Wow I just found out about your substack. I have been reading articles for about 3 hours here from you. I am super impressed. I have been waiting for someone writing with some canada focus that understands endogenous money creation. Im jealous of your writing prowess... plus your knowledge... This is such a breath of fresh air. This entire article is what I have been bashing my head against the wall about for a LONG time... So amazing to find this! Ill be looking to go to paid soon once finances permit!
Allan Sproul ... regarded as one of the world's foremost central bankers in his era, ... served as President of the Federal Reserve Bank of New York from 1941 to 1956.
He described in 1948 a central bank’s role
The control which such a system exercises, over the volume and value of money is a right of Government, and is exercised on behalf of Government, with powers delegated by the Government.
Growth is over. Our model is 50 years past its best before date. Debt since 1970 has been increasingly the primary rabbit in our hat, and unless P. is a magician who can conjur a new planet replete with the resources we had in 1950 these goals will continue to elude us.
The growth after the Second World War happened because there was virtually no personal debt. The inflation and war measures of full employment meant that U.S. workers were saving 20% of their income a year. There were a number of other debt relief programs, including in Germany, when the entire currency was replaced. The result was the post-war boom. Economic growth is about money and the economy - not just resources. You can pay people to put things back.
There was no personal debt after WWII because we didn’t need it. The energy returns on the ocean of easy oil we were sitting on were so spectacular as translating to our economy that the largest class of affluent people humanity has ever seen emerged and could pay for things with real money based on real physical assets. That equation flatlined in 1970 and we were forced to engineer a new system to maintain growth, or at least, the illusion of it. This was accomplished by divorcing our finances from reality, from real assets, from creating fiat currency, and by extending easier and easier credit to the common folk. Debt became the way we preserved the appearance of affluence, that had printing empty money, entering integers into computers. Historically, such tactics work for about a half century at best before the reality reasserts. And here we are, and look at how the chaos is escalating.
Respectfully, this is not entirely accurate. Energy absolutely plays a role, but it is not the only one.
When people have extremely low debt, it means that less of their income is siphoned off to non-productive purposes.
There were painful recessions in the 1960s, including a market downturn in 1966, with lots of political and social unrest around the world, including across North America and Europe that followed.
That included a near constant build up of debt as well as some crashes. Steve Keen argued that we were headed for a financial crisis in the 1970s and that the crisis, paradoxically, was avoided because of inflation.
Energy is everything. Energy IS the economy. We don’t understand this today in large part due to the adoption of Adam Smith’s economic theory, “The Wealth of Nations.” His fundamental premise, that our economics were not about energy, but rather about labor, was wrong. Thanks to him, we are “energy blind” as a population, and utterly confused over why it is we are steadily heading down the tubes now. It’s because our energy equation is going south. Without energy, you have no labor. This is why, for instance, GDP is as close to a 1:1 relationship with energy consumed as statistics get.
That is also because when the US ended the gold standard, the US dollar effectively became a petrocurrency, because the global market in oil is priced in US dollars. The value of dollars becomes tied to the value of oil.
Smith’s world was completely different in terms of banks, business, energy and more.
Gold was simply a form of money, a symbol of wealth, a symbol of energy that is. It is not wealth itself. Energy is wealth. You can’t grow a crop with gold as an energy source. You can use gold to obtain the energy used to grow a crop, provided the energy is available - if it is not, your gold is worthless to the economy. Oil is not our economy in terms of what the market values it at. Oil is the economy in terms of the energy it embodies - approximately 4 years worth of a man’s steady manual labor per single barrel. In fact, in terms of what it actually IS to us - everything - it has always been grossly undervalued by the market, essentially in this regard invisible. Without factoring this in, no sense can be made of economics. Which is why economists, when you understand the true nature of our economy, you wonder how they can possibly be so out to lunch. Well, this is how. They are energy-blind.
Smith’s world was no different from any economy on earth, including the economies of muskrats and bison. It was based on energy. The principle never changes. Energy IS the economy, any economy. What was different in his time was that the energy came from burning coal rather than oil, and from grass “burned” in horses. Take away the grass, you had no economy. Take away the oil today, you have no economy. You have no food, no labor, no nothing. Energy is the economy. Our economy today is not based on this. It is based on a lie agreed-upon, fiat currency, integers entered into computers. It is vastly inflated in this regard. Elon Musk is worth billions of dollars as a fiction, not a reality, for instance.
