12/25. Why I Don't Support Europe's Bailouts
July 11, 2012, By TIMO SOINI
Why I Don't Support Europe's Bailouts Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.
When I had the honor of leading the True Finn Party to electoral victory in April, we made a solemn promise to oppose the bailouts of euro-zone member states. Europe is suffering from the economic gangrene of insolvency—both public and private. Unless we amputate that which cannot be saved, we risk poisoning the whole body.
To understand the real nature and purpose of the bailouts, we first have to understand who really benefits from them.
At the risk of being accused of populism, we'll begin with the obvious: It is not the little guy who benefits. He is being milked and lied to in order to keep the insolvent system running. He is paid less and taxed more to provide the money needed to keep this Ponzi scheme going. Meanwhile, a symbiosis has developed between politicians and banks: Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.
In a true market economy, bad choices get penalized. Instead of accepting losses on unsound investments—which would have led to the probable collapse of some banks—it was decided to transfer the losses to taxpayers via loans, guarantees and opaque constructs such as the European Financial Stability Fund.
The money did not go to help indebted economies. It flowed through the European Central Bank and recipient states to the coffers of big banks and investment funds.
Further contrary to the official wisdom, the recipient states did not want such "help," not this way. The natural option for them was to admit insolvency and let failed private lenders, wherever they were based, eat their losses.
That was not to be. Ireland was forced to take the money. The same happened to Portugal.
Why did the Brussels-Frankfurt extortion racket force these countries to accept the money along with "recovery" plans that would inevitably fail? Because they needed to please the tax-guzzling banks, which might otherwise refuse to turn up at the next Spanish, Belgian, Italian or even French bond auction.
Unfortunately for this financial and political cartel, their plan isn't working. Already under this scheme, Greece, Ireland and Portugal are ruined. They will never be able to save and grow fast enough to pay back the debts with which Brussels has saddled them in the name of saving them.
Setting up the European Stability Mechanism is no solution. It would institutionalize the system of wealth transfers from private citizens to compromised politicians and failed bankers, creating a huge moral hazard and destroying what remains of Europe's competitive banking landscape.
Fortunately, it is not too late to stop the rot. For the banks, we need honest, serious stress tests. Stop the current politically inspired farce. Instead, have parallel assessments done by regulators and independent groups including stakeholders and academics. Trust, but verify.
Insolvent banks and financial institutions must be shut down, purging insolvency from the system. We must restore the market principle of freedom to fail.
If some banks are recapitalized with taxpayer money, taxpayers should get ownership stakes in return, and the entire board should be kicked out. But before any such taxpayer participation can be contemplated, it is essential to first apply big haircuts to bondholders.
For sovereign debt, the freedom to fail is again key. Significant restructuring is needed for genuine recovery. Yes, markets will punish defaulting states, but they are also quick to forgive. Current plans are destroying the real economies of Europe through elevated taxes and transfers of wealth from ordinary families to the coffers of insolvent states and banks. A restructuring that left a country's debt burden at a manageable level and encouraged a return to growth-oriented policies could lead to a swift return to international debt markets.
This is not just about economics. People feel betrayed. In Ireland, the incoming parties to the new government promised to hold senior bondholders responsible, but under pressure they succumbed, leaving their voters with a sense of disenfranchisement. The elites in Brussels have said that Finland must honor its commitments to its European partners, but Brussels is silent on whether national politicians should honor their commitments to their own voters.
I was raised to know that genocidal war must never again be visited on our continent and I came to understand the values and principles that originally motivated the establishment of what became the European Union. This Europe, this vision, was one that offered the people of Finland and all of Europe the gift of peace founded on democracy, freedom and justice. This is a Europe worth having, so it is with great distress that I see this project being put in jeopardy by a political elite who would sacrifice the interests of Europe's ordinary people in order to protect certain corporate interests.
Mr. Soini is chairman of the True Finn Party in Finland.
Comment: Here is hard evidence on how Goldman Sachs is contributing to this all...
12/24. "US could put Assange to death if it gets him" – former senior NSA official (if the video clip or MP4 clip do not show up, the script stands uncensored)
July 9th, 2012
If America gets its hands on the WikiLeaks founder, they may go as far as execute him, a known National Security Agency whistleblower Thomas Andrews Drake told RT, adding that in the US, security has become a state religion.
An expert on electronic eavesdropping, Drake sacrificed his career to blow the whistle on perceived wrongdoings within the NSA. He was charged under the Espionage Act, though the charges were dropped only last year.
He told RT that in America’s ‘soft tyranny’, everyone is subject or suspect in terms of surveillance. If the video does not show the interviw text is further below:
RT: What was the potential harm of the program that you challenged while working with the NSA?
Thomas Drake: There was a very large flagship program called Trailblazer that was designed to catapult the NSA into the twenty first century to deal with the vast amounts of data generated by the digital age. Given the massive fraud and abuse that the NSA had created with the Trailblazer program, as well as the super secret surveillance program, the NSA completely violated the Constitution and the Fourth Amendment. In particular, the stature called the Foreign Intelligence Surveillance Act, which was the first commandment at the NSA: you did violate Americans’ privacy without a warning, and if you did – there is a criminal penalty for doing so. And I found this out to my horror and shock, that shortly after 9/11, the NSA entered a secret agreement with the White House in which the NSA would become the executive agent for this secret surveillance program.
On the front end, it was designed to deal with a terrorist threat – and that was quite understandable. But what it did – it actually turned the US into a collection platform.Vast rims of data were increasingly being collected through other entities and saved for analysis.
RT: There is a lot of debate about the proposed legislation CISPA enabling providers (Google, Facebook etc.) to share users’ personal data with the government. Are they already doing that? Do they need this legislation to protect themselves from being liable for what they are already doing?
TD: I believe that is a part of it. The other part is the government just wants even more access to even more data. Under the Patriot Act there is a secret executive interpretation which essentially grants the government pretty much unfettered access to subscriber information held by those companies. CISPA would take that to a next level. Under the label or the rubric of cyber threats, and to provide cyber security, the government wants even more invasive access to networks not normally available to that public.
RT: So what is the goal; is it total surveillance?
TD: If you take what has been happening in the post-9/11 security world, what you’re see is the establishment of a surveillance society – the establishment of a surveillance network. People don’t realize the extent to which we’re surveilled in many, many ways. The extent to which vast amounts of our transactional data in all forms – electronic forms, your emails, your tweets, bank records and everything else – are all subject or suspect in terms of surveillance. It raises the specter of the rise of so-called “soft tyranny.” It raises the specter of you being automatically suspicious until you prove that you’re not; the specter of a universal and persistent wiretap on every single person. If not – they can create one. Because what happens if they don’t like you? What if you speak ill will against the government? What if you say something they consider disloyal? That is not the country I took an oath to defend four times in my government career.
There is also a fear element. Fear in itself is control. What would people do when they are fearful is they would begin to censor themselves. It sends an extraordinary chilling message that if you speak out – they are going to hammer you hard. Our security has become our state religion, you don’t question it. And if you question it – your loyalty is questioned.
RT: A question about Wikileaks’ founder Julian Assange. How angry you think Washington is at Julian Assange?
TD: They are extremely angry. According to press reports, there has been a secret Grand Jury and maybe a secret indictment. They want to get him and put him away. There are those at high levels in this country – they have called for a death warrant.
Believe me, if the US get its hands on him – they’re going to do everything they can to put him away for as long as they can – or worse.
Speaking truth to power is very dangerous. The power elites, those in charge don’t like dirty linen being aired. They don’t like skeletons in the closet being seen. Not only do they object to it, they decide to turn it into criminal activity. Remember, my whistle blowing was criminalized by my own government.
RT: Journalists exposing civilian deaths in drone strikes are exposed as helping terrorist. The terrorist-helper label has become a convenient tool to brush off investigative journalism, hasn’t it?
TD: What it is, you go after the messenger to deal with the message… because addressing the message has become very uncomfortable.
If we start moving away from the law, which has already happened very significantly, and leave it to policy as a substitute – we’re going down a very slippery slope in the US.
RT: US officials condemn cyber attacks but it turns out the US government itself is involved in cyber attacks (like Stuxnet and Flame viruses). How do you see that?
