Video of Whit­lam Insti­tute Talk

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Last month I spoke at a sem­i­nar on the finan­cial cri­sis organ­ised by The Whit­lam Insti­tute, in reply to a speech by Pro­fes­sor John Quig­gin. Guy Debelle, the Assis­tant Gov­er­nor (for Finan­cial Mar­kets) of the Reserve Bank of Aus­tralia, was the other dis­cus­sant.

The Insti­tute has put together a very pro­fes­sional video of the dis­cus­sion, which has been picked up by SlowTV, a free inter­net TV chan­nel run by The Monthly, an Aus­tralian mag­a­zine of com­ment and analy­sis which, amongst many other things, pub­lished Aus­tralian Prime Min­is­ter Kevin Rudd’s lengthy essay on the Global Finan­cial Cri­sis in which he explic­itly cri­tiqued neolib­er­al­ism.

The video comes in 4 parts, which are respec­tively

The Ques­tion and Answer ses­sion with the audi­ence isn’t avail­able at SlowTV, but it is on YouTube in three parts:

The Pow­er­point pre­sen­ta­tion that I gave is avail­able here.

My pre­sen­ta­tion includes sim­u­la­tions of two dynamic mod­els that are the core of my analy­sis of the finan­cial cri­sis:

  • The Min­sky Model sim­u­lates a cycli­cal econ­omy with debt in the form of both pro­duc­tive borrowing–where the money bor­rowed finances increases in pro­duc­tive capacity–and “Ponzi” borrowing–which gam­bles on asset prices (which are not explic­itly mod­elled here as yet) and there­fore adds to debt with­out increas­ing pro­duc­tive capac­ity;
  • The Cir­cuit Model mod­els the endoge­nous cre­ation of credit in a pure credit econ­omy, and also sim­u­lates a cri­sis caused by a sud­den shift in the will­ing­ness to lend and to take on debt–a “credit crunch”. I also model an “exoge­nous” gov­ern­ment res­cue one year into the cri­sis in one of two ways: 
    • By inject­ing a $100 bil­lion sum into banks unlent reserves over a one year period; and
    • By inject­ing the same sum into the bank accounts of the debtors (firms in this model) over the same period

The sim­u­la­tions are run in the visual sim­u­la­tion pro­gram Vis­sim; I have embed­ded a link to down­load the free Vis­sim Viewer into the pre­sen­ta­tion; that embed­ded link may no longer work, but the one given here should do so after a reg­is­tra­tion process (I use Vis­sim mainly to show­case the mod­els; I develop them in the math­e­mat­i­cal pro­gram Math­cad).

My main research objec­tive for the next year is to com­bine these two mod­els to develop an explic­itly mon­e­tary model of finan­cial insta­bil­ity. This will be the bedrock of the book Finance and Eco­nomic Break­down that will be pub­lished by Edward Elgar Pub­lish­ers.

Finally, my speech is embed­ded below (Reuters will soon start pub­lish­ing a reg­u­lar vid­cast by me, and I’ll repro­duce it on this site.)

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  • ak

    I don’t think that our democ­racy is in ter­mi­nal decline if I read what’s going on in other coun­tries. 5 min­utes spent every day with Gazeta Wybor­cza makes me feel­ing happy that I live in Aus­tralia. If I feel depressed I can always read about “pro­griess” of “diemokra­tia” in Rus­sia. It is much bet­ter than Orlov.

    In my opin­ion the bas­tardi­s­a­tion of pub­lic life in Poland (to some extent Cen­tral Europe in gen­eral) is a direct result of 20% unem­ploy­ment (and pre­vi­ous his­toric expe­ri­ences). This does not affect politi­cians only — think about your boss at work treat­ing you as his serf (this sys­tem was only abol­ished in 1864).

    If this doesn’t con­vince us we should put our cur­rent cri­sis of democ­racy in the his­tor­i­cal con­text. WW1, the Soviet Rev­o­lu­tion, Stalin, WW2, Nazi camps, geno­cide of Jews and Gyp­sies, com­mu­nism in East­ern Europe.

