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When the Directors of the Bank of England asked Benjamin Franklin what was responsible for the booming economy of the young colonies, Franklin is reported to have said:

“That is simple. In the colonies we issue our own money. It is called Colonial Scrip. We issue it to pay to pay the government’s approved expenses and charities. We make sure it is issued in approved proportions to make goods pass easily from the producer to the consumers…In this manner, creating for ourselves our own paper money, we control the purchasing power, and we have no interest to pay to no one. You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they neither can give away nor spend but a tiny fraction of the money people need. Thus, when your bankers here in England place money in circulation, there is always a debt principle to be returned and usury to be paid. The result is that you always have too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unpayable debt and usury.”

(From Web of Debt by E. H. Brown)

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Musings, Uncategorized bank, credit, franklin, money

There are moments in history that define future decades and even centuries.

Perhaps this is just such a time.

Has there been a time of such fear, uncertainty, and doubt in recent memory? What, exactly, is going on here?

A powerful lens into the situation would be the lens of the middle class in America in 2010.

They don’t want to be in stocks because the equity markets are going to crash.

They don’t want to buy bonds because they are now just printing them and there’s no way they will ever be able to pay off .

There are going to be defaults within the next couple of years and they don’t want to keep a lot of cash in an IRA because Timothy Geithner has his eyes on that and is thinking about new regulations to force all cash in retirement accounts into treasuries to save USD. This will be throwing money down the drain.

It is indeed possible that the government will essentially confiscate the savings of the middle classes by forcing it all into treasuries as a last ditch attempt to save the dollar. This also, is throwing money down the drain.

The question is will the middle class finally revolt before they can push it through?

All eyes are on the middle class right now. Only entertainers want all eyes on them. If you’re not an entertainer and all eyes are on you, you are most likely little more than prey.

What say you, fight or flight?

——–

Just saw this, by the way…looks like the middle class is in the news.

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Uncategorized 401k, investments, middle class

Richard Nixon, to his credit, held out as long as could before closing the gold window but when he did it was like removing the gas gauge from an automobile. The only reliable way of measuring value was discarded and off we went into a dubious future of “perceived value”.

So, what happened to force Nixon to take away the gas gauge, so to speak? The Vietnam war had driven America deeply into debt and France started to understand that there might not be enough gold to back up all those dollars so it asked for their $300 million in gold. That hurt. In 1971, Britain, after suffering the largest monthly trade deficit in their history requested their gold also…one third the gold reserves of the United States.

If the price of gold had been raised, that would probably have fixed the problem but it was decided to stick with the $35/oz price and Richard Nixon followed the advice of economist Milton Friedman and took the dollar off the gold standard, paving the way for the printing presses to start printing fiat currency.

True, there were problems with a gold standard. The price of gold fluctuated and was subject to manipulation by speculators and it also failed as global reserve currency because there was simply not enough gold to do what it needed to do.

Antal Fekete, writing in the Asia Times, has an opinion of all this, “This default, and the making of the dishonored debt money, was the cause of the destabilization of interest rates, as well as the explosive growth price volatility that has been plaguing the world ever since, causing ever greater economic distress.”

The gold system was flawed but the system of floating exchange rates has proven much worse.

We’ll end with a quote from Milton Friedman himself, “The government solution to a problem is usually as bad as the problem. “

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