Familiar with Economics, Mises, Anthony Sutton, C. Quigley?

[TheBlackSheep]

I'm really not familiar with economics, it's one of my biggest blind spots I think. I have a question, I'm reading through Tragedy and Hope and according to Quigley, the international bankers were highly in favor of a gold standard for currency. I am pretty sure that at leas Ludwig von Mises advocated that, and I'm not sure becuase I haven't read the books, but it seems like Anthony C Sutton might have written books advocating the gold standard.

Am I wrong about these things? Has something changed in the banking/international banking industry. I will continue to read on and see if it is mentioned in Tragedy and Hope, but since this book is huge and the amount of information available out there is endless, and because I have a restless curiousity, I was wondering if anyone could give me some info on this.

[stefano]

I don't know if bankers would really have been in favour of staying on the gold standard. They might have said they were, like most economists, but there are greater opportunities for profit under a fiat system, because money supply grows so much faster and the banks handle the money. It's possible that they only realised this once the new system was in place - Nixon's abandonment of the gold standard was essentially a debt default forced by a sluggish economy and the enormous costs of the Vietnam War and 'Great Society' programmes.

Nixon Shock

Bretton Woods system (quite long)

[TheBlackSheep]

Thanks for the input, I'll look into the links you sent.

[drstrangelove]

I'm really not familiar with economics, it's one of my biggest blind spots I think. I have a question, I'm reading through Tragedy and Hope and according to Quigley, the international bankers were highly in favor of a gold standard for currency. I am pretty sure that at leas Ludwig von Mises advocated that, and I'm not sure becuase I haven't read the books, but it seems like Anthony C Sutton might have written books advocating the gold standard.

Am I wrong about these things? Has something changed in the banking/international banking industry. I will continue to read on and see if it is mentioned in Tragedy and Hope, but since this book is huge and the amount of information available out there is endless, and because I have a restless curiousity, I was wondering if anyone could give me some info on this.

Doubt you're still around but i can answer this, as i was perplexed by exactly the same thing after reading the book. Why would those who benefited from a gold standard work to destroy it?

And Tragedy & Hope was censored likely to remove the explanation for this. As Quigley explains it in the final lecture he ever gave before retirement, and death shortly after.

You can listen to it here: http://www.carrollquigley.net/audio/Car ... ecture.mp3

Below are sections of the transcript for the above recording, where he explains exactly how the international banking industry adapted to a post gold standard inflationary environment, and how it benefited them:

To-day we have a totally different kind of a crisis, much worse. For one thing, it is an inflationary crisis. You can see that. The reason is that banks have changed totally their rôle. Back in that period banks had a creditor status, i.e., money was owed to them. Creditors like low prices. Inflation injures creditors, because it make the value of the money owed to you greater [actually, lesser]. You have to understand these principles, either through economics or by from what you've read in my book Because of the fact that bankers were deflationary here, they held only credit and any organization they controlled held only credit. For example, they controlled insurance companies. Insurance companies invested their money often entirely in bonds They controlled various other banks. These various other banks invested their money only in bonds.

Now, this then is a totally different system. All the universities were, endowments were in bonds, not in stock. Not in equity. They set up foundations. Foundations were invested in bonds. If you are in bonds, then you want deflation, because you are interested in the value of money. But if you leave bonds, and cease being a creditor, and become an owner, then you have everything that you want in, what you call, equity. And if you are in equity, you want inflation. To-day all the banks, all of the endowments of the old universities, and all of the holdings of the Rockefellers are in equity.

