Economic Devastation

[thaaanos]

If we see capital as "the means of production" then in modern economy capital IS knowledge and the knowledge worker, and the Banks are the Patent Offices. Problem is for Industry as we know it is that the Machine stays where you put it, while a Knowledge worker can move to a higher bidder. True they try to pin them using NDAs but that goes against the principles of free-market.
If we take this situation to the extreme where everyone offers services instead of employed work then the only barrier is a discovery, scheduling and transaction platform for the vast network services, cryptos can help here. Still I think groups will arise in order to have some result guaranties, and fixed networks that have achieved optimality or have broken through a new scape.
Corporations will hang around I guess as long as they can hold on to finite resources, or operate complex processes that will lose efficiency in a decentralized network. But for the Knowledge workers I think it will be the norm.

I think Steam shows a future here.

[AnonyMint]

I have refined my theory. Here is discussion:

https://bitcointalk.org/index.php?topic=557732.0


blablahblah, 3D printers can print themselves. Grow up man. You can't even understand the point, that chemicals don't allow you produce creations. The computer and the 3D printer change the landscape of what individuals can produce. Don't come in my thread. I will not allow you to post there. You are permanently banned from my life. Talk about garbage out. Everything you say is complete garbage. And that attack is intentional. Because it is true. I don't have time to respond to all your garbage drivel.

[thaaanos]

blablahblah, 3D printers can print themselves. Grow up man.

It's called debate and I'm not letting this point slide. Please show evidence of 3d printers that can fully self-replicate, including printing their own embedded electronics, or your claim is busted.

I've seen the cool viral advertising where they print replacement plastics which are then assembled with manual labour, but AFAIK the only fully self-replicating things in existence, which are integrated enough to call machines, are biological. Or virtual.

Come on. You're talking about "material production at the asymptote" and stuff. This one should be a breeze.

Graphene may change that, and nano-printing, but it's not that what bothers me...
If you take a look at current printing market status you will see that the printer costs as much as a ink cartridge replacement.

[AnonyMint]

Everything will be solved once you have even 1% of humanity doing autonomous knowledge production full-time.

The first computer was so clunky that they had to test 1000s of vacuum tubes if one malfunctioned:

http://en.wikipedia.org/wiki/ENIAC



We are at the cusp.

And you are going to swept away.

[Bit_Happy]

Can we just blame the Gov and talk about basic libertarian solutions?

The Libertarian platform advocates for:
Minimally regulated markets
A less powerful federal government Strong civil liberties
Separation of church and state
Open immigration
Non-interventionism

We had a government like this at one point (the US government circa 1800). Unfortunately it spontaneously degenerated into what we have today.....

..spontaneously degenerated?
The Federalists won out over the Anti-Federalists; I wouldn't call it spontaneous.

[AnonyMint]

Eric presented his refutation and I replied. This pretty much cements it for me.

http://esr.ibiblio.org/?p=5558&cpage=1#comment-480217

> For Rifkin’s predictions to come true it would not suffice for knowledge creation to rise in value. For his predictions to come true, material goods would have to fall to zero marginal cost. That will not happen, because atoms are heavy.

Mea culpa I haven't read the book. I indicated in my linked refutation, that I wouldn't agree with any Communist basis and agree with Eric's critique on that aspect. For the conceptual idea to scale, there must be symbiosis between individual gain and collective gain, per the Eric's Inverse Commons in the Magic Cauldron.

For example, one could argue that any initial start-up cost for a creation couldn't be offset by the knowledge network value of incremental edits because the initial creator is not directly receiving the return on investment. My counter logic is there may be business models dealing with modularity or diminishing trail of appreciation (citation) that when combined with micro payments can route remuneration backtracked to the creators. Moreover the non-monetary square law scaling of the Inverse Commons applies in that participants gain the return of the creations and incremental improvements of their brethren. It is a mesh topology N-highway of sharing. My belief is that according to gift culture Eric outlined, the community is aligned towards acknowledging sources especially when the act of doing so is only an insignificant (automated) micro payment or other remuneration models the ingenious may develop. Insignificant micro payments then aggregate to the creators at the rate of the participants squared. The squared law seems to be so powerful and at the heart of why the Inverse Commons is the "only known positive scaling law of software engineering" as so eloquently and astutely noted by Eric. That audio of Eric is permanently imprinted in my primary consciousness. I can never forget random "monkeys beating on the code" can outperform the cathedral of closed source (which I want to extend to vertical integration in general).

