And Global Warming

1
And Global Warming
Manufacturing Money
Dr David Evans
2
Fractional Reserve Banking

• Middle Ages
• Base Money Gold
• Bank Money Receipts for gold
• Today
• Base Money Cash and Bank Reserves
• Bank Money Receipts for base money
• All just called Money.
• Fractional Reserve banking Banks issue about 10
  times as much bank money as there is base money

3
How Money Is Manufactured

• Base Money
• Print cash on a printing press
• Put number in a new account at the central bank
  (monetization)
• Bank Money
• Put number in a new account at a private bank
  (this is how most loans are made)
• Bank money amplifies up base money by about 101.
• There are safeguards, but not perfect.
• System gives some systematic advantage.

4
Banks-Government Partnership

• Modern money is a dual creation of banks and
  government
• Bank money manufactured by private banks is
  national currency, backed by government
• Government can borrow as much as it wants
• Government coordinates and oversees private
  banking

5
Rise of the Paper Aristocracy

• Started as goldsmiths in the Middle Ages, as
  tradesmen
• Found they could over-issue paper that
  represented gold
• grew rich, politically powerful
• Found the key to the financial universe people
  would use their paper for money!
• Eventually dispensed with gold and all its
  constraints (1914 - 1971)

6
The Paper Aristocracy

• People who control and manufacture paper money
  those who know how to work the system of paper
  money, the banks, and some of government. The
  banking class.
• They rule the financial universe with a money
  system based entirely on paper.
• Runs the banks and government financial policy
  (as recently proved by the GFC!)

7
Banking Isnt Secret, But No One Tells You How It
Works

• Banking thrive behind a wall of complexity,
  confusion, and misdirection
• No actual secrets, just hard to understand
• Banking is a con that is, not coincidentally,
  just a little too complicated for the average
  person to grasp unless they really try. Most of
  the time they just cannot be bothered, because
  the system appears to work well enough.

8
Is Banking Fair?

• Some folks have the power to manufacture money
  out of thin air and, miraculously, they do not
  work particularly hard and they have lots more
  stuff than most of the rest of us.
• Rent seekers, definitely. Parasites?
• If everyone understood what really goes on, who
  are the winners and who are the losers, it would
  be outlawed in an instant. It used to be.

9
The Bubble, 1982 ?

• Bubbles are due to excess money
• This recession is different from all since 1929.
• What happens when the central banks simply keep
  interest rates low until something breaks? 1929,
  2011?
• We simply are running out of borrowing
  capacitythere just isnt enough income to
  service more debt, and the world is running low
  on unencumbered collateral.

10
The Debt-To-GDP Ratio

• Modern (bank) money is debt
• Size of money measured by total debt
• Size of economy measured by GDP
• Size of financial bubble measured by the
  Debt-To-GDP ratio
• This is the financial story of our times

11
Irrational Exuberance
GFC
Tech Crash
Clinton Strategy Starts
1987 Crash
Bubble Start
Fiat Base Money
235, 1929 peak
Karl Denninger, http//market-ticker.denninger.net
/archives/1427-Weekend-Stupidity-Roundup-Debt-On-P
arade.html
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The Clinton Strategy

• Clintons Problem Government spending
  initiatives constrained by bond market
• Solution Surreptitiously
• Lower Long Term Interest Rates
• Lower the CPI
• Suppress the Gold Price
• Result Lower short and long term interest rates
  ? the biggest, deepest, longest bubble ever

13
Irrational Exuberance
GFC
Tech Crash
Clinton Strategy Starts
1987 Crash
Bubble Start
Fiat Base Money
235, 1929 peak
Karl Denninger, http//market-ticker.denninger.net
/archives/1427-Weekend-Stupidity-Roundup-Debt-On-P
arade.html
14
Free Markets Are Now Broken

• Each part of the Clinton strategy had to be
  clandestine, designed to mislead the public and
  to interfere with the normal operation of
  markets.
• Free markets find and set prices most
  efficiently, free of political influence.
• Long bonds, short bonds, stocks, housing, gold
  and silver, agricultural, oil?,
• There are no free markets anymore, just
  interventions.

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What Next?

• 1995 2007 Extra debt and money added 1 or 2
  to GDP, every year.
• At least 15 - 25 of growth was essentially
  borrowed from the future.
• As debt-to-GDP ratio returns to normal, all
  borrowed GDP growth will be paid back
• ? give up 15 to 25 of GDP
• Double depression!
• Fast or slow?

16
Irrational Exuberance
GFC
Tech Crash
Clinton Strategy Starts
1987 Crash
Bubble Start
Fiat Base Money
235, 1929 peak
Karl Denninger, http//market-ticker.denninger.net
/archives/1427-Weekend-Stupidity-Roundup-Debt-On-P
arade.html
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Special Situation in the USA

• The European paper aristocracy conquered all
  other countries long ago.
• The American Revolution was mainly about whose
  money to use.
• The US was free of the paper aristocracy for most
  of 1776 1913. The biggest economic miracle in
  human history, free of the predations of any
  aristocracy.
• The US Constitution was designed to prevent
  takeover by the paper aristocracy, but has failed
  because it was subverted.

