Posts Tagged ‘currency’

Without cash, gold can have no monetary role

September 24, 2009 1 comment

Cashless Beast

Cashless Beast

Although the topics of the Cashless Society and the Gold Monetary Standard have been discussed previously on this and other sites, we feel that further discussion on these pressing issues is warranted.

The Cashless Society

Earlier we speculated that there might be a glorious return to sound money, such as a precious metal standard. But you can forget about gold as a real standard to moderate the issue of money. Not because it’s not a good idea. A gold standard is a fantastic idea, but it will not come about, because the finance industry has something else in mind. We all know it’s coming, but it has been somewhat forgotten as a discussion point. Yes, we mean the Cashless Society. Every monetary transaction is moving to electronic form.

Back in 2007, credit card Visa chief Peter Ayliffe predicted that a cashless society (in the UK) would come into being by 2012. It may not seem like a sure thing, but the timing of such a prediction is worth making a note of. The problems of electronic transactions at the moment are that financial institutions are making too much money from surcharges and fees, keeping cash as a more attractive way to buy small to medium priced products than plastic. During the current artificially created economic crisis, there has been a contraction of credit, but the idea of eliminating cash is still high on the agenda, even at the UN. The impediments to a universal cashless system can be removed overnight: remove fees on electronic transactions, and impose unreasonable fees on obtaining or depositing cash. Within a couple of years the system will be locked in, and nobody will take cash any more.

Introduced as part of the national e-Governance initiative, the e-Purse, embedded on national ID and resident cards, is the first of its kind in the region. Implemented by the Royal Oman Police (ROP), in association with the Information Technology Authority (ITA) and BankMuscat, the national e-Purse project will revolutionise cash transactions.

“Being an identity card, the e-Purse always remains with citizens and residents. Whenever e-Purse is used, the identity of the user is verified and the government can track each transaction. The support from ITA to the e-Purse project is in line with the directive of His Majesty Sultan Qaboos bin Said to enhance e-government services in Oman,” [Dr Salim Al Ruzaiqi, chief executive officer, ITA] added.

The cashless society is a government’s dream. Tax evasion becomes practically impossible, resulting in substantial gains in tax revenue. In theory, the purchase of dangerous substances and weapons becomes more easily traceable to individuals, making criminal activity increasingly difficult. Except for bartering, which is difficult to conduct on a large scale, the economy becomes completely accountable. Not a cent is lost, and society becomes unable to avoid policy changes. No more armoured cars, bank robberies, muggings, bribes, illegal drugs, and so on. All of this has been claimed by proponents of the cashless society. They tend not to mention certain other obvious points which might coincide with this phenomenon, such as the storage of personal information together with the electronic money devices (be they cards or some other form of identification), such as medial information, license details and biometric data. They are already being introduced.

The cashless society would likely accompany the introduction of a single world currency. Without the need to exchange physical coins or notes, all money becomes completely arbitrary. All money would reside on computer accounts, can be given any unit value, and can be created or destroyed at will (unlimited credit). Potentially, all money could reside on a single supercomputer, to save energy.

Banks are especially poised to benefit:

“Banks are very excited about replacing cash. Smart Cards give them the opportunity to make some big bucks off interest-free loans from their customers. Once a customer transfers credit to a cash card, the bank can stop paying interest but gets to hold on to the cash until it’s billed by a merchant. If 100 million people used a card with an average of only 10 unspent dollars on it, the banks would reap $1 billion a day of interest-free money to invest.” (Forbes Magazine, 1998)

Then of course is the argument for the implantation of microchips, or some other physical and permanent means of identification. The technology is indeed ready and has reached a mature status. It is only society that is not yet ready.

The truth of the matter is, of course, different. Many of the arguments in favour of the cashless society are false, where the truth in many cases is diametrically opposed to what is claimed. So what problems might exist with the Utopian dream of universal electronic funds transfer?

Most of the logistic problems are covered elsewhere, and can be easily thought about. Aside from the fact that private transfer of money becomes impossible without the involvement of the universal infrastructure, the other problems are identical to those that plague electronic money transfers already. Identity theft is the biggest problem, and it continues to occur as computing systems become ever complex and bug-ridden.

