Archive for the 'interest(rates)' Category

Gold at 42 cents an ounce

I’m a gold bug. I’ve bought it as a means of trying to give my measly savings some security against the obviously totally bogus totally manipulated paper money crap.

Gold had been rising steadily in (manipulated)price in the medium terms for about 10 years. So many ‘alternative’ websites were going on about gold going to $2,000, $3,000, $4,000, enve $5,000, etc an ounce.

Well where are those voices now? Gold reached it’s peak at about #1,900 and ounce now it’s about $1,570. It’s lost about 18% of it’s value. Where are those voices? Those crystal ballers who magically “knew” what price gold would go to.

Where are those voices? Why are they not crying at the fact that gold has lost 18% from it’s high. If it were a sham bank, the ‘alternative’ webosphere would be mocking the said fraudulent institution with glee, preparing the champagne for when the collapse went past the point of criticality.

Come on you Mistic Meg’ers (mistake meg!) when gold went up to $17,00… $1,800 you were going “I told you so”, well you didn’t see this 18% loss did ya?

I’ve been getting a tad tired of the ‘alternative’ webosphere on occasions, and often wonder if it’s not part of a game of ‘bipolarisation’. And the ‘crystal balling’ about gold prices is especially tiresome.

Well I’m tired now, so I’ll call it a day.

P.s. I’m not the slightest bit worried about the gold price, cos I’m only interested in the LONG TERM and savings. If you speculate on gold, well, you just as bas as those crap heads wheeling and dealing in derivatives. Gold at 42 cents an ounce does NOT worry me at all. I have total confidence that gold offers THE greatest safety net for savings protection. If gold really did go to 42 cents  an ounce, I’m fairly certain the fictional money we use today would experiencing far grater problems, e.g. there may only be 5,000,000p in circulation!

P.p.s. I know the value of gold hasn’t really increased or decreased, rahter the fictional value of the dollar has been manipulated relative to  gold. The upward trend of $ against ounce of gold was fully legitimate due to money being debt and the cranking up of the money presses in ‘quantitative easing’ exercises. That “gold has lost value” seems to me to be re-calibrrating or just simple  manipulative suppression. The long term future of gold is absolutly assured. So do yourself a favour don’t give a crap about the “price of gold”. Either going up or down. When you want to protect you earnings, buy gold. Do also with the sincere intention of spending it.




By M. Umer Chapra

Taken from the JUST Newsletter/Commentary bulletin.,com_rokdownloads/Itemid,130/id,18/view,file/

It is not Islam alone which has prohibited interest. Other major religions like Judaism, Christianity and Hinduism have also done the same. The Bible disapproves of interest severely and makes no distinction between usury and interest.1 Those who took interest were
branded as wicked2 and could not, according to the Third Lateran Council (1179), be admitted to communion or receive Christian burial.3 The Qur’an also prohibits interest strictly and declares those who take interest to be at war with
God and His Prophet (2:279). This raises the question of why there is such a harsh verdict against interest in all these religions. Is there any sound rationale behind it?

Those who are against the prohibition assume that interest was prohibited mainly because of the injustice it inflicted on the poor, who were charged an exorbitant rate of interest for loans borrowed by them to satisfy some urgent need. This, they argue, led to exploitation
and further impoverishment of the poor. They, therefore, conclude that the prohibition of interest is no longer valid because banks in modern times do not resort to such exploitation.

The assumption on which this conclusion is based does not, however, reflect the historical realities. During the Prophet’s days, peace and blessings of God be on him, borrowing was not undertaken by the poor. This is because by the end of the Prophet’s life, when the prohibition of interest became strictly enforced, the needs of the poor were taken care of either by the rich or the bayt al-mal (the Public Treasury). Therefore, the poor did not have to borrow to fulfil their needs.

This leads to the question of who borrowed and why? Borrowing was resorted to primarily by tribes and rich traders who operated as large informal partnership companies to conduct largescale trade. This was necessitated by the prevailing circumstances. The difficult
terrain, the harsh climate, and the slow means of communication made the task of trade caravans difficult and timeconsuming. It was not possible for them to undertake several business trips to the East and the West during a given year. Only a few trips could be undertaken.
Hence, it was necessary for the caravans to muster a large volume of financial resources to purchase all the exportable products of their society, sell them abroad, and use the proceeds to bring back the entire import needs of their society.