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The US Dollar

• The USD is the worlds reserve and trading
  currency.
• The single biggest export of the USA for the last
  few decades has been US dollars.
• The rest of the world has been sending the USA
  real goods and services for years, and receiving
  paper money in return.
• Ships travel to US full, return half empty
• This privilege is ending US living standards
  will fall.

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Conversations with Central Bankers

• Don Brash Governor of the Reserve Bank of New
  Zealand, 1988 2002
• Jerry Jordan President of the Federal Reserve
  Bank of Cleveland, 1992 2003
• CPI targeting was myopic
• Should have also targeted asset prices
• Brash thought gold a good investment now
• Jordan saw tough times ahead

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Emissions Trading is the Latest Paper Game

• The plan
• Manufacture emission credit permits
• Trade them between big financial companies
• Compel the rest of us pay for them (indirectly)
  by producing real goods and services.
• Ultimately
• Government will extract a tax from consumers
• The big financial companies will take a cut along
  the way.
• Government will control carbonand life!

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Follow the Moneyin the Climate Industry

• Skeptics and big oil
• 2 million per year on anti-AGW
• Big government and greens
• 6 billion per year on AGW
• Finance industry
• 120 billion traded last year
• 1 trillion by 2012 (gt oil), exploding!
• 1 - 5 will be 10 - 50 billion per year

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Why Not a Carbon Tax?

• A carbon tax that replaced some or all income tax
  would conserve non-renewable resources and reduce
  emissions
• Letting banker trade the emission permits is just
  stupidwe already pay them too much. Its a red
  flag alerting us the real nature of the emissions
  trading schemes.
• The paper aristocracy would not benefit from a
  carbon tax. Governments arent offering carbon
  taxes. Isnt that curious?

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An ETS is a New Fiat Currency

• Six structural similarities
• Like base money, emission permits are created out
  of thin air.
• Like modern money, carbon emission permits have
  no intrinsic value, yet they are given value by
  government.
• Like bank money and foreign exchange, carbon
  emission permits will be traded by big financial
  organizations for profit.

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ETS New Fiat Currency 2

• Like modern money, carbon emission permits will
  be manufactured and sold to the public by a
  partnership of government and financial firms.
  The bureaucrats get control, the financial firms
  get easy profits from captive clients, and you
  get to pay and do as you are told.
• Like banks, the permit traders will lobby
  politicians to protect economic privilege.

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ETS New Fiat Currency 3

• Like governments mismeasuring CPI and
  unemployment, governments will mismeasure global
  temperature to justify taking action against
  carbon dioxide.

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Who Benefits from Emission Trading?

• Trading favors the well-informed and those who
  can move the market, so big financial firms will
  routinely plunder the pockets of smaller market
  participants.
• The rest of us, one way or another, will pay for
  both the emission permits and the trading
  profits.
• Compared to a carbon tax, only financial traders
  benefit from an ETS.

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Bogus Government Statistics

• An important method that governments have for
  dealing with problems is to mismeasure them.
• 1970s Inflation, unemployment
• Governments will soon make some global agreement
  restricting carbon emissions, which will lead to
  taxes, trading profits, and maybe some early form
  of world government.

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Bogus Government Statistics 2

• To justify all this, there will need to be
  rising global temperaturesbecause we are
  guaranteed decades of rising carbon emissions as
  the developing world industrializes.
• Welcome to the future of systematic cheating of
  temperature data to justify taxes, profits, and
  world government.
• Its already started!

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Bogus Government Statistics 3

• 89 of official thermometers in the USA violate
  siting requirementstoo close to an artificial
  heat source!

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Bogus Government Statistics 4

• gt50 of official temperatures worldwide are at
  airports, near radiating heat sources like
  tarmac, often in jet exhaust

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Bogus Government Statistics 5

• Oceans temperatures measured by Argo network or
  diving buoys that radio back results, since 2003.
  Showed ocean cooling, so they omitted the cooler
  buoys.

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Bogus Government Statistics 6

• Hockey stick turned out to be based on one very
  unusual tree in Yamal in Russia, and some biased
  statistical processing.

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Bogus Government Statistics 7

• How would anyone really know if global warming is
  occurring?
• People don't usually notice changes as small as
  0.5C, the amount of global warming over the last
  century
• Any perceived cooling can be explained away as
  just regional variation, and its warming
  elsewhere
• It's beautiful this scam could go for decades

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Manufacturing Money
and
Manufacturing Money, and Global Warming
Both papers available at

• sciencespeak.com