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Systematic Thoughts on the Monetary System

1. No good system locks up when it is sound. 2. The Monetary system has (on more than one occasion) locked up. 3. Anybody with any experience diagnosing a problem (lock up) in a complex system knows that the systems investigator must find the initial fault injection point. This IFI point must be where the correction (fix) is applied. Otherwise, corrections are only applied to symptoms. Applying a fix to a symptom is also known as a kludge fix. After several of these attempted kludges you have what is known as a very kludge system and have introduced more and more new unintended consequences requiring further kludges. 4. Initial fault (fraud) injection point in the Monetary System is from the practice of selling short. Short selling means the selling of what the vendor does not possess. The bankers are selling short when they practice there demand banking borrowing short and lending long. If a simultaneous demand were to be made by all of the creditors of all of the banks, all of the banks would fail. That is because they are all short sold. This is a form of theft known as embezzlement, defined as appropriating fraudulently to ones own use, as money or property entrusted to ones care. This short selling is further compounded by fractional reserve banking (FRB). With FRB, the financial institutions are allowed the use of leverage to further the pyramiding and destabilizing of the monetary system. 5. This selling short tries to defy natural law by claiming that physical assets may be in more than one place at a time. In the case of selling short, it claims that monetary assets are both available on demand to the holder (bank depositor) of said asset and at the same time that some percentage of it may be loaned (embezzled) for some period of time to some other person. This cannot be so. No physical asset can be in more than one place at a time. Selling short by the banks is allowed by the authorities since 1) it is assumed that not all depositors would want there assets at the same time and 2) the system is artifically stimulated to run at a high pace (boom) always attractive to policy makers. However, under times of stress (bust) this will, and has indeed caused what is known as a run on the bank. 6. Note that this analysis is a focused reduction and does not concern the other known primary: dilution (inflation) of the money supply by fractional reserve banking or symptoms such as credit/debt leveraging/deleveraging also known as the boom/bust cycle. No known system can defy physical or mathematical law for long and get away with it. 7. All attempts at fixing this problem have addressed only the symptoms by applying layer upon layer of more and more regulations and institutions in order to delay the day of reckoning for this violation of physical law. These on the regulation side include: Federal Reserve System (backstop), Income Tax (governor device), FDIC (insurance) and all other so-called economic regulations. On the institutional side, very artificial instruments have been implemented such as CDOs, CDSs and SPV/SPEs to hedge the inherently ever more risky financial transactions. This symptom correcting in the end can only work to forestall a framework crushing (black swan) event as has happened before. 8. In other words, all regulation enforcement and institutional gimmickry concerned only with non-IFI, does nothing but further this monetary confidence game known by the public as a Ponzi Scheme. 9. No authority figure with integrity would foster an unsound system on those who they charge. 10. The longer the unsound system works, the longer it works until it does not work.