Also I noticed in the Bitcoin and now especially in the Dogecoin community, there is much more tipping and donations than I know about in the fiat world. The participants understand that to make their ecosystem grow, they need to reward participation. That is not Communism because it is an individual decision, no Max Weber central authority is holding a gun to each of our heads. You can see in my linked discussion thread, the participants are rallying the concepts and refining them perhaps better than I could, or at least differently and scaling requires diversity.

Atoms are heavy but that is lacking information. How heavy? Relativity is all the matters here. I never wrote zero, I wrote relative value is trending asymptotically towards zero.

> You are just as wrong as anyone who around 1900, observing the steep fall in marginal cost of manufactured goods, predicted that food would become effectively free.

In fact food declined from say a third or half of someone's income to something on the order of a tenth now in the developed world. The third world didn't industrialize so was devalued. The industrial economy was more valuable than the agricultural economy, and to survive the agricultural economy had to move to higher economies-of-scale and automation, thus significantly lowering relative prices.

And now the Knowledge Age economy is devaluing the Industrial and Agricultural age economies. Food is maybe a hundredth of my income and that is the future.

http://esr.ibiblio.org/?p=5558&cpage=1#comment-480286

> We’re still a long way from solving the shortage of skilled labor, as anyone who has ever needed a plumber can attest.

I am in the Lazarus Long camp that says there is nothing the government can't unimprove if it can touch it. Plumbing is not an extremely highly skilled activity, at least without the kafkaesque, labyrinth of building codes that must be navigated in some jurisdictions. Of course I am not arguing that building best practices aren't a good idea if done in the free market. I strongly suspect the supply of plumbers is restricted by the onerous licensing requirements which mismatch the education level of someone who wouldn't be bored out their freakin' mind to pursue that career. I was an autodidact plumber when I was 5 years old. Currently it is difficult to find a plumber in the post-BRICs NICs portion of the developing world, because the debt was driven sky-high by the Fed's ZIRP carry trade and uneconomic construction is going full tilt (to implode globally 2016 in a massive conflagrapocalypse).

I expect the discussion will likely digress to the usual pissing politics, so I won't participate further unless there is a solid refutation of my salient point about knowledge networking scaling faster than vertical integration.

[Erdogan]

In economics, there is no such thing as intellectual capital. It is work, capital (not money, but tools and commodities and partly produced products) and land factors (resources of nature) that are limited in supply.

Ideas, procedures for production, those kind of things, are practically limitless. When more capital is accumulated, enabling higher productivity, the ideas on how to use it come more or less automatically. You see this in paralell inventions, all coming independently at about the same time. There are something we can call real inventions, that skew the timeline a bit. An invention can come too early, which happens all the time (maybe bankrupting the optimistic investors), or maybe to late compared with what is natural, unleashing a new industry.

The patent system is an idea (!) to turn inventions into assets mimicking capital. I don't say it is inherently evil, but the economy would function just as well without it.

[thaaanos]

In economics, there is no such thing as intellectual capital. It is work, capital (not money, but tools and commodities and partly produced products) and land factors (resources of nature) that are limited in supply.

this is where they fail I think
If they don't take into account the intellectual capital, or the cultural capital, or the human capital. Those things don't translate into $ easily and are conveniently left out of the equations.

EDIT: But if you pause and think what kept empires like, Rome, Byzantium, China, USSR, 3rdReich, and US currently going is the Dominion in the Arts and Culture

[AnonyMint]

What exactly is he afraid of?

Jabba the Hutt who wastes all my time and doesn't even address the salient point about relative scaling rates between knowledge networking and vertical integration.

http://en.wikipedia.org/wiki/Jabba_the_Hutt

In economics, there is no such thing as intellectual capital. It is work, capital (not money, but tools and commodities and partly produced products) and land factors (resources of nature) that are limited in supply.

