Author Archives: Lila

Fiat Laws and Fiat Currencies (Excerpt from “Mobs, Messiahs and Markets”)

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Fiat Laws and Fiat Currencies – Vico’s barbarism of reflection and gold – Lila Rajiva

(Included in “Mobs, Messiahs and Markets”)
(originally published, December, 2006) [see also  The Age of Lint by B. Bonner, 2009]*

*Link broken and repaired on January 22, 2009

(See my post entitled Email. Update: the post is now private. )


Statutory laws, the laws that get passed with pomp and circumstance in legislatures, are not the laws that really govern society. They only look like they do. But if they really did, why is it that the crimes committed by Soviet commissars or by the Nazi Gestapo. . . or by the CIA  . . were all committed with the law books bulging at the seams? It’s not how many laws you have that matters, but how well those laws are obeyed. Which is a matter of culture and history, of what people expect…. and what they’re prepared to accept.
And to know that takes the study of history and manners; it needs a knowledge of morals and religion. The usual smoke and mirrors sideshow supplied by the political class won’t do. You need to turn to the accumulated wisdom of case law and precedent, of customary law and conventions.
The free market arises whereever there were laws and systems like that — whether in Europe or Africa or Asia.  One way to think about this difference would be to see it as the difference between a  fiat money, like paper, and a real store of value, like gold. You can print all the money you want, but if there’s nothing to back it up, then you’re in a bit of trouble. Your creditors are unlikely to put much store in you as a credit risk, just as the world’s wringing its hands today over the dollar. Pretty soon, they come calling for their loans with cudgels and pitchforks.

Gold does not have the same problem, because there’s a limited supply of it. It has to occur in nature. It has to be found somewhere underground and then mined and refined. It’s an expensive business — that takes risk, time, and money. There are costs attached to it that some one has to pay. Paper money, on the other hand, can be printed any time you want. Just ask Ben Bernanke. He’s dropping it by the helicopter load from the clouds.

You can pass all the laws you want on the statute books, you can employ stables full of well-groomed and pedigreed lawyers. But if there’s nothing to back the laws, you’re in trouble. Businesses aren’t going to want to do business with you. Investors are going to want their investments back.

The problem arises because you can pass statutory laws as you like, even if they have little relation to how the masses of people actually think and act. That means you can have a country where theft and looting are the norm that might, nonetheless, have very intricate laws on the books against theft and looting. The statutes wouldn’t do a thing to change it.

Customary law, on the other hand, can’t be manufactured out of nothing. It grows organically from the soil in which it lives. It reflects the way people really think and act. It doesn’t run so far ahead of its times that it provokes either resistance or indifference from people. Customary law, like gold, reflects real value. And because it does, it’s also likely to be accepted by people more often. Ultimately, customary law works because it’s a more sensitive and complex measure of a society.

It contains more information from the past — from the history and traditions of the people. Like the pricing mechanism, it’s a communication system that allows people to signal their desires and expectations faster and better than they could otherwise.

Customary law doesn’t just communicate with living members of the group, as pricing does. It also reflects the desires of generations past, where statutory law reflects only the demands of one generation, the living. In that sense statutory law really isn’t democratic at all. Or, at least, not democratic enough. It only consults living citizens. It forgets the dead ones.

It’s to be expected… since statutory law is a product of pure reason.

And pure reason, Cartesian reason, is very good at technical and physical problems, but it’s not nearly as good when it’s turned on itself or on human life. Human brains aren’t made that way. We’re more likely to understand who and what we are by looking at things we’ve done in the past — which is what we call history — or things we’ve made — which is what we call culture, than by logic.

Man is, first of all, Homo faber (man the creator), and we understand him best by looking at his creations.

Customary laws work, in other words, because they come out of the history and culture of a society. They constitute verum factum (truth as an act), as the Italian philosopher Giambattista Vico wrote in 1710. 

“The criterion and rule of the true is to have made it. Accordingly, our clear and distinct idea of the mind cannot be a criterion of the mind itself, still less of other truths. For while the mind perceives itself, it does not make itself,” said Vico.

As more and more of our world is no longer made by us, we understand it less and less. We’re forced to fall back on theory and speculation, on isolated reasoning.

But thinking, as Vico pointed out, is hopeless when it remains isolated reason. It has to include practical wisdom and rhetoric. The Cartesian cogito ergo sum (I think therefore I am) is just not enough.

Vico liked to argue that the rise of pure rationality in history was one signal of a declining phase of human culture. He called it the barbarie della reflessione (the barbarism of reflection) and said that it characterized what he called The Age of Man.

