Banks

Going Cashless

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Published on The Doomstead Diner on December 22, 2016

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One of the hottest topics in Collapse Economics these days is the prospect of the "Cashless" society.  Denmark is flirting with being the first country to go completely cashless, along with the other Scandinavian countries of Sweden and Norway.

In debates about the future of cash money, Denmark is often cited as the possible World’s first cashless society. Is that true? An investigation on the current state of cash in Denmark. 

Cash is dirty.
Cash is expensive to print.
Cash is for criminals.

Opponents of paper money, such as established economists Bofinger and Haldane, have declared the war on cash. In 2016, this is more apparent than ever before. The European Commission for instance currently assesses a potential ban of the 500 Euro banknote, as “these notes are in high demand among criminal groups.”

More so the finger is often pointed to Scandinavia, to show how some countries are already on the move to become ‘cashless societies’ – to eliminate cash whatsoever. And Denmark could be the World’s first. Hold up – is that true?

http://www.matoska.com/catgraph/3005-001b.jpg Money is symbology for a credit system that allocates the resources available in a society. It can be just about anything, as long as what you choose as the physical symbol is hard to counterfeit.  In Africa for a long time, Cowrie Shells were used as money.  They were relatively rare and about impossible to counterfeit.  Similarly, Gold and Silver have been used as the symbol, the metals themselves are elements and can't be counterfeited.  However, they can be alloyed with other metals, thus debasing the coinage made with them.  This was what the Romans did as their civilization collapsed.  They weren't able to keep bringing in enough gold and silver to keep coining up to have enough money in circulation.

The metals are in relatively short supply for a growing population, and they tend to be hoarded as well taking them out of circulation.  So in the modern era, paper money which was hard to counterfeit was developed as the currency and means of exchange.  The way paper money is traditionally made hard to counterfeit is through fine engraving and special paper and ink.  However, modern scanners made the engraving easy to duplicate, and if you have enough scientific expertiese and a big enough budget, the paper and ink can be duplicated as well.

http://www.accountingformanagement.org/wp-content/uploads/2016/01/balance-sheet.png Money originates in the banking system as credits and debits on a balance sheet.  Then the bills get printed up, and each one has a Serial Number on it.  At the origin point when it first gets handed out over the counter with fresh bills, the bank has a record of the serial numbers and the person that money was handed to.  After that though, there is no keeping track of where those bills go or to who.  In theory you could track it if in every transaction the serial numbers were recorded, but in practice that is never done, it's too cumbersome.

Because it can't be tracked, cash is very useful in the Black Economy, for things like drug deals and making bribes to politicians.  Its also useful to hide your transactions from the Tax Man.  If you begin to believe your banking system is untrustworthy or unsafe (they always are, but sometimes more than others), people start taking their money out of the banks and stuffing it in mattresses instead.  This can make a bank insolvent, because it needs deposits as part of its capital.  When you deposit your money in the bank, it becomes an unsecured loan to the bank, which they will then use as the basis for making other loans.  Making loans and originating money is how banks MAKE MONEY.

So, as far as Da Goobermint and the Banksters are concerned, paper money is not very good.  Da Goobermint wants to be able to track all transactions so they can be taxed and the Banksters want your money in the bank as much of the time as possible so they can use it for more lending. How can we solve these problems, they wonder?

https://historyinlivingcolor.files.wordpress.com/2013/11/westernunion803kanawhastreetcharkanawhablv_edited-1.jpg?w=670 Well, until the advent of the modern computer and the internet, it was basically an insoluble problem.  However, once the communications systems were in place and enough places where transactions take place were wired into it, the possibility of being all electronic balance sheet transfers became possible.  It goes back as far as the Telegraph and Western Union and the ability to "Wire Money".  It further expanded with the Telephone, which made Credit Cards possible.  If you remember back to the early days of American Express, if you used your card at a restaraunt they would call AMEX to get a verification, and once verified the transaction was cashless, going from your credit line over to the restaraunt's bank account.

At first, these credit cards were available only to the very rich, and few people used them.  The verifications were done manually and when the restaraunt called for verification, there was a live person on the other end of the line who did the verification of your account, on a big old clunky IBM Mainframe at the Amex Headquarters.  However, as the computer systems and communications systems improved and you could put Point of Sale (POS) terminals in stores, it became possible to issue Credit Cards to many more people.  Thus Master Card and Visa were born, and banks began issuing out Debit cards as well.

http://blog.couponrani.com/wp-content/uploads/2013/12/creditcard.jpg This brings us up to today, where at least in the FSoA pretty much everybody has Plastic of some kind, and over 90% of all transactions are done this way, so cash has become unecessary, at least as far as the Banks & Goobermint are concerned anyhow.  They would like to see cash eliminated entirely, because this is good for them.  Not so good for the average J6P though who is worried his money isn't safe in the bank and one day it will just be…GONE!  Also not good if he currently runs some type of cash bizness and wants to hide some of the income from the tax man.

What's the PROBLEM with taking cash out of the system entirely then?  Well, as long as you have complete faith that your computer systems will be up and running 100% of the time, communications up 100% of the time in 100% of locations and the system won't be hacked, there is no problem.  Unfortunately, none of those conditions are true even in the 1st World countries, and definitely not true in 3rd World countries.

http://www.telegraph.co.uk/content/dam/news/2016/11/13/113589873RupeesNEWS-small.jpg In places like India, vast areas of the country aren't even wired for electricity, much less have full internet coverage available 24/7.  Many in the population don't even have bank accounts or ID.  The only way they function in the society is with cash.  They get paid in cash, they buy their groceries with cash, they pay their rent with cash.  When India recently took its two largest denomination bills out of circulation, it created instant HAVOC, and is still causing havoc.  They may very well never recover from this poorly planned and executed monetary experiment.  It's already created a massive deflation in their housing market, as people simply don't have working money to pay the rent with.  Getting replacement bills out into circulation also has been a clusterfuck and goods are becoming hard to come by whether you have working money or not, because the supply chains are breaking down.

Now, in a place like Denmark where just about every square inch of the country is wired up, you wouldn't have this same kind of problem if you went cashless, although even in Denmark there are people who live off the official economy and depend on Cash to work.  Besides that though, you run into all sorts of problems on occassions where you have a power outage or communications outage or the computers with all the account information go down, even for short periods of time.  All of a sudden, everyone in the checkout line at the grocery store can't pay for their food.  Everyone commuting home from work can't pay the fare on the light rail.  Everyone whose gas gauge is on empty can't fill up on gas at the pump.  etc, etc, etc.  Anyplace that does go 100% cashless is going to run into these problems, and I think TPTB have to know this.

Even though I use Plastic almost all the time myself, I always do carry enough cash to buy groceries or buy gas if the debit card doesn't work.  At my local grocery store this has occurred twice due to the system being down itself, and then a couple of other times because my account at the bank was "frozen" due to suspicious charges being dropped on the card number.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/500%20euro_0.jpg What is more likely than 100% cashless is that just the large bills will be taken out of circulation, but how large is large?  In Europe, they have a €500 note, that one is just about certain to go the way of the Dinosaur.  Here in the FSoA, the largest note is a $100 Ben Franklin.  This would be harder to get rid of, because even just for buying groceries a family can spend $300 in the checkout line, I see that all the time with overflowing baskets of food.  You would need 15 Andrew Jackson's or Harriet Tubman $20s to cover this, which makes your wallet uncomfortably thick.

What you may have noticed however is that recently, in about the last year a new $100 note on new paper with more "security" devices has been substituted for the old $100 note.  My suspicion is these notes can be run through a reader and their serial numbers tracked.  All stores will be required to have the readers, which will probably be part of the POS terminal, and anytime you use such a bill, it will be recorded in the transaction.  You'll need your Goobermint ID to spend the bill.  So, similar to plastic transactions, the bill can be traced back to you.

http://www.usagold.com/images/coinstack.gif In the Black economy what may occur to circumvent this problem is a system of Barter may arise, and for this purpose such as large Drug Deals, Gold WOULD be very useful.  After the large exchange is done this way, then the street level exchanges are all done with the small bills still in circulation.  However, then when the drug dealer spends his money, he has to account for where he got it.  If he can't account for it, it's a criminal offense.

Because Gold and to a lesser extent Silver could be used in the black economy and to try and store wealth outside the Banking system, it will either be made illegal and confiscated, or any official transactions done with it heavily taxed.  So if you went to the Coin Dealer to exchange it for some of the paper currency, there might be a 50% tax on that transaction.  In the case of the Great Depression, Gold ownership was made illegal and the Gold confiscated and then revalued.  No reason to believe that would not occur again here as things further spin down in the Bankstering system.

http://www.knology.net/~bilrum/goldverbot-4128.jpg What you have to remember here is that "your money" doesn't belong to you, it's part of a very large and complex system of credit that has been evolving in this iteration since the Medici Banking era.  That system gradually spread its tentacles around the entire globe, and now most of the 1st World countries at least are fully wired up with the communication system necessary for all electronic transactions, fully recorded with everything bought and sold and by who to who.  It's the ultimate means of control over everything that goes on in the society, and as long as these systems are up and running, TPTB that run the system are going to use every means possible to maintain this control.  Even if a 100% Cashless society is not achieved, in the 1st World countries it will reach close to that goal before the system crashes in it's entirety.

The reasons it will crash in its entirety are many.  First of all, whether the money being moved around here is cash or digibit, the entire system is horrifically insolvent, and even if ovenight 100% of all depositors money was confiscated to recapitalize the banks, it still would be insolvent.  There's more debt out there than there are credits to balance it, because of the interest charges on all the loans.  On top of that you have trillions to quadrillions in derivative bets which can't be paid off.  Then you have the problem that either cash or digibit, money is not flowing through the system to the end consumer to buy the products of industrialization. Some still have access to the credit, but fewer all the time as people drop out of the work force.  Finally, what the money actually REPRESENTS, the resources available to the society are depleting, especially measured against the increasing global population size.  So you can't make it work long term no matter what you use for money.

What the conversion to (mostly) cashless can do is stretch out the Extend & Pretend a while longer, so it's likely to be undertaken in 1st World countries, at least if the monetary system doesn't reach critical mass and crash before a further changeover can be implemented.  The possibility such a system could be implemented in India or other 3rd World countries is exceedingly small, thus the reason they attempted to exchange one paper bill for another, and in the process took themselves one step closer to complete collapse.

The mostly unanswerable question is just how long the the Extend & Pretend game can be extended out here?  All you can say for sure is that it will crash at some point in the future, but pegging a date to it is quite difficult, if not impossible.  You have another variable in the equation, which is the political instability that arises as more people lose more purchasing power, whatever the money is that is being used.  You also have the geopolitical instability as different countries jockey for position trying to control what is left of global resources, mainly China, Russia and the FSoA there.  There are inumerable possible Trigger Events that could set off a cascade failure at any time, so any kind of mathematical prediction is useless because of a discontinuity in the function.  WAG though, it's hard to see how it holds together more than another 5 years, but it's just a guess.

So, even if the Banksters and Da Goobermint get their wish and convert to all digimoney, don't sweat it too much because it won't last all that long.  When it does crash, you'll have much bigger problems than trying to hide income from the Tax Man or keep your wealth safe from thieving Banksters.

http://playgrad.ru/uploads/posts/2012-07/1342419304_zombie_wallpapers-39.jpg

Oil Crash 2016 Terrifies Banksters

Oil Barrels with Red Arrow isolated on white background. 3D rendergc2reddit-logoOff the keyboard of Michale Snyder

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Published on The Economic Collapse on January 18, 2016

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Last time around it was subprime mortgages, but this time it is oil that is playing a starring role in a global financial crisis.  Since the start of 2015, 42 North American oil companies have filed for bankruptcy, 130,000 good paying energy jobs have been lost in the United States, and at this point 50 percent of all energy junk bonds are “distressed” according to Standard & Poor’s.  As you will see below, some of the big banks have a tremendous amount of loan exposure to the energy industry, and now they are bracing for big losses.  And the longer the price of oil stays this low, the worse the carnage is going to get.

Today, the price of oil has been hovering around 29 dollars a barrel, and over the past 18 months the price of oil has fallen by more than 70 percent.  This is something that has many U.S. consumers very excited.  The average price of a gallon of gasoline nationally is just $1.89 at the moment, and on Monday it was selling for as low as 46 cents a gallon at one station in Michigan.

But this oil crash is nothing to cheer about as far as the big banks are concerned.  During the boom years, those banks gave out billions upon billions of dollars in loans to fund exceedingly expensive drilling projects all over the world.

Now those firms are dropping like flies, and the big banks could potentially be facing absolutely catastrophic losses.  The following examples come from CNN

For instance, Wells Fargo (WFC) is sitting on more than $17 billion in loans to the oil and gas sector. The bank is setting aside $1.2 billion in reserves to cover losses because of the “continued deterioration within the energy sector.”

JPMorgan Chase (JPM) is setting aside an extra $124 million to cover potential losses in its oil and gas loans. It warned that figure could rise to $750 million if oil prices unexpectedly stay at their current $30 level for the next 18 months.

Citigroup is another bank that also has a tremendous amount of exposure

Citigroup (C) built up loan loss reserves in the energy space by $300 million. The bank said the move reflects its view that “oil prices are likely to remain low for a longer period of time.”

If oil stays around $30 a barrel, Citi is bracing for about $600 million of energy credit losses in the first half of 2016. Citi said that figure could double to $1.2 billion if oil dropped to $25 a barrel and stayed there.

For the moment, these big banks are telling the public that the damage can be contained.

But didn’t they tell us the same thing about subprime mortgages in 2008?

We are already seeing bank stocks start to slide precipitously.  People are beginning to realize that these banks are dangerously exposed to a lot of really bad deals.

If the price of oil were to shoot back up above 50 dollars in very short order, the damage would probably be manageable.  Unfortunately, that does not appear likely to happen.  In fact, now that sanctions have been lifted on Iran, the Iranians are planning to flood the world with massive amounts of oil that they have been storing in tankers at sea

Iran has been carefully planning for its return from the economic penalty box by hoarding tons of oil in tankers at sea.

Now that the U.S. and European Union have lifted some sanctions on Iran, the OPEC country can begin selling its massive stockpile of oil.

The sale of this seaborne oil will allow Iran to get an immediate financial boost before it ramps up production. The onslaught of Iranian oil is coming at a terrible time for the global oil markets, which are already drowning in an epic supply glut.

Just the other day, I explained that some of the biggest banks in the world are now projecting that the price of oil could soon fall much, much lower.

Morgan Stanley says that it could go as low as 20 dollars a barrel, the Royal Bank of Scotland says that it could go as low as 16 dollars a barrel, and Standard Chartered says that it could go as low as 10 dollars a barrel.

But the truth is that the price of oil does not need to go down one penny more to have a catastrophic impact on global financial markets.  If it just stays right here, we will see an endless parade of layoffs, energy company bankruptcies  and debt defaults.  Without any change, junk bonds will continue to crash and financial institutions will continue to go down like dominoes.

We are already experiencing a major disaster.  Things are already so bad that some forms of low quality crude oil are literally selling for next to nothing.  The following comes from Bloomberg

Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude.

Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. It had previously posted a price of -$0.50. The crude is down from $13.50 a barrel a year ago and $47.60 in January 2014.

While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch.

A chart that I saw posted on Zero Hedge earlier today can help put all of this into perspective.  Whenever the price of oil falls really low relative to the price of gold, there is a major global crisis.  Right now an ounce of gold will purchase more oil than ever before, and many believe that this indicates that a new great crisis is upon us…

The number of barrels of oil that a single ounce of gold can buy has never, ever been higher.

Barrels Of Oil Per Ounce Of Gold

All over the planet, big banks are absolutely teeming with bad loans.  And to be honest, the big banks in the U.S. are probably in better shape than some of the major banks in Europe and Asia.  But once the dominoes start to fall, very few financial institutions are going to escape unscathed.

In the coming days I would expect to see more headlines like we just got out of Italy.  Apparently, Italian banks are nearing full meltdown mode, and short selling has been temporarily banned.  To me, it appears that we are just inches away from full-blown financial panic in Europe.

However, just like with the last financial crisis, you never quite know where the next “explosion” is going to happen next.

But one thing is for sure – the financial crisis that began during the second half of 2015 is raging out of control, and the pain that we have seen so far is just the beginning.

 

 

 

 

 

 

 

 

 

 

 

 

OXI! Ugo Bardi, Gail Tverberg, Steve Ludlum & RE discuss the Greek Referendum

Discuss this Vidcast at the Diner TV Table inside the Diner

Audio Only (mp3 Download avaialable on Diner Soundcloud)

man-watching-tvIn the aftermath of the Greek Referendum results of a Vote of "OXI", or NO to the proposals made by the Troika and the Globalists, Ugo Bardi, Gail Tverberg, Steve Ludlum and myself got together for a Collapse Cafe to discuss the underlying causes of the Greek problems, and how this is being dealt with on the Political & Economic Level.

Production Notes:  Steve had connection issues early in the broadcast (around the 9 minute mark).  These were resolved later in the broadcast.

Entertainment Notes:  At around the 35 minute mark, you will be entertained by something quite novel in our Vidcasts.  A few Bloggers go BALLISTIC.  LOL.

Enjoy.

RE

$75T in Shadow Banking Collapsing

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on June 30, 2015

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Shadow Banking System - Public Domain

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Keep an eye on the shadow banking system – it is about to be shaken to the core.  According to the Financial Stability Board, the size of the global shadow banking system has reached an astounding 75 trillion dollars.  It has approximately tripled in size since 2002.  In the U.S. alone, the size of the shadow banking system is approximately 24 trillion dollars.  At this point, shadow banking assets in the United States are even greater than those of conventional banks.  These shadow banks are largely unregulated, but governments around the world have been extremely hesitant to crack down on them because these nonbank lenders have helped fuel economic growth.  But in the end, we will all likely pay a very great price for allowing these exceedingly reckless financial institutions to run wild.

If you are not familiar with the “shadow banking system”, the following is a pretty good definition from investing answers.com

The shadow banking system (or shadow financial system) is a network of financial institutions comprised of non-depository banks — e.g., investment banks, structured investment vehicles (SIVs), conduits, hedge funds, non-bank financial institutions and money market funds.

How it works/Example:

Shadow banking institutions generally serve as intermediaries between investors and borrowers, providing credit and capital for investors, institutional investors, and corporations, and profiting from fees and/or from the arbitrage in interest rates.

Because shadow banking institutions don’t receive traditional deposits like a depository bank, they have escaped most regulatory limits and laws imposed on the traditional banking system. Members are able to operate without being subject to regulatory oversight for unregulated activities. An example of an unregulated activity is a credit default swap (CDS).

These institutions are extremely dangerous because they are highly leveraged and they are behaving very recklessly.  They played a major role during the financial crisis of 2008, and even the New York Fed admits that shadow banking has “increased the fragility of the entire financial system”…

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a profound influence on the global financial system. In a market-based financial system, banking and capital market developments are inseparable: Funding conditions are closely tied to fluctuations in the leverage of market-based financial intermediaries. Growth in the balance sheets of these intermediaries provides a sense of the availability of credit, while contractions of their balance sheets have tended to precede the onset of financial crises. Securitization was intended as a way to transfer credit risk to those better able to absorb losses, but instead it increased the fragility of the entire financial system by allowing banks and other intermediaries to “leverage up” by buying one another’s securities.

Over the past decade, shadow banking has become a truly worldwide phenomenon, and thus it is a major threat to the entire global financial system.  In China, shadow banking has been growing by leaps and bounds, but this has the authorities deeply concerned.  In fact, according to Bloomberg one top Chinese regulator has referred to shadow banking as a “Ponzi scheme”…

Their growth had caused the man who is now China’s top securities regulator to label the off-balance-sheet products a “Ponzi scheme,” because banks have to sell more each month to pay off those that are maturing.

And what happens to all Ponzi schemes eventually?

In the end, they always collapse.

And when this 75 trillion dollar Ponzi scheme collapses, the global devastation that it will cause will be absolutely unprecedented.