Your antiquated indoctrination will be swept away by reality. Maybe you are Jabba's slave-driver assistant pictured above. Perhaps you didn't read the following.

http://esr.ibiblio.org/?p=5558&cpage=1#comment-479742

We will be able to produce all the food, raw materials, and energy we need with robots. There is no reason the price shouldn't trend towards zero, once the robots can build more robots.

The activity that can't be automated is creativity and knowledge creation. Thus it should rise in relative value.

[AnonyMint]

http://esr.ibiblio.org/?p=5558&cpage=1#comment-481122

Decreased transactional friction leads directly to elimination of the opportunities for arbitrage. I can buy plenty of products and services directly from Shenzhen, and there’s no profit for a new middleman.

I assume your implied point is that as knowledge moves more freely then no one can build a Buffet-esque moat to defend profit. Your correct use of the term "middleman" goes to the heart of my counter-logic. Remember I wrote upthread that knowledge creation isn't fungible. So when you need something created based on an existing body of work, you need an expert. Let me distill that for you. As the transactional costs of knowledge sharing decreases, the profit moves closer to the producer of knowledge and away from the rent-seeking middlemen. Diversity of creation and the maximum division-of-labor guarantee that moat but where it is rightfully deserved personal property. People will finally own their expertise and creative energy.

Eric I continue to honor you. Peace.

[AnonyMint]

Generally speaking, the point of life (at lower levels) is to make more life.  This is someways is explained well in The Selfish Gene.  It will do this by any means necessary and those means often mean creating gradients.  So life doesn't reduce gradients, it creates them.

Maximizing entropy (disorder) is the maximization of the number of equiprobable outcomes, i.e. maximizing degrees-of-freedom. Btw, degrees-of-freedom is potential energy. Creating more unique (every human is!) instances life increases diversity, granularity, and degrees-of-freedom. Procreation is breaking down the concentrated gradient (order a.k.a. kinetic energy) incoming from the Sun into maximum entropy or potential energy.

I got into this in the Information Is Alive! and The Universe essays at my blog (see my signature).

Schneider is semantically incomplete though on one point. jabo38 is correct, the goal of life is to maximize the instances life, yet life goes hand-in-hand with death because if nothing dies then procreation rate has to diminish. So in that sense Schneider is correct as quoted.

That was appreciated but let's not discuss that philosophical tangent further in this thread, so we don't bury the main point of this thread. We've already built a sufficient case for the point w.r.t. to stated goals for crypto-currency. I strongly urge to move further discussion on that to the Dark Enlightenment or Economic Devastation thread. I will copy this post there. You can click "Quote" then copy+paste into a Reply at any thread.

[johnytelevision]

I'm not sure if you can use traditional economy concepts for this problems. I guess we need one more step forward.

[CoinCube]

Finance Part II: The Parasitic Cycle

Modern economics obscures the truth about the process of money creation. In Finance Part I: Understanding the Parasite we explored how money is actually created. Today we explore the devastating economic consequences that inevitably follow.

Banking is a very treacherous business because you don't realize it is risky until it is too late. It is like calm waters that deliver huge storms.

The modern industrial economy is characterized by cyclical boom and bust. Massive growth is followed by recurrent busts. With only minor hand waving we are told by most economists that this "business cycle" is caused by mysterious and natural periodic shifts in savings and consumption. Karl Marx noticed that before the Industrial Revolution, these cyclical boom and busts did not occur. Marx concluded that the cycles must therefore be an inherent feature of capitalism. Various schools of modern economic thought, regardless of their other disagreements have all agreed on this sacred scripture. The business cycle (we are told) must be rooted deep within the free-market economy a natural boom and bust if you will. These crashes seem to just… happen.

We must go further back in history to find a true counter to the modern narrative. David Hume and David Ricardo would not have agreed with current orthodoxy. Hume was the first to point out that another critical institution had developed and grown strong alongside the industrial system. This wondrous creation of wealth extraction creation is our fractional reserve banking system. Could this powerful institution be responsible for the cycles? Ludwig von Mises answered this question definitively in 1912 with his groundbreaking book Theory of Money and Credit.  

