Two Titanic Forces Part 1
Friday, September 3rd, 2010Author David W. Franklin
Titanic Force No. 1:
There exists today, untouchable, unseeable trillions upon trillions of digital units of
modern “electronic money” in various forms of retirement “savings”: IRA’s, Keogh’s, 401K’s, etc. All these so called “savings” are “invested” in the Markets. These trillions are NOT TRUE SAVINGS! They cannot be eaten, worn, used or consumed today.
Rather, these trillions upon trillions of digital units of modern “electronic money” represent a “Claim” on Real Wealth production that may, or may NOT be available in the future.
TRUE SAVINGS defined:
“Tangible things we eat, wear and use, in the possession of the producer, which have been stored and preserved for future consumption.”
To qualify as true savings, the things saved must have two crucial qualities, as follows:
1. The savings must exist in the form of Real Wealth (things we eat, wear and use), which has been produced and set aside for future consumption.
2. The Real Wealth savings must be under the control and in the immediate personal possession (the personal property..) of the producer.
These two qualities ensure that Real Wealth savings cannot be confiscated by making them “disappear at the speed of Light”, like modern “electronic money” savings do when Markets are taken down.
AN EXAMPLE of TRUE SAVINGS
A farmer’s family sets aside a portion of current food production for future consumption. They fill their root cellar, freezer and granary with enough food to last them for the next six months. In addition, the farmer converts a portion of cash received from his crops into spare parts, fuel, fertilizer and seed for next year’s planting.
This IS…True Savings. It is Real Wealth set aside for future consumption. Further, it is in the immediate, personal possession and control of the producer.
WHAT ABOUT ‘ELECTRONIC’ SAVINGS?
Are they Real Wealth set aside for future consumption?
Are they in the immediate, personal possession of the producer?
Again, “electronic money” “savings” represent a “Claim” on Real Wealth production that may, or may NOT be produced and available in the future. Modern “electronic money” “savings” are in the immediate possession and control of the ‘person’ on whose computer they legally “exist”.
Do you have Real Wealth savings?, OR electronic “savings” vested in the Markets?
“Electronic” Retirement “savings”
Are your electronic “savings” on your computer, under your immediate, legal possession and control?
Please see AUTHORS NOTE No. 1 at the end of this article.
QUESTION:
What will be the EFFECT on prices, should the production of Real Wealth in the future be insufficient to meet the demand made by allowing those trillions of the public’s “electronic” modern money “savings” go into circulation?
Then what?
“Those unaware, are unaware of being unaware.” Merrill Jenkins
No. 1 CRITICAL FACT for you to be informed and aware of:
If permitted to be liquidated into spendable electronic “currency” today and the near future, those tens of trillions of units of modern, digital “electronic money” “savings” vested in the markets by future retirees would, all by themselves, consume nearly all future production of Real Wealth!
Titanic Force No. 2: GOVERNMENT DEFICITS
Now, and into the foreseeable future, the Federal Congress promises to “spend” into circulation in excess of fifty (50) $$ trillions of units of modern “electronic money”.
QUESTIONS:
1. Has the Federal Congress ever gone back on its “promise” to spend?
2. Has the Federal Congress ever spent less than they promised?
3. What will be the effect on prices in the future, when an equal or greater quantity of trillions of electronic monetary units, represented by government deficits, are “spent” into circulation at the same time as those trillions of electronic “savings”?
THEN WHAT?
No. 2 CRITICAL FACT for you to informed and aware of:
If spent into circulation as promised, those tens of trillions of units of modern, digital “electronic money”, representing the deficits of the Federal Congress would, all by themselves, consume nearly all future production of Real Wealth!
Now, it should begin to become crystal clear to you what is meant by the danger of government spending equaling, then exceeding GDP!, i.e. Gross Domestic Product! This is precisely what has been happening in Greece!
Please see AUTHORS NOTE No. 2 at the end of this article
See the story titled:
“U.S. facing debt ‘super cycle’: $13 trillion black hole to overtake
country’s GDP ‘within two years’ “‘
at: http://www.eaglesup.com/
This problem becomes perfectly understandable in simple terms, when we equate all future production of Real Wealth to that of a single Apple.
For the sake of example, let’s agree to the following equation of Equality: Future Real Wealth Production = one Apple.
Without question, the U.S. economy has two titanic forces of purchasing power coming “on line” in the very near future, at the very same time! Each one by itself, “promises” to consume nearly all available Real Wealth. BUT, there is only ONE APPLE to be consumed!
I hope it is clear to the reader by this time, that these two competing, economic forces of purchasing power provide the recipe for a certain economic disaster of titanic proportions, to occur in the very near future.
