Friday, 13 January 2012
Jacques Rueff told the story of two different monetary conferences, two "committees of experts" that both met in Genoa, and changed the course of monetary history. The first committee gathered in October, 1445, and the second one began in April, 1922, so Rueff's lecture had ten years on this second conference. The two committees gathered under similar circumstances, to respond to monetary disorder in the aftermath of a protracted war, yet they came to opposite conclusions.
The first committee declared gold the new, sole monetary reserve, unleashing its 500-year reign as the governor of supply and demand that would act as the natural counter-balance to international trade for the next half a millennium. The second committee, under the guise of improving this system, destroyed it, laying the groundwork for the unchecked growth of global imbalance, perpetual malinvestment and the series of periodic monetary crises we have experienced for the last 90 years.
How did the second committee (the debtors, spenders, speculators, bankers) accomplish this ?
Answer: Federal Reserve Sterilisation of Gold Flows
When a country imported gold, its central bank could sterilise the effect of the gold inflow on the monetary base by selling "securities" on the open market…
Sterilisation of gold flows shifted the burden of the adjustment of international prices to other gold standard countries. When a country sterilised gold imports, it precluded the gold flow from increasing the domestic price level and from mitigating the deflationary tendency in the rest of the world. Under the international gold standard, no country had absolute control over its domestic price level in the long run; but a large country could influence whether its price level converged toward the world price level or world prices converged toward the domestic price level…
Traditionally, economists and politicians have criticised the Federal Reserve for not playing by the strict rules of the gold standard during the 1920s.
…Federal Reserve sterilisation in the early 1920s probably served the best interests of the United States.-Leland Crabbe, Washington, D.C., 1988
Board of Governors of the Federal Reserve System
The flow of gold is the flow of real capital, even if today it is obscured by an electronic matrix of imaginary capital (infertile media). Today's debt (the bond market) is imaginary capital in that it cannot perform in real terms; with "real terms" defined as economic goods and services (under current economic conditions) plus gold—and this part is important—at today's prices. It is all nominal debt, but the price of goods and services—as well as the price of gold—is what connects it to reality. And at today's prices of each, bonds are imaginary capital. It is our obsessive compulsion to centrally control the price mechanism that sterilises the vital signals that would otherwise be transmitted to billions of individual market participants keeping the monetary and physical planes connected.
What the 1922 Genoa Conference did was to institutionalise the "sterilisation" of gold for the rest of the world through the reserve structure of the international banking system. And this bit of genius was decided by a "committee of experts" from 34 different countries. They did this by introducing paper gold—or paper promises of gold—into the international banking system as reserves equal to the gold itself. This wasn't the first paper gold, but it was the first time that specific paper gold (that from New York and London) What is acceptable as international reserves is critical because trade settlement is a function of the reserves. This conference was the birth of the bastardised gold standard which lead to the bastardised paper game today.
In 1922, they officially changed the old gold standard into the new "gold exchange standard", which Rueff said was "a conception so peculiarly Anglo-Saxon that there still is no French expression for it." The stated purpose was "the stabilisation of the general price level" which you can feel free to read as code for sterilising the price mechanism and its elegant governance of an extremely delicate and complex balance. This, of course, gave birth to the arrogance of the managed economy and its attendant science, Keynesian Economics (est. 1936) and its step-daughter Monetarism (est.~1956).
And......The birth of global warming and all the fraud that goes along with it. Mainly, the introduction of "carbon credits"
What they say-
Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions. Yeah right....
Could it be that these carbon credits are a continuation of their same old agenda ?
Which is "the stabilisation of the general price level" which we know to be the code for sterilising the price mechanism ?
For trading purposes, one allowance or CER is considered equivalent to one metric ton of CO2 emissions. These allowances can be sold privately or in the international market at the prevailing market price. These trade and settle internationally and hence allow allowances to be transferred between countries. Climate exchanges have been established to provide a spot market in allowances, as well as futures and options market to help discover a market price and maintain liquidity.
Futures, options and liquidity eh..... Looks like a debtor, spender, speculator bankers Keynesian wet dream.
Currently there are six exchanges trading in carbon allowances: the Chicago Climate Exchange, European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange. At least one private electronic market has been established in 2008: CantorCO2e.
Yep, that's the Fed primary dealer, Cantor Fitz
Cantor Fitzgerald L.P. is a global financial services firm specialising in bond trading.Cantor handled about one-quarter of the daily transactions in the multi-trillion dollar treasury security market before 9/11. (Cantor was one of the worst hit tenants in the WTC)
Managing emissions is one of the fastest-growing segments in financial services in the City of London with a market estimated to be worth about €30 billion in 2007. Louis Redshaw, head of environmental markets at Barclays Capital predicts that "Carbon will be the world's biggest commodity market, and it could become the world's biggest market overall." Bigger then the treasury market.
Carbon emissions trading has been steadily increasing in recent years. According to the "World Bank's Carbon Finance Unit",(laugh,cry, puke ?) 374 million metric tonnes of carbon dioxide equivalent (tCO2e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO2e) which was itself a 41% increase relative to 2003 (78 mtCO2e).
Yale University economics (economics!) professor William Nordhaus argues that the price of carbon needs to be high enough to motivate the changes in behaviour and changes in economic production systems necessary to effectively limit emissions of greenhouse gases.
It gets more surreal...
Nordhaus has suggested, based on the social cost of carbon emissions, that an optimal price of carbon is around $30(US) per ton and will need to increase with inflation.
The global warming sceptics have done a good job of exposing the science of global warming for the fraud that it is. But not a whole lot is being said about its connection to Keynesian economics. This is Keynesian arrogance and elitism at its worst and it has to be exposed.