TD: There are authorized leaks, which is an oxymoron coming from senior administration officials.
RT:They want people to know that?
TD: Right. I believe that is the case. They actually wanted people to know what the US is capable of doing. It is another form of warfare, it is a cyber weapon. But it is a Pandora’s box because we’re on uncharted territories of a virtual war.
The Pentagon itself has it on record that if a nation conducts actions against the US using things like Stuxnet – that’s an act of war. But we consider it (our actions) information or cyber operations. It goes under a whole host of different labels to make it something different from what it really is. So where are the lines drawn?
12/23. Proven - Market Forces did NOT create Housing Crash, nor worthless Mortgage Backed Securities, nor did they put Lehman Brothers and many others out of Business!
July 4th, 2012
The whole story is condensed into this picture from St.Louis FED.
The housing crisis was put in motion after large scale commodities cross trading experiments in Enron (Enron was a US$ 100 billion company that was simply driven to bankruptcy in 2001).
Was it coincidence, but the same time the dot.com bubble was exploding and stole all the headlines. The reporters should have been looking what was going on inside Enron's trading floors where a myriad of unorthodox trading methods were tested. With US$ 100 billion company you can make plenty of testing before the company value is evaporated!
Was President W Bush fully aware of the planned consequences when he told American people that every American should have their own home? At least the man writing his speeches for sure knew what the goal!
The bankers started now accommodating new lending policy that allowed previously unqualified people to suddenly have ability to even choose what kind of house they would like to own and have also means to get into it.
The real estate markets became suddenly red hot business. Millions of newly qualified buyers bought all kind of houses and even second homes. The resulting construction boom was huge and kept on going until September 15th, 2008.
At that day Lehman Brothers was put to bankruptcy and global stock markets collapsed. Ordinary people had no idea that a crash was coming and even less on what was really going on regardless that Bear Sterns and A.I.G had been in headlines.
The sophisticated investors on the top of the feeding chain must have noticed the earliest warning in the mid 2006 when the LIBOR rates suddenly stopped raising. For them it must have been clear that something was fishy when the 18th equally timed and equally sized upward step in LIBOR rate since mid 2004 did not come at all. It must have dawned to them that the housing boom was a trap and the hell would break lose in the very near future.
The sad part is that LIBOR if somebody among among the 98% of the Amerivcans had ever heard of it was something foreign they had in London with no impact to them.
Anyhow many knew instinctively that there would be plenty of suffering in housing sector for some of the new house owners after their mortgage grace periods would end. We knew that the housing bubble was lubricated with artificially low, fixed "teaser rates" and interest only payment policy for a few first years from the beginning. We just did not realize how massive this housing boom had been.
It appears that practically everyone working even on temporary jobs earning minimum wages was qualified to buy a house in this "lending scam" and that so many actually exercised this opportunity.
The loan "pushers" knew perfectly well that all these new way "qualified" buyers would default when the real interest rates would kick in but they were not paid for exercising common sense. The lending institutions did not care either as large numbers of these mortgage contracts were packaged together to Mortgage Backed Securities (MBS) and the demand for these clearly fraudulent income generators around the world seemed endless.
It all worked like Swiss watches. Most financiallyilliterate workers swallowed the hooks and millions more of those who should have known better joined this crowd.
When the time of the unqualified house owners run out they had two options available: 1) walk away, or 2) try to sell the house. Either way their time run out and "for sale" signs remained standing everywhere. Those with money knew that prices would be much lower later on. This downfall was accelerated even further as after Seprember 15th 2008 banks would not even lend money to ordinary house buyers.
The investing arms of the big banks, especially those selling the MBS overseas had of course shorted all MBS papers they could short as part of their "normal business insurance". These banks would not put themselves to any legal jepardy either as they could go behind the veil of the past and could even accuse the innocent and ignorant clerks who had forever been lumping mortgages into large MBS packages. In the past MBS papers had always been valuable and of course the people handling the actually sales physically were never told the difference.
Everything was rosy for ordinary tax payers in the USA and the World when the party crashed on September 15th, 2008 and the Guillotine blade hit the scapegoat, Lehman Brothers, with apparently by J P Morgan making the kill. FED knew this to happen and Bernanke was watching personally the markets that day to inject liquidity as/if needed. However, the need overwhelmed even the FED and they closed the markets after a short effort when they realized that no amount of "free" money would satisfy the markets on that very day.
So far the MBS scam, naked market shorting, and still continuing other stock market manipulation have robbed US$ 29 trillion from the US tax payers and even much more globally.
Why is nobody in jail for this? We jail people from stealing less than $100 but apparently not people who steal 290,000,000,000 times that $100?
How do our politicians justify this? Our Nations ws estblished on premise: "In God We Trust", our politicians seem not to get this and we must ask if can we trust anyone in the US Congress or even the White House?
Bear Sterns, A.I.G. and Lehman Brothers were scapegoats to this crime to keep people blaming them instead finding out who were the real criminals? Bernie Madoffs, IMF directors sex affairs and all similar contemporary meaningless and total BS shows were robbing the time from critical analysis, etc. None of these were real perpetrators. The real perpetrators are the owners of the US$ 700...1,200 trillion derivatives casino that is 100% controlled by the global banking empires with no regulations nor political supervision. This amout of money is much more than 10 times the World GDP lumped together and nobody cares???
Louis XIV of the Sun King of France, ranks as one of the most remarkable monarchs in European history. He reigned for 72 years with a motto: "Who has the most money will always win the war". "Armies and soldiers obey those who give them a paychek, nothing complicated - just never run out of gold and money when you are in war!"
It appears that the key perpetrators for all the current MBS and other financial crimes are associated or hiding inside the Banking Dynasties shown below. The key members of this group had lobbyed Congress almost for a century before they were granted the right to establish the private central Bank for the USA in 1913 when FED or the Federal Reserve Bank of the USA was established:
1) Rothschild Bank of London, 2) Rothschild Bank of Berlin, 3) Lazard Brothers of Paris, 4) Israel Moses Seif Banks of Italy, 5) Warburg Bank of Amsterdam, 6) Warburg Bank of Hamburg, 7) Lehman Brothers of New York ( forced to bankruptcy on September 15th, 2008 for debt to J P Morgan), 8) Kuhn Loeb Bank of New York, 9) Goldman Sachs of New York, and 10) Chase Manhattan Bank of New York
Chase Manhattan Bank of New York was acquired by J P Morgan Chase controlled by Rockefellers who in turn a couple of weeks ago joined forces with Rothschild family. Rockefellers control additionally a major part of the American health care industry and presumably still major part of the oil industry. They started in oil industry through their company Standard oil, which grew to monopoly position in the USA controlling about 70% of the US refined oil products. Standard Oil was found to break the monopoly laws and was ordered to break itself to 34 companies who's successors today are such companies like ExxonMobil, ConocoPhilips, Chevron, Pennzoil, and part of BP Standard oil of BP and several smaller ones.
Regardless of the above the crime has not stopped and we have now a stealthy enemy of the people who is continuously stealing openly from the individual investors on Wall Street. We now know how they operate but unfortunately our politicians receive their election campaign financing from them and they are too corrupt to cut the hands that feed them. Our current legal system is too weak to correct this.
These banking empires should be cut to independent pieces. Rockefellers Standard oil was cut to 34 independent companies in the USA after it controlled 70% of the markets. Also all investment banking should be totally separate from deposit based lending banking.
There is no too big to fail unit on this planet (Communist Russia was broken down and even UK has the Scotch looking for independence, EU cannot find a common ground for full union regardless that now Goldman Sachs has their man leading all major central banks and might soon conquer also the Bank of England. It is a fallacy that one can run the financial world separately and then control the political world like the owners in JPM, Rothschilds and Goldman Sachs are apparently thinking, etc,..., and why did Barclays quickly agree to pay US$ 451 million fine for meddling with LIBOR rates - they could not do it alone! Also US$ 451 million is not even peanuts when US$ 29 trillion was stolen from the tax payers!
12/22. Greece and the Euro: Fifty Ways to Leave Your Lover
Ellen Brown June 4, 2012
The problem is all inside your head she said to me
The answer is easy if you take it logically
I'd like to help you in your struggle to be free
There must be fifty ways to leave your lover.
