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Newsletter October 2002
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More gold,
more paper and more state-debt Did
metallic basis as international value standard solve
any of the problems it is throught of to do tomorrow Mainstream
history continued: The
task of maintaining stability within the bimetallic system, through
exercising control over the world's prices of gold and silver, fell to
France. The performance of this function imposed few problems in the years
between 1815 and 1850, when demand and supply conditions for both metals were
fairly stable. There was some withdrawal of silver from circulation, as gold
production steadily declined, and its value appreciated relative to that of
silver, but France possessed relatively large reserves of both metals and was
easily able to absorb silver at the expense of gold without actually moving
to a silver standard. The United States was also legally on a bimetallic
standard for most of the 19th century. Until the 1830s, however,
the country really operated on a silver standard, because at 15 to 1 the
Americans mint ratio of silver to gold undervalued gold and led to its disappearance
from circulation (Greshams’ Law in details
above). But a de facto silver standard was inconvenient for a country that
traded primarily with another Britain, which was on a gold standard. It was probably
for this reason that the Coinage Acts of 1834 and 1837 reduced the old
content of the dollar and established a new mint ratio of 16 to 1. Since this
ratio was above the free market ratio, which generally settle around the
French mint ration of 15½ to 1, the previous trend towards a silver standard
was replaced by a movement to a de facto gold standard similar to that found
in Britain during the 18th century. Then prices on commodities
rose generally. Inflation was active. The
private limited company was not really widespread until the 1800s. Also the bank houses of the Absolute Monarchy (which
ruled in most states) were businesses owned by one man or by partners. The
private limited companies are introduced en mass in the 1800s. Thereby you
have to distinguish between physical and juridical persons, and at the same
time distinguish between the responsibility of a physical person
and a juridical subject. It was not my task to analyze the laws of
private limited companies in different countries, but to show how the clear
advantages of the private limited company turn to disaster for the society
under the industrialism and the so-called democracies from the mid 1800s. All
laws concerning the private limited company in the different countries are
partly different, but a lot of the substance, of the rights and the
responsibilities are rather common. Definitely common to such a degree that a
rough outline will be described here: A
juridical subject with its characteristics and rights. The private limited
company gets a private life that has to be protected. Here the deciding is
its position as owner of a business, its protection, and its free access to
profit. The company owns some real goods, factories, land and products. The
share holders are directly related to those goods, because they look upon
themselves as members of a co-operative society, and because the business of
the company was not bigger or more distant than they were able to keep the
information up to date. The stocks and shares and share certificates were
pieces of evidence for a certain share of the real goods of which revenue and
profit were made. The participants of the circle of share-holders share
interest of certain common aims. That is the reason why they join their
efforts, and because each of the share-holder is not economic strong enough.
They appoint some participants – the
biggest share-holders – to form a board of directors that appoints a
director/a president, sometimes among the members of board of directors. In
this way the board becomes some kind of a deputy for the shareholders; the
board has some duties to the shareholders. It is not without some functions,
but its whole existence is caused by the private company. The shareholders
are in a way a kind of managers who are acting via delegation, but they feel
and certainly have a responsibility, even outside economics. Reality
does not correspond to this idyll. Life has denied the thought that the
private limited companies are just another kind of tradesmen. It has become a
social organi-zation, created for the advancement of some productive tasks.
