Inflation Colonization
interest rates, bail-ins & the system change djinni
In this video, I explain why inflation is really dilution and your house is not worth more, your money is worth less. I begin with dramatic and personal illustrations of inflation—the hospital bill when I was born, my college scholarship and a whopping windfall inheritance from my grandmother. I give examples from my book, How to Dismantle an Empire, on how the interest rate affects the price of a house and how they fluctuate it for the bankers' benefit. I read passages from my book on how a bond rating sunk Cyprus. And I answer the question: if a djinni gave you one system change you could make, what would you wish for?
At the end, I’ll add links to some excellent recent articles: Ellen Brown on bank bail-ins and quadrillion derivative risk; vintage Matt Ehret on bail-ins and Cynthia Chung on Japan as forerunner; CHD on Richard Werner and QE; Mathew Crawford’s three-part series on Why Would Silicon Valley Be Ground Zero for Banking Centralization?; James Corbett on AM WakeUp where he strategizes decentralization; and Emmanuel Pastreich’s five lectures on Money Is No Mystery and the Silicon Valley Circus. But you have to wait so you don’t click away too soon!
In going through some old letters, I found a packet of papers sent by my dad. One of them was the hospital bill for my birth, back in the dark ages of 1957. The day rate for the room was $11. Nurse, $3 a day. Delivery room $16. Intravenous something-or-other $10. The whole bill for a 5-day stay was $117, of which the insurance paid $75 and my parents paid $42. At the bottom of the page my mom wrote, “and you were worth every penny.” ;-)
Exhibit 2: my college scholarship of full tuition, room and board for $2400 a year. The same college on dinky little 5th & Olney of Philadelphia (we ain’t talking Ivies) is now $50K a year. I know because, as a scholarship kid, they hit me up (futilely) for donations. From my book, I read a commencement address that Tom Englehart says he’ll never be asked to give. Some of his points are that the average tuition went up 1,120% from 1978 to 2015, 70% of students have debt and the average debt has doubled.
Exhibit 3: my grandmother died when I was in high school and I was the beneficiary for her life insurance, which came to $345. They held it until I was 18 but assured me that it would get 5% interest a year. At the time she purchased the life insurance, that was a lot of money. By the time I got it, not so much. And now?
What this shows is that you can scrimp and save, be frugal, and it will never be enough because the value of your money is being leeched out, year by year.
your house is not worth more; your money is worth less
Most of you know that 96% of dollars are created through mortgage debt, which issues the principle but not the interest. So the money in circulation isn’t enough to repay the debt, it runs out halfway through the loan. Therefore, inflation is essential to keep the ponzi scheme going. In my book, I calculated how lowering the interest rate causes the price of the house to rise even with the same monthly amount.
At 10% interest, a $1000 monthly payment can repay $115,000. At 9%, $125,000. At 7%, $150,000. By the time it gets to 1%, the same $1000 repayment can buy $310,000, almost 3X what it did at 10%. But that’s good, right? No, because we bid against each other for houses based on how much debt we can afford.
When I bought my house 35 years ago, the interest rate was almost 20% so the price, while being as much as anyone could afford, was low by comparison to now. At that time, it seemed so crazy expensive I thought about waiting until prices went down. At this point, it would cost three to four times what I paid—something that no one should celebrate.
death by moody’s
In my book, I quote David Graeber that Greece 2012 was “a dress rehearsal for the likely fate of the global imperial system when it finally reaches its limits and the era comes definitively tumbling to a close.” When Greek bonds were devalued, the neighboring island of Cyprus sunk fiscally underwater. Bank holdings were 9X the GDP because Cyprus had been made a tax haven. One Russian oligarch alone owned 10% of the Bank of Cyprus. I continue:
In the summer of 2021, Moody’s slashed Cyprus’ credit rating to junk status and Fitch downgraded their bonds so they would no longer be accepted as collateral on loans. This meant that Cyprus was unable to raise money in the ordinary way, by selling bonds and passing the sovereign debt on to taxpayers. Instead the Open Bank Resolution of the 2010 BIS Committee had this advice: when bank failures become too expensive for governments to bail out the lenders, the losses should be shifted to the banks’ shareholders and creditors, which—surprise, surprise—includes depositors.
Legally, it turns out, when money is deposited in a bank, they own it. In return the depositor is given a credit account, which is considered a liability or debt of the bank. If the bank goes belly-up, depositors are considered unfunded creditors and get in line after the financial firms and central banks that have bought the bank’s debt.
So the bail-in is a ‘haircut’ where initially, all Cyprus depositors were to lose from 7-10% of their accounts. It later settled on the second-largest bank, selling off its healthy assets and leaving account holders to lose from 60 to 77.5% of their uninsured savings.
Certainly what this is all leading towards is Central Bank Digital Currency. But maybe that will be the final straw, or the djinni that gives us one system change wish. What should we wish for? If I could change only one thing that would enable the most change over everything else, it would be this: Only commonwealths under 300,000 people, could issue and control the credit backed by the properties within their borders.