Mises saw that true cause of the recurrent boom and bust cycles was fractional reserve banking. Banks create money, but each loan they make creates more debt than money. To pay back these loans the interest due must in be drawn from the larger economy. This interest can only be paid via two mechanisms.

1) Someone somewhere in the economy must take out even more debt to pay the initial loan.

Or

2) Somewhere debt must go into default and its underlying collateral seized.

The bank's costs to create money are fixed at a low price by the central bank (not the free market). Central banks keep this rate at the lowest possible level that avoids significant inflation. It is "good for the economy" or so we are told. Debt requires ever more debt to sustain.

Credit creation makes it appear as if the supply of "saved funds" ready for investment has increased, for the effect is the same: the supply of funds for investment purposes increases, and the interest rate is lowered. Borrowers, in short, are misled by the bank inflation into believing that the supply of saved funds (the pool of "deferred" funds ready to be invested) is greater than it really is.

When interest rates are artificially low, entrepreneurs are led to believe the income they will receive in the future is sufficient to cover their near term investment costs. In an environment where the money supply is continually expanding via debt, entrepreneurs mistakenly conclude that investments are really available for long term projects when in fact the pool of available funds has come solely from artificial credit creation that can and will be contracted at will by the banking sector. Entrepreneurs see spending in the economy and assume consumer demand exists for their projects when in fact consumer demand is artificially and unsustainably elevated.

As bank credit percolates through the economy it moves downward from business borrowers to landowners and capital owners who sold assets to the newly indebted entrepreneurs, and finally onto other factors of production like wages, rent, and interest.

No punch bowl stays full forever. The artificial boom from artificial credit raises prices and if left unchecked runaway inflation. Banks cannot allow that. As inflation picks up the central bank overseer signals the end of the party. Interest rates are rise and the squeeze begins.

When banks start to squeeze (often in response to inflation) the party quickly ends and there is a critical economy wide liquidity shortage. By definition there is never enough money to pay off debt. Without sufficient new debt what existing liquidity exists must be redirected towards an ultimately unpayable debt. Assets must be sold and prices drop.  Investors suddenly find their projects are unsustainable; banks call in loans and then seize the underlying collateral capturing the work and effort of the investor.
Some investments made during the artificial monetary boom were inappropriate and "wrong" from the perspective of the long-term financial sustainability. Others should be sound but nevertheless fail due to the economic distortion and contraction triggered by sudden credit tightening.

The boom is revealed for what it is, a period of wasteful malinvestment, a "false boom" where the investments undertaken during the period of fiat money expansion are revealed to lead nowhere but to insolvency and unsustainability. Seizure of collateral and general price deflation or reduction in inflation ensues. The longer the false monetary boom goes on, the bigger and more speculative the borrowing, the more wasteful the errors committed and the longer and more severe will be the necessary bankruptcies, foreclosures and depression.

As we have seen, an increase in the supply of money benefits the early receivers, that is, the government, the banks, and their favored debtors or contractors, at no point is this more true than at the bottom of the business cycle when asset prices are artificially depressed and only favored borrowers are allowed to borrow. It is at the bottom that favored insiders can still borrow allowing assets to be purchased at depressed prices.

In any economy not on a 100% percent commodity or cryptocurrency standard, the money supply is thus used as a vehicle for wealth extraction. Monetary inflation and the inevitable resulting parasitic cycle erroneously referred to as the "business cycle" is the method by which the banking system, and favored political groups are able to partially expropriate the wealth of other groups in society. Those empowered to control the money supply issue new money to their own economic advantage and at the expense of the remainder of the population. The parasitic cycle is a direct result of fractional reserve banking. The creation of new money is limited only by the top down imposed cost set by the central bank. This value is not set by individuals optimizing their economic savings decisions but a single top down controller, a controller who's charter mandates it to act in the best interest of its member banks.