    Of course I share the grave con­cerns about the impact of humans on the envi­ron­ment and then the impact of envi­ron­men­tal dam­ages and dimin­ish­ing resources on humans. But I believe that the evo­lu­tion of the cur­rent (imper­fect) sys­tem is the only way to address the issues and that we are not doomed.

    I am not for print­ing money — this is not the solu­tion. Deficits may be a tool to achieve cer­tain social goals and direct invest­ment in the areas nor­mally neglected by the investors. If the tool is abused the only effect will be even more mess. We can­not cure debt with more debt — but for now this seems to be the eas­i­est way out. This won’t work for very long I think.

    When our soci­ety is “stirred not shaken” by the next phase of the cri­sis either right-wing morons will seize power or we may actu­ally see our demo­c­ra­tic sys­tem work­ing bet­ter — peo­ple may lose cer­tain illu­sions and request gen­uine reforms. I am still an opti­mist to some extent — the awak­en­ing may slowly arrive.

  • MMitchell


    Peo­ple I know say (cer­tainly immi­grants) that Aus­tralia is the best place in the world to live, one says it one the few sys­tems worth fight­ing and dying for. I believe him. I have done very well in Aus­tralia, despite the faults I point out I have a great stan­dard of liv­ing and many oppor­tu­ni­ties. What con­cerns me is that is not a sus­tain­able sys­tem. I believe democ­racy is likely to sur­vive because with our his­tory and cul­ture we will accept noth­ing less, how­ever, I believe that democ­racy in the future, if we are to be sus­tain­able, must be localised, peo­ple must be faced with the con­se­quences of their actions/decisions (not just every­day peo­ple but also those that seek to exploit oth­ers for their own gain). Then peo­ple will act respon­si­bly. What wor­ries me is what is going to hap­pen in the tran­si­tion. We can nation­ally recog­nise the mas­sive prob­lems we are fac­ing and start mov­ing towards local, sus­tain­able com­mu­ni­ties now with a national effort, in this case would could prob­a­bly even main­tain our fed­eral sys­tem (pos­si­bly not our state sys­tem). I also believe there are sig­nif­i­cant ben­e­fits to local­i­sa­tion that make it worth­while in itself. Alter­na­tively, I believe we will con­tinue down our cur­rent path until we can go no fur­ther, and then our democ­racy will be truly chal­lenged, because the alter­na­tives for an unpre­pared, oil-depen­dent (for food and trans­port) nation are either mil­i­tary rule or anar­chy. Hope­fully democ­racy would revive, but it is this tran­si­tion that will threaten every­thing, not to mena­tion all the suf­fer­ing involved in either case. I am not just being can­tan­ker­ous, I have a child and I am seri­ously afraid of this.

  • mar­venger


    some of the infla­tion­ists in the US argue that the dol­lars over­seas will come flood­ing back, but as I under­stand it gov­ern­ment bor­row­ing like non-bank lend­ing doesn’t cre­ate new money just new debt, there­fore over­seas there’s likely to be a lot of debt held but not nearly as much actual cash. Is there any way that this debt com­ing back could cause infla­tion as I wouldn’t have thought so? 

    Also with gov­ern­ments just cre­at­ing new bonds to meet old serv­ing require­ments, this seems highly unsus­tain­able, surely the only options if con­tin­u­ing down this path are default or print­ing. Why would peo­ple keep giv­ing their money to the gov­ernemnt if its not being spent pro­duc­tively and they can’t expect a return on their money, in the case of gov­ern­ment the spend­ing has to increase growth so tax base rises. Surely its as sim­ple as pro­duc­tive invest­ment equals debt ser­vi­ca­ble and vice versa.