Before Islam such resources were mobilized on the basis of interest. This was not acceptable to Islam because it led to injustice. If there was a loss, it was the entrepreneur or the trader who had to bear the entire loss in spite of all the trouble he took. The financier, who did nothing more than providing finance, got a predetermined positive rate of return. Islam, therefore, tried to remove the injustice resulting from this. It abolished the interest-based nature of the financierentrepreneur relationship and reorganized it on the basis of profit-and-loss-sharing. This enabled the financier to have a just share and the entrepreneur did not get crushed under adverse conditions, one of which could be the caravan being waylaid on the way.

This shows that, although the extension of meaningful help to the poor carries a high priority in the Islamic value system, it was not the primary reason for the prohibition of interest. The primary reason was the realization of overall socio-economic justice, which is declared by the Qur’an to be the main mission of all God’s messengers (57:25).

Justice, however, needs to be understood in a much wider context. Confining it merely to trade may not be able to take us far enough. Justice demands that the resources provided by God to mankind as a trust must be utilized in such a manner

that the universally-cherished humanitarian goals of general need fulfillment, full employment, equitable distribution of income and wealth, and economic stability are optimally realized. It is the contention of this paper that these humanitarian goals can be realized
more effectively if there is also a humanitarian strategy. An important, though not the only, element of such a strategy is the abolition of interest. The following discussion tries to show briefly how the interest-based financial system frustrates the optional realization of these
goals and how its reorganization in a way that increases the reliance on equity and reduces that on debt can help in their more effective realization.4

Financial intermediation on the basis of interest tends to allocate financial resources among borrowers primarily on the basis of their having acceptable collateral to guarantee the repayment of principal and sufficient cash flow to service the debt. End-use of financial resources does not constitute the main criterion. Even though collateral and cash flow are both indispensable for ensuring repayment of loans, giving them undue weight leads to a relative disregard of the purpose for which borrowing takes place. Hence, financial resources go mainly to the rich, who have the collateral as well as the cash flow, and to governments who, it is assumed, will not go bankrupt. However, the rich borrow not only for productive investment but also for conspicuous consumption and speculation, while the governments borrow not only for development and public well-being, but also for chauvinistic defence buildup and white elephant projects. This does not only accentuate macroeconomic and external imbalances, but also squeezes the resources available for need fulfillment and development. This explains why even the richest countries in the world like the United States have been unable to fulfil the essential needs of all their people in spite of their desire to do so and the abundant resources at their disposal.

The living beyond means which the interest-based financial intermediation has the tendency to promote through the easy availability of credit, has led to a decline in savings in almost all countries around the world. Gross domestic saving as a percent of GDP has registered a
worldwide decline over the last quarter century form 26.2 percent in 1971 to 22.3 percent in 1998. The decline in industrial countries has been from 23.6 percent to 21.6 percent. That in developing countries, which need higher savings to accelerate development without a significant rise in inflation and debtservicing burden, has been even steeper from 34.2 percent to 26.0 percent over the same period.5 There are a number of reasons for this. One of these is the rise in consumption by both the public and the private sectors. This saving shortfall has been responsible for persistently high levels of real interest rates. This has led to lower rates of rise in investment, which have joined hands with structural rigidities and some other socio-economic factors to reduce the rates of growth in output and employment.

Unemployment has hence become one of the most intractable problems of most countries, including those in the rich industrial world. Unemployment stood at 9.2 percent in the European Union in 1999, more than three times its level of 2.9 percent in 1971-736 It may not be expected to fall significantly below this level in the near future because the real rate of growth in these countries has been consistently lower than what is necessary to reduce unemployment significantly. Even more worrying is the higher than average rate of youth unemployment because it hurts their pride, dampens their faith in the future, increases their hostility towards society, and damages their personal capacities and potential contribution.7

A decline in speculation and wasteful spending along with a rise in saving and productive investment could be very helpful. But this may not be possible when the value system encourages both the public and the private sectors to live beyond their means and the  nterestbased financial intermediation makes this possible by making credit easily available without due regard to its end use. If, however, banks are required to share in the risks and rewards of financing and credit is made available primarily for real goods and services, which the Islamic system tries to ensure, the banks will be more careful in lending and credit expansion will be in step with the growth of the economy. Unproductive and speculative spending may consequently decline and more resources may become available for productive investment and development. This may lead to higher growth, a rise in employment opportunities, and a gradual decline in unemployment.