--Lyrics by Paul Simon
The Euro appears to be a marriage of incompatible partners. A June 1st article in the UK Telegraph titled “Why Europe’s Love Affair with the European Project Is Ending” reported that two-thirds of 9,000 respondents thought that having the euro as their single currency was a mistake.
For Greece, it was a tragic mismatch from the beginning; and like many a breakup, it is really about money. Greece is a vivacious young woman chained to a tyrannical old man. She yearns to be free to dance on her own; but breaking up is hard to do. Defaulting on her debts will force her out of the Eurozone and back to issuing drachmas, and she could get brutally beaten by speculators on foreign exchange markets for her insolence.
Fortunately, there are alternatives to an ugly divorce. The treaties binding the 17 member nations are just a set of rules, entered into by mutual agreement; and rules can be bent or broken, especially in crises. The ECB (European Central Bank) broke a litany of rules to save the banks, and so did the Federal Reserve to save Wall Street in 2008. Rules that can be bent for banks can be bent for people and nations—not just Greece, but all the other Eurozone countries threatening to file for divorce.
Paul Simon says there are 50 ways, but here are five creative alternatives.
James Skinner, former chairman of NEF (the New Economics Foundation in the UK), suggests that the Greek government could start issuing drachmas without abandoning the euro. Drachmas could be reserved for domestic use—to pay the government’s budget, hire workers, build infrastructure and expand social services. He writes:
Greece is suffering from a lack of money because the only source, the single currency, has dried up. But there is no law that states that there has to be only one currency.
. . . By enabling the Government, monitored by the Central Bank, to spend newly created money directly into the economy, bypassing the banking sector, the burden of increasing national debt can be avoided. . . .
This programme for creating a new Greek Drachma, bypassing the private banking sector, could start tomorrow. Its immediate effect would be to get the unemployed back to work. All existing Euro transactions can continue as before, quite separately from the new currency. The two currencies can perfectly well co-exist and run alongside each other. . . . Foreign banks will continue to deal in Euros and other currencies as usual.
This solution was successfully used in Argentina when its currency collapsed in 2001. The government walked away from its debts and started issuing its own Argentine pesos. Three years after a record debt default on more than $100 billion, the country was well on the road to recovery. Exports increased, the currency was stable, investors returned, unemployment diminished and the economy grew by 8 percent for 2 consecutive years.
In a March 19 article on Seeking Alpha, George Kesarios observed that the Greek central bank has the power to issue more than just drachmas. The ECB is not an ordinary central bank:
Rather, it is a confederation of central banks. Each European national central bank can theoretically do the same types of market operations as the ECB and then some. The forefathers of the euro have left many monetary windows open, which, if used correctly, can solve the European debt crisis in a very short period without taxpayer funds.
He cited article 14.4 of the Protocol on the Statute of the European System of Central Banks, which provides:
14.4. National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.
That means the National Center Banks can do whatever the ECB can do—and even things it can’t. The Greek central bank could step in and start issuing euros itself. Again, there is precedent for this. It was under Article 14.4 that the Irish Central Bank was able to print 80 billion euros as “emergency liquidity assistance,” and the Greek central bank has already printed 44 billion euros itself.
The Greek government could print euros, refinance its sovereign debt, and pay the interest to itself, effectively eliminating the interest burden. Among other precedents, there is Canada, which borrowed from its own central bank from 1939 to 1974 to fund major infrastructure projects and social programs. It pulled this off over a 25-year period without hyperinflating the currency, driving up prices, or increasing the public debt, which remained low and sustainable.
There is the concern that the euro might suffer by devaluation if other Eurozone members followed suit. But Kesarios points to the Japanese experience, “where one can print and print and then print some more, without the value of the currency being marked down (due to positive trade flows).” The euro might be equally resilient.
According to the May 29th New York Times, the 130 billion euro bailout that was supposed to buy time for Greece is now mainly just servicing the interest on the debt. The “troika”—the ECB, IMF, and European Commission—which holds three-fourths of the debt, is sequestering the bailout funds to be paid right back to themselves in interest payments. This is merely going to compound the debt to disastrous levels, without a single cent going to the Greeks or their comatose economy.
Interest rates on Greek ten-year bonds have gone to nearly 30 percent recently. Under the Rule of 72, at 30% compounded annually, debt doubles in 2.4 years. If the Greeks can’t even pay the interest on the debt today except by borrowing, how are they going to repay double the principal in a mere 2.4 years? At 30%, the Greeks could be paying over 100% of their GDP in interest charges. Legally, a contract that is impossible to perform is void.
Alexis Tsipras, leader of the radical left-wing Greek party Syriza, which is now in second place in the Greek parliament, calls it an “odious debt,” a legal term for a national debt incurred by a regime for purposes that do not serve the best interests of the nation. An odious debt under international law need not be repaid.
If divorce is too much to contemplate, Greece’s crippling interest burden can be relieved by taking advantage of the ECB’s very generous 1% rate for bankers. Article 123 of the Maastricht Treaty forbids member governments from borrowing directly from the ECB, but it makes an exception in paragraph 2 for “publicly-owned credit institutions”—something Greece will have plenty of when it nationalizes its banks. They can line up at the ECB’s window for its bargain-basement 1% banking rate and use the borrowed funds to buy up the national debt.
Researcher Simon Thorpe wrote to the ECB and asked whether they would object if a publicly-owned credit institution were to borrow from the ECB and use the funds “to supply the money to a government such as the Greek government in order for that government to pay off its debts to financial markets.” The ECB replied:
According to the Treaty—as you have just quoted—such publicly owned credit institutions “shall be given the same treatment by national central banks and the ECB as private credit institutions.” It is up to the banks to decide how to use the money they have borrowed from the central bank system.
Thorpe notes that the ECB has issued and lent nearly one trillion euros to the banks at 1% since December 2011—three times the total Greek debt of 355 billion euros. If Greek public banks borrowed from the ECB at 1% and bought Greece’s sovereign debt, the debt could be paid off in 10 years just from the returns on a very modest Financial Transaction Tax (FTT) of 0.3%.
Imposing a tiny FTT on all financial trades would not only be a lucrative source of revenue but would prevent the attacks of speculators, both on the newly-issued drachma and on the sovereign debt of Greece and other Eurozone countries. The FTT has already been implemented in many countries. In 2011, there were 40 countries that had FTT in operation, raising $38 billion (€29bn).
The problem is finding the will, particularly among the Eurocrat leaders holding the reins of power, who may not be looking for an amicable workout. The marital problems of Greece and the Eurozone stem from an arbitrary set of rules that were entered into and can be changed by agreement. But as Mike Whitney maintained in a June 3 article titled “Europe Moves Closer to Banktatorship”:
These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to . . . solidify the power of big finance over the individual states . . . .
To avoid that dire scenario, the popular majority needs to grab the reins of power. It is fitting that Greece, the birthplace of European culture and democracy, is the focus of the struggle against bondage to an elite banker class. Greece can dance again if she can set herself free.
12/21. I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People
06/29/2012, chart via Zerohedge Robots... And China.
Why the combination of the two just may be the most dangerous thing for China's several hundred million strong migrant labor force, which, on the margin may just be the deciding factor defining the engine of global growth for the next decade. Oh, and did we mention global structural unemployment which will only get worse as increasing automation leaves more and more millions collecting their 99 weeks of extended unemployment benefits.
The politicians have no idea that bowing in from of the Emperors of the financial industry is wasted time. Those in that industry who cannot survive without help should simply be forced to the meet grinders and what comes out should be spread around the globe as fertilizer.
Let Germany have the referendum and bring a decent end to the Euro only currency experiment. They have the power to decide it all and as it looks EU as a commercial union is perfect but having a common currency cannot work before the Nationalism disappears and that is not likely to happen within the next few thousand years. The meantime the commerce between EU can flow freely using the Euro as common exchange unit in trade between them.
To give people the real options to decide about the political union within the next couple of millenniums they should all have ability to use either Euros or their local currencies like money, squirrel skins, gold, silver, fish or whatever they decide to be their local currency to receive their wages and salaries, buy groceries and pay all their bills and fees including taxes.