It is like a municipality, it has a long duration, longer than the life of an
individual, independent of the share-holders, the board of directors, the
management, the labour. It is an expression of a wanted co-operation. It is
something in itself, and it gets itself means, management and labour. The
most obvious differences between the municipality and the private limited
company is the way the organization is managed, its protected acces to
profit, and in the advantages of whom it is working. The tasks are often
different, but they don’t have to be. The company is not working primary to
satisfy neither the shareholders’ need of profit nor the need of the board of
directors to get higher salaries. The share-holder has stopped being a share-holder in
the original sense. He has nothing to do in production. The non-speculating
holder of share certificates, who owns and has paid his share entirely and
has the share for years, has gone. If you
look at the administration of the company, you find share-holders at the
general meeting who are entirely unprepared, and know nothing. The accounts
are at best opaque, and often uncorrect. The share-holders are simpletons as
lambs and are under normal conditions forced to be meek as such, because they
know that critics of the management of company are going to press the price
on their own shares. The share-holders therefore are incompetent to give
their votes with any sound reason. But most of the votes given at the general
meeting are not those of the non-speculators. The shares have been used to
borrow money, and the right to vote has been transferred to the bank, or a
group of finances by means borrowed in a bank which take possession of the
majority of shares by the famous ten percent payment, or the board of
directors take the power by buying the majority of shares in the days before
the general meeting. The board of directors whos interests are not those of
the company, and its actions are dictated by objectives that do not concern
the running of the company and a reasonable management. The management is not
a crowd of non-speculating representatives of shareholders. It has been
elected by a group of power that certainly do not own the capital, but it has
been able to pay just the tiny bit of the price of shares in majority. Often
the financing bank – that has financed the majority - points out the
management of company. Often the capital is simply owned by savers in the
financing bank, without they know it and can have their legal right. The
group of finances is certainly not the old type of share-holders and does
certainly not represent those. They are professionals with means not owned by
themselves, they act as irrelevant self-licenced masters of industry and are
possessors of the community’s capital. The management that is not dependent
of the board of directors leads to the fact that the management cannot act in
the interests of the company in the long run. It has taken what the bank or
financing group wanted, and seldom it is in the interest of the company. A newer
illustrating Danish example: A report from one of the 4 directors of the former
Kosan-Group: In 1989 an agreement was made between the 4 biggest
sister-companies in the Kosan-Group (among other me who sign this report)
that we should make a so-called MBO (Management Buy-Out), where we should buy
our mother-company. In this connection an agreement was made (Agreement of 21
Mars 1989 (called a framework agreement in earlier publications)). We agreed
that (the bank) SDS should advice us and lend us money to the buy. When Kosan
had many hidden values, and the former owners would sell relatively
unexpensive to us directors, SDS decided to use us as its front men and buy
Kosan for itself. Relatively short after the buy the Kosan-Group was stripped
totally, and almost all the daughter-companies had been sold. By this SDS
earned a huge sum of money, but as it was clearly against the agreement we
had made, we directors naturally made protests. One the former directors in the Kosan-group: All the manouevres of SDS have had the one purpose
to hide the break of the agreement and the unlawfullnesses of SDS towards the
public and the authorities. Instead of dealing with Kosan-affair with the
doors open in a courtroom it has been brought to an apply for arbitration. We have told more details about the Kosan–Stripping
and the judgment in Danish on: http://www.lilliput-information.com/kosan.htm In reality nothing has changed since the 1920s. Try
a Danish horrifying example in line backward from Enron, Worldcom 2001-2002
a.o.: The (Danish)
Agriculture Bank. In Denmark a president of the bank had to buy up the
majority secretly to prevent himself from being thrown out. But it went
further. To the central bank. To the minister of finances, to the government.
Nothing new under the sun. The especially the small-holders and farmers had
to bear the lost afterwards. companies) that may be opposite. The board of
directors is just formally elected by the the general meeting, in reality it
is pointed out by the management that it actually should control. We have
reached a point where members of the board can be called “guinea pigs” – at
first harmless and functionless greedy animal and the seats of the board have
become gifts between directors. One director gets a seat in one board and
another pay for the seat by giving a seat to the other in another board.
“Absentees” was a most describing name in the 1920s The process of capitalization is speeded up in a
society, where capital is an increasing condition for personal freedom and
security in life. When I buy a factory and pay for its physical value, I
vouch for society not just with what I own, but also for the profit that the
capitalized goodwill - the advantage that the business-connections including
the customers means - yields interest. Actually I work to get this interest
of historical values been earned in the business. The organ of the capitalization is the stock
exchange. Its technique centralizes at the splitting of the possession: The
capitalization of one company can may be expressed via 4-5 different papers:
The share, formally a business-owner-part, in reality is a second-class bond
with varying interest or yield, and a bond a first-class debt-evidence with
fixed interest. In this sense the share- and bondowners are both passive
capitalists[5],
even though this term primary is used for the last mentioned. When $200 mill.
in preference shares were exchanged in the American Steel Trust Morgan and
his friends earned 4% in guarantee commission and 1% by buying preference
shares at a price below par. Of the $1400 mill. - today they count these
accounts in hundreds of billions cause by the problem that this reading is
dealing with – that was the capitalized value of this more than $700 was
hot air or water (call it what you feel like), and the other half was reality.
