< HOME  Tuesday, May 16, 2006

HEART of Darkness: The REAL reason the Dollar is doomed

While the mainstream media is busy maligning comparitively plausible economic theories by putting them in league with the thoroughly discredited supply-side scam, a deep, dark malignancy continues to destroy world economies unopposed.

The root cause of all this [misery] is the basic precept of Western economic science, which is that the ultimate objective of all economic activity is maximization of the satisfaction of the individual.

Economists like Adam Smith believed that self-centered pursuit of economic activity would lead to perfect competition, and this would eventually level society.

But, wait a minute, you say. There’s nothing wrong with self-centered activity. I do it all the time.

BUT, there is something wrong with it when taken to extremes.

Based on the consequences, self-centered activities can be so qualitatively different from eachother that to ignore these differences is to court disaster.

For example, no reasonable person would argue that just because it would be ‘in my interest’ to have a city all to myself that I could legitimately eliminate all other inhabitants. Doing so would qualify as self-centered activity, but not the kind that civilized society can tolerate.

Therefore, in order for human beings to coexist with each other, there MUST be some very important qualifications to a principle that encourages each person to maximize their own self-interest.

Yet, from observing self-interest run amok in financial markets – specifically at the US Treasury – it’s apparent that world economies have not yet internalized this perfectly obvious limitation.

Treasuries may extend their biggest drop in a decade as international investors shun U.S. assets because of the dollar's decline.

Treasuries lost 2.04 percent this year . . . The dollar's 9 percent decline against the euro and 6 percent drop versus the yen is making returns even worse for international investors, who own more than half the $4.2 trillion of U.S. government bills, notes and bonds.

“There's further for the dollar to drop and that might make people even less inclined to buy Treasuries'' [.]

* * *

“The dollar has been knocked around by politics” and reports central banks sold the U.S. currency [.]

“This is a great time to be buying U.S. bonds.” Goldman said central bank dollar sales have been “marginal.”

Now, WHY exactly is it a great time to buy Treasuries?

(For those unfamiliar with them, Treasury bonds are legally binding financial instruments that represent debt the federal government carries and the premium owed on that debt, i.e. interest or ‘yield.’)
"Yields move inversely to bond prices."
This is true whether they’re sold at auction or traded in an 'open market.'

And THAT is at the HEART of everything that's WRONG – not just with the dollar – but with the world.

What does it mean when yields move inversely to bond prices?

At auction, it means that the bond issuer (a.k.a., the borrower) ‘must pay a higher yield’ ‘in return for less money.’

What does THAT mean?

It means that the bond buyer (a.k.a., the lender) is unwilling to lend money to the borrower except at higher yields than they would collect under different circumstances (more favorable to the lender).

And WHY is that?

Higher risk – higher interest, that’s how the free market works, they say – Econo 101.


We ALL know that financial markets are no more ‘free’ than the Federal Reserve Banks are ‘federal.’ The system is thoroughly rigged – from the private monopoly of the banking system to the private counterfeiting scheme they euphemistically call fractional reserve banking.

A cursory look at the rules of the game reveals that ALL exits are sealed and that the system is irredeemably corrupt.
[F]or anybody thinking of melting down a tonne of copper coins: don't. It's illegal; and by the time you find enough small change, it will be too late.
And the logical conclusion of allowing risk alone to justify a return on investment is that the highest risk among us must be exterminated.

So, it's not the principle of 'free markets' at play, but another entirely different and malignant one.

Not surprisingly, the term ‘interest’, as in ‘interest on money loaned,’ is also the term that describes ‘interest’, as in ‘self-interest’, ‘special interests’, and all sorts of interests that include some people’s interests but exclude the interests of others.

When a lender extracts more ‘interest’ from a borrower in exchange for less money loaned, that lender is in effect saying:

  • ‘It is not in my interest to lend money to you.’
  • ‘I am better than you.’
  • ‘I deserve to be in the position that I am in, not by luck (or a rigged system), but because I am qualitatively better than you.’
  • ‘You deserve to be in the position that you are in, not by luck (or a rigged system), but because you are qualitatively lesser than me.’
  • ‘If I thought you were like me, subject to the same rules and the same God’s wrath, then I would lend you my money and you could repay it in kind.’
  • ‘BUT SINCE I AM BETTER THAN YOU, there is NO reason for me to lend money to you UNLESS you can pay me for extending that privilege to you.’
  • ‘The more badly you need that money, the more money I will demand from you in return for that privilege before I am gracious enough to lend it to you.’
Among polite company, this attitude would be reviled as self-centered, egotistical, antisocial, and utterly without social redemption. The person or persons exhibiting this quality would fairly quickly be short on friends.

Yet, in business it’s applauded and facilitated with a system that relies on INTEREST-based debt to fuel ALL economic activity, which in turn is fueled by self-interest run amok.

