THE SHELL GAME

Modern economics is not rocket science. In fact, it's not science at all. It's

a game, a confidence game. Once paper passed for money, economics

became an elaborate shell game designed to hide the fact paper had been

substituted for silver and gold. Debt ratings are an attempt to quantify

confidence in paper assets and are an essential part of the game. The shell

game is called "Where's The Money?" The answer is simple, it's not

there.

The question "where did the money go during the Great Depression?" has now been

answered to my satisfaction. During the Great Depression, money essentially disappeared

and, as a consequence, consumer and business demand collapsed as did prices, beginning

a downward coreolis-like spiral that was to suck the global economy into an economic

black hole.

My study of the Great Depression began in the 1990s and the subsequent collapse of the

dot.com bubble provided a real-time corroboration of assumptions about the connection

between loose credit, excessive speculation, and financial bubbles; and, now, in 2008,

one of my most troubling questions about the depression has been answered-where did

the money go during the Great Depression?

Plunge In US Commercial Property, an article by Daniel Pimlott posted on FT.com

(Financial Times) May 21, 2008 provided a critical clue:

Commercial property prices in the US in February saw their sharpest

decline since records began nearly 15 years ago as sources of finance for

deals has dried up, according to data from Standard & Poor's out

yesterday.

The value of commercial buildings fell 1.03 percent between January and

February, the largest monthly decline since at least 1993, when the

industry was just emerging from a deep slump.

The fall in national property prices comes as banks have retrenched on

lending due to credit crisis and the slowing economy, causing the volume

of deals to slow sharply. The market for commercial mortgage-backed

securities, which until last August was a major route to cheaper

borrowing, has largely ground to a halt.

Sales of commercial properties were down 71 per cent in the first quarter

compared with a year earlier, according to data from Real Capital

Analytics.

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The fact that sales of US commercial real estate fell an astounding 71 % from 1st quarter

2007 to 1st quarter 2008 is shocking and the implications are quite serious. The cause of

the slowdown, however, provided the very clue I was seeking.

Commercial property prices in the US...saw their sharpest decline...as sources of finance

for deals has dried up... as banks have retrenched on lending due to credit crisis...

DURING THE GREAT DEPRESSION

MONEY DID NOT DISAPPEAR

CREDIT DID

The answer to: Where did the money go in the Great Depression? is found in the

metaphor of the shell game. It is now clear that money didn't disappear during the Great

Depression, credit disappeared.

The money was never there in the first place. Money had been replaced by credit in the

shell game introduced by the Federal Reserve in 1913 when the Federal Reserve began

issuing credit-based Federal Reserve notes in place of the savings-based money from the

US Treasury.

For details on how the shell game is run, Professor Antal E. Fekete's description of the

check kiting scheme between the US Treasury and Federal Reserve provides crucial

information for those perhaps wishing themselves to live off the earnings of others.

It is epitomized by an elaborate check-kiting conspiracy between the U.S:

Treasury and the Federal Reserve. Treasury bonds, contrary to

appearances, are no more redeemable than Federal Reserve notes. It's all

very neat: the notes are backed by the bonds, and the bonds are

redeemable by the notes. Therefore each is valued in terms of itself, rather

than by an independent outside asset. Each is an irredeemable liability of

the U.S: government. The whole scheme boils down to a farce. It is checkkiting

at the highest level. At maturity the bonds are replaced by another

with a more distant maturity date, or they are ostensibly paid in the form

of irredeemable currency. The issuer of either type of debt is usurping a

privilege without accepting the countervailing duty. They issue obligations

without taking any further responsibility for their fate or for the effect they

have on the economy. Moreover, a double standard of justice is involved.

Check-kiting is a crime under the Criminal Code. That is, provided that it

is perpetrated by private individuals. Practiced at the highest level, checkkiting

is the corner-stone of the monetary system.

GOTTERDÄMMERUNG The Twilight of Irredeemable Debt, Antal E.