Bond expert Bill Gross, who is intimately familiar with the shadow banking system, has just come out with a major warning about the lack of liquidity in the shadow banking system…

Mutual funds, hedge funds, and ETFs, are part of the “shadow banking system” where these modern “banks” are not required to maintain reserves or even emergency levels of cash. Since they in effect now are the market, a rush for liquidity on the part of the investing public, whether they be individuals in 401Ks or institutional pension funds and insurance companies, would find the “market” selling to itself with the Federal Reserve severely limited in its ability to provide assistance.

As far as shadow banking is concerned, everything is just fine as long as markets just keep going up and up and up.

But once they start falling, the whole system can start falling apart very rapidly.  Here is more from Bill Gross on what might cause a “run on the shadow banks” in the near future…

Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.

And what might precipitate such a “run on the shadow banks”?

1) A central bank mistake leading to lower bond prices and a stronger dollar.

2) Greece, and if so, the inevitable aftermath of default/restructuring leading to additional concerns for Eurozone peripherals.

3) China – “a riddle wrapped in a mystery, inside an enigma”. It is the “mystery meat” of economic sandwiches – you never know what’s in there. Credit has expanded more rapidly in recent years than any major economy in history, a sure warning sign.

4) Emerging market crisis – dollar denominated debt/overinvestment/commodity orientation – take your pick of potential culprits.

5) Geopolitical risks – too numerous to mention and too sensitive to print.

6) A butterfly’s wing – chaos theory suggests that a small change in “non-linear systems” could result in large changes elsewhere. Call this kooky, but in a levered financial system, small changes can upset the status quo. Keep that butterfly net handy.

Should that moment occur, a cold rather than a hot shower may be an investor’s reward and the view will be something less than “gorgeous”. So what to do? Hold an appropriate amount of cash so that panic selling for you is off the table.

In order to avoid a shadow banking crisis, what we need is for global financial markets to stabilize and to resume their upward trends.

If stocks and bonds start crashing, which is precisely what I have projected will happen during the last half of 2015, the shadow banking system is going to come under an extreme amount of stress.  If the coming global financial crisis is even half as bad as I believe it is going to be, there is no way that the shadow banking system is going to hold up.

So let’s hope that the financial devastation that we have seen so far this week is not a preview of things to come.  The global financial system has been transformed into a delicately balanced pyramid of glass that is not designed to handle turbulent times.  We should have never allowed the shadow banks to run wild like this, but we did, and now in just a short while we are going to get to witness a financial implosion unlike anything the world has ever seen before.

Financial Turmoil In Europe, China And The United States

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on June 19, 2015

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As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe.  In Greece, a full blown bank run is happening right now.  Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece.  Meanwhile, Chinese stocks are absolutely crashing.  The Shanghai Composite Index was down more than 13 percent this week alone.  That was the largest one week decline since the collapse of Lehman Brothers.  In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed.  Slowly but surely, we are starting to see the smart money head for the exits.  As one Swedish fund manager put it recently, everyone wants “to avoid being caught on the wrong side of markets once the herd realizes stocks are over-valued“.

I don’t think that most people understand how serious things have gotten already.  In Greece, so much money has been pulled out of the banks that the European Central Bank admits that Greek banks may not be able to open on Monday

The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.

Greek savers have withdrawn about 2 billion euros from banks over the past three days, with outflows accelerating rapidly since talks between the government and its creditors collapsed at the weekend, banking sources told Reuters.

All over social media, people are sharing photos of long lines at Greek ATMs as ordinary citizens rush to get their cash out of the troubled banks.  Here is one example

 

And if there is no debt deal by the end of this month, the Greek debt crisis is going to totally spin out of control and financial chaos will begin to erupt all over Europe.  But instead of trying to be reasonable, EU president Donald Tusk “has delivered an ultimatum to Greece”, and it almost appears as if EU officials are more concerned about winning a power struggle than they are about averting financial catastrophe…

EU president Donald Tusk has delivered an ultimatum to Greece, claiming the country must ‘accept an offer or default’ at an emergency summit set for Monday – in a last-ditch effort to stop the debt-stricken nation crashing out of the euro.

‘We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default,’ Mr Tusk said today.

His comments come as Greek Prime Minister Alexis Tsipras warned that his country’s exit from the eurozone would trigger the collapse of the single currency.

‘The famous Grexit cannot be an option either for the Greeks or the European Union,’ he said in an Austrian newspaper interview.

‘This would be an irreversible step, it would be the beginning of the end of the eurozone.’

While all of this has been going on, the obscene stock market bubble in China has started to implode.  Just check out the following numbers from Zero Hedge

As the carnage began last night in China we noted the extreme levels of volatility the major indices had experienced in recent weeks. By the close, things were ugly with the broad Shanghai Composite down a stunning 13.3% on the week – the most since Lehman in 2008 (with Shenzhen slightly better at down 12.8% and CHINEXT down a record-breaking 14.99%).

Under normal circumstances, numbers like these would be reason for a full-blown financial panic over in Asia.  But these are not normal times.  Even with these losses, stock prices in China are still massively overinflated.  For example, USA Today is reporting that the median stock over in China is “trading at 95 times earnings”…

Margin debt in China has soared to a record $363 billion, according to Bloomberg, and the median stock in mainland China is now trading at 95 times earnings, which even tops the price-to-earnings multiple of 68 back at the 2007 peak.

That is absolutely ridiculous.  When a stock is trading at 25 or 30 times earnings it is overpriced.  So these numbers that are coming out of China are beyond crazy, and what this means is that Chinese stocks have much, much farther to fall before they get back to any semblance of reality.

Meanwhile, in the U.S. money is flowing out of bonds at a staggering pace.  The following quote originally comes from Bank of America

“High grade credit funds suffered their biggest outflow this year, and double the previous week (and also the biggest since June 2013). High yield outflows also jumped to $1.1bn, the biggest since the start of the year. However, government bond funds suffered the most amid the recent spike in volatility, with outflows surging to the highest weekly number on record ($2.7bn). This brings the total outflow from fixed income funds to almost $6bn over the last week, the highest since the Taper Tantrum and the third highest outflow ever.”

What this means is that big trouble is brewing in the bond markets.  This is something that I warned about in my previous article entitled “Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode“.

For the moment, U.S. stocks are doing fine.  But just about everyone can see that we in a massive financial bubble that could burst at any time.  Presidential candidate Donald Trump says that what we are witnessing is a “big fat economic and financial bubble like you’ve never seen before”

Yesterday during an interview on MSNBC, presidential candidate Donald Trump said he has some big names in mind for the Treasury secretary if he wins the White House. “I’d like guys like Jack Welch. I like guys like Henry Kravis. I’d love to bring my friend Carl Icahn.” He also opined on the economy and the stock market, admitting that the Fed has benefited people like him but that the economy and is in a “big fat economic and financial bubble like you’ve never seen before.

Ron Paul also believes that this financial bubble is going to end very badly.  Just check out what he told CNBC earlier this week

Despite record highs in the market, former Rep. Ron Paul says the Fed’s easy money policies have left stocks and bonds are on the verge of a massive collapse.

“I am utterly amazed at how the Federal Reserve can play havoc with the market,” Paul said on CNBC’s “Futures Now” referring to Thursday’s surge in stocks. The S&P 500 closed less than 1 percent off its all-time high. “I look at it as being very unstable.”

In Paul’s eyes, “the fallacy of economic planning” has created such a “horrendous bubble” in the bond market that it’s only a matter of time before the bottom falls out. And when it does, it will lead to “stock market chaos.”

Yes, this financial bubble has persisted far longer than many believed possible, but all irrational bubbles eventually burst.

And you know what they say – the bigger they come the harder they fall.

When this gigantic financial bubble finally implodes, it is going to be absolutely horrifying, and the entire planet is going to be shocked by the carnage.

Why We Are All Now Cypriots-to-be in the New Age of Bail-Ins

Off the keyboard of Allan Stromfeldt Christensen

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Published on From Filmers to Farmers on June 15, 2018

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According to the mostly ignored and hardly covered piece of news from a couple of weeks ago, it turns out that 11 of the 28 European Union countries have been scolded by the European Commission for failing to implement a new set of rules intended to prop up failed banks. Known as the Bank Recovery and Resolution Directive (BRRD), the stated purpose of the newly required rules is to purportedly protect taxpayers from having to cover the losses of any possible future bank failures, similar to the failures that occurred back in 2008. Taking the place of the more conventional taxpayer-funded "bail-outs," banks would see their losses recapitalized with the newly-minted practice of the "bail-in."

A bail-in, in case you aren't familiar with it, is the emerging alternative to the well-known bail-out. Back in 2008 when a slew of "too big to fail" (TBTF) banks crumbled due to $147 barrels of oil and the bursting of the housing bubble, the entire financial system was put at risk and was deemed to be in need of a rescue. What occurred was an influx of money from outside sources to cover the bank losses, one example being the $700 billion life-line from the US government (which essentially means from the US taxpayer). This is known as a bail-out.

This differs from what occurred with the Cypriot banking system back in 2013, of which has since come to be known as a bail-in. In short, due to Cyprus' insolvent banking system, all banks in the country were shut down under the "bank holiday" rubric, to go along with withdrawals being limited, if not completely cut off. Upon cessation of the bank holiday measures, it was announced by officials that all bank accounts in excess of €100,000 would have their balances reduced by 47.5% (also known as a "haircut"). As the practice now goes, confiscated bail-in funds are used to recapitalize failed banks, and the depositors who had their balances reduced essentially become owners of a bank that no one has much of an interest in owning.

Call it theft of one's deposits if you will, but since the mandate of financial entities such as the US Federal Reserve, the European Central Bank, the Bank of International Settlements (BIS, the central bank of central banks), and so forth, is to ensure financial stability of the system (read: protect the big banks), this can only be expected. But on top of that, it turns out that it's entirely legal.

For as odd as it may sound, when a person makes a deposit into a bank the money actually becomes the property of the bank, and the depositor becomes an unsecured creditor with a claim against said bank. Since back in the day depositors would routinely lose their money when banks went bankrupt, entities such as the United States' Federal Deposit Insurance Corporation (FDIC) were created to secure some of those deposits. The numbers differ from country to country, but any deposits within the protected limits of the FDICs of the world (such as €100,000 in Europe, $250,000 in the US) are deemed safe, supposing that the coverage exists in the first place. For to use the US as the example here, since the $4.5 trillion in US bank deposits are covered by about $46 billion in the FDIC piggy bank, the reserve ratio is a measly 1% or so. Take from that what you will.

Russian President Vladmir Putin getting shirtfronted by Australian Prime Minister Tony Abbott at the G20 in Brisbane, 2014
 

Meanwhile, a new set of rules put forth by the Financial Stability Board (FSB), and similar to the BRRD, was rubber-stamped by G20 leaders meeting up in Brisbane in late-2014: the "Adequacy of Loss-Absorbing Capacity Global Systemically Important Banks in Resolution." According to author Ellen Brown and several others, what has been enacted with the plan of the FSB (which is basically an unelected consortium of finance ministers and central bankers from around the world, headquartered at the BIS in Switzerland) is essentially the institutionalization of the TBTF banks. If they fail, when they fail, the TBTF bank-losses will be once again covered, although this time with the funds of their creditors via the bail-in template already tried and tested in Cyprus.

Of course, one might say that bail-in rules are simply precautionary measures being taken in the purely hypothetical situation of another "slip-up." I mean, can we really expect another meltdown of the financial system?

Well, it turns out that pretty much nothing has changed since the Great Recession that began in 2008, and although promises were made that measures would be taken, the four largest TBTF banks in the US have actually increased in size by nearly 40%. On top of that, the total exposure to derivatives (basically a bet about what will or will not happen in the future) by the six largest TBTF banks stands at nearly $300 trillion – and exposed we are since depositor accounts are deemed as collateral for the derivative bets of the TBTF banks. If only one of those banks were to fail, never mind that that could set off a cascade that could spread to other banks, but even a single bank failure could exhaust the entire funds of the FDIC.

Meanwhile, as already described in a previous post of mine, the shale oil industry pretty much owes its existence to the creation of its very own fracking bubble. Since shale oil wells have a very steep rate of increase (Saudi America!), but also a similarly steep decline once they go over the edge (samurai America!), there's a good chance that when fracking plays begin their over-all decline, we might very well see a repeat of the 2008 financial crash.

However, for Ellen Brown to state that we can address this mess by "protecting our funds from Wall Street gambling" via "reining in the massive and risky derivatives casino" is to miss the even larger story here. For what Brown consistently misses, as far as I've noticed, is the role that energy plays in the financial system (as I've previously described it, money is a proxy for energy). Giving just one example, Brown described the recent crash in oil prices by stating that

the shocking $50 drop in the price of oil was not due merely to the forces of supply and demand… [but to] an act of geopolitical warfare administered by the Saudis.

But if only it were so nice and tidy. Fact is, the crash in prices was caused by demand destruction, of which several years of oil in the $100 range led to: too-expensive-to-bear-prices for a populace still trying to recover from the Great Recession led to a diminished demand for oil, precipitating the crash in prices. (To this you can add the flooding of world oil supply levels with the recently tapped into – and expensive to extract – US shale oil.)

Moreover, even if the Wall Street derivative casino could be reined in, there's still the fact that the Wall Street derivatives casino is based on the fractional-reserve banking system. And since this Ponzi scheme requires ever more energy to propel its expansion and hold back the system from imploding in on itself, the emerging conundrum of tightening energy supplies due to peak oil throws a spanner into all that.

What I'm trying to get at is, not only is the mainstream media's bail-in explanation of "providing a shield for taxpayers" rather misleading, but to see the new bail-in setup as simply some way for nefarious fat-cats to steal our money and/or to maintain the status quo is to completely miss out on the big picture here.

Bail-outs are funded by taxpayers (via the government), while bail-ins are funded by depositors. But to a large degree, taxpayers are depositors and depositors are taxpayers. In other words, whether you pay for it out of one hand (a bail-in) or out of the other (a bail-out), there really isn't that much of a difference. Of the differences that do exist, two of them predominantly stand out.

First off, bail-ins make the whole process of rescuing banks a whole lot smoother. Since the procedural work is already out of the way thanks to previously implemented statutes, politicians and their banker friends are negated from having to deal with uncooperative congresses or other branches of governments, and are similarly able to obviate the opinions of the electorate decrying "socialists!," "greedy one-percenters!," or whatever. Bail-ins are like a fast-track bail-out.

Secondly, since bail-outs sometimes entail funds coming from outside sources (such as Germany contributing to Greece's current bail-outs), and since less growth due to fewer fossil fuels means less plentitude to go around, richer countries are going to become less and less willing to sacrifice their dwindling excesses for the sake of others. In other words, bail-ins mean that rather than foreign taxpayers having to bail out the banks of others, domestic taxpayers will have to bail-in their own crumbling banks, if even that. This is how you triage early-bird victims of the collapse of industrial civilization, is why some think that Greece may be about to experience its own bail-in, and is why Greeks are reportedly now withdrawaling nearly €400 million from their bank accounts a day.

So to make a long story short, bail-in, bail-out, what's the big diff'?

A bail-in in the good ol' days (photo: Melisa D.)
 

For the record, although Ellen Brown does have many interesting things to say, I'm more of the Herman Daly camp and so believe we should nationalize the currency, not the banks.

Having said that, since there's not really much I can do about that besides write a few words about it all in a blog and dream about voting for a federal party that might actually have 100% reserves as one of its policies, perhaps the best thing the rest of us can do is work to set up local currencies in hopes of averting some of the upcoming problems from when the bail-ins come rolling our way.

The Bank-State Bargain

Off the keyboard of Graham Barnes

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Published on FEASTA on March 31, 2015

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“I react pragmatically. Where the market works, I’m for that. Where the government is necessary, I’m for that. I’m deeply suspicious of somebody who says, “I’m in favor of privatization,” or, “I’m deeply in favor of public ownership.” I’m in favor of whatever works in the particular case.” J K Galbraith

There’s no getting away from it. Banks create money out of nothing when they extend loans and then charge borrowers interest on this newly created capital. The result is an ongoing multi-billion pound/ dollar subsidy breaking the basic rules of capitalism. What is perhaps even more surprising is that there appears to be no explicit description of the ‘bargain’ underlying this important arrangement. What follows is an exploration of elements of a possible rationale for an unspoken agreement.

Until quite recently there was surprisingly fierce argument over the way in which money is created. Thanks largely to determined and repeated enquiry by monetary reformers [1] and propogation of the issue via social media, there is now consensus over the role that private banks play in originating money in the form of loans, essentially ex-nihilo – out of thin air.

Recently the Bank of England somewhat belatedly broke their silence and joined this consensus via an in-house publication on the subject [2]. So we have a little light shining in on the phenomenon of which J.K. Galbraith in 1975 wrote: “The process by which banks create money is so simple that the mind is repelled.[3]”

The amount of money in circulation has increased rapidly since 1970 [4]. According to one source, in the UK alone more than £200 billion a year seigniorage (profit from money-issue) is achieved via interest on loans to banks [5]. The money that is loaned out does not represent the fruits of the banks’ labour or innovation. It is created at a stroke of a pen. The extent to which banks are constrained by rules and regulations (reserve ratios, capital adequacy) can be debated to some extent, but it appears to be negligible. The extent to which this unearned £200 billion carries corresponding costs (e.g. reserve costs, operating costs) can also be debated, but it is minimal. What exactly do banks provide in return for this bounty?

The answer (although as we say, it does not appear to be articulated anywhere) may be that banks are seen to provide:

i) trustworthy, stable influence over the quantity of money-issue
ii) superior quality of capital allocation
iii) the provision of essential financial services
iv) the operation of payment and settlement systems
v) deniability – providing a buffer for politicians enabling denial of responsibility for unfavourable events
vi) an agency role in pacifying the population through the burden of debt
vii) front-line capability (and a quartermaster role) in international financial wars

We can look at these briefly in turn ….

The Quantity of Money, in orthodox economics, is moderated by the price of money – the interest rate. The base rate determines a floor to the price, and the private banks in turn ‘mark up’ the interest rate according to the risks they perceive on a particular loan and the demand for money. This ‘money market’ narrative has never adequately described the real world. Even neoliberal economists recognise ‘market failure’ in this area, and have been content to support state intervention in the form of Quantitative Easing. (A likely fruitless sidetrip is possible here, so we will content ourselves with the observation that QE is preferred to so-called helicopter money because – the argument is – it can be ‘unwound'[6]. In other words the troubled assets/ bonds bought, releasing money into circulation, can be sold at a later date removing that circulating money. Of course the price achieved is irrelevant.)

So if it is widely accepted that private money-issue left to its own devices causes crises that need periodic intervention, exactly what role in the private/ public mix does it play? Each round of regulatory measures aims to reduce the frequency and severity of crises but never does. It is as if the errant son is regularly forgiven and put back in charge of the shop after each bailout with minor changes to his groundrules. Such indulgent treatment makes him progressively cavalier about his behaviour. He knows whatever he does will be forgiven, and after a short period of public penitence resumes business (and bonuses) as normal.

The Quality of Capital Allocation is just as problematic. The assessment of risk is faulty – to the extent that interest rates achieved are more a measure of insider status than assessed risk. This preferenced access to capital reserved for friends of the casino has unfortunate side effects, including the taking out of innovative start-ups by less effective incumbents with better access to capital via leveraged buyouts. Worse still, there is no national (or planetary) strategic guidance over capital allocation. The banks are implicitly trusted to be the proxies of the market and to allocate funds ‘efficiently’. Unfortunately their idea of efficiency will likely result in a dead planet for our grandchildren. Maybe the ‘free market’ can be safely trusted to produce all the things we don’t need but for the stuff-of-life market failure is the norm – failure in terms of socially unacceptable outcomes.

The Quantity and Quality of capital allocation as credit can be (and is) articulated as part of the neoliberal narrative – the superiority of profit-motivated decision making, the inability of governments to ‘spot winners’, the highlighted failures of public procurement projects.