The chart below shows the real problem the politicians should be talking about when they wake up on Monday morning:
12/20. Fractional Reserve Banking and the Federal Reserve: The Economic Consequences of High-Powered Money
Thursday, June 28, at 2:00 p.m. in room 2128 of the Rayburn House Office Building. The hearing was chaired by Senator Ron Paul.
This is a must watch video to all those who want to understand how our banking system works today and how it could be fixed.
12/19. Using Austerity to solve our financial Crisis is like the "Final Solution" in WW II Europe - in just slightly altered format
Our more or less corrupt leaders are again claiming that their already many times failed economic religion of Austerity will solve our self made financial crisis. There is no change in the hell that Austerity solves anything. It will only make the already exuberantly rich plutocracy of the planet even more wealthy and powerful at the expense of the people while chopping off their financial freedom they received after centuries of struggle.
A manifesto for economic sense
By Paul Krugman and Richard Layard (June 27, 2012). The writers of the article published in today's Financial Times are professors at Princeton University and the London School of Economics. Krugman is also the recipient of the 2008 Nobel Prize in Economics.
More than four years after the financial crisis began, the world’s major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. The reason is simple: we are relying on the same ideas that governed policy during that decade. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature and the appropriate response.
These ideas have taken root in the public consciousness, providing support for the excessive austerity of fiscal policies in many countries. So the time is ripe for a manifesto in which mainstream economists offer the public a more evidence-based analysis of our problems.
The causes. Many policy makers insist that the crisis was caused by irresponsible public borrowing. With very few exceptions – such as Greece – this is false. Instead, the conditions for the crisis were created by excessive private sector borrowing and lending, including by over-leveraged banks. The bursting of this bubble led to large falls in output and thus in tax revenue. Today’s government deficits are a consequence of the crisis, not a cause.
The nature of the crisis. When property bubbles burst on both sides of the Atlantic, many parts of the private sector slashed spending in an attempt to pay down past debts. This was a rational response on the part of individuals, but has proved to be collectively self-defeating, because one person’s spending is another person’s income. The result of the spending collapse has been an economic depression that has worsened the public debt.
The appropriate response. At a time when the private sector is engaged in a collective effort to spend less, public policy should act as a stabilising force, attempting to sustain spending. At the very least, we should not be making things worse with big cuts in government spending or big increases in tax rates on ordinary people.
The big mistake. After responding well in the first, acute phase of the crisis, policy took a wrong turn – focusing on government deficits and arguing that the public sector should attempt to reduce its debts in tandem with the private sector. Instead of playing a stabilising role, fiscal policy has ended up reinforcing the damping effects of private-sector spending cuts.
In the face of a less severe shock, monetary policy could take up the slack. But with interest rates close to zero, monetary policy – while it should do all it can – cannot do the whole job. There must of course be a medium-term plan for reducing the government deficit. But if this is too front-loaded it can easily be self-defeating by aborting the recovery. A key priority is to reduce unemployment, before it becomes endemic, making recovery and future deficit reduction even more difficult.
How do those who support the existing approach respond to ours? They typically use two arguments.
The confidence argument. Their first argument is that government deficits will raise interest rates and thus prevent recovery. By contrast, austerity will increase confidence and encourage recovery.
But there is no evidence in favour of this argument. Despite exceptionally high deficits, interest rates are unprecedentedly low in all major countries where there is a normally functioning central bank. Interest rates are only high in some eurozone countries, because the European Central Bank is not allowed to act as lender of last resort to the government. Elsewhere the central bank can always, if needed, fund the deficit, leaving the bond market unaffected.
Experience includes no relevant case where budget cuts have actually generated increased economic activity. The International Monetary Fund has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction. That is what is happening: the countries with the biggest budget cuts have experienced the biggest falls in output.
For the truth, as we can now see, is that budget cuts do not inspire business confidence. Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.
The structural argument. A second argument against expanding demand is that output is in fact constrained on the supply side – by structural imbalances. If this theory were right, however, at least some parts of our economies ought to be at full stretch, and so should some occupations. But in most countries that is not the case. So the problem must be a general lack of spending and demand.
In the 1930s the same structural argument was used against proactive spending policies in the US. But as spending rose between 1940 and 1942, output rose by 20 per cent. So the problem in the 1930s, as now, was a shortage of demand, not of supply.
As a result of their mistaken ideas, many western policy makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s. It is tragic that in recent years the old ideas have again taken root.
The best policies will differ between countries and will require debate. But they must be based on a correct analysis of the problem. We therefore urge all economists and others who agree with the broad thrust of this manifesto for economic sense to register their agreement online and to publicly argue the case for a sounder approach. The whole world suffers when men and women are silent about what they know is wrong.
12/18. Latvia's government chose Austerity - its people did not - and labour force has started a mass emigration
(From FT, June 22, 2012) Michael Hudson and Jeffrey Sommers
Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened.
Its government has chosen austerity, its people have not. Finding no acceptable alternative, much of the labour force has elected to emigrate. This is a major factor holding down its unemployment rate to “just” 15 per cent today.
Latvia is not a model for austerity in Greece or anywhere else. Both the impression that neoliberal policy has been a success and the claim that Latvians have voted to support this failed model are incorrect.
Latvia’s one year of solid economic growth since its economy plunged by 25 per cent in 2008-10 is billed as a success. Then, unemployment soared above 20 per cent as the shutdown of foreign capital inflows (mainly Swedish mortgage loans to inflate its real estate bubble) left Latvia with a deep current-account deficit. It had to choose between devaluation or maintaining the euro peg.
It chose the latter in order to proceed towards euro accession. To meet the eurozone criteria it cut public sector wages by 30 per cent, driving down overall wage levels and consumption to match its low labour productivity. The doctrine was that this shock therapy and poverty would soon restore prosperity.
What enabled Latvia to survive the crisis were EU and IMF bailouts – whose repayments will soon fall due. Relatively low public sector debt (9 per cent of gross domestic product at the start of the crisis) also provided some protection from bond traders. Latvia’s problem was mostly private sector debt, especially mortgage debt, which is secured not only by property but by the personal liability of entire families of joint signatories. The bank insurance agency insisted on this measure as it saw unaffordable housing prices being inflated by reckless bank lending. (Its job was to protect the banks, not the economy.)
The resulting austerity programme is anything but popular. Latvia’s parliament often polls approval ratings in the single-digits. Yet the government has survived two elections. How is one to read this?
Chiefly by ethnic politics. The biggest party opposing the austerity programme (Harmony Centre) largely represents ethnic Russians and had no chance of winning given its focus on rights for Russian speakers. The smaller parties run by post-Soviet oligarchs also are seen as being in league with Russia and are widely resented for fiscal imprudence during the boom years, when oligarch-controlled parties were part of the governing coalition. So the only political force left is the “austerians”. While most voters dislike their economic policy, a majority are convinced that they are best able to resist Russia’s embrace. All other issues come a distant second for Latvian voters.
That said, Latvians have protested against austerity. In January 2009, in the dead of winter, 10,000 protested in Riga. Teachers, nurses and farmers held demonstrations of their own. The police were called to suppress protests over the closure of a hospital. After these protests subsided, Latvians resigned themselves and began to emigrate. Demographers estimate that 200,000 have left in the past decade – nearly 10 per cent of the population – at an accelerating rate that reflects the austerity being inflicted.
Why have so many left Latvia if it is such an economic success, with such popular support for austerity as the advocates claim? Birth rates fell during the crisis – as is the case almost everywhere austerity programmes are imposed. Only now is Latvia seeing the social effects of austerity. It has among Europe’s highest rates of suicide and of road deaths caused by drink driving. Crime is high because of prolonged unemployment and police budget cuts. There is less accessible, lower-quality education and there is a soaring brain drain alongside blue-collar emigration.
The moral for Europeans is that a Latvian economic and political model can work only temporarily, and only in a country with a population small enough (a few million) for other nations to absorb émigrés seeking employment abroad. Such a country should be willing to have its population decline, especially its prime working-age cohort. In Greece, this could only worsen an already serious demographic challenge.
Politically, it helps to be a post-Soviet economy with a fully flexible, poorly unionised labour force. Above all, the population needs to put an almost blind faith in “free market” central planners. Ethnic divisions can distract voters from complaints against austerity. Only under these political conditions can austerity be considered a “success”.