The inequitable allocation of financial resources in the conventional interestbased financial system is now widely recognized. According to Arne Bigsten, “the distribution of capital is even more unequal than that of land” and “the banking system tends to reinforce the unequal distribution of capital.”8 The reason is, as already indicated, interestbased financial intermediation tends to rely heavily on collateral and to give inadequate consideration to the strength of the project or the ultimate use of financing. Hence, while deposits come from a cross-section of the society, their benefit goes largely to the rich. As Mishan has rightly pointed out: “Given that differences in wealth are substantial, it would be irrational for the lender to be willing to lend much to the impecunious as to the richer members of  ociety, or to lend the same amounts on the same terms to each”.9 The Morgan Guarantee Trust Company, one of the largest banks in the U.S., has admitted that the banking system has failed to “finance either maturing smaller companies or venture capitalists,” and “though awash with funds, is not encouraged to deliver competitively priced funding to any but the largest, most cash-rich companies.”10

In contrast with this, risk-reward sharing could be more conducive to the realization of equity. It would tend to compel the financier to give due consideration to the strength of the project, thus making it possible for competent entrepreneurs from even the poor and the middle-classes to be at least considered for financing if they have worthwhile projects, adequate managerial ability, and a reputation for honesty and integrity. This may enable society to harness the pool of entrepreneurial ability from even the poor and middle classes.
The rich contribution that such entrepreneurs can make to output, employment and need fulfillment could thus be tapped.

There is no reason to be unduly apprehensive about loan losses from such financing. The experience of the International Fund for agricultural Development (IFAD) is that credit provided to the most enterprising of the poor is quickly repaid by them from their higher earnings.11 Other small-loan programmes have yielded similar results in several countries. Nevertheless, it may be desirable to arrange insurance of small loans to provide protection to financiers against fraud and mismanagement.

Economic activity has fluctuated throughout history for a number of reasons, some of which, like the natural phenomena, are difficult to remove. However, economic instability seems to have become exacerbated over the last three decades as a result of turbulence in the financial markets. One of the important reasons for this, according to Milton Friedman, a Nobel laureate, is the erratic behaviour of interest rates.12 The high degree of interest rate volatility injects great uncertainty into the investment market and makes it difficult for
entrepreneurs to take long-term investment decisions with confidence. This drives borrowers and lenders alike into the shorter end of the financial market. The result is a steep rise in highly leveraged short-term debt, which plays an important role in destabilizing financial

One may wish to pause here to ask why a rise in short-term debt should accentuate instability. This is because short-term debt is easily reversible as far as the lenders are concerned. Its repayment is, however, difficult for the borrowers if the amount is locked up in medium- and long-term investments with a long gestation period. While there is nothing basically wrong in a reasonable amount of short-term debt, which Islam allows on the basis of its sales-based modes of financing for real goods and services, an excess of it tends to get diverted to speculation in the foreign exchange, commodity and stock markets.

The 1997 East Asia crisis has clearly demonstrated this. The Eastern tigers had healthy fiscal polices which could be the envy of a number of developing countries. However, the large inflow of short-term foreign funds led to rapid growth in bank credit to the private sector.
This created speculative heat in the stock and property markets. It was the old mistake of lending on collateral without evaluating the underlying risks. As soon as there was a shock, there was a rapid outflow of funds, which had come primarily, on a short-term basis. This led to a precipitous fall in asset prices and exchange rates, making the borrowers unable to repay to the local banks, which could not in turn repay their short-term loans from foreign banks. There was thus a banking crisis. The IMF had to come to the help of these countries by arranging a huge amount of loans. What this ended up doing was to enable the foreign banks to get back their loans and go scot-free. The burden of the debt consequently shifted to the governments and, ultimately, to the taxpayers of these countries.

