Money and The Rats of NIHM

When you see that trading is done, not by consent, but by compulsion;
when you see that in order to produce, you need to obtain permission
from men who produce nothing; when you see money flowing to those
who deal, not in goods, but in favors; when you see that men get richer
by graft
and pull than by work, and your laws dont protect you against them,
but protect them against you; when you see corruption being rewarded
and honesty becoming a self-sacrifice you may know that your society
is doomed.
Ayn Rand
Last year I read aloud for my kids the childrens story: The Rats of NIMH.
Its a story about a mother with an ailing son, who is forced to seek out help
from a community of rats. She and her son are field mice.
The rat community evolved from a laboratory experiment designed to improve
intelligence. It worked, the rats escaped, aware and fully conscious.
They went on to build a complex society, though living off the farmer.
Ultimately, they are faced with the difficult decision to risk current comforts for
a more sustainable life.
A life without taking from others, and living cooperatively instead of stealing
from the humans.

The lesson is one of self reliance and it parallels the great financialization and
wealth transfer humans are facing in the developed world.
This comes collectively, through a persistent faith and worship of the status
quo. And in particular, the fiat currency illusion imposed upon us by the barrel
of a gun.
Is it too late? Can we find a new way like the rats? Do we have the courage to
walk away. Or will we all be trapped and drowned - or exterminated?
Deflationary Reality
We have been experiencing deflationary pressures since the 1990s, punctuated
by the Mexican Peso crisis, the savings and loan debacle, and finally the
DotCom fiasco.
Each resulted in one undprescendented bail out after the other.
The monetary intervention and inflation that came in the aftermath was
concealed in data management (CPI) or celebrated in the form of higher asset
prices for housing and equities.
As long as the voices of the disenfranchised (the elderly, the savor, and the
poor) are kept out of the mainstream narrative, then it will go on.
Central banks around the world will continue expanding balance sheets on a
massive scale.
In response, the financial sector, from the top down, will continue to extend
more credit and lending to less qualified borrowers which will again and again
pull forward demand making the economy appear stronger while gutting the
future in the name of speculation and on the back of a growing number of
citizen serfs.
Financial Weapons of Mass Destruction
Financial products (mostly derivatives) enable manipulation or the tail wagging
the dog by distorting prices of the underlying assets or commodities.
Money (credit) creation has hit huge levels with the bailouts and QE since
2008. Very little of that currency is finding its way into the hands of
consumers. Instead, levels of debt are increasing and financial institutions are
holding more cash.
You know its a problem when even the Counsel for Foreign Relations is urging
central banks to find a means of getting cash into the hands of consumers
without creating more debt.

Minsky Moment
As long as our currency is created through fractional reserve banking, levels of
debt will always exceed credit (cash) creation.
There comes a point when the levels of debt are too high. Also, when the
demand for servicing that debt takes up most available credit and cash becomes
relatively scarce (which should result deflationary pressures).
That is the essence of our money system and why calling it anything less than a
fraud is disingenuous.
We will soon see another crisis similar to 2008 and for a year or so, cash will be
king. The only tool available to the financial authorities will be devaluation of
the currency in order to make debt easier to service. They will need to create
credit without adding to debt.
Deflation is a foregone conclusion when you have a monetary system based on
unlimited fiat. Unlimited in finance simply does not equate with building real
capital and wealth.
Having said that, do not underestimate the resolve of the financial authorities to
devalue their respective currencies to make debt servicing easier.
Governments will push for devaluation in order to protect export markets in
parallel with the desperate attempt to save themselves.
A deflationary collapse in asset values, followed by an almost instantaneous
inflationary intervention in the form of stimulus and direct bidding of the prices
of everything while the dollar loses vast purchasing power overnight.
Prices of essential needs (food, energy etc.) will start to climb, though much of
the price increases will be a result of government-caused shortages rather than
an inflating currency supply.
And these final interventions will be cheered and praised by the masses.
***
Ultimately, a small group of rats carefully planned and chose a moral path, one
that didnt rely on the fruits of another, but one based on collaboration
and cooperation.
At first, I was surprised that some of the Rats of NIMH decided to leave the
comfortable life behind. As long as the farmer provided, things might still work
out.

In the end, some chose not to leave. And they did not survive.
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