Usually Doom readers aren’t shy. Take K for instance. The other day he burst open the gates of Castle to announce a new insight about Lennar. He proposes the HB as a sort of anti-DavidLereahWatch. Lennar seems so grounded in reality that they could serve as an antidote to NAR’s Chief Economist. K even proposes we should institute a whole "Lennar" Category to index their forecasts. We’re not quite ready to do that yet, but on K’s say-so we’re certainly going to study their activity and announcements with renewed vigor. K is typical. Doom readers, even the occassionally hostile REIC types who drop in, are usually straight-ahead, even straight for the jugular communicators. Doom usually doesn’t do subtle.
So we were all taken aback when right in the middle of holiday preparations at the Castle there came a gentle tapping at the window by a reader we’d never heard from before. After some hushed back-and-forth, there emerged information that not only lifted our eye-brows, it raised the hairs on the backs of our necks.
Follow us down the rabbit hole if you dare. Doom commenter Old Mike isn’t going to like it but remember, … we’re talking about the single most important economic event in the last hundred years.
We start with something only slightly mind-boggling, the distinction between Law and Equity (from Wikipedia; don’t worry, it gets worse).
The distinction between "legal" and "equitable" relief is an important aspect of common law systems, including the American legal system. The right of jury trial in civil cases is guaranteed by the Seventh Amendment of the Constitution but only in cases that traditionally would have been handled by the law courts at Common Law. [my emphasis]
Now let’s go way back to Pearl Harbor Day 1968. European student riots to rival that les Miserables stuff from 120 years previously were just dying down, and Democracy was threatening to burst out all over America. Meanwhile, real life was going on and the First National Bank of Montgomery was in a Minnesota court foreclosing on a $14,000 mortgage, based on the undeniable fact that the borrower had stopped making payments. In a fit of insanity, the bank’s lawyer had allowed the case to go to a jury. The defendent argued [1] that the loan wasn’t made with real money because US Fed notes are illegal, and both jury and judge agreed. Later, the judge refused the two dollar appeals fee.[2] The grounds were that he and the jury had just established that the money wasn’t real. Internet conspiracy theorists assert that the "Credit River Decision" is to this day the defining US case law on the subject, and that America’s money is illegal. No wonder companies avoid Law like the plague and insist on Equity procedings.
Meanwhile, related theories seem to have arisen up around Credit River. The presiding judge is said [3] to have been murdered, perhaps to protect the integrity of a special multi-trillion dollar fund the Illuminati uses to assassinate people it doesn’t like, among other things. There appears to be a consensus among the theorists that all this started during the famous (and, this time, well documented) 1910 Jekyll Island Duck Hunting Expedition.[4] Never fear, no ducks were harmed.
Indeed, it looks like the theorists are dead right. Clearly, Congress has the sole and undelegatable duty to manage US money, but since the Constitution is not a suicide pact, almost everyone just ignores the fact. What’s more worrying is the insight these people bring into how the Fed creates the illusion of money.[5]
"The entire function of this machine is to convert debt into money. It’s just that simple. First, the Fed takes all the government bonds which the public does not buy and writes a check to Congress in exchange for them. (It acquires other debt obligations as well, but government bonds comprise most of its inventory.) There is no money to back up this check. These fiat dollars are created on the spot for that purpose. By calling those bonds ‘reserves,’ the Fed then uses them as the base for creating 9 additional dollars for every dollar created for the bonds themselves. The money created for the bonds is spent by the government, whereas the money created on top of those bonds is the source of all the bank loans made to the nation’s businesses and individuals. The result of this process is the same as creating money on a printing press, but the illusion is based on an accounting trick rather than a printing trick. The bottom line is that Congress and the banking cartel have entered into a partnership in which the cartel has the privilege of collecting interest on money which it creates out of nothing, a perpetual override on every American dollar that exists in the world. Congress, on the other hand, has access to unlimited funding without having to tell the voters their taxes are being raised through the process of inflation. If you understand this paragraph, you understand the Federal Reserve System."
So, after all, it’s easy. They just do it with Feynman diagrams. A particle of money is created out of nothing along with an anti-particle of debt. If you consider Fannie’s and Freddie’s accounting as a couple of literal Black Holes, the fountain of cash that flows from the GSEs is just an instance of Hawking radiation. No wonder particle physicists and Ph.D. mathematicians have been going into finance, they are the only ones who really understand what’s going on. It’s not harmful that they get the joke at the expense of FASB, what matters is that so many of them are laughing at the money, all the way to the bank. Just remember guys, greed kills.
________________________
Notes and References
[1]: "RE: First National Bank of Montgomery vs. Jerome Daly", WorldNewsStand blog (represented as a copy of court documentation), undated. Snopes does not comment on this, so it is either genuine or the debunkers have not yet bothered to examine it.
[2]: "Revolt In Minnesota", The Libertarian Forum, Vol I, No. IX, August 1, 1969.
[3]: "Illuminati Cash ‘Slush Fund’ Estimated At 65 Trillion Dollars: Illegal Federal Reserve At Heart Of Problem As Minnesota Judge Allegedly Poisened [sic] In 1969 After Ruling Against Corrupt Banksters", by Greg Szymanski, Axis of Logic, June 22, 2006.