It is true of course that core financial services are vital. Producers need to insure against events and hedge risks. But most of our over-financialised economy is betting on other peoples’ risks rather than insuring our own. The resulting market in derivatives is so complex that no-one knows where the risks actually lie should the bets need to be unwound. This inherent uncertainty, which cannot be resolved except through a crash, results in a political inability to let businesses fold. The financial services industry is too interconnected to fail, and politicians dont want to take the risk of triggering a crash on their watch. It might be containable but it might not. No-one knows. Essential financial services should be provided via a stripped down version of the sector. We have, through sins of omission, allowed the real economy to be relegated to a corner of the casino.

There are many inter bank payment and settlement systems enabling national and international funds transfer, interlinking ATM networks and so on. They are run by a variety of bank consortia and co-operatives and enable a range of valuable personal and corporate services. These valuable services act as a sort of ‘human shield’ for the casino extremists. There is no reason that their function could not be provided by neutral ‘outsider’ or public service networks but it has to be accepted that this level of corporate re-engineering is not likely to be attempted. The complexity of interconnection, though, adds to the uncertainty surrounding any domino-collapse scenarios, and contributes to the general market failure of the banking sector. The uncertainty, which is often cultivated by the banks themselves when crisis threatens deprives the banks of that divine right of capitalism – the right to fail.

The importance of core financial services and payment systems is emphasised in the prevailing narrative, but these are presented as inseparable from banking per se. Arguably the dismantling of barriers to functional diversity (like Glass Steagall) have facilitated the ‘complexification’ and loss of resilience of modern banking, in the process creating the uncertainty that governments find it so hard to confront.

Of course, for politicians the idea of the free market is immensely attractive. The ‘invisible hand’ of the market works away, automatically allocating resources where they are best used and encouraging competition so that progress is guaranteed. That’s the theory. And none of it calls for any difficult value judgements. If things go wrong it was nothing to do with decisions they made because they didn’t make any. Unfortunately free markets don’t exist and the idea that if we tweak the regulations right we can get them to is to deceive ourselves. As Galbraith says in the quote at the beginning of this article we have to be more pragmatic about intervention. A good rubric would be ‘if it doesn’t really matter leave it to the market’. And money really matters.

In a previous article [7] I argued that there are three fundamental problems with mainstream money – the misallocation of capital referred to earlier, the impact of interest-based debt and the monetisation of everything. Certainly the level of debt and the interest burden taken on by the current generation is grinding it down and acting as a drag on the economy. We can be forgiven for imagining that the resulting pacification is not entirely unwelcome to the 1%. To Orwell’s Prolefeed [8] we can add debt burden debilitation. After earning enough to service our debts (and our childrens’) we may not want to do more than sit down on the sofa with a Big Mac and Eastenders. No energy for activism? Shame.

Finally, perhaps the most distasteful part of this unstated bargain is the role the banks play as the front line troops and quartermasters in financial wars. Alongside the use of drones, financial war is perhaps the favourite modern flavour of conflict. The bodies of victims are not so obviously visible. Wars may be national, like the measures being taken against Russia and Iran, or (shock-horror) class-based like the austerity wars of the European periphery. In either case banks act on the front line, taking measures which match the prevailing ideology and providing to some extent the ‘deniability layer’ for politicians. It’s nothing personal. James Rickards and others have written in some detail about this aspect of the financial system and the likely currency wars of the future. The amoral mindset required to be a diligent financial foot-soldier of the prevailing neoliberal truth is arguably a key factor in the degradation of modern banking. The moral vacuum gradually being uncovered represents a key element of the Deprecated Domain [9] – a driving force for us to design better money-forms than the one currently imposed on us.

These last three aspects – deniability, debt-peonage-management and financial warmongering represent the real ‘value for money’ that justifies the multi-billion subsidy provided to the banking fraternity via debt-interest. Because these elements of the bargain are not publicly recognised, and for obvious reasons will not be, they cannot be easily attacked. It is for this reason that I believe policy change with respect to money-issue will not be achieved, no matter how compelling the case.

Conclusion

Galbraith was right. Governments should be more pragmatic. Politicians should stop hiding behind the skirts of ‘the market’ and make some judgement calls. Their decisions can be influenced by quantitative analyses including economic indicators expressed in money terms. But they must reflect the fact that many of the most important things in life cannot be easily quantified, and must recognise that reducing everything to numbers leads to faulty decision-making. There is more to people, natural resources and land than a ‘Natural Capital’ formulation expressed in money terms.

Some of the elements of the bank-state bargain are already under attack from ‘disruptive’ digital developments and we can expect banking and financial services to be progressively reinvented, over time. But the neoliberal hold over private money-issue policy and its inherent banking-subsidy is secure. Certainly, mainstream media buy-in to the neoliberal narrative supports this intransigence, but the main factor is the hidden services provided to pseudo-democratic government. Without the deniability cloak, governments would be less able to claim that they were at the mercy of ‘events dear boy’ [10]; a less debt-burdened population would have more time and energy to reflect and question; and the loss of a financial warmongering capability would strike at the heart of the fascist state-corporate nexus. None of these outcomes is desired by TPTB.

Progress in relieving the ‘externalities’ associated with the beloved free market, such as the premature demise of planet earth, must therefore come from disruptive alternative projects. Some of these will be profit-oriented – so be it; increasingly as understanding and practice develop side by side, they will be commons-based or co-operative. In that context money can be ‘design[ed] to serve desirable interests of cooperative users inhabiting a different monetary world’ [11]. And we may see, gradually, ‘the exodus from proprietary money’ [11]. As @ChrisCook and others have said, we need banking but we don’t need banks, at least not banks like this.

[1}: How Banks Create Money – Positive Money http://www.positivemoney.org/how-money-works/how-banks-create-money/
[2]: Money creation in the modern economy – Bank of England http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
[3]: John Kenneth Galbraith, Money: Whence it came, Where it Went p. 29.
[4]: see for example: http://www.safehaven.com/article/8030/composition-of-the-us-money-supply http://ieconomics.com/uk-money-supply-m3
[5]: In their seminal publication Creating New Money (1997) Huber and Robertson estimated the gains possible through reclaiming seignorage from UK banks at GBP 49 billion – equivalent at the time to 15% of total UK tax take. The GBP 200 billion + figure is NEF’s updated calculation for 2012. Similar (1997) figures for % of tax take were 19% for Japan and between 4 and 6% for USA, Germany, Eurozone.
[6]: see Andrea Leadsom’s contribution to UK parliamentary debate on money creation as summarised (and responded to) by Positive Money: http://www.positivemoney.org/2014/11/sovereign-money-response-andrea-leadsom-economic-secretary-treasury/
[7]: The Mainstream Money Mess: http://www.feasta.org/2015/02/02/the-mainstream-money-mess-three-aspects-and-what-they-mean-for-new-money-forms/
[8]: http://en.wikipedia.org/wiki/Prolefeed
[9]: The Deprecated Domain: the pros and cons of designed exclusion http://www.feasta.org/2014/07/10/the-deprecated-domain-the-pros-and-cons-of-designed-exclusion/
[10]: As Harold Macmillan may have never said: http://en.wikiquote.org/wiki/Harold_Macmillan
[11]: http://www.dyndy.net/2011/08/our-future-our-money-the-design-of-currency-systems/

Featured image: Wojciech Kossak, quartering (Quartermaster) about 1893. Source: http://commons.wikimedia.org/wiki/File:EINQUARTIERUNG.jpg

Memo to Varoufakis

Off the keyboard of John Ward

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Published on The Slog on February 26, 2015

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Memo to Varoufakis: Game theory is fine, but this isn’t a game.

Yanis Varoufakis was caught in the headlights last Friday: he should stop denying it

https://hat4uk.files.wordpress.com/2015/02/varoufheadlinghts.pngThe anti-‘deal’ leaks from the ECB, Berlin, the IMF and Brussels have been in full flow since Tuesday evening. It’s all terribly predictable: a clever process of suggesting that – purely out the goodness of their hearts – Troika2 is going to cut Greece some slack….even though T2 has – to tot up the list to date – ‘grave doubts’, ‘major reservations’, ‘worries about the lack of detail’, and ‘concerns about achievability’. There is slack rope, and there is enough rope to hang oneself.

The stench of hypocrisy in all this is vomit-inducing: Greece is being set up to fail, and in the meantime the ECB will continue its covert policy of creating bank cash-flow problems…ensuring that Syriza comes across as a Skid Row lush dependent upon never-ending welfare.

From Yanis Varoufakis, the Master of Game Theory, there has been little since the sign-off beyond rationalisation. In an interview with the Irish Times’s Damian Mac Con Uladh today, Mr Varoufakis gives us:

“Good compromises don’t always satisfy everyone, and leave in a sense everyone somewhat dissatisfied. But the mandate from our party, our government and my prime minister was very straightforward. To get a deal done. So, compromise. The question is if we have compromised our basic principle. And the answer is a big, fat no….Our mandate was to struggle against this black and white, this either/or, and to create a third way….It’s a triumph for democracy and marks the end of automated austerity….Anything is better than confining us to an austerity hole where we shrink every day.”

Compare and contrast that entirely reasonable attitude with this BBC interview on February 3rd:

“”Europe in its infinite wisdom decided to deal with this bankruptcy by loading the largest loan in human history on the weakest of shoulders… What we’ve been having ever since is a kind of fiscal waterboarding that has turned this nation into a debt colony….[the Troika is] a committee built on rotten foundations…Greek democracy has chosen to stop going gently into the night. Greek democracy resolved to rage against the dying of the light….We are going to destroy the basis upon which they have built for decade after decade a system, a network that viciously sucks the energy and the economic power from everybody else in society.”

I’m being ironic: I vastly prefer the second (earlier) Varoufakis to the new relaunch. Today’s Irish Times interview shows Damian Mac Con Uladh giving Yanis an unbelievable easy ride on the subject of a fat, hairy mammoth in the room: the now well-documented way in which the Greek Finance Minister was ambushed by the Euromafia at 4.30 pm last Friday.

I recognise perfectly well that I’m breaking from the optimist pack, but then I do understand the sociopathy of that Mafia better than most Greeks. To be blunt, I think Varoufakis underestimated it; and last Friday, the breathtaking, bullying illegality of their input caught him napping.

I do not believe Syriza has bought time, I think it has sold principles. I’m sure Yanis knows all the tricks of Game Theory, but this is not a game. He is dealing with (as are we all sooner or later) a nasty and yet hopelessly splintered EU oligarchy of far greater venom than any existing in Greece. The division on the opposing side is what he missed.

It’s easy to define, and even easier to evidence: the Germans are fed up of the French, and losing faith in the Americans. That’s a very serious split, because the man with the most unaccountable power in the eurozone is Mario Draghi….who works for Wall Street. The French, meanwhile, bitterly resent the idea that a nasty piece of work like Wolfgang Schäuble will be eyeballing them during March…and if and when FiskalUnion ever comes to pass, telling them what they can and can’t spend 24/7. The idea that Paris has the remotest desire to acquiesce in that arrangement is ridiculous. Apart from anything else, it would hand millions of votes to both Marine Le Pen and Nigel Farage.

On top of that we have a general trend in Southern Europe towards euroscepticism: the continuing growth of Podemos in Spain, and europhobic Berlusconi attitudes in Italy. These can only be encouraged by a flat refusal by Greece to deal with the idiots who caused the problem in the first place.

This is the perspective from Syriza that I find flawed: the much bigger picture. Last week, Varoufakis focused on it, and then lost the plot on Friday. He was a refusenik, but now he’s a pragmatist.

The post I wrote earlier this week laying out the story behind this was taken down by the Blue Meanies. I am therefore eternally grateful to the half-dozen Sloggers who still had it open and used page capture to return the piece to its rightful owner. It is reproduced below for anyone who missed it first time around.

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GREECE CRISIS OPINION: TROIKA RISES FROM THE DEAD AS DRAGHI LEADS THE CHARGE, AND VAROUFAKIS EMPLOYS BRAVE FACE

Conflicting rumours surround the Syriza reform programme approval process tonight, but whatever emerges from this farcical trading of angels on a pinhead, I’m increasingly concerned as details of the humiliation process programme ‘deal’ accepted by Yanis Varoufakis last Friday come to light. I don’t actually think the five-point italic hand-tying target codicils matter a damn to be honest, because they’re all unachievable anyway.

Far more relevant is what EC behaviour has been found acceptable to the Greek Government.

Did you know, for instance, that both the Gang of Four revisions, the Friday ambush, and the ELA threats/leaks to Greek banks were driven by Draghi?

Did you know that – in a direct sideswipe at rehiring Ministerial cleaners – there is a blanket ban under the agreement on any more public sector hiring?

Did you know that, just to rub in really hard that how they think the Greeks shit on their shoes, eurogroup told Varoufakis Friday that they were “handing over the judgement process to the organisation formally known as the Troika” – Draghi’s exact words. This was a direct hit on Syriza’s refusal to deal with the Troika. “Eurogroup will leave the details to this institution, who will present their view to eurogroup” he added.

Varafoukakis told CNN this evening that it was eurogroup who wanted more time to think, not the Troika. That is very, very economical with the truth – and not how other Syriza officials see it. The Troika has made it clear to eurogroup there are things they don’t like. As Naked Capitalism reported yesterday, ‘The Greek government is required to submit a list of reforms to the Troika by the end of day Monday. If it is not approved, the Eurogroup will meet on Tuesday.’

Guess what? Earlier this evening, Greek Channel NERIT announced that the eurogroup has asked Greece to submit a revised reforms list for its meeting Tuesday morning. The Guardian carries the same story.

I’m sorry, but at the minute Yanis Varoufakis isn’t coming out of this very well. For now, I support him to the hilt: but he is either going to resist the EC/ECB/creditors Troika or he isn’t. I know perfectly well that there are many among Athenian opinion-leaders who disagree with me about this. So perhaps – to illustrate the point – I might be allowed to relate an infamous Churchillian anecdote.

In the mid 1920s, WSC found himself seated next to a lady of liberal leanings at supper. Glad to have this arch anti-Communist to herself, the socialite took him to task about strike breaking, dissembling newspaper articles about the working class, and several other genuinely unpleasant dimensions of Churchill’s curate’s egg of a personality.

As ever when in the presence of what he regarded as uppity suffragettes, Winston was cutting and dismissive, telling the woman she should stick to worrying about her children and suitable marriages for her daughters – while remaining grateful for the fact that Britain had unwisely given her the vote.

“Mr Churchill,” said the shocked supper companion, “If I were married to you, I would put poison in your wine”.

“Madam,” Churchill lisped, “if I were married to you, I would drink it”.

Think of this as the “Drop dead” period of Syriza/EU insult exchanging immediately following the election.

Back in 1927, this not entirely auspicious exchange rapidly deteriorated, such that by the time pudding arrived, the lady concerned had reached the end of whatever short tether she possessed.

“Mr Churchill,” she said loudly, “You are the last person in the world I would ever marry”.

“Madam,” WSC responded, “A small part of marriage involves procreation in the bedroom. In order to show you what my real intentions are, under what circumstance would you consent to sleep with me?” The mortified woman hesitated, and then replied.

“There is no amount of money on Earth that would so persuade me”.

“Not even,” asked Winston, “£10 million?”. She laughed out loud.

“Don’t be ridiculous, that’s more than the Poor Relief budget. No woman is worth that”.

“Very well then,” said the future war leader, “Shall we say £500?”

“That is an insult,” she responded, “what do you take me for – a common prostitute?”

“Madam,” said Winston Churchill, “We have already established your profession. At this stage, we are merely haggling about the price”.

Fast forward to 2015: that’s what has been going on since Friday afternoon between Syriza and the Troika.

I don’t buy the “lose the battle, win the war” argument. While the Troika, Wall Street, US economic colonisation, EU fascism and banking sociopathy are indeed the enemy, this is a peace time exchange, not all-out war – yet. A strategic retreat is one thing: preparedness to cling to the driftwood of credibility is merely appeasement.

I’m now informed – in the last twenty minutes by a well-placed Syriza source – that fully eight Greek Cabinet members are opposed to acceptance of the deal. For myself, I feel cheated and made to look stupid by the hidden facts and cynical spin that followed Friday’s little re-enactment of the 1938 Munich crisis. But my feelings don’t matter a jot: let  The Slog’s Saturday post stand as a testament to rushed judgement. More to the point is the reality that an opportunity to call the Troika bluff has been blown.

If Yanis Varoufakis wants to regain his dignity – and keep Syriza together – he needs to think very carefully about what Prime Minister Tsipras should be asked to accept tomorrow…and then sell to his Party. For what will it benefit a man if he buys time, yet sells his soul?

€€€€€€€€€€€€

The Oil Derivatives Bomb

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on December 3, 2014

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Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives

Panic Button - Public DomainCould rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market?  The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either.  If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses.  In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts.  The companies enter into these derivatives contracts for a couple of reasons.  Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production.  Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace.  These dramatic swings rarely happen, but when they do they can be absolutely crippling.  So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now.  But who is on the other end of those contracts?  In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.

It has been estimated that the six largest “too big to fail” banks control $3.9 trillion in commodity derivatives contracts.  And a very large chunk of that amount is made up of oil derivatives.

By the middle of next year, we could be facing a situation where many of these oil producers have locked in a price of 90 or 100 dollars a barrel on their oil but the price has fallen to about 50 dollars a barrel.

In such a case, the losses for those on the wrong end of the derivatives contracts would be astronomical.

At this point, some of the biggest players in the shale oil industry have already locked in high prices for most of their oil for the coming year.  The following is an excerpt from a recent article by Ambrose Evans-Pritchard

US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015.

Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production.

So they are protected to a very large degree.  It is those that are on the losing end of those contracts that are going to get burned.

Of course not all shale oil producers protected themselves.  Those that didn’t are in danger of going under.

For example, Continental Resources cashed out approximately 4 billion dollars in hedges about a month ago in a gamble that oil prices would go back up.  Instead, they just kept falling, so now this company is likely headed for some rough financial times…

Continental Resources (CLR.N), the pioneering U.S. driller that bet big on North Dakota’s Bakken shale patch when its rivals were looking abroad, is once again flying in the face of convention: cashing out some $4 billion worth of hedges in a huge gamble that oil prices will rebound.

Late on Tuesday, the company run by Harold Hamm, the Oklahoma wildcatter who once sued OPEC, said it had opted to take profits on more than 31 million barrels worth of U.S. and Brent crude oil hedges for 2015 and 2016, plus as much as 8 million barrels’ worth of outstanding positions over the rest of 2014, netting a $433 million extra profit for the fourth quarter. Based on its third quarter production of about 128,000 barrels per day (bpd) of crude, its hedges for next year would have covered nearly two-thirds of its oil production.

Oops.

When things are nice and stable, the derivatives marketplace works quite well most of the time.

But when there is a “black swan event” such as a dramatic swing in the price of oil, it can create really big winners and really big losers.

And no matter how complicated these derivatives become, and no matter how many times you transfer risk, you can never make these bets truly safe.  The following is from a recent article by Charles Hugh Smith

Financialization is always based on the presumption that risk can be cancelled out by hedging bets made with counterparties. This sounds appealing, but as I have noted many times, risk cannot be disappeared, it can only be masked or transferred to others.

Relying on counterparties to pay out cannot make risk vanish; it only masks the risk of default by transferring the risk to counterparties, who then transfer it to still other counterparties, and so on.
This illusory vanishing act hasn’t made risk disappear: rather, it has set up a line of dominoes waiting for one domino to topple. This one domino will proceed to take down the entire line of financial dominoes.
The 35% drop in the price of oil is the first domino. All the supposedly safe, low-risk loans and bets placed on oil, made with the supreme confidence that oil would continue to trade in a band around $100/barrel, are now revealed as high-risk.

In recent years, Wall Street has been transformed into the largest casino in the history of the world.

Most of the time the big banks are very careful to make sure that they come out on top, but this time their house of cards may come toppling down on top of them.

If you think that this is good news, you should keep in mind that if they collapse it virtually guarantees a full-blown economic meltdown.  The following is an extended excerpt from one of my previous articles

—–

For those looking forward to the day when these mammoth banks will collapse, you need to keep in mind that when they do go down the entire system is going to utterly fall apart.

At this point our economic system is so completely dependent on these banks that there is no way that it can function without them.

It is like a patient with an extremely advanced case of cancer.

