News & Analysis
Kaletsky: The Resiliance of Pure Fiat
Economic optimism is now official. The year ahead could be "a very good one for the American economy," Ben Bernanke, the chairman of the Federal Reserve, declared on Tuesday. If he turns out to be right, these words could probably be applied to the world economy as a whole. Since Bernanke, even more than other central bankers, has spent the past four years warning of perils such as the "fiscal cliff" and the dismal condition of the U.S. labor market, this statement, delivered in the carefully worded peroration of a speech to the prestigious Economic Club of New York, marks an important turning point. – Reuters
Dominant Social Theme: Let the good times roll. The party has just begun.
Free-Market Analysis: Reuters columnist Anatole Kaletsky has a decidely optimistic perspective when it comes to the current financial malaise afflicting countries around the world. He is a fan of Ben Bernanke's apparently and has been given a platform by Reuters to propose some non-traditional views. We wrote about him here:
TIME Spreads the Government Wealth Meme
"Sentiment," Kaletsky writes in his current editorial ("Economic Optimism Is Now Official"), "especially about government policies, is the biggest problem for the world economy today." Kaletsky will have none of it. He believes that 2013 will be a recovery year for the world and especially for Britain and the US. Outside of the Eurozone, he reports, economic statistics are clearly improving. Here's some more from his editorial, excerpted above:
Unemployment, though still high, is steadily falling. Banks are now adequately capitalized. Property prices have stabilized, stock markets are rising and credit conditions have returned more or less to normal. For much of this year, the main obstacle to hiring and investment decisions, according to many business surveys, has been uncertainty about politics and monetary policy. That uncertainty is almost over.
This may sound preposterous. After all, businesses and financiers have been obsessed all year with the euro crisis or speculation about Fed monetary policy or the U.S. presidential election or China's surprisingly chaotic leadership transition — and now the prospect that the United States will fall off a fiscal cliff, dragging down the whole world economy.
But that is the point. Political uncertainties have been resolved or dramatically improved in all the most important economies. Yet business sentiment is so negative that almost nobody believes this ... Best of all, the uncertainty about U.S. politics and monetary policy, which have preoccupied businesses and investors this year to the exclusion of almost all other issues, is about to disappear.
The fiscal cliff that looms in front of Washington, DC could still derail the US economy, Kaletsky admits, but he is optimistic here, too. "As long as Washington decides to avoid fiscal suicide, it hardly matters how."
For Kaletsky, "Once the political uncertainty [of the fiscal cliff] is neutralized, prospects for most of the world economy look pretty good." This is in keeping with Kaletksty's larger view that deficits are not as important as they've been made out to be. In a previous editorial, "Confessions of a Deficit Denier," he makes this case more strongly. "These countries' leaders should take a deep breath, relax and stop worrying about deficits," he writes.
The U.S. and British fiscal situations today are even less troubling — partly because two-thirds of the government debt issued since the 2008 crisis has been bought by the central banks. Since the Federal Reserve and the Bank of England are part of their respective governments, the bonds they own represent debts the government owes to itself. Once central bank holdings are consolidated within the government, the true burden of debt owed to the public falls to roughly 65 percent of GDP in both Britain and the United States.
This doesn't square with our view that a country like the US has some US$200 trillion in liabilities if one takes everything into account. And we figure Europe is in a similar situation. But Kaletsky is unapologetic.
He delights in idiosyncratic thinking when it comes to fiat money and how central banking technocrats can reconfigure debt and increase purported solvency. As chairman of the Institute for New Economic Thinking, he's floated a number of provocative ideas. Here's an excerpt from Wikipedia:
In 2012, Kaletsky was appointed Chairman of the Institute for New Economic Thinking, a foundation established after the 2008 financial crisis with $200m of grants from George Soros, Paul Volcker, William Janeway, Jim Balsillie and other leading financiers. INET was set up post-crisis to challenge the mainstream assumptions in contemporary economic research.
On his Reuters' blog, Kaletsky appealed several times the central banks to do "quantitative easing for the people." This solution would consist in enabling central banks to create debt-free money and inject it into the economy trough direct cash transfers to the citizens, instead of injecting money through the banking system. Kaletsky claims this radical solution "may be another idea whose time has come.
These latter solutions partake of the perspectives of such fiat theorists as Bill Still and Ellen Brown. The antecedents of such thinking can be found in the Fabian-oriented approaches of Silvio Gesell and Major Douglas.
Mutual credit and social credit have steadily been gaining in influence and we're not surprised to find that such eminences as George Soros and Paul Volcker are now starting to become public backers.
In numerous articles now we've pointed out that the United Nations is actively supporting similar systems (LETS) and that even Bitcoin might be considered suspect: The TOR security that Bitcoin users prize actually turns out to be a facility of the US military (DARPA) and there are certainly questions as well about Bitcoin's mysterious founder.
