Blue Monday

Just watching Bush, Sarko and some other bureaucrat from the EU announcing the coming of the new order or is it a new new order. Forget Black Monday its all Blue from here.

Actually they are right. Bretton Woods created US dominance in financial matters to go along with their dominance in military affairs. Whilst Keynes argued for a system of balanced trade the US saw an opportunity to sell the world US$ which they could print for nothing. The seignorage accruing to the US has been the backbone of their economy for 60 years and those holders of US$ and US paper must be wondering how they got sucked in so badly.

I enjoyed Sarkozy saying everyone would be part of developing a solution…..it’s amusing to watch Bush and Sarkozy together. The clash of cultures is stark and it will be interesting to see how this global summit develops and more importantly who gets to set the agenda.

One thing is for sure: leverage is history. The financial markets will shrink and exotic products will become a relic of a distant past. It will be back to basics like borrowing to create and produce rather than borrowing to invest in a synthetic financial product. The fall out from the contraction of the financial markets will be severe. Unemployment will rise not just in the financial industry itself but in all the industries that service it. Asset values will fall. How can property prices rise when the supply of money is contracting?

Of course the one issue I am looking to see on the table is who creates the supply of money: will it be banks once again creating loans deposits at will or will it be sovereign nations supplying money into the banking system to be lent out or supplying it direct to citizens as a basic income.

This is the crucial issue.

Will the sovereign right of Parliament be reasserted for the first time in over 300 years? No one remembers William of Orange but in 1685 his overthrow of the Stuarts, aided by European bankers, laid the foundations of modern banking.He gave away Parliament’s right to create money and placed it in the hands of the bankers.

Plus ca change.

But the time of change is upon us.

Tags: banking, bretton woods, central banks, credit, financial crisis, money, new world order