Faut-il avoir peur de la grippe porcine, demande le docteur Bertrand Buchs.

Le Blog Doc MediaPart – Paris,France, 28 Avril 2009, Par bertrandbuchs
http://www.mediapart.fr/club/blog/bertrandbuchs/280409/faut-il-avoir-peur-1

Il faut avoir très peur.

Marteljea, dans une réaction, fait une intéressante analogie avec la thalidomide .

La thalidomide a été développée par Rhône-Poulenc (c’est le prestigieux Sunday Times qui le disait en février de cette année), puis a été autorisée dans tous les pays limitrophes de la France, mais pas en France.

Grünenthal apparently purchased the trade name of the drug – Contergan – and therefore probably the substance itself, from a French firm, Rhône-Poulenc, which was under Nazi control during the war years.
(From The Sunday Times
February 8, 2009
Thalidomide ‘was created by the Nazis’
http://www.timesonline.co.uk/tol/life_and_style/health/article5683577.ece

http://www.thalidomide.ca/fr/informations/visages.html
France : non autorisée

L’alerte à la thalidomide a été sonnée par un congrès de neurologues à Duesseldorf les 30 avril – 1er mai 1960.

Les autorités qui avaient autorisé la thalidomide n’ont rien fait et on laissé l’initiative à Gruenenthal, le fabricant de la thalidomide, pour retirer la marchandise du marché le 27 novembre 1961, càd 18 mois plus tard.

Moi-même, je suis monstre softenon, nom commercial de la thalidomide en Belgique, né en Belgique en février 1962. Quand ai-je été conçu ?

C’est grâce aux héros de Gruenenthal que nos Maitres n’ont pas pu instituer un état policier complet.

Nos Maitres ont maintenant crée la grippe porcine.

Leur seul intérêt est de savoir quelles actions montent et quelles actions dégringolent.

Ils veulent donner un nouveau souffle à leur tentative d’instituer un état policier.

Il faut avoir très peur.

Ivo Cerckel
ivocerckel@siquijor.ws

Chindia versus Japamerica

The ideal interest rate for the US of A economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.  (1)

Exchanging dollar reserves for gold reserves is therefore an integral part of the new gold wealth-reserve concept.

The Chinese believe in and are prepared to collaborate with FreeGold.
They believe in and are prepared to collaborate with the antithesis of the dollar unit.

Hence, the Chinese want more gold metal and proportionally less dollar units on the asset side of their balance sheet.

Hence, India, the planet’s largest gold owner (more than 10,000 metric tonnes), will also collaborate with this gold wealth-reserve concept.

By arguing that the International Monetary Fund (IMF) should sell its entire gold reserves to raise money for the least developed countries (2) in order to make its sister organisation, the World Bank, more credible (3), India is trying to have its gold wealth-reserve freely re-evaluated.

Contrast this to Japan where the bureaucrats are panicking because there remain high uncertainties over the outlook for the stabilisation of the global financial system as well as the economy. (4)

For the (mercantile) producers and owners of genuine wealth, the new world reserve currency cannot possibly be constituted by or of a basket without FreeGold.

The (mercantile) producers and owners of genuine wealth are no longer prepared to let the dollar regime determine (what is) the value of their wealth.

Hence, they want gold metal on their balance sheet

They want this with a view to future freely floating valuations of gold.

Gold as a universal collateral is indeed the only possible answer to a world where debt is the order of the day.

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Fed study puts ideal US interest rate at -5%
By Krishna Guha in Washington
Published: April 27 2009 03:06 | Last updated: April 27 2009 03:06
http://www.ft.com/cms/s/0/37877644-32c9-11de-8116-00144feabdc0.html
SNIP
The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.

(2)
India and China want IMF to sell its $100b gold
Apr 15 2009 2305 hrs IST , New Delhi
http://www.mydigitalfc.com/news/india-and-china-want-imf-sell-its-100b-gold-897
SNIP{
India and China may press for the sale of the entire gold reserves of the International Monetary Fund (IMF) to raise money for the least developed countries.

(3)
Make World Bank more responsive, credible and relevant: India
27 Apr 2009, 0435 hrs IST, PTI
http://timesofindia.indiatimes.com/World/US/Make-World-Bank-more-responsive-credible-and-relevant-India/articleshow/4452896.cms
SNIP
WASHINGTON: India on Sunday called for making the World Bank a more “responsive, credible and relevant” organisation noting that the world body
should reflect the “changing dynamism of global economy and the evolving weights of developing economies”

(4)
Japan revises growth forecasts sharply lower
Reuters TOKYO, April 27
http://www.ft.com/cms/s/0/c4342f9c-32e2-11de-8116-00144feabdc0.html
SNIPS
The government cut its forecast for Japan’s economy to shrink 3.3 per cent in the year to next March instead of its previous estimate of zero growth on Monday as the world’s second largest economy remains in the grip of the worst recession since World War Two.
The government also sharply lowered forecasts for industrial output and exports, which have been the main drag to the economy.
+
The Cabinet Office said downside risks remain. ”High uncertainties remain over the outlook for the stabilisation of the global financial system as well as the economy,” the Cabinet Office said in a report.

