The Money Valve IV

by Reverse Engineer, Doomstead Diner

Discuss this article at the Economics Table inside the Diner
Supporter of the Sustaining Universal Needs Foundation

Follow up:

In the final article of examining the nature of the Money Valve of Central Banking, we will look at the end stages of the Waste Based Economy, along with a few of the parameters not included on what are quite simplified diagrams to make the total flow of downhill energy consumption apparent. It is quite possible to dissect many of these areas further, which I may do at a future date, but the global implications are obvious just from this level of analysis.

In Part I, we just looked at gross energy flow mediated by the Money Valve with this diagram:

Click to enlarge

The basic flowchart turning resources into waste through the Money Valve of Central Banks is straightforward and easy to understand. However, it does not look at all the various Feedback Loops that are engineered into the system in order to keep it operating. Most notably what is not included in the diagram is how Goobermint and the Military are involved, or how taxation and interest serve to capture wealth out of the system for the Elite class of society.

This diagram is basic, but it doesn’t show how the various parts of the Machine of Industrial Capitalism work in synergy. To elucidate that, I set up a Web Connections diagram to look at the most important connections and relationships in this sort of economy. This diagram itself is simplified, there are many further levels you could go to dissecting up the whole economy, but IMHO at a certain point this becomes a waste of time, because the conclusions are obvious just from this set of parameters. Here is the basic Web we are working with here:

Click to enlarge

Now we can take a look at the last waypoints in the system before the Energy which once was underground for a few million years ends up as Landfill where it will rot for the next few million years, until the Sun goes Red Giant.

12- Factories

I put Factories separate from Industry because they are not precisely synonymous, Industry is everything that surround the production and sales of goods and services, whereas Factories are just the physical infrastructure used  to produce the goods. Factories are only a part of an Industry.

Factories are important separately though because they are what require the maintenance, and they are what produce the most pollutants in the waste from production, and of course their placement around the world determines who gets a Job in some 3rd World country now and who does not. Few people here in Amerika work in Factories anymore, our Industry is Credit production, and generally speaking we continue to survive by living off debt issued to ever more countries around the world, which of course is irredeemable debt they will never be able to pay off, but who cares? We’ll just keep rolling it over and issuing out MOAR debt. As mentioned before, this keeps working until it doesn’t.

13- Products

The End of the Line on the “productive” end of this sort of economy, which brings to your doorstep via order on via Fed-Ex truck everything from Iphones to Netflix Movies. Condoms to Viagra and beyond. Every last one of these products though ends up as Waste in some Landfill somewhere. Gotta love that Newzspeak; call it what it is, a DUMP! Nothing is really “built to last” because if it was, the company making the thing couldn’t stay in biz and sell more of them! Everything has a Planned Obsolesence built in, from Carz to Iphones. Some things have slightly longer lifespans then others, for instance the original Verrazano Narrows Bridge lasted about 60 years, but now that one is destined for the Dump as so much Scrap Metal and Concrete. All the McMansions you live in are Ticky Tacky stuff that won’t last more than a year or two once the lights go out. All the Skyscrapers are useless Phallic Symbols once the Elevators no longer function and you can’t pump water up more than 6 stories to flush the toilets. There isn’t a single thing produced by Industrial Culture besides perhaps some Lodge Logic Cast Iron Cookware that might have a lifespan of more than a Century here in it before it is also Waste. Once it is in the Dump and the energy is not there to replace it, it is gone for good.

14- Waste

I could have shoved a Waste Bubble along every connection in the Network, there is Waste every step of the way here in the downhill flow of energy. This is the case with every machine that operates, it is basic thermodynamics. However, this would have made an already pretty cluttered network diagram even more cluttered, and is unnecessary. So I just sprinkled 3 Waste Bubbles around the periphery to demonstrate that in the end, this is where everything ends up. People are sold here that we have a perpetual Motion Machine, a Virtuous Cycle, yadda yadda, but this is complete bullshit. Energy gradient runs down below the ability of the whole machine to overcome the Friction involved, it seizes up. Period. There is no Free Lunch.

Missing Stuff?

Once again, you can go on endlessly making these sort of things more complex, trying to chart everything going on in the economy. Even trying to KISS it here, I end up with a freaking 6000 word dissertation. A few Notables here to mention though not in the Diagram.


Nowhere do I really show all the Jobs that accrue in the economy, and this is the way the Debt gets sprinkled out for people to buy the products, besides the Social Welfare System and Credit Cards. There are some types of Jobz available for almost every Bubble in the Network. Even the Waste Bubbles have a lot of Jobz, Sanitation (Garbage) men, Homeless Bottle Collectors for Recycling, you name it. Generally a low paid profession of course.

Thing is, as the economy begins to grind to a halt, the jobz disappear, initiating a positive feedback loop through the whole system. Less Taxes get collected, less products are bought, etc. Issuing gobs more debt slows the process some, but it does not stop it. Eventually at some node you will get Critical Mass here, and this locks up the whole machine. Suffice it to say that Jobz are an outcome of the whole economy, and they only exist as long as the energy is there to run such a large economy. Globally speaking, it is not there, which is why there is so much unemployment through places like Spain and Greece already. Coming Soon to a Theatre Near You also.