This was the last phase of his cycle of civilizations. In the Age of Man, popular democracy would run amok and lead to tyranny and empires, which would end in chaos. Then the whole cycle would begin again, with the age of the gods. And so it goes on from eon to eon, said Vico. It makes you wonder. Does anyone ever learn?

Lila Rajiva

Excerpted from Minding the Crowd, Dissident Voice

 http://www.dissidentvoice.org/Dec06/Rajiva30.htm

Copyright, December 2006,  All Rights Reserved

Global Games: Great Apes’ Lives Threatened By Palm Oil Production

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“Hoping to unravel the mysteries of human origin, anthropologist Louis Leakey sent three young women to Africa and Asia to study our closest relatives: It was chimpanzees for Jane Goodall, mountain gorillas for Dian Fossey and the elusive, solitary orangutans for Birute Mary Galdikas.

Nearly four decades later, 62-year-old Galdikas, the least famous of his “angels,” is the only one still at it. And the red apes she studies in Indonesia are on the verge of extinction because forests are being clear-cut and burned to make”There are only an estimated 50,000 to 60,000 orangutans left in the wild, 90 percent of them in Indonesia, said Serge Wich, a scientist at the Great Ape Trust of Iowa. Most live in small, scattered populations that cannot take the onslaught on the forests much longer.

Trees are being cut at a rate of 300 football fields every hour. And massive land-clearing fires have turned the country into one of the top emitters of carbon.

Tanjung Puting, which has 1,600 square miles, clings precariously to the southern tip of Borneo island. Its 6,000 orangutans — one of the two largest populations on the planet, together with the nearby Sebangau National Park — are less vulnerable to diseases and fires.

That has allowed them, to a degree, to live and evolve as they have for millions of years……..”I am not an alarmist,” says Galdikas, speaking calmly but deliberately, her brow slightly furrowed. “But I would say, if nothing is done, orangutan populations outside of national parks have less than 10 years left.”

More from  from AP here.

Comments:

Having often had to face families of aggressive, prowling monkeys on the way home from school, I’m firmly on the side of man when he goes mano a chimpo for survival. But there’s no reason to despoil the sacred heritage of nature when survival is not the issue. Land usage – part of the commons – is something that can be subject to government intervention, in my opinion.

I know this sounds anti-libertarian. It isn’t really, because dogmatic libertarianism in these areas ends up destroying its own foundation.

When land is ravaged by massive unrestricted development and speculation-driven usage (think of the vast over-cultivation of soy in Argentina that’s led to the depletion of its soil), that has to encroach on the liberty…indeed survival… of everyone on the planet.

Again, the problem is size. Libertarianism simply doesn’t work for a one-world society.

The answer to that is not to go collectivist. It’s to get rid of the idea of  a  one-world society. We want as many worlds as possible.

The socialists like to say, a different world is possible.

I like to say, a different world is impossible.

Because there’s no such thing as a world. Once you start thinking of a world you want to change, you’ll end up with the same problems  – only somewhere else.

Wall Street Powerhouses Invested Alongside Madoff

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“Primex Trading’s Dark Pool Operations

There has been much debate among Wall Street veterans as to why major European investment banks suffered serious damage from the Bernard Madoff Ponzi scheme while our biggest U.S. investment banks escaped unscathed.

For the past two decades, Wall Street watchers could count on four U.S. firms to land in the middle of every securities scandal. From Nasdaq price fixing to fake research to rigging the IPO markets to peddling toxic subprime assets, one could rest assured that Citigroup’s Smith Barney, Morgan Stanley, Merrill Lynch and Goldman Sachs would be heading the lineup. Their complete absence from the greatest Ponzi scheme in history raises the question: what did they know and when did they know it?

The answer may reside in a pentagonal structure created in 1999 to serve the interests of a Wall Street cartel.

On September 14, 1999, it was officially announced that Citigroup’s Smith Barney, Morgan Stanley, Merrill Lynch and Goldman Sachs had partnered with Bernard Madoff to compete head on with the New York Stock Exchange in a venture called Primex Trading.

Madoff had bought the rights to a new technology called Financial Auction Network (FAN) created by Christopher Keith, a 17-year veteran of technology creation at the New York Stock Exchange (NYSE). Mr. Keith had retired from the NYSE and started a technology think tank in lower Manhattan in the early 1990s called Exchange Lab. FAN was one of the early technology offerings and the rights to develop it were bought by Madoff. The firm that emerged was Primex Trading, a division of Primex Holdings. (Primex Holdings holds two patents and may be part of those secret Madoff assets the court won’t release to the public.)