The writers, a professor of economics at the University of Missouri and associate professor at the University of Wisconsin-Milwaukee respectively, have advised members of Latvia’s government on alternatives to austerity policies
12/17. This Flaw in Today's Capitalism Destroys It
(FT Editorial, June 22, 2012) Concentrated ownership of business is common, particularly in emerging countries. The consequences are malign. This is why the effort to break up the oligarchies dominating the Israeli economy is important. A bill now going to the Knesset, Israel’s parliament, would, if amended, bring great benefit to Israel and should be of interest elsewhere (comment: means the West, especially the USA and UK where the real power is even more concentrated regardless that a casual observer gets the opposite impression).
Israel is celebrated for the dynamism of its high-tech industry. But another side exists to its economy. Using pyramidal ownership structures, fewer than 20 Israeli families control conglomerates incorporating half the value of Israel’s stock market. The result is monopoly power. This chokes competition. It also creates corrupting relationships among business, politicians, bureaucrats and the media. The connections between money and politics taint democracy, reinforce inequality and undermine the legitimacy of the market economy.
Perhaps the most dangerous aspect of all is the combination of financial institutions with non-financial businesses. To its credit, the respected Bank of Israel brought attention to the dangers posed by these linkages. The latter undermine competition: it will be in the interest of the groups to starve competitors of credit. They are dangerous for the allocation of credit: the stranglehold over finance has led to dreadful investments, notably in foreign real estate. Above all, such cross-holdings cause a conflict between prudent management of banks and the interests of connected borrowers.
Last Sunday, the cabinet approved a draft law on concentration. This makes progress, not least by limiting cross-holdings between banks and non-banks. Yet, alas, this proposed bill is inadequate in three important respects.
First, the tycoons will get six years, instead of the initially proposed four, to adjust their conglomerates: that is an eternity. Second, pyramidal ownership would, in future, be limited to two tiers, but no action is to be taken against existing three-tier pyramids. Finally, no action is to be taken against conglomerate ownership of the media, which gives their owners inordinate power to protect their commercial interests.
The Knesset should toughen the bill. If it does, other countries should take note: a dynamic economy requires action against concentration and, above all, a separation of banks from non-banks. A business oligarchy is not the same as a market economy. Confusing two such different things is lethal for a country’s political and economic health.
12/16. Simple Solution to Euro Crisis - Suggested by Germany a Couple of Decades Ago
June 15, 2012. by GW
The real problem for all Europe and the World is the US supremacy imposed by the US dollar as the World only reserve currency. Long before EU and Euro, the "German leadership" had figured it all out :
Europe must become a common trading block (model EFTA and EEC) and it must have a common currency to trade inside that block. They also said that if Europe cannot agree with this, Germany will impose D-Mark over all Europe simply by exchanging goods and services only against D-Marks (both the USA and the City knew perfectly well that the single currency Euro could not survive and of course UK and some Nordic countries never joined Euro - perhaps it is not commonly known but all major political changes in the post WW II Germany must be pre-approved in the USA).
Germany did not demand at all that other countries would adopt D-Mark. This common currency could be "EMU", "ECU", "Euro" or anything else except the US dollar that was the only reserve currency of the world - and as such it gave the USA a major unfair edge over every other country on the planet.
With this new common currency, it would be best for each country in Europe to use their own currency for everything domestic exactly as they were doing at the moment.
Each country would introduce the new "Euro", or any of it's aliases, as the parallel currency to their citizens. This new currency would be also valid for buying and selling all goods and services in that country. Which currency would be used would depend totally from the buyer.
Too confusing? Not at all, this is the common practice in all non-Euro EU countries already. One can buy everything one wants using either local currency or "Euros". People in these countries do not look confused nor complain.
The exchange rate to "Euro" would of course fluctuate with passing years up and down following the trade balance. This is the main driver for the currency exchange rates around the globe.
Computers will handle all transactions anyhow and will print all price tags in both currencies
This simple already suggested solution from recent history would solve the European crisis "overnight" and it can be implement over any time after enough local currency is available. At that day the original exchange rate to Euros will be utilized to do the switch.
The only difference with today would be that all wages, salaries and everything related including all local and also the EU imposed taxes would be paid in in local currency of that country.
The debts of all EU countries could transferred as one time act to the ECB. In the long run this one time transfer means actually nothing. This was proven long time ago in the USA when the newly established nation was put together. The newly established US Treasury simply absorbed all the debts of the States. The USA has now a new set of problems because the rich States have started guiding the less fortunate ones in how to use the Central Government Tax dollars.
With all above done the EU can start repairing it's finances and common spirit from the turmoil that currently rages and worsens by the day.
12/15. Federal Reserve's 'Goliath' Dream
April 23, 2012. Robert Wenzel's 'David' Speech Crushes Federal Reserve's 'Goliath' Dream. The Full Speech is below:
"Thank you very much for inviting me to speak here at the New York Federal Reserve Bank.Tweet
Intellectual discourse is, of course, extraordinarily valuable in reaching truth. In this sense, I welcome the opportunity to discuss my views on the economy and monetary policy and how they may differ with those of you here at the Fed.
That said, I suspect my views are so different from those of you here today that my comments will be a complete failure in convincing you to do what I believe should be done, which is to close down the entire Federal Reserve System.
My views, I suspect, differ from beginning to end. From the proper methodology to be used in the science of economics, to the manner in which the macro-economy functions, to the role of the Federal Reserve, and to the accomplishments of the Federal Reserve, I stand here confused as to how you see the world so differently than I do.
I simply do not understand most of the thinking that goes on here at the Fed and I do not understand how this thinking can go on when in my view it smacks up against reality.
Please allow me to begin with methodology, I hold the view developed by such great economic thinkers as Ludwig von Mises, Friedrich Hayek and Murray Rothbard that there are no constants in the science of economics similar to those in the physical sciences.
In the science of physics, we know that water freezes at 32 degrees. We can predict with immense accuracy exactly how far a rocket ship will travel filled with 500 gallons of fuel. There is preciseness because there are constants, which do not change and upon which equations can be constructed.
There are no such constants in the field of economics since the science of economics deals with human action, which can change at any time. If potato prices remain the same for 10 weeks, it does not mean they will be the same the following day. I defy anyone in this room to provide me with a constant in the field of economics that has the same unchanging constancy that exists in the fields of physics or chemistry.
And yet, in paper after paper here at the Federal Reserve, I see equations built as though constants do exist. It is as if one were to assume a constant relationship existed between interest rates here and in Russia and throughout the world, and create equations based on this belief and then attempt to trade based on these equations. That was tried and the result was the blow up of the fund Long Term Capital Management, a blow up that resulted in high level meetings in this very building.
It is as if traders assumed a given default rate was constant for subprime mortgage paper and traded on that belief. Only to see it blow up in their faces, as it did, again, with intense meetings being held in this very building.
Yet, the equations, assuming constants, continue to be published in papers throughout the Fed system. I scratch my head.
I also find curious the general belief in the Keynesian model of the economy that somehow results in the belief that demand drives the economy, rather than production. I look out at the world and see iPhones, iPads, microwave ovens, flat screen televisions, which suggest to me that it is production that boosts an economy. Without production of these things and millions of other items, where would we be? Yet, the Keynesians in this room will reply, “But you need demand to buy these products.” And I will reply, “Do you not believe in supply and demand? Do you not believe that products once made will adjust to a market clearing price?”
Further , I will argue that the price of the factors of production will adjust to prices at the consumer level and that thus the markets at all levels will clear. Again do you believe in supply and demand or not?
I scratch my head that somehow most of you on some academic level believe in the theory of supply and demand and how market setting prices result, but yet you deny them in your macro thinking about the economy.
You will argue with me that prices are sticky on the downside, especially labor prices and therefore that you must pump money to get the economy going. And, I will look on in amazement as your fellow Keynesian brethren in the government create an environment of sticky non-downward bending wages.
The economist Robert Murphy reports that President Herbert Hoover continually pressured businessmen to not lower wages.
He quoted Hoover in a speech delivered to a group of businessmen:
In this country there has been a concerted and determined effort on the part of government and business... to prevent any reduction in wages.
He then reports that FDR actually outdid Hoover by seeking to “raise wages rates rather than merely put a floor under them.”
