Resolution #1: Let’s Call Things What They Really Are in 2014

The Status Quo system is failing. Its collapse will be messy. Starting to call things what they really are is a necessary first step to working with this reality.

Longtime correspondent Harun I. has offered a refreshing resolution for 2014: let’s start calling things what they actually are, rather than continue using officially sanctioned half-truths and misdirections. Language defines the context, meaning and agenda–in other words, everything. If we continue using Orwellian language, we get an Orwellian world of officially sanctioned deceptions passing as reality.

Here are Harun’s suggestions should we accept the value of Calling Things What They Really Are. This may well be one of the most insightful explanations of our financial system you will ever read:


“Let’s start off the new year by resolving to call things exactly what they are with words a 5th grader would understand.

Bank Deposit: An unsecured personal loan. The bank can do whatever it wishes with the money. The money may not be returned (ironically, people pay for this “service”).

Fractional Reserve Banking (Lending): Leverage. A bank has only a fraction of what it owes to its depositors. In a 10% fractional reserve system, the bank is only required to have ten cents of every dollar in its vaults.

The IMF is suggesting a 10% default by European banks. In a 10% reserve system, this is a reversal. Effectively, one person is going to get their money back and nine others are not. This may reset the banking system but the economic consequences due to the loss of purchasing power at such a scale will be significant.

Bank Bailout: The bank has lost its depositors money and thence government forces the public to borrow money they have a) already earned, b) from the very banks that supposedly have no money, and c) do so at interest (which must be borrowed). Effectively it is a failure and therefore a default.

Bank Bail-in: Every dollar placed at a bank is a dollar it owes to someone (liability). When the bank has lost all or a portion of its depositors’ money, it cannot return what it owes. Rather than forcing the people that are owed money by the bank to borrow money to put back in their accounts, the bank merely points out that it doesn’t have the money. This is a default.

Default = Default.

Money: Has no other purpose than to allow people to trade things they have worked to make or services they have performed. Holding on to it may allow one to trade for more or less of a particular good or service in the future. Money is a promise but not a guarantee that it will be exchangeable for something in the future. It is credit and debt.

Without a tangible good or service to trade money is worthless. If I have made a fine overcoat and you, with your skills in carpentry, have made an exquisite chair, we can trade these things directly. In this case money is worthless. It does not work the other way around. Goods and services do not become worthless in the absence of money. My coat will still have value even if I choose to wear it to keep warm. Your chair will have value even if you just choose to sit in it.

This is a critical distinction — and it has been completely lost on just about everyone. We have become completely divorced from the goods and services we make and provide and the money we use to trade these goods and services. At the core of this divorce is Fractional or zero Reserve Banking.

Let’s propose that you and I traded our goods and we deposited our goods in a bank. The bank immediately pledges my chair and your coat to ten other people. Some time later I engage in a redecoration of my home and want my chair. Winter comes and you want your coat. Immediately there is a problem. The bank owes our goods to ten other people. The only way for them to resolve this situation is to either get everyone to accept a fraction of the coat and chair, which of course isn’t very practical, reduce their liability by giving one person the chair and one person the coat and the other ten people get nothing (bail in), or get you and I to bail them out by producing eleven more chairs and coats (10 plus interest).

You see, if in the definitions of bailout and bail in we simply substitute the word moneywith the words goods and services, the situation loses its ambiguity. When we understand internally what money represents, then we understand what the term Bank backstops really mean. A bank can only be backstopped, bailed out or bailed in, by labor because that is the only thing that “money” represents.

If we understand the definition of money then when we discuss the Federal Reserve’s leverage, e.g. 72 to 1, we immediately understand that for each unit of labor performed 72 are owed. If for each hour of labor 72 is owed, how is this ever make that up? The clever person would pipe up and say, I’ll just work for 72 hours straight. But for each of those 72 hours he has worked he now owes 72. When we understand this, we understand that it is an event horizon.

