I had already done a lot of reading and conversations for years on economics for everyman, finding the best stuff in a recent series of novels by Neal Stephenson (the Baroque Cycle), and have written my own polemic on the Lords of Finance in my book Uncommon Sense*: the degeneration, and the redemption, of political life in America.
Anyway, I've been reading in all the above (WSJ etc.) about international monetary liquidity (there is a huge amount of cash becoming credit out there, fueling all kinds of financing and refinancing). Some folks are worried about this as maybe the next big and worst bubble (after the dot.com bubble and now the housing bubble). A bubble by the way means that values, in the market place where stuff is bought and sold, are driven up by completely unjustified speculation to absurd heights (lots of hot air, thus the image: bubble.
When bubbles burst (especially if they burst fast, economies might collapse. In the case of the housing bubble, so far so good (that's if you read the cheerleaders on the editorial pages of these magazines, which are the same cheerleaders that said dot.com buying and selling was fine). For those out of the loop on that one, a lot of money was poured into new dot.com businesses (the Internet was the next best new thing), and mostly what these new companies offered came to be known as vaporware, i.e. a product they imagined they might produce in the future. A lot of this imagined product never got past the drawing board, the companies failed, and the shareholders who followed the cheerleaders lost a lot of money.
Next the cheerleaders thought that home buying and selling was so good, people were borrowing money to buy second and third homes they didn't need, in order to cash in on the rising prices in the housing market. The housing market was also driven by a lot of that famous liquidity (huge free cash reserves internationally), which was invested in companies that specialized in financing questionable housing deals (loans to people who ordinarily wouldn't qualify - the so-called: subprime market). Sort of like Star Trek I guess, with its imaginary subspace communications.
Anyway the point of all this is that maybe if we sum up this kind of thinking (typical in financing circles), we might come to the conclusion that people do a lot of speculation, buy and sell stuff using imaginary ideas, and that this has been going on for a long time. One thing it means is that all these people doing this believe in illusions (the never ending rise in dot.com potentials, and the never ending rise in the housing market).
Okay, back to liquidity.
Lets ask first if the liquidity that seems to be fueling all this international buying and selling among hedge funds, investment banks, and everyone who thinks they can take on some debt and invest on credit - all this liquidity: Is it real?
I don't think so. I think this is the big one, the bubble that when it burst pushes Western Civilization into joining everyone else in the so-called Third World (except of course the Lords of Finance who see this coming, helped it along, and are creating private enclaves, private armies, and all kinds of goodies this fake money they've accumulated can provide).
Did he just say FAKE MONEY?
Yes he did. Lets look at history. The huge appearance of massive international liquidity (all kinds of money available to lend) comes about 80 years after the creation and promulgation of Central Banks (in the good old US of A, this is called: the Federal Reserve). With Central Banks coming into existence, this means that currency no longer is created by Nation States any more, but by the Banks themselves, and when Nixon (along with lots of other leaders) took the dollar (a leading currency) off the gold standard, then currency no longer represented anything but air. Money came into being because Central Banks created it, not because some fundamental transformation of a nature product into something useful that someone might buy led to currency being exchanged for an actual thing.
When we use currency to buy something we need that is a transformed nature produce or an actual service, money then plays its destine role as the blood stream of capital in the economy. Something living, a thing such as a bushel of corn, changes hands, and the means of liberating it without needing to barter, is money. Money as capital then moves around and is used to make all of us little capitalists.
With Central Banking, money comes into existence independent of an original transaction of capital for a needed thing. Money at that point has no meaning, and moreover those inside the Temples of Mystery of Money know this. At the same time knowing this gives a very few people a great advantage, because everyone else assumes that the currency in circulation has meaning (sometimes this is called investor or consumer confidence). What's happened is that we've been woven into a belief that is false, but which can be taken advantage of (at least for a time).
Now we are at the end point of that illusion. International liquidity exists because the amount of air money created all over the world by Central Banking is peaking. The nature of the financial system is that the air money rises (its all hot air remember), and if you have positioned yourself at the top, then it rises into your hands (an investment bank or a hedge fund) and you get to play with it on a massive scale, pumping air money into companies that otherwise would fail (badly managed, selling things people don't really need, propping up dictators who will sell you their own people's natural resources for a song, etc.).
Massive Bubble Time, folks, and you'll read about it on the economic sports page of your local paper (called the "business section") whenever there is a reference to international liquidity.