Im Jahre 1957, haben die Aufsichtsbehörden in einigen Ländern Contergan auf den Markt erlaubt.

30. April/1. Mai 1960:
Auf einem Neurologen-Kongress in Düsseldorf berichtet der Neurologe Ralf Voss über die Nervenschädigungen, die seinen Beobachtungen zufolge durch Thalidomid verursacht werden. (1)

Die Aufsichtsbehörden haben nichts getan.

Es war der Firma Grünenthal, der Hersteller von Contergan in Stolberg, Aachen, die die Initiative zu ergreifen hatte um Contergan vom Markt zu nehmen

26. November 1961:
Die Zeitung “Welt am Sonntag” veröffentlicht den Artikel “Missgeburten durch Tabletten? Alarmierender Verdacht eines Arztes gegen ein weitverbreitetes Medikament”. (1)

27. November 1961:
Die Firma Grünenthal kündigt in einem Telegramm an das Düsseldorfer Innenministerium an, ihre Thalidomid-Präparate im In- und Ausland sofort aus dem Handel zu nehmen.  (1)

Ja, ich weiß,
Grünenthal wusste vor dem 1. Mai 1960, dass Contergan wurde eine teratogene, d.h., dass Contergan Monster schafft.

Aber
die Aufsichtsbehörden wusste, dass es nach diesem Zeitpunkt auch.

Ivo Cerckel
ivocerckel@siquijor.ws

(1)
Chronik des Conterganfalls
Tragödie – Katastrophe – Skandal?
http://www.wdr.de/themen/gesundheit/pharmazie/contergan/chronik.jhtml?rubrikenstyle=contergan

Quantum Gravity

I concluded my previous post
Chinese Mercantilism?
Posted by Ivo Cerckel on April 25th, 2009
http://bphouse.com/honest_money/2009/04/25/chinese-mercantilism/
arguing that if FreeGold were to be further postponed, the liquid dollar-regime will only be further marginalised, that at the end of the day, the regime will then fall into disuse, that tomorrow, it will no longer possible to compromise between the dollar and gold and that overthrowing the dollar regime will no longer even be necessary.

By leveraging everything, the dollar regime has lost all proportions.

China, on the other hand, is prepared to submit to the discipline of FreeGold, thereby displaying no fear whatsoever to mark gold to market (value) and not to the pirated model of 40 something dollar like the US of A Treasury.

Piracy seems to have two, and maybe more, meanings on this planet.

Trademark piracy refers to infringement of intellectual property rights. Naval piracy to attacks on merchant ships.

Before Isaac Newton, gravity meant only serious mood or a quality of heaviness.

Newton’s laws did not take into account the relativistic effects that become apparent when speeds approach the speed of light or when extreme gravitational fields exist. Albert Einstein’s theory of special relativity, which was based on the idea that the laws of science should be the same for all observers, no matter how they are moving, in the absence of gravitational phenomena, was therefore an exception to Newton’s laws.

Einstein’s theory of general relativity explains the force of gravity in terms of the curvature of four-dimensional space-time.

Einstein’s classical physics, including his theory of general relativity, explains what happens when bodies are in free fall (like the US of A dollar).

This theory of general relativity is incompatible with quantum mechanics and especially with Werner Heisenberg’s uncertainty principle which says that
it is not possible to be exactly sure of both the position and the velocity of a particle;
the more accurately one is known, the less accurately the other can be known.
Einstein’s theory of general relativity concerns gravity and objects on large scales, quantum theory concern the electromagnetic force and the strong and weak nuclear forces on microscopic scales.
In the present state of science, the incompatibility between quantum theory and Einstein’s theory of general relativity, the issue of quantum gravity, remains.

Stock markets are rising again,
they are thus on their way again to defying …. gravity.
But if they defy gravity, they are again on the quantum level.

And, at that level, says Heisenberg,
it is not possible to be exactly sure of both the position and the velocity of a particle;
the more accurately one is known, the less accurately the other can be known.

