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Jumping the Great White Shark of Bubble Finance
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Wall Street has now truly jumped the shark—the one jockeyed by Jeff Bezos.

Last night Amazon reported a whopping 41% plunge in free cash flow for the March 2018 LTM period compared to prior year. Yet it was promptly rewarded by a $50 billion surge in market cap—-with $10 billion of that going to the guy riding topside on the Great White Shark of Bubble Finance.

That’s right. Amazon’s relatively meager operating free cash flow for the March 2017 LTM period had printed at $9.0 billion, but in the most recent 12 months the number has slithered all the way down to just $5.3 billion.

And that’s where the real insanity begins. A year ago Amazon’s market cap towered at $425 billion—meaning that it was being valued at a downright frisky 47X free cash flow. But fast forward a year and we get $780 billion in the market cap column this morning and 146X for the free cash flow multiple.

Folks, a company selling distilled water from the Fountain of Youth can’t be worth 146X free cash flow, but don’t tell the giddy lunatics on Wall Street because they are apparently just getting started.

Already at the crack of dawn SunTrust was out with a $1900 price target—meaning an implied market cap of $970 billion and 180X on the free cash flow multiple.

At this point, of course, you could say who’s counting and be done with it. But actually it’s worse—-and for both Amazon and the US economy.

That’s because Amazon is both the leading edge of the most fantastic ever bubble on Wall Street and also a poster boy for the manner in which Bubble Finance is hammering growth, jobs, incomes and economic vitality on main street.

Moreover, soon enough a collapsing Wall Street bubble will bring the already deeply impaired main street economy to its knees. So Amazon is a double-destroyer.

• Category: Economics • Tags: Wall Street 
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  1. I more or less agree with everything in the article but I think that the phenomenon described is a manifestation or symptom of a larger phenomenon that I describe as The Great Liability Kiting Bubble (copied below).

    Bankers are not equity-lenders – they are legal-debt insurance underwriters and liability-kiters who almost never actually pay anyone but only ever agree that they owe them by issuing deposit credits that do not cost them anything of substance to produce – or what the Canadian judiciary refers to as “substitutes for currency”. The appeal Court, below, directly addresses the system employed by the chartered banks and the Alberta Treasury Branches, but which applies equally in theory and practice to all members of the Canadian Payments Association (CPA):

    The chartered banks in Canada issue obligations, namely, deposit liabilities, which are generally accepted as means of payment in Canada although they do not have the status of legal tender. In like manner the treasury branches create deposit liabilities. These deposit liabilities are a form of book debt owing by the bank to the customer and in most cases, including the treasury branches, are subject to transfer by cheque. These payments by cheque provide the means of settlement of a large percentage of the transactions of Canada. Likewise, the treasury branches’ deposit liabilities furnish their customers with a similar means of making settlement of transactions by orders drawn on the treasury branches because the treasury branches have been able to persuade the public to regard their deposit liabilities or promises to pay as the equivalent of legal tender by undertaking to convert them into legal tender on demand. These deposit liabilities are used by the customers of the bank or treasury branch which created them as a substitute for currency. (Breckinridge Speedway v. R [The Crown] (1967) 63 W.W.R. 257).

    [1. Note that the said deposit liabilities function-in-fact as evidence-of-indebtedness, and not as promises-to-pay. To be precise the Court ought to have written: “…to regard their deposit liabilities or evidence of their own indebtedness…”. that is, a bank’s “deposit liability” is an assumption of liability and not a promise to pay. That and the assignability (by cheque) of the banker’s liability is what allows them to function as substitutes for currency.]

    The banks/bankers globally endlessly kite their liabilities while re-setting our financial perception calibration by a factor of 1,000 roughly every ten years to accommodate the massive ballooning of their aggregate liabilities. In the 1960’s we were accustomed to dealing with substantial (richest-family-based) wealth in the hundreds of millions. Then in the early seventies we were introduced to the words billion and billionaire. In the 1980’s we were introduced to the words trillion and trillionaire. Then toward the end of the 1990’s and early 2000’s we were introduced to the word quadrillion. In just my adult lifetime we have gone from a measurement standard calibrated in millions to one that is calibrated in million-billions (a quadrillion is a million billion). If a million is one inch, then a quadrillion is15,700 miles.