COMMUNISM, a definition:
“Multiple demands on the same Real Wealth.”
To permit both of these titanic forces to exist in the economy at the same time would result in an economic crisis identical to that currently facing the Greek Government. Simply, there would be more Apple “Claim checks” in circulation than there are Apples!
Please see AUTHORS NOTE No. 3 at the end of this article.
Enter again, THE
SUPREME INVIOLATE LAW of ECONOMICS!
“Consumption cannot exceed production”
IRREFUTABLE “FUTURE” FACT:
Were both of these titanic forces of purchasing power “permitted” to be unleashed at the same time into the U. S. economy’s supply of what constitutes “currency”, inflation would, very shortly thereafter, go exponential!
QUESTIONS:
Which one of these titanic forces will win the “bidding war”?
Perhaps the better question is:
Which one will be “permitted” to win?
Which one will lose?
Does History give an indication of how all this will soon “go down”?
Indeed it does!
END of PART I
AUTHOR’S NOTES
NOTE No. 1
“Those unaware, are unaware of being unaware.” Merrill Jenkins
Tragically for the American People, they were and are unaware to this day, of the following cold, hard, real world monetary fact:
The Real Wealth represented by those fifty (50) trillions of “electronic savings” on their brokerage statements which the people produced in the last two decades, has long been consumed by prior deficits of Government. For the American People during the last two decades, there has been no act of True Savings. No Real Wealth has been “..set aside..” for their future consumption. Their “electronic savings” are in fact and in reality, as empty as a folded paper bag.
NOTE No. 2
“Consumption cannot exceed production”
In reference to the recent issue of Greek government spending exceeding Gross Domestic Product, the following principle regarding the supply of modern “electronic money” applies.
The amount of currency or “purchasing power” (Gold, Silver, paper etc) issued into circulation, cannot and must not be permitted to exceed the value of available Real Wealth production: the things the people eat, wear and use. Should the value of “purchasing power” in the form of “currency” (CAUSE) be “allowed” to exceed the value of available Real Wealth, consumption would then begin to exceed production!
If this condition of consumption exceeding production via increasing amounts of circulating currency be allowed to continue, the EFFECT of such a CAUSE would be hyperinflation. This certain EFFECT of hyperinflation has been proven beyond a shadow of a doubt by the lessons of history. This explains why the private central bank monitors and controls very carefully, the “quantity” of electronic modern money currently circulating in Real Time.
The experience of the “Roaring Twenties” in the United States, the German Weimar Republic in about the same historical time period, and most recently that of Argentina in South America and Zimbabwe in Africa, prove again, the inviolability of THE SUPREME INVIOLATE LAW of ECONOMICS!
There are NO EXCEPTIONS to THE SUPREME INVIOLATE LAW of ECONOMICS. THE SUPREME LAW does NOT tolerate being violated! When the supreme Natural Law of Real World Supply versus Real World Consumption is violated, scarcity and higher prices result. If, as in the Weimar Republic and Zimbabwe, the Supreme Law is violated to an extreme, hyperinflation is the severe consequence for disobeying this Supreme Law.
NOTE No. 3
Modern “electronic money” is very different than paper money in the hands of the People. First, the computer digits representing modern “electronic money” are owned and controlled by the private central bank. Modern “electronic money” “exists” exclusively on their computer, and no one else’s.
Second, modern “electronic money” provides a tremendous “key” advantage over paper money for all private central banks. Modern “electronic money” can be created at the speed of light, and collapsed (“taxed”, “removed”) out of circulation at the speed of light, by a few keystrokes.
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Linda Brady Traynham says:
September 3rd, 2010
8:41 pm
Stunned silence, right? And it took me three tries to get him to put it into his version of baby steps. Thank you, David.
In one way fiat “money” is like a lamp. I can turn my desk lamp on to produce 100, 150, or 250 watts of light, and it appears instantly. I can turn it off just as quickly and the production of light ceases, the existing light disappears, and the power, uh, runs back into the wall. The power is not in the lamp. The power is not in the 3-way bulb. The light is not really under my control, although I could think so because I have the switch under my apparent control. The true power belongs to BTU, and they send it to me or not at their whim IF they have it and IF I have paid my bill.
I’ll bet Tony and David could both do a lot with that. David…don’t you think it is time to wave a few modestly veiled credentials at the people? I can’t without your permission.