Starters, underwriters and the financing banks got $150 mill. (Morgan, Moore,
Carnegie and Rockefeller got a substantial part of this). Thanks to the
position of monopoly they were able to pay interest on the capital, even
though they had bought several mines that were not put in work for the time
being. Between the valuation made by the management of the Steel Trust and
the valuation made by the USA-Trust-Commission in 1910-12 of the possessions
of the trust in 1902, there was a difference of $775 mill. (1457 - 682). From 1898 to 1914 and 1920 the circulation of means,
gold, silver, Greenbacks[6], other certificates[7]
and other bank notes increased from $2 bill. to respectively $3 2/3 and 6 1/3
bill. The circulation an individual accounted in a simple average was $17 in
1880, $35 in 1914 and $42 in 1924. On these amounts was founded a still
increasing credit. So the private fortune that amounted $90 bill. in 1900 got
closer to $200 in 1914 and $350 in 1920. The best helper of capitalization
was the inflation. The private capital (held free from the real activity of
production but allowed to earn profit) created by inflation is claimed by the
possessors to be remained under and after the reduction of credit that
followed (called deflation) and not by just by more the state-debt (this
specific point will get a paragraph of its own below). To pay interest on an
overdone capitalization every opportunity of monopoly are used, and that to
such a degree that you making appropriations can press the water or the hot
air out of the share and make substance (direct consumption-possibility)
instead. In the first 10 year with the Steel Trust it earned $1100 mill. of
which the owner of bonds got 284 and the share-holders $394 mill., while the
$422 mill. were placed as profit. http://www.lilliput-information.com/app3.html The process of capitalization is made easier by the
system with holding or trust companies and daughter companies. A holding
company owns the majority of shares in a paper-trust and a cellulose-trust
and eventually in a newspaper-trust and paper-machine-trust. Each of trusts
often has one or more factories, but their most important assets is the
majority of shares in each factory that again is able to secure the majority
in each of their helping industries or the share-majority in the industries, that buys their
products. Most developed was the system in South Africas mining industry,
where you often found a 4-5 links organization. 3-4 companies prevent
outsiders from make a even a rough estimate of the value of the shares in the
producing companies. The process of capitalization then runs without a
reasonable participation from the side of the public. The Danish parallel to
John Law’s Missisissippi-companies is without any doubt the Transatlantic
Company, that went bankruptcy and took the (Danish) Agriculture Bank with in
its fall 1923. Production in one end and consumption in another
end. Consumption and taxes remove the real capital from production to private
capital (outside production), and most of it to final consumption. There is
dilemma concerning the capital formation. The capital moves to where it earns
the most. So if state-debt (in form of bonds) yields the biggest profit,
capital knows its destination. But while state-debt and inflation have their
impacts, the money-owners are not especially interested in too much growth in
the real capital anymore, because this decreases the rate of interest and
leave the passive interest-earners with smaller incomes from passive
interest-income. The Bourgeois Kondratiev (1843-1897): After 1842, the boom reemerged
and a new Kondratiev wave began, this one as a result of the railroadization
in Northern Europe and America and the accompanying expansion in the coal and
iron industries. The boom ended approximately in 1857 when it turned into a
recession. The recession turned into a depression into 1870, which lasted
until about 1885. The recovery began after that and lasted until 1897. The Neo-Mercantilist
Kondratiev (1898-1950?): The boom began about 1898 with
the expansion of electric power and the automobile industry and lasted until
about 1911. The recession which followed turned into depression in about 1925
which lasted until around 1935. We can assume, that this third wave entered
into a recovery immediately afterwards the one that we might suspect lasted
until around 1950. Is it not funny? American crises
late in 1800s and the beginning of 1900s: By
the time of the Civil War, the United States already had experienced two
major economic depressions, the panics of 1819 and 1837. By 1873 postwar
expansion, especially of railroads, a drop in European demand for United
States farm produce, speculation and market manipulation by a few
individuals, and the failure of the large banking house of J. Cooke brought
on a depression that lasted from 1873 to 1878. (end of mainstream history) Some people did want help from the federal
government in controlling the business cycle. These people suggested the
government should increase the money supply either by adding coins of silver
to those of gold in order to increase the specie supply or by issuing paper
money. Throughout the 19th century and until the United States abandoned gold
as the basis of the money supply in 1933, there were many proposals for
coining silver and issuing Greenbacks that were inconvertible paper money. At
times these requests were accepted. For instance, the Union issued large
numbers of Greenbacks to help pay for the Civil War. When these Greenbacks
were recalled, and only specie became correct currency, there was a major
impact on the money supply that helped precipitate the depression of 1873.