The bottom line for Kaletsky and backers of pure fiat systems generally is that they posit that money can work well when it is directed by a few technocrats empowered to manage currency for everyone else. Kaletsky can be seen as a kind of professional optimist.
For Kaletksy, Still, Brown and others, the current system is a good one and the naysayers that believe in free-market money (gold, silver, etc.) and competitive currencies are positing unecessary solutions.
Conclusion: For such people, technocracy is an end of itself, and those who doubt its efficacy are uninformed naysayers who don't fully appreciate the resiliance of the current system.
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Posted by RR on 11/28/12 03:20 PM
The aim here seems to be at Bill Still, Ellen Brown and Silvio Gesell. They seem to have a rapidly growing popularity , helped by the internet revolution.
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Posted by Danny B on 11/27/12 10:50 AM
Insider threat policy
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"reinforce our defenses against both adversaries and insiders who misuse their access and endanger our national security."
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Posted by Danny B on 11/26/12 11:03 PM
Dear Bell, this is completely off topic but, I wanted to bring it to your attention.
Valery Jarret has promised vengeance against ALL who opposed obummer. It's usually not spoken so open.
Next, we see a huge blowout from the Benghazi fiasco. Heads did roll. Now, there is reportedly a direct attack against a palace coup. Dunno what to make of it.
Click to view link
Reply from The Daily Bell
It is simply more disinfo. So Iran's Press TV wants us to believe the "Jews" have targeted President Barack Obama who is seemingly a creature of the larger elite establishment. We are supposed to believe that Obama is standing up against the Jews and Israel and thus is targeted for assasination ...
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Posted by Summer on 11/26/12 10:41 PM
Hold on a minute, is this the guilty by association stuff again? It's getting boring!
The UN purports to be against human trafficking and poverty. Are induviduals working on this with them bad eggs too? Come on.
Please let's be serious and talk about the merits of Brown and especially Gesell's work. Isaac Newton calculated the destructive nature of compound interest. Let's look at the issue - the effect of compound interest.
Reply from The Daily Bell
Summer, it is simply a fact that money has a time value. Interest does not enslave people. Governments and those that stand behind governments are usually the slave-makers.
In a relatively FREE society (slavery being the exception) such as took place in the US pre-Civil War, interest was hardly a big problem for many. The industrial revolution was beginning. People traveled easily, if locally. Many farmed. Gold and silver traded freely, alternative communities like the Shakers had sprung up, and gold and silver discoveries afforded people the opportunity to generate wealth beyond what was ordinarily available within social norms.
In fact, the power elite apparently attempting to dominate needed to create a war to do it.
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Posted by alexsemen on 11/26/12 05:00 PM
This campagne of unjustified "directed optimisme"on command, was previousely used and abused.
The result it is as we can see. Bluff from talking heads !
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Posted by mava on 11/26/12 03:42 PM
@DannyB:
"... his ideas that U.S. debt is easily manageable appear to be aimed at keeping investors from fleeing the markets... "
Agree. I think this is exactly what all the fuss is all about. The powers that be are desperate with respect of the people withdrawing from the game of earning the game points. The current thought seems to be that those fleeing might be persuaded to keep playing if they too are allowed to have some of the money created out of thin air.
Whether they will be persuaded or not, we shall see, but one thing is clear, that this will only prolong the hesitation before stepping off the cliff.
@ Jeanna:
Absolutely. The same picture is what I see where I am.
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Posted by jwhitehawke on 11/26/12 02:38 PM
Then comes the reality... .. The FED continues to utilize the indefinite QE3 while sending billions overseas to try and keep the (almost useless) dollar as the benchmark of the world. T Bills dolled out with a a return that doesn't even meet the rate of deflation. All bullsh*t.
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Posted by 1776 on 11/26/12 02:04 PM
Published on Sep 14, 2012 by SchiffReport
The geniuses at the Federal Reserve have concocted a bold new plan to revive the U.S. economy -- print a bunch of money, loan it to Americans at super low interest rates so they can speculate on rising real estate prices, extract the appreciated equity and spend it on consumer goods. In other words, build an economy of real estate, by real estate, and for real estate. The only problem is we've been there and done that. The last time it almost destroyed the U.S.economy. I guess almost isn't quite good enough for the Fed, so now it's determined to finish the job.
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Posted by Abu Aardvark on 11/26/12 01:10 PM
boatman on 11/26/12 12:19 PM:
the only way debtholders will be repaid is more printed money.
so it's default... ... ... ... ..or default thru inflation.
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By the way, AN URGENT MESSAGE:
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Posted by Frank on 11/26/12 12:19 PM
Fiat paper money will fail and is well on it's way to failing. You can't evade economic laws, but you can temporarily postpone their effects... however in the end, when economic reality sets in, the effect will be much worse.