The 1998 collapse of the hedge fund, LTCM (Long-term Capital Management),  was also due to highly-leveraged shortterm lending. On the strength of their own equity, the hedge funds are able to borrow enormous amounts which they use to speculate in the international commodity, stock and foreign exchange markets, and thus end up destabilizing financial markets around the world. The leverage of LTCM was 25:1 before the crisis, but rose to 50:1, and ultimately to 167:1, after the crisis.13 If the Federal Reserve had not come to its rescue, the whole world economy could have been driven to the precipice of a serious financial crisis. The heavy reliance on short-term borrowing has injected a substantial degree of instability even in the international foreign exchange markets. Daily turnover in the international foreign exchange markets was $1,490 billion in April 199814, which was 49 times the daily volume of world merchandise trade.15 This indicates that a substantial volume of foreign exchange transactions is for speculative purposes. According to Andrew Crockett, General Manager of the Bank for International Settlement (BIS), “Our economies have thus become increasingly vulnerable to a possible breakdown in the payments system.”16

If it is not desirable to rely largely on short-term credit, then the more desirable thing to do would be to rely on long-term borrowing and equity. Of these two, equity financing is preferable because it would introduce greater health in the economy through a more careful scrutiny of the projects financed.17 A number of world-renowned scholars like Henry Simons, Hyman Minsky, Charles Kindleberger, Joan Robinson, G.L. Bach, and Kenneth Rogoff have hence concluded that an economy where there is greater reliance on equity would tend to be more stable than a debt-based economy.18

Thus it may be seen that greater reliance on equity financing has to be an indispensable part of the strategy of any system which wishes to actualize the humanitarian goals of need fulfillment, full employment, equitable distribution of income and wealth, and economic stability. The reason why capitalism has not been able to realize these goals effectively is not because its goals are not humanitarian or the people in capitalist countries do not have the will and the resources needed for this purpose. The primary reason is the conflict that exists between its goals and its strategy. The goals are humanitarian, originating from its religious past, while the strategy is social-Darwinist, based on the concept of survival of the fittest. It relies primarily on the rate of interest for allocating financial resources. This gives an edge to the rich and leads to not only concentration of wealth but also a rise in conspicuous and wasteful consumption. This hurts the realization of goals. It also contributes substantially to the prevailing instability in the international financial markets. Mills and Presley are, therefore, right in concluding that:

“There are sufficient grounds to wish that, in hindsight, the prohibition of usury had not been undermined in Europe in the sixteenth century. More practical wisdom was embodied in the moral stand against usury than was then realized”.19

1. For the Babylonian, Jewish and Christian
views on interest, see, Johns, in Hastings,
Vol.12, pp. 548-58; and Noonan, 1957, p.20.
For the Hindu view, see Bokare, 1993, p.168.
2. See the Bible – Ezekiel, 18:8, 13, 7; 22:12.
See also Exodus, 22: 25-27; Leviticus, 25:36-
38; Deuteronomy, 23:19; and Luke, 6:35.
3. Johns,, p.551.
4. The subject has been discussed in greater
detail by the author in Chapra, 1985, pp.19-
29 and 107-145; 1992, pp. 327-34; and 2000
a and b.
5. Figures have been derived from the Table on
“Consumption as percent of GDP” in IMF,
2000 Yearbook, pp.177-79.
6. OECD, Economic Outlook, December 1991,
Table 2, p.7; and June 2000, Table 22, p.266.
7. A question may be raised here about the
current low rate of unemployment in the U.S.
in spite of a substantial decline in household
saving. There are a number of reasons for this.
One of the most important of these is the large
inflow of foreign funds which “has helped to
fund a pronounced increase in the rate of growth
of the nation’s capital stock”(Peach and
Steindel, September 2000, p.1). Once there is
a reversal of, or even a decline in, this inflow,
it may be difficult to sustain the high rate of
growth in output and employment. In addition
the stock market may also experience a steep
8. Bigsten, 1987, p.156.
9. Mishan, 1971, p.205.
10. Morgan Guarantee Trust Company of New
York, 1987, p.7.
11. The Economist, 16 February 1985, p.15.
12. Friendman, 1982, p.4.
13. IMF, World Economic Outlook, December
1998, p.55. Leverage indicates the extent of
borrowing on the basis of equity. A leverage of
25:1 means a loan of $25 on the strength of a
capital of $1. When the leverage is high, it is
difficult for borrowers to repay their loans when
asset prices fall.
14. See Table 1 of the BIS Press Release of 19
October 1998 which gives the preliminary
results of the foreign exchange survey for April
1998. Such a survey is conducted by the BIS
every three years.
15. World merchandise trade (imports plus
exports) amounted to $908.7 billion in April
1998 (IMF, International Financial Statistics,
November 1998). The average value of the
daily world merchandise trade in April 1998
was thus only $ 30.3 billion.
16. BIS Press Release, 22 June 1994, p.3.
17. See IMF, World Economic Outlook, May
1998, p.82.
18. Simons, 1948, p.320; Minsky, 1975; see
also the summary of Minsky’s argument cited
by Joan Robinson, December 1977, p.1331;
Kindleberger, 1978, p.16; Bach, 1977, p.182;
and Rogoff, fall 1999, pp.211-46.
19. Mills and Presley, 1999, p.120.

