By Peter B. Meyer – 23rd March 2013
“Cash is King,” if not left in the bank as learnt in Cyprus, after the HUGE money heist on behalf the EU, the legality of this deposit grab is extremely questionable. The grab undermines the deposit insurance system and that makes it awfully dangerous. The entire banking business is based on TRUST: banks take in deposits and lend them to borrowers, but this system only works if depositors don’t demand their money back in cash all at once. The deposit insurance system was established to provide extra reassurance to depositors, so to undermine it threatens the very foundation of the entire European banking sector. This Cyprus deal is a forthright bank violation of the spirit of deposit insurance, which betrays those with the most to lose and the least to answer for.
Many Cypriots took to the streets in protest. Presumably after stopping at an ATM to remove whatever they could get from their bank accounts. Banks are closed to avoid any anticipated bank runs.
Maybe it’s just Cyprus’ turn. Since 2008, we’ve seen a variety of “crisis stories” arise under the umbrella of the EU — the so-called “PIIGS” nations chief among them. Maybe next we’ll see Malta and Estonia fight it out — or worse, whose “duty” it will be to save the euro at the next turn. Pity for the poor Cypriots, many of them could have little or no savings left. And all for the good of that seemingly sacrosanct currency they call the “euro.”
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” - “Power corrupts, and absolute power corrupts absolutely.” Lord Acton 1834 - 1902
Government leaders – including the European Central Bank, the Cypriot government, and the International Monetary Fund – decided they would steal from the nation's savers in order to bail out its cripple financial system. Talks led by Nicos Anastasiades, president of Cyprus, are currently underway to amend the proposals… Potential amendments include lowering the levy on accounts of less than 100,000 euros to 3% and increasing the burden on larger account holders.
“An interesting thing to consider… Cyprus' banking system has around 70 billion euros. Meanwhile, the country's entire economy is only 18 billion euros. And Cyprus is a banking hub for Russian oligarchs.”
The bank levy will raise 5.8 billion euros. Cyprus is receiving another 10 billion euros in bailout funds from the ECB and IMF. That's still short of Cyprus' estimated 18 billion-euro gap. And barring capital controls, it ensures a run on Cyprus' banks.
“The world's global banking system runs on trust… Depositors trust a bank with their savings in the belief they can access those savings on request.” That trust is broken now. And it will have severe consequences for the euro and European banks. “The bank levies in Cyprus are simply the latest move toward global socialism… the entire debacle (is) the abuse of paper money”.
It’s the ridiculous out of nowhere, they now want to tax bank deposits. So anyone with cash in a Cyprus bank could lose up to 9.9% or even more of his or her money. It’s as if Europe is engaged in some sort of defiant act of self-sabotage. The past two years of turmoil, austerity, bickering and riots just haven’t gone on long enough.
The bailout itself doesn’t matter. Europe is already blundering with damage control measures and might even back its way right out of this mess. It’s the waiting game that will get tricky. Now that the idea of bank runs throughout Europe has been planted in the heads of savers and investors around the world, renewed distrust quickly will be seen in equities, popping up all over the place.
This crisis will cause a massive collapse in trust in the global monetary system. But there still is time to buy real assets like gold and silver, real estate, agricultural real estate, timber, and oil and gas reserves. These kinds of investments will survive the ongoing global currency "reset." This crisis won't go away until all the debts are handled. The political class will do almost everything but deal with the root of these problems.
“People equate government with the economy,” says Doug. “They are entirely two different things. The only way to revitalize the economy is through both vast reductions in taxes and vast reductions in government spending. Instead, these idiots are arguing over how much to raise taxes and how little they can cut spending.”
“All pretense is now gone that central or global bankers can 'securitize' growth by packaging and repackaging debt; by hypothecating and re hypothecating debt; by regulating and deregulating debt. Since the bond market rally began in the early1980s, each crisis has been met with an increase in debt and an extension of the debt's maturity by central and global bankers – the IMF, EU and ECB, to name a few – and their Wall St. and City of London brethren.
“The result has been – as of 2007 – the biggest mountain of on-balance and off-balance sheet debt in history: A staggering $220 trillion in debt in America's $14-trillion economy alone (when included all public, private and contingent liabilities of unfunded entitlement programs). Deals in the global debt derivatives market now stand in excess of $1 quadrillion (1015), galloping above a global GDP of approximately $60 trillion.” To put the world debt in better perspective: Total worth of assets for the entire world is estimated $1 quadrillion! It’s clear that this staggering amount of debt never ever can be repaid!
“But starting in 2007, and then becoming spectacularly apparent in 2008 with the Lehman collapse, the ability of the world's taxpayers to pay either the interest or principal on this debt has hit a brick wall. And for several years now, governments around the world have tried the same old tricks of 'extend and pretend. 'Repackage and extend the maturity, and pray that tax receipts start picking up enough to pay some of the debt off. It didn't work.
The debt bomb just got bigger. Now in Cyprus the inevitable next phase has arrived: CONFISCATION to pay off the debts that were incurred to finance the biggest wealth grab by the Elite in history, via central and global banking institutions around the world, a trend to grab people's money from their 'insured' bank accounts.
“We should have figured out this was coming when JP Morgan (read: Jamie Dimon) reached in and illegally stepped ahead of customers at MF Global and grabbed over $1 billion, with the help of his crony pal Jon Corzine.
“Have we learned our lesson yet? They have more debts to pay than there is money in all the bank accounts in the world. This means that chances are, you – whoever you are, and whatever country you live in – will have a sizable percent of your savings stolen by banksters. Put as much money as you can in gold and silver. Warning: The only money you should keep in a bank account is money you're willing to lose.
The government gets revenue three ways. The first is by confiscating the wealth of citizens through taxes. There are hundreds of different taxes, and they all are quite high right now. The second way is by borrowing. Governments are incredibly over indebted and un-creditworthy now, and those debts will never be repaid. The third way is by printing money.
They will continue to print money because; it is the only way out left. So, politicians keep telling; printing money is a good way to stimulate the economy. Which meanwhile amply proved is a lie.
The most practical thing the average person can do is to have a significant position in precious metals. They should own the metal physically. In years to come, when governments have blown up their currencies, gold and silver will be reinstituted as money.
According to Westin: Politicians are “unpredictable" so one shouldn’t take on faith European MP’s promises the Cyprus deposit raid won’t happen in other countries.
“Even though we have parliamentarians in Europe saying that this is a one off. The problem is will the depositors in Italy, Spain and Greece believe this and will this cause a renewed massive crisis in Europe? Interestingly, people are looking at the size of the countries – when Greece hit the headlines, people were saying Greece is just 2 per cent of the Eurozone’s GDP and it’ll be a limited isolated effect. But it spread very quickly. Cyprus is ten-times smaller, but again I think we know that in this case size isn’t important.”
Still most Europeans continue to believe the state owes them a living and that the rich should be eaten to finance that. That attitude will not be changed without real tumult. There is no impetus for gradual change or reversal in Europe.
Byron King concludes. "At the very least, I believe that we'll see Russia -- both its central bank and rich oligarchs -- step up purchases of gold, versus depositing their cash in offshore banks. Other nations in which wealthy people tend to... umm... move money offshore will also likely step up their gold buying. Gold has the potential to hit $2,600 within a matter of weeks.”
This all may seem like a distant scenario. And there will be retreats along the way, based on the false appearance of economic recovery — but these will just be last-gasp buying opportunities. Don’t worry about the timing. Whatever happens in the near term, the global economies cannot avoid the fallout from currency abuse indefinitely. History has repeatedly shown this. It isn’t known whether the shift to price inflation will be sudden, occurring in fits and jolts, or appears in a slow dawning, but escape from it for sure is not possible.
By Peter B. Meyer – 15th of January 2012
Since 2000, we have had three crises - one the dot-com bubble, the next the housing bubble, and the latest the financial blowup. As this financial crisis gets worse, so will the political backlash and the disruptions in society. This scenario suggests much higher inflation, disenfranchisement of workers, and government oppression to maintain control.
Today’s system of the world can hardly be described as liberal or democratic or open or resilient. Institutions have been corrupted by unsound money, an intrusive State, and the myriad of bad private decisions made by people and corporations under the influence of too much credit. Innovation and adaptation are stifled by debt’ commitments incurred by corrupt politicians and lazy voters. Our system, in other words, has become inflexible. This inflexibility makes it brittle and fragile, even as the stewards of the system remain supremely confident in both in the system and themselves. Their overconfidence is their weakness.
So is Bernanke’s commitment to the dollar-standard and low interest rates giving people time to prepare for the world ahead once the money printers are overrun by their own creation. This year the FED turns one hundred years old and Bernanke remains upbeat. But check self how true are his and Draghi’s statements:
· “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”
— Ben Bernanke, 2007
· “The Federal Reserve will not monetize the debt.”
— Ben Bernanke, 2009
· “THERE’S NO MONETARY SOLUTION TO DEBT CRISIS” -
The U.S. dollar and euro are headed for a major crisis at some point. This is certain. The U.S. and E.U. governments are broke and digging a hole every day deeper. The only question is, not if but: "When will the big crisis arrive?
Fed members talking about cutting back on QE is like senators and congress members talking about cutting the deficit. It's not going to happen. They can talk about it. And all that debate makes fun for political theater. But once a country starts down the road of debt monetization, it never turns back.
Sure, the Fed can set targets – like 6.5% unemployment, 2% inflation, or some acceptable rate of economic growth – for when it's time to ease off the QE accelerator. But it's just a show to convince the masses that the Fed knows what it's doing and is in control of the situation. Just like the show members of parliament puts on whenever the issue of "spending cuts" is put on the table. Yet, the national debt time bomb just keeps ticking away.
A central bank’s balance sheet is essentially a self-reinforcing feedback loop: Government and ECB bonds are the collateral for dollar/euro liabilities, and bonds are streams of future dollar or euro payments. So these are backed by the promise of more dollars and euro’s!
As more are printed, their value inevitably falls. As they fall, the Fed and ECB respond with more printing. They use weak excuses to explain higher prices; they blame anything but themself. Geopolitics, and emerging market growth are classic scapegoats for higher prices. Few bother asking how those events would impact consumer prices without the influence of a swelling money supply.
The permanent near zero interest rates make the system even more fragile. Central banks are gambling with the trust of savers. They’re printing and buying bonds at the fastest pace in history. Zero interest rates also undermine confidence in the monetary system. Central banks’ most powerful tool to keep savers in the system lies in imposing positive real interest rates. Interest rates incentivize people to save. With zero interest rates, and little chance of positive rates for years into the future, there is no incentive.
Zero rates allow governments to fund budgets very cheaply. Of all governments in the world, Japan and Britain are the most bankrupt, with a debt many times the size of its GDP of 500%. A tiny rise in its government borrowing costs would usher in the same conditions as in Greece.
Governments continue spending money they don’t have. They continue keep-issuing bonds to borrow the money to pay for the deficit spending. The Central Banks continue printing money to buy the bonds they issued to keep interest rates low. And all that new money is going to continue pushing down the value of the dollar/euro and pushing up the price of gold. Now, consider that all central banks of the world are doing exactly the same thing, and consider whether if it makes more sense to sell gold or to buy it. As Austrian economist Ludwig Mises said, “gold real money".
And continued: "Public opinion always wants easy money, that is, low interest rates." Clearly, the governments’ policy is easy money and so monetary populism. The governments, and its associated class of media and financial enablers, want low interest rates to mask the true cost of horrific, irresponsible levels of borrowing and spending. Low interest rates are just grease for the countries’ monetized treadmill to nowhere.
Suppressing interest rates near zero for years and years will transfer countless wealth from savers to the government budget. As budget deficits continue to be measured in the trillions, the size of central banks balance sheets grows too. Inflation will remain stubbornly high worldwide, despite sluggish economic activity. Central bankers may talk tough from time to time, but they will ultimately do the bidding of governments — and print.
The end of all this central bank printing will see the end and not the reversal of quantitative easing programs and a re-pegging of the US dollar to gold at much higher gold prices. A new gold standard would allow the Fed and other central banks to save face after the following sequence of events: 1.
Central banks inflate their balance sheets and buy up many of the bonds governments issue to fund soaring budget deficits 2.
Once the largest suppliers of scarce products realize they’re exchanging products for infinitely diluted paper money, they start demanding more and more money in exchange for sending their scarce products to the marketplace 3.
Consumer prices start rising 4.
Calls for monetary tightening (reduction of central bank balance sheets and interest rate hikes) grow louder 5.
These central banks won’t be able to slash money supplies without crashing government bond markets and stock markets. They talk about tightening, but don’t tighten 6.
As central banks lose credibility, gold launches on a final, near-vertical stage of its bull market 7.
In response to inflation expectations running wild, governments and central banks draw up plans to re-peg currencies to gold in order to avoid having to drain trillions worth of cash from the banking system.
It’s almost impossible to imagine Central Bankers managing a “soft landing” back to its pre-quantitative easing condition. Say that the Fed doubles the size of its balance sheet yet again over the course of a QE3 operation, while the market’s expectation of future inflation steadily rises. The selling pressure on Treasuries would steadily grow, undermining the value of the Treasuries already sitting on the Fed’s balance sheet. On a mark-to- market basis, the equity on the Fed’s balance sheet would become negative.
Growth rates, ostensibly their primary focus, are slowing in the US, down from 2% rate for the first quarter to a decidedly flaccid 1.7% in the second. And that, after unprecedented amounts of economic “stimulus.” A more modest man might feel a twinge of embarrassment, perhaps even the onset of “performance anxiety.” But Bernanke is not that man. He as ECB’s Draghi have pledged, in the face of demonstrable impotence, to do “whatever it takes” to get the economy “up.”
Alas, the employment situation, another Fed Fetish, has softened too, with official unemployment still above 8%. Factor in discouraged non-workers and those forced to take part-time jobs and we’re looking at closer to 15%. John Williams at ShadowStats, who computes the figures the “old way,” puts the rate at almost 23%, nearly 1 in 4.
So the best protection is to put yourself on a gold standard, as it still is possible. Remind, bullion and coins in gold and silver and other metals are not reportable to the tax authorities, nor do they generate taxable income until you sell them. Keeping bullion and coins in a private and secure place, is a simple way to hold and move assets.
An alternative is investing in Switzerland's Zürcher Kantonalbank (ZKB) exchange-traded gold fund. ZKB is the state-run bank in the Swiss province - "canton" - of Zurich. ZKB is the third-largest bank in Switzerland, behind UBS and Credit Suisse. It employs nearly 5,000 people and made CHF 750 million in 2009 - US$700 million. It is an extraordinarily safe institution.
The bank offers exchange-traded funds in gold, silver, and platinum that trade on the Swiss stock exchange. The best part is, shares of the gold ETF are matched to physical gold stored in the bank's vault. And the shares are pegged to the price of gold. They do not carry a premium.
Another brilliant series of raw cuts, this time featuring legendary investor Jim Rogers, from the upcoming films The Bubble
. Of the many interviews I’ve seen with Mr. Rogers, this is possibly the best. The film’s writer, Thomas Woods, is an Austrian/free-market economist like Rogers. Who states: “American finance is going to be in a (relative) decline for the next 2 or 3 years. Savers are wiped out because op low interest rates, 10 years ago, most IPOs were done in NY”
“It will be good for us all when this central bank eventually disappears…”
By Peter B. Meyer – 25th of November 2012
Remember, how the EU and the USA, about a couple of years ago, were desperate to “prevent a catastrophic collapse?” The European banks bailed out their speculators. Then the governments bailed out their banks. Then, they bailed out the countries that had bailed out their banks. In America, the government bailed out the banks, the insurance companies, the automakers and a few more. Then, the Europeans and the Americans bailed out each other.
And today they’re still bailing. The US is running a budget deficit so large that track is lost how much it really is, was it $1.5 trillion or more? While in the EU it isn’t much different. Nonetheless as per today the Europeans keep preparing big bailouts for Greece, Cyprus, Spain, Portugal, Italy, and who knows whom else more.
Every bailout makes the world poorer, because it’s clearly bad money after good. Greece does not suddenly become a good credit risk just because it is lend more money. And Americans won’t be made richer because the feds offer them more debt at an even cheaper rate! Doing more of something that didn’t work is not a good idea. It is not a good objective to put more money into an investment that isn’t paying off, or to allocate more resources to an industry that stopped producing real benefits a generation ago.
What happens when Greece finally defaults? In a bit of irony, Greece played a role in the first known debt crisis more than six thousand years ago. Bloomberg reports: "History's first sovereign default came in the 4th century BC, committed by 10 Greek municipalities. There was one creditor: the temple of Delos..."
Opinions on Greek default have settled into two camps. One side sees a catastrophic event to be avoided at all costs. The other, a healthy act of cleansing that can't come soon enough.
Angela Merkel, expressed her darkest fears, arguing a Greek default would "destroy investor confidence" and could "spark contagion" in the style of Lehman Brothers in 2008. "We need to take steps we can control. What we can't do is destroy the confidence of all investors mid-course and get a situation where they say that if we've done it for Greece, we will also do it for Spain, for Belgium, or any other country. Then not a single person would put their money in Europe anymore."
On the opposing side, Jim Rogers believes Greece cannot default fast enough -- and says he would buy euros if it did. Via a Reuters interview he explains:
Well I hope that Greece defaults. It would be good for Europe, it would be good for Greece, and it would be good for the world. It would be good for the euro if they finally accepted reality and made Greece default, made the people who made the bad loans take their losses, and they made that happen to a couple of other countries. Everything would go down a lot... but that would be such a magnificent buying signal I would buy all the euros I could at that point, because then we would know we're going to have a sound currency, we're going to have a strong euro. It's not going to happen, but if it happened that way, wow. Then we'd have a serious competitor to the U.S. dollar.
Let’s have that catastrophic collapse and get it over with. Better now than later. It will only be worse if it is postponed. The problem can’t be fixed. When you borrow too much money, you have to pay it back. Or default. Better to do it as soon as possible. The ‘fix’ is obvious. Bite the bullet.
But there’s more. There also is the zombie factor. This is something that can be fixed easily. As institutions age — including private industries — they attract parasites. It’s all part of the picture of a society in need of a revolution, or a kick in the pants. Allow businesses and nations to go broke. No subsidies. No bailouts. No below-market loans. Just let them crash and burn.
Then, cut taxes to 10%, without deductions. No ifs, or buts. Russia already has a tax like this. And it is booming. Prohibit borrowing, and money printing. These measures would solve the debt problems overnight. They would protect the dollar and the euro. These would reassure investors, businessmen and householders and most importantly budget deficits.
A flat 10% tax rate would cut out most of the zombies. Freed from the dead hand of zombidom the private sector could get back to work.
The biggest risk is political. EU politicians aren’t interested in a kind of overhaul, which is not in their own interest; too many of the lucrative well-paying jobs would be gone. Rather than buckle down to restoring confidence, they are bent on another time-consuming redesign. José Manuel Barroso, the European Commission president, asserts that the “fight for the economic and political future of Europe” requires “a new federal moment.” What nonsense: it requires apologies to the EU’s furious voters. A headline in the German DIE WELT this weekend says it all: YOUNGER GENERATION HAS NO IDEA WHAT TO EXPECT. Young Germans face huge debts: Only six percent know that the current national debt is more than two trillion euros, while a large part of that debt is hidden.
The Greek debacle is the result of joining together incompatible economies. The 19th-century Latin Monetary Union embracing France, Italy, Spain, and Greece collapsed when the Greeks (and the pope) were caught debasing the common silver coinage, then too the world did not end.
The euro cannot be dismantled without a huge danger, in today’s turbulent conditions, but its long-term future is another matter. The colossal resentments generated by euro membership, in its debtor and creditor members alike, pose the real threat to Europe as an ideal. EU turmoil is a headache the world does not need. But headaches are seldom fatal.
In China, national economic policy keeps interest rates similarly to low too. It's an overt, albeit indirect, government subsidy to banks. The banks, in turn, make dicey loans, on favorable terms, to favored, often state-controlled entities.
The result of low Chinese interest rates and many years' worth of overly risky loans is embodied in stories about excess capacity across Chinese industry and uneconomic showcase projects that are monuments to the vanity of some big-shot official.
In China, as everywhere else, money that's "too cheap" leads to all manner of silly boondoggles. Just consider some of the stories, like empty airports, deserted shopping malls, see-through cities, bridges to nowhere, idle steel mills and silent shipyards.
The U.S. elections revealed the US is heading more toward the European economic model that the shift into gold should accelerate, as in China Gold is their hedge for the slowly eroding value of China's U.S. Treasury holdings.
Anyway for everyone with common sense, its time to prepare oneself for a historical turn in society, rather sooner than later the usual will change for the new future. In attached video a self-described libertarian, and his business partner, Dr. Steve Lantier, show how they transformed a hospital and staffs mentality for the new era, after they became disillusioned with the way patients were treated. In 1997, Smith and Lantier bought the shell of a former surgical center with the aim of creating a for-profit facility that could deliver first-rate care at a fraction of what traditional hospitals charge.
Latest Cartoon by Leon Kuhn: Government of the bankers
By Peter B. Meyer -13th of July 2012
The ability of modern representative government is that it cheats the masses into believing that they are insiders too. They are encouraged to vote and to believe that their vote really matters. Obviously, it matters not at all. Generally, voters have no idea what or whom they are voting for. Often, they get the opposite of what they thought they had voted for anyway. “Government is a phenomenon, not a system.” It is best understood as a fight between the outsiders and the insiders. The insiders always control the government, and use it to take control of the outsiders. Why do they want to do so? The usual reasons are Wealth, Power, and Status.” In short: Government is an institution wherein the “insiders” take the wealth, power and status from the “outsiders.”
the elected third president of the USA (1801–1809) said in 1802: "My reading of history convinces me that most bad government results from too much government." - "The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Further: "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and institutions that will grow up around the banks will deprive the people of all property - until their children wake-up homeless on the continent their fathers conquered."
A democracy is nothing more than mob rule, where 51% of the people may take away the rights of the other 49%. The experience of all former ages had shown that of all human governments, democracy was the most unstable, fluctuating and short-lived. Said John Quincy the sixth President of the United States (1825-1829). Yet the protection of the minority, most importantly the individual, along with his private property, is the basis on which the system of government is built.
Government may provide a useful, even necessary, function — such as keeping the peace and maintaining justice. They sometimes redistribute wealth among the outsiders. They sometimes claim to be acting in the name of the greater good, and often do not. But they always take wealth, power and status from those who are not among the insiders. The Romans already provided proof of this statement whereas power, prestige and wealth flowed back to Rome.
By giving taxpayers a voice in government, the Dutch and British democracies provided creditors with safer claims for repayment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.
The ECB and EU bureaucracy are now imposing a creditor-oriented austerity on Europe. Ostensibly social democratic governments have been directed to save the banks rather than reviving economic growth and employment. Losses on bad bank loans and speculations are taken onto the public balance sheet while scaling back public spending and even selling off infrastructure. The response of taxpayers stuck with the resulting debt has been to mount popular protests starting in Iceland and Latvia in January 2009, and more widespread demonstrations in Greece and Spain to protest their governments’ refusal to hold referendums on these fateful bailouts of foreign bondholders.
The financial sector has gained sufficient influence to use such emergencies as an opportunity to convince governments that the economy will collapse if they do not “save the banks.” In practice this means consolidating their control over policy, which they use in ways that further polarize economies.
The basic model is giving priority to bankers and leaving economic planning to be dictated by the EU, ECB and IMF, after previously the nation-states was stripped of the power to coin or print money and levy taxes.
The resulting conflict is pitting financial interests against national self-determination. The idea of an independent central bank being “the hallmark of democracy” is a euphemism for relinquishing the most important policy decision – the ability to create money and credit – to the financial sector. Rather than leaving the policy choice to popular referendums, the rescue of banks organized by the EU and ECB now represents the largest category of rising national debt.
The private bank debts taken onto government balance sheets in Ireland, Greece, and now in Spain have been turned into taxpayer obligations. The same is true for America’s $13 trillion added since September 2008 including $5.3 trillion in Fannie Mae and Freddie Mac bad mortgages taken onto the government’s balance sheet, and $2 trillion of Federal Reserve “cash-for-trash” swaps.
Barclays’ bank insiders setting Libor interest rates to suit themselves, rather than be determined by sellers and buyers, is the ultimate scandal. But this is more or less what one had expected in a world of manipulated interest rates, where those rates are set lower for banker’s own benefit. As a show of honesty both the Chairman and its chief executive have been ousted with “golden handshakes”. But isn’t manipulating interest rates lower exactly what all-central bankers the world over do? They think they have the right. They say it will help to stimulate growth.
Financial proxies euphemized as technocrats are dictating this. Designated by creditor lobbyists, their role is to calculate just how much unemployment and depression is needed to squeeze out a surplus to pay creditors for debts now on the books. What makes this calculation self-defeating is the fact that economic shrinkage – debt deflation – makes the debt burden even less payable.