    The Great Kited-Liability Bubble

    Kiting means to keep (financial) paper in the air.


    The aggregate existing global credit/charge-card business (about 50% controlled by visa and mastercard banks), especially, is a delivery mechanism / gateway for a massive ever-expanding liability bubble or ponzi scheme or what the Criminal Code (of Canada for example) calls a money increment scheme. Although to be more cognitively accurate it is a kited-liability-scheme.

    Assume that I am your payment agent and that you spend $60,000 from your salary ($5,000 per month) over the course of a year at various merchant establishments via a card that I give you for that purpose. Over the course of the year you also repay or reimburse me in cash / equity from your earned-income or monthly paycheques for that $5,000 per month or $60,000 total that I have paid out to merchants on your behalf.

    Now assume that you discover that I have not in fact paid any of the said merchants, but have only agreed that I owe them, such that I have also retained or pocketed your $60,000 of cash (equity) reimbursement.

    Does that make a difference?

    It makes all the difference in the world.

    In terms of procedure, approximately one billion card-users globally went to work an average of 25 days per month last year to earn at least an aggregate of $7 trillion (USD-equivalent) cash money / equity that they then paid to aggregate credit/charge-card companies (visa and mastercard banks alone) as what they believed to be reimbursement, while the said companies / banks have merely increased or kited their aggregate liabilities to the same merchants (and their assigns) by nearly $7 trillion while pocketing the $7 trillion of cash / equity.

    It works out to about 10% of global GDP (i.e., just through the visa / mc credit/charge-card systems alone).

    Do you think that that has some substantial effect on human socioeconomic relationships as opposed to a world where the aggregate card-issuers are required to actually pay the merchants instead of merely kiting / ever-inflating their liabilities?

    I was a high-school junior / freshman in the early 1970’s when Howard Hughes purportedly became the world’s first billionaire. And although undoubtedly a great entrepreneur in his own right, his greater fortune had been given an immense head-start by, among other things, his inheritance of the Hughes Tool Company from his father.

    So at that time we basically first needed the number “one billion” or 1,000,000,000 to account for the inter-generationally-accumulated fortune of the world’s purportedly richest man.

    And also at that time I would estimate in good faith that the majority of my classmates and the public generally would have had some trouble even identifying the precise concept of a trillion. We had only just been introduced to only very occasional references to a billion and the word trillion would normally have been used merely as a general or generic reference to an astronomically large number.

    Then as I lived my life through the 1980’s and 1990’s the term billion and multiple billions came into increasingly common use, especially in reference to the major financial fortunes won on the world’s stock markets.

    Then the word trillion was increasingly needed to describe the aggregate fortunes of relatively small groupings of what were called dot-com billionaires. Notwithstanding that a billion is a thousand millions and a trillion is a thousand billions or a million millions.

    Then as we passed into the first decade of the 21st century we were introduced to the term quadrillion (1,000,000,000,000,000) or one thousand trillions or one million billions to describe the nominal exposure of what is called the derivative markets (and which only exists to account for the money / liability itself).

    So for all of human history to about the middle of the 20th century the concepts of million and multiple millions were sufficient to account for the inter-generationally-accumulated fortunes of the world’s richest man / men / families. But once then introduced and educated to appreciate what a billion is, at least we could have reasonably expected not to have to make the same adjustment again in our lifetimes or even our great-grandchildren’s lifetimes.

    I also recall the major breakthrough of the late 1970’s when we achieved the great pre-tax $5 per hour for wages on entry-level jobs. Forty years later $10 per hour is about the minimum wage in practice. So based on that criteria we ought to be now speaking in terms of about two billion to describe the same top-of-the-pile that we needed one billion to describe in the 1970’s. And certainly no more than about ten billion.