The logical conclusion of this attitude is complete and utter subjugation of one group of people by another — in short, slavery. And those who refuse to be slaves are annihilated.
In the last two months, Sweden's Riksbank almost halved its dollar reserves and banks in Kuwait, Qatar and United Arab Emirates said they were increasing holdings of the euro. Russia's finance minister complained about the dollar's “instability.”

“We're definitely more defensive,” said Kevin Cronin, who oversees $67 billion as chief investment officer for fixed income at Putnam Investments in Boston. Rising interest rates around, higher commodity prices and the falling dollar work against Treasuries, he said in an interview last week.

Why would they be 'defensive', if they were not at WAR?

What's the opposite of ‘I’ as in ‘me’? Let's agree that it's ‘everyone else’.

But, if the goal is to co-exist as equals under God, ‘I’ cannot be opposite to ‘everyone else’.

On the other hand, if the goal is to subjugate one another, where one of us prevails tyrannically over the other, then yes we are opposites and there is room in this world for only one INTEREST – yours OR mine.

If the world were to replace the US dollar today with a currency that functions by the same misguided fallacy that opposing interests can co-exist in this world, it would be doomed to the same miserable fate.

You cannot adopt a ‘standard’ currency for the benefit of mankind and then expect it to ‘work’ for the benefit of a few without wreaking havoc on the rest of humanity. The whole premise of adopting a STANDARD, to begin with, is to facilitate productivity, trade, exchange, cooperation – among ALL people.

Money is an organizing principle without parallel, precisely because it is a STANDARD with which everyone is free to do whatever their heart desires. BUT, IT MUST BE WITHIN LIMITS. The most important of these limits is the boundary between co-existence and exploitation.

Once you cross that line, you enter the heart of Darkness.


At Tuesday, May 16, 2006, Blogger Bill said...

from russia with love!


At Tuesday, May 16, 2006, Blogger Mike said...

Very well said, qrswave.

At Tuesday, May 16, 2006, Anonymous Anonymous said...

you guys always have interesting ideas with your economic critiques. if I am reading it right I believe you are against people ever being able to charge interest. this is a bold stance. some naysayers wish to tear things down without ever offering alternative ideas.

could you please write about how you see a system working where people don't pay interest? I can't figure out how anybody would ever be inclinded to lend money in that situation. I can't see how it would work.

At Tuesday, May 16, 2006, Blogger Mike said...

Leaving aside for the moment the proposed systems that could operate without charging interest, have you ever lent a family member or a friend $20 to cover dinner or something like that? Why did you do it? We must start to see others as partners in this life rather than ones we can exploit for our own 'advantage', which is not really turning out to be an advantage as our social and physical environments go into the garbage can.

This website has some interesting information about alternative currency systems.

At Wednesday, May 17, 2006, Anonymous Anonymous said...

Yeah, I'm reminded of prey-predator models (rabbits and foxes) we studied in maths. The fox numbers drop when the food supply disappears. Usually these models are inherently stable - ie fox numbers deplete and then the rabbit numbers recover - but this is not always the case. Some prey-predator models have critical points built into them. Go outside those numbers and one or both populations die out. This can be seen when an animal host is invaded by too many parasites. The host dies and - eventually - so do all the parasites.

There seems to be no appreciation in mainstream economics circles of the symbiotic nature of the lender-borrower relationship. It's as if all the shopping mall developers in the world have conspired together to pay their laborers poorly to build for them and to pay their sales staff poorly to sell for them - forgetting all the time that those laborers and sales staff are going to spend their hard earned money in those very same shopping malls. Eventually you end up with mausoleums and an idle, unemployed population.

But the modern day parasite-predators are hoping to retire to their gated communities and let the world outside fend for itself. It's a nasty little philosophy, selfish and inhuman. It's Imelda Marcos and 3000 pairs of shoes while Filipina children scrounge through rubbish dumps. It's gold plated toilet seats in New York while 25,000 people die every day from hunger. It's the devaluation of Asian currencies a few years ago that saw the value of life savings slashed by 75% so that currency traders could make even more obscene profits. It's the IMF solution to places like Bolivia where poor people can pay half their wages for a privatised water supply that God had previously given to them for free. It's an oil invasion of Iraq with the only war plans in history that included provisions for enforced copyright protection for the products of the invading nation. It's sterile plant seeds from Monsanta so peasanst can have a new form of debt slavery.

It's something that needs to change. Because the consequences are too important for us all. Reagan trickle down, supply side economics is a licence to steal from the poor and defenceless. I wish there was just a small measure of intellectual honesty about our economic leaders but, with few exceptions, there is none. The people, as always, need to speak for themselves.

At Wednesday, May 17, 2006, Blogger Erosoplier said...