We then understand that every bit of QE (quantitative easing) is a pledge of labor someone must perform at some point in time and that the rate of performance required is impossible.

If we now understand money and leverage and are to propose debt forgiveness then we must embrace rather than bemoan austerity because austerity is the necessary result of 10 other people not getting a chair to sit in or a warm coat for the winter.

With these concepts firmly in tow we begin to see that all of this hand wringing over paying off the $17 trillion in debt is, at best, a fools errand. Yes, in public politicians try to sooth us by appearing concerned. But behind closed doors, the Fed, Treasury, the Congress and the Executive, are all trying to figure out how we are going to borrow more so that over the next doubling period (about 10 years) debt will expand to a necessary $34 trillion.

Some additional clarification may be needed to explain leverage and work. At 72 to 1 the other option is to create 72 units in the time it takes to make one. In other words, if it took you and I one month to create our goods, we must create 72 coats and chairs in that one month. Broken down into hours, if we worked at full capacity 8 hours per day to create one coat and chair, we must do enough work in that 8 hours to create 72 coats and chairs.

Ultimately, work is nothing more than an exchange of energy, and the equation for any exchange of energy is quantifiable and finite (the equation must always balance). If we measured labor output in calories instead of money, the deception disappears. People may not be willing to expend 10 calories for 1. We would also understand that 1 calorie cannot create 10.

These concepts (thermodynamics) are esoteric to the point a 5th grader would have trouble understanding. But what is easily understandable is that if we all did the same work everyday but got less food because of an increase of incoming workers, yes, we would all have food – and we would all soon become malnourished or starved.

How would people react if the Fed said that for every loaf of bread it takes out of the system 72 loafs of bread will disappear?

We must also understand that a lever transmits torque, it does not create more torque.

It is at this point of awareness that it becomes clear that to balance the equation, it is unavoidable that people are not going to get most or all of what they have been promised (austerity). It is at this point that the sober realization arises that we have to dramatically change our expectation of the future.

Credit: Allows trade of something for a promise. Regardless of whatever expectation that may exist, something has been traded or given for no service performed or product yet created. Simply, something has been traded for nothing.

Federal Reserve System: A group of secretly privately owned banks (which, logically were among those who lost all of their depositors money and most certainly compose the primary dealers), that control the global money supply by making more or less credit/money available. It is also supposed to regulate banks within its system.

Even if this system functioned as designed rather than what it has morphed into, it still reads: a subsidiary formed but not funded by member banks and sanctioned by government to lend money to corporations and member banks (to themselves) against strong collateral (which no other bank would touch). Meaning the assets they own are good, but nobody wants them (i.e. the assets are worthless). In essence, this gets those great and wonderful assets off corporation’s and member bank’s books at full value.

Today this subsidiary of the member banks (the banks that own the Fed), loans money to its parent banks to buy all sorts of debt (mostly government debt), then goes about removing that debt (asset) from its parent bank’s balance sheet by buying it from them at full price, regardless of what it would have fetched in the market place.

At the most cursory glance, one begins to see how this farcically incestuous relationship would open the door to cronyism, political capture, monetary dominance, and serious abuses of public trust. Whether there is an awakening on the part of of the public is irrelevant. This system is failing. Its collapse will be messy.

There is no need to fret over debt or the monetary system, or the Feds economic and monetary “models”. There is no need to grouse about their manipulations. These things are destined to fail and are already doing so. What we will do in the aftermath of their complete failure, however, is probably of utmost importance.”


Thank you, Harun, for an excellent start in Calling Things What They Really Are. Off the top of my head, here are two more:Capitalism: in the U.S. and global economy, this is a cover-word for crony/State capitalism, in which the Central State (rather than the marketplace) chooses the winners and losers.

Growth: Heavily manipulated statistics that reflect the increasing dominance of crony/State capitalism, passed off as “growth” in the real, lived-in economy. Those crony cartels that are receiving the Federal Reserve’s “free money” from quantitative easing (QE) are “growing,” and everything that isn’t receiving the Fed’s “free money” is stagnating.