The government's concern for the
debt payment and its desire to maintain a strong credit rating prolonged the
crisis, which began with a fall in security prices, what today is called “a
fast plunge” on Wall Street. The
inflation in the mid 1890s combined with high unemployment in USA[9]
and continued into the 1900s is closely connected to new discoveries of gold
in South Africa, Western Australia and Klondike between 1887 and 1896. The
causes of the 1873-depression was too much expansion, speculation,
bankruptcy-make a pattern that has repeated itself throughout United States
history, but in each case the details are somewhat different. After the New Deal
in the 20th century, the federal government has been actively involved in
attempts to avoid or control the ups and downs i.e. cyclical movement of the
business cycle, but the cycle in the rest of the Keynesian world continues to
move up and down. However, the 19th century business philosophy of
laissez-faire, supported by the attitudes of the Social Darwinists (a link to Darwin in
Danish), called for no government interference in the then unknown
economic cycle, which in the following century, especially after Keynes was
considered "natural", definitely close to a part of the law of
nature. Is it not funny? Now to the more or less
incoherent financial facts of history: Long
before the Battle of Jena 1806 the elector of Hessen-Cassel Wilhelm IX and
his ancestors had been the unofficial lenders to Princes of Europe. But the
latest and most giving business was selling of young European tramps and
soldiers of fortune to fight in the wars, and especially the War of
(In)dependence in America on the British side. The British government
financed the war with credit in form of bills of exchange. Mayer
Amschel was appointed to Agent of Court in Chief by the elector. Europe, towards the end of the eighteenth
century, at the time of the American Revolution (The War Of (In-)dependence),
was very different from what we know of the same area today. It was composed
oil a combination of large and small kingdoms, duchies and states which were
constantly engaged in squabbles among each other. Most people were reduced to
the level of serfs - with no political rights. The meager 'privileges'
that were granted to them by their 'owners' could be withdrawn at a
moment's notice. It was during this period of time that a young
man appeared on the European scene who was to have a tremendous impact on the
future course of world history; his name was Mayer Amschel Bauer. In later
years his name, which he had changed, became synonymous with wealth, power
and influence. He was the first of the Rothschilds - the first truly
international banker! Just
before (Napoleon’s) Marschal Augereau occupied Frankfurt January 23th 1806
and required 4 mill. franc from the citizens who he claimed had been trading
English products. Mayer Amschel (Rothschild) in Frankfurt had got the
assignment to secure the fortune of the Elector. As the first Nathan exported
secretly contraband to France and other countries on the continent occupied
by Napoleon. Products of cotton, yarns, tobacco, coffee, sugar and indigo to
sky-high black market prices. For ten years (1800-1810) the Rothschild family
succeed with this business. At
the same time the European apparently was falling into the hands of Napoleon
exorbitant sums had left for England, where one of Mayer Amschel’s five sons
Nathan Mayer already resided as a prince of finances, and Wilhelm was brought
in exile in Slesvig near the border to Denmark, later on in Denmark and in
Pragh. All the states of Europe owed enormous - outside almost any
imagination - amounts to Wilhelm, but Napoleon had now occupied almost every
one of them. From
1806 the fortune of Wilhelm IX and also the fortunes of other continential
creditors had been moved to London, and a good deal of it in the hands of
Nathan Mayer, one the Rothschild-sons that had moved from the textile area
Manchester to London in 1804, N. M. Rothschild and Sons became the name of
business. From the late 1810 the family transferred their investments – also
the ones of Wilhelm’s, but in the name of Rothschild – to
capital-investments. Nathan used the opportunities that Napoleon had given
him. His highness got British state-bonds in returned. Mayer Amschel Rothschild sent some of
William's money to his son Nathan in London, and according to the Jewish
Encyclopedia: "Nathan invested it in 800,000 pounds of gold from the
East India Company, knowing it would be needed for Wellington's peninsula
campaign. He made not less than four profits: (l) on the sale of Wellington's
paper (which he bought at 50¢ on the dollar); (2) on the sale of gold to
Wellington; (3) on its repurchase; and (4) on forwarding it to Portugal. This
was the beginning of the great fortune." (end of mainstream history) Gold
bullions were also smuggled by Nathan and his brother James Rothschild in
Paris to Wellington in huge amounts, so the small amount mentioned in the
last paragraph soon seemed to be nothing. Every day he was out and in with
the Elector’s British pounds. Nathan had been in England for 7 years then,
and officially his fortune (but especially the one of the Elector’s) had
increased enormously, his own credit as well. In
the period 1811-1815 Nathan Mayer Rothschild and J. C. Herries also
transferred £ 42.5 mill. in gold safely to Wellingtons army in Spain with the
help of Nathan’s brother James in Paris (established in Paris from Mars 24th
1811) and through France. Try for a moment to compare this amount with
circulation of notes and the covering fond in England as a whole in the same
years ( read the mentioned in
part 1 and then just click “back”). While Napoleon fought and lost in Russia,
the gold flowed through France to Wellington who also stopped Napoleon at
Waterloo. The
Battle of Waterloo was fought from 11:25 A.M. until, about 10 P.M. on Sunday
18 June 1815. That Battle made England the leading power of Europe and Nathan
Rothschild (1777-1836) the most influencial figure of his time. The hard work
began long before. As soon as the five Rothschild–brothers were well
established in Frankfurt, Vienna, Paris, Naples and London they began to
develop their own news service (in London Rothschild could send his
blue-dressed couriers to Rio, Toronto or Nairobi without warning until WW2).