Off to eat corned beef (hurrah) and continue reading.
admin says:
September 3rd, 2010
11:19 pm
Fiat money like light in the bulb is absorbed by the first things it hits. The first thing Fiat money hits are banks… So the banks get the money and if they don’t loan it out they absorb all the value, thus the reason the economy is stagnating since the banks have absorbed all the money through the bailout and any federal programs (Since they get the money from the Fed and it is only then that they release it out to the programs that are in need of it. By the time it trickles down to a meaningful level for the average citizen the money has been churned 7 to 8 times, meaning that each step of the way the banks have re loaned the money 6 to 7 times reducing the value of it 10% at each step). This ability for banks to re loan the money against itself is the primary engine for inflation since more of something there is the more it takes to create an equilibrium in the marketplace. So we the consumers get an extra tax in the form of inflation while the banks are gaining interest on $900 for every $100 deposited thanks to fractional banking. Just for fun I went and figured out how many times a bank can loan out from $100 keeping 10% back for each loan and it came to 87 times before the amount left was less than a penny. As stated in my earlier article about China banks, this sort of fractional lending inflates the market with cheap, valueless money which inevitably destabilizes the currency and economy.
Steve Foste says:
September 4th, 2010
5:55 pm
I really would be interested in Davids Credentials, The thought process and background and writing was captivating. As I read I kept wondering about the background of the author.
Here is a question for everyone. When AIG wrote all the insurance on the CDO’s, the credit default swaps, I think that’s what the are, and all the toxic assets and had to pay up, outside of Golden Sacks stashing the cash, who acturally recieved the money. The hedge Funds?
Is this an additionaly layer in the future that has yet to be played out with all the quote “toxic” assets set off to the side in a offsheet porfolios of the big banks.
The banks entered into these contracts, they lost, or maybe they haven’t lost just yet.
These players were leveraged up to 140 trillion dollars or more. They lost. We know that kind of money didn’t actually change hands. There is not that much money in the world.
These were contracts, somebody owed the money, but outside of Lehman Bros. everyone is still around, I know Bear Stearns is gone, absorbed by JP Morgan.
So David, educate me. Or Tex, or Michael, or Tony, anybody. Clear this unanswered question up in my mind.
tickmeister says:
September 4th, 2010
8:26 pm
Brilliant. I have for months tried to tell various people that we can only have what we produce, no matter how many dividends, social security checks, and compound interest payments we recieve. If we are all hungry and want a turnip, we can get a turnip voucher from the government if they are so inclined. A turnip voucher is not a turnip, sombody has got to plant and raise some damn turnips or we starve.
As I see it a bunch of Americans are currently living on turnip vouchers while the turnip patch is being moved overseas. How long can this last?
David Franklin says:
September 4th, 2010
8:38 pm
Exactly, Tickmeister, and thank you for the kind compliment.
In regards to production, you Whould enjoy my earlier article about the Greed Riots and the Supreme Economic Law that states consumption cannot exceed production.
Kind Regards,
Dave
David Franklin says:
September 4th, 2010
8:49 pm
Dear Steve,
Regarding your question about credit swaps… it as simple as understanding the selling and purchase of mortgage notes: you buy it at one price and sell the debt at a higher price. This is known as an arbitrage of price or debt. The arbitrage is the profit (electronic profit) you collect between the difference in price. You then convert that arbitrage (Profit) into REAL WEALTH.
The problem with this is that NOTHING was produced! ! You made an electronic profit yet produced absolutely no Real Wealth that increased the level of wealth and prosperity in the country.
And then…you take your electronic arbitrage and CONSUME…Real Wealth, thus REDUCING…the actual quantity of Real Wealth that was available.
BOTTOM LINE: The arbitrage of debt instruments, and the consumption of Real Wealth by those who so profit, are PURE INFLATION!
Some Thing Real (Real Wealth) for absolutely NO THING REAL in return.
In the most basic terms: PURE THEFT and PURE INFLATION !
Sincerely,
Dave
Steve Foste says:
September 5th, 2010
3:52 pm
David,
So are you saying that all derivatives are theft and Inflation? I think we only have one side of the equation. Because quite frankly I still don’t understand totally what went wrong.
Here is my simple understanding. The mortgage brokers produced fraudulant mortgages, made thousands of subprime loans to a gullible public,and with low interest rates and basically free credit, two things happened the values of homes expoded to the upside, and mortgage companies created more and more highly creative forms of mortgages, and the bubble, increasing value of homes produced the ATM effect on individual homeowners. Refinance that home to pay out the credit card debt and vehical purchases.
The credit bubble, or the greed of the mortgage brokers, plus government sponsored give everyone a home any way you can, the failure of the credit reporting agencies, and the failure of the underwriters to actually review the applications for credit and the documentation of income and debts all resulted in a fruadulent system of unmitgated greed on all sides of the table consumer and lenders, real estate agents,home builders, all of them.