In addition to harnessing the brains of Mr. Keith from the New York Stock Exchange, Primex hired Glen Shipway, the Executive Vice President of the over the counter stock market, Nasdaq, whose duties had included market surveillance of broker dealers like this gang of five.

The partners made a big splash in the press at the time, extolling altruistic intentions of getting better prices for their customers in an electronic version of the New York Stock Exchange. Here’s an excerpt from the New York Times on September 19, 1999:

“Primex is aiming to be an electronic version of the New York Stock Exchange. Participants will not only be able to buy and sell stocks at prevailing market prices, as they now do through many traditional and electronic exchanges, but also interact openly with one another — in effect, bargain — to find the best prices possible. ‘I think the fact four of the world’s largest securities firms have backed this system suggests that it brings something new and unique to our ability to obtain the best execution for our customers,’ said Bill Hart, a managing director in equity trading at Salomon Smith Barney.”

In reality, a very different motive was at work. One of the best kept secrets from the public is a benign sounding process on Wall Street called internalization. That’s where broker dealers like Madoff’s Primex partners match their customers’ buy and sell orders in-house rather than sending them off to the New York Stock Exchange or some other transparent stock exchange. The entities that engage in this trading process are called dark pools. (Recall that “pools” were the same secretive creatures that rigged the stock market leading up to the crash of 1929.)

While the investing public was being served up visions of Primex creating a more transparent and fairer pricing market mechanism, the goal for Madoff’s partners was to legitimize the highly questionable trading practice of internalization….”

— Pam Martens at Counterpunch.

Pigs At The Trough

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What regret can you have? I have given you life –
Take the sharp end from a thorn and the edge from the knife,
The ache from the leg and the back, and never old age,
And from the enjoyment of sin remove me the wage,
Let me devour the surplus without any work,
Let every error of choice be an innocent quirk

I have given you life to enjoy all the beauty I make –
Let me use up what I have and undo the mistake,
Let me have health in abundance without any pain,
And if I abuse it permit me to have it again,
Let me have privilege, rank without any duty
Let me loot, pocket and steal without calling it booty

Let me throw craps for a living, come seven eleven,
Let me take chances and gamble my way into heaven,
Let me be good if good is the way to get in,
But if there’s no heaven there’s nothing as pleasing as sin,
Let me live, Master, this life, and live it forever,
Not as you are little piglet, and so I say ‘never’!

Not as you are little pig, as you grunt at the trough,
A windfall of apples I gave you, desist and be off!

“Not As You Are” –

Pavel Chichikov at Catholic Exchange.

Vandals At The Gate – Updated

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“We won’t cede an inch to squeegee men, turnstile jumpers, and graffiti vandals who breed a sense of disorder and lawlessness,” the mayor said.

That’s Mayor Rudi -er – Mike Bloomberg, according to this piece in the NY Daily News, announcing his plans to step up law enforcement against “quality of life criminals” in the city.  He’s going to go after the “dirty dozen” in this bunch, he says.

Brave lad.  That’s what I’m lying awake agonizing over.  Some one jumping a turnstile.

 A couple of hustlers with buckets and squeegees. That’s what’s rmenacing the republic and breeding unrest in the population.

(Meanwhile, says Alan Nairn, in an interview with Amy Goodman  on the appointment of the genocide-supporting Admiral Blair  (I posted it recently), “Mayor Bloomberg of New York just went to Israel and gave a press conference where he said that the international law of proportional response was stupid. He rejected it.”

It’s not lawless for a state to retaliate out of all proportion when the state is legally and morally in the wrong, but hustling for pennies on the street is a monstrous crime.

Please.

I don’t know about you, but this is what cast a pall over me when I rolled out of bed this morning:

1. What was the point of the last 4 years of my life writing and petitioning against the Iraq war, torture, and financial criminality?

2.  How come I have to prove myself on a job but no one in Washington or New York does?

3.  Is this country revving up for more war and if so, when, where, and for how long?

4. Why work and save? Just get a bail-out. 

5. Why the heck can’t I get Tor to work on my computer and anyway, aren’t they turning over stuff to the government?

6.  Why doesn’t this site (www.mindbodypolitic.com) show up on google searches but my wordpress blog does? [this site shows up on altavista and yahoo)

7. How do you make yourself invisible without getting the powers- that-be interested in you.

8.  What’s the use if the credit bubble crashed but the bubble in disinformation’s still going strong…

 9.  How soon before the government clamps down on the net and  confiscates gold… and should I even bother buying physical?

