Thank you. Plus it appears you were excised when you wrote this. And I really like your closing, cutting the credit cards issuers.

In a culture where Alan Greenspan can be an acolyte of Ayn Rand and be taken seriously...what would one expect?
As you would be shocked how much of Mr. Haque's ideas are taken as wisdom much lower down the chain of rationality.
What I like are the names:
Mr. Haque is a hack writer who wrote a hack economic piece on how to hack the economy.
Mr. Madoff made off with billions of his client's money.
Mr. Kashkari carried billions in cash for his masters who appointed him to TARP.
What's with the names?
Does God have a sense of humor after all?

Until you resolve the issue of everyone , smart and stupid, wanting something for nothing, there will always be suckers and con artists.

Truth is. Answers are what people will pay to hear. Philosophers seek truth. Priests and politicians seek answers. That's why there are so many priests and politicians, but so few philosophers.

What is needed is an economic model which requires people to invest in their environment and community, rather than drain value out of both to put in a bank. Embed value, rather than distill it out. Throughout history populations have needed ways to focus their drive and energy. Whether it's conquering nature, fighting wars, building pyramids, temples, cathedrals, cities, etc. We have entertained ourselves with this consumer culture. Now we have to find a way to direct our energies to restoring the organism in which we exist. We need to go from being the top predator to the central nervous system of this planet. I for one, view the current economic crisis as an opportunity that we can't afford to pass up. Since I think the banking system should be a function of the various levels of government and feed wealth directly back into the communities which produce it, that the banks are doing everything possible to leech off the larger economy and thus the environment on which it is based, they are painting themselves in a corner and society will find them expendable.

What makes gold a good unit of exchange is that it puts the brakes on the monetization of debt. It is a good way to keep central banks honest.

You correctly state that "Fractional reserve accounting dates back a couple hundred years". But it was not until Nixon that the last link to the god standard was severed in the US. That is why the German experience of the Great Depression was quite different from the US one. Germany suffered through hyperinflation at the time.

Don't you think that a US dollar grounded in gold would have kept a check on the US government's ability to run up debt?

I for one would feel much more comfortable with the coming US deficit spending if the account deficit wasn't already sky high.

... really going to hate this well produced video that I found at a progressive blog.

http://video.google.com/googleplayer.swf?docid=6433985877267580603&hl=en&fs=true

It is just as critical of fractional reserve banking but comes at it from a rather different angle.

fucked up. I'm by no means wealthy; but I'm comfortable. I live a very modest life-style. I dumped my credit cards 7 years ago. I drive 1 to 2 days a week; the rest I use my bycycle. What's missing in the world in general is "common sense". When my long ago ex-girl friend kept sucking up the "equity" in her home, (she's a financial adviser), to finance lavish spending sprees and paying down credit card debt; I asked her was this a smart thing to do? She launched into a bunch of financial gobbledygook about why this was a smart financial move (saying basically why too much equity in a home was a bad thing). She being the expert, I didn't argue; I just walked away shaking my head. Not wishing her ill: I should expect she has lost everything by now. Common sense, there's never enough out there.

I had never heard of this guy, so I went to the HBS faculty page to see what he and his colleagues do. Apparently they are all salesmen/consultants. They don't seem to teach for a living. If they write anything it is to promulgate business and economic theories that first and foremost must have the sheen of novelty, which is pawned off as brilliance. Their customer base, which is certainly not the students at the Harvard Business School, are corporations and especially CEOs, for whom their ideal role is to serve as a personal mentor, educating them on the newest euphemisms for firing people.

In desperate times, when CEOs don't have the money to hire them, these consultants search for the most outlandish theories to promote themselves as clever and insightful. They all want to be the new Keynes without having the intellectual merit or work ethic to produce even a smidgen of what he did.

It never hurts to call them out on their hackery and vapidity, because the consulting industry has done great damage to the American worker, and it is about time somebody takes them on.

I was under the impression that Nixon's actions to end a putative gold standard and adoption of 'floating' currency was really the spark that started the conflagration of debt we have now - both in 'balance of payments' or trade deficit and the accompanying sale of US bonds to maintain defict spending for Federal Govt.

When I hear about mark to market and other currency trading 'bets' I always think that it's somehow 'obscene' to "make money" this way rather than to devote the energies and effort into production of - say consumer durables or something.

And then there is the downside of short selling a currency of the ignorant fools who stupidly chose to be born in a small country. On NPR's "Marketplace" last night there was a story about hedge funds short selling Hungarian currency - when mega funds short sell, their 'bet' soon becomes a self fulfilling prophecy. So everyone who borrowed in Euros (to get a lower interest rate) is now going broke and losing his house.

So what am I missing? Is there something to do with 'price discovery' - what is the 'public virtue' of currency speculation?

what is the 'public virtue' of currency speculation?

The so-called public virtue of financial speculation as a whole is market liquidity. This is based on false premises and probably false pretenses as well.

A false assumption of economic neoliberalism is that financial markets are essentially the same a goods markets and should therefore be treated the same way and be on the same footing.

Goods markets are about exchanging goods that have been produced, thereby supporting both production and consumption through the cycle of exchanging income from production for output of production.

The financial markets are about supporting ways of extracting rent from income from production. While financial markets are purported to supply the investment needed for production, the fact is that only a very small part of the financial markets are concerned with deploying new investment.

The principle reason for financial markets from this point of view is to provide liquidity in the exchange of existing investment. However, the actual reason is profit that is not directly related to production. There is only so much wealth in a system and it is derived from production. Wealth not directly related to production is captured from the wealth derived from production, e.g., through financial rents and schemes, government taxation, crime, etc.

The financial industry is essentially a web of wealth capture schemes based on rent, scheming, and speculative gain owing to price fluctuation of equity, RE, commodities and currency. These highly lucrative activities generally extract wealth from the system or concentrate it within the system, without adding anything substantial to the system. All of the BS about free markets, free trade, and free capital flows are designed to disguise these kinds of rip-offs from actual value-generators.

Those doing the ripping off do everything in their power to prevent regulation of these activities, as well as any legislation that is not favorable to neoliberalism. Moreover, they promote legislation that gives them an advantage and seek favors for the financial industry in particular. They decry regulation as "socialism," i.e., governmental intervention in private enterprise and private property. They pretend through the sleight of hand that GDP growth equates with national prosperity, that this will lead to less prosperity, when the opposite is the case, since the result is growing inequality among wealth-holders.

Arianna Huffington: Will The Madoff Debacle Finally End The "Who Could Have Known?" Era? Interesting read.

Nixon had to go off the gold standard, such as it was, because of Johnson's loose money policies to pay for the Great Society programs and the Vietnam war. Guns AND butter, as they say.

It's hilarious. Say goodbye to paper gold:
http://agonist.org/hongpong/20081215/goldbugs_unite_time_to_crash_comex_paper_gold
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Hongpong.com