But what I'm concerned with, however, is not the fact that middle class people bought mutual funds and get [just] part of the returns from the shares that the corporation bought using the money to pay for this. What I'm concerned with is: who votes those shares? Who voted XXXX. Because that is what you gave up. How conveniently XXXX they voted XXXX knock out. They voted for them, no matter what they're doing. But these same banks vote the shares. This means that if you are a very, very big shot banker, you will not control just the corporations that you have invested in. You control those corporations that you can vote the shares that are being held by the trustee. Now, who is the trustee? The trustee is the trust company that was given control of the shares by this corporation and who guarantee the payments will be made. And these are the biggest four or five commercial banks in this country, including Morgan Guaranty, First National City, Chase Manhattan, it's the three of them, and a couple of others. So they can control every significant corporation in the United States. Thousands of people. Now, now savings are part of.... Oh, suppose the government has not balanced the budget? This means that the government is putting into savings, in spending here more than it's taking from people in taxes there. They have to get that from the banks. When I drew the diagram here, I put the banks up here, but it became too complicated. In other words, if the government needs money it has to come down to these bankers and borrow from the banks.

The result is that the whole system to-day is inflationary. It's inflationary because that is what the small group of people who really dominate the system want. And they want it because they are in equity. Now, the real reason they want that is not just because they value their equity so much, every piece of land they own, every security they own and control, including XXXX. It's that, is that having pushed credit to the absolute limit in everything they control, including everything in the United States, to-day every significant entity in the United States, and that includes corporations, is technically bankrupt. By "technically bankrupt" I mean that their assets are less than their debts. Now, you know a lot of these. And they'll always tell you it's crookedness. Well, sure, it's crookedness. Even the ones that didn't go bankrupt are run crookedly. But you know Boeing, Penn Central, New York City, Lockheed, Pan American (I said that, didn't i?), in England, Rolls Royce, Chrysler of England, which is now pulling out of England. All these are bankrupt. They are all bankrupt because they borrowed more money than they possible could ever pay [back]. All right, what you do is exactly what the Germans did in 1923. That is, you deliberately inflate. If you can double prices, you cut the burden of your XXXX debt in half. Because if you double prices, you can sell, if you're making Quaker Oats,.... If you double the prices,.... And they certainly did double it. Now it's 110. That's $1.10 for two pounds of Quaker Oats to-day. Even though you can buy it in health stores for 29 cents a pound. But they got some nice XXXX, you see. And so forth. It has gone up from 59 cents to $1.10 in little over a year, they doubled it. So this means, they sell, if they sell the same amount of [Quaker] Oats, they take in twice as much money. And it means that the burden of their debt has been cut in half.

Anyway, for anyone who reads this, what is going to happen is that once the current US stock market bubble collapses, all the stimulus credit which has been hiding in it will flood into the commodities market and the US dollar will begin a period of hyperinflation. This period will extend until the dollar is worthless and the $28 trillion in US debt is wiped away. A currency reset will then take place and Central Banking Digital Currency will be fixed to the US dollar at a disparity of something like 1 CBDC: 1,000,000,000 US dollars or something like that. All new credit will cease in US dollars and will only be available in CBDC. All debt in US dollars, mostly government bonds, will be paid off easily assuming people still want to collect them. Of course they won't because that process will cost more than the debt is worth.

Of course no one can believe this will happen until it does. So until then I acknowledge it's fair to view me as a wackjob. But was it not strange that Wiemar Germany enjoyed an economic boom in the early 1920s, during a period they were supposedly burdened by reparation payments? And is it not also strange we enjoy an economic while right now, in the early 2020s, during a period we are supposedly burdened by economic repercussions of a global pandemic.

History is destined to repeat itself.



As above, So below.

[Agent Orange Cooper]

Except now we have Bitcoin.

Buy. Bitcoin.

[drstrangelove]

As long as people understand what bitcoin is it's a good speculative asset. The people who think it will replace gold or become a universal exchange currency don't know who own the fiber cables beneath the sea or the satellites above us. The money power would brick the internet before they would allow a decentralized and anonymous exchange currency become universal. Of course they would never have to. They are currently tapering bitcoin mining, which services its ledger, through ESG policy. Essentially, the infrastructure bitcoin relies on is not decentralized and is controlled by a very exclusive group of people who have an interest in Central Banking Digital Currency.