I concluded my other post of yesterday
Catch-22 versus G-7
Posted by Ivo Cerckel on April 25th, 2009
http://bphouse.com/honest_money/2009/04/25/catch-22-versus-g7/
by arguing that
[if] the US of A dollar is reduced to its intrinsic value, Gresham’s Law (“bad money drives out good money”) is no longer applicable because the US of A government will no longer have the opportunity to intervene in monetary matters in order to debase the intrinsic value, zero, of that piece of paper, called the US of A dollar Gold, hiding in oil, will then again reign supremely. – end of quote

The planet’s finance bureaucrats are meeting in Washington this week-end for what they call the spring (tell that in the planet’s southern hemisphere) meetings of the International Monetary Fund (IMF) and World Bank.  (1)

International Monetary and Financial Committee (IMFC), the policy steering committee of the IMF, bureaucrat Youssef Boutros-Ghali is saying that we have serious problems.

European Central Bank (ECB) bureaucrat Christian Noyer says that even Americans agree there should be no competitive devaluations.

US of A bureaucrat Geithner says there is an exchange rate problem.

Eurozone bureaucrat Jean-Claude Juncker is saying that the situation in forex markets is relatively calm.

All those bureaucrats seem to know that the US of A dollar, the planet’s reserve currency, is in the process being reduced to its intrinsic value.

To repeat the conclusion of my second post of yesterday, the first one I quoted today:
If FreeGold were to be further postponed, the liquid dollar-regime will only be further marginalised. At the end of the day, the regime will then fall into disuse. Tomorrow, it will no longer possible to compromise between the dollar and gold and overthrowing the dollar regime will no longer even be necessary.

Monetary piracy will soon be a thing of the past.

At that moment, leverage will have disappeared, proportions will have been re-instituted and what Roger Penrose calls the “vexed” issue of Quantum Gravity will be solvable. (2)

Ivo Cerckel
ivocerckel@siquijor.ws

(1)
Comments from officials at IMF/World Bank meetings
Sun Apr 26, 2009 1:16am BS
http://uk.reuters.com/article/mideast/idUKTRE53O2GB20090426?sp=true
world finance officials attending
SNIPS
IMFC CHAIRMAN YOUSSEF BOUTROS-GHALI
“We have serious problems. We are taking very serious measures, but things are beginning to look up. Carefully, cautiously, we can say there is a break in the clouds.”
+
ECB’S CHRISTIAN NOYER ON COMPETITIVE DEVALUATIONS:
“We must avoid strategies of competitive devaluation.”
“I think there is a real agreement on that… We know the Americans are totally on that line.”
“I think we have not seen any, that’s why I say everyone agrees.”

GEITHNER ON IMF’S CURRENCY SURVEILLANCE ROLE:
“The IMF needs to ensure going forward that the distribution of global demand is far better balanced. In this regard, it is also critical that the IMF exercise greater candor and clarity on exchange rate issues and follow through on the 2007 Surveillance Decision.”

EUROGROUP HEAD JEAN-CLAUDE JUNCKER ON CURRENCIES:
“It’s a subject that wasn’t raised in the meetings but I talked to various parties and I think the situation on forex markets is relatively calm. We are satisfied with the levels.”

(2)
Roger Penrose, “The Road to Reality: A Complete Guide to the Laws of the Universe”, London, Jonathan Cape, 2004, p. 1048

My other interpretations of physics come from
Stephen Hawking, with Leonard Mlodinow, “A Briefer History of Time”, Bantam Press, 2005

Yes, also Giancoli (2007, 6th ed.) and Cutnell & Johnson (2007)

and not to forget
Stan Gibilisco , “Physics Demystified’, McGraw Hill, 2006 int’l ed.

the liquidity argument of the dollar regime

The Chinese want the world to know that they are increasing their gold reserve in order that the product (the “fruit”) of their wealth be consolidated with a view to further fructifying.

US of A dollar versus gold

US of A dollar versus China et alt.

Who’s the real Mercantilist? China or Geithner?

Who’s the real Keynesian? China or Geithner?

Gordon Brown?

The dollar-regime is promoting itself with the argument that the liquidity of the regime would be in sharp contrast with the non-liquidity of mercantile gold.

The regime is arguing that one can get rid of dollars and dollar derivatives “ad nutum” (instantaneously), whereas, says the regime, one would not be able to find a buyer for gold when one wants to sell it.

This has always been the argument of the advocates of a dollar standard instead of a (mercantile) gold standard (hoarding).

Yes,
the Mercantilist theory, which formed the foundation of economic thought from about 1500 to 1800, says that countries should export more than they import and, if successful, would receive the value of their trade surpluses in the form of GOLD [capitalisation mine] from the country or countries that ran deficits.
(John D. Daniels and Lee H. Radebaugh, “International Business”, Addison Wesley, 1995, 7th ed., p. 168)

Ir is true that
the main concern of the Mercantilists was with the so-called balance of trade and the alleged need of governments to secure an excess of exports over imports, as the means of increasing the quantity of money in a country that lacked its own gold and silver mines.
(George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois: Jameson Books, 1998, 3rd ed., p. 6)

It is also true that
the concern of the Mercantilists with increasing the quantity of money led them to anticipate the essential fallacy of Lord KEYNES [capitalisation mine] in the last century, namely, that it is necessary for government to intervene in the economic system for the purpose of stimulating “demand” and “employment”.
(Reisman, loc. cit.)

