Tag: derivatives

Financial Solutions

Financial Solutions posted in Eleison Comments on November 19, 2011

Numbers of commentators on economic questions are presently writing or saying that the world’s financial system is on the brink of collapse. None of them are sure of the timing, but many of them predict that it will be a major collapse. Yet before the onset of the financial crisis in 2008, few people saw it coming because they were comfortable in a way of life that seemed well established and for ever moving forward. However, if these commentators are right, it is about to come off its hinges.

We should all of us be thinking what went wrong and how it should be put right. Here below are a series of practical proposals, adapted from a recent article on the website Burning Platform. One need not agree with each of them to begin envisaging alternatives to our present broken system. There are political and financial proposals. Let us begin with the latter:—

*Nationalize those banks which by being “Too Big to Fail” can hold the State to ransom. Let any consequent losses fall on the people responsible or involved, not on the taxpayer. *Re-institute (in the USA) the Glass-Steagall Act to stop banks from ever becoming so big again. *Re-institute mark to marketing accounting rules, so that banks can no longer pretend that their assets are worth much more than they are worth in the market-place. *Regulate the derivatives market so that likewise no financial entity can become so big that it can threaten to crash the entire system if it goes under (as happened in the USA with AIG). *Simplify the present highly cumbersome system of income tax, or replace it altogether with a consumer tax, and eliminate corporate tax breaks. Notice how such proposals may be explicitly financial, but they are implicitly political, because to be put into practice they would need a significant change in the political way of thinking of the people and especially of the leaders. Finance depends on politics. Here are the more obviously political proposals, which may be disputed, but they at least point in the right direction:—

*To combat the corruption of too comfortable politicians, impose term limits. To combat the corruption of elections by special interests, cut out all lobbying and lobbyists. *To cut down the power of the central bank, take away its control of the nation’s money supply. *Re-organize the States’ welfare benefits, today so draining the States’ finances that tomorrow they will be able to benefit nobody. *Re-instruct the people to go without, and to accept a lower standard of living, so that instead of spending society into oblivion, they build it by saving. *Do what can be done to replace suburban sprawl by more self-sufficient communities. *Renounce world empire so as to cut down the enormous military spending of the USA, for instance by bringing thousands of troops home from their bases all over the world.

Here again, for such proposals to be put into practice, they require great changes in the people’s way of thinking, especially in that of the leaders. Political decisions depend upon what people value more, or most. Why are we alive? To enjoy on earth, or to be truly happy for eternity? Is that an either-or question? Is there an eternity? Thus politics depend on religion, or on the lack of it. Will today even a financial crash bring anyone to their senses?

Kyrie eleison.

Capitalism Unfolding

Capitalism Unfolding posted in Eleison Comments on December 18, 2010

Selfishness cannot make a society. Now money represents essentially its owner’s claim upon the services of the rest of his society. If then capitalism be defined, in anything more than just economic terms, as a way of organizing society whereby every citizen is to be left free to make as much capital, i.e. money, as he can and will, then capitalism is riddled with contradiction. It is trying to make a society requiring selflessness out of encouraging everybody to be selfish.

Thus capitalism can only survive for as long as members of a capitalist society still have pre-capitalist values, such as common sense, moderation in the pursuit of money, and respect for the common good. But capitalism as defined above does nothing to promote any such pre-capitalist values. On the contrary, it works against them, as selfishness works against selflessness. Therefore capitalism is a parasite, living off a social body whose pre-capitalist values it works to undermine.

This internal contradiction of a society built upon the pursuit of money is reaching its devastating conclusion in the present state of world finance and the world economy. Since the end of World War II especially, the peoples of the world have more and more sought money to provide the material comforts they now prefer to the spiritual comforts that formerly gave purpose to their lives. Admiring and seeking money, they have been happy to let the money-men take power over their societies. Admired and sought after, the money-men have taken to themselves more and more money and power. After all, what intrinsic brakes do money or power have to limit their own further acquisition? None. The bankers turn into veritable gangsters.

Hence, for instance, the invention 10 or 15 years ago of “derivatives,” financial instruments which make a fortune in fees for the banksters who purvey them, but which act upon the delicate mechanisms of world finance like weapons of mass destruction, because they easily fabricate an unreal world of colossal and unpayable debt. In this destabilized and fraudulent world of unpayable debt, a semblance of order is maintained by one government after another fabricating out of thin air vast quantities of “money” to “pay” the debt, but this process can only end up in an inflation which empties of any usefulness the currency involved. Thus all the world’s paper and digital money – for years it has had no other – is now doomed.