* This paper is a significantly revised and
updated version of the paper, “A Matter of
Interest: The Rationale of Islam’s Anti-Interest
Stance,” published in the October 1992 issue
of Ahlan wa Sahlan, pp.38-41.
Dr. Chapra is Research Advisor at the Islamic
Research and Training Institute of the Islamic
Development Bank, Jeddah.

So that’s it then, we’re getting a single currency

Update 8-Apr-09:
ESSENTAIL READING ( About the recent G20 meeting and the directions they are embarking upon. NWO is just about here!
End of update.

 Seenetial I just replied back to Antireptilian a few hours ago [here] mentioning the global currency, and that Obomber was putting up a pretence that it wasn’t something the US was interested in. I knew his pretence is fake having educated myself as to what the hell is actually going on with the planet.

Here’s an Al-Jazeera (English) clip on the original ‘idea’:



A number of days ago China (who holds vast quantities of US debt) floated the idea publicly. Us informed loons saw this coming YEARS ago. “China’s idea” (LOL)drew a publicly cold response from Obomber a few days ago. As I said, so obviously fake.

Now we get this…


Story at Information Clearing House,

So the pretence is dropping – like a lead balloon! Bloody hell.!

Antireptilian said:

“the New World Order, i feel, has been forced to play it’s hand early.”

It seems those words are chillingly accurate. Hang onto your hats folks, it’s gonna be a bumpy ride – perhaps the very last ride you’ll ever take.

Chris Martenson – The Crash Course – The End of Money – (PBS) 38m05s – Feb 14, 2009

Attended a talk today by Dr Choo Peng Yi about Peak oil. Hope to put a post about it soon. From the talk, I got to hear of Chris Martenson. His site has a series of chapters trying to educate people about the state of the planet, and he does it in reasonably holistic terms (but no religious element – but I guess some people may have previously been turned off from this kind of ‘you must start preparing for bad times‘ kind of messages, if it is discussed in religious terms – which is a pity because it might lead to more people suffering as a result – so perhaps the absence of a religious element here may serve some function – P.S. I don’t have a clue about Chris’s views on religion – but I can definately say he cares grately about his fellow man) .  In addition to the edu-films on his site, on Googling him, I came across the video below which I think may be useful: (38 mins)

I don’t necessarily agree with ALL that Chris says, however I think I’d probably agree with the great majority of what he says, but he talks a great deal of sense. His appeal for community empowerment and unity at the end is IMO, the only way we can minimise what will be a very dangerous period of time in the next few coming years as the end of the age of cheap oil begins to kick in which I think has been compoiunded with the fundamental change in monetary system that the economic collapse has caused.

If socitey does become hostile, from a purely selfish point of view, your chanches of miniminising the danger to yourself comes from a strong community which helps each other. If you horde food and take pot shots at your neighbours you’re going to sign your own death warrant.

If you think I sound crazy, look at it like this. As Chris says in Chapter 20 of his ‘Crash Course’ series on his website, if the societal crash doesn’t happen, whats the worst that happened as a result for you taking som steps

Really, you should have started to think about these issues last year! But there is still time to make the necessary plans. 

Here’s another reasonable video:

The Crisis of Credit Visualized – Part 1 – 7m32s


Credit Crisis Visualized Part 2 – 3m44s

Financial Scam continues…

Pretty soon I’m going to start numbering these ‘$cam’ posts. Here’s a forecast the BBC are giving…


ALL of the predictions AFTER mid 2009, go up! – they are less negative, meaning the output is still falling but not as quickly as before. Then, most projections (or broadest span of confidence levels) break the zero mark – the level of output starts to increase – output is more than the year before. But it’s a relative value, it’s a comparison with the year before. Given the previous plunge, a % increase on the year before isn’t partcularly anything to sing and dance about.

Lets consider the positive regions. If the return to a +’ve % output isn’t simply based on just pure speculation, then there must be some recognisable economic activity that is known will take place later, forming the data on which the prediction is made.

If so, then therein lies the solution to the crisis! Simply make that economic activity happen NOW. Problem solved, ‘crisis’ over.