The result has been junk economics. Its aim is to disable public checks and balances, shifting planning power into the hands of high finance on the claim that this is more efficient than public regulation.
Government planning and taxation is accused of being “the road to serfdom,” as if “free markets” controlled by bankers give leeway to act recklessly if not planned by special interests in advance, in ways that are oligarchic, and not democratic. Governments are told to pay bailout debts taken on not to defend countries in military warfare as in times past, but to benefit the wealthiest layer of the population by shifting its losses onto taxpayers.
The failure to take the wishes of voters into consideration leaves the resulting national debts on shaky ground politically and even legally. Governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.
Despite all the phony governments’ interventions the recovery is not coming, it remains the same deplorable situation as the last two years. Recovery is impossible this isn’t an ordinary recession. The world faces a huge solvency problem and not a liquidity problem. New money supply cannot restore health to sick loans and government bonds. The only way to restore solvency to the financial system is to deflate the economy or slash the amount of debt through mass bankruptcy.
Nevertheless the elite will continue to defend their turf by printing more money until the bitter end, count with a long road down and a lot more unnecessary suffering.
Note: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner, as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved.” Those are the words of Austrian economist Ludwig Von Mises.
By Peter B. Meyer – July 8, 2012
Bankers, Politicians, and even the Pharmaceutical industry, lies, deceit, corrupt, and rigged the financial system to satisfy their greed. Lining insiders’ pockets, and keep the outsiders - the hardworking citizens dumb. Society is rotten to the bone, half the people are broke and almost the other half doesn’t have the brains to understand how they are cheated.
The Central Bankers rigged the financial system for the last 40 years; when in 1971 the gold standard was abolished they created paper money backed on faith. Money without anything behind it, except the bankers themselves. They spoiled their reputation by rigging the Libor rate into a Liebor scam for the sake of their own greed. Their bonuses are sanctified! While ordinary people bail them out, via austerity measures dictated by unwise politicians, besides being ripped off too through inflation. Continuing the destruction of paper money that eventually slowly brings this monetary system to its end. As a consequence consumer prices went up many times during the period, while labour did not. Gasoline lost 90% of its 1970 value, while financial assets rose with inflation of the money supply. No wonder that the rich got richer. This monetary system creates ‘inequality’.
The Central Bankers shaped a credit-based economy, increased the supply of credit 50 times in the past 50 years. Leading to the problems the world faces today, without any or little real growth and wealth, but increasing high unemployment.
Central bankers today are seen as superheroes, able to push markets around with a single phrase. Ben Bernanke, Mario Draghi and all the others should better be seen as robbers defending markets from downturns to deliver capital gains. But in reality these superheroes are impostors. They have no superpowers, other than the power of mass delusion and destruction. The powers of Mario Draghi and the other central bankers in Europe are waning. Each new round of printing has less impact on markets. “This is a solvency problem, not a liquidity problem.” In other words, new money supply cannot restore health to sick loans and government bonds. The only way to restore solvency to the system is to deflate the economy or slash the amount of debt in the system through mass bankruptcy.
“The biggest fraud in economics is economics itself. The more efficient the economy is, the more people get with the least effort and expense of resources.” It makes no sense to waste trillions of Euros worth of resources just to “protect the economy.” The whole purpose of an economy is to create more - not to waste it.
The rigging is rampant apart from the LIBOR rigging by Barclays and cohorts, Spain and Portugal are leading the pack on another front: “European Banks are buying back mortgage-backed securities at distressed levels to bolster capital levels and ECB collateral. So far this year, Spanish and Portuguese banks have repurchased €8.4 billion in asset-backed bonds - more than double the level for 2011. They buy this debt at distressed levels, and then book capital gains on par with the discount.”
As an example, Spanish bank BBVA bought back €638.2 million of mortgage-backed bonds, consumer, and business loans, and recorded a €250-million-capital gain, according to a June 28 regulatory filing.
In other words, these banks buy back at huge discounts the bad debt they issued before the crisis. And with the ECB as a backstop, they can mark the debt back to face value and book capital gains, on which their bonuses are calculated. The impression is created; European banks are getting stronger now. But actually their balance sheets are loaded with more garbage debt. Banks buy these assets because they cannot raise money in the private markets.
Recently, the ECB has relaxed the collateral requirements; making it easier for banks to continue this financial rigging, to "improve" their balance sheets under protection of the ECB. And while the market may ‘recover’, European banks will be left with loads of awful assets. The European economy won't recover by adding more and more -of the same- debt into the system.
Eventually, after the reelection of Angela Merkel as Germany’s Chancellor in 2013, the ECB will start directly purchasing bonds, opposed to the loans it is making now.
What are the options for improvement out of this mess: For now it is austerity that produces “falling wages and a broadly recessionary environment that can last for decades, and can result in the near or total economic destruction of a nation.” At the other hand, default could be catastrophic too, causing hard times, and a near collapse of the economy, but shortens the period of hardship. Right now, central bankers are diluting the value of debt by pushing interest rates below the rate of inflation, and eventually end in default anyhow, unnecessary extending people’s hardship. A kind of “financial repression.” It’s an unspoken policy that has many other negative consequences too. So what is an alternative, since all attempts to “fix” the current system with more borrowing and printing are failing?