They simply built their own intelligence service much more effective than
those of governments. No
news was as valuable to the speculators as the news of the outcome of the
Battle of Waterloo. For several days London listened. If Napoleon won the
price of English government-bonds inevitably would fall. Did England win
Napoleon’s empire would fall and the bonds would rise. The fate of Europe was
covered in smoke. At breakfast Monday 19 June 1815 a Rothschild-agent
Rothworth went from Ghent to Folkestone on the English coast in a fast fisher
boat. He reported to Nathan Rothschild at 2 New Court, St. Switin’s Lane in
City, London, then dashed to lord Liverpool’s house in Westminster: the Prime
Minister got the news at two in the afternoon. The dispath of Wellington, who
had be active in the war the day before and rowed across the Channel, reached
London at ten in the evening, went to Earl Bathurst’s House in Grosvenors
Square, where the cabinet was dining, then went down to St. James’s to
present the eagles to the Prince of Wales. With
this knowledge made public everyone would have known that the English
government-bonds now would rise instead of fall (if Napoleon had won), so
everyone else would have bought government-bonds. But Nathan Rothschild had
planned to make a so-called corner. He began to sell government-bonds leaning
to the pillar where he used to stand. His face was without any expression at all,
so it was interpreted as an English defeat at Waterloo against Napoleon. All
his agents, just known by himself, also sold bonds and other papers.
“Rothschild knows”, it was whispered. He did know, but not what the others
were meant to fear of. The prices went down and down, the market collapsed.
The prices fell from minute to minute, there was no botton. The solid and
strongest bank houses began to stagger. The papers literally did somersaults. In
the repercussions of the fine Congress of Vienna a now forgotten supplementary-congress
had to be held in Aix-la-Chapelle (now the German Achen, where besides the
Neanderthal man was found). Everything so-called necessary always (when you
forget “thanks” and “apologizes”) has a financial side. The congress is
called the forgotten one, so perhaps we were not meant to remind the reader
about it. Ludwig
the Eighteenth literally borrowed the restoration of the Bourbon’s
magnificence by Nathan and James Rothschild. He had received advances of
British money orders to finance his glorious entry in Paris in 1814. In 1818
the old financiers had returned, and the Rothschilds were not counted in this
connection. They were considered up-starts. Another
corner and still not the last. Day
after day the fall was steeper. Other value-papers began to stagger too. The
collapse was threatening, not just in France but all over the European
mainland. Suddenly the scene in the Aix palace changed.
The Rothschilds, who were patiently biding their time and waiting quietly in
an ante room, were ushered into the presence of the king. They were now the
center of attention. Their clothes were now the height of fashion.
"Their money [was] the darling of the best borrowers." The
Rothschilds had gained control of
France, and control is the precise name of the game! Benjamin Disraeli, who
was the prime minister of Britain, wrote a novel titled Coningsby. The Jewish
Encyclopedia, Vol. 10, pp. 501, 5O2 describes the book as "an ideal
portrait" of the Rothschild Empire. Disraeli characterized Nathan (in
conjunction with his four brothers) as "the lord and master of the money
markets of the world, and of course virtually lord and master of everything
else. He literally held the revenues of southern Italy in pawn, and monarchs
and ministers of all countries courted his advice and were guided by his
suggestions." Britain
alone on some doubtful Gold Standard for 100 years without and 100 years with
law: With
the growth of foreign commerce, financial innovations were quick to appear.
