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Back in the days of the barbarous relic, frivolous expenditures depleted a sovereign’s treasury and plunged his realm into a poverty that invited invasion from abroad. Bankrupt and beleaguered by rivals nipping at the boundaries of his realm, the insolvent sovereign was faced with two options – remain bankrupt and get ignominiously deposed, or submit to vassal status in exchange for the silver needed to defend his rights. Medieval wizards were mostly employed by the Catholic Church to keep the serfs in line with promises of salvation in exchange for a life of drudgery in the muddy furrows producing useful stuff for the nobles and wizards. There were few wizards around to ponder upon a royal fiduciary predicament save the odd court Jew here and there. Medieval macroeconomics were simple - when the gold and silver ran out there was no more gold and silver left to squander, especially on war. An empty treasury stopped wars in their tracks because martyrdom for the nation state had yet to be invented and there was no economic science back then to figure out how to prosecute war after the gold and silver was gone.
Classical European bankers learned well this vital liquidity lesson from their profligate feudal predecessors. Instead of curtailing wasteful expenditures when the silver ran low, the illuminated bankers concocted the deferment of the national bankruptcy using the black financial magic of fractional reserve alchemy. It was through the adoption of this monetary magic in the late 17th century whereby the Great Britain launched and sustained three large-scale naval wars against their Dutch rival in a bid to wrest from them their control over the world reserve currency. Thousands of fractional pounds sterling were squandered, inflation ran rampant throughout Britannia, and the poorest of the Queen’s subjects starved in the streets for want of the price of tea and a slice, only to see the French and their livre grab the guilder up for themselves as it fell to the ground. Yet most of the silver in Her Majesty’s treasury remained untouched and ready to prosecute yet another war. Commoners had magically foot the war bills through the mechanism of inflation. The costs for prosecuting Britain’s side of these three Anglo-Dutch wars had successfully been socialized upon the people, and the great British monetary experiment proved that if a nation aspired to superpower status, it had no option but adopt fractional reserve banking to fund its wars at the cost of inflation to its subjects.
So what followed from there during the 18th century was another seventy-four years and eight declared wars pitting Great Britain with its fractional pound sterling against France and its gold backed livre. But the classical French treasury lacked an economic science so it was drained of its gold and silver, where financing had continued to rely on the old school shakedowns of the aristocracy and heavy taxation placed upon the poor. So by the time the French Revolution erupted as a result of an illuminated sorcery conjured up by a shadowy social science, the economic science had established the precedent that monetary sorcery must be practiced concurrently with the prosecution of war.
Thus back in the days of the barbarous relic it was a more civilized time when the wars and killing actually came to a close when the gold and silver ran out. The death and destruction were contained, and inflation remained a consequence of a war’s disruption to trade.
It was the Bolshevik Soviets who were the first to attempt the grand sleight of hand of fiat money on the world stage when in 1924 they abandoned the Czar’s Gold Rouble and unleashed pure fiat upon the proletariat. But that trick was not followed up with the social euphoria required to sustain the hoax, and communism ultimately ended up being just plain boring. The launch of the Soviet fiat money was not accompanied by flappers, negro jazz bands, nor a single guy going over a waterfalls in a barrel to spice up the drudgery of meeting production quotas. There were few amusements for those united workers of the world, just vodka and rape and endless bread lines. There was no magic spell cast over communism’s monetary system, it was just Holodomors and gulags and the NKVD to back up the fledgling fiat rouble. So the Soviet fiat system was destined to collapse and despite a last desperate attempt using glasnost to import some rock ‘n roll and hamburgers, it did collapse spectacularly in 1989. In the end, it was boredom and the resulting apathy that killed communism, and with communism dead its fiat rouble and the empire it ruled died with it.
Fiat money without the accompanying magic spell is always a short-lived endeavor....
.......But everyone had to be all in the American Dream together, everyone watching the exact same movie on the exact same frame at the exact same time. The American people had to not just act in unison, but to think and believe as a cohesive unit. The goal of The Apollo 11 Show’s white magic was to pave the way for the release of the black magic finance that kept the people acting in unison once the triggers were broadcast across the mass media programming. Everyone had to unwillingly play out their roles in the great scripted play without thinking. The stubborn and rugged individual had to be deconstructed into and played out as a prefabricated stereotypical archetype. The American people had to be placed into the correct frame of mind to accept the black magic to come. And it was hard to engender Hope into that late 1960s America as its people were in a sullen mood what with the recessions and that hippy social unrest and civil rights anarchy and those dead Kennedys and the grinding Vietnam War and a summer of love ending in ritualistic murder.