The empirical evidence is strongly on the side of the view that deviations from full employment are often the result of spending shocks. Monetary policy, in particular, appears to have played a crucial role in causing business cycles in the United States since World War II. For example, the severe recessions of both the early 1970s and the early 1980s were directly attributable to decisions by the Federal Reserve to raise interest rates. On the expansionary side, the inflationary booms of the mid-1960s and the late 1970s were both at least partly due to monetary ease and low interest rates. The role of money in causing business cycles is even stronger if one considers the era before World War II. Many of the worst prewar depressions, including the recessions of 1908, 1921, and the Great Depression 1930s, were to a large extent the result of monetary contraction and high real interest rates.

Figure 1: Unemployment Rate and Recessions

Once inflation is safely tamed and another cycle of assets seized, the central bank signals the start of the next "boom" and low rates are initiated once more with the goal of "helping reduce the unemployment" caused by the "business cycle". However, the parasitic cycle is self-limiting. It only works if banks can identify individuals with collateral to harvest lend to. Eventually those people run out of assets to seize. The highly productive learn to avoid debt whenever possible and thus partially opt out of the game.

Once the parasitic cycle has run its course banks need a way to forcibly harvest the wealth of those who opt out of the system. To succeed they need a more efficient suction mechanism. Specifically they need powerful centralized government and taxation powers. Stay tuned for Finance Part III.

Finance Part I: Understanding the Parasite
Finance Part II: The Parasitic Cycle
Finance Part III: Divide, Conquer, Enslave
Finance Part IV: The Rise of Cryptocurrency (Coming Soon)

References:
Murray N. Rothbard, Economic Depressions: Their Cause and Cure
https://mises.org/daily/3127
Ludwig von Mises Institute, Austrian Business Cycle Theory
http://wiki.mises.org/wiki/Austrian_Business_Cycle_Theory#cite_note-6
Christina D. Romer, Business Cycles
http://www.econlib.org/library/Enc/BusinessCycles.html

[AnonyMint]

I just put ... and Martin Armstrong into SCIgen and it produced for me a verbatim transcript of Anonymints posts as presented on Bitcointalk, postulating his Theory of Everything  .

Hey fool, Martin Armstrong is always correct.

http://armstrongeconomics.com/2014/03/02/the-cycles-of-war-model-why/

QUESTION: Mr. Armstrong, I have followed you since your 1985 conference in Princeton. It was your advertisement in the Economist that caught my eye when you bluntly stated that the deflation was over and a major change in trend was at hand. I watched you forecast the takeover boom and I was shocked by your forecast that the Dow Jones would rally from 1000 to 6000 back then. The 1987 Crash was a real eye opener for the very day you pronounced the low was in place and new highs would be seen, the Elliot Wave people said a crash like 1929 was beginning. I watched in amazement your call on Japan, then the currency crisis of South East Asia. Your forecast for the fall of communism and then Russia in 1998 was shocking, however, I must confess, I was not entirely certain how you could do politics and markets. Then the rumors were Goldman Sachs and Buffet wanted you silenced. When it came to markets, I do not think there is anyone who can even come close to your track record. Now I have watched your Cycle of War and after all of these years I think the light has finally gone on. This is what you mean when you say it is all connected. You cannot be right on so many trends for so long unless you were correct about the structure. So do I now get a gold star?

Thanks for everything;

JCH

Include his recent prediction that Gold & silver would top in 2011 and then decline to below $1200 into 2014 at least. Goldbugs were resisting all the way down, until they finally capitulated to $1150 recently.

Edit: here is another list of amazing predictions he did correctly:

https://bitcointalk.org/index.php?topic=160612.msg2864869#msg2864869

Add: here is yet another list I compiled years ago and had forgotten about:

http://goldwetrust.up-with.com/t11p30-stocks-vs-precious-metals-vs-bonds-vs-real-estate#4728

http://armstrongeconomics.com/2014/04/16/20305/

A client has tweeted a picture of a slide from our 1998 World Economic Conference tour we did around the globe. In retrospect those forecasts were simply astonishing all based upon alignments with the ECM. I think if I had another whole lifetime, this whole thing would keep me occupied trying to figure out this amazing order masked by what people think is random chaos. The ECM is simply the frequency of life for everything seems to align with it no matter what the field. The mere fact there are the Four Blood Moons that line up to 2 days before the turning point 2015.75 when there was no input regarding planetary movement is just mind-bending.

