Saturday, October 11, 2008

Refuge, flight, battle rejoined, victory, retribution

Brad Setser looks at a flood of demand for US Treasuries and suspects that it's central banks shifting into the securest dollar asset they can find; and away from other dollar-denominated assets.

The first comment on the same post says that the next stage is a run on the dollar.

Continuing the Tolkien fantasy theme, one recalls the flight to Helm's Deep, and the eventual breach. Ultimately, though at a cost, the good side wins, of course (Denninger explains today how we can face the mess and clean it up).
Time to revisit Michael Panzner's "Financial Armageddon" - reviewed here in May of last year.
If he's right - and he's been right so far - it's first cash, then out of cash. But there's not enough gold to act as the world's currency (unless a horrific amount of wealth is permanently destroyed), and if we start up a new fiat currency, the moral criminals of the banking class will play the game all over again.
I note that Max Hastings in the Daily Mail calls for bankers to be "named and shamed"; this is milksop stuff. Yet they're still going to get billions in bonuses this year! Why does the Proceeds of Crime Bill not apply? Heavy, heavy fines, so that generations of bankers and traders will remember and hesitate. How about the last 5 years' bonuses, as a benchmark? Punitur quia peccatum est ("punishment is to be inflicted, because a crime has been committed").
But even that's not enough. What about the political class that opened the financial sluices to alleviate the discomfort of 2002-2003? And did it several times before, too? (See Jesse today on Greenspan's bubbles.) How do we mete out condign punishment to those greedy for power, as well as those for money?
I repeat, this is a crisis of democracy.


sobers said...

What is the future for our monetary needs then? If fiat currencies are susceptible to manipulation by bankers/politicians and there is not enough gold to go around (without reducing our economies to penury) what can we use as a medium of exchange that is reasonably exclusive, but not too rare, and not open to fraud? Could we pick another metal to back our ecomomies with? Something that has actual use? Copper is too common, as is aluminium. Or would silver fit the bill?

Sackerson said...

Sobers, wish I knew, but the US Consitution refers to gold AND silver, which allowed for a dynamic balance between the two; I understand that a bimetallic system is essential for the stability of a metals-based currency.

I suppose anything that's durable and in hard-to-increase (or uneconomical-to-fake) supply. I still have a pot of aluminium Cyprus one-mil (£1/1,000) pieces which we gathered there in 1970/71.

But it's all about discipline, so punishment could enter the equation. Politicians and bankers must know YOU WILL NOT steal, lose or reduce the value of the savings of the common people. If I had my way, there'd be public tribunals once we're through this.

Nick Drew said...

Agree all the way, and one could feel sort of sorry for the Enron convicts. That collapse happened more-or-less out in the open and the full force of the law was applied

if you look at the offences they were found guilty of (mostly, misleading investors ! - apart from some of the really technical offences of Andy Fastow), it's clear that if the same standards were to be applied there wouldn't be enough courts to handle the traffic

yup, there are just too many bankers (and politicians !) to go after: safety in numbers, plus "you need us to fix the mess we've made", of course

hatfield girl said...

Yes, it's a crisis of democracy. But I'm not sure about tribunals and handing out punishments when we're through this. First we aren't going to return after we're through this, to where we were. And second, shouldn't we be condemning and arguing and fighting now so that 'this' gets altered? When Brown said 'whatever it takes' he rather changed the rules. Whatever it takes for him to try and impose his mad vision, and whatever it takes for us to stop him. Which means now, not later.

Sackerson said...

Nick, HG, thank you.

HG, there is a general democratic crisis which you paint often and well, as Stubbs did horses, and certainly this needs to be addressed urgently; but there is also the specific matter of the vampire bankers, and the stakes must be sharpened for the final eradication of this huge, recurring threat to our security. To use the oft-cited quotation from Thomas Jefferson:

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs."