The Evolution Of Fiat Money, Endless War, & The End Of Citizenship (Part 2) Tyler Durden Sat, 08/15/2020 - 21:00
Authored by 'ICE-9' via The Burning Platform blog,
The Victory of Fiat Money, Endless War, and the Rise of the “Citizen Soldier”
The stage was now set for the victory of fiat money after the series of bloody religious wars that plagued Europe over the 16th and 17th centuries. For the first time some combatants would, at least initially, fight for religious “ideals” rather than pay or feudal obligation and this marks the beginning of the end of the Classical phase of European warfare. This phase of endless war was funded by ever increasing amounts of silver borrowed on credit which, together with an endless series of tax decrees, initiated severe price inflation, economic depressions, and peasant revolts that became larger and more expensive to quell (on credit). With both political and economic chaos spreading across Europe, it was at this time its intelligentsia began to espouse the “Universal Rights of Man” which, for its time, was nothing short of extreme radicalism as it demanded an end to the centuries old divine rights of the sovereign over his increasingly taxed subjects.
These tenets of the “Universal Rights of Man” were quickly adopted and championed by the Bourgeoisie / Burghers / Borghese, skilled craftsmen, and lesser nobility as a means to not only elevate their social status, but also to break free from their centuries old and ever increasing taxation and military funding obligations to the sovereign. The Reformation and subsequent religious wars proved that rebellion could, albeit at an extreme loss of (peasant) life, extricate a people from its taxation obligation to the Papal Empire. By the latter half of the 18th century, simmering peasant rebellions began to flare into outright revolution as the “Social Contract” between the sovereign and subject disintegrated, prices for basic necessities skyrocketed due to the increasing taxation and coin debasement needed to fund wars and extreme opulence. Sovereign default became state policy as by sovereign right, and the creditor class began to suffer heavy losses as the wars had no effect other than spawn new wars and drive the state further into debt, upon which it would eventually default, all while the state court played parlor games and gambled (on credit).
Mounting losses by the creditor class presented an existential threat to this now highly powerful group and put at risk the profitable flow of credit to the merchant class, so near the end of the 18th century these groups vowed to depose the debtor sovereigns and assume outright control of the nascent central banks and operate the state for the sole purpose of generating profits to themselves through the monopoly of state credit issuance. But the millennial old condition of raising an army funded with silver was an impossibility, as this not only presented a high probability of suffering staggering losses, but the sovereign, by his rights, could simply decree the provision of credit to rebels as treason and enforce punishment by death. The answer to the creditors’ monetary dilemma lie in extending these “Universal Rights of Man” to the peasants, and thus framing the obtainment of these “rights” contingent upon successful “revolution” and overthrow of the sovereign. Therefore, an army could be raised composed primarily of irregular foot soldiers that would fight for “ideals”, not silver, and thereby free up what silver could be raised for the purchase of munitions, the logistics of battle, and professional mercenary officers. And to create the fervor required to sustain the “revolution” and replace the continual loss of foot soldiers, these “Universal Rights of Man” were elevated to the status of quasi-religion – “Liberté, Égalité, Fraternité”, et cetera. So what we witness during this period of glorified history is not the emancipation of the people from the chains of sovereign prerogative, but the secret usurpation by the creditor class of the means of operating the state via proxy revolts against the insolvent creditor state and thus, the creditor class gain control of the state through the monopoly issuance or withholding of credit to the state.
This or is important as described below.
It is no coincidence that the establishment of privately owned central banks during the 19th and 20th centuries followed after the fall of sovereigns, and it was this creditor class that financed the overthrow of each sovereign. History’s interpretation of this period is wrong – the primary driver behind these revolutionary centuries was not the rise of the people against the sovereign, but instead was the secret overthrow and usurpation of the sovereign by the creditor class using the people as their proxy army. The seminal moment where incorporation of a privately owned central bank followed a successful people’s “revolution” was the rise and financing of the professional mercenary officer Napoleon and his establishment of the Bank of France in 1800. Now for the first time in Europe, we see two rival empires – Great Britain and France – whose privately owned central banks share an overlapping ownership within the great families of European finance – e.g., the Rothschild’s of Paris and London – and share common ownership between those royals sharing lineage on both sides of the English Channel that got out of agricultural feudalism and became creditors. This overlapping ownership was a great bonanza to the private central banks as nations could now be pitted against one other, war bonds issued by both sides of a conflict, and the price of these bonds manipulated during the prosecution of war by altering its outcome through the issuance or withholding of credit to one side or the other.