I ask you, with presidents actively conducting policies that attempt to defy supply and demand and prop up wages, are you really surprised that wages were sticky downward during the Great Depression?
In present day America, the government focus has changed a bit. In the new focus, the government attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work.? The 2010 Nobel Prize was awarded to economists for their studies which showed that, and I quote from the Noble press release announcing the award:
"One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times."
Don’t you think it would make more sense to stop these policies which are a direct factor in causing unemployment, than to add to the mess and devalue the currency by printing more money?
I scratch my head that somehow your conclusions about unemployment are so different than mine and that you call for the printing of money to boost “demand”. A call, I add, that since the founding of the Federal Reserve has resulted in an increase of the money supply by 12,230%.
I also must scratch my head at the view that the Federal Reserve should maintain a stable price level. What is wrong with having falling prices across the economy, like we now have in the computer sector, the flat screen television sector and the cell phone sector? Why, I ask, do you want stable prices? And, oh by the way, how’s that stable price thing going for you here at the Fed?
Since the start of the Fed, prices have increased at the consumer level by 2,241% . that’s not me misspeaking, I will repeat, since the start of the Fed, prices have increased at the consumer level by 2,241%.
So you then might tell me that stable prices are only a secondary goal of the Federal Reserve and that your real goal is to prevent serious declines in the economy but, since the start of the Fed, there have been 18 recessions including the Great Depression and the most recent Great Recession. These downturns have resulted in stock market crashes, tens of millions of unemployed and untold business bankruptcies.
I scratch my head and wonder how you think the Fed is any type of success when all this has occurred.
I am especially confused, since Austrian business cycle theory (ABCT), developed by Mises, Hayek and Rothbard, has warned about all these things. According to ABCT, it is central bank money printing that causes the business cycle and, again you here at the Fed have certainly done that by increasing the money supply. Can you imagine the distortions in the economy caused by the Fed by this massive money printing?
According to ABCT, if you print money those sectors where the money goes will boom, stop printing and those sectors will crash. Fed printing tends to find its way to Wall Street and other capital goods sectors first, thus it is no surprise to Austrian school economists that the crashes are most dramatic in these sectors, such as the stock market and real estate sectors. The economist Murray Rothbard in his book America’s Great Depression  went into painstaking detail outlining how the changes in money supply growth resulted in the Great Depression.
On a more personal level, as the recent crisis was developing here, I warned throughout the summer of 2008 of the impending crisis. On July 11, 2008 at EconomicPolicyJournal.com, I wrote:
SUPER ALERT: Dramatic Slowdown In Money Supply Growth
After growing at near double digit rates for months, money growth has slowed dramatically. Annualized money growth over the last 3 months is only 5.2%. Over the last two months, there has been zero growth in the M2NSA money measure.
This is something that must be watched carefully. If such a dramatic slowdown continues, a severe recession is inevitable.
We have never seen such a dramatic change in money supply growth from a double digit climb to 5% growth. Does Bernanke have any clue as to what the hell he is doing?
On July 20, 2008, I wrote:
I have previously noted that over the last two months money supply has been collapsing. M2NSA has gone from double digit growth to nearly zero growth.
A review of the credit situation appears worse. According to recent Fed data, for the 13 weeks ended June 25, bank credit (securities and loans) contracted at an annual rate of 7.9%.
There has been a minor blip up since June 25 in both credit growth and M2NSA, but the growth rates remain extremely slow.
If a dramatic turnaround in these numbers doesn't happen within the next few weeks, we are going to have to warn of a possible Great Depression style downturn.
Yet, just weeks before these warnings from me, Chairman Bernanke, while the money supply growth was crashing, had a decidedly much more optimistic outlook, In a speech on June 9, 2008, At the Federal Reserve Bank of Boston’s 53rd Annual Economic Conference , he said:
"I would like to provide a brief update on the outlook for the economy and policy, beginning with the prospects for growth. Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly. Indeed, although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so. Over the remainder of 2008, the effects of monetary and fiscal stimulus, a gradual ebbing of the drag from residential construction, further progress in the repair of financial and credit markets, and still-solid demand from abroad should provide some offset to the headwinds that still face the economy."
I believe the Great Recession that followed is still fresh enough in our minds so it is not necessary to recount in detail as to whose forecast, mine or the chairman’s, was more accurate.
I am also confused by many other policy making steps here at the Federal Reserve. There have been more changes in monetary policy direction during the Bernanke era then at any other time in the modern era of the Fed. Not under Arthur Burns, not under G. William Miller, not under Paul Volcker, not under Alan Greenspan have there been so many dramatically shifting Fed monetary policy moves. Under Chairman Bernanke there have been significant changes in direction of the money supply growth FIVE different times. Thus, for me, I am not at all surprised at the current stop and go economy. The current erratic monetary policy makes it exceedingly difficult for businessmen to make any long term plans. Indeed, in my own Daily Alert on the economy  I find it extremely difficult to give long term advice, when in short periods I have seen three month annualized M2 money growth go from near 20% to near zero, and then in another period see it go from 25% to 6%.
I am also confused by many of the monetary programs instituted by Chairman Bernanke. For example, Operation Twist.
This is not the first time an Operation Twist was tried. an Operation Twist was tried in 1961, at the start of the Kennedy Administration  A paper  was written by three Federal Reserve economists in 2004 that, in part, examined the 1960's Operation Twist
Their conclusion (My bold):
A second well-known historical episode involving the attempted manipulation of the term structure was so-called Operation Twist. Launched in early 1961 by the incoming Kennedy Administration, Operation Twist was intended to raise short-term rates (thereby promoting capital inflows and supporting the dollar) while lowering, or at least not raising, long-term rates. (Modigliani and Sutch 1966).... The two main actions of Operation Twist were the use of Federal Reserve open market operations and Treasury debt management operations..Operation Twist is widely viewed today as having been a failure, largely due to classic work by Modigliani and Sutch....
However, Modigliani and Sutch also noted that Operation Twist was a relatively small operation, and, indeed, that over a slightly longer period the maturity of outstanding government debt rose significantly, rather than falling...Thus, Operation Twist does not seem to provide strong evidence in either direction as to the possible effects of changes in the composition of the central bank’s balance sheet...
We believe that our findings go some way to refuting the strong hypothesis that nonstandard policy actions, including quantitative easing and targeted asset purchases, cannot be successful in a modern industrial economy. However, the effects of such policies remain quantitatively quite uncertain.
One of the authors of this 2004 paper was Federal Reserve Chairman Bernanke. Thus, I have to ask, what the hell is Chairman Bernanke doing implementing such a program, since it is his paper that states it was a failure according to Modigliani, and his paper implies that a larger test would be required to determine true performance.
I ask, is the Chairman using the United States economy as a lab with Americans as the lab rats to test his intellectual curiosity about such things as Operation Twist?
Further, I am very confused by the response of Chairman Bernanke to questioning by Congressman Ron Paul. To a seemingly near off the cuff question by Congressman Paul on Federal Reserve money provided to the Watergate burglars, Chairman Bernanke contacted the Inspector General’s Office of the Federal Reserve and requested an investigation . Yet, the congressman has regularly asked about the gold certificates held by the Federal Reserve  and whether the gold at Fort Knox backing up the certificates will be audited. Yet there have been no requests by the Chairman to the Treasury for an audit of the gold.This I find very odd. The Chairman calls for a major investigation of what can only be an historical point of interest but fails to seek out any confirmation on a point that would be of vital interest to many present day Americans.
In this very building, deep in the underground vaults, sits billions of dollars of gold, held by the Federal Reserve for foreign governments. The Federal Reserve gives regular tours of these vaults, even to school children.  Yet, America’s gold is off limits to seemingly everyone and has never been properly audited. Doesn’t that seem odd to you? If nothing else, does anyone at the Fed know the quality and fineness of the gold at Fort Knox?