Doctors can try to kill the cancer, but it is almost inevitable that the patient will die in the process.

The same thing could be said about our relationship with the “too big to fail” banks.  If they fail, so do the rest of us.

We were told that something would be done about the “too big to fail” problem after the last crisis, but it never happened.

In fact, as I have written about previously, the “too big to fail” banks have collectively gotten 37 percent larger since the last recession.

At this point, the five largest banks in the country account for 42 percent of all loans in the United States, and the six largest banks control 67 percent of all banking assets.

If those banks were to disappear tomorrow, we would not have much of an economy left.

—-

Our entire economy is based on the flow of credit.  And all of that debt comes from the banks.  That is why it has been so dangerous for us to become so deeply dependent on them.  Without their loans, the entire country could soon resemble White Flint Mall near Washington D.C….

It was once a hubbub of activity, where shoppers would snap up seasonal steals and teens would hang out to ‘look cool’.

But now White Flint Mall in Bethesda, Maryland – which opened its doors in March 1977 – looks like a modern-day mausoleum with just two tenants remaining.

Photographs taken inside the 874,000-square-foot complex show spotless faux marble floors, empty escalators and stationary elevators.

Only a couple of cars can be seen in the parking lot, where well-tended shrubbery appears to be the only thing alive.

I keep on saying it, and I will keep on saying it until it happens.  We are heading for a derivatives crisis unlike anything that we have ever seen.  It is going to make the financial meltdown of 2008 look like a walk in the park.

Our politicians promised that they would do something about the “too big to fail” banks and the out of control gambling on Wall Street, but they didn’t.

Now a day of reckoning is rapidly approaching, and it is going to horrify the entire planet.

Your Recovery Without Drugs

Off the keyboard of Jim Quinn

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Published on The Burning Platform on August 18, 2014

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“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson

Does this chart portray an economic recovery in any way? Wages have been stagnant since the START of the supposed recovery in 2010. Real median household income, even using the highly understated CPI, is on a glide path to oblivion. You just need to observe with your own two eyes the number of Space Available signs in front of office buildings, strip centers and malls across America to realize we have further to fall. Low paying, part-time burger flipping jobs aren’t going to revive this debt saturated economic system. But at least the .1% are enjoying their Federal Reserve created high. Fiat is a powerful drug when administered in large doses to addicts on Wall Street.

The S&P 500 has risen from 666 in March of 2009 to 1,972 today. That is a 196% increase in a little over five years. During this same time, real household income has fallen by 7%. There have been a few million jobs added, while 11 million people have left the labor market. According to Robert Shiller’s CAPE ratio, the stock market valuation has only been higher, three times in history – 1929, 1999, and 2007. He seems flabbergasted by why valuations are so high. Sometimes really smart people can act really dumb.

The Federal Reserve balance sheet was $900 billion before the 2008 financial crisis. Today it stands at $4.4 trillion. The Fed has increased their balance sheet by 220% since the March 2009 market lows. Do you think there is any correlation between the Fed puppets printing $2.4 trillion and handing it to their Wall Street puppeteers, who used their high frequency trading supercomputers and ability to rig the markets so they never lose, and the third stock bubble in the last 13 years? It’s so self evident that only an Ivy League economist or CNBC anchor wouldn’t be able to see it.

sp500fedbal

 

Let’s look at the amazing stock market recovery without Federal Reserve heroine pumped into the veins of Wall Street banker addicts. If you divide the S&P 500 Index by the size of the Federal reserve balance sheet, you see the true purpose of QE1, QE2, and QE3. It wasn’t to save Main Street. It was to save Wall Street. Without the Federal Reserve funneling fiat to the .1% banking cabal and creating inflation in energy, food, and other basic necessities for the 99.9%, there is no stock market recovery. The recovery has occurred in Manhattan and the Hamptons. It’s been non-existent for the vast majority of people in this country. The wealth effect and trickle down theory have been disproved in spades. The only thing trickling down on the former middle class from the Fed is warm and yellow.

sp500fedbalratio

The entire stock market advance has been created on record low trading volumes and record high levels of monetary manipulation. Even though the Federal Reserve has driven senior citizens further into poverty with 0% interest rates, those with common sense have refused to be lured back into the lion’s den. They have parked record levels of fiat in no interest bank and money market accounts. They are tired of being muppets led to slaughter.

Quantitative easing was supposed to force little old ladies into the stock market and consumers to spend their debased dollars before they lost more value. The spending would revive the dormant economy just as the Keynesian text books promised. It didn’t happen. The peasants haven’t cooperated. Quantitative easing and ZIRP sapped the life from the middle class as their wages have stagnated and their living expenses have skyrocketed. Mission Accomplished by the Fed. Of course, the CNBC bimbos and shills would declare this $10.8 trillion to be money on the sidelines ready to boost the stock market ever higher. I love that storyline. It never grows old.

The MSM, government and Wall Street continue to flog the story about a housing recovery. It’s been nothing but a confidence game based upon the Fed’s easy money and the Wall Street scheme to buy up foreclosed properties with the Fed’s money. The scheme was to artificially boost home prices by restricting home supply through foreclosure manipulation, in order to allow the insolvent Wall Street banks to get out from under their billions in toxic mortgage loans.

Shockingly, the Case Shiller home price index has soared by 25% since 2012 despite first time home buyers being virtually non-existent and mortgage applications plunging to 14 year lows. How could that be? Don’t people need mortgages to buy houses? Isn’t real demand necessary to drive prices higher? Not when Uncle Ben and Madam Yellen are in charge of the printing press. Housing bubble 2.0 has arrived. I wonder if the Federal Reserve balance sheet increase of 50% since 2012 has anything to do with the new housing bubble.

It seems a similar result is obtained when dividing the Case Shiller Index by the size of the Fed’s balance sheet. The real housing market for real people is worse than it was in 2009. The national home price increase has been centered in the usual speculative markets, aided and abetted by the Fed’s easy money, managed by the Wall Street hedge funds, and exacerbated by the late arriving flippers who will be left holding the bag again. The Fed/ Wall Street scheme has priced young people out of the market and has failed to ignite the desired Keynesian impact. Investors/flippers account for 34% of all home sales. Foreigners with no knowledge of value metrics account for 30% of all home sales. The lesson of history is that most people don’t learn the lessons of history. The 2nd housing bubble in seven years is seeking a pin.

If ever you needed proof of the confidence game in its full glory, the chart below from Zero Hedge says it all. Mortgage rates have been falling for the past year, home builders have been reporting soaring confidence about the future, and the National Association of Realtors keeps predicting a surge in home buying any minute now. One small problem. Mortgage applications are in free fall, new home sales are at 1991 levels, and existing home sales are falling. Home prices have peaked and are beginning to roll over. The Wall Street hedgies are all looking to exit stage left. Young people are saddled with over a trillion of government issued student loan debt and millions of older subprime borrowers have been lured into more auto loan debt. Home sales will be stagnant for the next decade.

 

Quantitative easing will cease come October, unless Yellen and Wall Street can create a new “crisis” to cure with more money printing. By every valuation measure used over the last 100 years, stocks are overvalued by at least 50%. By historical measures, home prices are overvalued by at least 30%. Ten year Treasuries are yielding 2.4%, while true inflation is north of 5%. With real interest rates deep in negative territory, the bond market is even more overvalued than stocks or houses. These simultaneous bubbles have been created by the Federal Reserve in a desperate attempt to keep this debt laden ship afloat. Their solution to a ship listing from too much debt was to load it down with trillions more in debt. The ship is taking on water rapidly.

We had a choice. We could have bitten the bullet in 2008 and accepted the consequences of decades of decadence, frivolity, materialism, delusion and debt accumulation. A steep sharp depression which would have purged the system of debt and punishment of those who created the disaster would have ensued. The masses would have suffered, but the rich and powerful bankers would have suffered the most. Today, the economy would be revived, saving and investing would be generating needed capital for expansion, and banks would be doing what they are supposed to do – lending money to businesses and individuals. Instead, the Wall Street bankers won the battle and continue to pillage and loot the national wealth while impoverishing the masses.

The arrogance, hubris and contempt for morality displayed by the ruling class is breathtaking to behold. They think they are untouchable and impervious to norms followed by the rest of society. They may have won the opening battle, but will lose the war. Discontent among the masses grows by the day. The critical thinking citizens are growing restless and angry. They are beginning to grasp the true enemy. The system has been captured by a few malevolent men. When the stock, bond and housing bubbles all implode simultaneously, all hell will break loose in this country. It will make Ferguson, Missouri look like a walk in the park. I wonder if the occupants of the Eccles building in Washington DC will get out alive.

“It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”Henry Ford

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Wealth Confiscation & Destruction

Off the microphone of RE

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Aired on the Doomstead Diner on July 6, 2014

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Snippet:

SAMSUNG CAMERA PICTURES…For today, I want to look at the specter of Wealth Confiscation coming down the pipe, which has already occurred in places like Cyprus, but looks likely to expand in scope as the general financial Ponzi of the World implodes.

Graham Summers of Capital Research is a regular contributor to ZH, and a regular predictor of Financial Doom as well.  His schtick is how you need to set up your portfolio for Doomsday.
 
In his latest piece below, Graham talks about how TPTB will come after anyone with financial assets over around $200K, striking FEAR into the Heart of every 1%er out there.

The idea here is, TPTB will do anything and everything they can to try to keep the financial system floating another day, and if that means they have to confiscate the paper wealth of 99.9% of the people with some money in the bank, they will do so.

While worrisome to the 1% crowd out there, this is probably not quite so worrisome to the .01% with wealth measured in $Billions$.  These folks are “Key Men”, and though they may take a Haircut at the beginning, they won’t lose it ALL

For the rest, LISTEN TO THE RANT!

RE

Harry Potter and the Wizard of Piketty

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on May 26, 2013

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The decadent, corrupt West and its imitators shiver at the end of the resource gangplank; the sharks are circling, the water is cruel and icy, the wind bitter, both space and time to procrastinate are gone … citizens are desperate to find some way past our self-created problems, we look with fluttering upward-turned hearts towards a savior … someone appropriately stylish … who can figure out how we can keep our resource gobbling pleasures while passing the costs associated with these pleasures onto others.

We expect wizardly economists and politicians to save us, clearly because they have been so incredibly successful at getting us where we are right now, shivering at the end of the gangplank.

Enter an acceptably chic savior-candidate, Thomas Piketty, a heretofore obscure, mild-mannered Parisian economist who has published a new book titled, “Capital in the Twenty-First Century”; an analysis of income- and wealth inequality based on a statistical review of tax and estate records of thirty countries including India, Japan, Malaysia and Uruguay beginning in the 19th century. He also examines changes in inequality over time in the United States from the Gilded Age to the present, asserting that wealth disparity is now as great as it has ever been.

Piketty’s timing could not be better: his concerns have emerged when grievance against inequality has become fabulously modish. Pope and president rail against it, Senator Elizabeth Warren’s anti-banker “Fighting Chance” stands alongside “Capital” on the New York Times best-seller list. Piketty joins a growing list of economists, sociologists, more economists, organizations, yet more economistsand bankers … even tycoons themselves, whining about excesses of tycoons. Meanwhile, wealth interests argue that Piketty’s work is riddled with errors and is not to be taken seriously.

Piketty’s observes; r > g … that money multiplies itself, the return r on money increases faster than does economic growth. Of course it must, by one means or another the rich will become richer, something will always increase faster than growth: (?) > g … in our instance, it is unsecured credit. Here, Piketty stands firmly on the easy side of conventional economic analysis. He paints a malfunctioning equilibrium economy where the chief complaint is decline in consumption efficiency; the increase of tycoon wealth takes place at the expense of workers. Tycoons invest their funds rather than squander them, by so doing they pinch off needed demand; businesses are deprived of customers, inventories build, businesses fail; there is increased unemployment, workers become burdened with debts that they cannot retire or service; the outcome is slow growth or recession.

Piketty’s macro view of tycoonery is remarkably bloodless, the rich are seen as automatons harvesting compound interest while onlooking masses fidget in silence. “Eventually, Piketty says, we could see the reëmergence of a world familiar to nineteenth-century Europeans; he cites the novels of Austen and Balzac. In this “patrimonial society,” a small group of wealthy rentiers lives lavishly on the fruits of its inherited wealth, and the rest struggle to keep up.”

This view understates the degree to which the tycoons actively immerse themselves within the wealth generating process, by promoting their own interests or by way of simple theft. Tycoons- and their wannabes are not bystanders but most rational of self-maximizing agents, unlike the workers they have leverage, they can make use of other peoples money’ which these others are more than eager to offer. Tycoons are parasitic enablers and opportunists; all else being equal, remove them and others will rush forward to take their places. Like Voldemort, tycoons are embodiments, creatures of the desires of their working-class clients.

Piketty is no ordinary academic, nor is he the archetypical ‘cafe communist’ skulking between bistros in St. Germain-des-Pres, chain-smoking foul-smelling cigarettes while muttering Marcuse and Sartre quotes under his hideous breath; he is a component of the French political establishment, a ‘house economist’ of the Parti Socialiste along with ex-IMF boss Dominique Strauss-Kahn, a past economic adviser to Ségolène Royal and current French president François Hollande. “Capital” is a French government policy document tarted up as a pop-culture analog to “Harry Potter and the Deathly Hallows”.

Economists are generally wrong about everything particularly the economy. Piketty grasps the baleful political nature of tycoon predation … that the marginal ‘wealth’ in the West has pretty much become the exclusive property of the rich. There is an obvious fairness argument must be taken seriously; it is socially and politically unacceptable that tycoons live sumptuously while ordinary citizens are deprived. Piketty and friends don’t go far enough. Rampaging tycoonery is only a component of onrushing economic descent which is the consequence of prior economic successes; non-stop consumption of capital by increased numbers of workers over the past 300+ years has finally caught up to us.

Having been given the chance, workers turned out to be as rapacious as their bosses. Economists including Piketty assert that this was for the best; that Americans’ monopoly on the wasting enterprise post-World War Two represented a ‘golden age’. This might be true but is also nonsense; golden ages have mighty consequences. Industrialization is ‘coming up short’ of the necessary cheap energy supplies needed to keep the bulk of the workforce employed at wasting energy. Our marketplaces are re-pricing capital to reflect changes in supply and demand; we dislike the markets’ verdict because the higher real fuel- and other resource prices cause recessions, the high prices are a remorseless tax on output.

Economists such as Piketty insist that capital is symbolic (money) rather than material. Capital is non-renewable resources, all industrial money is debt. Money is infinitely reproducible, material inputs — the actual basis of production — are not. The existence of unlimited money is by itself an incentive to waste capital even as input constraints unravel dependent enterprises such as petroleum, also agriculture, which requires topsoil, water and waste-carrying capacity. Adding more claims or shifting them around from one group or another does not increase capital but rather depletes it more quickly; efficiency does not assist but rebounds against us.

On a cash-flow basis our consumption economy is continually ‘underwater’, the gap between capital cost and system return — zero — is financed with debt. When input prices are low, the amount to be financed is affordable. Scarcity reprices resource capital, it becomes more costly than what can be affordably financed. At some point both capital and necessary credit are priced out of reach. The outcome is credit-driven ‘demand destruction’ which is currently underway around the world.

“Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”

— John Steinbeck

Modernity cannibalizes itself, it has done so for a very long time, as such our crisis is irreversible. Conventional marketplace remedies such as debt jubilees/write-offs, funds- or earnings redistribution, bailouts, stimulus, austerity policies, monetary easing, etc. have no effect on outcome other than to worsen conditions. These are efforts to reclaim capital that no longer exists. Consequently, remedies accelerate unraveling process by increasing gross debt (claims against capital) while exposing our remaining capital to consumption at higher rates. The capital ‘pie’ cannot be redistributed, only a new and much smaller pie remains to be carefully tended. This diminished pie of non-renewable resources is what we have to make use of, to last us and the rest of the world’s creatures until the end of humanity. Adjusting the waste-based economy to operate at greater efficiency depletes capital more thoroughly at a higher rate. Giving workers access to what remains of our capital resources will not enrich them but will accelerate their ruin.

Growth and capital depletion are the consequence of a culture of excess that refuses to accept limits: there is human overpopulation, a ballooning excess of capital-gobbling machines along with extractive industrial agriculture. Failures in credit- political- and production sector marketplaces are the manifestation of resource/capital depletion. What is underway is Conservation By Other Means™.

That the industrial economy cannot afford itself is self-evident: if the enterprise was productive it would retire its own debts. Industrial productivity is a myth … promoted by industrialists themselves who use credit to effect economies of scale … to continually take on greater amounts of debt.

The Dominion of Debtor-Tycoons

The industrial economy is a system that allows a handful of tycoons to borrow immense fortunes, leaving society as a whole to retire the loans; economic wizardry in action.

Industries’ promise of future returns stands as collateral for loans which are funneled to the owners. Firms borrow their profits as enterprises cannot earn organic, ongoing real returns (they must continually borrow against the accounts of their customers or that of the state). By answering to the transitory demands of fashion and for no other reason, the firm gains access to loans. Sufficient funds are left in firm accounts to maintain the appearance of actual business until it is time to borrow again. Firms by themselves are collateral for nothing, they are abstract containers for ‘potential’; for hoped-for gains in some undetermined future. The promise of increased resource waste-over-time; is collateral for debts, the justification for both the firm’s borrowing as well as for the firm itself … and nothing more. The consequence of this is massive, multiple-hundred-trillion-dollar debts secured with some used cars, lies, potholed infrastructure and toxic gases circling overhead in the atmosphere poised like elder gods to strike us down.

A firm’s ‘secondary good’ is jobs provided for willing workers: however, centralized industry eliminates employment. The labor of entire communities is concentrated into a few firms, this reduction in labor is abstract ‘productivity’, a statistical artifact. The debtonomy evolves toward simple arbitrage: money gains money returns directly without the need for physical output or workers. The process enables tycoons while repressing the rest; r > g.

A reordering of society for good or ill is an absolute certainty. Reordering will occur either as the outcome of rational policy and good management on our part or as the result of national bankruptcies and massive increases in poverty. Piketty along with his cohort offer adjustments to tax policies that would penalize non-productive rentiers while pushing the liberated funds into circulation. This is inadequate, we have reached an impasse where the outcomes of conventional administrative success or failure are indistinguishable from each other. Piketty himself admits that more than an equalizing gesture is unlikely: the public looks toward tycoons as saviors. The effort to tax would likely be ineffectively broad with too many exclusions … reflecting tycoon-dependent politicians whose hearts are not in the project.

Much is made of the marginal income tax rates levied against the wealthiest earners in the US during the period from 1932 to 1964. Leaving out the Depression and war period, this level of taxation — which few actually paid — coincided with that golden age of American business prosperity. The prosperity matters but not as much as the rate; the top levy was 94 percent during 1944-45.

An effective strategy would be to tax the total wealth of the top-ten richest Americans every year at a 99 percent rate with the proceeds distributed directly to the poor. Taxes are generally evaded, there are always some who cannot evade: ten tycoons is a very small number, fewer than would be unable to avoid a more general levy. The number is so modest that the process would become a popular public spectacle which would be a purpose of it; a kind of inverse game show. The ten richest at any given time are not hard to identify or find, in fact there is no place for them to hide. There no cause to feel pity for them, either. Their fortunes are abstract claims gained by way of chicanery and held for competitive purposes; they are beyond what any man or even family can spend over several lifetimes. The wealth of a Michael Bloomberg is such that the reduction of 99% of his fortune would leave him with $310 million, still an enormous sum, certainly sufficient for him to eke out a penurious subsistence in a Manhattan penthouse, or in the Hamptons. Certainly, fixing ten billionaires with certain losses would not be the same as booting them out of the cargo door of an aircraft over a combat zone. The political bosses don’t hesitate to consign thousands of the country’s children to this fate; it is not unreasonable to require a small number of billionaires make a modest sacrifice for national well-being … nobody is going to shoot at them.

