Yes, Mr Trichet, the system of worthless digital liquidity and fraudulent fractional-reserve banking is abnormal.
We are in a systemic financial crisis. This crisis is due to the phenomena of worthless digital liquidity and fraudulent fractional-reserve banking. Our Masters are not planning to replace these phenomena by gold-backed money nor by a full-reserve system. No, they are accusing the past oil prices, which were little higher, of having destabilised the world economy.
1.
The European Central Bank (ECB) is considering printing money to “solve” the crisis. (1)
I suppose that this cannot possibly lead to inflation and that that’s why on Thursday 04 December 2008, the ECB nevertheless lowered “its” interest rates with 75 basis points to 2.5 percent.
At the question and answer session, following the decision, ECB president Jean-Claude Trichet was asked whether the ECB was considering intervention to boost confidence [in the system of worthless digital liquidity and fraudulent fractional-reserve banking]. (2)
He replied to other questions that the ECB has to be active and expeditious [at the point of a gun] but that the market situation to which it has to react is subject to permanent changes.
Trichet does thus only react to the problem of the moment. He is not at all interested in solving the problem once and for all by addressing its cause. The existing system of worthless digital liquidity and fraudulent fractional-reserve banking must be saved/preserved at all cost.
2.
It was, for instance said Trichet, bad news for inflation and growth when oil and commodity prices went up. It is important, he added, that oil and commodity prices are now at a more reasonable level. This provides for the automatic stabilisation of the global economy. We need automatic stabilisers to ensure the normal functioning of the money market and loan market, said Trichet.
In chapter one of his 1946 book “Economics in One Lesson”, Dr Henry Hazlitt states the lesson as follows: the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups. http://jim.com/econ/chap01p1.html (3)
Whereas economic textbooks teach that the price of a good is the result of the price level at which supply and demand meet, for Trichet, this discovery process of the “reasonable” price of oil can only function as an automatic stabiliser if the price is low.
As a Reuters analysis by Christopher Johnson put it on Wednesday 03 December 2008:
Low energy prices squeeze investment in the oil industry, reducing future supplies. They discourage energy saving and they destabilize countries dependent on oil exports, making oil in the future more likely to be expensive and even more volatile.
Perhaps most important of all, low energy prices stifle investment in alternative energy, deepening dependence on oil and other hydrocarbons and increasing greenhouse gas emissions. (4)
Trichet only looks at the short-term consequences of the low oil price for one group.
Trichet looks only at the short-term consequences of the low oil price for the consumer.
3.
Subsequent chapters of Dr Hazlitt’s book apply the lesson (the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups) to different subjects of economics.
Chapter XXIII applies the lesson to “The Mirage of Inflation”. http://jim.com/econ/chap23p1.html
The chapter argues, p. 170, that inflation may bring benefits for short time to favoured groups, but only at the expense of others and in the long run, it brings ruinous consequences to the whole community. It leads to OVEREXPANSION of some industries at the expense of others.
When inflation collapses or is brought to a halt, the misdirected capital cannot yield an adequate return and loses the greater part of its value.
Yet the ardour for inflation never dies, says Hazlitt p. 171. It would almost seem as if no country is capable of profiting from the experience of another and no generation will learn from the suffering of another. It is because inflation confuses everything that it is so consistently resorted to.
END OF QUOTES FROM HAZLITT
Instead of addressing the systemic causes of the crisis, instead of addressing the phenomena of worthless digital liquidity and fractional-reserve banking,
our Masters are planning confusion by injecting money in some industries thereby expanding some industries at the expense of others.
In the coming weeks, ALL effects of decades of maladministration by our Masters will appear on stage, one by one. And every time, our Masters will applaud by throwing money at the symptoms (and by “printing” digital liquidity in order to achieve this).
As Trichet put it on Thursday:
The ECB will do all it can to put [the system of worthless digital liquidity and fraudulent fractional-reserve banking] back on its feet and achieve the normal functioning of the money market and loan market, but Trichet conceded that we have to wait and see whether the measures we enacted will work.
How could they work? The crisis is systemic. The measures only vaguely deal with the symptoms.
Trichet concluded that the situation (thus also the low price of oil?) is abnormal. He thus did not say that the circumstances were exceptional.
Yes, Mr Trichet, the system of worthless digital liquidity and fraudulent fractional-reserve banking is abnormal.
Ivo Cerckel
Siquijor, 06 December 2008
NOTES
(1)
ECB cuts to 2.5pc and mulls “printing money”
The European Central Bank has slashed interest rates by three-quarters of a point to 2.5pc in the boldest move since the launch of monetary union and hinted at revolutionary action to head off a severe slump next year as the economic crisis ravages the car, steel, and machine tool industries.
By Ambrose Evans-Pritchard
Last Updated: 9:17PM GMT 04 Dec 2008
http://www.telegraph.co.uk/finance/economics/interestrates/3551387/ECB-cuts-to-2.5pc-and-mulls-printing-money.html
SNIPS
“Tensions have increasingly spilled over from the financial sector to the real economy,” Jean-Claude Trichet, the ECB’s president, said. He added: “Global and euro-area demand are likely to be dampened for a protracted period of time.”
+
The Maastricht Treaty prohibits the ECB from injecting stimulus by purchasing the government debt of the eurozone’s fifteen states debt – a method known as “monetizing the deficit”, or more crudely as “printing money”.
But it can achieve the same effect by mopping up sovereign debt, mortgage securities, or even company debt on the open market, as the Fed has already begun to do. At the moment the ECB accepts some of these assets as collateral in exchange for loans, but it has not yet hit the atomic button by buying them outright with its own freshly
(2)
Transcript of the questions asked and the answers given by Jean-Claude Trichet, President of the ECB, Lucas Papademos, Vice-President of the ECB, and Guy Quaden, Governor, Nationale Bank van België/Banque Nationale de Belgique
http://www.ecb.int/press/pressconf/2008/html/is081204.en.html
SNIPS
We have also to take into account that it was very bad news that the prices of oil and commodities were going up and up as they did. It was very bad news for inflation, it was very bad news for growth, because it had a depressing influence which was considerable. Now, when the same prices are going down, it is good for inflation because we are back to much more appropriate price levels for commodities and oil.
+
it is very important that oil and commodity prices are at a much more reasonable level. This is extremely important because this is one of the automatic stabilisers that we have at the level of the global economy and at the level of its various components, including the euro area economy. So, everything that permits this market to function as smoothly as possible is welcome.
(3)
Henry Hazlitt, “Economics in One Lesson”, New York: Arlington House Publishers, 1978, 2nd ed. (first ed. published 1946 by Harper and Brothers)
(4)
Cheap oil: short-term good, long-term dangerous
Wed Dec 3, 2008 5:55am EST
By Christopher Johnson – Analysis
http://www.reuters.com/article/idUSTRE4B22QM20081203?pageNumber=1&virtualBrandChannel=0