In conclusion, it is my belief that from start to finish the Fed is a failure. I believe faulty methodology is used, I believe that the justification for the Fed, to bring price and economic stability, has never been a success. I repeat, prices since the start of the Fed have climbed by 2,241% and there have been over the same period 18 recessions. No one seems to care at the Fed about the gold supposedly backing up the gold certificates on the Fed balance sheet. The emperor has no clothes. Austrian Business cycle theorists are regularly ignored by the Fed, yet they have the best records with regard to spotting overall downturns, and further they specifically recognized the developing housing bubble. Let it not be forgotten that in 2004, two economists here at the New York Fed wrote a paper  denying there was a housing bubble. I responded to the paper  and wrote:
The faulty analysis by [these] Federal Reserve economists... may go down in financial history as the greatest forecasting error since Irving Fisher declared in 1929, just prior to the stock market crash, that stocks prices looked to be at a permanently high plateau.
Data released just yesterday, now show housing prices have crashed to 2002 levels.
I will now give you more warnings about the economy.
The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out.
Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat.
Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats.
12/14. China, the Steps of Genghis Khan to Prosperity
April 23, 2012. "Humans are no angels" This applies especially to many of the rich and powerful who today control the US Congress from behind the curtains by financing the election campaigns for those who have obeyed them and will continue to do so if elected.
There are no explanations for the more and more common exuberant political campaigns for people who have no own money at all.
GOP's mantra is smaller government and for them democrats are big spenders who just want a biiger government.
In reality it is not the number of the officials pushing the paper around that determines the cost of the government. It is the programs that are authorized by the "government". The majority both in House and Senate and the opinion of the President all have to agree or nothing is spent.
With same quality actors as today it all is getting even worse. These actors make and bend the laws to comply with the wishes of the rich and powerful disregarding totally the real needs of the Nation. As an example: Why do we have the most powerful army in the world? We are isolated by two major Oceans from the world. Canada's population is too low to ever be a threat and Mexico is also small and has more than enough trouble with the everlasting drug wars (that we are fincing) and in any case they have no matching army to speak of.
China had a huge problem after death of Mao Zedong how to govern the country. The inner circle or the "Gang of Four" would not make it as it consisted of Mao's closest allies that by that time knew already too well what was best for them only and not for China.
The power struggle was solved the only proven way in history that appears suit well for this wast country with 1.2 billion peole today. When the Gang of Four was eliminated the communist party had the absolute power had to find people to run the day to day operations of the country for the party. The philsophy of communism is close to democracy including elections of party officials.
As no obvious leadr was there that remain most a billion people after Mao the only sensible way by creating a central government that was run by meritocracy.
body into government. Study China. There meritocracy is in charge. Since death of Mao the country has moved steadily towards democracy. President Nixon saw the change happening but the GOP leadership appears still not to get it.
You cannot change anything abruptly for 1.2 billion people without getting yourself hanged to the nearest lamp post. China's leadeship is doing it all exceptionally well.
Dalai Lama yesterday even complemented China for the slow changes that are happening for Tibet.
Note that meritocry helped Chengis Khan to build the largest human controlled empire ever on the planet. He deliberately kept the rich and powerful out from running the empire and that was the secret for his success!
We just put ("elect") to Congress people who obey blindly their campaign financiers often ignoring the logic that rules the streets.
12/13. Wall Street Bailout is already more than Three times Pre-Tax Income Per Capita in the USA
Investors Business Daily, compiled by Christopher Chantrill
April 23, 2012. What could we have done if we tax payers in the USA would have received this same money instead of the banks who have yet to give a penny to the tax payers?
How much money are we talking about? In the USA the average income ( not GDP) is $21,300 per capita in pre-tax dollars while GDP shows $48,176.
During the past few decades our income has dropped from about 65% of the GDP to this 46% of the GDP. No wonder we feel poorer by the year. In 2011 the total reported personal pre-tax income from all sources was $6,6 trillion in 2011.
By now the Wall Street bailout is slightly over $20 trillion or 3.1 times of the personal pre-tax income.
We have two ways to look at this:
It is very clear that the money would have been better spent by giving it all to the people instead of the financial enterprises. Most of the money these received has vanished as smoke when they tried to catch even larger pie from the global derivatives casino that has now a total value of about US$ 700 trillion, up from US$ 500 trillion just a few years ago.
This an absurd amount of money but it is controlled by derivatives with combined face value of around $35 trillion in cash or equivivalents. Unfortuantely this Casino is niot Rregulated and as the players are the fellow financial institutions like those behind the FED then the rules are based more on mutual trust than facts. This Casino can become very real the moment one bets wrong like the past real fellows like AIG and Lehman Brothers.
Nobody remembers Enron any more. That company was the exercise machine serving as planning platform for the environment of the global derivatives Casino.
This casino has only one purpose: to give the global Banking Empires ownership to all major production facilities in the world. Unfortunately it is still working well as the message does not resonate as of yet.
This is the outcome of the Keynesian Religion that has been preached to every economist living today. However, there are also a different breed of economists who have abandoned it and started thinking. By now they are worth listening as they have clear suggestions for ways to break this trap of capitalism that will soon enslave us all.If we would have received the money most of us would have paid out our debts and the majority of us would now be out there spending on the economy that would be just humming happily.
We now instead have no economy at all to speak of, the derivatives casino wiped out our retirement savings, and most are now looking desperately where else can we cut our expenses to keep our houses instead of losing them for a fraction of their value to the financial institutions and their predator cronies.
The below table tells how our government in it's wisdom was advised by FED and the global banking empires who own it, advise that robbed our and our children's futures making us all financial slaves to support them in their already doomed quest to conquer the world.
12/12. The European Stabilization Mechanism - How Goldman Sachs Captured Europe and How To Reverse It
Comments followed by Ellen Bronwn's article:
On April 19th Christine Lagarde called on all IMF member states to "finish the job" and pledge more cash to tackle the euro zone crisis, demanding that bailout funds be sent directly to private banks instead of the struggling countries. In essence she declared that the EU and it's independent country governments are irrelevant and incompetent. IMF, the US FED and the dozen or so major global banks who in turn both own the FED and also the totally unregulated US$ 700 trillion global derivatives market form a cozy Global Banking Cartel.
The Banking Cartel controls now the financial decisions of the EU government and also the governments of EU's most powerful countries. It wants to enforce the rule that all EU private banks must have sufficient and forever higher safety capital against borrower risks. The requirement of this safety capital is determined artificially. Now this requirement forces the private banks to liquidate their solid holdings on anything sellable and drains the capital from the markets leading to further downturn e.g. on the stock markets.
The governments cannot borrow directly from ECB, which is lunacy, but instead they must borrow from the Banking Cartel and their banking associates. The banks get all ECB low interest money and as only capable lenders to the governments they have been sell bonds short on their left hand while with their right hand takes low cost money from ECB and IMF. That is today a totally legal daylight robbery of the EU tax payers.
When the deals with high yielding new Government bonds are completed the Cartel buy back their shorts and pocket huge benefits both immediately and also continuously into the foreseeable future.
This Cartel itself is safe, thanks to the US Congress forcing tax payers to pay it all through a carefully designed 2008-9 stock market collapse that wiped the wealth away from the Middle-Class in the USA. We are now on the European leg that will be cut off by ever tightening banking regulations.
The cartel's now picking the ripe fruits that and are now on the way to the bacchanals to celebrate it all - thanks to the fools running the independent EU country governments.
To get it right, EU should reverse everything or at least follow the example provided by the USA. Ar the end the government actions there stopped this Banking Cartel from taking over the country. This was done by changing the law and forcing FED to repay back all interest it gets from the US treasury. The money created should be the money of the country, not the money of some private for profit enterprise like the FED (even if now slightly limited profit). This is not enough but it was the beginning, Ellen Brown has explained it well in several of her articles on this topic, one is below.
EU and ECB should not send the cash to private banks inside EU but to the central banks of the individual EU countries. These are in the best position to determine which local banks must be saved and which can go. The failing banks must be let to fail and taken over by the stronger ones. With Ms Lagarde suggestion the ECB money would go to those private banks that are already ruled by the Banking Cartel.
This whole financial system failure was caused by this international Banking Cartel who is already controlling almost fully the Western financial system. People do not realize that this Banking Cartel can move every commodity and stock price to any direction they please. The US$ 700 trillion derivative casino is more than 10 times larger than the combined GDP of the world. The derivatives/options multiply the cash or promissory notes up to 30 times. This means that the more or less theoretical cash to control this all is 700/30 or about US$ 35 trillion. With cozy relationship inside the Banking Cartel it is much less as the margin requirements are not usually enforced between the friends. This cozy relationship also keeps this Banking Cartel united as any of the participants can be put to instantly receivership at will by the others.