But,
in order to keep this dollar liquidity alive, the dollar regime must continuously proceed to further devaluation.

And, adds Dr Reisman on p. 527,
Mercantilism bears a close similarity to the ideas of KEYNES and his followers in its concern with finding a source of economic “STIMULUS” and its fears that in the absence of such stimulus, the economic system must languish in employment and poverty. Its views on the ability of a larger quantity of money to reduce interest rates are also indistinguishable from those of KEYNES. [all capitalisations mine]

Now,
WHO’S THE REAL MERCANTILIST?

China or Geithner?

WHO’S THE REAL KEYNESIAN?

China or Geithner?

Gordon Brown?

Yes,
further devaluation is completely opposed to Mercantilism.

Indeed,
in Mercantilism, the wealth one has acquired is being consolidated in or through constant purchasing power.

Contrast
this to the dollar barrel in which more and more holes are appearing.

To the extent
that more dollars are being poured into the barrel,
to that extent
more holes are appearing in the barrel.

To the extent
that more dollars are being poured into the barrel,
to that extent
the échappatoires, the escape holes, must be larger to allow for the liquidity of the regime.

It is absurd to keep mercantile gold away from this.

If the dollar regime were to decide to keep mercantile gold away from the barrel, the dollar and its regime would self-destruct.

Who will indeed be prepared to keep dollars cerckeling around if their loss of purchasing power accelerates with the cerckeling around?

Gold advocates want the product (the “fruit”) of their wealth to be consolidated with a view to further fructifying, not with a view to further cerckeling around.

This is what the Mercantile Chinese want the world to know about their increasing gold reserve.

Gold exists INSIDE the liquid and continuously devaluating fiat system
THEREFORE
this wealth consolidator will always remain tradable.

Since the dollar regime has outrageously mismanaged the dollar liquidity, the regime has no other option but to accept the mercantile-gold competitor.

If FreeGold were to be further postponed,
the liquid dollar-regime will only be further marginalised.

At the end of the day, the regime will then fall into disuse.

Tomorrow, it will no longer possible to compromise between the dollar and gold.

Overthrowing the dollar regime will no longer even be necessary.

Ivo Cerckel
ivocerckel@siquijor.ws

The value of the US of A dollar is changing fast
hence, China is accumulating gold

“Our” stock markets are currently involved in a bear rally. Our Masters have now decreed that the financial crisis is over.

For our Masters, there is indeed no alternative than that the crisis is over because if the crisis is not over, then our Masters will face immediate natural political death.

Manipulation of confidence (confidence in what?
in the world reserve currency, of course) becomes then of the utmost importance.

This is a Catch-22, or a situation which presents the illusion of choice while preventing any real choice, for our Masters. (1)

The present financial crisis is the end-game of a failing system.

We are indeed in a systemic financial crisis. This crisis is due to the phenomena of irredeemable digital liquidity and fraudulent fractional-reserve banking. (2)

But mystics are people who surrendered their mind at its first encounter with the minds of others. (3)

Hence, whereas the International Monetary Fund (IMF) was gloomy earlier this week (4), the mystics of the Group of Seven Leviathans (G7) were cautious, but optimistic on Friday, and were pointing to signs that the worldwide slump is easing, and predicting a rebound by later this year. (5)

Also on Friday, gold prices rose modestly after China said it had become the world’s fifth largest holder of bullion after secretly increasing its reserves by 75 per cent to 1,054 tonnes since 2003. Gold added 0.9 per cent at $910.20 a troy ounce, taking its gain over the week to 4.9 per cent. There was talk that China’s announcement could prompt a broader reassessment of gold’s role as a reserve asset by other central banks. “The move does send a positive signal to the market, re-igniting gold’s relevance as a monetary asset,” said Suki Cooper of Barclays Capital. (6)

“The financial crisis means the US dollar’s value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage”, said Hou Huimin, vice general secretary of the China Gold Association. (7)

If the US of A dollar is reduced to its intrinsic value, Gresham’s Law (“bad money drives out good money”) is no longer applicable because the US of A government will no longer have the opportunity to intervene in monetary matters in order to debase the intrinsic value, zero, of that piece of paper, called the US of A dollar (8)

Gold, hiding in oil, will then again reign supremely.

