Monetary Policy Gone Wild – When The Best Offense Is Defense

The day is coming when a single carrot freshly observed will set off a revolution.

-Paul Cezanne

I’m on a group email list, an old fashioned list-service of mainly technology and science geeks.

While there are lots of witty, seemingly intelligent and often emotional debates on all manner of issues, to my dismay there is rarely a significant discussion about of financial or economic issues.

Recently, to my shock and horror, one of the members forwarded what was actually a marketing letter featuring the author Jim Rickards. The sales letter was a clever re-telling of Rickard’s experience as a consultant for the CIA and Pentagon during a financial war game simulation.

At first, I could not allow myself to believe it. I thought perhaps it was some new sophisticated spam hijacking my email from the list-service.

Rickards’ experience formed the core of his first book, “Currency Wars”, an excellent expose of the complex and largely surreptitious machinations of global finance as directed by central banks and monetary funds.

My hope (fear gone bad because I should no better at this point) was that the sales letter would inspire a deeper investigation or that it might inspire a more explorative narrative. That was not the case.

In fact, the conversation ended with an undramatic, “I would hope they were working on protecting us from all that!”

Generally, there is a sense that some immoral crime is being committed. Matt Taibbi, of Rolling Stone Magazine notoriety, has captured a large segment of what might be characterized as the Occupy Movement – the Left’s answer to the Tea Party.

(Notice that both movements were quickly diffused by the corporate-state.)

Nevertheless, the general consensus driven into those who are just awake enough to recognize the problems is that these issues stem from very tidily swept together systemic issue – that of capitalism, for example.

The view is that capitalism is the problem and that nothing can really be done about it except for more regulation.

Of course, it’s always a little more complicated than that. Definitions are funny that way. A classical conservative would not recognize himself in the ultra-nationalist of today’s neo-conservative.

I tried gracefully to point out some of the issues – and encourage people to read the book. It should be a part of the library of any-level student of economics.

In the book, we learn that even when the scenarios were clearly presented and played out in the war games, they were still misunderstood because Western Central Bank intervention was the direct cause. And it all comes back around to the realization that it was our policy that was creating the problem to begin with.

Failure of regulation in the midst of what has become a Wall Street takeover of banking and government financial policy has created the problems that make us perpetually fragile to crisis.

The monstrous market of derivatives and the opaque HFT-driven markets by which they trade and rely upon are understood by no one individual or group body – from within or from a regulatory perspective.

That the CIA has been preparing for this crisis is no doubt the assumption.  Rickards characterizes the results from the experience as revealing the sheer level of ignorance to the point of denial.

At best, the powers that be remain ignorant, not because of willfulness but partially out of helplessness and the darkness of these markets. But we should be wary of the distinction between aggression and preparation.

The vulnerabilities point right back to the source of the issue.

In reality, they are totally unprepared.

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