The ‘residual’ gained by way of this tax would be removed to the various finance marketplaces and converted from shares or notes into currency within 30 days. Generally the holdings of tycoons is in the form of stock, these would be sold ‘at the market’; the markets would certainly decline as a result of these forced sales. There is a reason for this as well, to demonstrate that markets are two sided, that they sometimes work against the interest of fortune as well as to accommodate it. Resulting funds would be distributed equally to those currently receiving food stamps (SNAP) within 60 days. Using the current group of tycoons as an example, the payments would amount to about $4,000 per recipient (x 50 millions).

The aim is to solve the challenge posed to the democratic process by tycoons and their practically unlimited money: here is a top-ten list that nobody would want to be on. The tax would be hard to evade as assets are readily identifiable and easily frozen. Tycoons fleeing the country would be labeled as tax evaders and hounded. By way of this process both wealth and money would de-sanctified, the state would be seen as even-handed, its efficacy would be increased. A limit would emerge as remaining wealthy would look to restrain themselves voluntarily or risk losing everything … a tycoon’s race to the bottom.

Another strategy is to describe how tycoons gain their fortunes in the first place, to dispel common myths. Tycoons do not ‘earn’ anything, by dint of creativity or managerial expertise, by manufacturing and selling widgets (job creation) or by lending and collecting interest. Instead, they borrow vast amounts — which are theirs to keep — then shift the obligation to service and repay the debts onto others: taxpayers, retirees, children and workers overseas. Put another way: a large percentage (30%) of Fortune 500 companies operating in 1970 were out of business within fifteen years. The lifespan for the ordinary business corporation is 50 years. Against this backdrop of failure, the tycoons proliferate and their fortunes swell. For them to succeed they must be short-sellers, that is, ‘bet’ against their own businesses. They borrow … then sell, they rush in to buy back after the company is dissolved, when shares or other ‘instruments’ are worthless, repayment obligation falls to zero. The tycoon retains 100% of what he has borrowed — meanwhile, the firm’s employees have lost their jobs.

The Walton family and the Kochs, Donald Trump … all of whom inherited great wealth .. these individuals and their firms whether they are decrepit or not are deemed by Wall Street to be credit worthy. Their parents borrowed then sold and became stupendously rich; the heirs now do the same thing.

A more generalized approach is to adapt a vaccination strategy, to adopt a certain degree of voluntary discomfort and inconvenience so as to forestall- or minimize the effects of out-and-out collapse. The economy would be inoculated with an attenuated version of the ‘recession’ virus so as to allow it to escape the most baleful effects of the actual virus itself. The attenuated vaccine would include requirements to cut energy use by a large percentage, to take on little- or no debt, to end bailouts of bankers and tycoons, to regulate interest rates and to vigorously prosecute finance law-breakers. The outcome would be unpleasant but only by a matter of degree, there would be a recession that is permanent but manageable as opposed to an unmanageable and destructive depression that would also be permanent. The recently inconvenienced millionaires (and billionaires) would be unhappy … they would have to give up their pleasures … but they are indeed beggars, they have few choices, this option represents more of a choice than the beggars deserve.

Alternatively, tycoons could make themselves useful … “the reëmergence of a world familiar to nineteenth-century Europeans; referring to the novels of Austen and Balzac. In this ‘patrimonial society,’ a small group of wealthy rentiers lives lavishly on the fruits of its inherited wealth, and the rest struggle to keep up.” In return the rentiers would hold tightly to the world’s resource capital and husband it carefully … until someone can figure out what to do with it besides burn it up in a Chevy. Whatever they might be paid would not be enough.

Economic Sense and Nonsense

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on December 16, 2013

schrodinger

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e·con·o·my

/iˈkänəmē/
noun
noun: economy; plural noun: economies
    1. the wealth and resources of a country or region, esp. in terms of the production and consumption of goods and services.
      synonyms: wealth, (financial) resources;
      financial system, financial management, “the nation’s economy”

      financial system, financial management
      “the nation’s economy”
      • a particular system or stage of an economy.
        “a free-market economy”

 

  1. careful management of available resources.
    “even heat distribution and fuel economy”
    synonyms: thrift, thriftiness, providence, prudence, careful budgeting, economizing, saving, scrimping, restraint, frugality, abstemiousness

    “one can combine good living with economy”
    antonyms: extravagance

    – from Google

    When is enough enough? When do economic ‘deep thinkers’ pull their heads out of their asses and realize there is more to economics besides cheerleading exponentially increased numbers of new cars, tract houses and the latest from Apple? Don’t these people understand entropy? Selling tens of billions of new cars would certainly be good for the car business but what about everything else?

    Right now we are destroying our life-support system so that a relative handful of individuals can become ‘rich’ … adverse conditions apply to wealthy and poor alike. After we screw up there is nowhere ‘off planet’ for the rich to go.

     


    Dead or alive? Schrödinger’s markets

    “True economic health will be known only when stimulus is removed!” says Financial Times.

    Rude good health is when our nature-raping monstrosity is able to cannibalize its own capital without any special help from the government. Of course, our irreplaceable capital must be continually annihilated faster because that rate of increase represents ‘growth’; the annihilation process is collateral is our ‘wealth’. We’ll know when we’ve finally reached the highest level of success when we fail spectacularly, when everything blows apart.

    What is wealth, you ask? Do you really want to know?

     

    Central banks have flooded the financial system with cash, driving investors to park their money in higher-yielding securities and largely obfuscating the true state of underlying markets.

    Take, for instance, the corporate default rate and the analytical models that are supposed to he …

     

    Blah, blah, blah! Everything the Financial Times writes after the words ‘Central Banks have’ is utter nonsense. The remark is designed to mislead. Either the highly regarded author of the piece is a complete moron who doesn’t know the first thing about finance or the Time’s staff knows better and is mouthing a client’s company line.

    People who claim the central banks print money are peak oil deniers, as it is the high and increasing real cost of fuel that is slowly and certainly strangling industrial economies. $110/barrel crude does not bring any more goods or services into this world than did $20 crude. The difference is prices is simply a tax levied by our past economic success against every current — and future — fuel user! Central banks cannot drive money costs low enough to compensate for rising costs of fuel. $110 Brent is the equivalent of a 5% or higher policy rate. Add this to the penalty rates levied against countries in Southern Europe and the result is +10% interest for sovereigns and banks … no surprise that Europe is falling apart.

    Fiddling with interest rates won’t deflect fuel prices: even if lenders pay customers to borrow there is no re-lending of fuel resources. When they are gone they are gone …

    Common sense lesson for Financial Times: central banks cannot ‘print money’ because they are collateral constrained, that is, they cannot make loans that are greater than the worth of collateral they take on as security. When central banks issue funds they are always very careful to accept ‘high-quality’ collateral from borrowers when they do so. Since finance institution collateral is promissory notes from loans already made, the central bank does nothing but refinance existing debt; no new money is created.

    A central bank can make a $10 billion loan against $10 billion in collateral but not a loan greater than that amount; it generally offers less than par; giving collateral a haircut. Only private sector finance institutions can make ‘unsecured’ loans; that is, lending increased amounts over and over against the same collateral … or against no collateral at all. Commercial banks have underwriting departments that determine whether a borrower can repay or not, whether he will be able to borrow tomorrow so as to retire the loan he seeks today. Central banks are dependent upon private sector credit creation => finance lends to itself because it can book ‘wealth effect’ gains-on-paper => this assures future loans = the finance marketplace is a self-perpetuating Ponzi scheme that serves to dump hundreds of borrowed billion$ into the pockets of tycoons.

    The rest of us are obliged to repay these loans …

    Private sector finance has a capital structure, an ownership interest/equity with the capacity to ‘sell’ risk at a discount to others. Central banks are ‘reserve banks’; they have no capital to speak of, they are risk absorbers. Returns are not retained but are paid to the treasury. Central banks are balance sheets and nothing more: assets and liabilities are always balanced … all loans are secured, they have to be. If not, the central bank is instantly another commercial bank and insolvent for the same reason; excess leverage. The ruined cannot rescue the ruined: there would be no lender of last resort, no entity able to fix asset prices or reassure markets and depositors. The entire banking system would teeter, there would be runs out of it.

    Right now there are signs that central banks have exhausted collateral and are inching toward leveraged lending, toward insolvency. Evidence is capital flows out of countries such as China.

    If a central bank was to make an unsecured loan to any one bank, all the other commercial banks would demand the same treatment. Banks would quickly borrow unlimited amounts without offering collateral. Private sector banks do not leverage the Fed or other central banks because they are disciplined but because they are unable to do so; they must offer collateral and there is not enough to go around.

    Keep in mind, real, physical collateral evaporates under everyone’s nose. Vast amounts of money are lent into existence to gain fuel, the fuel is instantly burned for nothing — at the end of the day there is no more collateral. What remains after each successful loan-for-fuel transaction is the need for even more loans and more fuel to burn. Collateral for the entire system ceases to be a thing but ‘demand’ for things to destroy. This destructiveness is the underlying health of the economy we are all supposed to be concerned about!

    Because the greatest amounts of debt have been taken on to buy fuel in some form or other, use of the fuel = destruction of the collateral. The only thing that allows this process to continue us is our purposeful and collective refusal to understand the true nature of collateral … or to accept what we are doing as a form of collective insanity.

    Something to keep in mind: when central banks conduct open-market operations such as quantitative easing (QE) it creates excess reserves. By doing so the central banks effectively create guarantees of commercial bank deposits. These reserves emerge from the shadows when there is a redemption demand, by depositors seeking their money … as during a bank run. It might be interesting to know why central banks seem intent on guaranteeing bank deposits in this way. Is there something that the central bank is not telling us?

    Because of faulty reasoning and desire to maintain the status quo at all cost, the banking system looks ready to unravel at the drop of a hat … of course, nobody will have seen it coming!

    Banks failed all over the world after Creditanstalt collapsed in 1931. There was a gigantic run, depositors demanded gold which the holders were loathe to part with. The result; velocity cratered which increased the demand for circulating money which was in turn held more tightly is a vicious cycle.

    Creditors called in loans; borrowers who retired their loans saw their repayments extinguished. This is how the money-creation process works: money appears when it is loaned into existence then extinguished when the loan is repaid. In the early 1930s, the demand for currency was increasing even as currency supply was being diminished; the result was a scarcity premium attached to money. It became impossible to find enough of the expensive currency to retire the remaining loan balances … this in turn caused defaults and decline in worth of non-money assets in yet another, complimentary vicious cycle.

    By 1933, most US banks were permanently closed except for those in two states (Manchester). When Roosevelt was inaugurated he declared a state of emergency and ordered Congress to prepare for an all-out effort to end the banking crisis. The Congress quickly authorized a seven-day bank holiday which provided time for the Treasury to print $700 million in currency; this was then flown to the Federal Reserve banks for distribution to commercial banks. This cash infusion allowed the banks to reopen and pay circulating money to depositors (who could then turn around and repay their own loans).

    Repayment to depositors was limited to currency as it could be printed rather than dug out of the ground or ‘bought’ with cripplingly high interest rates in the international market as had been the case up to that time. FDR and Congress removed specie out of circulation — it was already hoarded out of circulation and most gold holders were banks or speculators — and outlawed the predatory gold clause in contracts. The dollar was depreciated 40% against gold as well as against European currencies that were still pegged to gold. Without a gold peg to defend or gold hoards to increase, US interest rates retreated and nominal commodity prices including agricultural goods increased. The US stock market reached its lowest level (inflation adjusted or nominal) and began to rally. FDR had bailed out the banks, and by doing so he bailed out much of the rest of the US economy!

    After the immediate bailout, the government insured bank deposits, began to regulate Wall Street trading, separated ordinary deposit banking from finance underwriting, insurance and other forms of gambling. FDR also used federal money to employ some of the millions of young, unemployed men and women. His most successful programs were Works Progress Administration, Tennessee Valley Authority, Civilian Conservation Corp, the pro-union Wagner Act, Social Security, then later the Agricultural Adjustment Act.

    Today, the entire banking system is insolvent w/ banks’ non-government assets being worth far less than their face price. What keeps banks and bank-like entities afloat is dishonest accounting/mark to fantasy and the defective understanding (hope) that the central bank will lend against these impaired assets @ near-par. At some point every asset will be carefully measured on more rational grounds. Fantasy worth will be rejected: the result will be a massive hit against banking system liabilities which will result in banks closing — as during the 1930s.

    In the 1930s, bank balance sheets were lopsided; assets were often stocks bought during the Great Bubble or accumulated immediately after the crash — collected by way of margin calls. Assets also included inflated mortgages on now-worthless land. Bank liabilities were minuscule relative to the pyramid of assets; the loss of only a small amount of asset worth wiped out bank capital and impinged on liabilities. Banks closed rather than hand out their remaining deposits, some of which wound up in the Treasury and the central bank as non-balance sheet custody items. One could say the Treasury got a good deal, for $700 million in public currency the Treasury gained control over billions, at the same time it retired claims (liabilities) that would have otherwise contributed to the bankruptcy of the entire system.

    What would bankrupt the system today is situational awareness, the recognition of systemic insolvency. Right now the Depression-era depositor guarantees protect against one or two banks failing due to insolvency and over-leverage, not against all the banks being insolvent and over-leveraged at the same time. Ordinarily, if one bank fails, liabilities are shifted from the failed bank to other, solvent institutions. As discussed previously, when the entire system is over-leveraged, shifting funds from one failed bank to another is futile; all the banks are in effect a single, giant bank; depositor funds are trapped therein. Unlike in 1934, it would take far more than $700 million to refloat the system by making depositors whole with currency; it would take years for the government to produce even the smallest part of total liabilities (insured deposits) in paper money. There is over $7 trillion deposited @ banks, there is less than $1 trillion in currency, 40% of that is overseas. Seven trillion dollars is seventy billion $100 bills, there isn’t enough paper or ink! This is the problem with the post-modern bank run; depositors are unable to gain currency/circulating money because there isn’t enough time or resources to print it. On the other hand, shifting funds from one depository to another is pointless because all of them are bankrupt.

    When the central bank begins to offer unsecured loans and to leverage its collateral thereby, then the entire system from the largest to the smallest bank is insolvent. Afterward, the Treasury — with its massive imbalance of debits vs. liabilities as well as incompetent, criminal management — becomes insolvent. This is what Irving Fisher was describing in 1933.

     

    39.

    Those who imagine that Roosevelt’s avowed reflation is not the cause of our recovery but that we had “reached the bottom anyway” are very much mistaken. At any rate, they have given no evidence, so far as I have seen, that we had reached the bottom. And if they are right, my analysis must be woefully wrong.

    According to all the evidence, under that analysis, debt and deflation, which had wrought havoc up to March 4, 1933, were then stronger than ever and, if let alone, would have wreaked greater wreckage than ever, after March 4. Had no “artificial respiration” been applied, we would soon have seen general bankruptcies of the mortgage guarantee companies, savings banks, life insurance companies, railways, municipalities, and states. By that time the Federal Government would probably have become unable to pay its bills without resort to the printing press, which would itself have been a very belated and unfortunate case of artificial respiration. If even then our rulers should still have insisted on”leaving recovery to nature” and should still have refused to inflate in any way, should vainly have tried to balance the budget ad discharge more government employees, to raise taxes, to float, or try to float, more loans, they would soon have ceased to be our rulers. For we would have insolvency of our national government itself, and probably some form of political revolution without waiting for the next legal election. The mid-west farmers had already begun to defy the law.

    40.

    If all this is true, it would be as silly and immoral to “let nature take her course” as for a physician to neglect a case of pneumonia. It would also be a libel on economic science, which has its therapeutics as truly as medical science.

     

    One possible fix would be to forget trying to print the needed amounts of currency and turn deposits into a federalized form of Bitcoin. Deposits could be held by individuals on their own personal computers rather than at failed-and-failing banks. That this might be a real strategy is indicated by Fed/Treasury interest in Bitcoin … not to shut it down but to make use of it.

    Make no mistake; if the banks fail in the US and money becomes unavailable as it was in Argentina in early 2000s, there will be disturbances in this country. Americans have put their entire faith in money, it has been elevated in the place of family- and community: this is the big difference between USA in 2013 and USA in 1933. Take away the money flows — even for a little while — and there are instantly very serious problems … panic, breakdown of money-dependent processes leading to shortages of critical goods, loss of confidence, public rage and sense of ‘nothing to lose’.

    There would be tremendous backlash against the bankers. It’s one thing for the bankers to steal from the middle class stealthily as they have been doing since 1980, but stealing at once in broad daylight would be too much to bear.

    Attempting to make depositors whole with insufficient banknote capability allows for the printing of ‘unconventional’ notes of very high denominations, such as the famous RM 1,000,000,000 note. Banknote insufficiency is a component of hyperinflation that must be kept in mind at all times. If a depositor demands $100,000 there is the temptation on the part of the government to offer that individual a $100,000 bill instead of a thousand $100 bills. The first large-denomination bill is accompanied by others which are superseded by ever- larger bills as nominal currency demand increases along with nominal deposits in yet another self-reinforcing cycle. System failure is not currency failure but that of system components and currency ‘trap’.

    Here is another highly-regarded thought leader who does not recognize that the world has been changed by our own success:

     

    23 years ago the world seemed much simpler. Francis Fukuyama wrote that the West had won the war of Capitalism. However, 23 years later things have changed. By 2016 the economy of China will exceed that of the U.S. This is not what Fukuyama expected in 1989. It should not be possible that a communistic society could poised to overtake a capitalistic economy. It is quite an amazing turn of events.

    The explosion of public debt in Western economies is a symptom of the more profound economic malaise. The argument between stimulus and austerity are very futile. The reality is that by 2050 interest payments on government debt will be above 100% of federal revenues according to the Alternative Fiscal Scenario (AFS) of the CBO. The AFS is the more realistic of the two assumptions that the CBO produces.

    If we look at the US and China per capita to GDP ratios we find that in 1978 the average American was 22 times richer than the average Chinese citizen. Today, that ratio is down to only 5 times. The great divergence of prosperity that was generated by the strength of capitalism is now the great re-convergance.

    There were “6 Killer Apps” that defined the U.S. during its great economic growth cycle.

    1) Competition

    2) Scientific Revolution

    3) Modern Medicine

    4) Consumer Society

    5) Work Ethic

    6) Property Rights

    Those issues allowed for growth, innovation and rising economic prosperity during the 20th century. Today, while the rest of the world has slowly been adopting these “killer apps” the U.S. is slowly losing them.

     

    Says the analyst …

     

    “I did not come to this country to participate in its decline.”

     

    How self-congratulatory … and how misleading. America’s ‘Killer Apps’ were largely a matter of luck: that FDR was in charge of America during the Great Depression rather than Herbert Hoover. The American banking system avoided collapse by a matter of days or weeks in 1933. It would have taken a long time for the country to recover afterward had deflationary matters been allowed to run their course. As it was, the bellicose states Germany and Japan recovered more quickly than America, enough to take advantage of the US’s economic weakness and inability to secure its own and allies’ overseas interests. The consequence was a titanic and unnecessary conflagration that took tens of millions of lives.

    Any number of different conditions or sets of conditions can be added to those above to explain why American industry succeeded completely during its, “great economic growth cycle”. Missing from this list includes cheap labor, access to sea trade, favorable demographics and helpful doctrine — the gently moderating Invisible Hand.

    Most important and left out are access to inexpensive energy resources and organic credit. The latter is critical: centralized industry is fundamentally loss-making; credit is required in order for industry to both take root and to carry forward. The difference between economic success or failure is whether a country has access to its own sources of loans or must rely on intermittent streams of external funds. With organic credit a country lacking resources can gain them in exchange for excellent-appearing empty promises.

    American colonies in the early-to-mid 1700s were at the mercy of their home-island lenders whose rapaciousness was a major cause of the Revolution. Banks in London would lend in the form of paper drafts — discountable bills issued at no cost to them. Borrowers were compelled to repay in gold or silver. Inability to pay in the ‘appropriate manner’ resulted in forfeiture as lenders deputized the Crown’s agents and by way of arbitrary writs dispossessed borrowers in kangaroo courts. One reason for this abuse was 75-plus years of costly warfare in North America between England and France.

