How money becomes worthless, the elites profit, and what we can do?
What is Monetary Fascism?
What makes it ‘monetary?’ In the United States and much of the globe many governments together with the central banks use ‘modern monetary policy,’ which in short means something like, “the government should spend as much as possible because it is good for the economy.” This was an extension of the Keysian school of economics which endeavored to show that mass exchange of value (trade) facilitated primarily by government spending was a “net good” for the economy due to the surplus of liquidity and business generated around that influx of capital. The weakness though was seen as it was compared to the Austrian school of economics traditional theory, which simply states, don’t spend more than your make (like how most run their household), because Keysian economics pushed government spending while accumulating debt, spending more than what the government collects in taxes. Modern monetary Policy under the guidance of politicians led us to ever accelerating debt. When debt isn’t paid back, the pot from which the money was coming from in the first place (the central banks) gets more and more empty, so you replenish it by printing more fiat currency, allowing the bank to continue to lend. The economist in me then asks, “What drives the value of those new dollars?” It is not backed by gold, since 1974 it hasn’t been. We transitioned into the petro-dollar system which determined the value of the US dollar by establishing an intricate, global web of demand for the dollar by making the US dollar the common currency (reserve currency) of exchange for all oil — which then bled into other domains driving the demand for dollars greater. What is the alternative way to value something? Its value can be determined by the asset’s underlying productivity, the industry it produces, or the business products/services it represents. This is the more conservative view of value since it is based on an asset’s utility. For instance, carrots have the utility that I stay alive and don’t starve. I then create a carrot business, which business’ value is its life-sustaining carrots/food. I then bring that into the market, into that web of ‘demand-supply’ value, which bolsters the fundamental value of my carrot business. Nevertheless, if you strip away the supply-demand value component, my carrot business still has its fundamental value, which value is its life-sustaining food (along with the land, equipment, buildings, vehicles, etc.), at the very least for my family and friends. The point? A common currency, like the U.S. dollar, exists to facilitate trade (so I don’t have to barter my carrots for paper, dragging my carrots everywhere every time I want to buy something). That dollar, or common currency, represents something, or so we hope. Because humanity generally has considered gold and silver as inherently valuable, many civilizations used gold/silver directly for trade or created stockpiles of gold/silver to back their otherwise worthless paper value. The U.S. dollar was backed by gold but then shifted to the petro-dollar system, at which time began the growth of the sentiment that paper currency was really ‘fiat currency.’ This simply means that this currency is spoken out of nothing, has no inherent value, and is not backed by anything that has inherent value. The web of demand for the dollar gives it tremendous value: we should not underplay that. The shifting of oil trade being done with rubles or the yuan or any other currency is the dire circumstance in front of us.
Let’s talk about the ‘fascism’ side of monetary fascism. Given the demand for dollars globally, and that the U.S. dollar had a virtual hegemony as the reserve currency until very recently, the United States was in a prime position at the beginning of the Covid-19 pandemic to print dollars. It did. Drastic demand for dollars has helped it retain its value in relation to all other world currencies (as reported on the Forex even recently). However, as we can see from inflation, the U.S. dollar is devaluing big time in relation to assets that have underlying utility and productivity: eggs up 160% in the last 14 months, as an example. Why? The Federal Reserve flooded the market with dollars, fiat dollars, printed out of nothing. This opened up a window of opportunity for big finance businesses and governments and banks to have way, way more dollars than what would be in existence if each dollar was backed by either (a) gold or (b) underlying productivity. This window has been since March 2020 until June 2022, but this window of opportunity is rapidly closing. Money managers, investment advisors, banks, any big business capable of stockpiling dollars, etc., did so during this time period and were able to gain astronomical buying power, way more buying power than would have been if all dollars were backed by something (instead of being printed out of nothing). During the months of 2021, we saw many of these big entities exchange those dollars for either (a) gold or (b) underlying productivity value assets. E.g., Blackrock, managing some 9 trillion dollars, has been buying up real estate at astounding levels, whole neighborhoods of new construction. We have even seen many entities add Bitcoin to their balance sheets; many pundits opine it is digital gold. Put two and two together:
Way more buying power (fiat dollars) x Buying assets which have underlying productivity value =
Massive power build up for elites who now have much more underlying productivity assets than they would have.
