February 09, 2023

LFP220 – Has A Century Of The Federal Reserve and 50 Years Off The Gold Standard Directly Led To Monetary and Social Disaster for the West? w/Mario Innecco (@maneco64)

54 minutes

Financial Services is all about Finance which is all about money. However almost all FS employees just accept “money” as a thing in the same way they accept gravity. Which is an odd thing if you think about it. Most of the time this wouldn’t matter but at turning points such as we are at now if can be disastrous, What money is and the regimes around it have varied widely over time and space. However it is true to say that Central Banks are a total exception – indeed the ne plus ultra of Big State Centralism (which is leading to so many problems).

Most FS-savvy folk know that a dollar when the Fed was created in 1913 is worth a few cents now – not a great testimony to the performance of an institution whose job is to “protect” the dollar. Few appreciate the intimate connection between monetary collapse and societal collapse. Examples however are legion with perhaps the best known being Rome (see what I did there re legion? :-D) , Revolutionary France or the Weimar Republic. As the fallout from those were respectively a civilisational collapse in the West that literally took centuries to recover from and two brutal dictatorships we would be well advised to pay attention to this otherwise recherché topic.

Central Banks are profoundly antidemocratic and as we saw in 2008 in the US and the UK chose – unlike Iceland – to bankrupt their people in order to preserve the wealth of banks and bankers bonuses. Prima facie they seem to correlate to the greatest frequency of wars ever, higher inflation and government spending and a de facto tax on savers and the elderly. At a minimum there is a difficult charge sheet for them to address.

Mario who runs the highly successful YouTube Channel maneco64 is a long term student of the history and current practice of monetary policy as well as like me decades ago having worked successfully in the City without having any real understanding of money per se.

Mario joined us a year ago in LFP197 to discuss “Money in the 21stC: Ballooning Printing of Fiat/QE/”MMT”/Govt Debt, CBDCs, Crypto, Dedollarisation, Hyperinflation, Gold”. In this episode:

Mario updates us on what has happened over the past year re money and multipolarity and where this is all going

we dive into an assessment of – simply put whether Central Banks Are A Good Thing

Mario outlines what he would do to rebuild society and money if in a parallel universe he was Governor of the Bank of England or indeed if western money and societies collapse and need to be rebuilt

Mario looks forward to how Gold is becoming more important in a multipolar World. Central Bank buying of Gold was at its highest level in 2022 since 1967 and China has started releasing its monthly purchases thereof

Topics discussed include:

Skiing this year in Switzerland

the moves in China re money, gold, exchanges over the past year

multipolarity growing rapidly – Xi’s visit to Saudi Arabia

comparisons of the UK losing global dominance of sterling and the US and the dollar right now

the catastrophic impact – even to the US – of its freezing of Russian Central Bank reserves in 2023 – a jumping the shark if there ever was one (even in WW2 the Reichsbank Reserves were not frozen…)

A thousand years inflation in England and the huge correlation between inflation and war and having Central Banks

who controls the Central Banks? The fact that opinions differ widely in itself is a great pointer to a democratic deficit

Central Banks and permanent war

cf sound money, small government, no wars, peace

permacrisis allows ever-more land-grabs by the State

the median wage of the bottom 10% in the UK is lower than in Slovakia

drilling in to the phrase Central Banks – the Bank of England’s role has eg varied hugely since its formation in 1694 – there are many possible roles of a Central Bank

the fractional reserve and creating money out of thin air existed vestigially from the start

“lumbering the debt from the monarch to the people” – prior to the BoE the monarch was personally responsible for war debts – the BoE was the start of a process of moving war debts from the accounts of the King who started them to the people who didn’t

monetary policy in Anglo Saxon England – shaving of coins and the role of Kings in producing standardised money

William Cobbett (see below) who 200 years ago wrote of how having a Central Bank makes fighting wars much easier

AHM Ramsey a critic of the BoE who wrote a critique forecasting doom from the possibility of Private Banks to create money out of thin air in an inverted pyramid

the origin of the expression “pay through the nose”

what is the opposite of having Central Banks? How would Mario operate as the Governor of the Bank of England?

multiple options at a detailed level

the opposite of monopoly is competition

abolishing legal tender laws

challenges of transitions between monetary policy regimes – and in large part hence Napoleon and Hitler

16thC as private money worldwide and the origin of the London money markets

comparisons between revolutionary France monetary situation and western economies today

Alan Greenspan, future Federal Reserve Chaiman:

“An almost hysterical antagonism toward the gold standard is one issue which unites
statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.” 1967

Mario’s Crystal Ball for 2023 and future trends

China and Russians motivation

Maneco’s sponsor shoutouts:

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and last but not least we don’t even have time to dive into the Bank of England’s role in the demise of PM Truss via its announcements and timings and handling of LDI issues for pensions where even US State Federal Reserve officials have commented that this is obvious (see The Critic article for example)!

Recommended books:

David Graeber’s “Debt – The First 5,000 Years” (amazon.co.uk) especially on the inevitable collapse of fiat monetary schemes going back to the Bible

William Cobbett “Paper Against Gold; Containing the History and Mystery of the Bank of England, the Funds, the Debt, the Sinking Fund, the Bank Stoppage, the Lowering and the Raising of the Value of Paper-money” (1815)

Cobbett wrote the first volume of 28 Letters while in prison for two years (1810-11) for opposing the flogging of some militia men. It it a history of how Britain funded the war effort against Napoleon by increasing the national debt, suspending the use of gold, and using paper money. Cobbett also chronicles the economic hardships imposed on ordinary working people by the disruption of trade, war taxes, and inflation of the currency.

Two key book references on the connection between monetary policy and social collapse:

“Fiat Money Inflation in France” Andrew Dickson White (free pdf)

“When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany” Adam Ferguson (amazon.co.uk)

And much much more

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By Tony Clark

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