That said, this doesn't mean you can't make money on bitcoin. I bought one back when it was a grand and have happily sold it since for much less than it is worth now. It was a good investment.

[Agent Orange Cooper]

I'm one of those people. I believe it will replace gold and then some - it will become the primary store of value asset on the planet (displacing bonds and real estate). The money power doesn't have a choice - it's already working. They would have to brick the entire global power grid at once, which isn't going to happen. They can try to regulate it through environmental policy (nation-based) and spin silly FUD narratives to taint its reputation while they push CBDCs and shitcoins, but they don't 'control' it and never will.

[drstrangelove]

The two problems as i can see are:
1) Public-key cryptography can be broken by quantum computing. And while quantum computing can be inversely used to increase encryption algorithms to protect against this, this new technology won't be able to the public until it's been in use by agencies beholden to the money power for quite a while.
2) As the government cracks down on bitcoin mining, the incentive for miners to facilitate transactions decline. The incentive for miners will remain as long as the price of bitcoin raises, but the portion of miners who can circumvent the government crackdown will decrease. if mining can't be done legally, operations will need to be more sophisticated, raising the barrier to entry for those operating the ledger, all while the velocity of transactions it is meant to be validating rises.
It seems to me bitcoin will be prevented from scaling into a universal currency because the money power will choke the supply of ledger validators mining the coins.

Anyway, I'm not arguing people can't become millionaires or that bitcoin won't disrupt the system, as it currently is. And I like the optimism found in the idea there is still a chance for decentralized community orientated control. So I think you are justified in your belief.

[Elvis]

Quigley wrote:

if the government needs money it has to come down to these bankers and borrow from the banks.

This is backwards; in the modern system, banks borrow from the government.

A bit surprising that Quigley gets this wrong—but generations have been encouraged in this misperception and I think Quigley is just stuck in gold standard thinking here. I've got a stack of college macro textbooks here that give the same wrong explanation (some are better than others); it's a problem because the textbooks didn't keep up with the real-world changes.

(The primary dealer banks who buy all the Treasuries aren't really lending to the government, they're just shifting reserves into bond accounts. The dollars never leave the bond account.)

I read Tragedy and Hope, years ago, and I want to look it over again in the light of what I've absorbed since the first read. it's a unique, remarkable book, and Quigley is a giant, if IMO he's a little short in some areas.



And drstrangelove — welcome to RI!

[drstrangelove]

The bonds are mostly sold onto middle class pension funds, so the banks and government borrow from middle class savings. Tragedy & Hope leaves this part out, for whatever reason. Quigley says it was suppressed. The only genuine first edition copy I saw available was going for $15,000 a while ago.

Anyway if you listen to the lecture i linked he explains what he believes happened after the gold standard. And it looks like he was spot on. What they developed was a Custodian Banking system. Top five banks these days have $140.7 Trillion(yep with a T) in assets under custody. The middle class own all the stock but the banks vote the proxy on it to control boards. I researched it to see if it was true. It is.

[Elvis]

he bonds are mostly sold onto middle class pension funds, so the banks and government borrow from middle class savings.

You're describing the "loanable funds"/"fractional reserve" model which doesn't exist, at least not today. Banks don't loan out deposits; deposits become a component of reserves, which cover bank-to-bank payments (e.g. when checks clear). When a bank creates a loan, it's creating new money. Private savings do not fund lending. A bank can lend with no depositor savings whatever; it simply borrows any needed reserves from the government (via the central bank).

We see then, how in mainstream (macro)economics, the relationship between the public and private sectors has been flipped.

The "loanable funds" myth leads straight to the myth that the government has to "borrow" money from savers or banks to get money. Now who would want us to believe that? (Answer: the credit/finance industry, and stingy politicians.)

