Monday, April 6, 2009

Get your money out of the Bank

Thanks to Mary for finding this! :)
Some very good explanations.



FerFAL

11 comments:

Matt $ said...

Salbuchi says that the system has "planned monetary insufficiency" but this is a fallacious argument.

Firstly, no monetary system can ever provide a sufficient supply of money because humans have an infinite demand for money. That's what makes money different from apples, iron, chickens, etc. Money is the one thing that people always want more of, regardless of how much they already have -- not so with other goods such as apples, iron, chickens, etc.

Secondly, there is no way to ever determine how much "money" the system "needs." If a society is poor, we can only determine that it is poor if it is lacking the goods which sustain human life -- food, clothing, shelter, etc. It doesn't actually need money, because money cannot be eaten, worn, or lived in, etc. -- what it needs is food, clothing and shelter, and in order to produce these things, it needs CAPITAL. Capital is a good that produces other goods. Moreover, capital can employ people. An apple farm is capital because it produces apples. An iron mine is capital because it produces iron. A shoe factory is capital because it produces shoes. A poor country needs capital (farms, mines, factories, etc.) in order to satisfy its human needs -- money is an afterthought which will be created by the market.

We must never confuse a shortage of money, with a shortage of capital.

How can the market create money? This is the way money was created by the market for hundreds of years before the central banks were created. Let's say that a shopkeeper wants to sell pants and that he knows that he can sell them for 1oz of gold, but he doesn't have the gold to buy the fabric for his pants (the gold is in the pocket of the consumer). The shopkeeper can go to the fabric maker and make a deal where the fabric maker fronts fabric to the shopkeeper, and the shopkeeper promises to pay him 1oz of gold within 90 days. If the fabric maker doesn't have any gold to buy cotton to make his fabric, he can go to the cotton farmer and make a deal where the cotton farmer fronts cotton to the fabric maker, and the fabric maker promises to pay him 1oz of gold within 90 days.

When the shopkeeper sells the pants for 1oz of gold, he will pay 1oz of gold to the fabric maker, and the fabric maker will pay 1oz of gold to the cotton farmer. In this example, the market started with only 1 ounce of gold, but the market was able to create 2 more ounces of gold in order to facilitate production and trade of real goods. This is how the free market used to regulate the supply of money up until 1909. The NY fashion industry used to work like this until the 1980's

The problem with central banks is that they print money and use it to rig interest rates.

Anonymous said...

Ferfal,

I'm a bit surprised to see this video on your forum. Salbuchi has gone off deep end more so than the extreme survivalists that live in an Idaho compound. Let me explain why I say this.

Salbuchi, Celente and others of the same genre use a common strategy to sell fear. They combine the reality of dire economic situation with fictional elements of a new world order. This combination starts by stating the obvious, the stuff that CNN has already reported, to grab the attention of people, then (the second video) it introduces the fictional rhetoric about a new world order.

It sound like a load of crap from a charlatan selling fear. But hey, to each his cup of tea.

By the way, I'm looking forward to your book.

Jedi said...

@Matt$,

First of all, the shopkeeper might want to charge more than 1oz of gold if that is his break-even price :-)

I like the system that you've described much better than what we have now. Unfortunately, we have central banks making moves to drive people/countries into debt and then lending these same people/countries money once they no longer have enough for their needs/wants.

Whether it is a planned monetary insufficiency or not, I think it would be unwise to focus on the reasoning while ignoring what's actually happening. Salbuchi is sharing his observations based on having lived through the cycle three times. If someone has experienced something on three occasions, when they spot a fourth occasion and try to warn me, I'm going to listen.

So, in your case, let's say someone says, "Hey, that car is going to drive off of a cliff because of bad brakes!" You disagree by saying, "No. Brakes have nothing to do with it. It's the fact that the steering wheel isn't working." Whatever the reason, the car is, without a doubt, going to drive off of a cliff.

I believe it's the same way with our economy. We may disagree on the exact causes, but most of us, along with Salbuchi, believe we are at the point of no return, and the cliff is rapidly approaching. The only difference is that Salbuchi has already fallen off of three prior cliffs.

Now, where I do differ greatly from Salbuchi is when he says that he thinks it will all end with a global nuclear war. As history shows us, even the most greedy individuals draw the line at assured mutual destruction. After all, what's the point of turning people into enslaved debtors if you're dead and can't run their run their lives for them?

FerFAL said...

That's why I said "Some" very good explanations.
The hologram gold thing and plan C I think its very far fetched.
Besides, he says that what happens here in Argentina every 15 years or so happens in 1st world countries every 80 years instead.
That I somewhat agree on, but then again what happened here wasn't the end of the world, or his other guesstimations.

FerFAL

Anonymous said...

Hello Ferfal,

This comment is not in response to the videos. I wish to ask you a question that hopefully you can answer on the blog.

I have lived through several currency devaluations and very high inflation in Mexico. But as you may know, in Latin America, very few people have mortgages with a bank. The result of inflation only diminishes the purchasing power of the local currency and increases the cost of loans.
In the US, however, most people have a mortgage, and if you are smart, you got a fixed rate mortgage.

I have always wondered what would be the impact to US banks of a mayor dollar collapse and hyper-inflation. People would still continue to owe the old amount and pay 5-6% on their mortgage by contractual agreement. However, over night, the value of the house would adjust to reflrect the new value of the devalued currency. Did Argentine banks face this situation, and did the banks force the loan holders to pay a higher rate or peg the mortgage to a hard currency?

Thank you.

recon said...

FerFal, when this guy said 'on the verge of civil war', who did he mean with? citizens against the government?

anon, I don't think his theories on exporting debt and global war are too far off. and tying physical money to computers (chips in gold) is actually a good idea, to remove counterfeit money altogether.

of course no one wants a global nuclear war or wishes for it, but i wouldnt call it outlandish because it hasn't happened yet. like it or not war pays the bills.

Don Williams said...

Re Anon's criticism of Salbuchi, I would note that if Salbuchi had told US citizens two years ago that we would be in the situation that we are in today, Salbuchi would have been criticized for alarmist fictional rhetoric. Because the Major News networks were telling us everything was fine.

My only criticism of Salbuchi is not with his conclusions but that he doesn't offer enough evidence to support his opinions and predictions.

Salbuchi's criticism that the financial sector has seized an unjustified amount of power and wealth is spot on. Look at the share of corporate profits going to the financial industry today as opposed to people who actually make things -- and compare that share to 30 years ago.

Salbuchi is also correct to describe that sector as a malign political cancer.

Brian said...

FerFal, I checked out Salbuchi's website........and while I know we shouldn't be naive,as there is corruption at many levels in most goverments in the world,....... this guy is a conspiracy theorist and seemingly an anti-semmite. A lot of his claims can only be classified as absurd.

-Brian in Michigan, USA

Norcal said...

I saw the Salbuchi video on www.thecomingdepression.com


thecomingdepression.com is an interesting website, gets a ton of traffic.

If you look at his feedjit on the right hand column, you can see people on there from all over the world.

Norcal said...

I'm sorry, the website is:

www.thecomingdepression.blogspot.com

Anonymous said...

Yeah, Salbuchi says (on his website) "there's no such thing as an anti-semite."

This guy is a kook.

Btw, his remarks regarding derivatives expose a basic ignorance of what they are and how they work. He has some sort of agenda, but frankly, he's not persuasive enough to bother figuring out what it all adds up to.