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Catch-22 is a term coined by Joseph Heller in his novel Catch-22, describing a set of rules, regulations or procedures, or situation which presents the illusion of choice while preventing any real choice. In probability theory, it refers to a situation in which multiple probabilistic events exist, and the desirable outcome results from the confluence of these events, but there is zero probability of this happening, as they are mutually exclusive.http://en.wikipedia.org/wiki/Catch-22_(logic)

(2)
http://bphouse.com/honest_money/worthless-digital-liquidity-and-fractional-reserve-banking-are-fraudulent-%E2%80%93-let-the-system-collapse-now/

(3)
http://aynrandlexicon.com/lexicon/mysticism.html

(4)
IMF’s Strauss-Kahn says crisis still far from over
Thu Apr 23, 2009 11:41pm BST By Lesley Wroughton
http://uk.reuters.com/article/topNews/idUKTRE53M4BL20090423?feedType=RSS&feedName=topNews
SNIP
WASHINGTON (Reuters) – IMF Managing Director Dominique Strauss-Kahn said on Thursday the global economic crisis still had “long months” to go before it was finished.

(5)
From The Times
April 25, 2009
Mood at G7 meeting is cautious, but optimistic
Gary Duncan, Economics Editor, in Washington
http://business.timesonline.co.uk/tol/business/economics/article6165660.ece
SNIP
Finance chiefs from the Group of Seven leading economies last night boosted optimism that the worst of the global recession may well be over, pointing to signs that the worldwide slump is easing, and predicting a rebound by later this year.
In a cautious assessment, the G7 finance ministers and central bank governors emphasised that risks of further decline persisted, but concluded: “Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilisation are emerging. Economic activity should begin to recover later this year.”
G7 officials remain wary of prematurely declaring victory over the worst global downturn since the Second World War. They renewed pledges to take whatever actions were necessary “to accelerate the return to trend growth”.
The relatively upbeat G7 conclusion was clouded by dire developments in Europe and the US that suggest there is more economic pain to endure.

(6)
News of Chinese buying ‘re-ignites gold’s relevance
By Chris Flood
Published: April 24 2009 23:34 | Last updated: April 24 2009 23:34
http://www.ft.com/cms/s/0/f02eba70-30fa-11de-8196-00144feabdc0.html

(7)
China reveals huge rise in gold reserves
BY Chris Flood in London
Published: April 24 2009 09:31 | Last updated: April 24 2009 12:32
http://www.ft.com/cms/s/1d23f80c-30aa-11de-bc38-00144feabdc0,s01=1.html
Text no longer available because it was
Last updated (again): April 24 2009 19:06

(8)
Gresham’s law reads: “Bad money drives good money out of circulation”.
Taken at its face value Gresham’s law violates the general rule of the market that the best methods of satisfying consumers tend to win out over the poorer.
Actually, Gresham’s law should read: “Money overvalued by the State will drive money undervalued by the State out of circulation”.
Gresham’s law thus says that when government intervenes in monetary matters IN ORDER TO DEBASE CURRENCY, bad money drives out good money.
(Murray N. Rothbard, “Man, Economy, and State – A Treatise on Economics”, Auburn, Alabama: Ludwig von Mises Institute 2001, (originally published 1962), p. 783)

firewall with gold reserves

In order to restore confidence and prosperity, while preventing inflation, Jean-Claude Trichet, president of the European Central Bank, will divulge his non-standard measures (mesures non-conventionnelles – not agreed upon?) on 07 May 2009.

What does that mean “non-standard”?

One possible interpretation is derived from the fact that under a gold standard, gold is standard money, fiduciary media are non-standard money.  (1)

Gold is the inflation hedge par excellence.

FreeGold means that the currency should have a Gold component and a paper component, but should put a “firewall” between the two so that Gold’s valuation as a wealth-preserving asset cannot be pulled lower by the inevitable inflation of the paper component of circulating currencies. It is the marking to market (MTM) of Gold reserves which should provide that wall. (2)

Yes, Gold is also an industrial metal, but only slightly. Gold is mostly a monetary metal.
Copper, on the other hand, is just another commodity, like wheat. (3)

Ambrose Evans-Pritchard has therefore been widely criticised this week for his column in The Daily Telegraph “A ‘Copper Standard’ for the world’s currency system?” in which he was arguing that China is switching its  monetary reserves not into gold, but into copper. (4)

Perhaps, if “we” have also a copper-based currency, the FreeGold firewall (5) with gold will be even stronger?

Right, FreeGold means that the currency should have a Gold component and a paper component and a copper component is not a Gold component. The currency would then have three components.

Is copper a fiduciary medium?

