Understanding the Nature of a Worldwide Monetary System Collapse

I’m going to try to dispel a very powerful MYTH regarding the fiscal imprudence of our elected officials, which is the assumption that had we not pursued endless and unwinnable wars and had we not developed such a large “nanny state”, we could be sitting happily now on top of a pile of money while the rest of the world collapsed. Its actually not true, even if we had honest CONgressman who could balance a checkbook, the monetary system would STILL have collapsed, and likely a whole lot sooner than it did.

To do this, I am going to do another analysis of money flow in trade to show why Sovereign wealth always collapses when the resource base runs too thin to support a given population.

First I will reduce the world to just a few 3 major trading countries, the US, China, and Saudi Arabia. Start each of them off with a equal pile of Gold Bars which represents their monetary wealth on day 1. Each of these countries must have something to trade that the other country needs or wants.

The Chinese trade Cheap Labor. Using that cheap labor, they can manufacture what everyone else wants or needs cheaper than anybody else. Even with factories and automation, you still need cheap labor to do many routine tasks. Automation cannot sew up Hockey Gloves for instance. You need the sewing machines of course, but you still need hands to maneuver the material around to sew up such complex items as gloves.

Of course to run the sewing machines you need the Oil. This is what Saudi Arabia provides to the trading system. However, they cannot buy back the hockey gloves (though doubtful Saudis want many of those) without dipping into their supply of Gold, because when they buy back the gloves from the Chinese, they pay for both the cost of the oil to the Chinese PLUS the labor. If they don’t, the Chinese cannot make a profit.

The Amerikans have neither Oil not Cheap Labor to offer into the system.

They do have Food, which they can produce in great quantity utilizing again the Oil. If they price upt the food too high, nobody will be able to buy it and will rather produce food on their own to whatever extent their land is able to produce food. In fact the opposite approach was taken, which was to sell the food so cheap (in fact give it away through Food Aid) that it virtually destroyed local agriculture in many other countries. Only possible of course because the Oil was coming out of the ground practically free for a while there.

The Saudis of course can produce little food, so they use their oil to keep buying food, which is actually priced out cheaper than the oil for a while there. This immediately puts the US in a balance of payments deficit against the Saudis. The US is also in abalnce of payments deficit against the Chinese because the Chinese don’t need to buy food from the US for the most part, or they didn’t for a while there anyhow. So the US doesn’t really have anything to sell to the Chinese they need or want.

What then DOES the US have to sell? Well, like Al Capone, they sell “Protection”.

We sell protection to the ruling House of Saud in the form of military bases, and we sell protection to the Chinese by engaging in proxy wars in places like Korea and Vietnam. Basically,you say to the Chiense you have 2 choices here, you cn impoverish yourselves fighting us, or you can be our slaves and work for Peanuts and loan us back the money you make in the balance of payments deficit we have with you. That was the choice made by the Chinese during Nixon’s Ping Pong Diplomacy expedition back in the 70s.

For the US, the whole economic paradigm in the Post –WWII era was about selling Protection.

Often for many places it was Protection from US. Just like Al Capone would go to a local Bar Owner and tell him that he needed Protection. If the Bar Owner didn’t pay the protection money, the Bar Owner was sleeping with the fishes soon afterward.

The bottom line here is that mercantilist economies do not work, because if they are successful at producing things others want or need, then eventually those others are bankrupted of all their Gold.

Only if everybody in perfect synergy produced something the others wanted and dead even trades were made all the time with no profit would a perfect balance of payments exist, and then only for so long as the natural resources a country was using to extract wealth from the earth lasts. The money, whether it is Fiat or Gold merely is an accounting tool which tracks the flow of capital to the various economies.

This of course has been a problem ever since we developed a Global economy, around the time of the early sailing ships of the colonial period. Early on, the theft involved in keeping an Empire like the Brits had was more explicit, but it never ended.

What became ever larger and more refined was the art of theft through Banking, and a Global Banking system administered by the BIS. Our problems are only marginally tied to the incompetence of our Elected Officials.

The flow of funds and the ricing structure of commodities and the value of different currencies has always been in the hands of the BIS, not CONgress or the Fed. About the only way we ever could have avoided being robbed of our wealth was if we had opted out of the system right after the Revolutionary War, but that was impossible to do.

The Banksters and Industrialist of England of the period were well in control of money and the means of production, and while colonists could fight War against Taxation, they never could fight a war against the folks who controlled the money they used to pay the taxation.

So today we find ourselves in a situation where Goobermint Debt is spiraling out of control, but that is mainly because Goobermint is taking onto its own books massive PRIVATE debt accumulated by Capitalistas over the years.

Really, our national debt would not be all that bad if we simply let AIG, Fannie and Freddie, Citibank and all the rest of the TBTF just FAIL here. We can’t though, because those companies hold all the money we use hostage in one way or the other.
If this was just a problem of corrupt US Politicians, then we wouldn’t have all the PIIGS going BK, all of Eastern Europe going BK, Japan going BK and about every major Private Corporation ALSO going BK here, all at the SAME TIME.

The Vomit Inducing Balance Sheet of GE Capital is NOT the result of the mistakes of CONgress. NO CONgressman forced BofA to write LIAR Loans.

No CONgressman forced Goldman to write CDS contracts on securities they were selling.

The commonality between all these failing companies and nation states is the fraudulent nature of the monetary system.

It has always been a Ponzi, just it got to be a very BIG ponzi over many centuries, and now its crumbling down. No policy our Goobermint ever could have undertaken would have stopped this, other than rejecting from the get go the money the Banking Cartel used to control the world.

So now we have politicians scrambling around like idiots with no CLUE what to do, other than print more money and keep throwing it at every TBTF systemically important conduit. Its not resolving the problems of irredeemable debt, just shifting the debt onto the balance sheet of a taxpayer who no longer has any money to pay taxes. So the system will collapse, and not just here in the FSofA, but GLOBALLY.

It cannot work, it cannot continue onward because the resource base is no longer there to support the industrialized model.

Until we redevelop a new resource base, particularly in energy, NO monetary system will work. You really can forget about Gold holding much value, even if you can get your hands on any since it appears now it has reached the stage of permanent backwardation.

Gold only functioned as an accounting system, it doesn’t put Oil back in the ground or make it any more possible to balance out fundamental trade imbalances between nation states.

Those will always exist in any trade situation.

Only after local communities become independently self sustaining can any international currency work again, and that won’t be for a long time to come.

The future following the complete collapse of this monetary system is one of Barter, followed by LETS currencies operating in local communities. It won’t happen overnight, but it is the inevitable outcome of this downspin.