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What Is Money?

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What Is Money? - Page 5 Empty Debunking Saville's latest article

Post  Shelby Thu Apr 26, 2012 5:14 am

I will email him this. This was a very sloppy article, not up to his usual insightful quality.

What Is Money? - Page 5 Apr242012_1

He should have noticed that copper (and other commodities) have been getting cheaper throughout history. This is because mankind makes machines and computers and becomes more efficient and thus commodity production becomes a smaller and smaller part of the total economy. Duh! And he is supposed to be an economist!

What Is Money? - Page 5 Milhouse071707c

Compare to gold. Gold's price doesn't have anything to do with the cost or efficiency of mining, as Gold is the world's money supply (and so its price should increase relative to commodities):

What Is Money? - Page 5 Milhouse071707b

What Is Money? - Page 5 Apr252012_4

Note, the above charts are inflation-adjusted, which proves the govt's CPI is a lie, as they show copper remaining a constant portion of the economy over time (which doesn't make sense, as we knowing for example that farming is a much smaller % of the economy in developed nations where most of the global GDP is produced):

What Is Money? - Page 5 183-copper-inflation-adjusted


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What Is Money? - Page 5 Empty End of Finance?

Post  Shelby Wed Oct 17, 2012 10:47 am

Shelby replied:
Andrew asked:
Assuming you are correct, or partially correct, what would the economic devastation be? A crash like in the USA?

Also, what would be a way to “short sell” china and prepare for the crash?

First, this is not an investment blog.

I will offer my opinion. It is very risky to bet short over any near-term timeline that gives great leverage, because it appears to me (speculation from limited data) that China is increasing subsidies to the export sector (more loans so they can operate longer at thin or negative profit margins), allowing the real estate bubble to reignite to some perhaps limited extent, and injecting massive short-term liquidity via record setting $40+ billion reverse repos. And some (even a quote of the incoming Chinese Premier) think the data out of China is not accurate. So if the market participants are all fooled by this (and even China's state investment arm and state companies are buying their own shares), then short bets on the market can expire before any crash is realized.

No matter what China and the market do over the next year or two, the Professor has reasoned that ultimately the difficult adjustment process will come. The only question is does it come by proactively beginning the adjustment process and a (hopefully more) muted level of suffering over a longer period of time, or will it be an implosion. Professor Pettis has warned and I agree history has shown that if imbalances exacerbate, eventually it can lead to an avalanche rebalancing.

Also I think China's Yuan peg sustained the western debt bubble and vice versa, thus there is likely to be a global contagion implosion. The USA remains some what stronger *diversified* economy, because even with its huge real estate bubble, still has 70% consumer share of the GDP (which is the mirror imbalance to China and hints at the complicity), and thus the USA could rebalance by eliminating non-essential consumption and/or removing the friction of the welfare state. This would probably implode China, and thus Germany, etc.

Thus I think there is only one investment option to surely protect a store-of-value, that is not gambling. It is physical gold (and silver) held in your own possession. Whether the politics chooses to exacerbate the imbalances (and thus the negative real interest rates), or choose debt deleveraging crash, gold maintains its purchasing power in both scenarios , and it is the only asset that is not simultaneously someone else's liability (i.e. there is no counter-party promise involved as with all other assets, even non-allodial titled real estate). Some incorrect logic out there argues that gold is something else, such as a protection against inflation. Gold is a protection against negative real interest rates, and a protection against debt deleveraging deflation (the crash of gold in 2008 was because gold is still price-fixed by futures markets until that bankrupt dollar financial system fails...this requires a very long explanation). See prior comments regarding the monetary nature of gold:

Unfortunately, gold is also an enslavement mechanism, because its supply can only grow at 2-3% per annum. Thus it overly rewards "burying capital in a hole", which is the antithesis of prosperity (since 2% is a natural population growth rate, unless we destroy future demographics...again antithesis of prosperity). It gives all the power to "he who holds the gold, makes the rules". So society will always eventually debase any gold standard, and convert it to a fiat, e.g. the futures market in gold now. But during the period of gold discipline, the power will rest with those who control most of the 150,000 tonnes above ground. And certainly that is not the masses. Do I need to define slavery any other way?

