Debasement is the practice of lowering the value of currency. It is particularly used in connection with commodity money such as gold or silver coins. A coin is said to be debased if the quantity of gold, silver, copper or nickel is reduced.
Reasons for debasement: The main reason a government will debase its currency is financial gain. By reducing the silver or gold content of a coin, a government can make more coins out of a given amount of specie.
Effects of debasement: Debasement lowers the value of the coinage, causing inflation. Over time, it may even lead to a new coin being adopted as a standard currency.
In the late 1990′s, the US debased its currency by altering the CPI index, in a statistical debasement maintained by the Federal Bureau of Labor Statistics. The politicians did so, so that the US dollar would not be replaced as standard currency for much of the world’s business. And so that the US would appear to be robust, even though it was mid-stages in severe contractions.
By 2007, most heads of Central Banks and Sovereign Wealth Funds, with large US currency holdings or currencies pegged to the US dollar, realized that the REAL CPI is actually above government figures and the real GDP is actually less than government figures.
So the lies foisted on the American public in the last decade, that low inflation is under control, are not true.
We have not been ‘in control’, for years.
We’re being statistically waterboarded. Laid at a negative incline, face covered, darkness around us, stress elevated, then poured on with burgeoning reality, choked with terror as the economy stumbles around us and the only solution being offered to us is MORE OF THE SAME, giving money to the people who got us here.
Torture of all kinds is wrong. We need to sweep aside the ‘old boys’ and start over again. Naomi Klein was on Colbert Report, with her book ‘Shock Doctrine’ about how our leaders take advantage of us in moments of crisis.
I feel vindicated. Someone else is an anarchist like me. As a mom, I’ve discovered a deep life truth: you can’t always fix things. Sometimes you need to admit defeat and start over with a clean slate. For the last few years, I’ve believed we need to sweep aside the old failed banking and shadow banking industries. They cannot be ‘fixed’. They’ve had their run, at the expense of the entire global economy.
Start over.
Years ago, my kid asked why cigarette companies are allowed to make money for expliciting addicting people, and I gasped because it was such a clear, brilliant question. Why, indeed? The tobacco companies soon after were admitting their lies in front of Congress and were finally opened up to lawsuits, which they’d skirted for decades.
Now, the banking industry and the shadow banking industry have taken us to the precipe of a deep depression. DO NOT GIVE THEM MORE MONEY.
Be a visionary and think outside the box. Create a new financial system, with built-in ‘global citizen’ considerations. Make profit go hand-in-hand with responsible capitalism.
by David Leinweber The bailout of the US financial system isn’t working. The government’s rescue plan has fundamental flaws, including incentives that favor the failed firms, not the country as a whole. New ideas are needed. In “New American Bank Initiative: Removing structural flaws in the economic rescue,” Sal Khan and I propose a radically different plan–don’t prop up existing banks, take part of the $700 billion earmarked for the bailout, and capitalize a new financial system. Sounds crazy at first. But we’re in the midst of a crisis that requires bold, even drastic, action. Using the systems thinking that drives technology innovation, we lay out a simple, direct approach to re-creating our financial system in a way that benefits the taxpayers, and the country, and that doesn’t reward failure and irresponsible decisions. Download the full paper, and let me know what you think: New American Banks Initiative.pdf
David Leinweber is a financial technologist and former quantitative investment manager for $6 billion in global equity assets. Founder of one of the first commercial algo trading firms. Widely published author and speaker on Artificial Intelligence, Intelligence Amplification, and other leading edge technologies for Wall Street.
Michael Lewis, author of “Liar’s Poker” just wrote a great article for Conde Nast Portfolio about the end of Wall Street, as we know it. He writes with a clear voice of shock and awe about the two-decade long era of smoke and mirrors that Wall Street has called democratic capitalism.
The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.
I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.
When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.
Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.
I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”
Photoillustration by: Ji Lee
To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.
Later in the article, he tells us how the smoke and mirrors lost its power:
At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.
Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend.
From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.
Its ugly, people, its ugly. We’re still not told the truth by Paulson and Bernanke. We can’t make wise choices about our financial future without the full truth.
Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):
Without the government’s containment the economy would indeed ace another Great Depression, but fortunately, nothing so dire will occur. The government will prevent a collapse of the financial system and partially buffer the damage to the economy, containing the depression. The government will succeed not because it is wise about economic affairs or because it won’t make mistakes. Rather, it will have no choice but to keep patching holes in the financial sector, and its sheer size and presence guarantee a sizable fiscal stabilization. The government has virtually unlimited power to intervene to protect the basic functioning of the financial system, and in an emergency can spend whatever is necessary. Although government solutions will not fix the fundamental problems that will cause the depression, they will limit the financial fallout. By the end of the contained depression, the government will likely have committed trillions between rescue operations and running huge deficits. And although some may complain about the price tag, it will be a bargain for enabling us to avoid another Great Depression.