But money is to a society what lubricating oil is to an engine. Without oil, an engine seizes up and is killed dead. Without money in a society, exchange becomes much more difficult, and commerce can be slowed to a standstill. If for any such reason the food-trucks (or lorries) could not run, and food ran short, especially in the big cities, what could a politician do to head off the food riots, and to stop the peasants from coming after him with pitchforks? Start a war!

World War III may not be far off. Lord, have mercy!

Kyrie eleison.

Money-Men Supreme?

Money-Men Supreme? posted in Eleison Comments on November 1, 2008

There is a fascination in reading commentaries on the ever-evolving crisis of global finance. How much more do the commentators tell than they say, of a natural order being violated and taking its revenge! Yet nobody seems to know how the crisis will play out – except the master violators?

To get a glimpse of that natural order, it may be necessary to step back a few centuries. Let us briefly for our purposes define (1) religion as man’s relations to his God, (2) politics as his social relations to his fellow-men, (3) economics as the art of distributing goods between producers and consumers, and (4) finance as the art of handling money. Then the natural order is that as money exists to facilitate the exchange of goods essential to any society, so finance should serve economics. And as the State is ultimately responsible for the well-being of all its citizens, especially those most in need of protection (Leo XIII, “Rerum Novarum”), so the material goods of economics should come under the common good of politics. But politics can only adjust and ensure the common good of all men in any society if it is properly understood what man is here on earth for, and so politics should come under the true religion.

However, modern times, especially since Protestantism, have step by step turned this natural order upside down. England is a clear example. Firstly, politics in the persons of Henry VIII and Elizabeth I, etc., virtually stamped out the true religion of God in England. Then within a hundred years the Bank of England was founded, the world’s first central bank, and the English government and people were off in pursuit of economics and the wealth of nations. But having made free enterprise sacrosanct meant freedom for the major money-men to gobble up the minor money-men, and so free enterprise capitalism turned progressively into the finance capitalism now reigning supreme, not only in England but all over the world.

Thus what we can observe today is both politics and economics vainly struggling against this overthrow of their natural priority over finance. To clean up the mess created by the financiers through derivatives in particular, the politicians are resorting to huge bailouts by the State, in a desperate effort to keep money circulating. On the contrary old-fashioned economists are appealing for a return to free enterprise, as though the mass of today’s citizens do not want to be nannied by the State.

But when the most decent of politicians and economists themselves believe in little but money, how can they possibly get their necks out of the noose prepared for them by the Masters of Money? These most likely think – by means of a slipknot around Vatican finances? – that they have the Lord God himself on a leash! Little, literally, do they know. Poor things!

Kyrie eleison.


Giga-Shenanigans posted in Eleison Comments on October 18, 2008

Without pretending to be any kind of an expert on matters financial or economic, I have for over a year now been following with a keen interest the evolution of the financial crisis that burst upon the global scene in the summer of last year, 2007. One could guess that it would have an impact on all of our daily lives, and also it seemed to be the beginning of that massive reality check which a number of us have long since seen coming.

As to our daily lives, a recent article on CREDIT CARDS made good sense. It said, get rid of them! The crisis consists essentially in mountains of debt, piled up over tens, even hundreds, of years, and which must be paid back or defaulted on. Now credit cards are an all too easy way of running up debt, and the rates of interest to be paid on them are often sheer usury. Unless one is very disciplined in their use, they should be torn apart and thrown away, and debit cards should be used in their place, if necessary. St. Paul says, owe nothing to any man, except charity (Romans XIII, 8). The Old Testament says, the debtor is slave of the creditor (Proverbs, XXII, 7).

As for the grander question of a global reality check, many things are not clear in what is happening, because the hidden paymasters of the media make sure that we never get the complete truth on their television or in their newspapers. What their lies will not twist, their half-truths and omissions will conceal. They are an “operation of error” (II Thess, II, 10).

However, a few things seem clear. Firstly, the recent 700 billion dollar “bailout” in the USA is a mere drop in the bucket compared with the problem to be bailed out – a mountain-range of 1.4 quadrillion (thousand thousand thousand thousand million) dollars’ worth of worthless debt hanging upon “derivatives” (highly complicated financial instruments of many kinds, whose value derives from other assets). Secondly, only by fantasy and greed can so many money-men over the last 20 years have chosen to deal, or let themselves be tricked into dealing, in such worthless paper, that its collapse now threatens the global economy.

