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<nettime> The Fiat of Last Resort
Ed Phillips on Mon, 29 Sep 2008 23:06:10 +0200 (CEST)

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<nettime> The Fiat of Last Resort

Much of the chatter, the millions of words sputtered about this acute
phase of the crisis in financialization, is sheer noise. I take this
reality to be one more example of the cultural inflation that
has followed the easy credit money supply inflation.

One can't remain opaque forever. Acute deflation has been at the door
for over a year now, and if deflation is denied access through the
front door of price, it comes in through the back door.

Deflation is now knocking down the door. The credit markets have "deflated", as the
institutions with razor thin balance sheets, and just in time
funding, chased the global surplus value pot off a cliff.

A sensible system would take the deflation, or so say the
neo-classical and paleo-classical economists. This is in some sense,
Hayek's hour. 

Something of his vicious sense of humor would at least cut through
some of the false moralism and false sentiment.

When George Boosh is heard decrying the greed of short sellers in the
marketplace, when Boosh explains the fact that hundreds
of billions of dollars of injection over two weeks into a deflation had no immediate
effect by making reference to a few loans in Modesto that went south,
wicked deflation is called for.

in hilarite triste in tristis hilarite

The admixture of opposites is glossed over in an ideological gaussian blur. 

The Zuder Zee drained out and ideology made a
reappearance. Everywhere, liberalism in the classical sense was in
evidence, and the surface libertians were flushed out of the bushes,
the mock free marketeers sheepishly rearranged their toupes.

We see the farce of apparent free markets in a kind of reverse time tunnel with
history not repeating itself but revealing itself to be farce from
beginning to end.

"The intermingling of hilarity and fear is sufficient to betray the
presence of the clown." 

Farce, whose etymology is "stuffing," is a fine word for a moment that
that lacks no precedent.

I'm about rolly whollyover into some kind of Joycean techgnostic
gibberish just trying to express some of this wicked, sad hilarity.
"He dumptied the wholeborrow of rubbages."

In our wierd comingling of state and capital, the pontiffs of the
technocracy, of the banking complex, were heard using such outdated,
fossilized words as "intrinsic" to describe the value of paper
intruments. This word was spoken with straight face by the biggest fiat
cum credit currency casino in history. Was that a poker face?  

These were the same mortgage backed securities whose spread of risk
was supposed to have reduced risk to the banking system. Spreading
risk is starting to mean something far from its intended meaning.

Intrinsic is a funny word to even describe a store of value, let alone
a derivative of something whose movement was reflexively dependent on
the fiat-credit money supply. Derivatives are pure velocity.

Hoarding cash is your only option, if you have any cash to hoard.

Welcome to the fiat of last resort. The "confidence" game in which
those closest to the centralized banking system feed at the trough of
attempted inflation is at the breaking point.

The credit markets in their celebrated and denigrated innovations are
a kind of loss leader for the central fiat banking systems. And now state
networks of currency swapping are coming on line even as the
shadow banking system is deflating like a punctured ballon, or
deleveraging if you are shy about using the word deflation.

The spectre of banking was the source of the money supply, with the
real game taking place off of the balance sheets, and in its leverage and
its perverse universalism it replaced the facade of the marble banks
and made their fractional reserves look too weighty.

So there is complete collapse out there in the credit markets,
with a simultaneous comingling of inflation and deflation. The LIBOR
has become a kind of joke, a spectre of a market where the only
markets are the state banks.

The bold Paulson plan was a bid for "price discovery" in markets too shy to price
in deflation, and too thin to support deflation. 

And the the Fed is breaking the bank trying to stanch the
bleeding. They still have the fiat of last resort left if this does
not inflate enough. That fiat will be some kind of "bank holiday,"
creative or no.

There is already a quite bank run happening in the global markets with
the quite bail out trying counter it.

One needs the eyes of an anthropologist or sociologist who not only
speaks but studies "economese" to even think through recent events.

In a severe, and from the paleo-classical economic perspective, much
needed bank credit deflation: banks hoarding cash, interbank loaning
slowing or increasing in cost, nothing the Fed is doing is having an

With what stuff the financials have farced up their portfolios. With
what stuff the U.S. executive and legislative bodies have farced
up their proposals. And the farce appears as farce.

They dumptied the wholeborrow of rubbages on our doorstop and
incipit intermissio. 

Incipit "bank holiday," or the fiat of last resort.

And so we have an interregnum, an interlude of farce.

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