10. Where do you escape to? There’s no place to run from the kleptocracy….

You’ll notice that squeegee men didn’t figure once. Not even in a supporting role. 

The Madoff And Pony Show…

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“Each month, Madoff sent out elaborate statements of trades conducted by his broker-dealer. Last November, for example, he issued a statement to one investor showing he bought shares of Merck & Co Inc, Microsoft Corp, Exxon Mobil Corp and Amgen Inc among others.

It also showed transactions in Fidelity Investments’ Spartan Fund. But Fidelity, the world’s biggest mutual fund company, has no record of Madoff or his company making any investments in its funds.

DISCREPANCIES

“We are not aware of any investments by Madoff in our funds on behalf of his clients,” Fidelity spokeswoman Anne Crowley said in an e-mail to Reuters…”

Another “Mobs” Review On Seeking Alpha

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“I have a confession to make. Twice while reading the book Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, by William Bonner and Lila Rajiva, I felt a compelling need to refer to the first few pages and refresh my memory on when the book was published. For your information, it was published in the year 2007 (I believe in August) and well before the mega crisis and financial blowup of the second half 2008 unfolded. If not for anything else, then you have to read this book for its clairvoyance alone.The authors have been bang on target painting what was then a potentially scary scenario which ended up becoming one of the biggest blowups in the financial history of the world as it unfolded. They deserve credit for having faith in their contrarian doomsday vision when everyone else was going all out buying mortgage originator companies and expanding prop desks funded by banks’ leveraged books without any due regard for the inherent risks…..”

Atim Kabra on Seeking Alpha

Comment:

It’s nice to be complimented about abilities…even if you don’t have them! And I can’t say that a little green man popped out of the corner to tell me to do it, either.

Clairvoyant? Who would want to be….since the essence of playing Cassandra is you’re doomed not to be believed at the time it counts.

What’s more, we weren’t the only ones who predicted a credit crisis and global financial collapse.

I found out recently that economics professor and author Ravi Batra also did – only so frequently that by the time it actually came around, he’d moved out of the spotlight. (His doomsday books are 15 years old).

Austrian-oriented libertarians have been warning about an impending train-wreck for years. Seems like it didn’t get through to the mainstream press – which, of course, had every reason not to want it to come through…

But ours is the most wide-ranging analysis and we were certainly the first ones to get a best-selling book out about it. [I should correct that – one of the first ones….I see that Peter Schiff’s Crash Proof and Michael Panzner’s Financial Armageddon were out in April that year. So was Bookhaber’s  “industry insider” peek into hedge-fund risk management that I posted about earlier. But I didn’t get to read them and only skimmed Schiff’s and Bookhaber’s book after the publication of ours. And I still think ours was the most wide-ranging…and spookily timed – Mobs came out exactly as the first banks started collapsing.

And, even if I do accept credit only for doggedness, not prescience, it’s true that I’m mildly fey.  I sometimes feel I was led to this project by a series of events that go back to 2001…. by strange coincidences, uncanny repetitions, chance encounters where the past and the future were entangled. 

So, thanks for the thumbs up, Mr. Kabra – maybe I’ll pass it on to the green man.

Financial Follies: Eurozone Debt Near Unsustainable

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“In Portugal, one in every €8 of economic turnover goes overseas to settle its trade deficit. Rome owed 109% of Italy’s annualized GDP on the latest data.Today the Irish prime minister, Brian Cowen, warned trades union leaders that without public-sector pay cuts and job losses, he may seek a rescue by the International Monetary Fund (IMF).Dublin’s budget deficit is now running at 6.2% of Ireland’s annual economy, and the cost of credit-default swaps on its sovereign debt has now risen 7-fold since Sept.Default insurance on serial bankrupt.Mexico, in contrast, has fallen according to CMA Datavision.”

Adrian Ash at Bullion Vault

The comeuppance of the Euro was long overdue, which is why I’ve suspected that the short term prospects of the dollar are better than most give it credit for. In the mid-term, its prospects are 50-50.

In the long term, it’s down. But then, in the long-term, to paraphrase someone, all currencies are dead anyway.

Asia-Europe Shipping Rates Plunge to Zero

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“Idle ships are now stretched in rows outside Singapore’s harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes.

It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction.

The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the Second World War. This appears increasingly certain with each new batch of data.

Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc – possibly 12pc. Trade flows grow 8pc in an average year. ”

Says Ambrose Evans-Pritchard at The Daily Telegraph, in a piece on the drop of Asia-Europe shipping rates to zero.