This is not my theory – it was my discovery.

http://armstrongeconomics.com/2014/04/16/is-anything-really-random/

ANSWER: It is impossible to create any system that is random. No matter what, in computing, a pattern will always emerge precisely as this pretend random image that quickly falls into a pattern. It is simply impossible to create a truly random number generator. In gambling, there are card counters that they make illegal. Look at a casino and you will notice that they rotate the dealers regularly moving them from table to table. WHY? Because they will end up in a pattern.

Armstrong is correct. The more scientific way of stating is that the entropy of the universe is not infinite, rather it trends to maximum. Thus Bitcoin's proof-of-work is more randomized than proof-of-stake, because the entropy of spontaneous outcomes includes every computer in the network trying to guess the mathematical solution (for the nonce of the hash) to the next block in the block chain.

How can you all continue to deny that NOTHING in the universe is random?

The Second Law of Thermodynamics (which even Einstein said was more fundamental than his relativity) says entropy trends to maximum, not is infinite. Infinite entropy would be required for a truly random universe.

If you want to explore more the meaning of infinity w.r.t. to our universe and the properties of our minds, see my two blog essays:

http://unheresy.com/The%20Universe.html#Matter_as_a_continuum
http://unheresy.com/Information%20Is%20Alive.html#Algorithm_!=_Entropy

Rather the appearance of disorder (a.k.a. randomness) is an illusion of complexity of high entropy.

Maximum entropy is obtained with the maximum number of potential equiprobable outcomes, i.e. maximum degrees-of-freedom which is same as saying maximum potential energy. I explain that and give citations at following posts:

https://bitcointalk.org/index.php?topic=355212.msg3804256#msg3804256
https://bitcointalk.org/index.php?topic=355212.msg4576810#msg4576810
https://bitcointalk.org/index.php?topic=355212.msg3852724#msg3852724

[counter]

yea I've decided to take some time in the future to look into what Anonymint is getting at because I get the sense that there it some legitimate things and information brought to the table and I like being informed.

[AnonyMint]

http://www.infowars.com/video-tiny-magnetic-robots-build-things-in-microfactory/

[zolace]

It was under the Clinton Administration that the Federal Government also specifically decided to not regulate the derivatives.

[AnonyMint]

Cross-posting...

Generative essence of why humans prefer slavery

Let's reduce this Bundy ranch debate to its generative essence.

http://www.reuters.com/article/2014/04/26/us-korea-north-usa-idUSBREA3P02U20140426

Obama reminds North Korea of U.S. 'military might'

"So like all nations on Earth, North Korea and its people have a choice. They can choose to continue down a lonely road of isolation, or they can choose to join the rest of the world and seek a future of greater opportunity, and greater security, and greater respect - a future that already exists for the citizens on the southern end of the Korean peninsula."

Obama's rhetoric above cloaks the true meaning which is that world government is "greater opportunity, and greater security, and greater respect" than sovereign countries, counties, and individuals.

The powers-that-be create a conflict (China supporting N. Korean and USA supporting S. Korea) in order to frighten individuals and cause them to think a world government is necessary for security. The powers-that-be are doing it again with China threatening the Philippines over the Spratly islands and the Philippines taking their claim to UN tribunal.

What Obama's rhetoric doesn't reveal is that instead of a diversity of sovereign countries, counties, and individuals (which includes allowing individuals to express and live their own opinions of diverse issues such as race, work ethics, and marriage), the world government means all that freedom of expression and life will be subjected to the will of those powers-that-be who manage the world 'democracy' by promising the people everything, manipulating 75% of their emotions, and taking everything for themselves. This is how the power vacuum of 'democracy' has always worked and will always work.

