THE LIBERTARIAN ENTERPRISE
Number 684, August 19, 2012
Special to L. Neil Smith's The Libertarian Enterprise
It goes by many names. Some call it "the black market," or "the underground economy." Sam Konkin called it "the counter-establishment economy" or just "counter economy." In Germany, it is sometimes known as "trick 17." The Finnish call it kikka kolmonen or "Trick 3." One of the more widely used terms today is "System D" which derives from the French term Système D. The French words débrouillard and démerder seem to be the source of the "D" in system D. The verb se débrouiller means "to untangle" which suggests the entanglements that come with involving the government in any way. The verb se démerder literally means to remove oneself from "the shit" or to keep clear of manure.
From this term for the informal economy, my friend Patrick Chkoreff recently coined the term "System F." System F is the "formal" economy, but it is also the economy built on fraud and force. Today, that system involves centralisation, government regulations to prevent competition, cronyism to keep certain powerful vested economic interests from being threatened, and corruption at all levels and across all branches of government. The system F economy is dynamically unstable and it is failing. It is not simply the case that the financial system of the formal economy is unstable and failing, although that is clearly true. It is also that the entire economic system is close to collapse.
One of the reasons the formal economy is close to collapse is because it no longer protects individual investors and private property owners. So, the very people whose investments are needed to pull the economy forward, the small business owners who create most of the new jobs in the world, are opting out. Let's take the case of investors with a company called Sentinel.
If you want to follow the story in some detail, consider this article from Reuters news service.
Or visit Barnhardt.biz to follow the story as told by Ann Barnhardt who has been watching it closely. She notes, in part, "Sentinel took customer segregated money and fraudulently used it as the collateral on a loan from Bank of New York Mellon for $312 million to fund their own in-house proprietary trading operations. When the Sentinel Ponzi collapsed, BNYM sued to go to the front of the line of creditorsahead of the customers of Sentinel whose money was fraudulently used as collateral, which has now been 'linguistically sanitized' into the word 'hypothecated.'
"The federal appeals court ruled yesterday that not only does BNYM stay at the front of the line, but that using customer segregated funds as collateral is NOT a crime, and that co-mingling customer segregated funds with proprietary funds is NOT fraud.
"What this means is that even if Jon Corzine is somehow dragged into court by private citizens, because you know damn good and well that the Justice Department will never, ever touch him, Corzine now has a legal precedent, likely from a bribed or otherwise coerced Federal Appeals Court, explicitly stating that an FCM can use customer deposits to pay its debts, and that the customers themselves are subjugated and have basically no legal right to their own monies, no matter what the law says, or what legal assurances, claims or guarantees are made to that customer about their funds held with an FCM or any other brokerage or depository institution. ...
"In other words, all customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks."
If you have the ability to get the actual stock certificates of your investment portfolio into your possession, you should do so. Similarly, if you can take physical delivery of gold and silver coins or bullion, or other resources, you should seriously consider doing so. And don't store these things at a bank "safety deposit" box, as those who were around when FDR began confiscating gold coins in 1933-35 found out. Make entirely private arrangements for storage, or keep things at home where you can keep an eye on them.
The System F economy is based on formal, documented activities, central banks, Federal Reserve Notes, and war. If you are participating actively in System F you are funding the wars of occupation in Iraq, Afghanistan, Uganda, and elsewhere. Moreover, you are funding, through your tax payments, the war on drugs which is now a war against individual liberty and, through civil asset forfeiture, against private property.
If you want to get a sense of how much of the System F economy is based on lies and distortions, I suggest a visit to the web site Shadowstats.com. There you can find more accurate reporting of the unemployment, inflation, and money supply figures, among many other statistics. You won't find different sourcesthey use the same government figures. But they report them using the original algorithms. For example, this chart strongly suggests that the USA currently sees about 23% unemployment, using the algorithm developed in 1980. The government simply isn't reporting how bad things really are.
Another very broad measure of global economic activity is the Baltic Dry Index. According to the recent figures on that chart, we are seeing shipping statistics comparable to the worst period in 2009 at the nadir of the financial collapse, and comparable to figures from a decade agotruly a lost decade of economic activity.
Well, sure, you say, things are getting dire. System F is full of fail. But your 401K is invested in mainstream stocks, right? Your pension is based on the lamestream economy. Your retirement plans involve the system sticking around.
Is that realistic? Fifteen years ago, Americans under the age of 45 were polled. More of them were convinced they would be abducted by aliens, by a substantial margin, than believed they would ever see a dime of the funds they had been paying into Social Security. If your retirement plans are based on receiving cheques from the government, you should be making other plans.
System D is growing. A large number of alternative currencies have been developed. These include BitCoin, gold Globals, silver Isles, Pecunix, Px Gold, c-gold, Shire Silver, delValley Silver, dime cards, and others. Systems for privately exchanging these currencies have also been developed, such as TruLedger, Loom, Open Transactions, and Voucher Safe. Voucher Safe's developers recently added an innovation called OnionPay that further secures transaction processing. Well, okay, so there are new currencies. There are encryption systems to keep information about transactions private. There are new ways of distributing transactions so that they cannot be easily traced. But what can I really do with BitCoin?You can invest your BitCoin in a stock market. One such market that has recently been developed is called the Global Bitcoin Stock Exchange, glbse.com. It is not the first counter-establishment stock market, but it does accept BitCoin for investments.
You've been waiting for alternatives. You've said before that you would back out of the existing system once alternatives were available, once someone showed you another path. That time is now. The other path is here.
Which means you should seriously reconsider your involvement in the politics of System F. Seventeen years ago, Sam Konkin wrote "The last whole introduction to agorism." He said, in part, "The anti-party majority argued that working within the political system had failed for two centuries. The new 'party anarchists' or partyarchs argued that nothing else had worked (everything else, presumably, had been tried in the Sixties). At least they had a strategy. Furthermore, it could be perceived to work in stages and even increments as a law was repealed here or a tax there. Of course, in the twenty years of the LP's existence, no "retreat of statism' has been noticeable."
Indeed, it has now been 40 years. The Libertarian Party has existed for forty years, has advanced candidates for president, for house and senate, for statehouses, for governor seats, and the encroachments on individual liberty are greater than ever. There has been no retreat of statism, at all. Gradualism or incrementalism has failed.
When System F is full of fail, what will you do? Hunker down? Or engage in System D? I think you should give up on System F and its politics of cronyism and corruption. I think you should embrace the alternatives. Help build a new culture, with new institutions, in System D.
D is for direct, decisive, and determined. It is also for distributed as opposed to centralised. The counter-establishment economy is where it is at.