patrick.net

This is a shorter version which I haven't seen:

http://m.youtube.com/watch?v=d3mfkD6Ky5o

Here is the trailer:

http://www.youtube.com/embed/-wMU2HdoURA

".. financially savvy PatNet community-"

ROFLMAO

I get to the video later.

Indiana Jones says

This is a bit long, but if you get through it I have a few questions for the financially savvy PatNet community- how accurate is this documentary about the financial system? The focus is on Europe, but does it apply to the US as well? Is the banking system truly creating money out of thin air?

I watched the and from the trailer they are correct. You see the problem is that government(s) and central banks having control of the money supply. Another problem is that the currencies are not tied to any real tangible assets like gold so governments and central banks can use debt to leverage their other debts and create more debt (print more money).

I also stated the same similar message in this post http://patrick.net/?p=1240638&c=1070937#comment-1070937.

Another problem is when governments increase the money supply, is that nearly all the wealth goes into assets, usually the stock market and housing market. But prices of goods also tend to rise, in fact there was an article last week by zero hedge saying that food prices have risen by 19% so far this year.

So yes what you see is a world wide problem and it's a world wide problem because all governments have central banks and all central banks operate pretty much the same way and they have been doing so since 1971 ever since currencies were no longer tied to gold. But don't let that fool you the FED (U.S. Central Bank) has actually being doing it since 1918 but not to the great extent to where we are now.

It seems like the players are the central bank, the private banks and the government. Are they all just in cahoots with each other? Are they all old fraternity brothers doing favors for each other? Or did one of them start this process, and then infiltrate the other? Was it that the central banks were so powerful, then infiltrated the top government positions and private banks? Or government wanted to create money to resolve debt, take over another country or some other issue, and got the central bank and private banks to be complicit?

spydah_hh says

I also stated the same similar message in this post http://patrick.net/?p=1240638&c=1070937#comment-1070937.

If we do not have true capitalism now, did we or any other country in the world ever have it?

The thing to understand is that when you borrow money from the bank you are creating money out of thin air.

Part of the money that the bank has is borrowed from the FED. The FED creates the money out of thin air.

The thing to realize is that the money is debt. When you borrow from the bank it is debt.

I suppose you could do away with fractional banking. Which would make a more stable banking system.

Saving that when the banks fuck up DO NOT BAIL THEM OUT. That way the debt is required to die with the last person holding the debt. This has huge implications. If you are interested ask me why.

Saving that require a consistent reserve ratio. And a consistent interest rate. As these two are disingenuous tools of cronyism. If you are interested ask me why.

There is no problem with deflation. From 1776 until 1912 there was 0 inflation, no problem.

indigenous says

There is no problem with deflation

If you can capture the growth of the economy by taking 0 risk and just keeping gold in a vault, what is the incentive to take risks and circulate money?

indigenous says

There is no problem with deflation. From 1776 until 1912 there was 0 inflation, no problem.

What were the currencies involved, how did they grow?
How did gold reserves in the US grow during that period?

Heraclitusstudent says

If you can capture the growth of the economy by taking 0 risk and just keeping gold in a vault, what is the incentive to take risks and circulate money?

That question is not relevant to what I'm talking about.

Heraclitusstudent says

What were the currencies involved, how did they grow?

How did gold reserves in the US grow during that period?

The dollar. The definition of inflation is an increase in the money supply. The money supply grew commensurate to the economy. I don't know the mechanics of it, but too much and you have inflation. too little and you have deflation.

If you have too little then the rich guys will not be able to profit off of inflation too much and the little guy takes it in the ass.

But as far as it being too little it just means that the money has more value. It does not mean there will be a depression. There will be an adjustment to the new value of the money as there was in the early 30s but that would been over with rather quickly, if not for the state meddling, it had to be done because of too much supply in the 20s.

I have heard 3 takes on this that seem to make sense to me:

Michael Pettis says it was because the dollar was undervalued and that the US used mercantilism to increase the GDP of the US at the expense of other countries, in the late 20s.