  • LT

    Hi Steve,
    Thanks for another very inter­est­ing and per­sua­sive pre­sen­ta­tion. I’m a big fan of your inno­v­a­tive analy­sis which has cer­tainly con­tributed enor­mously to my under­stand­ing of how credit-dri­ven economies actu­ally work.
    I do have a few ques­tions on the model how­ever: firstly, what even­tu­ally hap­pens to all the excess reserves that accu­mu­late in banks dur­ing the delever­ag­ing? I have read your cav­a­liers of credit piece, and can see how the ces­sa­tion of growth in PSC con­tribues to a sharp reduc­tion in agge­gate demand. How­ever, when peo­ple attempt to delever­age, the repay­ment of loans, if they are not relent out by banks (which in aggre­gate needs to hap­pen if delever­ar­ing is to occur), become excess reserves (although obvi­ously some are needed merely to replen­ish equity against bad loans). I note in your mod­el­ling out­comes, unem­ploy­ment rises, debt/GDP declines over time, and also back reserves increase mate­ri­ally.
    I can see how when new credit growth occurs, new “money” and aggre­gate demand is cre­ated. but when the debt is paid back, that “money” does not dis­ap­pear — it just gets pulled tem­porar­ily out of cir­cu­la­tion but remains very much real on the bal­ance sheet of banks. this would seem to imply a mas­sive excess of cap­i­tal and ulti­mately very low inter­est rates for a long time. I guess my ques­tion is, what are the impli­caitons of this? Seems unre­al­is­tic to think banks are going to have equity/asset ratios of 20–30%??
    Thanks in advance,

  • ak

    When a loan is repaid the bal­ance is net­ted and the vir­tual (credit) money is destroyed. For exam­ple the bank removes mort­gage from your house. This process led to the decrease in the amount of M2 dur­ing the Great Depres­sion.

  • Not my analy­sis ak,

    I argue that the money is taken out of cir­cu­la­tion by being trans­ferred from active deposits to unlent reserves; but it is not destroyed.

    LT, I’m flat out now for lec­ture writ­ing but I’ll answer your post tomor­row some­time.

  • DrBob127
  • ak


    I thought that the orig­i­nal ques­tion referred to the prin­ci­pal of the loan.

    I can see how when new credit growth occurs, new “money” and aggre­gate demand is cre­ated. but when the debt is paid back, that “money” does not dis­ap­pear – it just gets pulled tem­porar­ily out of cir­cu­la­tion but remains very much real on the bal­ance sheet of banks” 

    Obvi­ously I didn’t refer to the inter­ests accrued.

    This is what I’ve found on the Wikipedia:
    “When the loan is repaid, with inter­est, the credit money of the loan is destroyed, but reserves (equal to the inter­est) are cre­ated – the profit from the loan.”

    If I am wrong could you please explain what I have mis­un­der­stood as this may have far reach­ing con­se­quences.


    This arti­cle should inter­est those who think we have infla­tion to worry about. Good chart porn.

  • strabes

    Hi MMitchell, I like your ques­tion about how wealth in the west is defined. West­ern­ers have accepted the def­i­n­i­tion bankers want us to believe–“the num­ber of elec­tronic dig­its you have in your bank accounts.” Humans instinc­tively know that’s not wealth…no child I know feels more inner joy, delight, rest, beauty by hav­ing an account some­where with dig­its in it which would really only show how much time they’ve spent try­ing to col­lect more pur­chas­ing power, or how much they’ve bor­rowed as they put them­selves into debt. West­ern­ers need to be taught this def­i­n­i­tion over the course of a career in pub­lic schools and pub­lic media so we can be good debt slaves and cor­po­rate wage slaves and national tax slaves and con­sump­tion addicts…all to fuel the sys­tem the bank­ing oli­garchy cre­ated. And now sur­veys indi­cate the more “wealthy” devel­oped world is the least joy­ful pop­u­la­tion. Hmm…puts the lie to the def­i­n­i­tion of wealth.

    Native tribes knew what real wealth was. They knew what sus­tain­able life was…they didn’t cre­ate unsus­tain­able bank­ing mod­els with debt-based money which required unsus­tain­able cor­po­rate debt laun­der­ing machines. That’s why the anglo-bank­ing empires had to exter­mi­nate them…they weren’t cor­rupt­ible and capa­ble of being taught to be debt slaves. Now isn’t it inter­est­ing that a few hun­dred years later we’re strug­gling to answer the ques­tions you ask about wealth and sus­tain­abil­ity, but they knew it all along? If only we had lis­tened to them rather than killing them.