Why is this fascism? If we know how this played out, what makes it clearly collusion among the elites (=fascism)? The question depends on the average family’s ability to stockpile cash for a very brief amount of time, from about March 2020 – March 2021, 1 year. The average family of four in the most affluent nation on the planet, the United States, brings home a median household income of roughly $60,000. For anyone with a family, I need not spell this out further. With this income, with a family of four, no one is stockpiling anything. For the rest without families, after taxes the take home pay is about $4,800 a month, more or less. If you live in a low cost of living locality, you are looking at two car payments, a mortgage, food, healthcare, and utilities just to start listing the expenses. A family of four would be doing well to only use $4,000 of that income each month — and it would be hard. Thus, your average person was not in a position to stockpile cash; even very wealthy persons, working with millions say, would not be in a position to capitalize on this massive liquidity (fiat printed dollars) in the market. No, no, it is only the super elites, big governments, big finance, and big businesses, that are positioned to take advantage this window of opportunity.
Summarily, printing the fiat currency opens a window of opportunity for those big entities to capture big slices of that new capital flooding the market. During the printing time-period, there is a magic spot where that newly captured capital still has retained much of its buying power before it devalues (= inflation). The Federal Reserve and other global big banks issued monetary policy to flood the market with astronomical amounts of newly printed fiat currency. Do not blame congress or the Trump Presidency for this; the Federal Reserve controls monetary policy (how much and when to add or subtract liquidity) while the Congress controls fiscal policy (the government budget), which the President then signs if he agrees with it. The big corporations, other banks, governments, massive finance institutes, and likely the .1% top wealthiest people then vacuumed up or otherwise gained access to the buying power of this new, massive liquidity that entered the market (for instance, an Investment Advisor managing money on behalf of others). With that pile of newly printed capital, they then set out to buy ‘productivity-value assets’ or land or real estate or gold or Bitcoin. Viola, a perfect transfer mechanism for the world elites to pass on their wealth while the rest of society crashes and burns with the fiat debasement, through inflation.
We should not be dismissive of the “intentional” implications. The inner workings of bank policy and how that policy is related to the biggest financial institutions and other big entities is a known factor. More than that, if you look at something like reverse repurchase agreements, we see that the Fed and these big institutions work together in managing the liquidity of the entire economy. It is therefore “monetary fascism” because big corporations/institutions are enacting and working with the policies of the government for the benefit of the corporations and the government while setting the common person up to lose their wealth — it is not lost on me that the Fed and other central banks of the world may really be public-private enterprises, but I can’t go down that rabbit hole here. This monetary money printing policy does not work on behalf of the People but ensures the People’s fiscal plight will surely come. Like all fascism, the corporations that collude with the government stand to gain much even if such arrangements tell to sour over time. Importantly, persons who are involved in setting the monetary policy are often board members or otherwise financially vested in the big institutions that directly and greatly benefit from that policy.
This is how the elites transfer their power and wealth from the current crashing financial system to the next one they no doubt will be instrumental in establishing. From what I can tell from economic history and my experience with economies in general, hyper printing of fiat currency is the death knell of that economy. From what I can tell the only way to salvage an economy at that point would be to raise interest rates in giant sorts of ways, but the government, who borrowed the money from the bank, only has a certain taxation ability. What tells me this? Central banks often price things in gold and even commodities. They do this to set a stable value to the currency that the bank lends. In other words, if the bank lent (in 2005 let’s say) 100 gold bars which translated to $100,000,000 in 2005, the bank will want that commensurate value returned plus interest (otherwise the bank loses big time). In 2022 though, because of inflation (devaluation of the fiat currency), paying back that 100 gold bars requires $160,000,000 plus another $16,000,000 in interest. However, the government can’t raise taxes to 76% to try to cover the additional expense incurred by inflation. What happens then? The government let’s that economy die and the banks work with the government on a new deal or the government can have the bank print a ton of fiat currency out of nothing as a way to extend that economy and slow roll a collapse. We know that they did the latter.
The takeaway that you should hear for you and your family is that raising the interest rates to the point that inflation is handled would bring the whole system down since the government cannot raise taxes to cover it and thus massive defaults on the debt owed would become commonplace. What can we do? Buy those things that have underlying productivity value. Do not outsource this productivity though, which is what we do when we buy stocks of businesses the do produce products. Buy land, buy real estate, buy a small business the produces something your situation deems important.
If you want “inherent value” although I find these less attractive because the don’t do anything, don’t provide me with any productivity value, you could buy gold, silver, platinum, pallidum, or bitcoin.