The film follows the theme of the previous two movies, namely the issue of debt slavery and the monetary system that underpins it as well as the Venus Project (TVP) which envisions a different societal structure. What is different to ZA is the structure of the film: it splits into four parts: human nature, the market, inequality and the resource based economy. This gives the film, and ultimately the proposition, more depth and more connection for viewers. I know some people still grapple with the explanation of the money system (though my 16 year old son saw the logical answer as quite obvious: why doesn’t the government create the money. doh!) so a look at our innate and determined nature helps to provide some context to the discussion.

Why do we behave the way we do? Does poverty, racism, inequality drive our behaviours? Is our society sick from its institutions and structures? Why does the monetary-market structure treat the well-being of society as irrelevant. Going back to Locke and Smith we see that racism and inequality within the market system was well anticipated. The drive to individual success at all cost (especially social and environmental) was paramount as a system based on cyclical consumption and demand for product was created.

The film posits, quite correctly, that we are stuck on a spin cycle of consuming to be happy even though we must work like slaves to be in this position, that slavery defined by the debt we must accrue in order to enjoy the products paraded before us. That the production process is almost anti-economy, building in obsolescence and focusing on the short term simply puts my pressure on both resources and available money. In essence product sustainability is inverse to economic growth. Yet politicians keep saying they will speed up economic growth. They never say we will build a more healthy society. Perhaps that is because they have swallowed too many blue pills.

So if efficiency, sustainability and preservation are enemies of the current economic system the we have a problem. Crime, war, terror are positives for the economy. Does any of this make sense? Certainly it feels like the US has been gutted by the corporatocracy and inequality is at an all time high. ZMF draws a picture showing how our monetary-market system and socio-economic structure has raised inequality to never before seen levels. The rise of the super-elite is complete.

So far so good. I don’t disagree with anything in this film. In fact I’ve been aware of it for many years now….so whilst I appreciate the diligent work that Peter Joseph has done on these films, what do we do about it? The answer, as alluded to in ZA, is The Venus Project. TVP lays out a move to a resource based economy with no institutions, laws, money and a world based on abundance for all based around the very smartest of technology. Think of it as a techno-utopia. It’s certainly visionary and I leave it to the individual viewer to imagine it and see for themselves. It’s certainly not unachievable.

My main question would be “how do we get there?” This isn’t dealt with in the film but the general suggestion is to somehow opt out of the current system and to move to a more localized and transition based economy. This is all good stuff but the most important message of the film for me is still that we must take back control of our money supply and issue it interest free.

That is the first and most important step on the road to a people centered world.

“When I look back over the last decade and forward to the next, it seems as if the same themes will recur:

- Financialisation of Economies: Can we remove the yoke of derivative financial instruments from the real economy?

- Technology: Will social media enable the development of a networked based economy?

- Global Politics: Can we move to a multi-polar world without the necessity of the United Nations as a de facto world government?

- Climate change: How do we manage the change in our climate and the resulting shifts in population and its attendant baggage?”

So we saw the Fed continue to print new money and hand it to the banks so they could pay out decent bonuses again. All that new cash managed to pump up the stock markets to new highs and generate hot money flows into commodities and emerging markets thus creating quite nicely the set up for new bubbles. What could the Fed have done? Just directly credited the bank accounts of every citizen thus boosting bank deposits and giving people money to actually spend into the economy or pay down debt.

Oh well, maybe next time.

2010 has seen China flex its international muscles and appear more focused on international relations. And of course Vladimir Putin has been flexing his too but that’s more for Russian domestic consumption. But clearly there’s been an acknowledged shift in influence with the BRIC countries all putting their hands up. Europe has been a huge mess with Auntie Angela having to clear up after the  big party. 2011 will see more shifts as power moves from the USA and spreads all over the globe. I guess it doesn’t help when you national debt is $14trln and rising (great site by the way). How this all plays out will be very interesting but I imagine we will see another crisis within the US insurance market and more derivative catastrophes. There will be huge write offs and if someone owes you a lot of money you may be collecting thin air…..that’s the problem with land…you can’t take it away.

And 2010 was officially rather hot. Well tied with 2005 and 1998. Weather was quite unpleasant all around and the severe flooding in Pakistan, China and now Australia and Brazil. Don’t mention the big freeze in the US and Europe. There’s no answer to this really. Either we bite the bullet now and take action or we’ll just have to adapt and buy a Sealegs amphibious boat (dec: I am a shareholder in Sealegs).