  • strabes

    ak, I sug­gest we don’t live in democ­ra­cies. We’re made to think so, but we’re in some­thing far more akin to the Roman Empire. Empires need mass democ­racy (mob rule) to manip­u­late with fear/entertainment and main­tain con­trol. I don’t know how Aus­tralia was orig­i­nally con­structed, but the US was con­structed as a repub­lic specif­i­cally to pre­vent the dan­ger of empire and mass democ­racy. Unfor­tu­nately the repub­lic failed and we now live in the biggest empire in his­tory. The empire is crum­bling now, which means a renais­sance may fol­low, but the tran­si­tional col­lapse to get there is going to be hor­rific. The equiv­a­lent of the Roman prae­to­rian guard in the US has put in place a police state to pro­tect itself from the masses. I think there’s a high prob­a­bil­ity we will be see­ing in the US some of the stuff we saw in the peri­ods you men­tion (WW1, WW2, Nazis, Com­mu­nists, etc). 

    By the way, the “emperor” of today’s empire is the bank­ing elite…they are transnational…they have con­quered all devel­oped ter­ri­to­ries via the US dol­lar. They are also some of the same inter­ests that funded Hitler after the banks col­lapsed the Ger­man econ­omy.

  • hbl


    Regard­ing what hap­pens when bank loans are repayed, Steve dis­cusses the topic in much more detail here:

    and in the linked paper:

    How­ever, I’m also a bit unclear as to the mean­ing of his dis­tinc­tion here. Page 17 of the PDF in par­tic­u­lar shows the effects of loan repay­ment — the bank’s assets (loan bal­ance) and lia­bil­i­ties (deposit bal­ance of the loan recip­i­ent) are both reduced by the amount of the repay­ment. This part seems to agree with the idea that repay­ing the loan reverses the orig­i­nal money cre­ation and con­tracts the bank bal­ance sheet.

    I haven’t read the whole paper yet, but where Steve loses me so far is in the jus­ti­fi­ca­tion for how/why this process adds to the reserves of the bank. He shows those reserves in a seem­ingly sep­a­rate table from the bank bal­ance sheet itself. Are they off bal­ance sheet? If they are on the bank’s bal­ance sheet, what hap­pens on the lia­bil­i­ties side to match the reserve assets? (i.e., so that loan repay­ment doesn’t shrink the lia­bil­i­ties side of the bank bal­ance sheet while leav­ing the asset side at the same size). Is a spe­cial type of cap­i­tal cre­ated that is dis­tinct from share cap­i­tal / equity? Per­haps (just guess­ing) that’s what the “loan cap­i­tal” exam­ple refers to in this wikipedia exam­ple?

    Per­haps quot­ing one of Steve’s state­ments could help clar­ify:

    The repay­ment of loans there­fore does not “destroy” money, but trans­fers it out of income accounts—where it can be used for expenditure—to a reserve account. The propo­si­tion that money is destroyed when loans are repaid in part reflects eco­nomic con­ven­tions that money is the sum of active bank bal­ances. If money is defined that way, then it is indeed destroyed; but I feel that the dynam­ics of endoge­nous money cre­ation are more clearly illu­mi­nated if we define money in the fun­da­men­tal Cir­cuitist sense as a token whose trans­fer set­tles all com­mit­ments between trad­ing par­ties. That token can then reside in active accounts (deposits) or inac­tive accounts (reserves). Repay­ment of loans alters the bal­ance between active and inac­tive accounts, and thus alters the amount of money in cir­cu­la­tion, but it does not destroy the token itself.”

    The whole topic seems like some­thing that should be black and white — i.e., don’t bank accoun­tants (or com­puter sys­tems) have to han­dle this every day? Or maybe I’m the only one con­fused 🙂

  • ak

    I have an idea how the part of the sys­tem (a bank, a debtor and their imme­di­ate neigh­bour­hood) can be described but I will prob­a­bly have enough time to write about it on the week­end. I would be extremely happy to see Steve’s response to my ini­tial post because I may be miss­ing some­thing.

  • Have to wait till Fri­day ak–too much work for tomorrow’s lec­ture right now.

  • mar­venger

    Ak, what you describe makes sense to me. Also I’m not really sure it mat­ters in effect if the cap­i­tal repay­ment goes into a reserve or is destroyed as the bank, when it wants to make a new loan, can either draw down on the reserve account or just cre­ate it out of thin air if it orig­i­nally can­celled it. It doesn’t mat­ter it seems to me.

