Saturday, December 11, 2010

Embrace freedom or decend into a new Dark Age.

By Nick Sorrentino

The economic crisis continues to take hold. 2 years in it continues to warp our once familiar societies. Europe is truly in trouble, and so are we of course.

I just watched a great roundtable discussion of the crisis on PressTV.

Max Keiser, one of my personal favorites was as good as ever and waxed on about the need for everyday folks to take delivery of silver. There was another guest, a former bank risk manager, who was excellent as well. But I grew frustrated with the other 3 guests and especially with the London audience which was comprised mostly it seemed of recently graduated university students. It was clear that the audience was thoroughly steeped in good old fashioned Marxist nonsense and went on and on about the need for the government to create jobs etc. Despite the horrible mismanagement of nearly everything by the state, these students still looked to the state to feed them.

It was sad, like a beaten dog that does not know where else to look for food, the audience still thought the answer to their problems lay in a more activist state. They couldn‘t even imagine themselves without a master .

As the moderator explored how to get through the crisis the audience consistently expressed their hatred for the banks and in some cases America (PressTV is Iranian BTW so this is to be expected, saying that it still has some great stuff.) but refused to embrace the only solution to the crisis that I see, and that is to let the market work. That is, stop propping the banks. Let the banks fail. Then, lets start over with real money, gold and silver based money.

One of the guests, a “street organizer,” had a clear aversion to metals. Marx of course hated gold, as did Lenin. They believed that gold was just another commodity, essentially the same as paper with no inherent value. The organizer seemed to perceive gold through this lens. Gold reins in the state. And here lay the unholy marriage between much of the left, and the banks that many of the people on the left say they hate.

The banks (And I mean the big 6) are as powerful today as they are because they have been able to convince the world that fiat currency, that is paper, and now just blips on a computer screen, are valuable. So long as they can keep this up things will be very good for them. The banks essentially need to have almost nothing on the books to lend out money at interest to you and me.

There was a time when a bank needed to have a certain amount of cash, and before that gold, on hand to stave off a bank run. If people thought the bank was lending out too much money versus it’s reserves people would go and take money out of the bank. This was how the market kept banking under control.

However the banks figured out that having a central bank from which to get new paper assets in the event of insolvency made quite a lot of sense for them. The central bank insulated the broader banking establishment in many ways (though not entirely) from the public voting with their bank books.

The banks sold the idea of a central bank to the public as necessary for the stability of a modern economy. Such an economy was just coming online in the USA when the Federal Reserve was instituted. With much influence from the Bank of England and the German Warburg family, the American central bank was resurrected. It had been killed by Andrew Jackson once before, his proudest achievement.

What the public got was in fact not economic stability, but a new thoroughly entrenched banking aristocracy based in New York City.

The progressives of the time knew that a central bank would allow for the expansion of the money supply for as long as they could imagine. This would allow them to fund the utopian state they envisioned. The banks recognized that this expansion of the money supply would also increase their power exponentially as well. A society based on debt servitude was born and the power of the purse was taken from the people and given to the Fed.

It's not because the people that run the show need to be changed and replaced with better, more thoughtful managers. Government always reverts to it’s nature which is not a nice nature whoever is involved. The only solution is to drastically cut our reliance on the state. We must look at the post WWII era as a time of hubris and foolishness. It was an anomaly.

We must embrace transparency, and entrepreneurialism. We must embrace freedom. We must embrace capitalism in its purest form.

We stand on the precipice of a huge leap in human consciousness, so long as the dung heads don’t derail things. They may still throw us into a dark age.

But to quote Cypress Hill…

“I ain’t goin’ out like that… I ain't goin out...”

About Me

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Nick Sorrentino is the Editor of The Liberty and Economics Review and CEO of a social media management company.