So I think really it’s more of the same for 2011. It’s going to be a year of adjustment before the big one in 2012. We have an election here in NZ in November which might be interesting if we can get financial reform into the debate. Maybe all the politicians should have to watch this film and then discuss (more on this in my next post). Buckle up!

I’ve just finished Michael Lewis’s “The Big Short”. It’s an amazing book, not just because it informs us of the road to the subprime mess but he creates a story around the protagonists. He also manages to expose the whole wretched mess, the fictionalisation of risk and yield laid bare. He introduces us to the main players in the debacle through the eyes of a few weird and wonderful players who worked out that something was terribly wrong and bet against it. These colourful characters expose the whole damn scheme as nothing more than a paper pyramid.

As Lewis sums up the Collateralized Debt Obligation (CDO) on page 73:

“The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America. For Wall Street it was a machine that turned lead into gold”.

Simply put a CDO was a collection (a tower) of subprime loans that had miraculously transformed from junk status to triple A (AAA) credit and therefore it was investible by major funds (referred to in the book as dopey Germans).

So what was the short? Well on one hand you had investors who sold insurance on these debts defaulting. They believed (incorrectly) that it could never happen and therefore they were picking up free money. The shorters realised the were getting amazing odds on the loans defaulting and piled in.

At the bottom of this was an average person with no money and a big mortgage, usually 100% or more. Any fall in the price of their property would immediately put them in a default position. Yes it was a giant pyramid scheme. The real laugh is that even the guys going short didn’t really understand what it was they were shorting so opaque was the structure and process.

I recommend the book very highly. It’s a gripping read and manageable for the layperson.

You’re left wondering how the bankers got away with it. The answer given by the bankers (well laid out in Sorkin’s book) was that they were too big to fail.

This sets us up nicely for the next round.

P.S.

Today the SEC is launching a case against ICP Asset management for their role in handling CDO investments. Along with the case against Goldman Sachs we can expect more companies to be investigated for their role in this financial fraud. It will also be interesting to see when the rating agencies themselves will come under review. They were the ones who gave the AAA blessing to these products they really knew very little about. Makes you wonder about the whole darn shooting match!

Each stop feels like the last but it never is.

After a horrendous week G7 has responded with a new pledge to do whatever it takes.

The question is will they? Do they know what it’s going to take?

They already said this back in April.

It seems to me that the numbers are no long relevant.The game has been up for some time now.

Everywhere you look monetary authorities are looking to buy something whether its banks or stocks.

Forget it…..some banks arent worth it. Deposits in major banks should be guaranteed. That is people’s money not an investment (well it is sort of but not for most).

Stocks should go down to wherever they go down to. The US via the Plunge Protection Team has supported the equity markets for too long.

They should let it act like the market it is supposed to be. Once leveraged trading is stripped out out the market we can go back to buying stocks in a normal investment manner.

As i keep stressing the financial system has been nationalised in all but name. Psycholigically that is hard to take for many because nationalisation is a dirty word to many in the markets, just as priviatisation is to others.

Money is a national tool. Regardless of the shennanigans around the BIS and the Fed and their accountability to government and citizens, we can assume that governments will reassert their sovereign right to coin.

What is interesting in the G7 communique is Point 3:

“3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.”

I like the inclusion of “public” sources.

I think we can expect more and more public money flowing into banks coffers.

Part nationalisation is already here. Depending on how the markets fare from here will determine how far this goes.The margin calls are coming thick and fast and the only place to get cash is from equities. Given the lack of concrete proposals (let’s face it all they are saying is that they’ll bring loads of ambulances) markets will continue to tremble.

The timing has never been better for a sovereign reassertion of the right to create money.

On the US the AMI continues to work on its American Monetary Act and in the UK the Forum for Stable Currencies promotes its series of EDMs on Public Money. More and more we need constructive proposals that can be presented to Government for debate.

There is no time to waste.

It’s dolling out cash like sweets at a birthday party. Where is it all coming from?

Last week bank borrowing from the Fed reached an average of $188bln a day!!

All the primary dealers (all 3 of them GS, MS and ML) were in at their teat, the Primary Dealer Credit Facility, for over $100bln.

This is the stuff of legend.

Parker Brothers will be rushing out new Monopoly sets soon with an extra 6 zeros added.

To say the banking system is on life support would be an understatement. Its actually getting CPR……one billion, 2 billion, 3 billion…………

Even the Fed must run out of cash at some point.