The bill of exchange was introduced early, and by the fourteenth century a
simple multilateral clearing system had been established. Multilateralism, at
least of the a primitive type, had been a major feature of international
economic relations for centuries. Much later, during the 17th and
18th century: The first “forwarded” exchange markets were
developed to overcome the uncertainty of future movements in the ‘spot’ rate
of exchange, so reducing the risks inherent in fluctuating exchange rates. Britain
was alone on gold standard de jure for both domestic and international
dealings from 1821. Most other major trading nations at this time were
operating either a bimetallic standard, for example France and the United
States, or a silver standard, as were most other European countries. Thus
triangular payments system comprising the United Kingdom, Western Europe and
the Baltic countries had dominated Northern Europe’s trade for many years,
and the “slave” triangle, linking Britain, Africa and West Indies provided
another example of this type of trading pattern. Other triangular trading
systems developed during the first half of 19th century. By the
1860s, for example, Britain’s trade deficits with United States were largely
covered by her surpluses with Latin America, and a British deficit in the
trade with China was offset by the a surplus with India. When
foreign capital flows from one country to another, its transfer may be
effected in several ways, for example through a shift of gold from lending to
borrowing country, through an increase in the capital receiving country’s
import from the lending country (or from other countries), or through a
decline in the borrower’s export such that the trade balance becomes more
unfavourable. Gold flows and reduced exports rarely effectted the transfers
during the late 19th century, and for most part the transfers of
capital from lending to borrowing countries took the form of increased
commodity imports by capital receiving countries. Nothing
in the accounts from the 18th century and just a tiny bit from the
19th shows us how much of
the transfers of gold originated from an equalization concerning trade
deficits and trade surplus on the balance of payment or from foreign
investments or loans. An
answer to the question was given by the classical economists, David Hume,
Adam Smith, and J. S. Mill, who worked out the price-specie-flow mechanism.
According to this explanation, prices changes induced by gold flows were
supposed to bring about the adjustment. Suppose a country develops a balance
of payments deficit because of excessive imports and proceeds to export gold
to cover this excess. This loss of gold will reduce the domestic money
supply, since either gold circulates as money in the country or the banking
system keeps the country’s internal supply of money adjusted to the quantity
of its gold reserves. A decrease in the domestic money supply will lead to a
decline in commodity prices, since less spending with output unchanged means
lower prices. Lower prices for goods will in turn increase exports, as
foreigners find the country a cheaper place in which to buy. Lower domestic
prices will also reduce imports, since domestic substitutes foreign goods as
they got cheaper relative to foreign supplies. In the gold-receiving country
the process is reversed. Those
were the mainstream explanations. Systems
of stability-funds that let the gold - in question deficits and surplus on
the balances of payments - circulate between certain trading-partners and no
circulation through other channels also existed. Read the next paragraph in
the light of this. Gold Standard: During
its relatively brief existence the gold standard was not the standardized or
automatic international monetary system it was widely believed to have been
in the 1930s and later on. There was various versions of the gold basic: thus
Gold Coin Basic or Classic Gold
Standard, the Gold Exchange Standard and finally from 1840s the
Flexible Gold Exchange Standard. They were all used, especially the last
mentioned. And as we have seen reality was far away from the theories. As
for the other European countries, by 1870 they were either on a silver
standard – the Germanic States, Holland, Scandinavia – or like Russia,
Austria-Hungary, Italy, Greece, and more recently France, had been forced by
wars and revolutions to issue inconvertible paper money. Outside Europe, the
Orient and Latin America were on silver, and the United States had
inconvertible and depreciated notes (Greenbacks), issued during the Civil
War, still in circulation. By 1870, therefore, the gold standard was far from
being internationally adopted. Britain alone operated on a legal gold
exchange standard. Bimetallism existed legally in the United States and the
Latin Monetary Union, and Germany, Holland, Scandinavia, Latin America and
the Orient adhered to the silver standard. The
easy-credits created the so-called boom in the 1920s. A more restrictive
montary-policy would have prevented the Big Crash that happened via the
shares-prices on stock market. The easy-credits seduce the investors to
believe that a larger propensity to save has made more resources avaible for
investment. Now (2002) the press on the prices was beginning to be shown, and
profits fell. It is the question if the central bank (FRB) will put the
brakes on. Perhaps, but it is precisely the opposite what is needed then,
when it has happended (like in 1929 the wrong was done more of less
expected). Another
sign is the speculation in share-price earnings that are beginning to go in