There had to be an unthinking and unflinching belief in the unlimited potential of America before the fiat money was released. And within that unlimited potential, every man had to see his role clearly defined with a place for himself as the beneficiary of that promise. Hi Mom, We’re #1 had to reign supreme at home while a constant and pervasive fear had to grip the world abroad. There had to be the right zeitgeist permeating American society before the wizards could summon the black magic of fiat money. Because once it was released, it was going to be a very rough ride into the beginnings of the End of History......
.......After August 15th of 1971, debt and proxy wars were cemented as the dual pillars of American foreign policy. There was no other logical alternative after the jump to Full Faith and Credit because when credit was issued, an equivalent amount of money was conjured up somewhere in The UNITED STATES of AMERICA and through statistical magic, both debt and war were entered into the Grand Ledger as GDP growth. Most new domestic money creation was squandered, so this waste added to the inflation which increased asset prices that in turn created the new incremental collateral that beget the issuance of more credit that led to the ever expanding GDP growth ad infinitum.......
............The great significance of August 15th, 1971 is that it marked the official beginning of the American transition from a goods producing economy into primarily a non-productive economy dependent upon the conjuring up of debt, foreign proxy wars, and stuff that nobody needed like pet rocks and lava lamps. Most of the “jobs” created henceforth were in petty services and government which required little to no skill or know-how yet gave the home front the illusion of value creation from those carefully curated economic data that were allowed to appear on the Six O’clock Evening News. The American nation had the look and feel and statistics of a productive and vibrant economy, and people expended lots and lots of energy in that economy, but the reality in the basement was that this credit driven “prosperity” masked the massive productive job losses and factory town despair arising out of the American de-industrialization program.
And there was a good reason for that American de-industrialization program. A nation could never be pushed into the End of History if it practiced and retained its collective knowledge of how to produce real and useful stuff. Only the Eloi can be allowed to remain on a planet ruled by Morlocks.
This transition into financialization would beget an almost “perfect” system that was nearly immune to waste, sloth, arrogance, and incompetence. Indeed, the system would only grow stronger the more voracious and wasteful and stupid it became. The stronger the system became, the more slothful, arrogant, and incompetent it grew. And the more slothful, arrogant, and incompetent the system grew, the more voracious and wasteful and violent it became.
Ad infinitum.
But the fiat money system would eventually reach a point where it ran out of suckers to fleece. The day would come when everyone trapped in the circus side-show had figured out what “To the Egress →” meant. At that point, the system would start to devour its self and its sole purpose become the creation of waste - not as a by-product of productive economic activity, but as the end activity of economic conjuring in and of its self. Financialization under fiat money has no choice but create waste as its primary output since all its productive capacity and shop floor technical know-how get jettisoned and off-shored to facilitate the build-up of foreign earned export dollars for repatriation to feed this home based Frankenstein of fiat money’s creation – the “virtuous cycle”. The Economic Science™ knew this well – they had discovered this in their calculus but dare not publicly publish their findings. In fact, they created a great and sprawling de-education edifice to hide and divert from their occult knowledge, and that edifice produced the captains of finance with their MBAs that knew how to get things done but couldn’t do a damn thing themselves......
.....Using interest rates, the Philosopher Kings deliberately wiped out the vast majority of American manufacturing capacity and the blue collar skilled jobs that went with it. Once the “virtuous cycle” was globally up and running, The Economic Science™ could claim it had “tamed inflation” and begin steadily reducing those job killing interest rates. This about face then subsidized Wall Street’s speculation foray into a “technology based” economy and facilitated America’s transition into a sea of white collar jobs that produced little except waste and a bigger pile of debt. And the squandering and inflation continued to work their magic on asset prices, and interest rates nearly ground the US construction industry to a halt. America and its suppressed real wages were brought from the brink, and the Six O’clock Evening News could not shower enough praise upon the Ashkenazi genius of The Economic Science™. But it was all economic theater As Seen on TV!
And it was at this point just before 1980 when Joe Six Pack finally broke. Sporadically employed, in poor health from a beer and cigarette too far, his local bowling alley long ago closed, and with a stack of “FINAL NOTICE” piled up on his kitchen table, he threw in the towel and, one after another, just quietly disappeared. And those swarms of ineducable immigrants who had finally figured out the operating intricacies of the indoor plumbing flush toilet occupied Joe Six Pack’s former urban tenements by the millions. Joe Six Pack had lost his social status, his standard of living, had an entire day of television viewing leisure, and was left with no political clout whatsoever. And it only took 10 years to kill him off. From Joe Six Pack’s vantage, America had abandoned him - yet he refused to question America’s greatness. He still firmly believed that America had always been his country and that it could all still be fixed to become again what it was always supposed to be.
But what Joe Six Pack never saw was that the permanent fix was in on August 15th, 1971. Joe Six Pack was not in on the joke. What he never saw was that the joke was on him.