Levy thinks we will be out the other side in late 2009 or early 2010, albeit out in a tepid way.
I’m wondering:
What will be left, in late 2009 or early 2010? An over-encumbered, has-been economy of broke taxpayers who finally realize that the assets they purchased are worthless, and over-leveraged? The next generation will be working their way out of our mess, for years and years to come?
Bailouts are socialistic. Bankruptcy pwns the shareholders, bailouts pwn taxpayers. I’d still rather see a domino effect of failures for two or three years, instead of this ‘contained’ depression.
When a big company that gets into trouble is more valuable living than dead, there used to be a well-established legal process for reorganizing it – called chapter 11 of the bankruptcy code. Under it, creditors took some losses, shareholders even bigger ones, some managers’ heads rolled. Companies cleaned up their books and got a fresh start. And taxpayers didn’t pay a penny.So why, exactly, is the Treasury substituting government bailouts for chapter 11? Even if you assume Wall Street’s major banks and insurance giant AIG are so important to the national and global economy that they can’t be allowed to fail, that doesn’t mean they have to be bailed out. They could be reorganized under bankruptcy protection. True, their creditors, shareholders, and executives would take bigger hits than they’re taking now that taxpayers are bailing them out. But they’re the ones who took the risk. We didn’t.
The Treasury seems to have lost sight of its real client. It’s client is not the creditors, shareholders, or executives of any of these firms. Its sole client is the American people.
It would be different if Main Street was getting something out of all this. But credit still isn’t flowing to small businesses or distressed homeowners, and unemployment is skyrocketing.
There’s more at stake for Main Street when it comes to General Motors and other automakers now teetering on the edge of bankruptcy, because two and a half million households depend directly or indirectly on them for their paychecks. But the best way to protect all these people is not to pay off the automakers’ creditors, shareholders, and executives, with no strings attached. Recall that when the government bailed out Chrysler in the early 1980s, a third of its employees lost their jobs.
In exchange for government aid, the Big Three’s creditors, shareholders, and executives should be required to accept losses as large as they’d endure under chapter 11, and the UAW should agree to some across-the-board wage and benefit cuts. The resulting savings, combined with the bailout, should be enough to allow the Big Three to shift production to more fuel efficient cars while keeping almost all its current workforce employed. Ideally, major parts suppliers would adhere to the same conditions.
Remember: The underlying goal is to help Americans through this crisis and come out of it with a stronger economy.
And what a tragedy it would be if the government spends so much on these bailouts there isn’t enough money left for the next administration to help average people get affordable health insurance, send their kids to good schools, and find good jobs — including jobs rebuilding the nation’s crumbling infrastructure and finding alternative sources of energy.
It’s not the big guys who need rescuing. It’s the small. Right now, the government has its priorities upside down. posted by Robert Reich | 10:02 AM
I say PWN THE SHAREHOLDERS, NOT THE TAXPAYERS. Bankruptcy, not bailout.
German researchers say that LED lights penetrate the skin and cause changes in sub-surface tissue by changing the molecular makeup of a layer of water on elastin (the protein that provides elasticity in skin). In the study, Andrei P. Sommer and Dan Zhu point out that high-intensity visible light has been used in medicine for more than 40 years to speed healing of wounds. That light actually penetrates into the skin, causing changes in the sub-surface tissue. Until now, however, scientists have not known the physicochemical nature of those changes.
Here are the worrisome, to me, words:
They report identifying how the visible light works — by changing the molecular structure of a glue-like layer of water on elastin, the protein that provides elasticity in skin, blood vessels, heart and other body structures.
I wonder if and when someone will think about five and ten year repercussions to these huge findings.
While that sounds great, for skin healing and of course, to channel billions of American dollars already being spent on plastic surgery alternatives, might not there be a downside we should consider, before we see LED lights for sale with the ‘GETS RID OF WRINKLES’ banner?
I read 50 blogs a day, financial, political, international, environmental, technological, cultural. I am a single mom raising 3 kids. I have a brain and I intuit a huge culture shift. I believe we are in for a big, global slowdown of epic proportions. Here’s today’s online frontpage of Financial Times:
I believe that the American Way of Life that George H.W. Bush insisted was not negotiable, the one where you can make all the money you want to, unfettered by regulation or common decency, is gone.
