Colin's Cornucopia

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The Source of Money

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Who will have the last laugh?

So just what has brought us to this state in which we find ourselves in 2010 and do we need to do something radical to change things? We are entering a new phase in the life of Homo Sapiens on this planet and there are plenty of things we can do to help us on our way to this new life.

Firstly let us make a concise history of the main events that led us to live in a rich and wasteful society that is squandering the resources of the natural world much too fast for comfort. I shall try to maintain some sort of chronological order but don’t quote me.

The first was money. This was invented at least ten thousand years ago and has taken many forms. Shells and stones, beads and teeth, sticks and feathers have all be used to tokenise wealth. More lately we have used silver and gold and pearls and diamonds and then paper money. But tokens that represented debt or credit were in use several thousand years ago.  Now most of our money is in debt recorded on paper or, lately, on computer disc.

The wheel was an early aid to multiply the effect of man’s effort. The plough was equally useful and so was the sword and axe. The use of tools of a million varieties has hugely magnified the ability of man to shape his home. The development continues.

Then Galileo discovered that the earth was not the centre of the universe and we have not stopped since searching for scientific truths. Newton was the next milestone who taught us about the forces and masses of the stars and planets. His equations, with minor adjustments from Einstein, tell us everything we need to know about the movement of the earth, sun, rockets and space ships, stars, galaxies and the universe. 

Einstein and his heirs have taught us that the universe is not only expanding but that it started at a single point about 14 billion years ago and that the earth is eight billion years old and was formed for the debris of previous generations of stars. We also learned almost everything there is to know about energy and atoms and the universe.

We already knew how to make iron and bronze and make charcoal and dig coal when Abraham Darby constructed the first blast furnace to make iron and later Bessemer taught us to make steel. Then Thomas Newcomen is generally credited with the invention of the steam engine and made coal and tin mining much easier. James Watt patented a much better steam engine and George Stevenson invented the first practical steam locomotive. The industrial revolution was truly under way.

The essence of this revolution was the magnification of the puny physical efforts of men by the latent power that had been placed on earth over millions of years by a steady accumulation of sunlight concentrating energy in the form of hydro-carbons into a tight-knit package called coal. For two hundred years now the world has been largely driven by coal.

The countries who knew how to use this technology expanded their power and influence rapidly. They had the ability to manufacture a huge amount of goods to trade and weapons to defend their trade routes. To exploit their new-found power they invented a banking system to secure their wealth and enable their trade and then the Joint Stock Company with Limited Liability to facilitate and multiply their endeavours.

Baron Rothschild sent five of his sons to all the big European capitals to form banks that linked to his own and effectively controlled the currencies, and the economies, of every big European country. Rothschild became one of the richest and most powerful men on earth. The network and methods he set up still exist largely today and still largely rule the world.

Then came oil. Those with oil on their doorstep quickly gained an even greater advantage and developed even more rapidly. Soon the world was scoured for more oil and within less than a hundred years about 60 percent of the world’s probable stock of oil had been discovered. A major part of the world developed very rapidly.

This development was punctuated by at least three major wars that owed their nature and their possibility to the availability of industrial production and weapons deployment based very firmly on coal and oil. The American Civil war saw the development of the repeating rifle and the machine gun. The First World War was based upon the machine gun and gave birth to the armoured warfare in the form of the tank and a new form of warfare in the form of the aeroplane. The Second World War was based very firmly on the allied side by American oil, hydropower and aluminium and coal and steel while Germany relied on Eastern European oilfields captured by the Nazis together with the whole of European coal supplies. The Middle Eastern oilfields ruled by the British came under attack from two directions. In retrospect it can be seen that oil was a very important factor in that war and preceded by only a very short time the explosion in oil use. Saudi Arabian oil was uncovered in 1945 and quickly came under Western influence.