How about the classical gold standard, which stands out as the least flawed of all the systems ever tried. Each nation could choose to peg its own currency to gold at a price that allows for enough growth in bank reserves to greatly reduce the burden of public- and private sector debts.
“Re-pegging a currency like the US dollar to gold at the current price of about $1,550 has its pitfalls. Most notably, it would not deleverage an overleveraged banking system. But re-pegging the dollar to something like $10,000 an ounce might do the trick.”
Hedge fund managers Lee Quaintance and Paul Brodsky from QB Asset Management wrote a fascinating outline on the potential reintroduction of gold into the monetary system, while “simultaneously implementing what one might consider a debt jubilee.”
“Using the US as an example, the Fed would purchase Treasury’s gold at a large and specified premium to its current spot valuation. The higher the price, the more base money would be created and the more public debt would be extinguished. An eight-to-10-fold increase in the gold price via this mechanism would fully reserve all existing US dollar-denominated bank deposits (a full deleveraging of the banking system).” For a detailed explanation go to Zero Hedge site at this link
As an added bonus: Central bankers would no longer be viewed as superheroes! Just meager servants, pegging the money supply to gold and letting the free market determine the price of money. After all, history proved that central planning never ever has better worked over time than the free market.
For the time being expect conditions getting much worse in the financial sector, before a deleveraging gold standard system will be implemented. The end of the welfare state is near, giving something for nothing is attractive for politicians to be elected, but by now it must be clear that this ruins the people and their country. Important; to protect yourself and your accumulated wealth buy gold and silver at least now, as the price is relative low.
Tags: Libor rigging, Barclays fraud, corruption, gold standard, gold prices, collapse of welfare state, banking bonus, lies
By Peter B. Meyer – June 17, June 2012
It is hardly possible to keep up with the accelerating events. Amazing how quick a government can waste €100 billion. Just days after the European Union agreed to float Spain's financial sector, the yield on Spanish 10-year debt breached the all-important 7% mark – its highest yield since the euro was created in 1999. Yields jumped after Moody's cut Spain's credit rating. For the record: Portugal, Ireland, and Greece were all bailed out after their government debt yields climbed above 7%. In Spain's case, this is the point at which the country will need another bailout soon.
The Spanish government may announce additional fiscal cuts and structural reforms. Bolstered by funds from the ESM, Spain remains financially afloat for several months. But the Spanish economy continues to deteriorate and unemployment heads towards 30%.
The financial world is watching with disbelief and shock as the European banking and political elites do the daily shuffle in a veiled attempt to hold together a forced, non-elected European Union. While it continues to come further apart at the seams due to excessive sovereign debt and failing austerity measures, rendered meaningless by an explosion in fiat currency creation, not seen since the days of the German Weimer Republic.
"The EuroTitanic has now hit the iceberg and sadly there simply aren't enough lifeboats." Says Nigel Farage, from UK Independence Party.
The next scenario: Violent protests against Prime Minister Mariano Rajoy’s austerity measures, will lead him to call for a referendum. His government fails to get the necessary support from voters and resigns, throwing the country into full-blown political chaos. Likely another Guerra Civil, as the one of the thirties may occur.
Merkel cuts off further support for Spain, saying that hard-working German taxpayers have already done enough. In a hastily arranged mini-summit, Germany, Finland, Austria, and The Netherlands announce that they will not renounce the euro as their joint currency. This only increases financial pressure on France, Italy, and the other members. As the reality of the partial dissolution of the EU sinks in, the financial meltdown spreads from Europe to the United States and Asia.
Investors should study history and get ready for a fast replay of a new version of European history during1919, 1931 and 1933 that could transpire quickly over the next year.
Whether the effects of a worldwide depression will again be countered by another world war (WW3) is the only open question facing the world today. The failed European Union is going down. Of course the power elites will attempt to use the real or manufactured crisis as a pretext to expand the EU, but don’t believe they will succeed. The speed of events and flow of alternative news renders their old style propaganda powerless to keep up with and control public opinion today.
“We are indeed seeing a latter-day replay of the infamous Treaty of Versailles debt load forced on a defeated German nation in 1919 now levied on the entire European Union and this time Germany will be the winner. Maybe the turnabout is fair play but the long-term consequences could be as tragic as what the victorious allies did to a prostrate German nation that led to the rise of National Socialism and Adolf Hitler back in the 1930’s.”
“As was the case in 1919, 93 years ago, the banks and the power elite are seeking profits, gold and wealth at the expense of bankrupt and defeated nations but this time Germany is getting it’s revenge. In 1919, the victorious and "righteous" allied politicians that had earlier forced the United States to enter the war in 1917 in order to forestall a German victory so the American banks and arms industry could get their loans repaid and avoid bankruptcy, are this time on the receiving end. Germany might bailout the EU nations, at the last minute, but at the price of their gold reserves, control over economic policies and veto threat even over elections in the individual nations.”