    But after the last fifty years of the global credit/charge-card system, if we pause and look back, we see that globally we have collectively earned the USD-equivalent of at least $100 trillion or $100,000,000,000,000, and that we have paid that amount to the aggregate banks as cash / equity reimbursement for the same amount that the banks have ostensibly paid to broadly-defined merchants on our behalf over the same 50-year period. (Less about $3 trillion in concealed interest / credit charges called “merchant discounts” – but that is a different fraud).

    [2. For one billion card-users $100 trillion works out to an average of $100,000 per card-user over 50 years or $2,000 per year.]

    But then we look a little more closely to discover that the banks / bankers collectively still owe the world’s merchants (and their assigns) the same $100 trillion and that they have never paid them at all, but instead endlessly kite their liabilities while taking our cash / equity to wager in the financial markets, to buy up most everything else, and to pay themselves ever larger dividends, salaries and bonuses.

    Here again, the Big Five private banks in Canada had about $32 billion of total assets balanced by $32 billion of liabilities (i.e., they owed about $1,600 per Canadian times 20 million Canadians) in 1968 when the visa credit card system was introduced into Canada. Almost fifty years later the same five banks have over $4 trillion of assets balanced / off-set by $4 trillion of liabilities (they owe about $120,000 per Canadian times 35 million Canadians).

    The near $4 trillion or $4,000 billion difference is a function of endlessly-kited liabilities. We keep feeding them our cash earnings from labour and other forms of production, and they keep pocketing the cash and kiting their liabilities to anyone and everyone.

    The bank(s) merely agree that they owe the merchants by issuing them deposit account credits (“substitutes for currency”) that do not cost the banks anything material to produce. The merchant then writes cheques to its employees, suppliers and other service providers. Now the bank(s) agree that they owe the entities to whom the cheques have been written instead of the original merchant(s). But except in about 2% of cases the banks never actually pay anyone.

    [3. And even then they are only discharging in favour of the Crown as lead underwriter/debtor. Legal tender is by definition evidence of Crown debt.]

    Economists are trained to say that banks may create credit for free, but also that the same credit is destroyed when it is repaid, so it is not really as bad as it appears. But that is only half the equation and they essentially deal with the other half by ignoring it.

    The bank’s credit asset is indeed destroyed when it is repaid in cash / equity, but the bank continues to hold and own the cash repayment as a much more valuable replacement for it. By process the loan asset was used to support the mirror-image creation of an off-setting liability to the vendor or merchant, and that liability persists long after the credit asset has been re-paid or converted to the debtor’s former equity (mostly from labour). In fact it persists forever or until the scheme collapses.

    Taking today (the current 24 hours) as a snap-shot-in-time, the banks globally (through visa and mastercard alone) will collectively kite another $20 billion or $20,000,000,000 in new liabilities to merchants. Seven trillion dollars per year in gross throughput works out to about $20 billion per day and that is the current expansion rate of the gross credit/charge-card liability-kiting bubble.

    As at late 2017 there have been a number of articles in the media about who from the current crop of mega-billionaires will become the world’s first genuine trillionaire. So we see that over the past 50 years the measurement standard for the world’s single richest human has increased by an approaching 1,000-fold (from $1 billion to $1 trillion), while the minimum wage in practice for the little people has increased about 5-fold (from about $2 per hour to $10 per hour). In practice it would appear that the vaunted level playing field has an actual slope of about 500-to-1 in favour of the entrenched money power.

    Any bleeping moron could rule the world with the benefit of rules like that. Bankers are not financial geniuses. The only reason they own and / or control everything is because their great-grandfathers accidentally discovered the great stupid-ray that keeps the rest of us believing whatever they tell us regardless of how obviously and profoundly stupid.

    We only need to keep in mind one thing to grasp / comprehend the fraud and scam that is banking, and that is that the global banking system essentially still owes to someone every last dollar that it has ever allegedly loaned / advanced to anyone. At the very end the nominal bankers (credit-insurers-in-fact) will both own everything and owe everything.