Fekete, April 28, 2008

http://www.professorfekete.com/articles%5CAEFGotterdammerung.pdf

THE STUDY OF MODERN ECONOMICS IS SIMILAR

TO THE STUDY OF RELIGION IN A TIME OF IDOLATRY

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In the shell game of modern economics, credit replaces money and when credit gives rise

to speculative bubbles, the collapse of those bubbles leads to the defaulting of debt which

causes credit to disappear and the economy to collapse.

The credit based shell game, however, is nearing its end. The historic credit contraction

that began in August 2007 is still in progress. Despite the efforts of central bankers, credit

is still disappearing and, just as in the Great Depression, the credit contraction is

continuing to spread causing more and more debt to default.

Credit, the fertilizer of human debt, when no longer available effectively spells the end of

the legalized shell game masquerading as modern economics; but the kreditmeisters, their

global confidence game now damaged by an unexpected lack of confidence on the part of

the marks, sic investors, however, will not give up their scam easily.

THE CONUNDRUM OF THE KREDITMEISTERS

Those running the shell game, the central bankers and their codependent brethren,

investment bankers, are terrified of losing their day jobs, They have lived well for three

hundred years (since the establishment of the Bank of England in 1694) leveraging the

productivity of others and we can be assured they will do everything in their considerable

power to keep their lifestyle intact..

At this time the central bankers are collectively engaged in financial triage as they

attempt to replace the credit that is rapidly being withdrawn in the face of ever increasing

amounts of defaulting debt.

Following the same play book they used in the aftermath of the dot.com collapse, the Fed

has quickly cut rates from 5.25 % to 2 % but this time they will not ignite a housing

bubble as they did the last time. This time, they will do worse. This time, they will burn

down the house.

BURNING DOWN THE HOUSE

In the long run, there is no short run

In retrospect it will all be clear, the mistakes, the reasons, the excuses, the results. Now,

however, in the beginning of the collapse, events appear more problematic, the outcome

still unknown. Nonetheless, even in the fog of unexpected events, certain things can be

known and safely predicted; and, one of them is that we are now on the road to

hyperinflation.

Appointing "Helicopter Ben" Bernanke to head the Federal Reserve now is akin to

sending Sammy the Bull, the mafia hit-man, to negotiate with the Palestinians and

Israelis; and when the news comes back that Sammy the Bull shot and killed the

Palestinians and Israelis at the negotiating table, we should not be surprised-just as we

should not be surprised that Ben "the printing press" Bernanke is erring on the side of

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excess in the current economic crisis by providing even more credit, by shoving even

more debt based paper into now a burning house.

WHEN A HOUSE OF PAPER MONEY BURNS

Hyperinflation is to inflation like pneumonia is to a cold. Though similar, the former is

much more consequential; and whereas pneumonia can sometimes kill, hyperinflation is a

veritable death sentence. Hyperinflation always ends in the total destruction of paper

money. In hyperinflation, the value of paper money reverts to its mean-ZERO.

The past is indeed prologue when it comes to humanity, printing presses, and the

recurrent desire of governments to turn paper into gold; which through the alchemy of

central banking is possible-though only for a limited time.

While central bankers and governments do not intend to cause hyperinflation anymore

than drunk drivers intend to crash, they are nonetheless responsible for the decisions that

lead to hyperinflation and deflationary depressions.

The United States has experienced high rates of inflation in the past and appears to be

running the same type of fiscal policies that engendered hyperinflations in 20 countries

over the past century.

Professor Laurance Kotlikoff, Federal Reserve Bank Review St Louis July/Aug 2006

The US is the largest economy in the world and the US dollar is the world's reserve

currency. Its central bank, the Federal Reserve, is the most influential, and Ben "the

printing press" Bernanke is its chairman. We should not be surprised at what is now

going to happen to the US, the US dollar and the world economy.

As the Fed is busy bailing out international investment banks with America's money, we

should be more concerned with what is going to happen to us; because when the US

dollar goes up in smoke, the US economy will go down in flames and the world economy

will stumble badly, if not collapse completely.

