by Reverse Engineer, Doomstead Diner Published this article on 08 June 2014
Discuss this article at the Economics Table inside the Diner
In Part I of the Money Valve, we examined the basic downhill flow of energy in the Waste Based economy of Industrialization, managed in it’s downhill flow by the Money Valve of Central Banking.
The basic flowchart turning resources into waste through the Money Valve of Central Banks from Part I 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.
So for the next 3 installments of the Money Valve series, I made a basic Web diagram to show the relationships of these portions of the economy, and from that define where the waste is produced at each level. Part II looked at the first 5 Nodes in the network, Part III here will go into deeper detail looking at the mechanisms and players that function to make this machine work.
As mentioned, the building and maintenance of the enormous infrastructure necessary to run an Industrial Economy all falls onto the back of Goobermint, with the costs for it distributed out to the population through Taxation. In the building of the infrastructure, Da Goobermint floats Bonds (Debt) which the TBTF banks buy with freshly printed Toilet Paper from Da Fed. The Taxpayers also pay for that, since they have to cover the Interest charges on those loans, and so the TBTF Banks collect their Vigorish this way also.
The big problem with Infrastructure is that it doesn’t last without Maintenance and Replacement, and the more you build, the higher those costs get all the time. In many cases, before you ever paid off the original Bridge you built floating up Bonds and Rolling them over, you gotta replace it with a whole new one and float up still more debt for that. Roadways are a particularly nasty maintenance problem, yearly Freeze-Thaw cycles crack up roads and you have to send out crews to fill potholes and seal the cracks. In winter, you have to send out fleets of trucks to plow the roads covered with snow so everyone can keep Happy Motoring through the Winter. Once again, the auto industry doesn’t pay for these costs, even though without the roads to drive on they could sell no cars. The cost is borne by the end user of the automobile, and obviously said end user is increasingly unable to afford such costs, even spread out over everyone.
You think a Boutique Economy for the 1% could be run with just the Filthy Rich drving around Maseratis and Rolls-Royces? Not a chance. They wouldn’t be able to find open Convenience stores selling Gas, too few customers at any price. The roads will be full of Potholes, and drive past 10mph and you’ll lose the rear axle of your Jag in no time. Same problem with Airports big enough to lend a decent size Private Jet on. Talk about Money Sinks, Airports are a Sinkhole the size of the Grand Canyon. More Bond Issues, more debt the Taxpayer is supposed to finance so maybe the top 10% can fly on commercial jets to take Vacations in Hawaii.
Maybe the top .01% can keep flying around in Helicopters for a while, everybody else is SOL.
At Node 7 you find Interest, which is part of the recycling system that keeps a monetary system running for a while, but also is the Achilles Heel that brings it down in the end. As just about everyone knows, the Bible forbade the charging of interest, though that has been totally ignored in the modern era on the Christian side of the religious divide. However, even the Islamic banking system has ways of charging for the use of money without calling it interest, so there really is not money in use anywhere that doesn’t have an interest charge attached.
Basically the reason for this is that since the whole monetary system is based on Debt, if you could not collect Interest on a Loan, why would anyone Loan out money at all? The idea is that you are compensated for the “risk” in making a loan through the Interest you charge on it. Thing is here of course is that the folks making the Loans never had the money at all before the loan was originated. They CREATE the money on demand as people/biznesses/goobermints take out more loans. Banks don’t really make loans on their deposit base, the opposite is true, the loans create the deposits. If you have the kind of Monopoly on this Biz that the International Banking Cartel has, you can’t ever really “Go Broke” as long as there are resources to extract and folks willing to sign for loans, or Goobermints that sign for loans in the name of their populations. Great Biz to be in for the folks who originated and monopolize this Bizness in the modern era. In the words of Mayer Rothschild:
“Give me control of a nation’s money and I care not who makes it’s laws”.