Meanwhile the Dow, FTSE etc. continue to shoe their relationship.


Rep. Kanjorski: $550 Billion Disappeared in “Electronic Run On the Banks”

“electronic run” – wow!

Hardcore loons will probably recall what they learnt in retrospect about Donald Bumsfelt.  One day before 9-11, he announced the pentagon ‘missing trillions’.

Strangely enough the part of the peantagon which was investigating these ‘money holes’, was the part that was struck by ??something?? on 9-11.

Cynthia McKinney also drew focus to EXTRA amouts of ‘missing money’, 1 trillion+, because the pentagons computer systems didn’t talk to each other.

Bush and Paulson, now Obama and his Treasury Secretary refuse to tell us exactly where the bailout money is going. 

In the UK, something similar happens. The UK government spends peoples money of a bank who’s had all the prime assets packed off to an off shore firm.

To me, I see the scam has having only one purpose: The declare financial collapse in order to propose a ‘fresh start’ – electronic money as the only way to get out of the rut. It’s likely to go hand in hand with the biometric database.

And if I am wrong about e-money, I’m not wrong about this: The Financial system in use today, MUST experience a crash because of the very nature of Riba that it’s based on, of which usury and paper money are a part.

You need to start asking yourself what plans are you making? Perhaps you think that this crisis doesn’t really matter as at the moment you’re all right. And should e-money come, you’ll play along with it you you’ll be alright. If so, can you spot anything selfish about that?

Worthy articles:  2.3 Trillion Dollar Toilet Seats

The Second most important information you’ll ever come across.

You’ve heard the occasional story, caught the odd glimpse, smelt the odd whiff, fleetingly, tasted something strange.
You’ve touched the odd sign. You know something’s coming but the disconnect is still too much.

I sincerely hope this make the connect.

And thanks mate (you will knwo who you are) for bringing this to my attention. 

Words fail me with regard to the subliminal sex things in the ‘kids stuff’., much of which I’ve not seen before.

Unfortunately, there is a fair bit of timewasting going on, esp for seasoned loons, and particularly annoying (part 9) are the multiple slides of the guys who made the series, but it’s the message that counts and the extent of what’s going on. As ever Cherrypick.




Have your say (I certainly will) – The paradox of thrift


Page last updated at 15:09 GMT, Monday, 24 November 2008
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The paradox of thrift

By Steve Schifferes
Economics reporter, BBC News 
Retail sales fell for a second month in a row
Should we save or should we spend?

Ed: Yes, bipolarise the issue. Well done.

It’s gloomy out there. The economy is shrinking, property values are falling and stock markets are in the doldrums.

Ed: It’s gloomy because the crappy economic ‘system’ has been welded onto most of our lives. If it never impinged upon us, there wouldn’t be any ‘gloom’. 

Many people borrowed heavily during the boom, and now are tempted to pay off debt or save more for a rainy day – something which until now has not characterised the behaviour of UK consumers.

Ed: They borrowed on interest to make more money. Granted, many have never had the opportunity to discover the harm this practice causes, but many others knew, and simply don’t give a damn. Who is tempted to pay off the debt? Do you mean the new jobless or homeless? Do you mean the remaining house owners who now have lower rates of interest on their loans? Who? And what debt? The untouchable personally unpayable debt the governmenthas saddled us with ‘bailouts’ etc?

 But if this happens, will the government’s plan to boost the economy through greater spending work?

Ed: Wait a minute. How can we spend more, if saving has never characterised the behaviour of UK consumers.??


Paradox of thrift

Because thrift may be a virtue for the individual, but could damage the economy as a whole, according to the economist John Maynard Keynes, writing in the midst of the Great Depression in the 1930s.

Ed: thrift as I understand it means cautious non-wasteful (prudential) money management – leaning towards the savings / nest-eggs. Aaah. Now we see where this article is going… guess what? It follows the government line they’ve recently been chanting “spend, spend, spend”

He called it the paradox of thrift. The more people saved, the more they reduced effective demand, thus further slowing the economy.

Ed: Well, mixed in with this is the “as demand increases, price increases” – and more money changes hands. Therefore, it’s “good” for “the economy” – translated means: It’s good for those who increase the financial distance between them and most other people. But this ultimately (and fairly rapidly) harms the people at the bottom tier of the financial pyramid who end up paying for that greed.