Upthread we have Communists who vehemently express their hatred of diversity of expression and life. They prefer a society that is top-down managed, so the powers-that-be can enforce all their control-freak pet peeves they want the community enslaved within.

The subconscious (root) motivation of these upthread antagonists is they won't want to see anyone have something they don't, i.e. jealousy. They convince themselves they are fighting for the good of all, but the truth is they are subconsciously jealous that individuals could compete and excel without their control over them via their powers-that-be proxy.

So I don't want to speak to these brain-dead antagonists who throughout history have destroyed themselves in repeating bouts of economic gridlock collapse and megadeath.

I speak today to those who want to opt-out of their killing machine.

Join me. I have the solution.

I'm ceasing debate with the antagonists. Their fate is sealed.

[thezerg]

Cross-posting...

Generative essence of why humans prefer slavery

Let's reduce this Bundy ranch debate to its generative essence.

http://www.reuters.com/article/2014/04/26/us-korea-north-usa-idUSBREA3P02U20140426

Obama reminds North Korea of U.S. 'military might'

"So like all nations on Earth, North Korea and its people have a choice. They can choose to continue down a lonely road of isolation, or they can choose to join the rest of the world and seek a future of greater opportunity, and greater security, and greater respect - a future that already exists for the citizens on the southern end of the Korean peninsula."

Obama's rhetoric above cloaks the true meaning which is that world government is "greater opportunity, and greater security, and greater respect" than sovereign countries, counties, and individuals.

The powers-that-be create a conflict (China supporting N. Korean and USA supporting S. Korea) in order to frighten individuals and cause them to think a world government is necessary for security. The powers-that-be are doing it again with China threatening the Philippines over the Spratly islands and the Philippines taking their claim to UN tribunal.

What Obama's rhetoric doesn't reveal is that instead of a diversity of sovereign countries, counties, and individuals (which includes allowing individuals to express and live their own opinions of diverse issues such as race, work ethics, and marriage), the world government means all that freedom of expression and life will be subjected to the will of those powers-that-be who manage the world 'democracy' by promising the people everything, manipulating 75% of their emotions, and taking everything for themselves. This is how the power vacuum of 'democracy' has always worked and will always work.

Upthread we have Communists who vehemently express their hatred of diversity of expression and life. They prefer a society that is top-down managed, so the powers-that-be can enforce all their control-freak pet peeves they want the community enslaved within.

The subconscious (root) motivation of these upthread antagonists is they won't want to see anyone have something they don't, i.e. jealousy. They convince themselves they are fighting for the good of all, but the truth is they are subconsciously jealous that individuals could compete and excel without their control over them via their powers-that-be proxy.

So I don't want to speak to these brain-dead antagonists who throughout history have destroyed themselves in repeating bouts of economic gridlock collapse and megadeath.

I speak today to those who want to opt-out of their killing machine.

Join me. I have the solution.

I'm ceasing debate with the antagonists. Their fate is sealed.

Ok, then show us your solution instead of fooling around with all these teasers.

[CoinCube]

Finance Part III: Divide, Conquer, Enslave

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Central banking is a resilient institution. Historically there have been many attempts to destroy it but it always grows back stronger then ever.
In Part I and Part II we explored how fractional reserve banking exploits the power of money creation to impoverish the middle class. Today we will see that the upper classes are not immune. They too are eventually decimated by finance.

Fractional reserve leads inevitably to cyclical boom and bust. Our tolerance of this system has profound social and economic consequences. With every rotation of the "business cycle" the  middle class finds it harder to maintain a quality standard of living. As the populace suffers from cyclical but progressive economic strangulation many find they simply cannot get ahead. Intuitively they feel the system is rigged against them but they do not understand how or why. Growing progressively desperate they turn to the only actor willing to help. They petition the government.

The nine most terrifying words in the English language are "I'm from the government, and I'm here to help."

Responding to public demand government steps in and tries to halt finance induced crashes. However, government does not simply print money to mitigate the cyclical monetary crunch. True money printing would harm vested financial interests and is taboo. Instead government enters the arena meekly as the sucker borrower of last resort. Once government is ensnared the triumph of finance is complete.  Government debt is paid via taxation and taxation primarily targets the upper class. Thus with the capture of government finance gains the ability to siphon wealth from the upper class.