    Enough abuses and the colonists rebelled. Afterward, Americans erected their own credit structure: a national treasury, an American currency, sufficient large finance institutions able to act as lenders of last resort and final guarantors of liabilities, then a central bank. America also had many local banks able to make loans or issue bills as well as a legal structure including enforceable private contracts.

    Indeed, it is only within the context of enforceable — and equitable — contracts do competition, consumer society, work ethic or private property matter.

    Likewise, the UK possessed its own organic credit which was necessary — along with the theft of Spanish-New World treasure — to finance the Industrial Revolution. This included the Bank of England, Britain’s country banks as well as merchant lenders and insurers within the City of London, the well-regarded and long enduring sterling currency and discountable bills-of-exchange; also commercial laws and the court system within which these would be exercised. With organic credit the iron machines and factories that made them were made possible in the first place as all had to be bought and paid for before they could be put to any use.

    Kenya was a country with ‘killer apps’ but no organic credit; like the other colonies it was dependent upon British credit and currency. Kenya’s economy ‘succeeded’ when credit flowed from the UK towards it, Kenya was ruined when credit rushed out. Blame for ruin was cast upon demographics: Kenya is a country filled with hapless Negro savages who deserve whatever they get. Demographics cannot explain the repeated failures of Ireland, a country filled with Caucasians; also a country that was — and is — a slave-state to external credit.

    Ireland: a country that once borrowed in sterling now borrows euros from the European Union; as such it is as much a colony as it ever was; ditto Greece, Spain, Portugal, Italy … France. Here is real Killer App: all EU nations are credit slaves to nothing or no-one … only each others’ foolishness and iniquity.

    “Growth, innovation and rising economic prosperity during the 20th century,” is the outcome of expanding credit and self-extinguished resources. A highly regarded economic thinker swings and misses:

     

    There is no such thing as “the central challenge to growth”. Proof is impossible to come by with respect to all macroeconomic controversies. Klein vapidly handwrings that, “Growth simply isn’t producing enough jobs” without meaningfully addressing the question of how to achieve growth, or addressing the arguments that Bernstein carefully catalogs for why a broader distribution might be growth-supportive. When Klein writes “fixing [unemployment] is necessary, though not sufficient, to making real headway against inequality”, he is making an empirical assertion without …

     

    The content of this relatively harmless and inoffensive article what one might expect. What matters is the repeated invocation of ‘growth’ and the absence of a “central challenge” to it. Evidence is easy to find, one need only drive to a gas station and fill ‘er up. The $3+ dollars squandered on each gallon in excess of the small change spent in identical transactions during earlier and better times is money that cannot be spent elsewhere: it subsidizes the decreasingly productive petroleum industry. Meanwhile, the collateral in the gas tank is burned up for absolutely nothing. The economist does not recognize the problem, in fact he likely believes he is contributing to a better world by adding to ‘demand’.

    The car cannot be paid for by driving the car … neither can the gas. The driver-economist could become a courier or taxi driver but there is very modest amount of commercial business for drivers so employed. The fuel customer must instead borrow; his boss borrows against the bank accounts of his company’s customers who in turn borrow from from their own customers’ banks which themselves borrow in turn. Multiply by the tens of millions driving to gas stations every day using borrowed money to buy gas … there is the central challenge to growth … there is no way to retrieve the gas … there is nothing to retire the loans!

    Arguing about non-existent growth is like arguing about transubstantiation. There is not point to it because thermodynamic physics rules, economics that ignores this is irrelevant. Instead, conventional monetary economics has become ‘the silly science’, useful only to the degree that it sheds some light on how far we will fall when we cross certain — and onrushing — thermodynamic thresholds.

    The time to invent a new economic regime is running out … one that rewards husbandry and capital conservation the way it rewards squandrous waste. Economics today has become the science of extravagance and nothing more. Economists relentlessly pimp living beyond our means as if this is a natural entitlement rather than a fatal wound. It is appalling how clueless, stupid and self-interested the economic management appears to be. This is failure of the highest order, the willfully blind are leading the rest over the precipice.

    Pre-crash bull Irving Fisher famously predicted two weeks before the 1929 crash that, “Stock prices have reached what looks like a permanently high plateau …” During the run-up to the crash, Fisher had become wealthy by way of his analysis, he was a famous and highly regarded economist. The depression that followed the crash cost Fisher his fortune. Nevertheless, he was possessed of enough integrity to reconsider his prejudices and analyze carefully the dynamics that brought his world — and himself — to ruin.

    Now it is time for the rest of the analysts to follow suit …

 

TBTF Banks Take Over

Off the keyboard of Michael Snyder

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Published on The Economic Collapse on December 3, 2013

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Too Big To Fail Banks Are Taking Over As Number Of U.S. Banks Falls To All-Time Record Low

Lower East Manhattan - Photo by Eric KilbyThe too big to fail banks have a larger share of the U.S. banking industry than they have ever had before.  So if having banks that were too big to fail was a “problem” back in 2008, what is it today?  As you will read about below, the total number of banks in the United States has fallen to a brand new all-time record low and that means that the health of the too big to fail banks is now more critical to our economy than ever.  In 1985, there were more than 18,000 banks in the United States.  Today, there are only 6,891 left, and that number continues to drop every single year.  That means that more than 10,000 U.S. banks have gone out of existence since 1985.  Meanwhile, the too big to fail banks just keep on getting even bigger.  In fact, the six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37 percent larger over the past five years.  If even one of those banks collapses, it would be absolutely crippling to the U.S. economy.  If several of them were to collapse at the same time, it could potentially plunge us into an economic depression unlike anything that this nation has ever seen before.

Incredibly, there were actually more banks in existence back during the days of the Great Depression than there is today.  According to the Wall Street Journal, the federal government has been keeping track of the number of banks since 1934 and this year is the very first time that the number has fallen below 7,000…

The number of federally insured institutions nationwide shrank to 6,891 in the third quarter after this summer falling below 7,000 for the first time since federal regulators began keeping track in 1934, according to the Federal Deposit Insurance Corp.

And the number of active bank branches all across America is falling too.  In fact, according to the FDIC the total number of bank branches in the United States fell by 3.2 percent between the end of 2009 and June 30th of this year.

Unfortunately, the closing of bank branches appears to be accelerating.  The number of bank branches in the U.S. declined by 390 during the third quarter of 2013 alone, and it is being projected that the number of bank branches in the U.S. could fall by as much as 40 percent over the next decade.

Can you guess where most of the bank branches are being closed?

If you guessed “poor neighborhoods” you would be correct.

According to Bloomberg, an astounding 93 percent of all bank branch closings since late 2008 have been in neighborhoods where incomes are below the national median household income…

Banks have shut 1,826 branches since late 2008, and 93 percent of closings were in postal codes where the household income is below the national median, according to census and federal banking data compiled by Bloomberg.

It turns out that opening up checking accounts and running ATM machines for poor people just isn’t that profitable.  The executives at these big banks are very open about the fact that they “love affluent customers“, and there is never a shortage of bank branches in wealthy neighborhoods.  But in many poor neighborhoods it is a very different story

About 10 million U.S. households lack bank accounts, according to a study released in September by the Federal Deposit Insurance Corp. An additional 24 million are “underbanked,” using check-cashing services and other storefront businesses for financial transactions. The Bronx in New York City is the nation’s second most underbanked large county—behind Hidalgo County in Texas—with 48 percent of households either not having an account or relying on alternative financial providers, according to a report by the Corporation for Enterprise Development, an advocacy organization for lower-​income Americans.

And if you are waiting for a whole bunch of new banks to start up to serve these poor neighborhoods, you can just forget about it.  Because of a whole host of new rules and regulations that have been put on the backs of small banks over the past several years, it has become nearly impossible to start up a new bank in the United States.  In fact, only one new bank has been started in the United States in the last three years.

So the number of banks is going to continue to decline.  1,400 smaller banks have quietly disappeared from the U.S. banking industry over the past five years alone.  We are witnessing a consolidation of the banking industry in America that is absolutely unprecedented.

Just consider the following statistics.  These numbers come from a recent CNN article

-The assets of the six largest banks in the United States have grown by 37 percent over the past five years.

-The U.S. banking system has 14.4 trillion dollars in total assets.  The six largest banks now account for 67 percent of those assets and all of the other banks account for only 33 percent of those assets.

-Approximately 1,400 smaller banks have disappeared over the past five years.

-JPMorgan Chase is roughly the size of the entire British economy.

-The four largest banks have more than a million employees combined.

-The five largest banks account for 42 percent of all loans in the United States.

-Bank of America accounts for about a third of all business loans all by itself.

-Wells Fargo accounts for about one quarter of all mortgage loans all by itself.

-About 12 percent of all cash in the United States is held in the vaults of JPMorgan Chase.

As you can see, without those banks we do not have a financial system.

Our entire economy is based on debt, and if those banks were to disappear the flow of credit would dry up almost completely.  Without those banks, we would rapidly enter an economic depression unlike anything that the United States has seen before.

It is kind of like a patient that has such an advanced case of cancer that if you try to kill the cancer you will inevitably also kill the patient.  That is essentially what our relationship with these big banks is like at this point.

Unfortunately, since the last financial crisis the too big to fail banks have become even more reckless.  Right now, four of the too big to fail banks each have total exposure to derivatives that is well in excess of 40 TRILLION dollars.

Keep in mind that U.S. GDP for the entire year of 2012 was just 15.7 trillion dollars and the U.S. national debt is just 17 trillion dollars.

So when you are talking about four banks that each have more than 40 trillion dollars of exposure to derivatives you are talking about an amount of money that is almost incomprehensible.

Posted below are the figures for the four banks that I am talking about.  I have written about this in the past, but in this article I have included the very latest updated numbers from the U.S. government.  I think that you will agree that these numbers are absolutely staggering…

JPMorgan Chase

Total Assets: $1,947,794,000,000 (nearly 1.95 trillion dollars)

Total Exposure To Derivatives: $71,289,673,000,000 (more than 71 trillion dollars)

Citibank

Total Assets: $1,319,359,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $60,398,289,000,000 (more than 60 trillion dollars)

Bank Of America

Total Assets: $1,429,737,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $42,670,269,000,000 (more than 42 trillion dollars)

Goldman Sachs

Total Assets: $113,064,000,000 (just a shade over 113 billion dollars – yes, you read that correctly)

Total Exposure To Derivatives: $43,135,021,000,000 (more than 43 trillion dollars)

Please don’t just gloss over those huge numbers.

Let them sink in for a moment.

Goldman Sachs has total assets worth approximately 113 billion dollars (billion with a little “b”), but they have more than 43 TRILLON dollars of total exposure to derivatives.

That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 381 times greater than their total assets.

Most Americans do not understand that Wall Street has been transformed into the largest casino in the history of the world.  The big banks are being incredibly reckless with our money, and if they fail it will bring down the entire economy.

The biggest chunk of these derivatives contracts that Wall Street banks are gambling on is made up of interest rate derivatives.  According to the Bank for International Settlements, the global financial system has a total of 441 TRILLION dollars worth of exposure to interest rate derivatives.

When that Ponzi scheme finally comes crumbling down, there won’t be enough money on the entire planet to fix it.

We had our warning back in 2008.

The too big to fail banks were in the headlines every single day and our politicians promised to fix the problem.

But instead of fixing it, the too big to fail banks are now 37 percent larger and our economy is more dependent on them than ever before.

And in their endless greed for even larger paychecks, they have become insanely reckless with all of our money.

Mark my words – there is going to be a derivatives crisis.

When it happens, we are going to see some of these too big to fail banks actually fail.

At that point, there will be absolutely no hope for the U.S. economy.

We willingly allowed the too big to fail banks to become the core of our economic system, and now we are all going to pay the price.

The Anti-Empire Report #123

Off the Keyboard of William Blum

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nature bailout

Published December 4, 2013 by William Blum on The Anti-Empire Report

“If nature were a bank, they would have already rescued it.” – Eduardo Galeano

 

What do you think of this as an argument to use when speaking to those who don’t accept the idea that extreme weather phenomena are man-made?

Well, we can proceed in one of two ways:

  1. We can do our best to limit the greenhouse effect by curtailing greenhouse gas emissions (carbon dioxide, methane, and nitrous oxide) into the atmosphere, and if it turns out that these emissions were not in fact the cause of all the extreme weather phenomena, then we’ve wasted a lot of time, effort and money (although other benefits to the ecosystem would still accrue).
  2. We can do nothing at all to curtail the emission of greenhouse gases into the atmosphere, and if it turns out that these emissions were in fact the cause of all the extreme weather phenomena (not simply extreme, but getting downright freaky), then we’ve lost the earth and life as we know it.

So, are you a gambler?

Whatever we do on a purely personal level to try and curtail greenhouse gas emissions cannot of course compare to what corporations could do; but it’s inevitable that the process will impinge upon the bottom line of one corporation or another, who can be relied upon to put optimization of profit before societal good; corporate “personhood” before human personhood. This is a barrier faced by any environmentalist or social movement, and is the reason why I don’t subscribe to the frequently-voiced idea that “Left vs. Right” is an obsolete concept; that we’re all together in a common movement against corporate and government abuse regardless of where we fall on the ideological spectrum.

It’s only the Left that maintains as a bedrock principle: People before Profit, which can serve as a very concise definition of socialism, an ideology anathema to the Right and libertarians, who fervently believe, against all evidence, in the rationality of a free market. I personally favor the idea of a centralized, planned economy.

Holy Lenin, Batman! This guy’s a Damn Commie!

Is it the terminology that bothers you? Because Americans are raised to be dedicated anti-communists and anti-socialists, and to equate a “planned economy” with the worst excesses of Stalinism? Okay, forget the scary labels; let’s describe it as people sitting down and discussing what the most serious problems facing society are; and which institutions and forces in the society have the best access, experience, and resources to offer a solution to those problems. So, the idea is to enable these institutions and forces to deal with the problems in a highly organized and efficient manner. All this is usually called “planning”, and if the organization of it all generally stems from the government it can be called “centralized”. The alternative to this is called either anarchy or free enterprise.

I don’t place much weight on the idea of “libertarian socialism”. That to me is an oxymoron. The key questions to be considered are: Who will make the decisions on a daily basis to run the society? For whose benefit will those decisions be made. It’s easy to speak of “economic democracy” that comes from “the people”, and is “locally controlled”, not by the government. But is every town and village going to manufacture automobiles, trains and airplanes? Will every city of any size have an airport? Will each one oversee its own food and drug inspections? Maintain all the roads passing through? Protect the environment within the city boundary only? Such questions are obviously without limit. I’m just suggesting that we shouldn’t have stars in our eyes about local control or be paranoid about central planning.

“We are all ready to be savage in some cause. The difference between a good man and a bad one is the choice of the cause.” – William James (1842-1910)

So, George W. Bush is now a painter. He tells his art teacher that “there’s a Rembrandt trapped inside this body”. 1 Ah, so Georgie is more than just a painter. He’s an artiste.

And we all know that artistes are very special people. They’re never to be confused with mass murderers, war criminals, merciless torturers or inveterate liars. Neither are they ever to be accused of dullness of wit or incoherence of thought.

Artistes are not the only special people. Devout people are also special: Josef Stalin studied for the priesthood. Osama bin Laden prayed five times a day.

And animal lovers: Herman Goering, while his Luftwaffe rained death upon Europe, kept a sign in his office that read: “He who tortures animals wounds the feelings of the German people.” Adolf Hitler was also an animal lover and had long periods of being a vegetarian and anti-smoking. Charles Manson was a staunch anti-vivisectionist.

And cultured people: This fact Elie Wiesel called the greatest discovery of the war: that Adolf Eichmann was cultured, read deeply, played the violin. Mussolini also played the violin. Some Nazi concentration camp commanders listened to Mozart to drown out the cries of the inmates.

Former Bosnian Serb politician Radovan Karadzic, on trial now before the International Criminal Tribunal for the former Yugoslavia, charged with war crimes, genocide, and crimes against humanity, was a psychiatrist, specializing in depression; a practitioner of alternative medicine; published a book of poetry and books for children.

Al Qaeda and other suicide bombers are genuinely and sincerely convinced that they are doing the right thing. That doesn’t make them less evil; in fact it makes them more terrifying, since they force us to face the scary reality of a world in which sincerity and morality do not necessarily have anything to do with each other.

Getting your history from Hollywood

Imagine a documentary film about the Holocaust which makes no mention of Nazi Germany.

Imagine a documentary film about the 1965-66 slaughter of as many as a million “communists” in Indonesia which makes no mention of the key role in the killing played by the United States.

But there’s no need to imagine it. It’s been made, and was released this past summer. It’s called “The Act of Killing” and makes no mention of the American role. Two articles in the Washington Post about the film made no such mention either. The Indonesian massacre, along with the jailing without trial of about a million others and the widespread use of torture and rape, ranks as one of the great crimes of the twentieth century and is certainly well known amongst those with at least a modest interest in modern history.

Here’s an email I sent to the Washington Post writer who reviewed the film:

“The fact that you can write about this historical event and not mention a word about the US government role is a sad commentary on your intellect and social conscience. If the film itself omits any serious mention of the US role, that is a condemnation of the filmmaker, and of you for not pointing this out. So the ignorance and brainwashing of the American people about their country’s foreign policy (i.e., holocaust) continues decade after decade, thanks to media people like Mr. Oppenheimer [one of the filmmakers] and yourself.”

The Post reviewer, rather than being offended by my intemperate language, was actually taken with what I said and she asked me to send her an article outlining the US role in Indonesia, which she would try to get published in the Post as an op-ed. I did so and she wrote me that she very much appreciated what I had sent her. But – as I was pretty sure would happen – the Post did not print what I wrote. So this incident may have had the sole saving grace of enlightening a Washington Post writer about the journalistic standards and politics of her own newspaper.

And now, just out, we have the film “Long Walk to Freedom” based on Nelson Mandela’s 1994 autobiography of the same name. The heroic Mandela spent close to 28 years in prison at the hands of the apartheid South African government. His arrest and imprisonment were the direct result of a CIA operation. But the film makes no mention of the role played by the CIA or any other agency of the United States.

In fairness to the makers of the film, Mandela himself, in his book, declined to accuse the CIA for his imprisonment, writing: “The story has never been confirmed and I have never seen any reliable evidence as to the truth of it.”

Well, Mr. Mandela and the filmmaker should read what I wrote and documented on the subject some years after Mandela’s book came out, in my own book: Rogue State: A Guide to the World’s Only Superpower (2000). It’s not quite a “smoking gun”, but I think it convinces almost all readers that what happened in South Africa in 1962 was another of the CIA operations we’ve all come to know and love. And almost all my sources were available to Mandela at the time he wrote his autobiography. There has been speculation about what finally led to Mandela’s release from prison; perhaps a deal was made concerning his post-prison behavior.

From a purely educational point of view, seeing films such as the two discussed here may well be worse than not exposing your mind at all to any pop culture treatment of American history or foreign policy.

Getting your history from the American daily press

During the US federal government shutdown in October over a budgetary dispute, Washington Post columnist Max Fisher wondered if there had ever been anything like this in another country. He decided that “there actually is one foreign precedent: Australia did this once. In 1975, the Australian government shut down because the legislature had failed to fund it, deadlocked by a budgetary squabble. It looked a lot like the U.S. shutdown of today, or the 17 previous U.S. shutdowns.” 2

Except for what Fisher fails to tell us: that it strongly appears that the CIA used the occasion to force a regime change in Australia, whereby the Governor General, John Kerr – a man who had been intimately involved with CIA fronts for a number of years – discharged Edward Gough Whitlam, the democratically-elected prime minister whose various policies had been a thorn in the side of the United States, and the CIA in particular.

I must again cite my own writing, for the story of the CIA coup in Australia – as far as I know – is not described in any kind of detail anywhere other than in my book Killing Hope: U.S. Military and C.I.A. Interventions Since World War II (2004).

Americans are living in an Orwellian police state. Either that, or the greatest democracy ever.