I am sure you can add your own list of “calling things what they really are.”

 

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9 comments on “Resolution #1: Let’s Call Things What They Really Are in 2014
  1. jogador says:

    I’m fluent in 6 languages, its almost impossible to trick polyglots with new words :p

  2. Danny Cunnington says:

    Labeling is very important to propagandists. For instance the latest one which describes anyone who follows alternative media and disregards the establishment is now, “An anti-government theorist.”

    A really silly label is “Climate denier.” Do these people deny that there is a climate? A better term would be “A global warming blasphemer” or “A climate change heretic.”

    A blasphemer is someone who holds a religion up to ridicule or scorn and a heretic is basically a free thinker who won’t subscribe to a usually religious doctrine.

  3. Capt. Ray says:

    @ Danny

    I came up with “denier”…

    That was after some back and forward discussions.

    I blame them on denying change of every bodies (real world) environment. Be it global warming our cooling, the point is that everywhere there is pollution and change in weather patterns.

    Some argue it’s for the better, my opinion is that it is for the worse.

    That aside. Categorically denying stuff that is observable deserves, imo, labeling.

    was funny though to hear Diann Rheem (?) From npr using that word.

    Btw, i don’t tap myself on the chest, there are perhaps more people who, in that same period came up with that term… But funny it was!

    :D

  4. Danny Cunnington says:

    @Bongo, realseeds.co.uk is the place to buy especially in the UK. I always get a bulk order for all the neighbours (for delivery by post in the Netherlands), because the post costs more, at least €15,00.

    All seeds can be saved but it’s up to you to control cross pollination. The seed packets cost around £2.00 which is no more than the F1 Hybrid crap in the garden centre.

  5. mijj says:

    Capitalism: Inevitable Fascism.

    Socialism: Inevitable Fascism.

    Anarchism: A blissful self-sustaining self-optimising social/environmental adaptive system. Emerging out of self-organizing network of individuals’ innate nature and environmental circumstances – striving for a balance of economic, spiritual, and physical wellbeing.

    Communism: Inevitable Fascism.

    .. note: i may be biased.

  6. mijj says:

    ps:

    for a comparison of Anarchic (emergent order) vs. Fascist (centrally ordered) Civilizations:

    The BBC TV Documentary by Terry Jomes compares the Celts and Romans (puncturing the cliched pro-roman propaganda)

    The BBC TV Documentary by Terry Jomes: Celts vs. Romans:
    ——————–
    (for Brit browsers):
    http://www.youtube.com/watch?v=iKGVqXznpNU

    ( in 4 parts for US browsers):
    http://www.youtube.com/watch?v=t-FWzSoG-i4&list=PL2324387B8C4DF9EB

    ….
    another example of Anarchic (emergent) Civilization vs. Fascist Civilization:

    Germans vs. Romans
    (which is part of this cliche puncturing Terry Jones documentary: “The Savage Goths”)
    —————–
    (for UK browsers)
    http://www.youtube.com/watch?v=DkV3OR5jUtE

    (for US browsers)
    http://www.youtube.com/watch?v=VtxSeGkeyKk

  7. Litoshi says:

    CONSPIRACY THEORIST………. truth seeker

  8. jack says:

    If the names are not correct, language is not in accordance with the truth of things. Confucius

    Misunderstandings about money have been and continue to be intentional. They derive neither from the nature of money nor from any stupidity of the public…the International Usurocracy aims at preserving intact the public’s ignorance of the Usurocratic System and its workings…
    EZRA POUND

    No one has the right to be a moneylender save him who has it to lend.
    THOMAS JEFFERSON

    “Banking was conceived in inequity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the costs of your own salary, let them continue to create deposits.” Sir Josiah Stamp – Bank of England

    “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
    Henry Ford

  9. Sharron says:

    Hi mates, how is everything, and what you wish for
    to say on the topic of this article, in my view its truly remarkable in favor of me.

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