The virtue of ‘spending’ is only that it prevents potholes for this frankly speaking, rather nasty economic system during its operation. Why milk the ‘high demand’ opportunity to extract higher fees? What if we didn’t? Don’t you think the consequences would be a lot more pleasant for virtually everyone on the planet other than those at the top? Or isn’t Democracy supposed to permeate to this extent?

So yeah, if you save of course you’ll harm the greedy system. Mais oui!

This was one reason, he pointed out, that a recession can become self-reinforcing.

Ed: Message = save and (they say) you’ll make things worse therefore spend

Keynes also argued that, faced with slowing demand, businesses would not necessarily use the extra savings available in the economy to invest.

 Ed: Didn’t Keynes every say anythingin favour of saving? The appearance offered is that he didn’t.

In the Keynesian theory, as the slump in demand cascaded through the economy, the resulting slowdown would mean that everyone had less income – ultimately reducing the absolute amount of savings, even if people increase the proportion of their income they put aside.

 Ed: Guess no-one sees fit to mention that in the normal economy, the value of money has plummeted and that today even before the ‘sub-prime’ initial signaling that the scam was to take a new vibrant direction, that people today (and governments) are today in debt on a massive scale that simply dwarfs any debt help say 100 years ago. That’s right folks, the ‘fraud economy’ sucked you into a hole. All you are being offered is a burning rope to clamber into yet another deeper hole. BBC quality and balanced reporting you see.

As unemployment grew, investment would fall, whatever the level of savings.

Ed: I’m incredibly old fashioned, because I believe if a business makes a profit, then it is a worthy enterprise and should keep ticking along – employees included. But that’s just silly me. If I had any contempory financial respectability, I would cut jobs the moment successive year on year INCREASE IN PROFITS took a downturn.


Government help needed 
The government has slashed interest rates in a bid to boost spending.

Ed: Aaah. So far, ‘probems’ (savings) have been discussed because of YOU!. Now Government is mentioned with the word “help”, previously when ‘government’ was mentioned, it was accompanied with the word “boost” – Get the message folks?

 But how can we persuade the reluctant consumer to spend, and the reluctant businessman to invest?

Ed: So, one man, albeit a very insightful and textualising man, and some tiny portion of what he said has sealed the argument. ‘Saving is the big bad” – And don’t forget we still haven’t been offered any of Keynes’s insights as to virtues of saving {if indeed he had any}.

Keynes’ answer was that it was only the government that could overcome the collective paradox: what was good for the individual would weaken the economy.

Ed: Government good, Person bad. Oh, and who got us into this recession in the first place? Either by active participation in it (enticing interest rates, bailouts, massive overpayment for nationalising something engaged in fraudulent practices anyone?) or by failure to create regulate to prevent it from happening in the first place? Well, I guess as I have been told that it’s the people who are bad, then it must be them then! 

This is now the theory being embraced by the chancellor, who has abandoned his fiscal rules for the time being in order to pour money back into the economy.

 Ed: “Rules” that lead to….?  {Rules for us, opportunities and loop holes for ‘them}

And cuts in interest rates by the Bank of England are also designed to encourage businesses to continue to invest.

 Ed: Invest? Oopps, this is the age of leverage – I almost forgot. Being old fashioned I slipped into ‘old’ mode of imagining investment was done with real, tangeable savings. ‘Move over old git’ I hear. P.s. {Rules for us, opportunities and loop holes for ‘them}

But this is not very effective, because credit markets are in deep freeze. As a result, it is even more important to inject cash into the economy – at least according to Mervyn King, the governor of the Bank of England.

 Ed: anyone else feel like declaring and participating in freezing something that doesn’t really exists either? If enough of us do it, we’ll probably get a nice big payout for fear of collapsing the meaningless imaginary system? Yoo Hoo! Who’s in?


Spectre of deflation

There is another reason why the government wants to give a jolt to the economy now.

It is the fear that prices will actually start to fall as the slowdown gets going.

And deflation – falling prices – would certainly reinforce the paradox of thrift.

Ed: Can’t have those darkies and others we’ve already cut of of the system from being able to afford anything again can we? You see, once gain, falling prices only ‘hurt’ the vultures that were already doing very nicely from the situation before. You know, people who fund those lovely political parties of ours and own fine Tuscany based yachts for us to sip champagne on. We must help those suffering people.

If consumers expect prices to drop further in the future, then they have an even stronger incentive to delay their purchases until later, when they can benefit from lower prices.