The Austrians says that is was generally too much money supply in the late 20s

David Stockmans says that the excess money supply came from inflation from WWl. And because of manipulated bond market. Which IMO is mercantilism just like China is doing.

Bernanke says it is because of a lack of money supply in the early 30s, presumably because of 1/3 of the banks going under at that time. This is specious as when looking for the answer to a problem logic dictates the cause of the problem is earlier in the sequence, which Bernanke ignores, as well I might add does Milton Friedman.

indigenous says

Saving that when the banks fuck up DO NOT BAIL THEM OUT. That way the debt is required to die with the last person holding the debt. This has huge implications. If you are interested ask me why.

Saving that require a consistent reserve ratio. And a consistent interest rate. As these two are disingenuous tools of cronyism. If you are interested ask me why.

Why?

Indiana Jones says

Saving that when the banks fuck up DO NOT BAIL THEM OUT. That way the debt is required to die with the last person holding the debt. This has huge implications. If you are interested ask me why.

Because if you do not allow these companies to go bankrupt the FED prints money to keep the companies afloat, (3-6 trillion in the last 6 years), this money creates the potential for inflation, and it is taken away from small business. This money is then spent by the the companies that are bailed out on things that will not create economic growth; they park it in their in house account and get paid interest by the FED for excess reserves, or they buy back their own stock, or they play arbitrage, but they don't lend the money to business' that need to borrow money.

This is because investment drives the economy, over investment creates a recession. This is why bonds are the #1 predictor of the economy. As this is when business can borrow money for less money and invest in producer goods.
To borrow a quote from Captain SU "business always grows in new ways after a recession it never grows in the same way it did before".

The recession is cathartic for the economy as this is when business's that are failing go bankrupt and are cleared from the landscape. The debt that they owe is reconciled through the bankruptcy court. The assets are then put to use in another business and the debt is paid at a fraction of the debt. This is necessary in order to make money available for new small business.

If the banks don't lend to small business the economy doesn't grow.

What is happening right now is that banks are not lending, but instead are doing the aforementioned activities, which does not grow the economy.

The analogy is a forest that government does not allow any trees to be harvested or any fires to burn. Eventually the trees over grow and take all of the water and some don't get enough water or sun, so they become susceptible to disease, the Pine Beetle then becomes an epidemic, so then when there is a fire it wipes out the whole forest.

Indiana Jones says

Saving that require a consistent reserve ratio. And a consistent interest rate. As these two are disingenuous tools of cronyism. If you are interested ask me why.

When interest rates are held down or/and the money supply is increased it creates inflation which creates over investment. Currently the over investment is in housing, the stock market, luxury goods. It also devalues the currency.

Equally important to going off of the gold standard was going to a floating exchange rate. This quote from Professor Rothbard:

"The chaos and the unbridled economic warfare of the 1930s points up an important lesson: the grievous political flaw (apart from the economic problems) in the Milton Friedman-Chicago School monetary scheme for freely-fluctuating fiat currencies. For what the Friedmanites would do — in the name of the free market — is to cut all ties to gold completely, leave the absolute control of each national currency in the hands of its central government issuing fiat paper as legal tender — and then advise each government to allow its currency to fluctuate freely with respect to all other fiat currencies, as well as to refrain from inflating its currency too outrageously. The grave political flaw is to hand total control of the money supply to the Nation-State, and then to hope and expect that the State will refrain from using that power. And since power always tends to be used, including the power to counterfeit legally, the naivete, as well as the statist nature, of this type of program should be starkly evident."

This and going off of the gold standard has landed us in what we see today.

Indiana Jones says

I have a few questions for the financially savvy PatNet community- how accurate is this documentary about the financial system?

pure left wing propaganda..the left shoved nonsense into the schools and left out education people about technology, industry, economics... so your left with people who never were educated on economics. To say the world is run by Goldman Sachs is a far fetch nonsense.

For the most part it is very accurate... sadly. The series of articles below speaks to the problem as it applies to the United States. When the Federal Reserve was formed in 1913, the U.S. financial system became owned and operated by a cartel of crooks that still own it today. And "yes", the Fed creates money out of thin air.

http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-end-of-the-federal-reserve-system-part-1/