The main reasons the federal government sells bonds is to 1) drain excess bank reserves created by new federal spending, and 2) to set the interest rate floor.

It's mostly accounting gimmicks, largely nowadays to obscure the simple fact that the government creates money. It's getting harder and harder to conceal that fact, so the idea of "printing money" comes out as some horrible prospect that will destroy the value of money. It's all "printed' money.


This 2014 Bank of Englad bulletin points out how bank lending works, and how the wrong model persists in teaching and textbooks; it works the same in the US; bold emphasis theirs (arrow is mine).:

https://www.bankofengland.co.uk/-/media ... conomy.pdf

Money creation in the modern economy

In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

The reality of how money is created today differs from the description found in some economics textbooks:

- Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.

- In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.

And, here is a good exploration of the points in the BoE bulletin, originally from Washington's Blog:

https://billtotten.wordpress.com/2014/0 ... read-myth/

The Bank of England Corrects a Widespread Myth

a 1960s Chicago Federal Reserve Bank booklet entitled “Modern Money Mechanics” said:

[Banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.

Would someone please explain this to Larry Summers?

---

As to the custodian banks, that deserves some unpacking. That's $140 trillion in assets, I assume; I wonder what the breakdown is.

[drstrangelove]

I'm talking about The Fed government bond buying program. The Treasury borrows from The Fed and they create the money and give it to the government. The Fed then auctions the government bonds off and they get bought up by pension funds, which are made up of middle class retirement savings.

Middle class retirement savings are used to purchase government bonds via mutual funds. Which means the government is being funded by the middle class. But this is an aside to what Quigley was talking about. He was saying, in this lecture not the book, that the middle class had been made the creditors of society post gold standard, because inflationary monetary policy was bad for creditors. He broadly speaking about the separation of ownership from control.

Most people don't know about this system. But it's easily observable once you know what to look for.

It's explained in further depth here: https://thehotstar.net/controlownership.html

[Elvis]

The Treasury borrows from The Fed and they create the money and give it to the government. The Fed then auctions the government bonds off

This is not quite correct; first, the Fed is the government, created by and accountable to Congress. Second, the Fed does not participate in Treasuries auctions, and doesn't do the auctioning on behalf of Treasury. The Fed may subsequently choose to buy some bonds from the dealers, for monetary policy purposes (not to fund the Treasury); it holds those bonds on its balance sheet, it doesn't turn them over to Treasury. The interest collected by the Fed is passed to Treasury. There's a (stupid) law prohibiting the Fed from directly funding the Treasury.

Numbers in the Treasury General Account come essentially from tax receipt and bond sale numbers. They're just numbers.

Middle class retirement savings are used to purchase government bonds via mutual funds. Which means the government is being funded by the middle class.

The second sentence doesn't follow from the first sentence. It doesn't matter who buys government bonds—they simply don't fund the government.

Given the generations of bullshit economics teaching, it may seem counter-intuitive, but the government funds the private sector, not the other way around.

As one economist put it: "The government doesn't need your money; the government needs you to need its money."

Consider that the private sector's net savings used to buy Treasury bonds comes from federal deficit spending. There is no other source. The government is collecting back some of what it previously spent, chiefly to optimize bank reserves and set interest rates.

There's a smart proposal recommending that the Treasury stop selling bonds altogether, and let the Fed issue bonds for its monetary policy aims (high employment and low inflation). Australia does this now; the Aussie central bank website states explicitly that the bonds are not for raising government revenue.

---

The systems of how corporations are controlled is a worthy topic, for sure. One prescription I like is abolishing the private equity industry.

One problem is the massive over-financialization of debt—repackaging debt as more debt. 2008 GFC anyone?


The whole system of US government bonds is a patchwork agglomeration of past policies, policy go-arounds and series of experimental evolutions. In one sense it works smoothly, but really it's a kabuki dance with a lot of extra steps that help obscure the true nature of the money system and "protect us from ourselves."