Just brainstorming …

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Fiduciary media are transferable claims to standard money payable by the issuer on demand and accepted in commerce as the equivalent of standard money but for which no standard money actually exists.
The larger part of our money supply today consists of fiduciary media in the form of CHECKING DEPOSITS.
VERSUS
STANDARD MONEY = money that is NOT itself a CLAIM to anything further. It possesses ultimate debt-paying power, in that when it is received, no further claim to be paid is present.
Under a gold standard, standard money is gold. Any paper money that exists is a claim to it.
Under a system of irredeemable paper money – fiat money- the irredeemable paper money is standard money.
(George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois: Jameson Books, 1998, 3rd rev. ed.,  p. 512)

(2)
A Single Currency for the GCC
http://bphouse.com/honest_money/a-single-currency-for-the-gcc/

(3)
Harry Browne, “The Economic Time Bomb”, New York, St Martin’s Press, 1989, p. 188

(4)
A ‘Copper Standard’ for the world’s currency system?
Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
By Ambrose Evans-Pritchard
Last Updated: 6:54PM BST 15 Apr 2009
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
SNIPS
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the “Bancor,” floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities — a broader base than the gold standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of “credit-based” excess that has brought the global finance to its knees
+
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1 percent, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a copper standard as a gold standard. UNSNIP

(5)
Only USD or EUR – oil relationship?
Thursday, March 13, 2008
http://knowledgeperson.blogspot.com/2008/03/only-usd-or-eur-oil-relationship.html
SNIP
The secret to all of this is in the “Legal Tender laws”. Allowing gold to be used as a Legal Tender,,,, “for the settlement of all debts public and private”,, but changing international law such that no form of debt can force it’s payment in gold! This opens a one way street for gold and a two way street in fiat currencies. No one will lend gold because they cannot force it’s return in the courts, thereby making gold a physical only international currency. Yet, on the other hand, we all must borrow in this modern world and currencies will be the only avenue for this. Creating a demand (and added value) for them in addition to general use demand.
The first thought many will have is that everyone will just buy gold to make debt payments, driving out fiat currencies. But remember, if you have debts they will be in currency settlement only. One will weigh the cheapest form for repayment! Gold in this atmosphere will be completely free to trade, become extremely expensive and stay that way. Not to mention that it’s sale as a commodity (outside it’s money use) on the private level will be well taxed.

Harry Browne says that a bank earns its living by taking money in from depositors, and lending the money to its customers or investing it,
that the bank’s gross profit is the difference between the interest it earns and the interest it pays,
and that because a bank generally can earn a greater return on loans than on investment,
it will lend out as much of its money as it dares.
A bank fails when it doesn’t have enough cash available to pay the depositors who want to withdraw their money – even if the bank’s assets are worth enough money to pay everyone eventually.
Matching maturities, LIQUIDITY, the availability of enough cash (or assets that can be converted to cash immediately) to honour all withdrawal requests is the key for a bank, says Browne. To be liquid, a bank doesn’t need to have all its money in the vault.
But it does need to arrange its loans and investments to allow for the promises that the bank has made to its depositors.
The virtue of “matching maturities” – matching one year loans to one year deposits and so on – is a lesson taught in basic college finance classes.
And it is simple common sense. But unfortunately, American banks don’t do business that way. But a bank with mismatched maturities is however bank an illiquid bank, says Browne (1)

Browne does not seem to discuss money creation by banks.

Money creation by banks was outlined by Ludwig von Mises and the outline is still being refined by his student Dr George Reisman.
http://www.georgereisman.com/blog/

Here’s how I would revisit fractional-reserve banking. (2)

Reisman says that it is impossible to understand the extent to which the government has increased the quantity of money without understanding how the government has encouraged the creation of money by the private banking system. Therefore, says Reisman, we must deal here with the question how the government has encouraged the existence of what Ludwig von MISES calls FIDUCIARY MEDIA which set up money and debt like a house of cards or row of dominoes that any breeze can knock over.

Mises gives the name of MONEY SUBSTITUTES and not that of money
to those objects that are employed like money in commerce
but consist in perfectly secure and immediately convertible CLAIMS to money.

For Mises,
MONEY CERTIFICATES = those money substitutes that are completely covered by the reservation of corresponding sums of money.

For Mises,
FIDUCIARY MEDIA = those which are not covered in this way.

Fiduciary media are transferable claims to standard money payable by the issuer on demand and accepted in commerce as the equivalent of standard money but for which no standard money actually exists, says Reisman.

