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Max Kaiser's muddled money-speak

For those that don't know, Max Kaiser is an independent broadcaster with a thrice weekly program on Russia Today, and he appears occasionally on the BBC and elsewhere. He amplifies all the reporting on financial fraud and rages and sneers entertainingly and informatively at financial terrorists. His partiality, colourful metaphors, and defamatory outbursts make him not a very good journalist, but a master propagandist to whom the Kremlin is happy to give a platform. He's also an activist in his own right, telling the people to disbelieve the hype, rise up, and take back the financial power - the real power - with genius campaigns such as Karmabanque and 'Crash JP Morgan Buy Silver'. He uses his power to talk up the value of silver, Bitcoin, and latterly Maxcoin in a way I find totally irresponsible, but that is not the bone I want to pick now.

Monetarily, Max is famous for berating 'fiat' currencies, sometimes known as 'paper' money. In this he echos Austrian school, which often says that money should properly be issued only when backed by precious metals. The antithesis of this money is 'paper', or fiat money, which is issued by the state out of nothing. Paper, having no intrinsic value and being redeemabable for nothing but itself, is therefore the way by which a bankrupt government can value it doesn't have at the expense of the rich via inflation. There is much truth in this, but the flimsy use of language hides a different reality.

Firstly, 'Paper money' is Austrian economist slang for government fiat, but it is very misleading to equate fiat money with paper. While it is true that the tenner in your pocket is both fiat and paper, paper is only the form, not the substance. A redeemable certificate for gold may also be on paper, and the vast majority of fiat money is digital.

Secondly, the fiat money issued by the government is only 3% of the money in circulation these days, which is the least over-issued, and the least socially damaging part of the money supply. Raging against 3% of the money supply, and the government that issued it, is gross negligence. 97% of the money is issued by the private banking cartel, without regard to the optimum quantity in circulation. The more they can lend into circulation, through mortgages overdrafts, credit cards etc., the more profit they make, and sod the macroeconomic effects! Despite ranting about Debt, loan sharking, and banking cartels, and interviewing Bill Still and Ellen Brown, and Ben Dyson, Max he appears not to have grasped the fundamental point that modern money is 97% commercial credit. He gives a platform to many reformers and theorists, but seems not to actually listen to them or integrate their message into his.

Thirdly, Max's proposed solution to the worlds economic woes, a gold standard or bitcoin standard, does not readily tally with the social concern he sometimes displays. It can be argued that putting money on a proper footing will create wealth which is better distributed but this is by no means agreed or proven. What is clear, at least to me, is that by fighting inflation rich people will be better off, and by backing money with a commodity, rich people will still be in control the money supply. Certainly, while banks are both writing and breaking the laws, no possible reforms are going to change anything and advocating any top-down monetary solution over another is a pointless diversion.

That's why I work on bottom-up monetary reform.

Finally, I give Kudos to Max for being the first person on TV to show an interest in Bitcoin, when it was worth only a few cents. But I cringe to hear that Bitcoin is 'backed by cryptography'. As a gold-bug, I suppose he believes that any 'sound' money has to be backed by something. Thus by induction, Bitcoin must be backed, but by what? What does 'backed' even mean? says sense of 'in direct payment or return' but there is direct payment or return in Bitcoin. Bitcoin is more like fiat money in that way!

Am I wrong?

Max is the champion at broadcasting financial corruption and even financial literacy, but because he is so invested in creating theatre of rage, he barely touches monetary reform, complementary currencies, and never mention non-monetary exchange, barter, and broader economic issues like the peer to peer economy. He could be using his super-powers to better effect.

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