Hyperinflation will destroy both the US dollar and the US economy and the world will

not be unaffected. Professor Kotlikoff's warning about a US hyperinflation was published

in 2006; and, now in 2008, US printing presses under Fed chairman Ben Bernanke are

running faster than they've ever been run before.

HYPERINFLATION IS LIKE STEPPING OFF A CLIFF.

YOU ONLY EXPERIENCE IT AFTER YOU'VE GONE TOO FAR

Friedrich Kessler, a law professor at Harvard and at Boalt Hall UC Berkeley described

the onset of hyperinflation during the Weimar Republic in Germany.

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It was horrible. Horrible! Like lightening it struck. No one was prepared. You cannot

imagine the rapidity with which the whole thing happened. The shelves in the grocery

stores were empty. You could buy nothing with your paper money.

From Fiat Paper Money, The History And Evolution of Our Currency $28.50 by Ralph T.

Foster, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it (510) 845-3015 This book, a primer on the end game, is

everything you wanted to know about fiat paper money and were too afraid to ask.

At Session III of Professor Fekete's Gold Standard University Live in February, I

discussed the possibility of a sequential or simultaneous hyperinflationary deflationary

depression, the economic equivalent of having both a severe heart condition and a

possibly fatal cancer at the same time. Such is not impossible; in fact, it is increasingly

likely.

I highly recommend the thorough and studied analysis of hyperinflation and concurrent

possibilities in John Williams' Hyperinflation Special Report, Shadow Government

Statistics, Series Issue No. 41, April 8, 2008, http://www.shadowstats.com/article/292.

John Williams also references and recommends Ralph T. Foster's Fiat Paper Money, The

History And Evolution of Our Currency noted above.

The critical question should now be asked: What can we do?

THE PARACHUTE OF GOLD AND SILVER

JUMPING OUT OF UNCLE BEN'S SPUTTERING HELIPCOPTER

The following is from The Nightmare German Inflation, Scientific Market Analysis,

1970, which describes the extreme hyperinflationary conditions during the Weimar

Republic in the 1920s:

The ones who fared best were the small minority who had the foresight to exchange

marks into foreign money or gold very early, before new laws made this difficult and

before the mark lost too much value.

The difference between 1920s Germany and today is that there are no longer any

currencies convertible to precious metals. In the 1920s, when hyperinflation destroyed

the German mark, other currencies were still tied to gold. Today, this is no longer the

case. Today, only gold and silver will offer guaranteed monetary refuge during the

coming crisis.

A hyperinflation is a monetary phenomena caused by the rapid printing of money not

convertible to gold or silver. The inflation of the paper money supply happens gradually,

but hyperinflation is itself a sudden-onset phenomena. Suddenly and unexpectedly,

inflation becomes hyperinflation and unless you are already prepared, it is already too

late.

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Today, we are moving closer to the end game, the resolution of past monetary sins when

the banker's shell game is exposed for what it is-a monetary abomination, a parasite on

the economic body that over time kills the host on which it feeds.

Be aware. Be careful. Be safe.

Have faith.

Note I: I now have a blog, Moving Through The Maelstom with Darryl Robert Schoon.

My first blog discusses the underlying reasons for our increasing series of crises.

see http://www.posdev.net/pdn/index.php?option=com_myblog&blogger=drs&Itemid=106

Note II: I will be speaking at Professor Antal E. Fekete's Session IV of Gold Standard

University Live (GSUL) July 3-6, 2008 in Szombathely, Hungary. If you are interested in

monetary matters and gold, the opportunity to hear Professor Fekete should not be

missed. A perusal of Professor Fekete's topics may convince you to attend (see

http://www.professorfekete.com/gsul.asp ). Professor Fekete, in my opinion, is a giant in

a time of small men.

Darryl Robert Schoon

www.survivethecrisis.com

www.drschoon.com

blog www.posdev.net/pdn/index.php?option=com_myblog&blogger=drs&Itemid=106