For example, Country A and Country B’s war bonds are issued from each respective private central bank, sold to investors including themselves, and at the beginning of the war are of equal value. Then Country A is given advantage through the issuance of additional credit, and Country A’s war bonds increase in value as it accumulates victories on the battlefield where Country B’s war bonds decrease in value with every setback. It is at Country B’s nadir that these same private central banks buy up its war bonds at huge discounts, sell their Country A war bonds at high prices, and then begin to withhold further credit to Country A while issuing large amounts of additional credit to Country B. The tide of battle eventually turns as the reversed credit flow takes effect, and now Country B’s war bonds, acquired at great discount, begin to appreciate where Country A’s war bonds, sold at high prices, begin to depreciate. Thus the progression and outcome of war can be controlled by the issuance or withholding of credit and tremendous profits extracted by the shared ownership of both country’s central banks regardless of which country wins or loses. Thus the early 19th century now saw incredibly expensive wars of attrition prosecuted not for the purpose of empire building, but instead for the profits derived from the issuance of and trade in war bonds.
It didn’t take long for the peasants to realize that the promised “Universal Rights of Man” delivered nothing more than conscription, subsistence wages from the growing number of industrialized factories, and yes, taxes. Some new “ideal” was needed to motivate these peasants and make them a part of “something larger than themselves”, and the answers were found in “democratic” revolution and the labor union movement. Now, the central banks had an endless pool of young men that would fight for the “ideals” of “democratic enfranchisement” embodied in “citizenship” and these newly minted aspiring “citizen soldiers” would accept fiat money offered in exchange for combat. Thus, for the first time in history, not only could money be conjured out of thin air, but so too an army that would fight under this notion of “democracy”. This quasi-religion surrounding the “Universal Rights of Man” matured into full religious zealotry under the banner of “democracy”, and like all religions this “democracy” had to be spread to the infidels through war. But why? Because the promise of the “Universal Rights of Man” failed to establish a privately owned central banks within Europe’s key empire – Germany.
The rise of Marxism and the labor union movement in the mid-19th century were put to work by the creditor class to operate where the democratic “citizen soldier” armies proved ineffective against the powerful Prussian professional army. These “democracy” foot soldiers were not deployed to the rural battlefields but instead to the streets of major industrial cities with the objective to ferment political agitation and societal discord in order to weaken the German state from within prior to “democratic” invasion from without. The German Wars of Unification and later founding of the state controlled Reichsbank (1876) starts a 70 year interval where the primary objective of western European history is the destruction and overthrow of the powerful and efficient German state with its state controlled central bank, the imposition of “democracy”, and “empowering” the German people to replace the state controlled Reichsbank with a privately owned central bank having similar overlapping ownership structure to those already established. Thus at the onset of the 20th century we observe the establishment of truly endless war, funded entirely by fiat money, waged by “citizen soldiers”, and fought on the basis of political “ideology” that has attained the status of religion.
But the German state proved to be an implacable foe. Through a combination of strategic offensive wars, prudent foreign policy, sound finances, liberal labor reform concessions to the working class, and unparalleled martial ability of its professional army, Germany managed not only to fend off the assault of “democracy” but also to expand its territory and influence and negate the influence of its communist agitators. And German leadership had a true philosophical vision – the End of History starting with the consolidation of all Germanic peoples under the single rule of the German Emperor. This meant eventual state control over the privately owned central banks in Great Britain, France, Scandinavia, and the Low Countries and stood as a direct threat to the creditor class’ own growing vision of the “End of History”.