Between 1930 and 1945 there was a great deal of work done on the theory of the booming economies of the Western World. One of the most influential events was the work of John Maynard Keynes who clearly defined the methods necessary to allow companies and economies to expand by borrowing money on which they paid interest. If the economy expanded at three percent every year and the value of the currency depreciated at the same rate and debt attracted three percent interest then everyone was fairly happy. The company owners effectively got their loans for free because they were repaying in depreciating money. The workers could demand a three percent rise every year and the bosses could increase prices by three percent every year. The system worked quite well for many years. Every participating country became very rich. The whole shebang was effectively paid for by the depreciating currency, the negative effects of which were spread widely amongst the citizens. 

The system and inventions worked together amazingly well and our standard of living as measured by our consumption of consumer goods soared to heights previously unimaginable. We embarked upon a binge of building roads and railways, docks and harbours and ships, motorways and factories, cars and trucks and power stations and electricity grids, all of which transformed the countryside, the way we work and the way we live. All of this was based firmly on the use of energy – mainly in the form of oil.

The invention of the transistor at Bell Labs around 1946 took fifteen years to enter common knowledge and 30 years to realise its potential. The personal computer followed logically soon after this and is still under development as a tool that can hugely magnify man’s intellectual capacity. Its effects are already apparent as they have facilitated the World Wide Web and the spread of information around the world in seconds rather than the months or years of ancient times.

Then we got so rich that we became careless and relaxed some of the previously sensible regulations that had checked the activities of the Limited Liability Companies and the Banks that sheltered our accumulated wealth. Then we invented a new type of money called the Credit Card that enabled us to live far beyond our means.

All this worked quite well but we had forgotten, or ignored, two important facts. Firstly, that the world is a finite place. It has a fixed size and resources and you cannot expand into it forever. That is impossible. Secondly, that our resources consisted mainly of hydrocarbon fuels that were a gift from millions of years of nature, a finite gift not to be repeated. We had also constantly refused to recognise that constant growth is the definition of cancer. In a young and thriving body growth is normal and healthy. Continued growth in an adult is death. A bad ending became inevitable.

We knew well that oil was finite in 1968 but nobody really thought it would actually run out. The miracles wrought by scientists and engineers over the previous hundred years would not let it. Ha! In 2009 it has become quite clear that the supply of oil has peaked. We might drag out a little more per annum but only at constantly increasing prices and with the risk of beggaring future supplies. We can continue like we are for only a few years before we have to start the oil run down.

Around 1995 a few people began to be alarmed at the way our society was developing. There were, of course the Jeremiahs who would frown at anybody enjoying themselves and delight in any coming Armageddon. But serious thinkers began to question the deregulated economic system and the rapid growth in money supply, now almost totally debt, or credit.

But the big problem was that the money supply and the economy could no longer be controlled or regulated by national governments. The rules that had been set up in the nineteenth and early twentieth centuries had served us well but now, not only had most national laws on money and finance been denatured, but the Joint Stock Companies had become so big that they operated outside anybody’s law. If they did not like the laws in one country they moved to another. Many of them moved to all countries and shipped their money around to where it would pay no tax. Most giant corporations pay no tax at all and neither do their directors.

When the huge corporations moved their operations to undeveloped countries, their intention was to exploit the cheap labour there and this certainly worked for a while. But labour soon organises and grows wealthier and makes demands so that the companies simply moved on to pastures new. The semi-industrialised workforces had developed a taste for their new found wealth and also the ability to do much of the work for themselves. So the undeveloped world was developed very rapidly.

You might consider this to be a good thing but the down side is that it has increased the load on the earth’s supply of raw materials at a frightening pace as well as the planet’s ability to sink the resulting industrial detritus. There appears to be no mechanism available to us to stop this process. It will, of course, level out, as do all responses, but not necessarily at a level that is sustainable.

The world governments have responded to the fears expressed by their citizens and are attempting to impose restraints on the processes that are causing pollution. They like to tell us that technological improvements will solve the problems. I have argued at length elsewhere that the ability of technology to cope is limited. There is nothing we can do to outpace our ability to procreate.