I just want to make it clear that I don't view a gold standard as a panacea, but in the short-term, unless you have an active growth investment, then the safest passive store-of-value is gold (until this global storm is over).

If this global contagion is real, imagine the potential chaos. In my opinion, all forms of financial investments will thus be vulnerable to failure. We've already twice had the $billions failure (theft!) of futures brokerage accounts, and in a worsening global crisis, capital controls are possible.

Gold is not the way to prosperity. It represents the old industrial and agricultural world economy where huge levels of capital were predominant over the value of the knowledge creation. This is changing now. Apple has (had) a larger mcap than Exxon-Mobile. A couple of guys in their garage with a couple of computers, can launch a $millions mcap startup software company. Knowledge capital is now outpacing hard resources capital in terms of value creation.

So my thesis is that the trap of the gold standard and the debt deleveraging new world order, will only catch those who don't shift out of the old world economy. With this in mind, I have stopped all speculation in the financial markets, and have refocused myself back on creating another startup software company (as I had done in the past).

I would urge everyone to look for investments that are knowledge based. There are 7 billion people we need to employ. Manufacturing will move towards automation. The industrial revolution is over. The 3D printer is here:

This is probably my last post. I have stopped speculating about when China (and the world) will run out the rope of increasing debt. I have wasted far too much time on it, but it at least it has affirmed what I realized 25 years ago, that it was much more efficient and freedom-oriented for me to be able to create software with a computer, than become an (electrical or otherwise) engineer whose productive output has to be capitalized.

My dream is for this to be the end of finance, and for knowledge based production to exceed the paper value creation of wallstreet. I dream to see a world valued based on intelligence and art, not on gambling, passive investment (i.e. physical savings), theft, deception, leverage, and the "Iron Law of Political Economics":

Of course, there is no way all 7 billion people can make that shift, thus its only a dream overall although I dream (very far-fetched) there could be two (mostly) orthogonal economies.


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What Is Money? - Page 5 Empty The Chicago Plan, Hitler tried that, China is trying it too

Post  Shelby Wed Oct 24, 2012 3:52 am

I must thank you. I learned something new about Hitler's regime:

Also the comments at the link on that article are very interesting and in line with my view of how the energy has been suppressed by the cartels.

What we really have going on is always a mix of people trying to fight for freedom and the banksters exploiting human nature to their ends.

Hitler's experimentation into state-socialism failed. We can claim that Germany was more prosperous for a few years by printing its own money, just as we can claim China is more prosperous now by printing its own Yuan and directing it top-down to infrastucture.

But we see how it always ends, because such activity is not economic. The bankers bided their time while Hitler created a social liability, then when the time was right, they used their leverage over oil to force Hitler into aggression, because Hitler had to keep the socialism apparatus funded with cheap energy. Yeah okay we can say that Stalin had threatened Poland, but in reality these states were competing for resources, because they had promised socialism.

It is always the result that socialism, e.g. universal healthcare, results in war and failure.

We can say that Hitler was fighting the bankers, but he could only win the hearts of the people, by promising them more than the bankers were. So he increased the socialism and misallocation of capital. Remember my recent unpublished article, wherein I explained the math that top-down systems always fail. The center of the bell curve will never understand it, so society is destined to repeat the same outcomes over and over.

Of course in the early stages, misallocation via top-down control appears to be prosperous. It is only in the latter stages (e.g. what China is approaching now) where the failure sets in, as I had explained in my unpublished article.

Perhaps Hitler's hand was forced sooner than it would have been otherwise, if Germany hadn't been so dependent on external oil. But even if he had oil internally, the socialism would have eventually imploded on him any way.

So I still stick with that universal health care created the mindset that the weak are to blame for not being able to give away for free, that which is not free. And thus the purging of the weak in Germany, which morphed to purging the Jews.