For the creditor class, the solution to this existential crisis was to first establish a reliable overseas creditor of significant means that was not directly threatened by German land based military power and had the ability to create and adsorb large quantities of fiat money. This financial act of “guarding the rear” resulted in the 1913 Federal Reserve Act in the United States and its transfer of both monetary issuance and policy from the Corporation of the United States to the privately owned Federal Reserve System. Thus with the Federal Reserve System established and in private ownership hands the flow of credit to the anti-German combatants could be guaranteed despite any opposition of the (primarily) German-American people. Concurrent with this effort was the consolidation of a nexus of inescapable mutual defense pacts between European countries both with and without private ownership control over their central banks. This nexus would draw both sides of the central banking ownership split into a war, weaken all countries equally, and leave no major power remaining to contest the outcome. Thus any “victory” to the Western European creditor class became contingent upon mutually assured destruction of all combatants, but only the privately owned central bank side would be back-stopped by credit issued from the United States to rebuild military capability after hostilities ended.
With both an independent credit supply and mutual defense nexus secured, the final act was to goad Germany via false flag into a super war of attrition – the war to begin all endless war – that would not only completely defeat and enervate the German state, but generate tremendous profits to the New York and London client banks via their financing of hostilities, supply of armaments, and provision of logistic services. And last, coalition member states that did not yet operate under control of privately owned central banks would be weakened to the point where the communist insurgents could be effective in prosecuting street level “revolutions”, at little cost, and these “revolutions” used to construct an existential threat to “democracy” occupying the position of Anti-Christ within this new politico-religious ideology and require never ending debt financing of military armaments and the excuse needed to conscript large standing armies.
World War I went according to plan with Germany defeated, the last viable Goldmark extracted, economic collapse across the Weimar Republic, and no state owned Reichsbank to thwart the eastward expansion of private central banks. With martial victory complete but only a bankrupt and worthless now privately owned Reichsbank left to show for their efforts, the creditor class set to devise a second round of wartime wealth “creation” and transfer via Germany through financing the rise and succession of the Nazis, as one could not build a Wehrmacht from stolen wedding rings and extracted gold teeth alone. Client banks in New York, London, and Stockholm – cities in countries never invaded by the Nazis – showered the new Thousand Year Reich with the international credit facilities needed to buy the massive amounts of steel, copper, lead, zinc, tin, rubber, fuel, et cetera that it did not possess within its own territories, and buy these commodities primarily from countries it would soon face in battle. From out of both the physical and financial ashes of World War I, between 1933 and 1939 the greatest military power Europe had ever assembled was conjured out of thin air by international fiat money that itself was conjured out of thin air. Like WWI, this second phase of endless war ended with Germany’s total defeat and absolute destruction, its financial system under complete submission to the victors, huge private profits created and transferred to New York and London, and a new major player on the world stage – the US Dollar.
The end of World War II marked the unequivocal victory of fiat money. The most significant post-WWII finance shifts were the creditor class giving up on private ownership of the German central bank and the nationalization of both the Bank of England and Bank of France. The BoE and BoF were insolvent due to their ownership of huge quantities of war bonds that would never be repaid so these losses were dumped onto the British and French taxpayers. Thus with the BoE and BoF off their hands these same central bankers could focus their attention towards their ownership in the Federal Reserve System and use the United States as their proxy army for the global spread of US Dollar financing. With the Soviet Empire left battered but intact, the post-WWII world was not only split along political systems and ideology, but was also split along competing fiat money systems – the “Free World” Dollar versus the “Red Menace” Ruble. The antagonism between these two systems played into the hands of both sides, as each gave the other the excuse to commit vast quantities of national resources towards their respective militaries, expand their international political and intelligence operations, terrorize unaligned countries into both compliance with one system or noncompliance with the other, and commit all manner of atrocity in their politico-religious campaigns to force all countries of the world into one fiat system or the other. Thus descended upon the world an endless series of overt and covert international wars and coup d’états and rigged elections to progress the urgent spread of “democracy”, denominated in US Dollars, against the spread of the “Red Menace”, denominated in Rubles. In its simplest analysis, this was the essence of the Cold War – the fight between competing fiat systems for world domination.