Unless we leave the planet, and even if we do, we are on a course to disaster. We have to limit our expansion to a sustainable level.  Every technical advance we make at the  moment simply results in more people and more production, more depletion of resources and more rubbish creation.

One of the root problems is that we have decoupled the means of production of wealth from our national laws and therefore from our control. The only control over mega corporations now is the bottom line in company accounts. Very few people, even within the big corporations, understand the accounts and even if you can understand them they are often ambiguous, subject to omissions and revisions, and do not put much, if any, control over the operations of the company. They are always produced after the fact and often contain deliberate distortions. Many would claim that the accounts hide the truth of operation rather than revealing it.

In short, the vast mass of the world’s population is still in the same philosophical and political situation that it was in five generations ago. We are ruled by a very small number of very rich oligarchs. Prime amongst these are the bankers. Baron Rothschild is reputed to have said “Allow me to control a nation’s supply of money and I give not one whit for its laws”.  Bottom-line management and the operation of our society by means of debt has sold us out. We no longer have control over our laws and our lives. The banks do exactly what they want and we must follow – and pay tribute.

The only thing that is significantly different to five generation ago is that we are much wealthier and more technologically dependent. The endless stream of consumer goods that drives our industry also besots and bedazzles most people. The vast majority of it is junk. It glistens but is not gold. Aldous Huxley in Brave New World introduced Soma Tablets, which his government gave to the masses to keep them quiescent. Soma tablets are big business but the real soporifics of the masses are television, the internet and consumer goods. An endless stream of advertising persuades people that they crave these things and ultimately they do. And then they wonder why they do not find happiness.

The next layer of oligarchs, businessmen, keep the population pacified with these artifacts while they make a huge amount of money. The politicians have joined in the bean feast and sold the voters down the river by allowing business to deregulate and avoid any law they do not like. In return the top politicians have been allowed to trough with the big boys. It is no accident that the Houses of Parliament are about, with the election of 2010, to have the biggest sleaze-based shakeout ever.

The ordinary honest people are being screwed in every way you can imagine. And the whole process will overload the planet. There can be no doubt about that. And there is no mechanism to stop it. If you, as an individual, wish to do something useful, these are the problems to which you should address yourself.

The best starting point is probably Monetary Reform. This is total unfashionable as it will mean that the bankers will lose their government granted monopoly over the supply of money – the most lucrative exercise on the planet. Once we have done this it will be a relatively easy to bring the rest into line. Yes, it may well mean that our consumer consumption will decrease but this is not necessarily synonymous with “standard of living”.

The bankers will put up a hell of a fight. They are extremely rich and powerful and have no intention of relinquishing their privileged position. There is good evidence that the first two US presidents to be assassinated were strong advocates of Monetary Reform. And some think that Jack Kennedy was killed for similar reasons. 

If you think this is incredible then consider this. President Wilson imposed upon Germany after the First World War some rather silly demands for reparations. As a result of that the nation went bankrupt. Inflation was measured in thousands of percent per day. There are claims that this was exacerbated by selling short on international exchanges, which is entirely credible. Then, in 1933, a rather nasty guy called Hitler came legally to power – put there by angry people who had been betrayed. Hitler issued Deutsche Bonds which owed nothing to the banking system. He issued these to pay for Autobahn, houses, factories, and later tanks, aeroplanes, warships and submarines. In little more than three years he turned this useless bankrupt mess into the most powerful nation on earth.

I hold no brief for the rest of this thug’s achievements but you cannot deny he knew how to build a nation. He took it away from the bankers. I see no reason why a similar tactic should not be used to build a peaceable nation. Belligerence and control of your own money supply are not necessarily bedfellows. On the contrary, control of its own affairs should allow a rational and democratic government to avoid aggression and minimise the need for defence.

Abraham Lincoln issued Greenbacks to help finance the Civil War when the bankers were hauling him over the coals. There are those who think he was assassinated partly for this reason. He had taken a very lucrative business from the bankers. He had also financed and won a bloody and expensive war. Perhaps it is time that the people exercised their right and took control of the money supply for peaceful purposes.