What this would give us is power over our own labor to serve the interests of families and communities. I call this the caret system, with the commonwealth deciding its exchange rate for the imperial currency and its taxation. But here’s a question for you, since every commonwealth is different and decides their own rules: would you have a fluctuating interest rate or would you, like Ben Franklin, set it at 5% permanently?
With a stable rate, he said, people would pay off their debts and tighten the supply when there was too much in circulation and money was cheap. When money was tight, they’d borrow against their homes and loosen it. So it leads to a self-regulating system according to Franklin.
In my own commonwealth, I’d aim for that but start out by offering 3% fixed mortgages to refinance an existing loan. I’d announce that six months from then, the new fixed rate would be 3.1% and go up by .1% every three months until it reached 5% where it would stay. So people with existing mortgages will be eager to get them out of the imperial banks and into the commonwealth bank. Rather than forcing people, you can just use carets not sticks!
Related posts: Part I and II of Web of Debt’s Ellen Brown. As an aside, Barney Frank of the 2010 Dodd-Frank just did a NYT interview saying that he sat on the board of Signature Bank ‘because it paid well’.
Mathew Crawford has done an excellent series on Why Would Silicon Valley be the Ground Zero for Banking Centralization. This Part 3 has links to the other two:
Matt Ehret has this recent piece on the coming banking implosion but also referred back to a podcast on bail-ins he did in 2013, when I was also writing about them. And his wife Cynthia Chung has a very interesting piece looking at Japan as a precursor from the perspective of Richard Warner’s Princes of Yen :
Also on Richard Werner is this piece from CHD looking at Kim Iverson’s interview with the following quote::
https://childrenshealthdefense.org/defender/richard-werner-decentralized-economy-preserve-freedom/
The current inflation crisis is the direct result of intentional decisions made by central banking institutions, according to banking and development economist Richard Werner, Ph.D.
In 2020, the world’s central banks, including the U.S. Federal Reserve, acted in a “coordinated fashion” and enacted an “intentional policy” they knew would cause massive inflation 18 months down the road, Werner told political commentator Kim Iversen on a recent episode of “The Kim Iversen Show.”
The inflation that began in late 2021 — which we are still experiencing — had nothing to do with an energy crisis or wars, Werner said.
“Nobody can say this was a mistake. They [the central banks] on purpose created this inflation — that’s what my work shows and there’s no doubt about that,” Werner said.
Werner, a professor at De Montfort University in the U.K., created the Quantitative Easing (QE) model — also called the “Quantitative Theory of Credit” — which he says is “arguably the simplest empirically-grounded model that incorporates the key macroeconomic role of the banking sector.”
QE is a kind of monetary policy that involves a central bank purchasing securities from the open market to reduce interest rates and increase the money supply.
Iversen told Werner he is an interesting figure because QE recently showed up in the news for exacerbating the current financial situation.
“A lot of people would blame you, as the person who invented Quantitative Easing, for the crisis that we’re in,” Iversen said. “At the same time, a lot of those people that feel that way are also the very people who don’t trust this central digital currency [and] don’t trust the World Economic Forum — and you seem to be also in that group.”
“I think that blows a lot of people’s minds,” she said. “They don’t really know what to make of you and your policies. Are you the good guy, are you the bad guy?”
Werner said most central banks incorrectly applied his QE policy by following only part of his advice — and at the wrong time.
QE was designed for a time of deflation and a contracting money supply, Werner said, not for a time period when we already had an expanding money supply and expanding demand. “It was not designed for this situation,” he said.
James Corbett does his usual deep dive on the need for a peer-to-peer economy:
And Emmanuel Patreich shares five lectures on Money is no Mystery:
But for building the next system, here are the two of mine from the video:
There’s been much talk about Biden’s $10K student loan forgiveness but student loans are just one symptom of the dysfunctional education system. This episode examines how to reinvent K-12 through university with self-driven curricula, edu-tourism, edu-travel and no debt. It uses the economic system of anarchy and federalism described in my book, How to Dismantle an Empire. It references The Student Loan Scam by Alan Michael Collinge, a TEDtalk by Sir Ken Robinson, a NY Times article by Nick Burns, and The Underground History of American Education by John Taylor Gatto.
Continues the System Change Series developing a parallel community economy backed by local mortgages. This episode explores retirement and using the Social Security Trust Fund to capitalize public banks, stabilize the interest rate, and bring down the cost of the Unaffordable 4H--housing, healthcare, higher education and hope for retirement. Cites Eric Laursen's tome, The People's Pension. Explains how inflation is really dilution, what Ben Franklin thought was the right interest rate, and how we've been tricked into betting our futures on gambling chips.
Thanks Tereza! That's way more info than I can get through in a short time, and I am pretty far down on the curve. I wanted to share one more story about retirement. It's the fraud of the 401K. If your rich, go for it. If you are a regular wage earner, you might be better off spending it than saving it. You can't save enough to retire on no matter what instrument you use. Most people can't save at all. And, do you really want someone else managing your money in the stock market?
if you divide the inflating money supply by the deflating population it looks even worse, the dilution.