The primary post-WWII profit motive for the creditor class came now not so much from the usurpation of state owned central banks but instead from the relentless spread of “democracy” via coercion, subterfuge, and military force throughout the non- and semi-industrialized nations with the installation of pliant and reliable “growth” friendly juntas and regimes. With international “growth” came accelerated US Dollar financing for the purchase of military hardware and civil infrastructure projects and ever increasing profits from the accompanying “skim” taken in fees, interest, and contract awards to controlled entities. As these new US Dollar converted countries had no power to issue fiat money of influence and could not print their way out of economic trouble, and as “growth” rarely followed within their own borders but corruption and waste did, mechanisms were established to cover potential losses to the creditor class by expanding the mission of post-WWII extra-governmental financing institutions (IMF, World Bank, Asian Development Bank) to include the “international community” and back-stop all losses with “contributions” from “Free World” taxpayers. War now was waged not for the profits generated from war bond issuance and trade, but for this zero risk “skim” taken from the spread of “democracy” and facilitation of international “growth” financing. “Citizen Soldiers” were now not only tasked with risking their lives to impose “democracy”, but also for footing the bill when “democracy” couldn’t pay its tab.
The number one recipient of this international “growth” was the United States itself. As the holder of the world’s international reserve currency it was insulated from inflationary pressure due to the massive issuance of US Dollar denominated fiat relative to the combined value of its national resources and productive output. This insulation was effected when the amount of fiat increased, the “value” via inflation of the underlying national resources and productive output denominated in US Dollars also increased and provided an additional layer of “growth” in the United States to be taxed via capital gains and skimmed through mortgage financing. And as inflation raised this underlying “value” of goods and services, it also raised the “value” of labor inputs to these same goods and services, so wages increased as inflation progressed as money and labor inputs were not yet divorced. For 25 years post-WWII the United States “citizen” actually saw purchasing power increase with the increasing issuance of fiat money around the world, as inflation was exported to non-US Dollar economies and US Dollars returned to the home country to be re-invested in growing US exports. This insulation from inflation and increasing purchasing power was, in a sense, the “rights of the victor” granted to the United States “citizen soldier” and was the “carrot before the rod” that secured the blasé indifference to the prosecution of the endless overt and covert wars on foreign soil need to secure US Dollar financing hegemony. And it all worked until August, 1971.
During the mid- to late 1960s, oil producing countries along with other producers of US Dollar denominated commodities began to return their excess US Dollars and demand their conversion into gold. Gold outflows from the United States via the US Treasury’s Gold Window soared and became a major problem for US Dollar hegemony as it was this promised gold convertibility – but never expected to be exercised convertibility – that gave the US Dollar its illusory “value”. As US gold supplies depleted, the US Dollar began to depreciate in purchasing power at home and the domestic standard of living stagnated, as did profits generated by international “growth” to the creditor class. Thus the late 1960s and early 1970s saw a period of stagnant domestic “growth” via reduced exports combined with domestic inflation fueled by the conversion of US Dollars into gold – stagflation – and the limits of US Dollar denominated international “growth” within the post-WWII model had been reached. So in response to the cessation of international “growth” in financial profits, the creditor class devised a way out that would generate even greater profits to themselves, but was also the financial self-destruct mechanism that would eventually end US Dollar hegemony and money itself.
This new profit model entirely eliminated gold convertibility and moved the history of money from the fractional reserve fiat system to true fiat – money backed by nothing more than political coercion, military force, and outright fraud. And this new system would tolerate no opposition – i.e., the Soviet model – as its extreme instability, utter worthlessness, and complete absence of underlying natural economic laws made it highly susceptible to failure. Thus the competing fiat system – the Soviet system – had to be destroyed and all nations of the world brought under the unipolar suzerainty of the US Dollar. Welcome to the modern age – the age of endless-endless war waged by the United States in the service of unipolar “Globalism”.
The End of Money, Endless-Endless War, and the Coming Age of Subjugation
The conversion to pure fiat money in August, 1971 was money’s defining moment since it first appeared as electrum coins in 7th century BC Lydia as this divorced money from any representation of, and true measure of, value. During its existence, money had gone from value in of its self in the form of coins, to the (progressively fading) representation of value during its fractional reserve paper money phase, to a completely abstract replacement for “value” backed only by future taxation and additional US Dollars “hypothecated” from ever increasing issuance of Treasury bills. Thus its journey from “barbarous relic” to “refined abstraction” was complete.