 Ed: I went to the canteen today. Strangely they were selling food. I wonder if I should have gone up to the owner and said “You know, you could save money if you didn’t buy any food today but waited for the price drop in a couple of days.” Somehow, I can’t quite place why, but I don’t think she’d be all that impressed.

Deflation, especially in asset prices like houses, can be very long-lasting and hugely damaging to the economy, as recent experience in Japan suggests.

 Ed: Yes, better keep those house prices a ‘risin. Can’t have people breaking free of the 20 year debt now can we? Or those who buy simply to make more money out of peoples need. Deflation, like you = evil being! Can’t have a law that says “A house can only cost £500” 

So one reason the government may want to temporarily cut VAT now is to convince people that prices are going to go up later, thus encouraging them to spend.

Ed: And of course, they have looked at problems that arise from this, like the effect on the poor. they did look at the effect on the poor – didn’t they? Anyone?.


Rational expectations

Will these measures work?

One reason Keynesian explanations of the economy fell out of favour in the last few decades was the rise of a new economic theory – rational expectations.

Ed: But you’ve just finished advocating ‘spend spend spend’ based on a very small seciton of this one mans empirical evidence of a greed based, elite serving, manipulated system. And no doubt your readers were beginning to convince themselves that what they were reading was correct.

This argued that people were aware that any government borrowing would have to be paid back later. As a result they adjust their expectations accordingly, and do not spend as much as predicted.

Ed: So the government, in trying to get people to spend, never heard of this ‘new’ theory or paid it little/no attention?

Since this time, the government will be signalling its intentions to claw back the money it spends in future budgets,…

Ed: Aaah! The government is going to ‘save’. No comment on negative implications of this?

…perhaps we will all save more to cover our future loss of income.

Ed: People obviously need income to pay their expenses. They only need to save for when they want to purchase something of significant cost, to provide some security for ill health or as security for when the inherently fraudulent system belches. If their needs were constantly met by a guaranteed ability to acquire income, if houses were made to cost £500, cars (which really we should design life to avoid having to use) the same, free or near-free schooling and health treatment then nobody would need to save. Really! Are we so stupid we can’t design an economic system that negates the need to save? Of course we can, it’s just that people throughout history who have considered themselves as being superior to others, have implemented a system which maintains that relationship. Worst of all, we have stupidly allowed it to survive.

This theory may well apply to the financial markets, which are making the price of UK debt more expensive on the grounds it is likely to expand dramatically.

Ed: They make it more expensive by lowering interest rates? Mmmm! But of these ‘markets’; they certainly aren’t the kind of markets I would like to see – and lets stop calling them ‘markets’ – giving them the veneer of respectability – and call them for what they really are… Gambling dens. Given my way these ‘markets’ would be scrapped. Only those markets in harmony with catering for the needs of ordinary people proper markets should be allowed to survive. 

But the psychology of individuals may be different.

In the first place, some people may not be able save much whatever their expectations. Money that goes to pensioners surviving on the state pension, for example, may go straight into spending.

And some psychological research suggests that people do not “discount” very effectively in the long term.

So we may be under-estimating the attractiveness of spending even in the midst of a recession.

Returning to the single source, ‘murder hole’ of Keynesian ‘philisophy’, telling you not to save in the first place. I wonder if anyone has heard of aspect of psychological that identifies ‘if a lie is repeated often enough, it will be believed’. Notice the ‘may’. This is the ‘guilt free’ clause published so that then people believe this article and spend for the ‘good of the economy’ whatever that means (it usually means ‘help rich people stay rich’) then when they have no money and even more debt the BBC can say ‘Well, we didn’t say it WOULD help’.

This, at least, has to be the government’s hope as it embarks on its most audacious economic U-turn since Labour came to office in 1997.

Ed: Here we go again. “Government” and “hope”. Do these BBC journo’s take psychology lessons? Given the reference to it in the article and the fact this ‘economic financial system’ (read: ‘economic scam’) as well as political system does rely on fear and mind games, you would have to say ‘yes, they probably do’.

My opinion is: If the BBC are advocating spend, then its probably better not to. The BBC Newz department is simply an outlet for government spin, Newz heavily overlaps with finance of course, and I think it’s safe to say from a cursory examination of (particularly)modern government policy, they don’t give a damn about you – in fact they want to screw you, unless of course you happen to be of reasonale wealth. In that case, they love you.

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