Anyway, once these loans were made, the were packaged and bundled into CDO’S and given AAA ratings by what we now know to disreputable companies, basically run by Wall Street.
These CDO’s were sold at a discount to banks and investment firms to raise more cash to keep the Ponzi scheme going aided and and abeted by Fanny and Freddi, FHA etc, based on future earnings of the people paying the mortgages. Supposedly they were AAA and wouldn’t default.
Enter AIG, who know puts out and creates a market for CDS, Credit Defalt Swaps, Though not true insurance it is a derivative on the underlying CDO’S. They would sell let us say 10 million dollar package of CDO’s and charge a premium of say .5 percent and bring in around 50,000 dollars per year. If the bond or the CDO defaults then the seller would have to pay out 10,000,000 dollars. He would have to liqidate the CDO at what ever value and then pay the difference.
AIG and many others got stuck in this trap when the subpime mortgages, the fraudulent mortgages, began to default and the house of cards began to unravel.
So my real question is this?
The govenment steps in and puts up the money to cover the losses,But only the Mark to Model difference, but the original CDO’s are still out there on the books of all these companies, they have not been liquidated, that have been Marked to Model, and not Market to Market, and the game is not yet over.
The CDO’s are still out there and a ticking time bomb.
Am I correct in my most simple analogy because it is a whole lot more complicated than this.
David Franklin says:
September 5th, 2010
6:30 pm
DEBT DERIVATIVES…
An analogy is a game of musical chairs. From the creation of these derivatives, and through out all the buying and selling of them, NO REAL WEALTH is created. Each time they are subsequently sold and bought, the seller derives an “electronic” profit. That is, they sell them for less digits than they bought them for. This game of selling and buying derivatives is akin to a game “musical (debt) chairs”. All is well until the point is reached wherein the selling ASK price is so close to the total value of the debt derivative, that no buyer is willing to part with such a large sum of electronic digits to obtain such a small percent arbitrage of profit. WHEN a derivative created and based (priced) on the total mature value of say, a mortgage, and the mortgage is defaulted on, the derivative’s value collapses to ZERO because there no longer exits the promise of future redemption because the provider of that redemption liquidity, the person paying and providing the interest, ceases to fund the underlying security of the Mortgage. That is when…the music stops for all holders of debt derivatives. All this is akin to JUNK BONDS of the late seventies and 80′s, when individuals like Michael Milken made 500 million plus, selling so called corporate “Junk Bonds”, until the price was reached where no one would risk purchasing them. And the Junk Bond Market collapsed.
David Franklin says:
September 5th, 2010
6:33 pm
CORRECTION on the DERIVATIVES comment
That is, they sell them for MORE.. digits than they bought them for.
Sorry…
Dave
David Franklin says:
September 5th, 2010
6:55 pm
ON MORTGAGE BROKERS….
Mortgage brokers were NOT THE CAUSE of the fraud. Mortgage brokers did NOT create the electronic funds they were lending. Their sole objective was to collect the fees for “selling” the electronic digits.
The question every one SHOULD BE ASKING IS: WHERE and WHO was….the ORIGINATING SOURCE of the electronic funds the brokers were lending?
The mortgage brokers were only facilitators of the fraud of the electronic debt bondage scheme that originated with the central bank’s creation of electronic digits.
Thus, the fraud began at the private central bank. A detailed and sufficient explanation of the NATIONAL MORTGAGE FRAUD initiated by the private central bank can only be addressed in a separate article.
Therein, I could provide details as to WHY the private central bank began and engaged in a nation wide, mass marketing of “electronic Mortgages” in the late 1990′s, going into the mid 2000 years.
The explanation will enlighten and inform you. Perhaps that will be my next article.
As to my “credentials”….. There is a phrase in Latin as follows:
“res ipsa loquitur”. An approximate translation is:
“It speaks for itself.”, meaning in this case, the Truth exposed is self evident, by reason, fact and observation.
If..you find Truth and enlightenment in my writings, then the articles
“speak the Truth for themselves” and need no credentials presented.
Economics, History, and the interrelated part played by “MONEY” in all historical forms, has always held a major fascination for me. My REAL WEALTH ANALYSIS, the RWA, exposes the FRAUD of paper and modern electronic Money for all to see. This exposure is, in principle, no different than the child viewing the procession of the King waling in his new “invisible” clothes, who proclaims out loud to crowd:
“Look!, the King is naked!”
Sincerely,
Dave
Essie Feldhacher says:
September 11th, 2010
5:29 am
Brilliant, David! Thank you very much for sharing and unloading your exquisitely intelligent and insightful thoughts with mankind for the better understanding of all.