A time honored strategy in war is divide and conquer. It is easier to subjugate a people who are fighting amongst themselves. Finance and fractional reserve divides the public into two competing blocks of victims. The poor as we have seen become ever poorer with each "business cycle". They  look at the relatively well off and cry Thief! The entrepreneurs and productive increasingly suffer under ever higher tax burdens. They point to government and the welfare recipients and cry Thief!

Government does not handle this conflict well. Unable to decide between competing citizen demands it waffles. It spends to support the poor but does not raise taxes. The result is ever larger government debt. Each attempt by government to buffer the finance induced downturn simply delays the liquidation of middle classes assets by transferring that liability to the government and eventually to the upper classes via increased taxation.  Bailouts are thus a transfer wealth from the productive upper classes to well-connected financial interests. Finance uses the business cycle to harvest the  poor, and bailouts to harvest the rich.

The long-term costs of all this are borne out by the majority of the ill-informed public who are too busy fighting over a myriad useless conservative versus liberal disputes to address the root cause of their suffering. Meanwhile government in its misguided attempt to "help" becomes so indebted that eventually it can no longer service its loans.

The people are blind to the mechanism which is enslaving them and reducing their prosperity. Thus, since they will not change the mechanism, centralization of governance will grow stronger from the current financial crisis

Government can and does shield the people from their folly for a time. However, its ability to do so comes to an abrupt end when it reaches the limits of its solvency. Once the solvency threshold is reached  government must choose to either default, cut spending, or raise taxes. The effects of inertia, a population dependent on government benefits, and powerful financial interests will ensure it chooses to raise taxes. Matt Taibbi of Rolling Stone described the most powerful investment bank as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." This image neatly  captures the reality of finance today. Feeding the squid just increases its appetite.

Eventually the upper class starts to sag under the weight of ever higher taxation. This slows growth and leads to jobs becoming hard to find. As the economy declines the clamor for ever more government intervention grows louder. The predictable result is more deficit spending more debt and eventually more tax increases. Both conservatives and liberals are complicit as both argue only for their own narrow interests. Conservatives argue for minimal government and low taxes while simultaneously supporting the finance induced vampirism that decimates the middle class. Liberals correctly feel that the deck is stacked against the poor and look to level the playing field via big government and taxation regardless of the damage these policies do. The great beneficiary of this battle between idiots is finance.

Eventually rising taxes will hit the laffer maximum where an increase actually lowers revenue obtained. Various academic studies have placed this rate as somewhere between 40-70%. The French are already taxing high earners at 75%. Once governments hit this maximum they face a stark choice between default, printing money (direct printing not bond issues), or seizing assets. The obvious choice for politicians is to seize assets via some form of wealth tax. Such seizures will become ever more common as governments around the world slide into insolvency. The result will be  progressive deflation not inflation as wealth tries to get off the grid and hide from the taxman and the velocity of money declines.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

It is only much later when assets can no longer be effectively seized that government will turn on the printing press. Those in the know will have placed their funds in hard to seize assets prior to this time. The hum of the printing press will signal the start of hyperinflation.

In short fractional reserve is a disease which progressively weakens and consumes its host. Left unchecked it corrupts society driving us to extremes of debt, taxation, and eventual systemic failure. It does thus while masquerading as a natural part of the economy.  It's closest biological parallel is that of metastatic cancer.

Finance Part I: Understanding the Parasite
Finance Part II: The Parasitic Cycle
Finance Part III: Divide, Conquer, Enslave
Finance Part IV: The Rise of Cryptocurrency (Coming Soon)

References:
Shelby Moore III, Understand Everything Fundamentally
http://www.coolpage.com/commentary/economic/shelby/Understand%20Everything%20Fundamentally.html
Matt Taibbi The Great American Bubble Machine, Rolling Stones July 9, 2009
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
Ludwig von Mises. Human Action: A Treatise on Economics 1949
http://mises.org/Books/humanaction.pdf