    In 2007 the High Court of (the Province of) Gujurat in India made the following decision in a dispute involving two banking companies where one had sold / assigned its nominal portfolio of bad debts to the other: (Assignment of Debts (Appeal no. 156 of 2007) in KOTAK MAHINDRA BANK LTD. versus O.L. of M/S APS STAR IND LTD. (emphasis added):

    24. In fact the concept of trading in debts is, by its very nature, abhorrent to the concept of banking in any form, either the form of primary business of banking or the additional activities…

    48. (n). [T]he entire [sale or assignment] transaction is based on a speculative form of activity which can never be a permissible mode of activities as part of, or in addition to, or incidental to or conducive to the promotion for advancement of the business of a banking company;
    So why would the judges of the Court say that? What is it that these judges know that the global public generally do not?

    There are a number of independent reasons or routes by which the Court / judges would arrive at the same conclusion, but the short answer here is that equity dominates law (in this case the law of the contract) and the original merchants and / or their assigns have a superior equity title to the assets of the defaulting debtor(s) (who are the financial creditors-in-fact but that is another issue).

    The merchandise provided by the original merchants is what created the legal-debts and the merchant(s) have still not been paid (i.e., the debts have been discharged (passed on or assigned to someone else) but not paid). The original bank has still not paid the merchants but only agreed that it owes them (and / or their assigns), and so that bank has an inferior claim to the money owing by the defaulting card-users. The nominal selling bank cannot sell the debts to another party because that original bank has itself still not paid for them. Is that clear?

    This decision may well turn out to be one of the first cracks in the global system of control by the entrenched-money-power. If you think that the financial system is crooked at the front-end, it is breathtakingly and scandalously criminal at the back-end. Global nominal debt-collection and deemed-debtor-management practices would make Al Capone or even Attilla the Hun blush.

    From a different perspective, the kiting of liabilities is also how and why Bernie Madoff, for example, was able to run a flagrant ponzi scheme in broad daylight for 25-plus years. It is all one massive on-going ponzi scheme and Mr. Madoff wasn’t doing anything that would cause anyone to point and say “Hey he shouldn’t be doing that!”. He wasn’t running a ponzi scheme on the back of an honest system – he was running a ponzi scheme nested and disguised within a larger ponzi scheme.

    The larger system / arrangement is contrary to every rule of law and equity and is in fact utterly ridiculous but the bankers and the entrenched-money-power generally have employed the power of language to fraudulently induce the rest of us to believe that that is the way things ought to be.

    It now becomes clear regardless as to the real purpose of the massive global movement to nominally eliminate cash. It is not the cash that the private bankers want to eliminate so much as cash convertibility of their liabilities.

    Eliminating cash convertibility is functionally indistinguishable from printing a global aggregate of the USD-equivalent of about $200 trillion (or $200,000 billion) and making a gift of it to the private banking (credit-insurance) system. Over the past 50 years they have collectively kited $200 trillion of liabilities and now they are going to effectively / constructively cancel (default on) their debts for the common good.

    But in both law and equity the nominal anti-cash movement defines the private global banking system as an absconding debtor whose goal is to avoid and evade their lawful and legal debts.

    Another false premise in the systemized delusion here is that the socioeconomic damages created by pyramid / ponzi / kiting schemes occur when they collapse. The truly massive socioeconomic damages (misdirection and misuse of resources) occur while the schemes are working and not when they collapse.

    And they could have gotten away with it forever – if they would not have become so greedy and flat-out-stupid.

    The bankers and their solicitors have effectively committed the ultimate folly of believing their own legal-fiction-based word-games. The only thing holding their system together was the bare pretence of the legality of it and that is now gone. Again, not just in Canada but throughout most of the world.

    In both equity and in law (in fact and in law) the entrenched-money-power – the so-called “1%” – are the greatest debtors in world history. The only thing preventing justice (equity) is policy – the policy of the former bank lawyers running the Courts (English Crown) that criminal offences committed by the entrenched-money-power-parasites-in-fact are criminal but not fundamentally illegal because the criminal law only provides that offenders will be severely punished but does not expressly state Don’t do it.