[4]: "The Fed — Jekyll Island Monster", by Stephen Neitzke, Populist Party of America, July 16, 2006.
[5]: "Chapter Ten: THE MANDRAKE MECHANISM – The Method by which the Federal Reserve create
s money out of nothing; the concept of usury as the payment of interest on pretended loans; the true cause of the hidden tax called inflation; the way in which the Fed creates boom-bust cycles", by G. Edward Griffin (extract of the book reviewed in [4] above).
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I believe it was Lennar’s CEO who just about called Robert Toll a liar at a conference where the two were sitting before an audience telling the state of the housing industry. (was that in New Orleans?) Any way it looked as though Toll wanted to throw a punch at him.
As for the “physics speak” in economics, I would offer the latest one which is the Dark Matter theory of foreign trade where tghe US supposedly exports stuff but we just can’t measure it. Economists will borrow anything from anywhere to obfscate the reality that they really don’t know what they are saying. They just believe it in the way that Stepphen Colbert describes “Truthiness”.
John. I love it. Is it the beginning of April already?(yes I know you are not serious!, I am not that big of an idiot). In the spirit offered I would suggest:
Now this is the Justice of the Peace of Scott County, “Credit River Township”, whatever, right? Even if it is an actual court document, from an actual court, in actual three dimensional space, it didn’t take a conspiracy of Bankers(with or without waterfowl) to make it as irrelevant as the latest realtor’s urging to “be smart, buy now”.
Not to get too technical,but even serious courts that actually create decisions which may be considered something more than merely binding on the parties involved (like State and Federal Appeals Courts) have a whole lot of silliness on the books. A series of decisions aroung the turn of the century upheld trial court damages against adjacent landowners(under a trespass theory) for brush piles that “caused” polio, an apparent trial lawyer favorite theory from that period(and now one is running for president, ain’t it a great country).
This new funny stuff you offer is much like those internet geniuses that every year urge people to not pay “illegal” federal income taxes( go directly to jail, do not pass go) by refering to similar nonsense. I’m sure that neither you nor any other doom reader will bet their actual liberty or wealth on such information. If anybody out there will, send me all that useless fiat money you can get your hands on and I will send you a “valuable”, completely natural new beauty product produced daily by my dog “Cesaer”.
You have, of course illustrated one of my pet points. Expertise matters. Legal opinions, (or even discussion of the differences between Courts of Law and Courts of Equity ) from those without training, experience, and (excuse me!), a license, even if well armed with a computer and serious wit, should be scrupulously avoided by serious people. The same is true of economics ,although I note that your Mr. Smith’s ( yes still useless) stuff now appears not as obviously alarmist, wonder why? Did Jan have a talk with him an tell him he was scaring cheese out of the Swiss?
Your posting today was good fun, clearly the result of some high level realization that the 11 th dimension allows all such things, a type of AtoZtome theory (why stick to boring old M theory). But alas, cosmology, like law, is a young mans game these days.If you ever get the opportunity to visit with your sources at a PPA convention, which I suspect looks a bit like a shabby Star Trek gathering but not as busy, be sure to wear your tin foil hat. And by the way, isn’t your friend Chairman Frank likily now very intensely investigating “The Mandrake Mechanism”?
I’ve got to go brush up on my Samual Glasstone now since your posting was obviously a sign.
Old Mike -
Unlike brush-pile polio, it sure looks like the Fed’s money really is unconstitutional, for whatever that’s worth. What may be more important than the legalities, though, is how the world’s favorite reserve fiat currency is performing within finance, and housing finance in particular. It’s in that space these people may have something important to tell us.
Please John, you sound like you actually think these “things” are sources. Disrespect fully intended here, given what you say is your education and background, your opinion on what is “unconstitutional” is worth nothing. Are you really so arrogant as to actually believe you and these beyond the fringe propoganistas have discovered a “constitutional truth” that almost a century of real legal scholarship and a million qualified practitioners just “missed”.
And what is the “something important” these and many of your other truly bizarre sources have to tell us. They tell us that our house is almost worthess, our currencies are all worthless, our investments (excepting gold) will soon all fail, our pensions hollow promises, our courts a riged game, all because of a conspiracy by small, hidden,
greedy (insert your favorite hated group, Jew, Illuminati, succesful fund managers, the Canadian) powerful men who control all politics and the economy. Private property is theft,lending is dishonest usery, The state, labor and gold are the only true currency. All these statements are frequently as poisonously dishonest as that sign (from a time when such lunacy almost siezed the world) which welcomed those poor souls who were largely the targets of similar economic and “legal” theories with the motto that: “work will set you free.”
These “rise up, oh masses” messages invariably appeal to the less educated, less successful and most envious, who in some distorted self-deception really do not believe it is fair that a CEO’s job is worth more than menial work. They gladly borrow money and then damn the lender when he wants it back. And worse, at the darkest edges of this fringe,the ones who really think they are smarter and more abused than most, pick up a gun or a bomb and hurt somebody who just is living an honorable life.
