like Harley Davidson and others.  A federal reserve note is called a "note" because that is the legal term for a debt instrument.  So in effect, the federal reserve can create new debt from thin air and use it to purchase anything it wants to in order to keep the Ponzi plate spinning.  In this way, the government picks winners and losers.  This is the essence of crony capitalism.

So you see, Greg is really talking about the symptoms: the manipulation of interest rates.  This is NOT the root cause of the evil.  The root cause is a fraudulent money supply.  Take away the fraudulent money supply and replace it with an honest one and the fed would no longer be able to increase the money supply on the sneak and at will.  For example, under a gold standard, more gold would have to be mined and put in the vaults before more currency could be issued.  This is the hallmark of an honest money supply: a feedback mechanism that constrains the powers that be from criminal behavior without anyone even looking twice at them for it.  In an honest money supply, if the money supply is increased the people can ask "why?" and "by what authority do you do it?".  In a dishonest money supply there are no controls and the good old boy system takes care of itself and leaves you and me hanging out to twist in the wind.

Now for most people, all of this might seem academic.  They don't see how it affects them but I assure you that it affects anyone who is bound to live under the system that uses the fraudulent and corrupt money supply.  In order to understand this, please go back and review what money is supposed to be which is a store of value.  Value can only be created through the labor of humans.  So money is supposed to be a store of labor.  If someone is creating fake money (which, if done by someone other than the government would be a crime known as counterfeiting) then they are effectively naked shorting human labor.  In other words, they get to own human labor that they never earned.

When you naked short something, you effectively devalue it.  If this devaluation is ongoing and systemic then it is tantamount to theft.  Theft of people's labor has a name.  We call it slavery.  A fraudulent money supply enslaves the population which is stupid enough to labor under it.  The people work day in and day out wondering why their labor never buys them the lifestyle that it would have bought them if they had been a settler in the early days of any country.  Their labor would have built them shelter, provided clothing and food, and would have afforded them to have a family which would have been their social security program.  Now all of these basic things are being pulled further and further from the people and the people have no clue why.   Laboring under a dishonest money supply is a clear form of slavery whether or not the people understand it.  Again, just because Madoff victims did not understand that they were being conned, did that make it any less true?  Of course not.  They were simpleton victims of a white collar criminal who was running a long con on them just like our government is doing to the people of the USA and other governments are doing to their people.