    [The reference above is to the 1989/90 decisions of the Canadian appellate courts that criminal acts committed by creditors and their solicitors are “not fundamentally illegal” (Thomson, (William E.) Associates Inc. v. Carpenter [1989] 34 O.A.C. 365).]

  2. Miro23 says:

    Another false premise in the systemized delusion here is that the socioeconomic damages created by pyramid / Ponzi / kiting schemes occur when they collapse. The truly massive socioeconomic damages (misdirection and misuse of resources) occur while the schemes are working and not when they collapse.

    This is what Stockman is saying about the misdirection and misuse of resources:

    That’s because Amazon is both the leading edge of the most fantastic ever bubble on Wall Street and also a poster boy for the manner in which Bubble Finance is hammering growth, jobs, incomes and economic vitality on main street.

    And, this is before anything collapses. We are still in the pump phase of the Pump & Dump cycle.

    The Wall St./FED alliance pump up Amazon with newly issued QE liquidity, drawing in the public with stellar stock price increases and loads of media hype. When Amazon finally shows the crazy valuations referred to by Stockman, and when the public has no more money to invest or borrow on margin, then the FED & Friends decide to withdraw liquidity and raise rates (like now) initiating the Dump cycle.

    Pump & Dump works because the criminal boiler shop operators (Wall St. and their FED enablers) are the first to drive up the price (with borrowed money) and the first to exit, in fact initiating the collapse with their own selling (i.e. they get to keep their “profits” while everyone else is wiped out).

    That’s not to say that all credit is bad. There are good investments and bad investments.

    If a project that is brought into reality with a loan provides a good enough profit to repay the capital borrowed and interest, then the loan is legitimate (like the first $ 1 million loan to Google), but billions of $ invested to share in hyped future fantasy profits (current Amazon), just destroy capital and enrich the Pump & Dump operators.

    • Replies: @TimothyPMadden
  3. you can precisely measure

    the degree of Jewification of an economy

    by the extent to which financial products

    have replaced physical products.

  4. @Miro23

    Hi: Thanks for that and I certainly appreciate the insight. I think that one of the most significant aspects is a systemic problem of the markets – being that all shares in a given company or listing are deemed to have an exchange value equal to that of the last (most recent) trade.

    Also, it is critical to always make a distinction between a loan of money, and an advance of credit which is in substance an insurance transaction and not a money lending transaction. The following is from another article that I am working on. It is still work-in-progress but hopefully the basic distinction comes across.


    On the meaning of the word repay

    A collateral device in the deceptive process is the counter-sense word repay. If a lender makes a loan, then the word repay means to pay back. But when a creditor makes an advance of credit (i.e., merely provides a credit-insurance service), then the word repay cognitively flips to mean or accommodate to pay again.

    Lender versus creditor; loan versus advance

    Lenders make loans, which they pay for by:

    1. pre-existing money/equity already earned and possessed by the lender,
    2. assumption of risk, and
    3. administrative overhead.

    Creditors advance (insure) credit, which they pay for by:

    1. assumption of risk, and
    2. administrative overhead.

    It costs at least a billion dollars to loan a billion dollars, and the lender walks away from the transaction a billion dollars poorer in terms of immediate purchasing power, because now the borrower has it, and the lender does not. A lender incurs a net depletion of its existing money assets by making a loan.

    It costs at least nothing to advance a billion dollars of credit, and the creditor walks away from the transaction a billion dollars richer than the instant before, because now they own the debtor’s security, plus the debtor owes them a billion dollars that the creditor did not even possess the instant before. A creditor obtains a net increase in its money assets by making (insuring) an advance of credit.

    A billion dollar loan instantly costs a lender a billion dollars.
    A billion dollar advance instantly advances or gains a creditor a billion dollars.