Anonymous, never mind NO interest, the solution to all our woes lies in the governments of the world (that is, the representatives of the peoples of the world) taking back the power to create money for themselves. The US is so imbued with the spirit of "free enterprise" that this idea initially seems dangerous, but truly, things can't get a whole lot worse (or can they?).
The GOVERNMENT should turn a profit by creating and loaning out money, and charging interest (the more worthy the cause, the lower the interest rate - down to zero), and the profit can be used to fund government spending. "Interest" would be a kind of tax - a source government revenue.
The actual bodies that oversee all the banking activity can be as privatised as you want, but the bottom line is the "profit" should be for the people.

Surely that is the way any truly democratic society would run things, don't you think?

At Wednesday, May 17, 2006, Blogger jomama said...

I ain't worried about someone else's self-interest. I'll look out for my own.

Back to the topic, Dollar Doom.

The Amurikun Borg Pol has gone along with the paper-the-world-with-dollars routine for so long with their incessant power/spend trips that the dollar will soon be worth less than toilet paper and not near as useful.

$1=1/715th oz. of gold.

Did they want the whole world on one currency, the $?

Does it matter? They failed if they did.

Humans aren't Borg. Have you looked out for yourself lately?

And not one in a thousand will see these connections or disconnections.

So many distractions, so little time.

At Wednesday, May 17, 2006, Blogger qrswave said...

Interest is a lousy administrative tax. The government already collects most of the interest now. Federal Reserve Banks collect 6% annual dividends. The key is not who collects the interest initially, but WHO DIRECTS the flow of the money and for what purposes and for whose benefit. These are the most crucial questions.

Interest is not only parasitic, but hard to keep track of even if it's administered in an "honest" way. It's an invisible tax, so some people can be taxed more than others and we wouldn't know how to begin to keep track of it.

Money should be issued ONLY for productive reasons. Period. It should be allocated by a non-profit national or local community entity based on a plan and criteria that ensure the GENERAL WELFARE.

Very little money should be 'loaned,' i.e., only in emergencies. But, of course, whatever is loaned should be loaned interest-free.

Taxes should be flat (maybe 2%) for everyone who lives above subsistance. Everyone should be treated fairly. The rich will no longer have a free ride (they CANNOT collect interest). It's not fair to tax them extra.

That should pay for maintaining a police force and army, which incidentally, would rarely if ever be used if the goal remains co-existance and not domination.

Bankers are not by nature "dishonest." They don't by default game the system. People don't become dishonest. Either they are honest or they are NOT.

The system we have is a result of letting dishonest people control the most important system on earth - the one that requires the most integrity. Instead we have handed it over to a 'den of vipers.'

If a person is not honest, you don't promote them or transfer them to another division. You throw them out of anything that requires honesty. Period.

Administer VERY HARSH punishment for stealing and value HONESTY above all other qualities and civilization will be transformed.

An interest free system is possible. And under an interest-free not-for profit banking system administered only for PRODUCTIVE uses, the value of money would NOT diminish.

At Wednesday, May 17, 2006, Anonymous Anonymous said...

This might be the most poorly argued piece ever posted on this website. A couple of points: your examples of individuals acting in their own self-interest have nothing to do with the economic activity Smith was describing. Second, your explanation of bond pricing is not only overly simple, (on the subject of yields, you are trying to describe a principle that requires a calculus-based dialogue with a simple syllogism) it is also plain wrong.

At Wednesday, May 17, 2006, Blogger qrswave said...

anon, either enlighten us or we can assume that there is no substance behind your criticism.

Here's a perfect example of a group of people who revel in profiteering from other people's crises in a system that's rigged from start to finish.

We live in an age of cannibalism.

At Thursday, May 18, 2006, Blogger Erosoplier said...

Qrswave, you said "The government already collects most of the interest now. Federal Reserve Banks collect 6% annual dividends."
I don't understand the system. Are you saying here that the Feds collect 6%pa on *all* the money generated by normal banks via fractional reserve banking ie not just 6%pa on the initial "reserve"?

At Thursday, May 18, 2006, Blogger qrswave said...

no, the government only collects on reserves. Sorry if I wasn't clear. The fractional reserve scam is of course as corrupt and absurd as ever.

At Friday, May 19, 2006, Anonymous Anonymous said...


Why can't I copy your essay and store it for future reference?

Is there a reason for this?

It is excellent and precise.

At Friday, May 19, 2006, Blogger qrswave said...

Thanks, diogenes.

I don't know. Why can't you copy it? Copy/paste not working?

Feel free to copy everything at my site and if you do, let me know so I can access it if this blog ever goes down.

It would be nice if you link to the blog. But, it's certainly not a prerequisite.

I publish my posts to spread the word, not hoard it.


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