From our point of view there are three major threats to ordinary people arising from a cashless monetary system. Some of these can already be appreciated, if you just imagine your life suddenly without any access to your credit or bank cards.

(Out of) Control

Could it be said that the quality of governance is directly proportional to the likelihood that the governor is deposed should he or she fail to perform? The easier it is to block the government, the better.

The motivations for a cashless society are really those of making the government of the population easier (for government) and not to ‘enable’ or ’empower’ ordinary people. Supposedly, it would cost less to collect taxes, to police fraud, to run after escapees, because all you need to do is look up the individual’s number and instantly you can see practically every interaction the person has had, each hour of each day. Tracking the movements of people becomes a trivial matter. It’s no secret that even the rudimentary magnetic strips on credit cards can be read from a distance, particularly at doorways if the appropriate magnetic coils are installed (which, in most first world retail stores, they are).

Any electronic device designed to act as a portable electronic wallet will also serve as an access key and unique identifier. It is merely natural progression to bundle passport, wallet, driver’s license, medical alerts and personal details into one key, which is synchronized both locally (on the person) and centrally (on the supercomputer). The same can be rigged to allow key-less entry to house, car, workplace, and airport departure gate. The benefits are a seamless, keyless, paperless, and no-touch life from the apartment door, to the secure car-park, into the car, into work, through the shops, to one’s overseas holiday, and all the purchases and movements there, and back. All of this can be achieved with a single microchip, either as a card, embedded in a wristwatch, or implanted under the skin.

The great weakness of a centralized, integrated and unified key system is that people can be ‘unplugged’ instantaneously and effortlessly, even arbitrarily. Physical papers, a wad of cash and a set of metal keys is a robust, low-tech and  redundant way of doing things, yet the tiny gains in convenience of electronic keys (and money) come at great personal risk, because the power is completely out of the hands of the individual. Any failure of the supporting infrastructure is a total failure. It can happen at the hands of a disgruntled or corrupt employee, a hacker or an out-of-control government. The temptation to abuse such a system is immeasurable. If it can happen, it will happen.

In essence, by “holding” all of an individual’s money for him, the electronic monetary system robs the individual of all of his power. This is the ultimate form of population control. In particular, since populations now live in cities and are totally dependent on common infrastructure for their survival, the cashless society permits any kind of political and social change to be effected with no way for people to resist effectively, nor to organize against the system without being found out at a very early stage. The cashless society has the potential to transform what today appears to be a free society into a prison that is tighter and more oppressive than has existed in any totalitarian system in the past, including the Soviet Union under Stalin.

Black Box Economy

It is already problematic that the vast majority of money that is “out there” exists in the form of electrons on magnetic and solid state devices, and not as tangible wealth. We read in the news about billions of dollars being “wiped off” stock markets, and trillions of dollars sitting “on the sidelines”. All of it is meaningless sensationalism, and only illustrates the absurdity of fiat money. The fact that central banks can magic trillions of dollars of new funds into the economy in the space of a few seconds, and that the supply of credit is limited only by people’s willingness to borrow, means that the number that represents your life savings can be wiped out in seconds, by the sudden dilution of the global money supply (to name but one example). The fact that company shares are mostly traded by computers, with the value of shares fluctuating every millisecond as a result of computer algorithms and not human decision making, makes the whole business of market investment a farce.

There is no way of being certain, in an electronic economy, that anything is real. There is not necessarily any paper trail to account for the volume of transactions that exists, and a corrupt elite (which, conveniently enough, already exists) can line its pockets with limitless money, with no way of detecting or proving the crime. Forensic information can be planted or removed all too easily. Without cash, there is no way for an individual to opt out of the system by holding his money in physical form. In a cashless society, there remains only one certainty: hard assets. Everything else will have made the full transition to becoming make-believe.

In many ways, the electronic economy reflects the modern approach to morals. There is great emphasis on civics, and on the conduct of individuals in public (looking good in public), but there is no emphasis on personal moral integrity and the proper conduct of thoughts and deeds in one’s private realm. Modern society encourages personal moral depravity, and teaches a perfect hypocrisy, whereby people in public behave impeccably, yet frequently their private lives are as corrupt and vile as can be imagined. An electronic economy looks squeaky clean on the outside, but there is no telling what manipulation, corruption and wholesale theft is going on beneath. There is also no way to trust the individuals maintaining and governing the monetary infrastructure, since they are as likely to be soulless, amoral and opportunistic as society itself has become.