    Yet not one man or woman in 10,000 even appreciates that there is a difference; that a loan is vastly more expensive to one of the parties, than an advance of credit, because of the added cost of the money itself. Yet legal documents, securities, mortgages, credit-card contracts, newspapers, TV and radio media, court judgements, all of it – all use the word-pairs lender and creditor; loan and advance, cross-interchangeably for what is objectively the single greatest distinction to be made on Earth. I had done so myself for years without realising it (and on occasion still do – it takes persistent mental discipline to avoid it).

    “Mr. Banker, that $1 billion transaction that you just completed – did it cost you $1 billion? Or did it gain you $1 billion?”

    Banker: “Cost, gain; what’s the difference? You just need to get back to work and leave the complicated philosophical questions to us. As the president of the Anthracite Coal Trust/Monopoly, Mr. George F. Baer, so aptly put it in 1902:

    “The interests of the labouring man will be cared for, not by the labour agitators, but by the Christian men [read: inherited wealth club] to whom God has given control of the property rights of the country.”

    Among the foundational elements of broadly-defined English law, which still dominates most of the planet (including the U.S.), is the concept of what the judges of the civil/money courts call ones station in life. Under such doctrine, if you were born poor, then it is because God wants you poor, and it is deemed a morally wrongful act for the law to actively assist you to escape God’s will. The English language – including and especially legalese and the language of finance – has concurrently developed so as to mould our perception of reality consistent with that principle.

    A closely-related collateral or converse principle or doctrine is the avoidance of unjust enrichment whereby the law holds it as a wrongful and harmful act, of itself, for a living human to get something for nothing (except via inheritance/God’s will). This was also the ground for the original prohibition against financial lotteries, which were portrayed as an attempt by the poor to escape God’s will that they be poor.

    A foundational exception/precedent was created, however, and ratified by the House of Lords in 1830 (The Amicable Society for a Perpetual Life Assurance Office v. Bolland et al. [1830] 4 Bligh N. S. 194) under which it was argued by lawyers for the financial institution, and accepted by the judges of the Court, that a corporation owes a duty to its shareholders, wherever possible, to seek and obtain unearned/unjust enrichment, even if it has to commit a tort (an otherwise actionable wrongful act) and/or breach its contract(s) to do it. Again, the Lords agreed.

    After establishing this schism in our aggregate and/or collective minds, the commercial law system has slowly massaged and shaped our perceptions of reality to accept the unearned enrichment of a human as a wickedly wrongful act (unless they are already wealthy), while simultaneously accepting the same unearned enrichment of a corporation (and therefore its management and owners) as the epitome of virtue.

    • Replies: @JoeFour
    , @Miro23
  5. JoeFour says:

    Timothy, where do you post your articles?

    I would like to read more of your thoughts and observations about this crazy financial world we all live in … what you have posted here is fascinating…and very challenging! Thanks!

    • Replies: @TimothyPMadden
  6. Miro23 says:

    1) A billion dollar loan instantly costs a lender a billion dollars.
    2) A billion dollar advance instantly advances or gains a creditor a billion dollars.

    This is true, but in the real world the whole banking system runs on 2).

    Then the question is; If the bank already has a few billion dollars and it creates a new billion dollar loan (out of thin air) and awards it to a borrower, what could go wrong? It’s gained an extra billion dollars.

    That’s good, but the evidence is that it can go wrong. For example the Sub-Prime boom created vast amounts of new money (credit) that ended up in construction and speculation. If this speculative pyramid collapses, why shoud it concern the banks? – After all, it was new money conjured out of thin air – so if it disappears what does it matter to the bank?

    The point seems to be, that you can liken type 2 credit loans to cows “created” by a farmer. He has a collection of them , that he one day has to “un-create”, but in the meanwhile he cares for them (and sells the milk) to cover his costs and make a profit (hopefully).

    If he gets “Sub-Primed” he’s created a lot of sick cows that a) don’t give any milk b) die while he’s still got the liability to support them = a bad situation. He has to dip into his small savings to cover his costs which he knows he can’t.

    In the Sub-Prime debacle, the farmers knew that the cows were sick, but they all wanted big farms, and word got round that that a company called AEG would give cheap insurance that covered their loses if the animals didn`t turn out to be prime milkers. AEG did very well until they were asked to pay up – and when they didn’t – the government paid, and the farmers still got their bonuses.