Taxation is the fiat “value”, but future Treasury bill issuance is its hedge since future purchases cannot be guaranteed and may not materialize, and when they don’t materialize that triggers either massive tax increases, national default, or both. Thus the system either “works” when nations buy Treasury bills, or it implodes spectacularly when they don’t. To ensure the system “worked”, nations captured by the US Dollar fiat system were “persuaded” to “invest” their US Dollars not in gold but in US Treasury bills through this newly re-routed “virtuous cycle”. Thus the prosecution of endless-endless war was the failsafe continuously operating to ensure the fiat system “worked” and that nations did not stray to gold or other fiat and thus trigger systemic US Dollar collapse. War, regime change, US Dollar fiat imposition – lather, rinse repeat.
Adoption of this new purely fiat money mandated that United States federal debt continually increase ad infinitum as debt was required to maintain operation of the fiat system through ad infinitum issuance of new Treasury bills – i.e., the repatriated US Dollars that went to new Treasury bill issuance always had to exceed the sum of Treasury bill interest and redemption payments. Any budget surplus now was an indicator that either the tax take was too low or not enough Treasury bills were issued, and if budget surplus arose the system would revert to either higher tax take or new wars to impose more nations under US Dollar fiat. To safeguard these continually increasing budget deficits through Treasury bill issuance and preservation of the global US Dollar fiat system, in the mid-1970s the United States embarked on a policy of de-industrialization using a combination of regulatory excess and high interest rates that discouraged new capital investments in production at home and drove up the domestic cost base until the laws of economics forced productive capabilities to cheap overseas destinations with little regulatory oversight.
This de-industrialization ensured that when US Dollars arrived home from overseas via the “virtuous cycle”, these dollars, if they did not go to purchase military hardware, went to purchase US Treasury bills instead of US manufactured goods and services. Therefore de-industrialization ensured no federal budget surplus would ever arise, removed the inflationary cushion that US Dollar fiat provided during the 1950s and 1960s export boom, and guaranteed ever increasing budget deficits would follow in the wake of never ending Treasury bill issuance. It is this purposeful redirection of US Dollar inflows away from the purchase of manufactured goods and services towards the purchase of Treasury bills that is the core nature of what is today termed “financialization”, as a high volume of these US “virtuous cycle” Dollars returning to purchase manufactured goods and services would starve the US Treasury market and implode the US Dollar fiat system. Thus the US Dollar fiat system demands the destruction of the US manufacturing export base because Treasury bills, on which fiat survives, cannot tolerate competition from the purchase of US exports no more than it can tolerate competition with another fiat system abroad.
With the removal of the inflation cushion and the imposition of forced de-industrialization, American domestic purchasing power was now locked into a permanent and inescapable downward spiral. This was driven partly by the fiat system’s hedge component that necessitated ever expanding quantities of federal debt to create the Treasury bill issuance that funded the growing amounts of future interest payments and redemptions. The other driver was with the removal of a large portion of the US industrial export market, labor began to produce goods of lower value and drifted more towards services whereby wages began to stagnate as they contributed less and less to the combined “value” of underlying US goods and services and wages began to be eclipsed by “financial profits”.
During frequent periods of economic downturn US Dollars start to purchase gold and threaten the fiat system as gold begins to operate as a transparent and true indicator of value that does not exist in a fiat system and therefore, gold prices rise in all comparisons – e.g., the amount in tons of gold required to purchase the total stock market capitalization, et cetera. So gold price fixing and outright bailouts when tax confiscation declines as unemployment rises and trade collapses become the norm as lack of value transparency drives underlying systemic instability to the surface. So at this phase of fiat, bailouts are in reality an extreme measure to suppress the price of gold in US Dollars and thus keep hidden the absence of fiat’s worthlessness as a transparent and true indicator of underlying “value” in anything.