The Apocalyptic Vision

It is easy to laugh at religious zealots when they harp on about St. John’s Apocalypse, on things such as the Mark of the Beast, and so on. In their rush to sell a message they don’t understand, they undermine the value of the Sacred Texts, leading others to miss out on the wisdom contained therein. We quote the passage that appears to be relevant to the idea of the cashless society:

And he shall make all, both little and great, rich and poor, freemen and bondmen, to have a character in their right hand, or on their foreheads. 17 And that no man might buy or sell, but he that hath the character, or the name of the beast, or the number of his name. Here is wisdom. He that hath understanding, let him count the number of the beast. For it is the number of a man: and the number of him is six hundred sixty-six.

These dramatic passages are full of symbolism and, to some extent, allegory. Throughout the last two millennia, people have tried to torture the words to fit the situation of the day. The lesson we draw from the passage is that the restriction to trade, imposed on individuals because of a religious or political attribute, is always a bad thing. The point to be taken from the Apocalypse, however, is that the predictions apply to the entire world, not just the situation in one or another country at a given time. The point of our article, in part, is that the cashless society is a phenomenon which is capable of being imposed globally, perhaps over the space of a decade or so.

If the G20, for example, met for another “crisis meeting”, and decided, once and for all, to coalesce their currencies, they may simultaneously claim that it is cheaper not to issue any notes or coins, but to issue electronic keys, as described above. Once some heavyweight economies adopt the idea, all else will follow, or face the sword. The scenario is plausible, even though in 2009 it still seems like a pipe dream.

It ought to be noted that think tanks that guide global policy have attitudes which resemble those described by St. John.

In the closing plenary session of the [San Francisco, 1996] forum, philosopher/author Sam Keen provided a summary and conclusive remarks on the conference. Among the conference participants, said Keen, “there was very strong agreement that religious institutions have to take primary responsibility for the population explosion. We must speak far more clearly about sexuality, about contraception, about abortion, about the values that control the population, because the ecological crisis, in short, is the population crisis.

Cut the population by 90 percent and there aren’t enough people left to do a great deal of ecological damage.”

It’s had to imagine just how so many people could be killed without leaving the planet itself uninhabitable, but there is no limit to human ingenuity. There is also, clearly, an insanity at work that makes Nero look like a dull boy.

Gold Has No Place

To go back to material matters, we think once again of gold. Even if a single world currency is purportedly based on a precious metal, because this currency is likely to be cashless, the metallic standard is nothing more than an empty promise. You are trusting the same men in the same suits who are this very day swindling the planet without rest. Just as there is no living soul within the body of the modern man (in a suit), there can be no golden heart to an electronic currency.

We conclude that whatever actions can be taken to limit the progression towards the elimination of cash, should be taken. More importantly, however, it behoves every person to consider the implications of such a system coming about, and to have contingencies in place (a topic in its own right).

Circus Economicus to Crisis Maximus

April 24, 2009 1 comment


The (Christian) Torches of Nero

Nero, to win credit for himself of enjoying nothing so much as the capital, prepared banquets in the public places, and used the whole city, so to say, as his private house. Of these entertainments the most famous for their notorious profligacy were those furnished by Tigellinus, which I will describe as an illustration, that I may not have again and again to narrate similar extravagance. He had a raft constructed on Agrippa’s lake, put the guests on board and set it in motion by other vessels towing it. These vessels glittered with gold and ivory; the crews were arranged according to age and experience in vice. Birds and beasts had been procured from remote countries, and sea monsters from the ocean. On the margin of the lake were set up brothels crowded with noble ladies, and on the opposite bank were seen naked prostitutes with obscene gestures and movements. As darkness approached, all the adjacent grove and surrounding buildings resounded with song, and shone brilliantly with lights. Nero, who polluted himself by every lawful or lawless indulgence, had not omitted a single abomination which could heighten his depravity, till a few days afterwards he stooped to marry himself to one of that filthy herd, by name Pythagoras, with all the forms of regular wedlock. The bridal veil was put over the emperor; people saw the witnesses of the ceremony, the wedding dower, the couch and the nuptial torches; everything in a word was plainly visible, which, even when a woman weds darkness hides. Tacitus (Annals, 15.37)