Extremist nonsense that trades on fear, hatred and conspiracy theory is more than just harmless fun. It is not merely “another voice we can learn from.” In the US it is often, but not always, constitutionally protected speech(and I AM qualified on such topics), but that does not mean that men of good faith pass it on.
If you actually have reviewed the materials that you cited, and what they actually allege, and you were not really just kidding, then any further dialogue between us is a complete waste of time. And I feel sorry for Twist. She may be dealing with something very dark dressed up like a curious, sweet, old civil servant. Tell me it ain’t really so.
John, PS> I really love the fact that you finally ridiculed these clowns in case you couldn’t tell, “not subtle!” right
Old Mike -
I said you wouldn’t like this. Sometimes it’s necessary to muck around in foul smelling goop when you’re looking for something. As for that “very dark” business, they don’t call economics “The Dismal Science” for nothing. Things are going to get pretty ugly before we’re finished, and a lot of the players will be revealing their nastier sides before it’s over, your humble servant included. By the way, some pretty hairy stuff has come out of avuncular, bumbling, middle-aged men in recent years. Check out the career of Leo Szilard some time.
It is a lifelong habit of mine to point out the blindingly obvious in fields where I have no qualifications at all. Among the constellation of ideas and opinions our correspondent revealed, some of the material at [5] looks worthwhile and important. Fed notes aren’t real money. Griffin, regardless of his qualifications, if any, explains this pretty well.
Modern fiat currencies are a sort of social contract. Most essentially they are legal tender, which means you can always discharge obligations with them, including government imposed ones like fines and taxes. What really freaked out the bank in the Credit River scenario was that the judge didn’t accept the two dollars, when they had a clear right to appeal his judgement. The judge was certainly wrong there. It is routine for governments to restrict what can be bought, on the other hand. Congress recently refused to allow an American energy company to be sold to Chinese interests, regardless of the fact it was for sale and the Asian buyers had the dollars. This would certainly have happened even if the buyers had offered gold.
But more to the point, the government and financial services industry has an obligation to treat dollars as if they were real money. These overly bright hedgies and others in the system seem to have found flaws in the SFAS rules, or they are taking advantage of obscure ways to violate their letter and spirit. In short, they are not treating the currency with due respect. Working in finance is not a game, and winning should not be defined by how much personal wealth you’ve got at the end of the day. Therefore I see last month’s legendary bonuses on Wall Street and The City not as a cause for celebration of brilliance, but as a profound symptom of diseased morality. Getting rich just isn’t the point of being a fiduciary.
These financial types are hiding some of their work, and the marginal guys can sometimes shed a bit of light. That’s all.
So “Old Mike” is the village conventionalist troll? How dare anyone speak anything that would shock and upset the sleepy masses! Amusing.
Yes, it’s all true — the fiat money we have in the US is unconstitutional (read the constitution), but arguably legal by various statues (including the one that established the Federal reserve). No, things aren’t supposed to become legal if they’re unconstitutional unless an amendment has been made, but, hey, who’s keeping track anyway?
Apparently not most people, and that’s precisely what allows the system to keep chugging on. It’s really all a morass of convention and assumptions. Besides, there are too many “laws” to keep track of. Does anyone think the government even knows the laws itself? I’ve certainly witnessed plenty of evidence to the contrary. And it has become common knowledge that even our Chief Executive doesn’t seem to know or care what is “legal” either.
Details, details.
One thing is clear: fiat money is what we’ve got, and it is being horrifically abused, to the detriment of most of the American people. Inflation is one aspect. Credit/asset bubbles are another. The results are a deteriorating condition for the average joe (stagnating/declining wages, stratospheric debt burden, negative savings rate, etc., declining share of corporate profits, etc.), and the hazard of occasional financial ruin when joe tries to play like Donald Trump. Or maybe just when he can’t pay his medical bills.
This isn’t wild-eyed conspiracy theorist stuff. Just read the Fed’s own publications and the data it publishes itself. $3.5 trillion of financial system credit created on $30 billion of Fed monetization? Hmmmm. The Fed admits that the reserve requirement is effectively irrelevant, which is incidentally why so much credit ends up getting credit, but just for good measure, is moving to eliminate it formally. Hmmm, hmmm. And why eliminate M3 reporting? Maybe because they wanted to allow it to expand at an unprecedented rate? Nahhh, couldn’t be. People might notice a thing like that, and then everyone would revolt, right?
Hmmmmm!
Or maybe Goebbels had it: lie large enough and confident enough, and people won’t imagine you could possibly be fibbing, or have any malicious intent at heart.
Ok guys, I understand, its just that the real lawyers,and others who may suffer with that “diseased morality” of wealth and success, could, if your theory is correct, become both more fabulously wealthy and famous pursing it. Either they are not as smart as you, or what? Who is it today that is keeping the lie afloat and the “poor masses” (especially in the US, my word what a myopic, obiously grudge rather than fact driven view), the Pope, Jewish Banking interests,or what one of your primary sources calls “the racist elite”? You hang in there guys, but this “troll” believes you are known by the company you keep, and it is a mess here right now. This stuff is the pornography of economics and law, a foul smelling paraody indeed.