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Posted by boatman on 11/26/12 12:19 PM
the only way debtholders will be repaid is more printed money.
so it's default... ... ... ... ..or default thru inflation.
they always pick the latter... ... ... and this time it will be a dooosey.
Reply from The Daily Bell
Agreed.
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Posted by boatman on 11/26/12 12:16 PM
i want what 'HE"S HAVING!'
oooh... ... ... .then again maybe i don't!
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Posted by Abu Aardvark on 11/26/12 12:02 PM
"In 2012, Kaletsky was appointed Chairman of the Institute for New Economic Thinking, a foundation established after the 2008 financial crisis with $200m of grants from George Soros, Paul Volcker, William Janeway, Jim Balsillie and other leading financiers. INET was set up post-crisis to challenge the mainstream assumptions in contemporary economic research.
On his Reuters' blog, Kaletsky appealed several times the central banks to do "quantitative easing for the people." This solution would consist in enabling central banks to create debt-free money and inject it into the economy trough direct cash transfers to the citizens, instead of injecting money through the banking system. Kaletsky claims this radical solution "may be another idea whose time has come."
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What's that supposed to mean? That Soros, Volcker and friends may fork over cash when some dude opens up a blog in order to praise "interest-free" fiat-money, demonize free-market thinking and disseminate stark nonsense like "debt and inflation don't matter"?
Hey, I wonder ... NOT if someone already did!
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Posted by Jeanna on 11/26/12 11:30 AM
" Best of all, the uncertainty about U.S. politics and monetary policy, which have preoccupied businesses and investors this year to the exclusion of almost all other issues, is about to disappear."
You bet! We are now taking action to fire any unnecessary employees, comply with the govt's new definition of a less than 30 Hr work week, and hunker down.
I do wish that people would quit thinking that corporations pay taxes. They may comply with gov't regulations to remit monies, but every tax imposed upon business is deemed a cost of doing business just like copy paper, pens, rent, the electric bill, etc. All costs of doing business are included in the price of the product sold. The customer pays the taxes.
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Posted by Don from the Republic of Lakotah on 11/26/12 11:16 AM
"These countries' leaders should take a deep breath, relax and stop worrying about deficits,"
No worries. "Jawboning" leaders merely pretend to worry.
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Posted by Danny B on 11/26/12 10:47 AM
Dear Bell, you already know my neo-Luddite views. You know that I prefer social credit to mass culling. I do believe that Kaletsky has ideas worth considering. But, his ideas that U.S. debt is easily manageable appear to be aimed at keeping investors from fleeing the markets.
His idea of a social dividend seems to be implemented fairly successfully by Lula in Brazil. I haven't read about that program lately.
"the bonds they own represent debts the government owes to itself."
The insurance and pension funds may not see it that way.
Why do I get the idea that certain people/powers are introducing the idea that currency inflation is just not doing the job adequately? Inflation must be augmented by default.
Private industry casts off unneeded workers.
Marxist/Hegelian GOV absorbs them. Taxes pay for this. As fewer and fewer people are in the workforce, income tax revenues shrink. Much of the work is being done by machines. The machines are owned by large corporations that use regulatory capture to avoid taxes. Tax revenues are dropping as capitalism gets ever more efficient.
The Hegelian dialectic sees an ever-growing GOV workforce but, this needs ever-growing revenue. A falling wage base combined with an ever more sheltered corporatocracy results in an ever-shrinking source of funding.
The Republicans are now talking about breaking their promise of no new taxes. Seems that there is a growing awareness that an ever-shrinking income base for GOV will eventually create insurmountable problems.
Reply from The Daily Bell
His idea of a social dividend seems to be implemented fairly successfully by Lula in Brazil. I haven't read about that program lately.
C'mon Danny B. You think Brazil is role model for the West? They've got terrible racial tensions, massive inflation, a ruling clique backed by the US military, an oligarchical society and pervasive poverty and violence.
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Posted by dave jr on 11/26/12 08:37 AM
Kaletsky: "Once central bank holdings are consolidated within the government, the true burden of debt owed to the public falls to roughly 65 percent of GDP in both Britain and the United States."
It's magic! Hocus-pocus and TADA! You see, new debt doesn't realy even exist! Now central government and central banking can work together and print coupons that business is bound by law to accept for their goods and services. Now we can all get back to work! Oh Boy! And even better yet, government can grow unlimited. The regulatory agencies can now smother what is left of the free market segment with their extra layers of fat. Now I am reeely optimistic! NOT.
Kaletsky: "This solution would consist in enabling central banks to create debt-free money and inject it into the economy trough direct cash transfers to the citizens, instead of injecting money through the banking system."
Of course he is talking of welfare. So people do not have to help produce goods and services. They can sit around and wait for their fair share of fed/gov coupons which can buy all the things that come from... hocus pocus... we'll just have to sign on to find out.