Wow I just found out about your substack. I have been reading articles for about 3 hours here from you. I am super impressed. I have been waiting for someone writing with some canada focus that understands endogenous money creation. Im jealous of your writing prowess... plus your knowledge... This is such a breath of fresh air. This entire article is what I have been bashing my head against the wall about for a LONG time... So amazing to find this! Ill be looking to go to paid soon once finances permit!
Wow! Thank you very much. Please share far and wide.
Consistently superb posts.
Allan Sproul ... regarded as one of the world's foremost central bankers in his era, ... served as President of the Federal Reserve Bank of New York from 1941 to 1956.
He described in 1948 a central bank’s role
The control which such a system exercises, over the volume and value of money is a right of Government, and is exercised on behalf of Government, with powers delegated by the Government.
Central Bankers have lost that vision.
Growth is over. Our model is 50 years past its best before date. Debt since 1970 has been increasingly the primary rabbit in our hat, and unless P. is a magician who can conjur a new planet replete with the resources we had in 1950 these goals will continue to elude us.
The growth after the Second World War happened because there was virtually no personal debt. The inflation and war measures of full employment meant that U.S. workers were saving 20% of their income a year. There were a number of other debt relief programs, including in Germany, when the entire currency was replaced. The result was the post-war boom. Economic growth is about money and the economy - not just resources. You can pay people to put things back.
There was no personal debt after WWII because we didn’t need it. The energy returns on the ocean of easy oil we were sitting on were so spectacular as translating to our economy that the largest class of affluent people humanity has ever seen emerged and could pay for things with real money based on real physical assets. That equation flatlined in 1970 and we were forced to engineer a new system to maintain growth, or at least, the illusion of it. This was accomplished by divorcing our finances from reality, from real assets, from creating fiat currency, and by extending easier and easier credit to the common folk. Debt became the way we preserved the appearance of affluence, that had printing empty money, entering integers into computers. Historically, such tactics work for about a half century at best before the reality reasserts. And here we are, and look at how the chaos is escalating.
Respectfully, this is not entirely accurate. Energy absolutely plays a role, but it is not the only one.
When people have extremely low debt, it means that less of their income is siphoned off to non-productive purposes.
There were painful recessions in the 1960s, including a market downturn in 1966, with lots of political and social unrest around the world, including across North America and Europe that followed.
That included a near constant build up of debt as well as some crashes. Steve Keen argued that we were headed for a financial crisis in the 1970s and that the crisis, paradoxically, was avoided because of inflation.
Energy is everything. Energy IS the economy. We don’t understand this today in large part due to the adoption of Adam Smith’s economic theory, “The Wealth of Nations.” His fundamental premise, that our economics were not about energy, but rather about labor, was wrong. Thanks to him, we are “energy blind” as a population, and utterly confused over why it is we are steadily heading down the tubes now. It’s because our energy equation is going south. Without energy, you have no labor. This is why, for instance, GDP is as close to a 1:1 relationship with energy consumed as statistics get.
That is also because when the US ended the gold standard, the US dollar effectively became a petrocurrency, because the global market in oil is priced in US dollars. The value of dollars becomes tied to the value of oil.
Smith’s world was completely different in terms of banks, business, energy and more.
Gold was simply a form of money, a symbol of wealth, a symbol of energy that is. It is not wealth itself. Energy is wealth. You can’t grow a crop with gold as an energy source. You can use gold to obtain the energy used to grow a crop, provided the energy is available - if it is not, your gold is worthless to the economy. Oil is not our economy in terms of what the market values it at. Oil is the economy in terms of the energy it embodies - approximately 4 years worth of a man’s steady manual labor per single barrel. In fact, in terms of what it actually IS to us - everything - it has always been grossly undervalued by the market, essentially in this regard invisible. Without factoring this in, no sense can be made of economics. Which is why economists, when you understand the true nature of our economy, you wonder how they can possibly be so out to lunch. Well, this is how. They are energy-blind.
Smith’s world was no different from any economy on earth, including the economies of muskrats and bison. It was based on energy. The principle never changes. Energy IS the economy, any economy. What was different in his time was that the energy came from burning coal rather than oil, and from grass “burned” in horses. Take away the grass, you had no economy. Take away the oil today, you have no economy. You have no food, no labor, no nothing. Energy is the economy. Our economy today is not based on this. It is based on a lie agreed-upon, fiat currency, integers entered into computers. It is vastly inflated in this regard. Elon Musk is worth billions of dollars as a fiction, not a reality, for instance.