Paper money eventually returns to its intrinsic value – zero. And we have known since the earliest days of the republic exactly where it would lead us. Jefferson told us long after he left office that, “the evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause and consequences, and silence by their authority the interested clamors and sophistry of speculating, shaving, and banking institutions. Till then, we must be content to return quoad hoc to the savage state, to recur to barter in the exchange of our property for want of a stable common measure of value, that now in use being less fixed than the beads and wampum of the Indian, and to deliver up our citizens, their property and their labor, passive victims to the swindling tricks of bankers and mountebankers.”
The problem of course is that our citizens are never generally and radically instructed in their cause and consequences, or if they have been the other shoe has dropped and, as Alexander Fraser Tytler put it in the 18th century, ” A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.
“The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
“From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.”
One of the principal components of the process is the transition of crimes to government policy. There is no doubt that had he lived Kreuger would have been tried for fraud and should have been hanged as a swindler – as should have been Ken Lay and Bernie Madoff. However a closer examination of the facts shows that government bonds – especially in the light of rising deficits – are nothing more than a Ponzi scheme and things that are a crime in the private sector become enshrined as policy when practised by the government.
At the end of the Second World War, during the Japanese war crimes trials, the defense maintained that the allies had merely duplicated Hitler’s wolf pack tactics in their submarine warfare and that it was accordingly unfair to punish the Japanese for using the same tactics. The International Military Tribunal for the Far East had a charter that provided that evidence against the accused could include any document “without proof of its issuance or signature” as well as diaries, letters, press reports, and sworn or unsworn out-of-court statements relating to the charges” and that “The tribunal shall not be bound by technical rules of evidence … and shall admit any evidence which it deems to have probative value.” In other words the governments of the allied nations simply took a page from Stalin’s manual of justice[sic] and, as the victor, applied them to hang people it had been unable to defeat.
This would seem to indicate that we turned the corner from abundance to complacency about 1945 and seem to be in the throes of going from apathy to dependence right about now. I am less worried about leaving my sons and grandchildren debt than I am about seeing them go from dependence back into bondage.
The match king : Ivar Kreuger, the financial genius behind a century of Wall Street scandals New York : PublicAffairs, c 2009 Frank Partnoy International finance Corrupt practices History Hardcover. 1st. ed., later printing. xiii, 272 p. ; 25 cm. Includes bibliographical references (p. -235) and index. Clean, tight and strong binding with clean dust jacket. No highlighting, underlining or marginalia in text. VG/VG
At the height of the roaring ’20s, Swedish emigre; Ivar Kreuger made a fortune raising money in America and loaning it to Europe in exchange for matchstick monopolies. His enterprise was a rare success story throughout the Great Depression.
Yet after Kreuger’s suicide in 1932, the true nature of his empire emerged. Driven by success to adopt ever-more perilous practices, Kreuger had turned to shell companies in tax havens, fudged accounting figures, off-balance-sheet accounting, even forgery. He created a raft of innovative financial products – many of them precursors to instruments wreaking havoc in today’s markets. When his Wall Street empire collapsed, millions went bankrupt.
Frank Partnoy, a frequent commentator on financial disaster recasts the life story of a remarkable yet forgotten genius in ways that force us to re-think our ideas about the wisdom of crowds, the invisible hand, and the free and unfettered market.