Nero was populist and hedonist. He was also probably insane and it is postulated that he, and most other aristocratic Romans suffered from lead poisoning. The above account by Tacitus (having occurred during his childhood) occurs shortly before the great fire of Rome which, burning for a whole week, destroyed much of the City including Nero’s palace and the Temple of Jupiter, a building which had spanned eight centuries of history. It would have left around a million inhabitants homeless. The fire also completely destroyed the homes of the members of the Roman Senate. The entire system of legislative government, the decision making core of the Roman Empire, was left in disarray.

Eugene Thirion - Triumph of Faith

Eugene Thirion - Triumph of Faith

There is no answer to the question of who caused the great fire, but rumors abounded. It’s as likely that the fire was accidental as is the possibility of arson. Nero was suspected to have organized the fire by many, for reasons of reshaping the City against the wishes of the Senate. Fearing the loss of authority, he blamed the Christians, whom he persecuted with ever greater brutality thereafter. The Christians believed a prophecy which predicted Rome’s destruction by flame. The date of 19th July, on the night of which the star Sirius rose above the Roman horizon, was given much astrological significance. They were also probably saying “I told you so”, which would have invited the finger of blame. Refusing to ‘worship’ the Caesar and the Roman gods, Christians had already been identified as a potentially subversive group. The thing going against the theory that they conspired to burn down Rome is that such a crime would certainly not have been condoned by the followers of Jesus whose doctrine was generally pacifist, whose beliefs included a rejection of the brutality and moral depravity which abounded at the time.

Regarding statecraft, Nero’s populism (and popularity) was as important as his brutal oppression of perceived enemies. He lowered taxes (down to 2.5%), cut the wages of lawyers and cracked down on various forms of government corruption. He made imports cheaper by removing tariffs. These interventions were not ‘reforms’ as much as they were attempts to promote himself at any cost. The city of Rome, in many respects, had outgrown itself. The streets were a shambles and the quality of buildings poor. It didn’t seem to matter, because the people were distracted and they loved their Caesar. Yet Nero’s populism and extravagance threatened to bankrupt the government. In response, he kicked off Rome’s economic decline by debasing the dinarius, reducing its gold content by 5%.

The events in Rome around this period are significant, not merely because of the magnitude of the fire. Rome was rebuilt and the growth of the Empire continued, although the administrative problems compounded over time. Nero’s Rome stands out as being the time and place where Christianity began the war of ideas, the battle for Rome’s heart and mind, in earnest. That Nero chose Christians as the scapegoats for the Great Fire shows their significance. The number of followers of Jesus in Rome by 60 AD must already have numbered in the tens of thousands (or more) for Nero to have been so worried about them.

People occasionally compare the Western world with aspects of Roman history. There are some extremely important differences which nullify many of these comparisons. Nero was truly powerful as an individual. His personal opinion counted. Today, the personal opinion of almost every head of state in a Western democracy counts for almost nothing. Nero had significant control of the Empire’s finances. Today, no Western government has any realistic control of its finances; the issuance of money is practically in the hands of private individuals.

However, other similarities are striking, such as the emphasis on public entertainment as a means of distraction, while extreme brutality and torture is sanctioned by governments. The loss of grip on real power by politicians and their increasing populism have similarities with Nero’s approach. The debasement of the currency by Nero and the same today is also a telling sign of the times. History teaches that such moves tend to precede an unremitting economic decline that eventually threatens civilizations. Today, the flood of US dollars threatens to have the same effect, except that it is occurring so rapidly that the three hundred or so years it took for Rome to ruin itself might be curtailed to a mere 18 or so months for America and its closest allies.