So, all the Main Components of the economy besides the Military pays Interest on Money the Banking Cartel creates, Industry pays it, Consumers pay it, Goobermint pays it. You could say even the Military pays it since they are an arm of Goobermint, but the Pentagon doesn’t have to worry about this in making expenditures, you do. Servicing the debt the Pentagon works up is supposed to be done by the Taxpayer, but when the Taxpayer is Tapped out, how do you service it? EZ, float up still MOAR Debt! LOL. This works until it doesn’t anymore.
What everybody Loves to Hate, and memorialized in Ben Franklin’s cliche, “The only two things unavoidable in life are Death & Taxes”.
Just as Interest provides the Recycling Mechanism for Banks to operate, Taxes provide the recycling mechanism for Goobermint to operate. It’s often said that Money gets it’s Value from the its acceptance as a means to pay taxes. Going back to pre-Revolutionary War days here in the FSoA, although much Biz was done utilizing local scrip created by local Banksters like Sam Adam’s dad, the only money the Crown over in Jolly Old England would accept as payment was Gold & Silver, which in those days was in rather short supply in the North American colonies. The Aztecs down in Mejico had plenty for the Conquistadores to steal, but until the railroads got built and Gold was discovered in the Black Hills of SD, there just wasn’t much Gold around north of the Rio Grande. The Limeys though needed Gold, since they were constantly at war with the Frogs over in France, and over there at the time the only thing everybody would accept in payment was Gold for weapons and so forth. Anyhow, this problem became so onerous for the colonists over here that they eventually flipped the bird at the Crown, and War ensued. Did this free Amerikans from control by the Banking Cartel? Of course not. Just created a new Corporation, which over time outgrew its parent corp of the British Empire, due to more vast resources available to exploit.
Anyhow, IMHO it is only partially true that Taxes give Money it’s Value, the Interest Charges placed on it contribute at least equally if not in greater measure than taxes to making Money valuable. If you have a stock of it and can “grow” that stock merely by Loaning it out and not actually doing any work, this makes it inherently valuable. Better yet if you can create it out of thin air and then charge to use it. On the other hand, if you have none but have to pay a charge on it to use it, this also makes it valuable, from the other side.
Anyhow, Consumers pay Taxes, Industry pays Taxes, even the Money Creators themselves pay taxes, though they have means of cutting their Tax Liability to Zero, through numerous means like Off Balance Sheet transactions, foreign Tax havens, etc. Industry has a similar ability, though less so than the Banks. J6P of course has Zero such ability to hide from the Tax Man, so in the end its J6P that supports everything in the Industrial system it needs to operate but doesn’t want to pay the freight on. This is known as “Privatize the Profits, Socialize the Losses”, the fundamental principal of Capitalism.
Hard to place in the network, because Industry and Energy extraction are symbiotic, one does not exist without the other. In order to access the Oil, you needed drilling rigs made by Industry. In order to make the drilling rigs, you needed energy to smelt all the metal and make the drilling equipment. That of course was leveraged on the back of the energy supply that came before Oil, Coal. In the end though, work your way far enough back into pre-history, and it is the Energy that got accessed first, with the invention, or rather control over, fire. However, one supports the other, one does not exist in the absence of the other. The same folks who own the energy extraction bizness own the industries that consume the energy, the auto industry, the aviation industry, the electrical grid, the telecommunications network, etc. Get rid of all those industries, you have close to Zero need for fossil fuels. In fact it is Zero in the end, since Homo Sapiens existed for millennia before these sources of energy were accessed. Obviously though, the living standard was much more “primitive” than it is today, with a much lower population.
Anyhow, besides drawing the connection between Energy Extraction and Industry to show the relationship, I put it further to the right in the diagram because it is closer to the end of the stream of Waste production. Industry produces the products and services the consumers buy with the credit they get issued by the Money Valve folks. Industry produces its own waste stream along with the products the Consumers eventually turn into Waste.