The larger part of our money supply today consists of fiduciary media in the form of CHECKING DEPOSITS
VERSUS
STANDARD MONEY = money that is NOT itself a CLAIM to anything further. It possesses ultimate debt-paying power, in that when it is received, no further claim to be paid is present.
Under a gold standard, standard money is gold. Any paper money that exists is a claim to it.
Under a system of irredeemable paper money – fiat money- the irredeemable paper money is standard money, says Reisman,

One quote, because this may become important in our later analysis, Mises, “Human Action”, third revised edition, p. 434
The term credit expansion has often been misinterpreted. It is important to realize that commodity credit cannot be expanded. The only vehicle of credit expansion is circulation credit. But the granting of circulation credit does not always mean credit expansion. If the amount of fiduciary media previously issued has consummated all its effects upon the market, if prices, wage rates, and interest rates have been adjusted to the total supply of money proper plus fiduciary media (supply of money in the broader sense), granting of circulation credit without a further increase in the quantity of fiduciary media is no longer credit expansion. Credit expansion is present only if credit is granted by the issue of an additional amount of fiduciary media, not if banks lend anew fiduciary media paid back to them by the old debtors. (3)

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Harry Browne, “The Economic Time Bomb”, New York, St Martin’s Press, 1989, p. 10
Many banks have a smaller net worth than you do.
If they tried to pay of all their depositors, they would have little money left/

Browne, p. 47
A banking crisis would touch you much more directly than the other crises.

Browne, pp. 49 – 50
A bank earns its living by taking money in from depositors, and lending the money to its customers or investing it.
The bank’s gross profit is the difference between the interest it earns and the interest it pays.

A bank’s assets are its cash holdings, its outstanding loans (the money owed to it by borrowers and its investments.)
its main liabilities are its outstanding deposits  – money it owes to its depositors.

Because banks generally can earn a greater return on loans than on investment,
it will lend out as much of its money as it dares.
a bank may tie up nearly all of its assets in loans – if it’s confident that only a few of its depositors will want to withdraw their money on any day or in any short period.
A bank fails when it doesn’t have enough cash available to pay the depositors who want to withdraw their money – even if the bank’s assets are worth enough money to pay everyone eventually

Browne, p. 50
§ MATCHING MATURITIES

for a bank, LIQUIDITY is the key
the availability of enough cash  (or assets that can be converted to cash immediately) to honour all withdrawal requests

To be liquid, a bank doesn’t need to have all its money in the vault.
But it does need to arrange its loans and investments to allow for the promises that the bank has made to its depositors.

Browne, p. 51
§ IN PRACTICE
The virtue of “matching maturities” – matching one year loans to one year deposits and so on – is a lesson taught in basic college finance classes.
And it is simple common sense.

But unfortunately, American banks don’t do  business that way
-    this is done in order to increase banks’ profit margins

But a bank with MISMATCHED MATURITIES is an ILLIQUID bank.

(2)
My sources are

Ludwig Von Mises, “The Theory of Money and Credit”, Indianapolis, Liberty Classics, 1980, (the original second German-language edition of this book was published in 1924), pp. 65  and p. 155

Ludwig von Mises, “Human Action – A Treatise on Economics”, Chicago, Contemporary Books, 1966, (originally published 1949), 3rd. rev. ed., p. 432 – 434

George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois: Jameson Books, 1998, pp. 511-513

(3)
Ludwig von Mises, “Human Action – A Treatise on Economics”, Chicago, Contemporary Books, 1966, (originally published 1949), 3rd. rev. ed., p. 434

Investors are worried that the financial system is going to collapse and that US of A banks do not have sufficient capital to bear the consequences of their previous mistakes.

To reassure investors that this is not the case, the US of A Treasury is now subjecting banks to “stress tests”. The results of this exercise – to determine whether the banks have enough money to stay afloat in a range of scenarios – are due to be announced by the end of the month, says an editorial this week in the Financial Times. (1) The bureaucrats of the US of A government want to avoid a disorderly situation in which the stronger banks advertise the results of their stress tests while weaker banks resist doing so. This could further stigmatise the weaker banks and lead to an additional loss of CONFIDENCE. (2)

This was the late European Central Bank president Dr. Willem F. Duisenberg in May 2002:
What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value.
We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the CONFIDENCE that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.
The euro, probably more than any other currency, represents the mutual CONFIDENCE at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. (3)

Dr Nouriel Roubini has already drawn our attention to the fact that the actual macro data are already worse than the more adverse scenario for 2009 in the stress tests. So the stress tests fail the basic criterion of reality check even before they are concluded. (4)

We can have the utmost confidence that the stress tests are a further exercise in deceit by the bureaucrats of the US of A guv’mint.

