Crime of The Central Bankers –

Using the Power of the State to Mix the Real Economy with the Casino.

   -published on josuterdotcom, October 20, 2016

Social hierarchies and division of labor are essential to modern life. Our power as humans cannot be separated from the ability to create social hierarchies since, as individuals, we cannot do much aside from subsistence farming or hunting. The glue that bind us together includes language and the ability to create stories, some of which hopefully will reflect reality.   The other key ingredient is currency.   If we destroy the currency we destroy our ability to interact in a reasonable and kindly manner. Without a stable currency things fall apart.

Imagine what early currency might have been. A farmer and herdsman trade a bushel of apples for a goat. The apples are not yet ripe, so the farmer writes an IOU to the herdsman. This IOU is a form of currency.   It not only represents the value of the apples but is also a sign of the integrity of the agreement between two people. Suppose the owner of this IOU now makes many more copies of the IOU. It not only changes the value of the original IOU but possibly destroys a trusted relationship.   Counterfeiters of such IOU’s would not be looked upon kindly by the community.

Nineteenth century political scientist Max Weber observed that the nation-state is that entity which has gained a monopoly on the [legitimate] use of physical force. In modern society, central bankers and congress are responsible for maintaining the integrity of the currency and loss of this integrity harms our relationships with each other. This power of the state is what the Fed and other Central Banks use to enforce financial laws and regulations. They can do this by printing money or forcing interest rates to zero to save institutions who have bet too much.

Central Bankers misuse our trust by allowing a mixing of the real economy with the casino economy, then using the power of the state to enforce this connection.   Evidence for this connection is seen in the sky high Price to Earnings ration (PE).   A reasonable PE might be 10 or 15 to 1. Ten dollars invested in a growing business represented on Wall Street should earn one dollar more over a reasonable period of growth. But PE ratios are now as high as 60 to 1. No one expects that money to be paid back merely by growth of an honest business. Money invested at this level is made simply by staying ahead of other investors. Real and healthy investments are forced to support gambling.

Casinos have their separate economies with bouncers at the door who can spot persona non grata, clients who have not paid their gambling debts. Everyone who goes into a casino knows this.   The risk to the real economy is that this casino effect has been allowed to become entangled and mixed up with the casino economy. Congress, the Fed, and other Central Bankers use the power of the state to enforce this charade when they print money to bail out the banks. Retirement and honest investment funds will be brought down along with a casino that crashes because it is impossible to separate the two lines of investment.