    Moral that dairy farmers/bankers need a good connection to government.

  7. @JoeFour

    Hi: thank you for your kind words. My writings are not as yet posted anywhere. I am a researcher and writer whose home is on Vancouver Island but I have been in South Africa for the past two years researching a book on the history of English law and equity (and policy) over the past 400 years. (Sorry for the delay in responding – 9 hour time difference from the west coast of Canada).

    Basically, things in the financial world are made to appear vastly more complicated than they really are. Above all, modern banking (since 1913) is not money-lending. It is credit-insurance and reinsurance. Banks do not advance credit to nominal debtors – they obtain credit from them in the form of the nominal debtor’s underwriting or acceptance of the liability to the bank (via the promissory note). The banker then merely insures or reinsures the credit that it has obtained from the nominal debtor, in favour of the vendor of the property being acquired with the credit. The nominal debtor is the lead-underwriter and creditor-in-fact who creates the credit by underwriting/accepting the liability.

    But even that is going too far in a sense, in terms of complexity. Start with the basics. The following is from an essay that I call “My Top 7 Reasons why ‘All of this is unreal’” (Reason #2):

    The Deposit function


    Assume, for the sake of argument, that some force, divine or otherwise, makes me the winner of $1 billion in cash in a super-multi-state powerball-type lottery. That $1 billion in cash would bestow upon me some quantifiable and very substantial socioeconomic power.

    By whatever means, fate will have selected me for such power, and of course about 100 million people would have each paid an average of at least $10 in cash buying tickets to make it happen.

    Also further assume, just to keep track of it, that the typical/average lottery-ticket-buyer earns $14 per hour, and nets $10 after nominal taxes, such that the $1 billion jackpot represents the product of an aggregate 140 million hours of labour already performed (plus whatever percentage the government keeps from total ticket sales).

    But the cash would be mine regardless and I would own it in fact (possession) and in law.

    Yet the next day if and when I deposit the cash in a private bank, the cash henceforth belongs in fact and in law to the bank, and I (henceforth) have an unsecured liability of the bank that I own and which I can trade with or assign to others by cheque (check), but which did not cost the bank anything of substance to produce.

    Now the private bank also has $1 billion of new socioeconomic power by my decision to so favour it – a systemic gift of the equity and financial product of 140 million hours of labour already performed.

    Now apply the same process to the (say) $5 trillion-plus of earnings from new broadly-defined labour services annually in the U.S. economy.

    Assume that you work for a year to earn a cash payment of $100,000 in exchange for your labour and other skills and talents that others find useful in that amount. You too will have earned a certain amount of socioeconomic power.

    But the instant you deposit the money into a bank account, it is no longer your legal or actual money, and you have unwittingly made the private bank an equal partner in the product of your year’s labour. Same with cheques/checks (and anything that is deposited) – the bank literally and legally owns your paycheque the instant you deposit it.

    The same goes for all the illegal-drug-money globally. Even if the drug dealers could obtain every last coin and banknote on Earth, there is still only about the USD-equivalent of $1 trillion, or about a one-year supply for the world’s broadly-defined substance-abuse industries. So if it has been going on for 40 years-in-fact, then you know with certainty that virtually every last dollar of such drug money is being laundered-in-fact (converted to deposit balances) through private banks. It can’t go anywhere else. They are partners-in-theory and they are partners-in-fact.

    Then if and when you participate in the financial markets, you find that your local bank, as all banks individually and collectively, is not just a scorekeeper, but an active participant on the economic and financial playing field. So even if you beat it, you give your gain back to it when you deposit it. When your opponent scores a point, it scores a point. When you score a point, your point is forfeit to your opponent, but you get a different kind of point as a consolation, so it is kind of all right.