History doesn’t repeat itself, but the lessons that can be gleaned from history are eternal. The Neroes of our time are not poisoned by lead exposure, but the philosophies that guide their decision making are no less poisonous and insidious. Nero’s era marked the beginning of centuries of Christian persecution, and the oppression of good ideas. Stupid decision making on a massive scale lead to Rome’s decline and fall. The suppression of ideas and the blindness (and corruption) of Western leadership threatens to have the same effect on our civilization. Yet the time of Nero and the centuries that followed are a source of great hope for our own future, because despite all efforts to the contrary, the principles of peaceful resistance, and the power of truth succeeded in overcoming even the most rigorous opposition. The Romans thought the world would be theirs, but they were wrong.

The fall of the Roman Empire, as gradual as it was, resulted in the end of slavery in Europe and the rise of Christianity. In our time, the pace of change is an order of magnitude greater, due in part to the speed at which ideas are propagated. As the economic crisis plays out, today’s oligarchy believes it is on the verge of world domination, of finally tying things up for good, but it cannot escape the fact that its position and influence are jeopardized by this very belief. The fact that the ‘global elite’ is not a meritocracy, that its money is meaningless, that its people are corrupt and its philosophies are not based on truth, makes it fallible and weak. By relying on false principles, it lays the seeds of its own destruction.

Roman civilization was not built on false economy, hedonism and laziness, or the Circus Maximus. Modern civilization will fall for the same reasons.

Engulf and Devour

March 26, 2009 Leave a comment
Silent Movie

Silent Movie

In the Times Online we read:

More aggressive, concerted efforts are needed by key economies to quell financial market stresses if the world is to avoid an even sharper and longer recession, the International Monetary Fund urged today.

Let’s face it, economic catastrophe is unavoidable and was foreseen by many (including those in power) for a long time. The IMF pretends to care, but we know that deep down it favors a single world currency (presumably with itself at the helm). There seems to be a race to get this single currency concept off the ground, with China and Russia also vying for the “top job”. But for ordinary people, a single planetary currency (with its obligatory single World Government) is nothing but a guarantee of Universal Mediocrity. The reasons the world is sick financially is because of Internationalism, not for the lack of it.

In the Mel Brooks film “Silent Movie”, the “Engulf and Devour Corporation” steals the film just before it is previewed. It is a parody of the Gulf & Western company, notorious for its aggressive business practices, hostile takeovers, asset evisceration and so on. It was an example of a highly immoral business in terms of how it treated its assets (companies it owned and its employees). The history of the company has been covered from several aspects and its business methods analyzed in detail:

The imperial conglomerate has wholly owned subsidiaries in unrelated industries. In theory, the conglomerate can use cash generated by operations in some areas to diversify into other areas that might provide counter cyclical market risk reduction.

Actually, these mega-corporations are like huge monsters which destroy smaller, independent companies by taking them over, bleeding them dry (particularly to cover the losses of other companies) and then selling the left-over carcass of a company to some other sucker-company. Some more of this excellent analysis is worth quoting:

In other words, a great many of America’s largest companies are de facto hedge funds. Their “diversification” (Peter Lynch preferred the term “di-worse-ification”) resembles that of imperial conglomerates. This is not exactly good news for a country with out of control debt growth and intractable balance of trade deficits linked to declining product competitiveness.

The size, prestige, and complexity created by cobbling many firms together into a large conglomerate often provides enough maneuvering room to subtly and cleverly plunder shareholders while real underlying wealth-creating performance actually declines (and malinvestment rises). As part of their sorcerer’s bag of tricks, imperial conglomerators typically have enough cash flow to pay for big ad budgets, big consulting fees, major lobbyist services, and big transaction costs. All of this helps to bribe elements of the media, academia, the consulting profession, Washington, and Wall Street into saying nice things about them.

Having too much under one umbrella company is not good for the world, let alone America. A single world currency would bring this about in its most extreme form, as what it really means is a single World Central Bank, with a single Director. It will be the Monster to end all monsters, if it ever comes about.

This is the situation where Capitalism will converge with International Socialism to create the worst form of government the world will ever see. When no nation is independent from the other (politically and financially), when the world’s economy is centrally governed (with politics to follow suit), there will be only one way to march. Yes, there will be “stability”. Yes, there will probably be no more wars between subscribing countries. But there will be no way to stop “scientific government policy” such as forced population reduction, suppression of religion and free speech.

You will smile and you will enjoy it, or else.