B- Assets

All along the way as this economy developed, certain things were deemed as “assets”, like say your McMansion or a Skyscraper in NYC. Your Car also viewed as an “Asset”. During the Heady Daze when the economy was functioning, such assets could be traded back and forth regularly, House Flippers made money as Real Estate values inflated and Car Buyers could trade in the old model for a new one easily.

As we progress along here in collapse of the Industrial Economy, these all become what I call “Asset Class Sinkholes”. You can’t sell them because there are no buyers for them. A nice example of this on the grand scale are our friends Sears & Roebuck, now basically a Zombie REIT. Most of whatever is left of the Net Worth of that company is in terms of all the Real Estate it owns for all the stores in all the Malls sprinkled around the country. On the Balance Sheet, all those stores and their marked to make believe value are listed as Assets. This is ridiculous, they are all Liabilities requiring tons of maintenance, in many respects it is cheaper to keep them running as Zombie Retailers just because it is cheaper than Decommissioning them. Can they sell these stores to anybody? Nope. WTF is gonna buy them at the price they list on the balance sheet? Nobody. If they could get 10 cents on the dollar they would be lucky. The Banks don’t want to realize the loss though, so debt gets rolled over and you the last Sears Customer gets to park in an empty parking lot and shop in a store devoid of customers. For a while more here anyhow, but not in perpetuity.

C- Markets

Sometimes referred to as Bourses, aka the NYSE, COMEX,  Nikkei, DAX yadda yadda.

If I had included this, I then would have had to include also Pension Funds, Insurance Companies, Hedge Funds, etc. etc. etc. The diagram wasn’t complicated enough? The text wasn’t long enough? What? LOL.

Seriously, the so called “Free Market” is just a Casino run by the TBTF Banks and a subsidiary Bubble encapsulated in the #4 Money Valve Bubble. If you bust it out as separate, then you have to dissect the whole FIRE economy, which maybe I will do at a future date but this article was way too overloaded with information for the typical reader already. Long as you grasp it is a complete sham and totally manipulated, that is sufficient.

In fact over on Global Economic Intersection, I was taken to task by Per Kurowski, a former Executive Director at the World Bank for not detailing enough all the various ways in which the flow of money is sprinkled out into the economy through various asset classes. According to Per Kurowski, two days ago:

You talk and you illustrate your “money valve” as a traditional single flow valve. It is not.

By means of the risk-weighted capital requirements for banks, the regulators have construed an irrigation system in which there are ample channels for bank credit to flow to whatever is perceived as “absolutely safe” like housing, the infallible sovereign and the AAAristocracy and very narrow channels for bank credit to flow to “the risky” like medium and small businesses, entrepreneurs and start-ups.

If you do not redraw and rethink taking in consideration these hidden capital controls you will not get a real understanding of what is happening.

Basel III, risk based capital requirements, leverage ratio, distortions, and “The Drowning Pool”

Thing here is, while there are in fact many channels for the money (and the energy it proxies for) to flow through, there is only one end result to the channels, which is Waste, and only one source of Capital, Resources, most critically the Energy Resource in this design. My response to Per was as follows:

Yes, of course the system is more complex than I drew it out, but adding the complexity isn’t really necessary to understand the nature of the problem. Like tributaries of a major river, all those various channels controlled by the Global Banking system all lead to the same place, liquidity traps and asset class sinkholes, as I have referred to them in past articles.

Housing isn’t an “absolutely safe” investment, not when it was designed and built on a completely unsustainable suburban sprawl model. This is all mal-investment and in fact more waste, worthless flotsam of the industrial economy. “Infallible Sovereigns” are anything but that, countries built up on the industrial model are all themselves loaded with debt and destined for failure, and the infrastructure they built holds no more value than the McMansions the Consumers live in.

The folks who ran this system and built this machine either never really had a good grasp of the nature of capital and thermodynamic flows, or they were criminally insane. You can’t prop it up by issuing more debt on it, because per capita the resources aren’t there to extract at cheap enough price. The system either shrinks or it collapses, there is no way to “grow” it anymore, and anyone selling the idea of growth is using fictitious math to do it.

The shrinkage is absolutely apparent now just about everywhere, the only question is how rapidly this moves from the periphery to the core, and then what occurs when it hits the core. It could be modeled now quite well, there is enough data to do it, but nobody is doing this because it would generate a result nobody wants to hear, which is that the Industrial Civilization cannot continue onward.


Are there any solutions to the problems we face here now, even just on the economic level, forgetting for a moment about the climate issues and Nuke Puke issues? Well, 40 years ago there were quite a few solutions which might have worked, but overall the Will to Power prevented such things from happening. Nowadays, the choices are much more restricted. At this point, once the general economy fails, probably the only thing that functions for a while will be a Command Economy along with Enforced Rationing, but that will be hard to maintain for all sorts of logistical reasons. After that, it may be possible to get some local economies up and running on a vastly reduced scale, depending on local resources and so forth. You still always need a surplus of energy relative to populaton size for a monetary system to work. The better solution here once it shrinks enough is probably return to a Potlatch or Gift economy and dispense with Money. I don’t see any way for a Monetary system to function in a contracting economy.

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