Excellent article! I learned a lot. Hitler was definitely a megalomaniac, but he thought he had a better way. Of course, socialism is always failure, no matter what the intentions.

I know you are really searching for a complete solution-- i.e. if we can just kill all the bankers, then humans won't want socialism. Sorry it will never be that way, because of that bell curve of ignorance that persists.

We had better accept this bell curve we live in. It is nature.

Time for me to move back to producing, you know that activity I used to do before I got off on this nonsense about trying to fix the world. The world can't be fixed.

We produce, we live, we die. Accept it.

Thanks for helping complete my education on this.


> I believe you are misjudging it. In my view most money they spent was
spent productively.

Never is top-down spent money the most productive, but it often takes a long time for this to become clear.

In 5 years or less, we can talk about what happened to China after it is proven because they have collapsed.

The vital infrastructure typically is the least wasteful, e.g. the autobonne. But it is more wasteful than what a free market would have done with the same human capital. The politics and type of economy we see today in Germany was molded and shifted course somewhat by those infrastructure in Weimer era. And Germany is a failed state right now (depend on China and PIIGS imports).

This will all be more proven in a few more years.

It is silly for us to argue about it. We will know the outcome in a few years at most. Let's just wait to see.

> It was not the healthcare that killed them but
> the war effort.

Agreed, but the healthcare socialism (and its economic failure)
contributed to the development of the mindset for purging the weak.

When we promise healthcare to all, we socially get concerned about the cost of the weak.

It fits into the German psychology that men can improve and perfect the world. The German philosophers all exhibited this trait, and I can even see it in the Germans I meet here, they think they are better than everyone else. And Germans are known to write down an inventory of every item they buy for their household. I remember there was a time in the 1980s (when my WordUp software was published in Germany) when Germans did not want to adopt color computer screens for publishing, because they felt the B&W was more purely focused on the content and the essence of the layout.

Hitler was an artist. He was dreaming of a perfect world where the superior race can do art and be prosperous. His dream was not all that far from my dream with an Inverse Commons where we can focus on knowledge creation and art. (software is an art).

The difference I hope is that I am not a megalomania in extremis. If ever I find I am top-down controlling my creation, I am likely to be repulsed and conflicted. I abandoned CoolPage in 2002 when sales were still $10,000 per month, for large reason that I couldn't technologically find a way to make it more open and less proprietary (it doesn't import HTML due to the easy layout paradigm).

> War is always unproductive, even destructive and it
> was that that did them in financially in the later years.

Oh I agree. But they would have ended up a failed state any way, because Hilter fundamentally did not understand nature and economics. Top-down planning always ends up economically failed. Always. And you can try to rationalize that there has never been a test-case without the bankers meddling, but mathematically I am sure that is a strawman or red-herring.

I have explained it in my last two papers:,%20Rise%20of%20Knowledge.html

I don't expect you to agree with me, because you really want to believe that if we could wipe out the bankers, that we could reach some nirvana.

For some reasons, the Germanic cultures think that nirvana is possible with man.

It violates entropy. It is mathematically false. I would have to try to explain this mathematically better than I have. But for now, I have no time to do that.

Erik Verlinde is proving that everything in nature is emergent from entropy:

I find Erik's explanation in the following video makes it easier to understand.

> Of course the Jews will deny that forever, because Hitler's financial
model cannot be allowed to make school, then and now.

Bill Still of the Money Masters via fame, along with Karl Denninger, are promoting this "if the state can print its own money" school of thought.

The USA did during the Civil War apparently (the notes ended up worthless, but that is besides the point).

Any way, it will fail economically, because it is more top-down management of the economy.

There is no solution about money. And the reason is because money
represents passive capital and not active knowledge.

And thus I work on making knowledge a tradeable fungible unit in the Inverse Commons.

> Where would the
> money printers end up if each country started to print its own money?

They would wait for the economic failure of top-down money printing, and then they would be right back in business.

> Everything Hitler did must be demonized.