Industrialists glorify what they do as being “Entrepreneurs”, and of course Ayn Rand glorified the iconographic John Galt as such a Rugged Individualist who adds value to a society, while everybody else is just a Leech on them. In fact of course precisely the opposite is true, what the Industrialist does is find a niche in the whole system to leech off of. The “Small Bizman” isn’t the core of Capitalism, the core is in the large Corporations and TBTF Banks established in many cases in the Colonial Era. The small Bizman inserts himself into the system at some point and captures part of the downhill flow of energy. Each one strives to “get rich”, but in reality can only do so by sieving off profit from the labor he hires to do the work of the biz. The justification for the higher standard of living he enjoys than the people he employs comes from the idea that if he did not organize and run the biz, these folks would not have jobs at all! Basically what this person does is serve as an enabler for the whole system of Industrialization to continue, as a Middle Manager in it. It is a disguised slavery system, with the Middle Manager Entrepreneurs serving as Overseers for the Masters at the top who run the whole show. They pat themselves on the back for their ingenuity, drive Jags and fly First Class and puff themselves up with their success. Then they complain their taxes are too high. Gimmee a break.
Detroit Packard Plant. The largest abandoned factory plant in the World.
Maintenance is a cost in the system that just about everyone at all levels either ignores or defers in some way. Goobermints defer costs on Infrastructure maintenance, Industry defers costs on plant maintenance, J6P defers costs on McMansion and SUV and Health Maintenance. Basically because in all cases, if you actually accurately account for maintenance issues, no level can afford the total cost of the system! Goobermint can’t afford the maintenance of the roads and bridges without taxing the population at higher levels than it can afford, Industry can’t afford the cost of Plant maintenance and still be competitive with somebody else producing the same stuff, J6P can’t afford his maintenance bills because then he can’t afford his mortgage and car payment, neither of which took into account the fact both things break down way more often than any calculation of affordability and buffer when the bank OKs him a loan.
So everybody works on the assumption nothing will break, or at least if it does it will be affordable to fix. Except it never really is, so the society as a whole keeps on taking out ever more debt to try to maintain the whole system. You can see this in every weather related Disaster from big ones like Katrina or Sandy to just local things like Tornadoes and Ice Storms. All the houses and the power lines get knocked down, FEMA steps in, the POTUS declares a Disaster Area, and LOANS are offered to everybody to rebuild what just got knocked down. How many cycles of that can you go through before you can’t even service the interest on these loans, much less pay off the principal? Can only be done long as there is copious and cheap energy to pitch out, which there really is not much of anymore.
To process all the energy extracted here, the end of the line is the Consumer. The consumer buys the products, flips on the lights, drives the car, surfs the internet, watches the Big Screen TV, texts on the Iphone, etc. So it is often said that this whole process is Consumer Driven, my friend Steve on Economic Undertow often refers to this as “Fashion”. People want these things just because they are “Fashionable” to have. Even Goobermints and the Military want Jets and Aircrasft Carriers because they are Fashionable. Is that really true though?
First of all, all along the way here the Consumer is bombarded with Advertisement, all controlled by the same folks who produce the stuff you are expected to want and buy. This goes back at least as far as the original Sears & Roebuck Catalogues first published their catalogue in the 1890s.
The 1943 Sears News Graphic wrote that the Sears catalog, “serves as a mirror of our times, recording for future historians today’s desires, habits, customs, and mode of living.” The roots of the Sears catalog are as old as the company. In 1888, Richard Sears first used a printed mailer to advertise watches and jewelry. Under the banner “The R.W. Sears Watch Co.” Sears promised his customers that, “we warrant every American watch sold by us, with fair usage, an accurate time keeper for six years – during which time, under our written guarantee we are compelled to keep it in perfect order free of charge.”
The time was right for mail order merchandise. Fueled by the Homestead Act of 1862, America’s westward expansion followed the growth of the railroads. The postal system aided the mail order business by permitting the classification of mail order publications as aids in the dissemination of knowledge entitling these catalogs the postage rate of one cent per pound. The advent of Rural Free Delivery in 1896 also made distribution of the catalog economical.