    And since at least my great-great-great-grandfather’s time, our global army of economic analysts, with more troops worldwide than Napoleon and Wellington combined at Waterloo, cannot figure out that unearned and unjust conveyance of rights of property in money itself, via deposits and the custom and practice of private bankers, is a multi-hundred-trillion-dollar annual business of itself, and the defining reality of our entire system. It has just never occurred to anyone that it might be important?

    Just as the words “application fee” or “loan fee” or “commitment fee” excite a different area of your brain, than do the words “True-principal-amount and real-interest-rate obfuscation and concealment fee” or “GAAP-fraud concealment fee”, so too does the word “deposit” evoke a very different reality than the more conceptually accurate “gratuitous wealth transfer”. As in: “Hi Bob, I just got my paycheque, and I am on my way to gratuitously assign the right of property in my earnings to the bank. I’ll meet you later for pizza.”

    Since the founding of the privately-owned Bank of England, for that matter; for 323 years our international army of bloodhound economists have failed to grasp the significance of this one all-encompassing and game-defining rule.

    Now let’s see, why would an economist concern themselves with something as arcane as rights of property in money itself, in a global system that processes $98 of financial/money transactions for every $2 of actual GDP? You witness $3 quadrillion of financial transactions annually to support global GDP of $60 trillion (2%) and you Einsteins can’t think of a single reason why rights of property in the $3 quadrillion might have some effect on human socioeconomic relationships?

    Assuming that there are about 7,000 substantive private deposit-taking institutions globally, then there would be one such special-player per million human players (labour units). Assume also that each special-player is substantially and beneficially owned and/or controlled by one vested-oligarch-family-unit, with the most senior (and largest by far) units having been in place for over 300 years.

    In this game, all seven billion human players perform labour each day for wages and 90% of them, by amounts, deposit those wages into deposit (gratuitous wealth transfer) accounts at one of the 7,000 special-players/family-units, at which point the wages become the legal and actual property of the special-players/families. The special players call their special advantage a level playing field and which is their inherent right by the longstanding custom and practice of private bankers.

    And for 323 years our inter-generational global army of economists cannot figure out “What’s wrong with this game?”


    Hope it help. Tim.

    • Replies: @JoeFour
    , @JoeFour
  8. m___ says:

    On all of the above, comments, column. The systemic error at the root: no concise terminology. That is what theoretical economics, and for the ones that have salesman blood, especially financial capitalism, is about. Add to that that numbers(whether to include them or not), can lie as much as terminology, the conceit is endless. Add to that a layer of serious mathematics within confined contexts to give it credibility. To be countered by amazing ignorance to bait the performance(one looses face to acknowledge not understanding the terms of the variables), the circle is complete.

    Drunkenness, stupor, and when somewhere someone wakes up, (China!), the make believe drains into the sleeping deplorables. Military capitalism holds up what is the US prestige, and badly, financial hocus pocus is so passe.

    Looking forward with great delight to see how the first global “crises” is going to play out.

  9. JoeFour says:

    Tim, I owe you a late but sincere thank you(!) for your response to my inquiry which I had previously missed…just saw it now as I was searching for this article this evening and, in particular, for your first comment on it to send to an interested friend. How’s your book coming along…and have you posted any additional financial commentary anywhere?

  10. JoeFour says:

    Tim, given your interest in the history of English law, I thought I would suggest the below referenced book to you (though perhaps you are already familiar with it):

    Our Corrupt Legal System by Evan Whitton

  11. Hi Joe! Thanks for that! I have not in fact heard of the author before but after reading the table of contents it looks quite fascinating.

    I am still in Toronto but expect to be heading back to Joburg in the next few days.

    It is still in pre-release (a couple of typos remaining) but I can send you the pub version of my new ebook “Nominal my butt”.

    Also a pdf version of “Rule of Law my butt” that you should find most interesting.

    But I do not know how to send the attached files as I don’t have your email address. Can I just upload them here to the comment?

    I am just scrambling to get everything finished here in Toronto before returning but will certainly read the pdf book on corrupt legal systems. Actually I will probably read it on the trip back.

    Thanks again. And I look forward to any reaction you may have to the material.


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