The bankers were probably helping him too, because they are smart enough to know that his model was doomed.

It is not as B&W as one might want to think.

> Of course, in the end his model was wrong too, because a government
doesn't have any business printing money.


Happy we could agree on that!

I was worried you were going to idolize centralized solutions.

> Money is produced by the
> people in the form of products and services. If counterfeit money is
printed, whether by Rothschild assholes or governments, it's still counterfeiting and theft.

Wow. We agree on a lot then.

Karl Denninger and I got in a very nasty argument in email (he was so nasty), because he believes government printing its own money is a solution.


>> > I believe you are misjudging it. In my view most money they spent was spent productively.
>>Never is top-down spent money the most productive, but it often takes a long time for this to become clear.
> That is pure theory. You have evidence for that?

Yes. Find one top-down managed economy that ever did not implode.

And don't use the persistent presence of bankers as an excuse.

You can see in Hitler's case that a top-down economy is not resilient against other forces.

Until you understand this concept, you will go in circles the rest of your life like a dog chasing his tail.

> I say in this case
> the private economy with honest money could not have done what Hitler did because the private economy did not have the overall view and political power.

Correct. A free market of autonomous actors would not have created that catastrophic failure that resulted.

But we don't have a free market ever, because of socialism, which always exists.

The only way to rise about it, is make knowledge a more higher value component of your individual life. Then you care much less about what the rest of this socialist world is doing. You become a more autonomous actor.

> The fact is that he turned a broke nation of unemployed into a boom economy within two years by buiding infrastructure, car plants, etc.

No he turned it into a disaster zone where everthing was flattened to the ground by 1944.

Not a resilient system.

There is unarguable. You can claim this and that (blame it on others, etc), but the fact is the result is the result.

Hard facts. Result is the result.

> There was work done for every mark that was issued.

I can employ 10 men with spoons to dig trenches.

> You have too many preconceptions that you take for granted.

I have a solid foundation in science, math, and physical historical evidence.

You will not be able to find one counter-example in all of recorded history.

Not one. Zero. None.

>>In 5 years or less, we can talk about what happened to China after it is proven because they have collapsed.
>>The vital infrastructure typically is the least wasteful, e.g. the autobonne. But it is more wasteful than what a free market would have
>> done
>>with the same human capital. The politics and type of economy we see
>> today
>>in Germany was molded and shifted course somewhat by those infrastructure in Weimer era. And Germany is a failed state right now (depend on China and PIIGS imports).
>>This will all be more proven in a few more years.
>>It is silly for us to argue about it. We will know the outcome in a few years at most. Let's just wait to see.
> Yes it is silly but you can't just throw whoppers around and expect to get away with it.

China will not be an exception. The same thing has always happened throughout recorded history.


I am going to try to stop talking about this stuff so I don't waste time that I could use for programming or being outdoors to prevent the insomnia that i get from being on computer too much.

So please lets not make a long debate.

You could argue that if the bankers hadn't been there, Hitler could have succeeded. You have no long-term proof and no instance in history to back that theory.

I can argue that top-down eventually fails and I have every instance in history as my proof.

The reason top-down fails is because it attempts to flatten the bell curve. It attempts to give to the center of the bell curve that which they could not get on their own.

So we push on building the autobonn and we are feeling like the economy is prosperous , because there is a lot of activity. But what we have done is violate nature, in that we've said that we can command all the people to be productive. But the fact of nature is a bell curve and the center is orders-of-magnitude less productive than the outer ends of the curve. So yes, we can temporarily command work for the center, but this is just wasting capital w.r.t. the maximum efficiency that could be obtained by giving most of the capital to outer ends.

It is a sad fact of nature, that nature does not want a equal distribution of anything.

So when ever you see widespread equality of prosperity, you will know there is massive socialism, and the economy is doomed to fail.

Sorry but this is fact of entropy. It isn't even a theory, since it is really observed fact throughout recorded history.

Disagree if you want. Any way, we've both got more important things to do than argue.