But it is absurd to imagine that the world’s top money-men did not foresee the danger. The evidence abounds that they deliberately created the danger, so that to avoid losing all our goodies in a global collapse we would come begging to them to impose on us their global police-state. We have worshipped Mammon. Now Mammon is poised to enslave us.

Kyrie eleison.

Guerrilla Gardening

Guerrilla Gardening posted in Eleison Comments on September 20, 2008

Over the last few years I have advised several owners of a house with a yard or garden to pull up the rose-bushes and plant potatoes. Some of them must have wondered what on earth I was talking about. With the collapse of Wall Street and finance capitalism now well on its way, they may understand better.

It is the last Chairman of the US Federal Reserve, the banksters’ puppet at the head of the banksters’own Sesame Cave, who for several years promoted, pushed and protected those financial instruments known as “derivatives” which the famed American investor Warren Buffett denounced prophetically soon after they appeared as “weapons of mass financial destruction.” In other words the banksters themselves put in place the rolling rock to let loose the avalanche.

“Free enterprise” means in effect survival of the fittest, with freedom for the stronger to eat up the weaker, until takeovers and mergers make enterprises so massive that they become too big to fail. Then, by capitalism’s internal contradiction, the failing enterprises that used to scream for the government not to intervene, now scream for it to intervene, and we see, for instance, the US government nationalising Freddie Mac and Fannie Mae (Sept. 13), AIG, etc. Thus capitalism and socialism that always pretended to be enemies suddenly discover they are friends, while the banksters’ globalism is waiting in the wings to swallow up both of them.

So what is the solution to the grand problem of the false split between capitalism and socialism? Many serious and honest non-Catholics recognize it is to be found in Pope Leo XIII’s famed Encyclical of 1891, Rerum Novarum. That solution is the Gospel. Yes, both capitalism and socialism are problems ultimately religious!

And what is the solution to the immediate problem of rising food prices and imminent war (classic solution for capitalism’s problems)? See the article on “Guerrilla Gardening” in the August 25 edition of the admirable “American Free Press” – dig up the lawn and plant potatoes.

Kyrie eleison.

Credit Crunch

Credit Crunch posted in Eleison Comments on September 8, 2007

A global financial problem may soon be changing the lives of all of us. Let me offer a few answers

(A) to a few elementary questions (Q):

Q. What is the problem? I have not yet felt anything. A: The problem is a credit crunch, or, a worldwide lack of money. Money circulating in an economy is something like oil circulating in an engine. Just as an engine will seize up if there is not enough oil, so an economy will seize up if there is not enough “liquidity,” or money circulating.

Q: I might understand one or a few nations being short of money, but how can they all be short at once? How can such a problem be global? A: Because the unprecedented ease of communications and trade between modern nations by, for instance, airplanes and electronics, is making the world into a “global village” where all the national economies interlock, so that if one nation, especially the USA, sneezes, they all catch cold. That is what is now happening.

Q: Still, how can not enough money be circulating amongst all the nations at once? A: Because the 300-year rise of “fractional reserve banking” means that the vast amount of money circulating worldwide comes into existence in the form of a loan. For instance you are most likely unaware that there is every probability that even the cash in your pocket was borrowed by your country’s government from the country’s (non-government) central bank, to which the government is paying interest on that cash! Now for a loan to take place, both lender and borrower need confidence, the lender that he will be paid back, the borrower (if he is honest) that he will be able to pay back. This confidence has been dwindling in a big way, worldwide, since about July.

Q: Why? A: Mainly because of a new form of debt paper being introduced a few years ago called “derivatives,” named from debt deriving from other debt. Even many experts are not exactly clear how derivatives work, which must be part of the problem. However, one very successful American investor, Warren Buffett, who must have studied them, has called them “weapons of mass financial destruction.” Indeed. There is now a shaking 30 trillion US dollar mountain of derivatives threatening the world’s financial system.

Q: What do we do? A: One, be ready for hardship. Two, do not be surprised if a 9/11 Part II happens to distract us. Three, turn to the Gospel:— “Seek ye first the Kingdom of God, and all these things will be added unto you.” “Fear not him who can harm only the body. Fear him who can throw body and soul together into Hell.” Economics are only of things bodily.

Kyrie eleison.