The system at the moment is that bankers create and issue money by means of the reserve margin. This means that the law of the country in which they operate requires the bankers to keep around ten percent of their total funds in ready cash. The other 90 percent is just hypothetical. If you deposit $10,000 with a bank they are only required to back it with $1,000 cash. The other $9,000 they can lend to someone else. The second person can then deposit that money in a bank that can then lend another $8100 to a third person. And so on. They literally create money from nothing.

In total the banks can thus effectively create $100,000 from the $10,000 you deposited. The cut is that they get to lend all that money at an interest rate effectively over ten times greater than they are paying you. By this means the bankers become exceedingly rich and you get to pay the bills. You probably think this sounds like Alice-in-Wonderland. No. This is how the banking system actually works. And when the bankers get greedy and stupid and go bankrupt the state has to bail them out so that they can continue their exceedingly profligate ways. Just who is the sucker here?

The point is that they have no god-given right to do this; they can do it only because of the licence granted to them by your government. It seems the licence terms are biased grossly in favour of bankers and heavily against the punters who borrow this money to live. International capital is jerking you off. Indeed every one of us.

The rub is that these licences are granted by the politicians that you vote into power. And one of their main tasks is to screw you well and truly – and they have been doing this for over 200 years. Do you not think it is time you took control of your own money? Lincoln and Hitler did it to fight wars. Maybe it is time to do it for peaceful purposes.

Another result of the Bottom Line Management of our society has been the destruction of our inner cities. Only high value, high profit, activities are allowed in city centres. All the pleasant, laid back, uneconomic activities that made cities peasant places to live have been beggared.  Our lives have also been redesigned to use the car. We shop in huge shopping centres with free car parking. City centres are generally painful.

Another significant victim of this process has been Britain's industrial production. The large corporations, financed by The City and controlled only by the bottom line have found it much more profitable to move production to Eastern Europe, Taiwan, South America, The far East and now China. Britain's manufacturing capacity has been decimated and now consists very largely of weapons, oil and gas and assembling foreign cars. This has returned huge profits to the owners of the corporations and to The City but has also led to high endemic unemployment through great swathes of British cities.

We have made a lot of money from North Sea Oil and selling our know-how through booming universities. The North Sea bonanza is well past its peak and our know-how depends on continuous development formerly funded by industry. As we no longer have much original industry we shall soon find that the Chinese are streets ahead of us and in thirty years time we shall have to send our children to China to learn the latest technology.

The accountants and bankers have ignored another fundamental truth. Wealth is created by taking raw materials from the earth and converting them into saleable products that support life. These products are what we call wealth. There is no other way to create wealth. We no longer create wealth here. We simply stir the pot and skim off what profits we can. But that method is time limited and the accumulated wealth of generations that has allowed it will not last for ever. We have to create wealth by manufacturing. Or die.

One of the significant victims of this progress has been the independent trader. The small shopkeeper and the providers of repair services and strange and unusual goods have virtually disappeared.  This has been a clearly discernible trend of the last eighty years. The problem is that it means that all these people must earn their livings within big corporations. The scope for independence has been hugely reduced. And with that has reduced the freedom and ability for independent thinking.

The employee in a large corporation must toe the line. Even his personal thoughts are censored on a second by second basis. Anyone who does not match the corporate image will soon find he cannot work. Most toe the line and so the development of independent thought is constantly slapped down and replaced with corporate gobbledygook. The very ability to think never develops in such people. Fear and conformity replace the potential exercise and flowering of intellect.

And the corporate philosophy inevitable follows the creed of bottom Line Management. By this means the vast majority are sucked into the consumer lifestyle spending most of their lives working to buy goods they do not need to keep flowing the debt that the bankers tax at five percent on every transaction. Not only are they trapped within the system but their minds are not allowed to consider alternatives. Breaking out of this rather vicious spiral is almost impossible for most people.

Welcome to the future. It is in your hands.

28th March 2010

Colin Walker

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