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What Is Money? - Page 5 Empty Gold standard is not an improvement

Post  Shelby Sun Jan 27, 2013 10:21 am

Okay here is the succinct argument I promised on why a gold standard is not sustainable and not an improvement.

Can you refute this?

JustSaying (Shelby) wrote:
@JAD there is an article on your blog claiming the US Treasury might not possess any unencumbered gold.

Ah the baiting of the soul with the "gold will save us" emotional trap.

History has shown that the stored value medium for money is always debased, regardless whether it is gold, paper, Tally sticks, electronic digits, etc..

An insoluble fact is that debasement is always assured with politics, because the costs of the voters' desires is obfuscated in the debasement of all citizens, instead of applied individually w.r.t. individual performance.

Don't confuse the desire to work and get paid, or to start a business and earn a profit, with the political promises made to voters. Don't confuse "economic value" with "I saw jobs, prosperity being created". Economic value is a network of feedback loops from investment followed by profit or bankruptcy. The more individually directed these investments are, the more chances of finding the profitable ones that fit the economic demand. The collective politics has an incentive (to earn votes) to invest in everything voters want, economic or not.

This insoluble power vacuum (that sucks in a leader who can make the political promises) can not be wished away just because it is repulses a person's emotions. There is no possible mechanism to remove it.

For example, some claim that Hitler and Lincoln or recently Iceland and China, took the power from the banking establishment and gave it to the citizens, by handing the control over the creation of paper money to the national treasury. Hitler and Confederate notes both debased their society by spending on uneconomic projects. China is doing the same now. Hitler initially made the people happy with lavish public works spending (e.g. the road network and health care), promising the people more than the economic value of the projects could sustain. When he could not get enough oil to sustain it, he was forced to expropriate via war in order to fulfill the collective social promises. That summary probably misses some complexities, but the essential point remains valid.

Since the masses don't hold most of the wealth, if the society enforces a strict gold standard, then the masses don't get what they want. This is why gold standards are always subverted by politics.

A strict gold standard would over time concentrate relative wealth from the consuming middle class to the wealthy, who save say 99% and consume 1% of their income. Politics demands debasement, because the rich concentrate wealth (with or) without debasement.

Some refer to the Byzantine era as an example of a sustainable gold standard. I have not studied the period intensely. Apparently gold was being imported into the economy by their trade surplus, so perhaps political promises were less attractive to citizens who were finding sufficient opportunities to be busy and prosperous. Unlike China's current situation, their trade surplus was not due to a mercantile policy of debasement of their currency, rather apparently due to some situational and technological advantages, e.g. their cannon spraying flaming oil on pirates. Further insight on this would be appreciated.

I posit the taxonomy of male social order types from PUA type theory applies to this power vacuum. I asserted that the alphas get their power from public politics and/or Theory of the Firm (corporate politics), with the lower order male types (betas, gammas, omegas) employing politics to fight back. They can band together with politics to fight the rich with political promises including Doublethink such as equality and social justice, which actually end up as debasement and plunder. The sigmas don't play the class warfare delusion, instead create technology to empower individuals.

Stored wealth is ephemeral and depleting. It should be this way, otherwise people become unmotivated to continue producing. The rate of growth of relative wealth of the rich decelerates as they grow richer and less in tune with the markets invested in, i.e. smaller things grow faster because of the fitness. I don't hate the bankers+politicians because I don't want to hate most people (i.e. the symbiotic borrowers+voters). Why hate what can't be changed? Why be bitter and perceive the glass as half-empty? The inspiring fact is that despite the booms and busts (and occasional resultant atrocities and wars) caused by the political promises, everyone gets wealthier over time. The cost of commodities is inexorably declining as a relative share of the global GDP. In 323 B.C. iron was a precious metal. Technology, innovation, and art (i.e. knowledge) is the savior of mankind.

Atrocities repulse all of us. Religion is not the only cause. To entirely prevent them, we would have to somehow eliminate political promises and the Doublethink they create. Unfortunately I don't see how such a goal is possible or congruent with evolution.


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