  • Bull­turned­bear

    I have a few thoughts on Australia’s posi­tion in the global may­hem.

    I remem­ber late 2007 and early 2008 the RBA was rais­ing rates. They were very late in the trend. The herd had already changed course, the RBA was only just catch­ing the trend. Many bor­row­ers started to go into arrears and suf­fer stress. Since then rates fell to 3% and PAYG bor­row­ers began find­ing a way to pay again (busi­nesses are a dif­fer­ent story, due to crash­ing demand). 

    The MSM assump­tion is that we are in recov­ery and inter­est rates will have to rise again so that bub­bles and infla­tion can be headed off at the pass. I sus­pect though that rates can’t be raised much going for­ward, because too much mort­gage stress will be evi­dent too quickly. Since 2007 mort­gage debt lev­els have risen and wages have stag­nated and hours worked have fallen. Mean­ing that bor­row­ers are even more sen­si­tive to ris­ing inter­est rates now. 

    The down­side prob­lem that the RBA faces, is that all up rates (lend­ing rates) can­not go much lower, due to cost of funds con­straints. In other words. The RBA may lower the cash rate, but can banks fol­low? So if sen­ti­ment turns neg­a­tive again, what power will low­ing rates have in “sav­ing” bor­row­ers?

    As Steve has iden­ti­fied before. Mon­e­tary pol­icy is get­ting pretty blunt in Aus­tralia. If it every did any­thing other than fol­low the trend in the first place!

    The sec­ond obser­va­tion is a com­ment on how quickly and sharply Aus­tralians became neg­a­tive last year, even before unem­ploy­ment started ris­ing. I take that as an omen. Aus­tralians are very ner­vous. They have flipped back to extreme opti­mism at the moment. But what if that flips straight back to neg­a­tiv­ity? What will save the Aus­tralian asset bub­bles next time?

  • MMitchell


    Thanks for your com­ments. I agree with almost every­thing you say. Except I would like to sep­a­rate the idea of wealth and democ­racy. Our sys­tem has tra­di­tion­ally excelled at pro­vid­ing per­sonal free­dom and the free­dom of ideas. This I think is worth fight­ing for and retain­ing. In Aus­tralia we, at least in pub­lic, are very accept­ing of multi-cul­tur­al­ism, this is worth retain­ing, how­ever, I sus­pect this only works while every­one is well off, under stress racial ten­sions (which are prob­a­bly already present) may arise. What has been cor­rupted is our entire eco­nomic exis­tence, and in turn the aspects of soci­ety that are related to eco­nom­ics ie: every­thing that can be mar­keted; edu­ca­tion; mass-media (which is dri­ven by mar­ket­ing). These are the domains in which empire reigns as you say. Mob rule need not be bad, as long as the fate of every­one in the mob is linked. In this case, stu­pid mobs will not pros­per or sur­vive, even­tu­ally all mobs must wise up. In our mas­sive sys­tem the link­ing of everyone’s fate does not hold, and one group can ben­e­fit by exploit­ing or dom­i­nat­ing another, per­haps weaker group — this is the fail­ing of democ­racy, and per­haps the mech­a­nism by which the native peo­ples you refer to have been extin­guished. To make my point yet-again (sorry to every­one) smaller masses will more likely have linked fates. These seems pos­si­ble if we have localised com­mu­ni­ties with the final say over any deci­sion mak­ing. Large projects, such as nation­wide rail­ways will still be pos­si­ble, but would need to be done with much more sen­si­tiv­ity (who cares how long it takes if it is done prop­erly and sus­tain­ably and fairly. Steal­ing land (called com­pul­sory acqui­si­tion) for unsus­tain­able projects should not be pos­si­ble. In the case of water allo­ca­tions such as we face now where one state or com­mu­nity takes more than its share, that state is actu­ally pro­tected by our cur­rent national struc­tures. Under a regional arrange­ment it is far more likely that an equi­table arrange­ment would even­tu­ally be reached, either by co-ordi­nated sanc­tions against the offend­ing com­mu­ni­ties, or, immi­gra­tion to the areas that are appro­pri­at­ing the resources (so that they are in effect are shared equi­tably) or, in the very worst case, the threat of armed con­flict.