There are those in the United States and Germany these days who insist that the National Security Agency is no match for the East German Ministry for State Security, or Stasi, which, during the Cold War, employed an estimated 190,000 part-time secret informants, and an additional 90,000 officers full time, in a spying operation that permeated both East and West Germany. Since the end of the Cold War, revelations from the Stasi files have led to thousands of collaborators being chased from public life. Even now, new accusations of a Stasi association can hound politicians and celebrities in Germany. 3

All that of course stems from an era before almost all information and secrets became electronic. It was largely labor intensive. In the digital age, the NSA has very little need for individuals to spy on their friends, acquaintances, and co-workers. (In any event, the FBI takes care of that department very well.)

Can we ever expect that NSA employees will suffer public disgrace as numerous Stasi employees and informants have? No more than war criminals Bush and Cheney have been punished in any way. Only those who have exposed NSA crimes have been punished, like Edward Snowden and several other whistleblowers.

Notes

  1. Washington Post, November 21, 2013
  2. Washington Post, October 1, 2013
  3. Washington Post, November 18, 2013

Any part of this report may be disseminated without permission, provided attribution to William Blum as author and a link to this website are given.

 

 

William Blum is an author, historian, and renowned critic of U.S. foreign policy. He is the author of Killing Hope: U.S. Military and CIA Interventions Since World War II and Rogue State: A Guide to the World’s Only Superpower, among others.

Any part of this report may be disseminated without permission, provided attribution to William Blum as author and a link to this website are given.

Take it to the Bank

Off the keyboard of Jim Quinn

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Published on The Burning Platform on November 17, 2013

Strip_Mall

Discuss this article at the Economics Table inside the Diner

iStock 000016651896Small 2 300x199 What to Do When Your Bank Branch ClosesReports like the recent one from SNL Financial – Branch Networks Continue to Shrink really get my goat. As I travel the increasingly vacant highways of Montgomery County, PA I’m keenly aware of my surroundings. If I were a foreigner visiting for the first time, I’d think Space Available was the hot new retailer in the country. I’ve detailed the slow disintegration of our suburban sprawl paradise in previous articles:

Available

Are you Seeing What I’m Seeing?

More than 30 Blocks of Grey and Decay

Extend & Pretend Coming to an End

Thousands of Space Available signs dot the bleak landscape, as office buildings, strip malls, and industrial complexes wither and die. Gas stations are shuttered on a daily basis as the ongoing depression results in less miles being driven by unemployed and underemployed suburbanites. At least the Chinese “Space Available” sign manufacturers are doing well. The only buildings doing brisk business are the food banks and homeless shelters.

 

The sad part is that I live in a relatively prosperous county with a low level of SNAP recipients and primarily occupied by a white collar college educated populace. If the clear downward spiral in my upper middle class county is an indication of our country’s path, the less well-off counties across the land must be in deep trouble.

While hundreds of thousands of square feet of retail, restaurant, office and industrial space have been vacated in the last six years, the only entities expanding in my area have been banks, drug stores, municipal buildings and healthcare facilities. I have been flabbergasted by what I’ve viewed as a complete waste of resources to create facilities that weren’t needed and wouldn’t be utilized. I have seven drug stores within five miles of my house. I have ten bank branches within five miles of my house. While two perfectly fine older hospitals in Norristown were abandoned, a brand new $300 million super deluxe, glass encased Einstein Hospital palace was built three miles away by a barely above junk bond status non-profit institution. None of this makes sense in a contracting economy.

This is another classic case of mal-investment spurred by the Federal Reserve easy money policies, zero interest rates, and QEternity. Cheap money leads to bad investments. I’m all for competition between drug store chains and banks. CVS, Walgreens, and Rite Aid are the three big chains in the country. I have my pick of multiple stores close to my house. There are clearly too many stores competing for a dwindling number of customers, with a dwindling supply of disposable income. The only reason Rite Aid is still in the picture is the easy money policies of the Federal Reserve. They have been teetering on the verge of bankruptcy for the last five years, but continue to get cheap financing from the Wall Street cabal, who would rather pretend they will get paid, than write-off the bad debt. Who in their right mind would continue to lend money to a company with $6 billion in debt, NEGATIVE $2.3 billion of equity, and losses exceeding $2 billion since 2008? They are the poster child for badly run businesses that over expanded, took on too much debt and should be liquidated. There are over 4,600 zombie Rite Aid stores littering the countryside waiting to be put out of their misery.

the walking dead season 4 rick grimes  rite-aid-corner-abandoned

Rite Aid will never repay the $6 billion of debt. They know it. Their auditors know it. Their Wall Street lenders know it. The Federal Reserve Bank regulators know it. Anyone with a functioning brain knows it. Tune in to CNBC for those who are paid to keep clueless investors from knowing it. Interest rates that actually reflected risk and weren’t manipulated to an artificially low level by the Federal Reserve would make financing for a dog like Rite Aid a non-starter. Creative destruction would be allowed to work its magic, with winners separated from losers. Instead Rite Aid continues as a zombie entity, barely surviving for now. This exact scenario applies to J.C. Penney, RadioShack, Sears and a myriad of other dead retailers walking. Rather than suffering the consequences of appalling management judgment, dreadful strategic decisions, and reckless financial gambles, they have been allowed to remain on life support compliments of Bernanke, his Wall Street chiefs, and the American taxpayer.

In a truly free, non-manipulated market the weak would be culled, new dynamic competitors would fill the void, and consumers would benefit.  Extending debt payment schedules of zombie entities and pretending you will get paid has been the mantra of the insolvent zombie Wall Street banks since 2009. The Federal Reserve is responsible for zombifying the entire country. And it wasn’t a mistake. It was a choice made by those in power in order to maintain the status quo. The fateful day in March 2009 when the pencil pushing lightweight accountants at the FASB rescinded mark to market accounting rules gave birth to zombie nation. And not coincidently, marked the bottom for the stock market. Wall Street banks were free to fabricate their earnings, pretend they didn’t have hundreds of billions in bad loans on their books, and extend the terms of commercial real estate loans that were in default. With their taxpayer funded TARP ransom, ability to borrow at 0% from Uncle Ben, and the $3 trillion of QE cocaine snorted up their noses in the last four years, the mal-investment, fraud, and idiocy of the Wall Street drug addicts has reached a crescendo.

Commerce Bank

The mal-investment by zombie drug store chains has only been exceeded by the foolish, egocentric, insane bank branch expansion by the Too Big To Trust Wall Street CEOs. In the last ten years dozens of bank branches have been built in the vicinity of my house and across the state of Pennsylvania. These gleaming glass TARP palaces are on virtually every other street corner across Montgomery County. Stunning, glittery, colorful branches stuffed with bank employees pretending to loan money to non-existent customers. They have become nothing but a high priced marketing billboard with an ATM attached. By 2010, the number of bank branches in this country had reached almost 100,000. The vast majority are run by the usual insolvent suspects:

Wells Fargo – 6,500

J.P. Morgan – 6,000

Bank of America – 5,700

The top ten biggest banks, in addition to holding the vast majority of deposits, mortgages and credit card accounts, operate 33% of all the bank branches in the country. The very same banks that have paid out $66 billion in criminal settlement charges over the last three years and have incurred $103 billion of legal fees to defend themselves against the thousands of actions brought by victims for their criminal misdeeds, decided it was a wise decision to open new bank branches from 2007 through 2010. Only an Ivy League educated MBA could possibly think this was a good idea.

It was almost as if the CEO’s of the biggest Wall Street banks didn’t care about pissing away the $2.5 million to build the average 3,500 square foot bank branch, which would require $30 million of deposits to breakeven. This level of deposits isn’t easy to achieve when your customers are unemployed due to your bank destroying the American economy, broke due to their real household income declining by 10% over the past fourteen years, and your bank paying them .15% on their deposits. It also probably doesn’t help when you charge them $3 every time they withdraw their own money from your bank and you charge them $25 when their bank balance falls below $1,000 because they just got laid off from Merck on Christmas Eve. It is now estimated that one-third of all bank branches in the country lose money. Who can afford to run something that consistently losses money, other than our government? Wall Street bankers can when the taxpayer is footing the bill and Bernanke/Yellen subsidizes their mal-investment by lending to them at 0%, providing them $2.5 billion per day of QE play money, and paying them $5 billion per year in interest to park the excess reserves that aren’t getting leant to small businesses and consumers at their thousands of gleaming bank branches.

Hasn’t one of the thousands of highly educated MBA vice presidents occupying offices at the Too Big To Control Wall Street banks explained to Stumpf, Dimon and Monyihan that bricks and mortar are dead? A new invention called the internet has made in-person banking virtually obsolete. Why does anyone need to go into a bank branch in this electronic age? I’ve been in my credit union branch five times in the last ten years, twice for a refinance closing on my home and a couple times to get a certified check. With ATM machines, direct deposit and on-line bill paying, why would the country need 100,000 physical bank locations? I pay 90% of my bills on-line. If I need cash, I hit the ATM at Wawa, where there are no ATM fees (my credit union doesn’t charge me to get my own money). The only people who go into bank branches on a regular basis are old fogeys that don’t trust that new-fangled internet. The older generations are dying out and the millennial generation has no need for bank branches. Their iGadgets function as their bank connection. Plus, since they don’t have jobs or money, a bank account at the local bank branch of J.P. Morgan seems a bit trite.

The writing had been on the wall for a long time, but the reckless bank executives continued to build branches in an ego driven desire to outdo their equally irresponsible competitor bank executives. Now the race is on to see which banks can close the most branches. Bank consultant Jim Adkins succinctly sums up the pure idiocy of physical bank branches:

“There’s almost nobody in the branches. You could shoot water balloons all over the place and not hit anybody.”

It seems my humble state of Pennsylvania leads the pack in closing branches in the past year, with 149 abandoned and only 43 opened. Only two states in the entire country had more branch openings than closings.

After shuttering 2,267 branches in 2012, the industry is on track to closing another 2,500 in 2013. Shockingly, the leader of the Wall Street zombie apocalypse, Bank of America, led the pack in bank branch closings with 194 in the last year. Staying true to his hubristic arrogance, Jamie Dimon actually opened 62 more branches than he closed in the last year, despite his upstanding institution having to pay tens of billions in fines, settlements and pay-offs for their criminal transgressions.

There are now 93,000 bank branches remaining in this country, and one third of them don’t generate a profit. That percentage will grow as the older generations rapidly die out and are replaced by the techno-narcissists who never leave their family rooms.  Online banking already accounts for 53% of banking transactions, compared with 14% for in-branch visits. Younger bank customers increasingly prefer online and mobile banking, as advancing technology enables them to make remote deposits, shop for loans and manage accounts more efficiently from their desktops or smartphones. This trend will only accelerate in the years to come.

Banking industry profits reached a record level of $141 billion in 2012 as more vacancy signs appeared on Main Street. Now that the Wall Street cabal have syphoned every ounce of blood from their customers/victims through ATM fees, overdraft fees, minimum balance fees, credit card fees, late payment fees, and paying no interest on deposits, they are forced to focus on the $300,000 average loss per bank branch. QE and ZIRP might not last forever. Yeah right. AlixPartners, a New York consulting firm, expects the number of bank branches to drop to 80,000 over the next decade. They are wrong. They have failed to take into account the lemming like behavior of Wall Street banks. As their accounting gimmicks to generate fake profits dissipate, the increasingly desperate insolvent zombie banks will rapidly vacate their prime corner locations in droves. With approximately 30,000 locations already generating losses, the Wall Street MBAs will be closing branches quicker than you can say “mortgage fraud”. There will be less than 70,000 branches within the next five years. That means another 20,000 to 30,000 Space Available signs going up on Main Street. That means another 200,000 to 300,000 neighbors without jobs. But don’t worry about Jamie Dimon and the rest of the Wall Street bankers. They’ll be just fine. In addition to being endlessly fed by the Fed, they’ll get creative and charge their customers a new bank branch access fee of $50 for the privilege of entering one of their few remaining outlets. By now we should know how cash flows to Main Street in this corporate fascist paradise.

140226 600 Cash Flow cartoons

Do your part to starve the beast. Move your bank accounts to a local credit union. Don’t support criminals.

 

The Turning

Off the keyboard of James Howard Kunstler

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Originally Published on Clusterfuck Nation  November 11, 2013

 A new work by British artist Banksy adorns a wall near the Canary Wharf financial district in London

The Turning

      In these northern climes, this turning into the year’s final quarter feels written in the blood, or at least into the legacy code of culture. The leaves skitter across the streets in an early twilight, chill winds daunt man and dog, the landscape buttons itself up for the long sleep, and human activity moves indoors — including the arduous festivities around the spooky solstice. We take the comfort that we can in all that. But a strange torpor of event attends this year’s turning. In the year’s final happenings, nothing seems to happen, and what little does happen seems not to matter. The world sits with frayed nerves and hears a distant noise, which is the cosmic screw of history turning.

      The nation gets over everything without resolving anything — fiscal cliffs, debt ceilings, health care implosions, domestic spying outrages, taper talk jukes, banking turpitudes, the Syria bluster, the Iran nuke deal fake-out. It’s dangerous to live as though there was no such thing as consequence. Societies have a way of reaching a consensus about something without ever stating it outright. The American public has silently agreed to sit on its hands though one more Christmas and after that things shake loose.

      What happens, for instance, in the limbo months of ObamaCare ahead, when people either won’t sign in for health insurance, or can’t because of the stupidity of the website design, and the failure of its work-arounds, and the number rises of people falling seriously ill without insurance, and the ludicrously extortionate hospital bills start rolling in and the machinery of bankruptcy and re-po turns the screws on tens of thousands of families — while the insurance company executives spend their 2013 bonus money on Beemers and McMansion additions? There must be some threshold for criticality there, some breaking point that prompts a swindled population to break out its fabled arsenals.  Say, somewhere in America a child tragically dies after being hit by a car and three unsuccessful surgeries to try to fix the damage, and thirty days after the funeral, the uninsured dad gets a bill for $416,000? I doubt a society can withstand many insults like that.

     Above all, this big nation has failed to reckon the central quandary of our time: the fatal hypertrophy of finance. This ghastly engine of rackets and swindles is the enlarged heart of a dying body politic, and all we know how to do is feed it more monetary Cheez Doodles. This has been going on far longer than the doctors and the witch doctors thought possible, and there is a foolish hope among the credulous that the larger organism of the economy must therefore be immortal. But the reality-based minority stoically awaits the final congestive infarction.

     Everything points to 2014 as the moment the pretending stops and things get real. Nobody believes anymore that the Federal Reserve can replace an economy of authentic transactions with promissory notes. There is only one final thing that can happen with the Fed, and that is losing all control over rising interest rates. Janet Yellen is being set up as one of the epic chumps of history, and proof of her academic fecklessness is the mere fact that she accepted the post as Fed chair. She will preside over a fabulous disappearance of wealth in America. The blame for it will be epic, too, but it will not represent any genuine understanding of what happened.

     Much is being made of the loneliness of Barack Obama these days. He also occupies a rather tragic niche in history — or the arc of his story at least points that way these days. Right now, it is very hard to tell whether he has been a hostage or a fool. He could have moved to break up the big banks in January of 2009, and any time since then he could have sent a memo to the Department of Justice instructing the prosecutions of financial crime to begin in earnest (or replaced the Attorney General). Didn’t happen. Was he being blackmailed by the likes of Jamie Dimon and Lloyd Blankfein, or did he just not know what was at stake?

     The history of Barack Obama will be one long record of omissions to act, not just overt failures. He is the Bartleby the Scrivener of our politics. He “prefers not to….” Hence, the powerful lure of the charismatic figure who is sure to act. Adolf Hitler was very clear about his proposed program in the early 1920s, a decade before he came to power. He spelled it out unmistakably in his speeches and his political testament, Mein Kampf: do away with pain-in-the-ass democracy and destroy the Jews. He couldn’t have put it more plainly. The residual admiration for Hitler among the extreme right-wingers of today derives mainly from the simple fact that the man actually did what he said he would do. You can’t overstate the potential hunger for that sort of thing. The current climate of US politics being Weimar-on-steroids, I’m sure that an American corn-pone Hitler would have huge appeal for a beaten-down citizenry.

      The means for such a coup of the zeitgeist are rather frightful now: drone aircraft, computer surveillance, militarized police, a puppet press. It makes thoughtful folks queasy. My bet, though, is that a fascist takeover of the US would end up being as inept and ineffectual as ObamaCare. It is one of the great hidden blessings of our time, actually, that anything organized on the massive scale is doomed to failure. But it is likewise the great mission of our time to prepare to get local and smaller, something we’re not really ready for and certainly not interested in. The intertwining of these dynamics will be the story in the year to come.

 

***

James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

That Was The Week That Was In Doom July 7, 2013

From the Keyboard of Surly1

Originally published on the Doomstead Diner on July 7, 2013

http://991.com/newGallery/That-Was-The-Week-That-W-That-Was-The-Week-473964.jpg

Discuss this article here in the Diner Forum.

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

  ~H. L. Mencken

Another week goes by as the doomsday clock continues to tick… tick… tick. Mohammad Morsi leaves to spend more time with his family, while observers speculate about how many the role the IMF has actually played behind the scenes…  ice craters in the Antarctic, the do-nothing 113th left for vacation but not before setting the thumbscrews good and tight for the next generation of college students, Sy Hersh steps on SOMEONE’s last nerve, the immensity of the spy networks becomes even more apparent, more  musings on the death of Michael Hastings, and the Diner itself comes within a hair’s breadth of its own version of fast collapse, rescued by haniel and the “database cavalry.” Plus a brand new franchise lovingly entitled, “You’re shitting me, right?” All in a weeks work watching the intertubes. So ignore your doctor’s orders,  pour another cuppa java Diner style, sit back and shake your head in disbelief at what the gobshites are doing this week.

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Why The Muslim Brotherhood Failed In Egypt

There are as many reasons and interpretations of the fall of Morsi and the Muslim Brotherhood as there are observers. Causes and explanations sprout like dandelions. Morsi was too politically aggressive, too aggressively religious, he alienated too many Egyptians by signaling respect for secular laws then veering rightward,  his religiosity and sectarian Islamist rhetoric was getting on people’s nerves, he spat in the face of public opinion, and ultimately he lost the trust of the people.

Which is not to say that none of this is not true. But those of us who have grown up in a toxic political and media culture within the FSA are in the habit of looking for Root Causes. One such was conjured up Saturday in a fine little blog called The Excavator, in a link posted by Newshound Joe inside the Forum. An analysis by Webster Tarpley (yes, we know) reminds us that if you want the truth,as always, follow the money.

“As soon as they got into power last summer, they [Muslim Brotherhood] began negotiations with the International Monetary Fund. This is the main thing to understand. They threw away their chance to govern because they caved in to the IMF worse than any government in recent Egyptian history. The IMF has always targeted the system of subsidy going back to Nasser and Arab socialism. There is a bread subsidy, there is a cooking oil subsidy, there are other staples, there may be a rice subsidy, but it’s wheat in particular, and fuel, household fuel or gasoline.

And the demand of the IMF was we’ll give you a loan of four billion dollars if you sign a letter of intent that specifies conditionalities. What are the conditionalities? That you will immediately double the price of gasoline. That happened last November, and really it’s been a slide downhill for Morsi since that moment. In other words, he doubled the price of gasoline. Think of that. I think any country in the world you’ll get riots. And in Egypt there’s a tradition. In 1977 Sadat tried to tamper with the bread subsidy and the whole country exploded in his face and he backed off and he never tried that again.

One of the important factors in the entire color revolution-Arab Spring situation, be it Tunisia or Gaddafi or others, is these governments were weakened in advance. They were set up for destruction by years-long IMF offensive to try to attack the system of subsidies and other government interventions to maintain the standard of living. Always the character of these things is to put a floor under the very poor. So the IMF was attacking this.

And what Morsi accepted to do was to double the price of gasoline, to raise the sales tax, and to move towards the implementation of a value-added tax which would be 10, 15, or 20 percent. That was last November. That’s part of the conditionality. This is what destroyed him.” –  Webster G. Tarpley

Tarpley as a source may well be suspect, but even the stopped clock of axiom is right twice a day. Let’s just stop to consider the evidence.

 

187_max

“Should a regime fall without mass mobilization, it is defined as a victim of a coup d’état, usually by a military cabal.”

– Ronald A Francisco, “Collective Action Theory And Empirical Evidence.” Pg. 11.