Sure the Treasury can sell more paper….but whoa……who is going to keep funding the US Treasury in order to buy toxic paper from the banks?

Who will bail out the Fed?

We have no choice but to…………fill in the blank.

There is always a choice. It’s amazing that the USA, Land of the Free, seems to find itself in situations where there is no choice. We must invade, bomb, bankrupt etc. Engineer a huge crisis and then say we have no choice but to send in troops or take all your money.

Watching the negotiations over the “Mother of All Bailouts” is like watching children squabble over a bag of sweets.

But it’s dawning on many that the taxpayer should not be handing over any cash. Sure the government can stand by with liquidity infusions but any investors in banks can write off their cash immediately and that includes bond holders.

If anything this shows that there are always risks in investing even in AAA US Securities. This is a great opportunity for a huge clearout and cleansing of the financial system: making banks carry higher capital ratios would be a good start as it will automatically deleverage the system; making sure the tax system encourages productive applications of capital, away from speculative strcutures.

It doesn’t necessarily mean more regulation. Ultimately investors will have to learn more about the companies and products they invest in: what is a securitised loan, what is subordinated debt, what is a perpetual bond etc.

The rating companies are all part of the game but again new approaches will will be found to get around the conflicts of interest currently present.

Section 8 of the proposed legislation says it all:

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

Writing out a big cheque with no strings attached is a recipe for more of the same.

Let’s hope the senators are not fooled by Tina. There’s always another way.

Shame Lehmans didn’t get this little gift. Then again they didn’t have anyone in the Cabinet to look after them.

It’s no surprise that a recent poll showed American’s most concerned about rebuilding their reputation overseas as their most pressing issue (83%). The country has well and truly gone down the tubes and under a Republican watch. Some mentioned National Socialism was alive and well in the USA.

Stablising financial markets is one thing but underwriting the losses of the banking system is another. This just confirms everything Thomas Jefferson ever said about the bankers and also confirms that the US is no longer the world’s leading financial center.

It feels like a 4th down with 80m to go and 10 seconds on the clock.

Game over.

Wrap up the toxic stuff (we’ve heard that before) and hopefully it will all go away. Strange that Goldmans have been spared the ignominy of going under as Paulson comes in to the rescue. Anyone wondering about the Goldmans cabal at the centre of a government that always yells out “we had no choice” will be muttering feverishly about the intervention on Friday.

Forget about whether the US should lose its AAA rating or the $ be heaved off the cliff, what concerns me is the idea that ex-market players are running the public finances. Why not let all the banks fail? If that’s the outcome of the “free market” then let it happen. As long as depositors money is safe the rest is a simple case of caveat emptor.

The taxpayer is picking up the bill so why not pay as little as possible.

And what then you ask? Well the banking system will be nationalised to a point, focused in the issuance of money as opposed to making loans. The point is that there are elements of our financial system that we could well do without.

They said the Titanic was unsinkable.

I haven’t added much recently because there was no need. It’s like watching a train wreck in slow motion: you stand there with yoru mouth wide open unable to speak as you take in the enormity of the action in front of you.

What’s left to say? The banking system is effectively nationalised but we knew that with Northern Rock. The difference between Lehmans and Bear Stearns was simply timing. BS was first in the queue and so got some help. By the time Lehmans (who I once worked for) came around no one wanted to touch it and given that they didn’t have customer deposits they could be allowed to fail. Mind you I see Barclays already snapping up some units in the US.

Now we have AIG, a private company, but an insurer so therefore a pretty important spoke the the wheel of the economy. $80bln…..the Fed’s printing press must be running to breaking point. Anyone keeping count of all this?

Don’t bother.

The US debt position is in La-La Land.

This move on AIG is dangerous. Not only has the banking system been nationalised but the stock market is being underwritten. Why the S+P isn’t at 1000 is beyond me. This artificial support of the stock market is just as crazy.

The Fed worries about adding “to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance”. Well that’s fair enough but that is the reality. The US has overextended itself over the last 8 years with cheap credit and massive leverage through financial intermediaries.

It’s over. The Fed should be over too.

The authorities need to take a cold hard look at the financial system and the disaster it has wreaked.

No clearer evidence of this has been the advancement into positions of political power by ex-investment bankers particularly from Goldmans. The leverage game must surely be over now.

We are watching the end of 20 years of US financial domination through global investment banking. The end of financial assets being marketed as investments and hopefully a complete reorganisation of the banking and financial system onto a sounder and more stable position, once which encourages productive endeavour and not constant speculation.