and finance uneconomical unions of corporations. The same happened in 1899,
1902, 1924 and in 1929. The paper mill the Danish professor Laurids V. Birck
called this practice. You
actually find falling prices in the period 1817-1896 as a whole, but you find
generally rapidly rising prices 1851-1854 and 1872-1873. Large deposits of
gold were found in California and Australia between 1848 and 1855 (as
mentioned earlier) that led to an substantial increase in the circulation of
gold coins in Europe and elsewhere. Rapidly rising prices appeared in England
when gold-coins dominated circulation. In England late in 1790s, in the United States in the 1850s under the
gold-boom, Japan in the 1870s and Italy in the 1880s. An
example of competition on debt and on gold standard: The
unfree trade- and industrial competition on the European Continent, the
competition on the seas and in the colonies, and at last on the land in
Europe too. It was most of all financed
by national debt. The German production of steel, which was concentrated
in the Ruhr Districht, increased 12 times in the period 1880-1913. In the
same period the German part of the world trade increased from 17 to 22
percent, while the British fell from 38 to 27 percent. The national debt in
Germany was doubled from 1900 to 1910 (under the gold standard). Under the
second increase of “the (German) Marine” income- and fortune-taxation were
introduced in 1913 for the first time in the history of Germany. At the
outbreak of the First World War the German steel production amounted 3 times
the British. State-debt under the international gold
standard and immediately after WWI. Professor L. V. Birck was an eye-witness : “In
1922 L. V. Birck could account in details the capital of the state in 'The
World Crisis And Denmark' “... The income of the capital is the raising of
loans and sold values, and its expenditures are the return of loan and
in-vestment of money...About the future there is of my opinion 3 ways to go,
and all ways are equally impossible for the moment, because the time has been
missed" 1. "To do open and honest bankrucptcy. It is an awful
unjustice against those individuals, who by accident have the papers". 2
"Then you can try to pay back". "Immediatly after World War I
England paid down its national debt, the second year it paid its interest,
and third an forth year it did, what other decent nations did, paid interest
by increasing the floating debt' – short-run debt, as book-debt or debt in
current account". 3."Finally you can destroy your currency",
and try to do it just as quickly as other indebted nations. Just after World
War I (1922) Birck wrote in the same book: "It does not help to believe
that the world can go out of the war without looking different than before or
that those people who have got these papers (debt-papers, German Marks and
inflated and depreciated shares) should live secure from them, what they
require. Take
the 1800s and the first quarter of the 20th century. State-debt
flourished as it never did before and again until the 1980s. Inflation,
deflation and unemployment the same except for in the 1930s. WWI was carried through with a counterfeiting turned out in its
caricature of a state-debt of mad dimensions. In the European- American
economy the state-debt increased from 150 billions (accounted reliably in
Danish Krones) to 1 trillion in 1918, 1½ trillion in 1919 and 2 trillions a
little later. Regardless of the units you choose to count in, it’s relatively
more than 13 times bigger today. And the state-debt of the nations of which
the debt-lost was too astronomical was not included then. From
international high finance you then heard the words: The national currency as close as
possible to pari (accounted in gold) and preserve the debt as much as
possible, certainly no instalment at once, but a slow amortization, born by
the yearly ordinary taxes. You will gradually change the empty space of the
state-debt with fill it with real capital. The
Danish state-debt-account after the first quarter of 20th century: After
WWI you could choose bankruptcy or continue the mortgaging of the land
values and the labour force of the
nation that had already had begun. The debt of state was 2400 mill. d. kr
(don’t mind the units) in 1923, when the debt of the municipalities and of
harbors is included, and level of prices is the same. In the year 1900 the state-debt
was about 200 mill. d. kr.. The debt is multiplied with factor 12 in just 23
years. To the state-debt should have been added the present value of burders
of pension. In the official forum you compared such a state-debt with assets
of the state and the municipalities. This sum showed 1800 mill. 1923, when
Denmark was on the edge of bankruptcy. The
state-debt should from the mid 1930s be regarded just opposite because the
nations had to bee indebted by the professional leaders of the states. I
should perhaps had complemented with repeating the reparation from France to
Germany after the 1870-1871 war of borrowed 5.3 billions francs paid in
German bills (with an interest-burden of 356 mill. a year) or the figures of
paper-money-circulation in France in 1882 of 2430 mill. rising to 6 billions
in 1914, 27 billions in 1918 and more than 38 billions in 1921. The total
debt of France was 400 billions francs of which $7 billons was foreign debt
in 1921. The French citizens were excellent savers in contrast to most
European peoples, and the French capitalists separate class, mostly private
investors investing abroad. I
could have told the history of the American paper mill in the 1800s, but the
way it runs is the same as that of the European then and today. The