Our financial crisis will not end before we dismantle this casino and put the Banking Cartel out of business. The world will not end with that like they have been trumpeting in all major news channels to frighten the people. Note that they actually own every meaningful news channels in the Western World.
As alternative we can always go back to bartering systems and replace even all of the current currencies at will. All trade is just bartering using a convenient way to exchange the goods and services to some paper slips. Some cities in Greece have actually started doing this.
This could make the life difficult to the Banking Cartel as they produce nothing and with that have nothing to barter. During and after real wars the bartering is the only way to survive. The "barter" money can be made trillions of times more valuable than any of the currencies that exists and in the matter of fact we can pay everything we owe in paper slips to this Banking Empire. The people are and have always been in charge of everything. They just must realize their power. The Banking Cartel has no army nor weapons, of course they can buy one or as many as they want with every imaginable weaponry. But to operate the weapons systems they need the same people that have just realized that they have been robbed by this same Banking Cartel.
The true need for derivatives exists but it is only to cover the potential losses in farming and international trade and all that together is much less than the Global GDP at around US$ 50-60 trillion.
The purpose of this Banking Cartel is to impose their control over the world by taking over all major corporations and food production.
With her statement Ms Lagarde appears delusional believing that the Banking Cartel has already won power over the European Governments when they have installed the "former" executives from Goldman Sachs to run all meaningful European central banks.
April 19, 2012, by Ellen Brown
The Goldman Sachs coup that failed in America has nearly succeeded in Europe—a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.
In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund—the Troubled Asset Relief Program or TARP—was opposed by Congress and ultimately rejected.
By December 2011, European Central Bank president Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion Euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s Eurocrat overseers demand.
The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by Eurozone governments, their creditors, and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the Eurozone governments?
There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB . . . .
The Dark Side of the ESM
The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as Member States representing 90% of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 youtube video titled “The shocking truth of the pending EU collapse!”, originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:
The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt. . . . The authorized capital stock shall be 700 billion euros. Question: why 700 billion? [Probable answer: it simply mimicked the $700 billion the U.S. Congress bought into in 2008.] . . . .
[Article 9]: “. . . ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them . . . within seven days of receipt of such demand.” . . . If the ESM needs money, we have seven days to pay. . . . But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM? . . . .
[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 . . . accordingly.” Question: . . . 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?
[Article 27, lines 2-3]: “The ESM, its property, funding, and assets . . . shall enjoy immunity from every form of judicial process . . . .” Question: So the ESM program can sue us, but we can’t challenge it in court?
[Article 27, line 4]: “The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: . . . [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!
[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them . . . and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? . . . The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?
The Goldman Squid Captures the ECB
Last November, without fanfare and barely noticed in the press, former Goldman exec Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments—lavish money on them at very cheap rates. French blogger Simon Thorpe reports:
On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent”, but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.
The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.
At 18% interest, debt doubles in just four years. It is this onerous interest burden, not the debt itself, that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:
Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?
The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:
My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.
At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.
Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet the government is the people—or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.
Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse article 123 of the Lisbon treaty. Then the ECB could issue credit directly to its member governments. Alternatively, Eurozone governments could re-establish their economic sovereignty by reviving their publicly-owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest-free. This is not a new idea but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.
Today the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.
To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.Tweet
12/10. Major General Smedley Butler saved USA from Fascism in 1930's - any Volunteers Today?
April 16, 2012.
The major US news organizations have never broadcasted the 2009 BBC audio report from the US National Archives that reveals the events of a serious coup attempt in the USA during 1933. It appears that the until very recently the fully "forgotten" Major General Smedley Butler actually changed the history of the USA and Europe - if not even the World.
At the time when all was over in 1934, the court could not "find" evidence to prosecute the real perpetrators to this Treason. It all was a well designed, as can be expected from the most powerful people, with absolute minimum of links to any of the perpetrators but still powerful enough to provide sufficient evidence to Major General Smedley Butler to get him believing on it.
When Butler revealed it to President Roosevelt it was obvious that what would happen next when the army was fully backing the new president. Unfortunately, these treason participants were so powerful that they could only be toppled by such large events leading to French, Russian, Chinese and recently, Egyptian and Libyan revolutions.
“War is a racket. It always has been.” These words are as true now as they were when Major General Smedley Butler first delivered them in a series of speeches in the 1930s. And he should have known. As one of the most decorated and celebrated marines in the history of the Corps, Butler drew on his own experiences around the globe to rail against the business interests that use the U.S. military as muscle men to protect their racket from perceived threats. From National City Bank interests in Haiti to United Fruit plantations in Honduras, from Standard Oil access to China to Brown Brothers operations in Nicaragua, Butler pointed out how intervention after intervention served the business interests of the well-connected even as American taxpayer money went to foot the bill for these adventures. The names and places may have changed, but the old adage holds: the more things change, the more they stay the same.
12/9. The real US pre-tax income is $21,300 per capita not the misleading GDP based $48,147
April 16, 2012. (two graphs below from the US National Economic Council via FT tell the story)
According to the graphs below the commonly "known" claim that wages and salaries add up to about 60% to 70% of the GDP around the globe. For the USA in 2011 this number was 46% ($6,600/$14,300=46%), i.e. people earned $6.6 trillion ($6,600,000,000,000) in wages, salaries, pensions, dividends, interest and all other income.
Total of 54% of the US National Income is financial or other book keeping entries with no real impact to the well being to the vast majority to the US citizens.
The average pre-tax income per us citizen is $6,600,000,000/310,000,000=$21,300 per capita. This is a far cry from the "standard" per capita income from GDP reported as $48,147.
It is now clear that global statistics do not tell the truth how people live and can afford in other countries. All these statistics must be re based to reflect the real earnings of the people. Every country has the suitable tax statistics available. We should as why it has not been done so?
With increasing income dividends show up in these statistics first time in the earner group $50k..$75k. Those earning less appear to have chosen not to invest but just to consume it all. Perhaps they need to pamper themselves with tiny luxuries they people around them having.
Unfortunately any excessive papering make them vulnerable to our deliberately made economic downturns and a percentage of house owners in this group will now lose their homes to the mortgage lenders. The lenders have already pocketed the down payment and plenty of monthly mortgage payments that at the beginning represent mainly interest on the loan for the borrower while for the lender they represent already received dollars. The below table tells the how Mortgage Loans secure the Lenders Money:
Mortgage Amount Loan Length in Years Interest Monthly Payment $100,000 Paid during the Year After paid in full Lender's Profit $100,000
8% $11,683 9 $75,244 $100,000 15
$120,236 $100,000 30 8% $8,883 12 $166,484 $100,000 30 12% $12,414 9 $272,431
If you have been paying your mortgage loan for 10 years at the above interest rates and paid 10% down to get the loan you have already repaid all of your mortgage to your lender and anything more is just profit for the lender.
Remember that banks use incoming mortgage payments as collateral to get even more loans from the central banks to lend to other borrowers. If one borrower defaults the chain of mortgage loans that started before and after simply cover this loss. The lender profits of course is impacted but not so much.
Capital gains start showing up first with the income group $100...$200k but are not really meaningful until in the group above $1 billion a year.
With this highest earner group the capital gains produce about half of their earnings while their dividend income is not that much higher than in the $100k...$200 group.
What does this mean? The only plausible explanation is that these people must have inside information available, otherwise at least the people above $100k groups would have also larger portions of their income from the same. Bill Gates with some other rare cases would not achieve this alone.
It is absurd to think that this wealthiest group contain all the smartest people in the USA. Agreed that they are very smart but as above Bill Gates, Steve Jobs and many others prove the opposite.
We have here a serious case to make all capital gains to be taxed at receiving persons marginal tax rate while making dividends and interest income actually tax free. These actions would actually increase innovation and savings into stocks and bonds. The same as above the stories of Bill Gates, Steve Jobs and others tell that the real innovations come from the middle class and almost never from the top 1% or less.
A simple tax code change and use marginal tax rate for all capital gains would more than pay the lost income from dividends and interest while making public interested to getting progressive companies properly financed. It would also bring a couple hundred billions excess to the US Treasury.