  • Bull­turned­bear

    I see that an inter­na­tional con­sor­tium has signed a deal with China to sell Aus­tralian Nat­ural Gas to China for the next 30 years. This is a big POSITIVE story this morn­ing.

    No where did I read that nat­ural gas is now trad­ing at $3 per mmBTU. This is approach­ing a multi decade low. One year ago gas sold for $13+ mm BTU and in 2006 the price hit $17.

    Great pos­i­tive story! A con­sor­tium of Exxon­Mo­bil, Shell and Chevron will sell our gas to China and vir­tu­ally give it away. Why is this good? I read that the gov­ern­ment will get $40B tax over the next 30 years. Maybe that’s the good bit.

    By the way the price of gas is falling into a multi-decade low as men­tioned. A pos­si­ble tar­get I have is $2.50. But if wave 5 down extends the tar­get will be in the mid to high $1s. That’s insane! Nat­ural gas looks like it will be one of the first com­modi­ties to reg­is­ter a long long term low. Some time next year. Nat­ural gas may be the buy of the decade. This is not advice, only opin­ion.

  • Philip


    I would agree with Strabes that we don’t live in a gen­uine democ­racy. If one looks at the insti­tu­tions in our soci­ety: gov­ern­ments (fed­eral, state & local), cap­i­tal­ist firms, edu­ca­tional insti­tu­tions (uni­ver­si­ties, TAFEs & schools), churches, non-profit foun­da­tions, etc., the only one that has for­mal demo­c­ra­tic mech­a­nisms is the gov­ern­ment. All oth­ers are based upon author­i­tar­ian inter­nal struc­tures whose lead­ers are unelected and can serve poten­tial life terms (a pathol­ogy found in fas­cist and Bol­she­vist states). Some may be more mod­er­ate but all are based upon top-down hier­ar­chi­cal struc­tures. We don’t accept total­i­tar­i­an­ism in the polit­i­cal sphere of life, so why do we accept it in the work­place?

    Describ­ing Aus­tralia as a democ­racy defiles its very mean­ing. Just because one insti­tu­tion (the gov­ern­ment) out of many in our soci­ety has for­mal demo­c­ra­tic mech­a­nisms, in this case vot­ing rights, this hardly means that Aus­tralia can be defined as a democ­racy in any sub­stan­tive fash­ion.

    The­o­ret­i­cally, in a democ­racy, the peo­ple rule. How­ever, deci­sion-mak­ing power over many aspects of life reside in pri­vate, unac­count­able hands, gen­er­at­ing large-scale effects through­out soci­ety. The best way to resolve this prob­lem is to extend democ­racy through­out the econ­omy so that deci­sions relat­ing to invest­ment, sav­ing, plan­ning, orga­ni­za­tion of work, etc. is firmly within the con­trol of peo­ple and demo­c­ra­tic grass­roots orga­ni­za­tions. There is no nat­ural law which states that our econ­omy has to be largely man­aged by unelected and unac­count­able cor­po­rate cen­tral plan­ners and barely account­able state cen­tral plan­ners. Reform­ing this dis­as­trous sys­tem would con­sti­tute a major social rev­o­lu­tion.

    Our sys­tem has tra­di­tion­ally excelled at pro­vid­ing per­sonal free­dom and the free­dom of ideas.”

    With the caveat that rights and free­doms are always won, never given.

  • MMitchell


    I agree with you because of course you are right. I was talk­ing, and think­ing, about democ­racy in a gov­ern­men­tal sense, in all those other areas you men­tion we have lit­tle or no democ­racy. How­ever, I think our lack of democ­racy in these other areas comes from our eco­nomic his­tory, which in turn prob­a­bly evolved from our feu­dal his­tory. How­ever, I was not claim­ing the best pos­si­ble polit­i­cal sys­tem, just the best exist­ing sys­tem beyond tribe size. Com­pared to many other coun­tries we are rel­a­tively very well off.