I believe that we are offered a new opportunity. The reason I say this is that I’ve had huge life changes: divorce, selling my house, moving my kids, renting then moving to a second rental home, and finally, losing my mom. I bought in to the whole US lifestyle, have the credit cards to prove it. But I sold my home, paid off the million dollar mortgage and tons of joint marital debt and am living within my means (mostly), re-evaluating my future. And I see that we as a country need to do the same gut-check and change course drastically and quickly.
Our corporations can’t operate unless they calculate in ‘social costs’ and ‘environmental costs’ and ‘global citizenship’ costs. They can’t keep marketing to us that we ‘need’ things that we don’t. They can’t then blame us for getting addicted to their credit, their loans, their cars, and then ask us to also clean up their mess when they dissipate their profits into the hands of a few of their deal-makers.
You know the American Dream? Sales people are rewarded in the American Dream. They make the millions we glorify. But sales people aren’t responsible for the appropriateness of their product. They get paid to sell. And they walk away with their sales commission when their products, credit cards, home equity or car loans implode on us, the buying public.
We must feed and provide healthy upbringing for all of our children. We have to provide them with neighborhood centers where they can get nutritious food and before and after school mentoring and tutoring. If some kids do not need this help, great! But many kids do need this support and we are destroying our culture by not ensuring we have a smart, challenged next generation of taxpayers, let alone country builders. The George Lucas Educational Foundation knows what kind of education all of our kids deserve, and need. We will overhaul our educational system so that kids learn their own talents and are taught to those talents.
We have a moral obligation, I believe, to also feed and care for our sick and elderly. Before my mother passed away, she lived in a beautiful assisted living place, Alma Via (The Way of the Soul). She was provided 3 meals a day that met with her specific health needs: near kidney failure and rheumatoid arthritis. She felt a happy sense of community there, and my sisters and I were able to visit her frequently and take her out for medical appointments and family time. Knowing that her basic needs were met, we felt that her life was full. Every elder deserves this care.
Communities need to rebuild. Gas prices skyrocketed, now the shipping industry is faltering because of the world financial crises, trucking industries are going thru shakeups. We do not need to put our heads in the sand, but it is prudent to get your food from as close to your home as you can, to do business with local vendors.
All of these huge global stumblings, they are our sign to re-invest in our local communities. To reach out thru the global brain of the internet, but also to nestle in to our smaller environments. Its a paradox: going smaller, while going bigger. Be global citizens, but also be tribal in your county. Have a large vision about your carbon or water use footprint, but also know who your neighbors are, and offer help or accept help. Get out of debt, lay low, do not buy into the consumption mania of advertising.
So when you see the Financial Times talking about a SEVERE GLOBAL SLOWDOWN, don’t fret. Its a chance to remake things in the image of the 21st century. We’re global, we’re wired, we give a damn. Lets draw a new world, instead of continually trying to buoy up the old paradigms that we have outgrown.
Oh my god. This is Olberman’s most moving video ever. No anger, no screaming, just from the heart, in defense of the true sanctity of marriage, the marriage of two people in love and committed to a future together, be they boy/girl, boy/boy or girl/girl.
This video should be showed in schools, homes, churches.
“You want to honor your god and the universal love you think he represents? Then spread happiness.” “You are asked now to stand on a question of love… Let the tiny ember of love meets its own fate… That love is in fact the ember of your love for your fellow person.”
“Redefining marriage”. We’ve already ‘redefined marriage’. 30 years ago, the parents of the President of the United States could not have married in 1/3 the states of this country.
97% of micro-loans are repaid! $3 million a month is lent out, and 97% is repaid!
While looking at the trillions we’re giving to profit-siphoning US corporations, I doubt that we’re ever going to see payback at the rate paid by micro-businesses.
This 3 minute video is about how Social Entrepreneurs are changing our World:
“The Tactics of Hope: How Social Entrepreneurs Are Changing Our World”
Written by Wilford Welch
Foreword by Desmond Tutu
Contributing Editor David Hopkins
These 27 case studies tell stories of individuals, in their own words, from the Amazon rainforest, Himalayan Mountains, New Orleans, and Silicon Valley.
A cutting-edge website (http://www.TacticsofHope.org) has been released with the book that connects you with organizations and other individuals who share your unique passion so you can be empowered as an agent of change.
Perhaps Wilford Welch should be in Obama’s cabinet. We need people who think out-of-the-box, who have big visions for the US and the globe.
