David Wolman has written a book called The End of Money.
In the book, Wolman asks:
‘Yet how different is Kim Jong Il’s counterfeiting, really, from the decision to spend $700 billion in borrowed money to kick-start economic growth, from creating more than $1 trillion out of thin air to help clean up the housing bubble crisis?’
It’s a fair question, and we’ve asked similar questions during the past four years.
But right now, those who control the printing presses don’t see their actions as counterfeiting. They call it stimulus, support and monetary policy.
They even create fancy names to disguise what they’re really doing. They call it ‘quantitative easing’.
But they can call it what they like. It all means the same thing, devaluation and destruction of wealth…
We haven’t read Wolman’s book in full, so we can’t recommend it. But from the excerpts we’ve read it appears to be a combination of an historical look at the history of money and some thoughts on the next logical step for money.
In an interview with the BBC, Wolman says:
‘We don’t transact using anything of real value – food, electricity, blankets. I give you this worthless slip of paper and you give me dinner or you educate my children or you provide me with healthcare. Or I give you a digital version of this useless thing and it somehow works. The money supply is already driven by the return key so the cat is out of the bag on that one.’
The Cat is Out of the Bag for Central Banks
Central banks now openly practice what they had previously done in secret. They have – if you like – come out of the closet: ‘Yes, we are money-printers and proud of it!’
Let’s call it ‘Bankers Pride’.
They even have their own bankers-only events. Any non-bankers trying to get in are seen as a potential trouble-maker. Guards will turn them away at the door.
For many people it’s easy to spot a central banker just by looking at him or her. It’s like having a built-in ‘Bankdar’ (that’s a contraction of banker and radar, in case you’re wondering).
But comparing central banking to homosexuality isn’t fair to gay people. Any private behaviour between consenting adults is clearly different to the fraud forced on the public by central bankers.
Central bankers have become a private cartel of unelected counterfeiters. They force their decisions on millions of unsuspecting civilians without their consent.
This used to be a well-disguised secret. The kind of secret you keep when you’re afraid that the truth will ruin you.
But now the bankers are out of the closet and proudly proclaiming their fraud in public. Emboldened by the public’s indifference, they’re prepared to ramp the action up further.
The Difference Between Legal and Illegal Counterfeiters
Last night, Bank of England governor Mervyn King gave his annual speech to the Lord Mayor’s Banquet for Bankers and Merchants of the City of London.
In the speech he said:
‘The view that further monetary stimulus is, in present conditions, simply ‘pushing on a string’ is, in my view, too pessimistic. The creation of money by the Bank of England has helped offset what would otherwise have been an extremely damaging contraction of the money supply…
‘There is a widespread misunderstanding that the impact of an expansion of the broad money supply is limited to the first round effects of gilt purchases. But the private sector which sells gilts to us then uses the money thereby created to purchase other assets, including private sector paper.’
You can take two things from this small extract. First, get ready for the Bank of England (BoE) to print more money. As a percentage of GDP, the BoE has now printed more money than the US Federal Reserve, as the following chart shows:
Second, it shows Mr. King doesn’t understand the impact of money-printing on bond traders. Sure, many bond traders have used the proceeds from selling bonds to the BoE to buy private sector debt.
But private sector debt is inherently risky. A private company could go bust. A sovereign country that prints its own money typically won’t go bust.
So rather than buying private debt, bond traders have simply taken their money from the BoE and then bought more UK government bonds…banking on the odds of the BoE printing more money to buy more bonds. Hence UK bond yields near record lows.
But Mr. King made another interesting comment. Opening his speech, he said:
‘Five years ago, at this same dinner and just before the crisis began, I quoted a banker who had said to me, ‘I cannot recall a time when credit was more easily available.’ Today, the sentiment is exactly the opposite.’
To satisfy our curiosity, we checked out Mr. King’s speech from five years ago. And indeed he did quote the banker marvelling at the easiness of credit.
But, that wasn’t all he said in the speech. He said something much more interesting…
Can You Trust Central Bank Money?
And it would be worth Mr. King’s while to reflect on it before he unleashes the printing presses once more.
Here’s what he said on Wednesday, 20 June 2007:
‘Behind the design of our monetary institutions is a simple principle. I described it last October in a lecture at Kirkcaldy. It is that the value of paper money depends on trust. Trust that it will hold its value. Trust that others will accept it as a means of payment.
‘In particular, our banknotes must be trusted by the public – cash still accounts for over 60% of the number of transactions…
‘Imagine my concern, therefore, when, after 3½ years as Governor, I read the following report from the Wolverhampton Crown Court. ‘A judge demanded to know why police failed for three and a half years to arrest a wanted Birmingham man – when all the time he was living at home… Adam Smith, suspected of passing forged £20 notes, had a fixed address in Edgbaston and was picking up benefits.’
Mr. King’s 2007 speech was all about the sanctity of trusting paper money. How the bank had developed new security features for £20 pound notes that would deter counterfeiters and ensure complete faith and trust in paper money.
In last night’s speech – to use Mr. King’s own phrase – ‘the sentiment is exactly the opposite.’
The Bank of England, like all other central bankers no longer feels the need to use words like ‘trust’ when it comes to the money supply.
The cat is out of the bag. The bankers are loud and proud that when the economy starts to falter they can simply print more money.
And if you needed more evidence, what can explain the rally in US stocks overnight? This report from Bloomberg News should explain things:
‘Speculation grew that the Federal Reserve will discuss stimulus efforts at its meeting next week after reports showed jobless claims unexpectedly climbed by 6,000 to 386,000 last week and the cost of living fell by the most in more than three years.’
In other words, the market is priming itself for more money-printing.
All up, David Wolman is right, we are approaching the end of money. The end of paper money, that is. But that’s not to say replacing worthless paper money with worthless electronic money will be any better. Because it won’t be.
The only genuine solution is to end the paper money and central banking experiment and return to real money – gold.
Cheer,
Kris.
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