    Rights and free­doms are never given, because those in power use the usurp­tion of rights and free­doms to stay in power. In a truly demo­c­ra­tic sys­tem I don’t think this would be a prob­lem. In any case, if the fol­low­ing dis­cus­sion with Mon­biot is any indi­ca­tion, I don’t think we should be wor­ry­ing about that just now, but rather how we can get our exist­ing sys­tem to mobilise to deal with the prob­lems we are fac­ing, oth­er­wise their might be no sys­tem to talk of:

  • strabes

    I would dis­pute that the govt sec­tor is demo­c­ra­tic either. Just because the media puts on an elec­tion show every once in a while doesn’t mean it’s a democ­racy. At least in the US we have 2 estab­lish­ment par­ties con­trolled by the banking/corporate elite. They give us 2 to fool us into think­ing we have a choice. They debate the irrel­e­vant issues, but nei­ther party would ever cross the Fed­eral Reserve or the rule of Wall St. It doesn’t mat­ter to the elite which one wins…both of them appoint the same Wall Streeters to run the econ­omy and CFR mem­bers to run Defense, State, CIA, NSA, Jus­tice.

    The elite giv­ing peo­ple 2 very lim­ited choices is hardly free­dom.

    Not to men­tion the sim­ple evi­dence that 75% of peo­ple were strongly opposed to the US govt bailout pro­gram, yet Con­gress passed it in fly­ing col­ors. This is not democ­racy.

    I think we’re going to have revealed to us over the next 10 years how un-free we are. The elite allowed us for a few gen­er­a­tions to play the bankers’ game because they needed us as good lit­tle borrowers/interest pay­ers to ensure we kept the veloc­ity of money scream­ing so they were propped up as the wealth­i­est elite on the planet. We’re no longer needed. Our debt bondage, lack of free­dom, will soon become obvi­ous to every­one.

  • Lyon­wiss

    The global finan­cial sys­tem plays a game of “pass the par­cel” to avoid proper reg­u­la­tion, includ­ing mort­gage secu­ri­ti­sa­tion, mort­gage insur­ance etc. Here is a use­ful health warn­ing from Kris Sayce:

  • Philip


    I would agree that gov­ern­ment doesn’t tend to be very demo­c­ra­tic and respon­sive to the will of the pop­u­la­tion. How­ever, despite its inter­nal bureau­cratic prob­lems, the great­est imped­i­ment to democ­racy comes from out­side the gov­ern­ment, namely the busi­ness class or more specif­i­cally, the cor­po­rate sec­tor.

    Cit­i­zens turn up to vote once every four years but the busi­ness class spends every day and night sub­vert­ing democ­racy and mar­ket prin­ci­ples. As the Found­ing Fathers in the US cre­ated a sep­a­ra­tion of church and state, a sep­a­ra­tion of cor­po­ra­tion and state needs to occur.

  • MMitchell

    Strabes and Philip,

    As I KBH and I dis­cussed in a pre­vi­ous thread: it is almost inevitable that vested inter­ests will take con­trol of any sys­tem. I think the sys­tem put in place in the US, like ours, was in fact very good (to begin with). The fact is that over time vested inter­ests sub­vert what­ever demo­c­ra­tic processes and checks that are in place. It seems the only way we have any hope of avoid­ing this is to have as close to direct democ­racy as pos­si­ble, no cor­po­ra­tions that can use their enor­mous resources to out-gun any­one using sys­tems of law, EOI, etc that were set up for indi­vid­ual PEOPLE. I do not believe this can be done suc­cess­fully on a large scale. The temp­ta­tion to let some group or organ­i­sa­tion do our think­ing and look after things for us is too great and the ratio­nale that it is more effe­cient or effec­tive to have some group of so-called experts do this is too tempt­ing for pol­icy mak­ers. We then get a sit­u­a­tion like now where the instru­ments (eg: Finan­cial instru­ments) used are so arcane that only trained experts can under­stand them (if even they do) and the every­day per­son is excluded from par­tic­i­pat­ing even if he/she wants to. Hav­ing small localised economies (locally pro­duced goods and local con­trol over all resources, laws and deci­sion mak­ing) will allow higher lev­els of account­abil­ity, and even if many do get cor­rupted over time, the scale will not be cat­a­strophic as we seem to be expe­ri­enc­ing now.

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