“In May of 1931, the historic Credit-Anstalt Bank in Vienna, - now called UniCredit and based in Italy- founded by the Rothschild family in 1855, collapsed, - as will UniCredit do-. This in turn caused banks and companies across Europe to go under in a domino inspired panic. This collapse destabilized Europe far more than the Wall Street Crash of 1929 and over time destroyed European confidence and belief in political and financial institutions. The result was the rise in nationalism, fascism and ultimately World War II.”
“Americans don’t really know European history but the people of Europe do and this is why the elites are so determined to avoid another banking panic and collapse at any price. The problem for them is the expensive bank bailouts may well bring an even more destructive threat to Europe hyperinflation. Again, we know what happened in Germany.”
“The EU and the banking elites may well succeed in their efforts but the losers will ultimately be the sovereignty of individual nations and the wealth, freedom and prosperity of Europe. This problem will likely jump the Atlantic and an inefficient fascism like what took place in Italy combined with a nationalistic foreign policy like the German Reich does not bode well for the United States.”
Count on; European bank and stock exchange closures, private gold confiscation, limitations on ATM and bank account withdrawals and international wire transfers, that also will happen in the United States. The people of Europe and America will lose their wealth-security and preservation of purchasing power. Only precious metals and none exchange traded private equity opportunities will provide unique market opportunities.
Suggestion: Take action today and buy gold and silver, because this wil not end well for Europe or the United States.
Note: Many years later, Merkel, who has withdrawn from politics and become a recluse, is asked whether she thinks that she should have done anything differently during the EU crisis. Unfortunately, her answer comes too late to change the course of history.
By Peter B. Meyer – March 25, 2012
Five economic phenomena are at work: They are Deflation, Default, De-leverage, Depression, and Decline. With 'decline' is meant the deterioration of a society, where the standard of living stagnates the economy in shamble is, and the place in the economic world ranking diminishes.
The world is still a world of excess supply. This 'excess' capacity causes falling prices thus deflation. The real problem, from activists' point of view, is not excess or shortage, it is fear. They are afraid of falling prices, necessary to clear the market from the excesses. Real estate, property, shares and so on may lose up to half their original purchase value. Causing Banks and Nations to go broke.
The existing economic model is finished. It's over. Consumers are not coming back by adding more debt. Nonetheless governments add even more debt.
The world is currently undergoing an economic shock every bit as big as in the Great Depression of 1929-30. But in the event of an economic depression: Schumpeter* says that the "process of creative destruction is the essential fact about capitalism." Layoffs of workers with obsolete working skills can be one price of new innovations that are valued by consumers. Creative destruction can cause severe hardship in the short term and in the long term for the ones who cannot acquire the skills and work experience necessary in the new environment. Although an innovating economy generates new opportunities for workers to participate in more creative and productive enterprises, it still requires acquiring the necessary new skills and that will take time.
All this is inevitable, but Governments bend this tendency of deflation towards inflation, they don’t allow the necessary deflation to take hold. If deflation takes place debt problems are getting a heavier burden, so our leaders kill this process. Say goodbye to your rising purchasing power, instead of improving that under deflation it is going down drain under inflation. And once our leaders face problems they cannot solve, they start printing more money as their sole solution. This leads to lowering the value of all paper currencies, and then these are going to be less worth down the road, deteriorating consumers’ purchasing power even more. Be assured, that the world's central bankers will keep printing money.
Governments are taking an ever-larger role in the economy. Social programs are too costly and without money to pay for. Not enough money has been invested in productive business, reducing employment opportunities and not creating returns on investments. With military burden too heavy and difficult to escape. With population that is growing older without savings meanwhile still paying down private debt, that is taking them most likely the next 10 years. With leaders that are incompetent and corrupt. And on top of all, rising oil price. These altogether are severe threats to global economic growth. So there is not much growth to expect. In an environment where societies become more and more deprived of ever more expensive energy and consequently lacking the means to expand into new economic growth that will diminish more every time oil prices go up and less money is left for consumption, while not as much of income is generated to pay off the huge public and private debt burden.
Meanwhile debts are compounding at an accelerating pace because the lack of political ability to limit the government's spending. While government spending has grown at a record pace, the economy hasn't. It has hardly grown at all.
Nevertheless declares IMF chief Christine Lagarde: “The world economy has stepped back from the brink.” She apparently has no reluctance about issuing silly statements. They really believe they solved the euro zone debt crisis by putting Greece into deeper debt.
The combination of borrowing record amounts of money and continuing to borrow the money needed to pay the interest is setting the stage for a massive increase in total debt levels. Don't our leaders realize they can't continue on this path?
The political solution to soaring deficits is most likely higher taxes, as governments never make dramatic, meaningful cuts to promised benefits, not when half the country’s citizens don’t pay taxes. Will higher taxes save us? They cannot squeeze blood from a stone, so that won’t work either. And in the meantime central banks are secretly buying gold, too! Apparently they do understand where this is going to end.
So better yet, protecting your hard saved money with gold and silver, as hyperinflation looks by the day more and more unavoidable.
*Joseph Alois Schumpeter (8 February 1883 – 8 January 1950) was an Austrian economist and political scientist. Schumpeter thought that the institution enabling the entrepreneur to purchase the resources needed to realize his or her vision was a well-developed capitalist financial system.