All this set the stage for the Sears, Roebuck and Co. catalog. A master at slogans and catchy phrases, Richard Sears illustrated the cover of his 1894 catalog declaring it the “Book of Bargains: A Money Saver for Everyone,” and the “Cheapest Supply House on Earth,” claiming that “Our trade reaches around the World.” Sears also knew the importance of keeping customers, boldly stating that “We Can’t Afford to Lose a Customer.” He proudly included testimonials from satisfied customers and made every effort to assure the reader that Sears had the lowest prices and best values. This catalog expanded from watches and jewelry, offering merchandise such as sewing machines, sporting goods, musical instruments, saddles, firearms, buggies, bicycles, baby carriages, and men’s and children’s clothing. The 1895 catalog added eyeglasses, including a self-test for “old sight, near sight and astigmatism.” At this time Sears wrote nearly every line appearing in the catalogs drawing upon his personal experience using language and expressions that appealed to his target customers.
“A Money Saver for Everyone”. Does this sound like Walmart “Low, Low Prices Every Day” or what? All dependent of course on the transportation system of the railroads, and all those folks out in rural Amerika had to be convinced they needed to buy the stuff the industrialists were producing and selling for the money that the TBTF Banks were creating to buy it. The language is all pure Bernay’s Propaganda, and face it most of the population gets easily sold by shit like this.
Obviously this did not stop with the Sears Catalogue, it got more and more sophisticated with the advent of Radio and Television. In my earliest years, I remember Milton Berle’s “Texaco Star Theater”, slogan, “You Can Trust Your Car to the Man Who Wears the Star”.
So who is funding this whole biz? You guessed it, the Oil Companies who wanna sell more energy to more people so the folks who own this biz can make more money, because they got control of the Oil under the ground courtesy of the FSoA Military and Gen. Smedley Butler’s career as a “high class Gangster for Capitalism”, and not only that, THEY issue the money YOU gotta use! You wonder why Henry Ford said:
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
However, beyond the fact J6P is constantly subject to the high intensity Sales Pitch, as the system evolves it just becomes plain old NECESSARY to buy in to the culture because you can’t compete (read that survive) without buying in. If you are a Farmer, you can’t compete with the guy down the block using Tractors. As less Ag work is available because of the Tractors, more of you have to migrate to Big Cities where you can get Jobz in Factories. After you get the job, the only way to get to work is first using the early Public Transport systems of Trolleys and Subways, then eventually the Carz.
Then beyond that is the whole revving up of the Industrial War machine, necessary to take control over more territory that had more Oil under the ground. The Military, run at the behest of the Energy Extractors and Money Valve control folks becomes a HUGE employer of J6P as Cannon Fodder for a non-stop war that has been running since the fucking Civil War! Two HUGE outbreaks in WWI and WWII, but the bizness never stopped as Smedley Butler’s career demonstrates.
This is “Fashion” driven from the bottom up by J6P? No WAY, Jose. this is the Will to Power, driven from the top down by a few powerful people who gained control over the Energy Resources and Industrial Apparatus early on. The rest was a Sales Pitch all along the way that was designed to convince J6P he truly NEEDED all the products they had to sell. It wasn’t a hard sell of course, because who WOULDN’T want their own Car instead of having to wait for a Train which didn’t show up on schedule, and besides you hadda walk to the Train Station? Ever more convenience is GREAT, long as you believe it comes with No Consequences, which of course it does as we are seeing now.
Every Consumer in the whole damn world has been sold on the idea they can have a Free Lunch and enjoy the same kind of Happy Motoring J6P got here for the last 50 years. The Chinese want it, but except for a small percentage of Han Chinese Elite in that society, they ain’t gonna get it, because they got in a Day Late and a Yuan short to the Pahhty. The Keg is just about empty, and the Beer left is flat. You think Chen Rice Wine is gonna be happy about this? I hardly think so.
NOTE: In the final installment of the Money Valve Series next Sunday, we will look at the final few nodes in the Waste Based economy, as well as a few parameters which did not make it onto the chart, and draw a few conclusions on where we may go from here.