paper mill ruined the world then and did it again yesterday These
papers have to be destroyed in one way or the other, society can not exist,
if it has to pay interest of these money, it is a crisis that is coming over
the world in one or another way, and that will have to hit us even along the
way of sympathy, because we are close connected to each other in Europe. The
same can be said about the share-prices on the stock-market that are 1000
millions from, what they were at the maximum, and they have to be written
down with 500 millions within the next 1½ to 2 years. But all the writing
down of our values can only be done with individual losses". "I
claim, what is happening now (1925) is a world revolution, which in reality
is much bigger than that the Bolsheviks are making, where some citizens are
killed and some workers are shot. The capital, as the world believes it has,
is not present, it has to be written down with 30 to 40%. It may harm you and
me, never the less it works in many respects very revolutionary. It has
happened before" (unquote L. V. Birck in 'The World Crisis and Denmark',
1922). Don’t
be a bit surprised, if the monetary units change from billions to trillions
in the period 1920s to 2000s, new figures, new names and expressions cover
precisely the same fraud internationally. "The
Ability of a country to bear credit was in the opinion of the bank dependents
of a serie of qualitative factors, such as for example laws, traditions,
national character, structure of businesses. To connect changes in the
currency-exchange-rates with problems of the balances of payments was, the
bank considered, not durable, and it was a pure quantitative criteria that,
if it was used, would lead to just crazy conditions". Bank
Of Norweig was perhaps right in 1944 a new and even more fateful
international agreement of a new monetary system had been made . How
can we allow a country to make a devaluation just because its products are
becoming too expensive to buy for other countries. Why should the country/state/the
leaders not be forced to make a good order the economy of the country. The
problem is the nominal currency-exchange-rates that was coupled to the
balances of payments problem combined with the dollars-dominans steady
allowing dollars to be exchanged for gold at constant price of $35 per ounce,
while America made inflation more fateful than any other western nation. This
has been gone through in details on: http://www.lilliput-information.com/truth/tru1.html Final conclusion: David
Hume was right: “Money is not, properly speaking, one of the
subjects of commerce, but only an instrument which men have to have agreed
upon to facilitate the exchange of one commodity for another.” But
it was a theory. Reality had long ago even then made money to commodities
subject for commerce. And in the 1800s the money and other paper developed
this characteristic to the atmost as I have shown. Hume was also right in
considerations of money in circulation as the central problem to focuse on,
when the value of the money was looked upon. Money is not the relative scarce
silver and gold pieces if money is not commodities subjects for sail. It’s to
go against reality to claim that in the same way that some ideologists
maintain that the human being is created good. David Hume also demonstrates
that both areas benefits from trade. Both
Adam Smith and David Ricardo were brilliant writers and famous and approved
thinkers by the elite. They did not take the papermill much into attention,
but rather left to the coming politicians to set the morals of the monetary
regime. Some
economists blithely assumed that no government of a civilized nation would
use the gold exchange standard intentionally as an instrument of inflationary
policy. And I shall not discredit their huge contributions,
especially not the new theoretical knowledge centred round the
price-parameter explored by Adam Smith, or for both their believing in the
coming system based on gold and Britain. The
price-specie-flow mechanism: According to this explanation, prices changes
induced by gold flows were supposed to bring about the adjustment. Suppose a
country develops a balance of payments deficit because of excessive imports
and proceeds to export gold to cover this excess. Combined with: Nothing in
the accounts from the 18th century shows us how much of the
transfers of gold originated from an equalization concerning trade deficits
and trade surplus on the balance of payment or from foreign investments or
loans. It
is obvious that the main problem of too much paper money have to solved by
changing from nominal exchange rates to real exchange rate. How this could be
done tomorrow you can read on: http://www.lilliput-information.com/intmo.html
But it is not the only problem to solved properly. The problems of the
irresponsible private limited company have to be solve by discussing the
anonymous ownership and limited responsibility
have to be altered too. A
quotation from “The Truth Is (That) What You Believe In (?)” : http://www.lilliput-information.com/truth/tru1.html Debt,
inflation and mass-unemployment are caused by that concentration of power and
of ignorance that uninformed voters are letting themselves be ruled of.
Business-owners may be greedy, unions just alike, but national debt,
inflation as well as mass-unemployment they are not able to make, if
government and civil servants, who cleverly live on these arrangements, do
not play the game. You
find the creator of the following quotation by reading on
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