Karl Marx defined money as the “abstraction of undifferentiated social labor” – by this, he saw money as the representation of some unit labor input into goods and services, and thus the price in money for goods and services was equal to the sum of these unit labor inputs along the entire value chain that created and distributed them. What gave gold its value was the large amounts of labor input to discover, mine, process, and smelt that gold. Paper money was the mere representation of this value inherent in gold held in reserve, and was a promissory note for its convertibility into gold – a true measure of labor input value. When money became no longer convertible into gold, labor inputs were removed and it no longer had bearing on the price in money for anything. Thus the price in paper money for goods and services – e.g., gold and labor – could now be entirely manipulated for the benefit of the creditor class at the expense of the working class and divorce money from any natural laws of economics. Money had now transformed from its ancient representation of value in of its self into an almost zero cost tool (in unit labor inputs) of potential infinite quantity used to grant political and social privilege and thus, money was transformed from a finance instrument into a political instrument controlled by a new power amalgamation between the creditor and political classes. Thus it is no surprise that wages measured in constant dollars have not risen since 1973, and when measured relative to a realistic CPI have declined substantially. This is a direct effect of the creditor / political class, using this newly weaponized money, revoking all privileges formerly granted to the working class and handing these privileges to the corporate class, as the corporate class were now responsible for more and more of the rise in debt financing and tax take needed to support interest payments and redemptions on a never ending deluge of Treasury bill issuance.
To ensure success and control of this new highly unstable form of worthless money, one of the two competing fiat systems first had to be destroyed and a unipolar fiat “world order” imposed on the entirety of the globe. And like after Bretton Woods, the creditor class turned again to the United States as its proxy army for the prosecution of now endless-endless war in pursuit of infinite “growth” via “nation building” funded with US Dollar fiat money of no underlying value. To set the groundwork for this phase and the eventual consolidation of political power after fiat collapse, in the 1960s many of the noble families of finance and their high level operatives “magnanimously” answered the call to enter into the unelected realms of politics through funding and ascension into the upper echelons of global extra-governmental agencies and policy formulation think tanks. These globally focused organizations, after these key placements were effected, began to wield greater political influence on the US Dollar fiat denominated world transacted under the gateway guise of lofty aspirations like “universal peace” and “shared prosperity”, but with the malevolent end objective of eventually usurping the governing power of nations and transferring that power to this newly amalgamated creditor / political class. This influence was spread internationally using bribes in the form of “foreign aid packages”, “humanitarian aid”, and lucrative extra-governmental sinecures to key second and third world figures so to establish a chain of US military bases across the globe. Thus through extra-governmental policy “recommendations”, the United States was granted the “moral authority” to prosecute endless-endless global war against the Soviet fiat system and establish and maintain this coming single fiat “world order”, all under the appearance of some kind of reputable extra-governmental “global consensus”. At the same time, the think tanks and their allies in academia began to ferment social discord in the United States to dilute and discourage political participation by the white working class and foster indifference to creeping extra-governmental influence at home through such things like the manufacture of counter culture, the promotion of drug use and homosexuality, feminism and women’s liberation, the Civil Rights movement, and the concept of “diversity”.
With the American people dazed and confused during the 1970s after hit with everything from a 24/7 televised humiliating retreat from Vietnam to a quintuple in energy prices to Watergate to the introduction of the metric system and rise of disco, the creditor / political class effected a silent transition from the old profit motives embodied in the Korean / Vietnam Wars to the new war motives embodied in the ascendency of the Neo-Conservatives – the “End of History” and total subjugation of humanity.
But rather than cultivate acceptance of a new religious zealotry in support of endless-endless war, the creditor / political class instead formulated a temporary phase of debt based material “success” and exhalation of hedonism that facilitated its plans through mass public indifference to these plans. While America partied like it was 1999, the US military machine was greatly expanded during “peacetime” and prosecuted multiple overt and covert proxy wars on all continents simultaneously, each of which warranted an equally expensive response from the competing Soviet fiat system. It was the “moral equivalent of our founding fathers” versus the “Evil Empire” until one side or the other ran out of credibility to its fiat system.
The Soviets succumbed first and suddenly half the world became the political and fiat vacuum necessary for the Neo-Conservative prosecution of the “New World Order”.
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