Nobel Prize winner Joseph Stiglitz points out that some of that guv’mint’s advisers have close ties to Wall Street. Hence, that guv’mint’s plan to fix the US of A banking system have been designed to help Wall Street rather than create a viable financial system. And hence, we can have the utmost confidence that that guv’mint’s plan to fix the US of A banking system is destined to fail. (5) (6)

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Capitol capital
Published: April 16 2009 19:32 | Last updated: April 16 2009 19:32
http://www.ft.com/cms/s/0/b3dffd90-2ab0-11de-8415-00144feabdc0.html

(2)
Jobless put new slant on stress tests
By Krishna Guha in Washington
Published: April 17 2009 22:00 | Last updated: April 17 2009 23:01
http://www.ft.com/cms/s/0/ca1f86da-2b77-11de-b806-00144feabdc0.html

(3)
International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002
http://www.ecb.eu/press/key/date/2002/html/sp020509.en.html
http://bphouse.com/honest_money/2008/09/03/

(4)
Stress Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded
Nouriel Roubini’s Global EconoMonitor Apr 13, 2009
http://www.rgemonitor.com/roubini-monitor/256382/stress_testing_the_stress_test_scenarios_actual_macro_data_are_already_worse_than_the_more_adverse_scenario_for_2009_in_the_stress_tests_so_the_stress_tests_fail_the_basic_criterion_of_reality_check_even_before_they_are_concluded

(5)
Nobel Prize winner Joseph Stiglitz says Wall St ties threaten bank-rescue plan
Nobel Prize-winning economist Joseph Stiglitz has warned the US bank-rescue plan is likely to fail as its architects are either in the “pocket of the banks or incompetent”.
By Telegraph Staff
Last Updated: 12:35PM BST 17 Apr 2009
http://www.telegraph.co.uk:80/finance/financetopics/financialcrisis/5169582/Nobel-Prize-winner-Joseph-Stiglitz-says-Wall-St-ties-threaten-bank-rescue-plan.html
Nobel Prize winner Joseph Stiglitz criticises bank-rescue plan
SNIP
Mr Stiglitz, who won the Nobel prize in 2001 said the Troubled Asset Relief Program, which will see the Government purchase assets and equity from financial institutions was not large enough to recapitalise the banking system and had been compromised because some of President Obama’s advisers had close ties to Wall Street.

(6)
Stiglitz Says White House Ties to Wall Street Doom Bank Rescue
By Michael McKee and Matthew Benjamin
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahnPchOxZMh8&refer=home
SNIP
April 16 (Bloomberg) — The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

Au chapitre 2 “Chari’a et institutions financières islamiques“ de l’ouvrage “La finance islamique à la française : Un moteur pour l’économie, une alternative éthique” (Paris, Secure Finance, novembre 2008)  édité par Jean-Paul Laramée, Abdel Maoula Chaar écrit aux pages 54 et 55 que la finance islamique dénie toute valeur intrinsèque à la monnaie, que la monnaie n’a d’autre utilité que de faciliter les transactions en servant d’étalon de mesure et que cette interprétation a une très forte connotation aristotélicienne, Aristote ayant, selon notre auteur, développé la thèse de la stérilité de la monnaie.

Or,
Ubada ibn as-Samit a rapporté que le Prophète Mohamed (paix et prières soient sur lui) a dit:
L’échange de l’or contre de l’or, de l’argent contre de l’argent, de la monnaie (en papier) contre une monnaie de la même nature, du blé contre du blé, des dattes contre des dattes doit se faire en parfaite égalité et séance tenante. Quiconque donne un surplus ou l’exige tombe dans l’usure.
(Rapporté par Mouslim dans son Sahih).
Aristote écrit au Livre V, Chapitre V, lignes 1133a33- 1133b1, de son Ethique à Nicomaque qu’
il y aura réciprocité, quand les marchandises ont été égalisées de telle sorte que le rapport entre cultivateur et cordonnier soit le même qu’entre l’oeuvre du cordonnier et celle du cultivateur.

Sans valeur intrinsèque, la monnaie de la finance islamique favorise les transactions monétaires déconnectées de l’économie réelle ou à des fins purement spéculatives, ce qui est interdit. (Dominique de Courcelles, “Avant-propos”,  in: Laramée,  (éd.), op. cit., 19, p. 27)

Sans valeur intrinsèque, la monnaie de la finance islamique favorise l’usure.

Rappelons qu’en tant que religion, l’Islam concerne la pratique et non la théorie pour arriver à une perfection. Cette perfection, la soumission à Dieu par appel à la miséricorde et à la bienveillance de Dieu, permet d’arriver à la purification du caractère de l’individu et à l’établissement de la justice dans la société humaine. L’Usul al-fiqh, ou les racines de la loi, énoncent la compréhension exacte, ou fiqh, de la chari’a, ou de la voie pratique à suivre pour arriver à cette perfection en observant les principes du droit, et non les principes de la finance, islamique. Ce n’est qu’en n’octroyant la qualification de monnaie uniquement à une chose possédant une valeur intrinsèque, que la pratique de lutte contre l’usure puisse débuter.

Ivo Cerckel
ivocerckel@siquijor.ws