Max Keiser's Muddled Money-Speak
For those that don't know, Max Keiser is an independent broadcaster with a thrice weekly program on Russia Today, and he appears occasionally on the BBC and elsewhere. He amplifies all the reporting on financial fraud and rages and sneers at the financial terrorists, attempting to educate us about how things really work.

His partiality, colorful metaphors, and defamatory outbursts make him not a very good journalist, but a master propagandist in a temporary alliance with the Kremlin. He's also an activist in his own right, telling the people to disbelieve the hype, rise up, and take back the financial power - the real power - and designing genius campaigns such as Karmabanque and 'Crash JP Morgan Buy Silver'. He uses his power to talk up the value of silver, then Bitcoin, and now Maxcoin in a way I find totally irresponsible, but that is not the bone I want to pick now.

Max used to propound a brash version of the Austrian school's doctrine, that the only sound basis for money is precious metals. This approach is sometimes called 'honest money', which means that the metal value in the coin is equivalent to the value of what is being bought. Exchanges with honest money are therefore equal exchanges, requiring no trust in mistrusted third parties.

By contrast, in this view, there is 'paper', or fiat money, which is issued by the state out of nothing. Paper, having no intrinsic value or even redeemability for anything, is therefore the way by which a bankrupt government spends value it doesn't have. There is much truth in this, but the words are all wrong.

First of all, paper is only a medium for storing a transferable contract. The nature of the money is not in the medium (unless its gold) but in the contract. Paper is used for government fiat, aid tax, mortgage certificates, and claims on allocated gold. 'Paper money' is Austrian economist slang for government fiat.

Secondly the government only issues 3% of the money in circulation these days, which is the least socially damaging part. Raging against 3% of the money supply, and the government that issued it, is misleading. 97% of the money is issued by the private banking cartel, without regard to the optimum quantity in circulation.

The more they can lend into circulation, through mortgages overdrafts, credit cards etc, the more profit they make, and sod the macroeconomic effects! Despite ranting about Debt, loan sharking, and banking cartels, and interviewing Bill Still and Ellen Brown, Max appears not to have grasped the fundamental point that modern money is 97% commercial credit.

Even when last month the Bank of England finally admitted that 'most economic textbooks were wrong' about money creation, I don't believe he covered it!

Thirdly, Kudos to Max for being the first person on TV to show an interest in Bitcoin, when it was worth only a few cents. But I cringe to hear that Bitcoin is 'backed by cryptography'. What do you mean by 'backed', Max?

He can't mean it in the sense of 'in direct payment or return' for something of real value. But as a goldbug, he probably believes that any 'sound' money has to be backed by something. Bitcoin has a limited supply, like gold, which gives it a certain appeal in an era of quantitative easing, but backed it is not.

Max is the champion at broadcasting financial corruption and even financial literacy, but because he is so invested in creating theatre of rage, he barely touches monetary reform, complementary currencies, and never mention non-monetary exchange, barter, and broader economic issues like the peer to peer economy. He could be using his super-powers to better effect.