On his blog,  continues to asser that painting Morsi as the victim of a coup is to miss the larger picture.

The military alone can’t get tens of millions Egyptians onto the streets to remove a president they don’t like. Military leaders were responding to events and the force of public opinion. Was the military happy to nudge the protests along and see the Muslim Brotherhood suffer a defeat? Yes, but the unpopularity of Morsi and the Muslim Broterhood was their own doing.

This is the bigger picture that many in the media are missing.Morsi was doing unpopular things and damaging the reputation of Egypt by calling for a holy war in Syria against Assad and threatening an unnecessary war against Ethiopia over a Dam Project. Many people believe the dispute over the Nile is resolvable through negotiations, including the late Ethiopian Prime Minister Meles Zenawi.   

If Morsi and the Muslim Brotherhood had remained in power, Egypt might have been dragged into two wars. So the question that should be asked in this instance is not whether an action is good for democracy but whether it is good for the country. Keeping Morsi in power any longer would’ve hurt Egypt, and for many Egyptians their country is more valuable and sacred than the concept of democracy. 

A country should be led by its best men in a crisis and Morsi proved through his actions that he did not belong in high office. It took less than a year for the Egyptian people to recognize Morsi’s failings as a leader and they acted quickly to preserve their country. Morsi was not “ousted” by the military; he was overthrown by his people with the helpful aid of the military. I know it’s hard to believe in these cynical times but popular mass protests can lead to unforeseen political change.

And in a single observation to make the final point, one which warms the heart of this former Occupier…

Brazil’s leadership responded quickly to the massive protests by promising to dedicate the country’s oil wealth to education, health, and other government services.

The only action that changes anything is mass, collective action. Which is why the oligarchs of the FSA, via their hired thugs and rented congressmen, their instrumentations and armies of bankers all conspire to keep Americans at one another’s throats, to prevent that very thing from ever happening here. “Divide et impera,” motherfkers . . .

 

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Antarctic flood produces ‘ice crater’

The BBC moved a story this week that reported that satellite imagery revealed evidence for a colossal flood under Antarctica that drained six billion tons of water, quite possibly straight to the ocean.

The cause is thought to be a deeply buried lake that suddenly over-topped.

Satellites were used to map the crater that developed as the 2.7km-thick overlying ice sheet slumped to fill the void left by the escaping water.

The peak discharge would have been more than double the normal flow rate of London’s River Thames, researchers say.

The location of the flood was Cook Sub-Glacial Lake (SGL) in the east of the continent, and the event itself occurred over a period of about 18 months in 2007-2008.

It was detected and described using a combination of data gathered by the now-retired US Icesat mission and Europe’s new Cryosat platform.

The American spacecraft’s laser altimeter first noted a drop in the ice-surface height associated with the slumping.

The European satellite’s radar altimeter was then employed to map the shape of the crater that resulted.

 

Apparently Antarctica has a little understood series of “ghost lakes” which fill, drain and are replenished via mechanisms little understood. These “ghost lakes” are kept in a liquid state by heat rising from the rockbed below and from the pressure of the weight of the massive amount of the ice pushing down from above.

At present, Antarctica is losing mass at a rate of 50-100 billion tonnes a year, helping to raise global sea level. This study suggests that a not insignificant fraction of this mass loss could be due to flood events like that seen at Cook SGL. “This one lake on its own represents 5-10% of [Antarctica’s] annual mass imbalance,” said Leeds co-author Prof Andy Shepherd. “If there are nearly 400 of these sub-glacial lakes then there’s a chance a handful of them are draining each year, and that needs to be considered,” he told BBC News.

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Fk the kids… and go fk yourself!

Through inaction, which has become a vital part of this Congress’ skill set, the student loan rate doubled on July 1st. After all, why shouldn’t banksters pay half a point for the billions they borrow, while the next generation, upon which we pin our hopes and promise, start their lives with a mountain of non-dischargeable debt for student loans, which will now cost even more? Clearly, the government has recognized that education is indeed the great social equalizer which enables mobility among the classes, and the lesser classes will be getting none of it, not if the agents of the Owners can help it. The subtext is, equally clearly, to make it as difficult as possible for the children of the working classes to date their daughters in some collegiate future.

With the future of the children of the elites secured with trust funds and offshore accounts, the Koch-suckers of the 113th Congress bid America’s next generation, “Go fk yourselves!”

Bob Borosage explains in “Student Loans: Gouge The Kids,”

Interest rates on student loans will double to 6.8 percent on July 1 unless Congress acts. But it seems increasingly likely that the Congress will take off for the Fourth of July recess without addressing the problem. The major sticking point: Republicans in the House and Senate insist on gouging the kids to help reduce the deficit.

Mission accomplished. Republicans want student loan rates to double to “market rates” plus a bit more, much in the same way your credit card rates seem to never get below onerous no matter how cheap the money gets. The theory is that “the government can make a profit from the loans,”  because should government help students even a little on interest rates – never mind paying for college – it is “government spending” and is Therefore An Apostasy. The notion of “providing for the common welfare is a Capital Crime in Glennbeckistan  and Aynrandia.

What does the public want? Well, go fk yourselves.

Public Policy Polling has recently found:

83 percent of Americans want student loan rates to stay the same or be lowered.

41 percent want them to be lowered to 0.75 percent, the same rate big banks pay for overnight loans.

86 percent of Republicans, 84 percent of Democrats, 77 percent of independents want action taken on this issue.

74 percent of voters would be less likely to vote for their representative if they let rates rise.

52 percent would be more likely to vote for them if they lowered rates.

60 percent of Democrats are more likely to vote for their representative if they lowered rates, 50 percent of Republicans.

2:1 in support of passing Sen. Elizabeth Warren’s bill to lower student interest rates to 0.75 percent; including 65 percent of Democrats and, 56 percent of Republicans.

Nothing will happen between this writing and when this article publishes, so with the best of holiday greetings in sight, remember students and parents, “Go Fk Youselves!”

This message made possible by the 113th Congress.

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Has Seymour Hersh grabbed the third rail?

 

In a speech in January, Seymour Hersh charged that U.S. foreign policy had been hijacked by a cabal of neoconservative “crusaders” in the former vice president’s office and now in the special operations community:

That’s the attitude,” he continued. “We’re gonna change mosques into cathedrals. That’s an attitude that pervades, I’m here to say, a large percentage of the Joint Special Operations Command.”

He then alleged that Gen. Stanley McChrystal, who headed JSOC before briefly becoming the top U.S. commander in Afghanistan, and his successor, Vice Adm. William McRaven, as well as many within JSOC, “are all members of, or at least supporters of, Knights of Malta.”

Hersh may have been referring to the Sovereign Order of Malta, a Roman Catholic organization commited [sic] to “defence [sic] of the Faith and assistance to the poor and the suffering,” according to its website.

“They do see what they’re doing — and this is not an atypical attitude among some military — it’s a crusade, literally. They see themselves as the protectors of the Christians. They’re protecting them from the Muslims [as in] the 13th century. And this is their function.”

“They have little insignias, these coins they pass among each other, which are crusader coins,” he continued. “They have insignia that reflect the whole notion that this is a culture war. … Right now, there’s a tremendous, tremendous amount of anti-Muslim feeling in the military community.”

 

 

For his trouble, Hersh was called, essentially, batshit-crazy by writers in Foreign Policy. Indeed the vituperation of his critics leads a careful reader to wonder just which Establishment nerve has been struck here. Hersh reported a strange correlation and a surprising importance to a catholic religious order. An order whose past members have included William Casey, James Jesus angleton, Stanley McChrystal, William F. Buckley, Willian “Wild Bill” Donovan, and many others whose names may not be recognizable, but who have hands on the levels of foreign policy, intelligence and NGOs.

Hersh’s opponents have leapt from skepticism to attack and derision. One wonders whether Hersh stumbled onto something deeper and more important than even he realizes? Given that the RCC has been involved in a variety of sordid intrigues for centuries, just how incredulous does it seem for a newly-assertive Church to wish to reassert its  stature and influence. It is reasonable to assume the Church would simply readjust tactics for a new day.

IN any event, who to believe?

Seymour Hersh is in the middle of researching and writing a lengthy book on America’s wars and occupations in Iraq and Afghanistan. He has something of a history of playing looser with his facts in speeches than in print—partially to preserve his scoops pre-publication—and his speech in Doha hewed close to that tradition. In addition to the Knights, for example, he also made claims regarding Opus Dei, another secretive far right Catholic group steeped in just as much rumor and conspiracy theory. However, Hersh is a five-time Polk winner and recipient of the 2004 George Orwell Award—a reporter with a record that is well-burnished and nearly sterling.

Given the late 20th Century history of the “Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta,” how strange would it really be to find members of the Order, in and out of the military, collaborating on a new silent crusade with their old Cold War allies?

It would certainly complement the Christian fundamentalist version of the war, as prosecuted by Erik Prince, the former CEO of the military’s most notorious civilian contractor Xe (formerly Blackwater). His views—as depicted in one affidavit from the court case against him—certainly echo much of what Hersh ascribes to the JSOC and the Knights of Malta:

To that end, Mr. Prince intentionally deployed to Iraq certain men who shared his vision of Christian supremacy, knowing and wanting these men to take every available opportunity to murder Iraqis. Many of these men used call signs based on the Knights of the Templar, the warriors who fought the Crusades.

Mr. Prince operated his companies in a manner that encouraged and rewarded the destruction of Iraqi life. For example, Mr. Prince’s executives would openly speak about going over to Iraq to “lay Hajiis out on cardboard.” Going to Iraq to shoot and kill Iraqis was viewed as a sport or game. Mr. Prince’s employees openly and consistently used racist and derogatory terms for Iraqis and other Arabs, such as “ragheads” or “hajiis.”

As for me, I’ll be waiting for Hersh’s next book.

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Murky arrangements

A post by Hiroyuki Hamada. Here is an important article talking about a complexity of the massive NSA spying. It talks about how Western allies colluding with the US massive apparatus.

We won’t be hearing much about it in the mainstream media, but the topic of suppressing mass movements against corporate domination must be an important one among the corporate elites as the movements against austerity, GMO giants, wars, human rights violation and etc. are increasingly becoming global.
We should keep in mind as we hear about NSA revelations that it’s often “the people” who suffer from the collusion of the corporate power, government agencies and elected officials. Behind the scene, the global elites are working hard to keep “the people” under control.

Snowden is being roundly condemned by many who say he had no authority or right to provide the public with details of NSA snooping. But what right or authority did NSA director, General Keith Alexander, have to provide information on NSA surveillance at five meetings of the global Bilderberg Conference – two in Virginia and one meeting each in Greece, Spain and Switzerland?”

“Alexander claims he is protecting the American people from a constantly changing number of terrorist attacks. In fact, he is providing information to elites on the methods NSA uses to spy on labor, student, religious and progressive organizations.”

“When Alexander leaks to the elites, he’s thanked. When Snowden does it, he’s called a traitor and a coward.

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Add Michael Hastings

This man’s death continues to haunt. Circumstances indicate it was inexplicable, and quite possibly no accident.

“It doesn’t take much to extrapolate, as Richard  Clarke did, what might happen to a hacked car driven by a high-value target. Really, with the difficulty in tracing an attack after the car, computers and driver have been “compromised” by a raging inferno, even not-so-high value targets that previously might have escaped retribution are now, thanks to technology, easy prey that might be too tempting to pass up.

One simple OnStar feature, for example, is “Stolen Vehicle Slowdown” which allows a remote operator to decelerate a vehicle. (Imagine the opposite happening via a hack of some kind.)

Although Clarke eschewed the moniker of “conspiracy theorist” and also made clear he was not necessarily claiming that Hastings’ late model, Bluetooth-ready car had been victimized by such an attack, it is notable that he felt the need to make such a strong case for considering the possibility. This is, you will recall, a man who has had a front row seat on the 50 yard line in terms of understanding the means available to govermnent operatives and the motivations that drive them.

As someone well-versed both in cyberwarfare and the tendency of people in power to “shoot the messenger” when the message is dangerous to them, the timing and veracity of Clarke’s interview stand out as chilling reminders of the dangerous games currently being played with national security, whistleblowers and investigative journalism.”
Read more at: http://newsvandal.com/2013/06/richard-clarkes-dire-warning-to-journalists/
Clarke’s HuffPo interview: http://www.huffingtonpost.com/2013/06/24/michael-hastings-car-hacked_n_3492339.html
http://www.slate.com/articles/news_and_politics/war_stories/2013/05/james_rosen_named_a_co_conspirator_why_is_barack_obama_s_justice_department.html

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Diner Almost Buys the Farm

As most regulars and some guests know, this week was difficult for the Diner as the hosting service that houses this enterprise shut the forum down, supposedly in response to a reported 75,000 database queries per hour. RE, who lived through all of this, tells it best:

It appears more likely that the old Host simply wanted me to buy a Bigger Hosting Package, based on what appears to be a fraudulent number of Database queries, quoted at around 75,000/hour, which is just insane if it is Real People and not some kind of glitch in the system or some BOT attack.  Sure, the Diner has grown here and we have a pretty decent size readership now, but not anywhere NEAR enough to generate that kind of traffic number in legitimate queries.

Thanks to the intervention of haniel and the “database cavalry,” the entire database has been mirrored, copied and even features some new Features and Widgets already installed on the new Diner. The new URL is www.doomsteaddiner.net. RE again:

This is another very important aspect of running a Website, because the Hosting Server holds ALL your Data, and they can fuck with you at will. IF YOU OWN SUCH A WEBSITE, BACKUP YOUR DATABASES ON YOUR OWN HARD DRIVE!  I was not so backed up, but fortunately for me I had Haniel who could Spoof the Security on the old Host and pull it all down.  Flick of a Switch if you get in a dispute with the Host, your website is DOWN.  You cannot access your data.   So you have to host on a Server where you have decent faith in the people who run it to be Honest & Righteous.  You don’t get that on Corporate Hosts, once you pass a certain point of Popularity, they start to Blackmail you in insidious ways to cough up moreMONEY.  Buy Paid Technical Support, Buy Bigger Hosting Packages.

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The literal meanings of places in the world, mapped.

Sometimes, it’s just for fun. From Slate this week. A pair of cartographers has created a map in which the original place names have been translated to reflect their original meanings.

From the “Misty Mountains” to “Winterfell,” the names of places in fantasy do for us what most real-world names do not: They evoke something. With their primitive literalism, they conjure a sense of dread, as in “Mount Doom” or durability, as in “Storm’s End,” or peace, as in “Rivendell.” Of course, the names of most places in the real world have meanings too, but many have slipped from common knowledge long ago. The above map, designed bycartographers Stephan Hormes and Silke Peust, labels countries, cities, and landmarks with the literal meanings of their official names. Some places, such as “Darkpool” (Dublin) or “Land of the South Wind” (Australia) or “Sea of Middle Earth” (Mediterranean Sea) seem torn straight from a Tolkien epic. Others, such as “I Don’t Understand You!” (Yucatan, Mexico), “Tax Haven for Pilgrims” (Astrakhan, Russia), and “We’re Coming From Cutting Leaves!” (Abidjan, Ivory Coast), are more perplexing. To see further details about the etymology of the names and other maps like this, or to order printed copies, see the cartographers’ website. For more detail on places in the U.S., check out the U.S. map of literal place names.

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Dept. of “You’re Shitting Me, Right?”

http://www.newslo.com/noneedtosatirize-jennifer-lopez-sings-happy-birthday-mr-president-to-brutal-dictator/

Pop singer Jennifer Lopez appeared in a special concert Saturday night for the dictator of Turkmenistan, who runs one of the world’s most brutal and oppressive regimes.

“It was our pleasure!” she cheered from the stage. “And we wish you the very happiest birthday… Happy birthday to you — happy birthday, Mr. President.”

Turkmenistan President Gurbanguly Berdymukhamedov, who last made waves in the western media for falling off his horse in front of a large crowd, has accumulated a sordid history since coming to power in 2006.

Reporters Without Borders says that under his rule, Turkmenistan has become “one of the world’s most absolute and brutal dictatorships.” Human Rights Watch similarly classifies the country as “virtually closed to independent scrutiny,” where “human rights defenders and other activists face the constant threat of government reprisal.”

The trip to the oil-rich former Soviet nation was organized by the state-run China National Petroleum Corporation, which Lopez reportedly “obliged” at the last moment, according to The Guardian. Her publicist told the paper that she would not have performed the show had she known about the country’s regime.

You know they LOVE this kind of talk. One wonders where are the women ready to Lysistrata on their asses.

Some women like being forced to have an ultrasound before receiving an abortion, according to former Senator Jim DeMint (R-SC).

Republicans in state legislatures across the country have pushed legislation that requires women to undergo an ultrasound procedure 24 hours before terminating their pregnancy. The so-called “informed consent” laws usually require women to be given a picture of the fetus and be shown a fetal heartbeat, along with general information about abortion.

“The more the ultrasounds have become part of the law, where a woman gets the opportunity to see that there’s a real child, it’s beginning to change minds, and I think that’s a good thing,” DeMint said on NBC’s Meet the Press. “It’s time that the 3,000 babies we lose every day have some people speaking up for them.”

Res ipsa loquitor.

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Senior Vatican cleric’s arrest for smuggling stranger than fiction

In yet another blow to the Vatican’s image, a Senior Vatican Cleric has been arrested with two others in an international money smuggling case. Sixty-one-year-old Monsignor Nunzio Scarano, who worked as a senior accountant in the Vatican’s financial administration, was arrested along with an Italian secret service agent and a financial intermediary. Scarano was already under investigation in a convoluted case that reads like a spy novel.

Arrested in a Rome parish and taken to Rome’s Queen of Heaven jail, Scarano had hatched a plot to bring up to $52 million into Italy for a family of shipbuilders in his hometown of Salerno in southern Italy, magistrate Nello Rossi says. Rossi is already investigating the Vatican bank for money laundering.

Scarano is under separate investigation in southern Italy in relation to his accounts in the Vatican bank.

Scarano engaged Giovanni Zito, a paramilitary Carabiniere policeman on loan to the secret services, to help him get the money last July, which was in a Swiss bank, into Italy without tax and customs controls, Rossi says.

The third person arrested was Giovanni Carenzio, a financial broker with offices in Switzerland and the Canary Islands and who was acting as the fiduciary for the owners of the money.

It’s not yet known how the money got to Switzerland in the first place.

A cleric tries to help some friends, and suddenly, everyone’s a detective . . .

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Add Catholic Church: Still Terrible, Still Stacking Cash So Tall They Could Climb It

Wonkette moved a story detailing this particular flavor of horrible: moving assets around so that they could insulate themselves from legal claims from victims:

Files released by the Roman Catholic Archdiocese of Milwaukee on Monday reveal that in 2007, Cardinal Timothy F. Dolan, then the archbishop there, requested permission from the Vatican to move nearly $57 million into a cemetery trust fund to protect the assets from victims of clergy sexual abuse who were demanding compensation….

[T]he files contain a 2007 letter to the Vatican in which he explains that by transferring the assets, “I foresee an improved protection of these funds from any legal claim and liability.” The Vatican approved the request in five weeks, the files show.

Hiding your money in trust funds does indeed improve your protection of those delicious monies. Doing so to dick over victims is just what Jesus said to do in First Corinthians, right?! NOPE NOT RIGHT.

This latest bit of financial shenanigans is just one episode in the long-running series called Milwaukee Archdiocese, Why Do You Suck So Hard? Hence, our desire for a macro because Jeee-zus it gets depressing to write about this again and again. Longtime fans will remember that the Milwaukee Archdiocese filed bankruptcy back in 2011 because it was the best way to compensate victims. No really, they said that. They’ve also been whining like a baby without a bottle over the fact that they’ve spent $9 million in legal fees so far during the bankruptcy process and are therefore hobos now. Yr Wonkette is not all that money-savvy, as we have none, but even our rudimentary understanding of how money works leads us to believe that spending $9 million dollars does not make you bankrupt when you’ve already stashed a cool $57 million elsewhere. Milwaukee Archdiocese, you are like the Mitt Romney of churches and your crocodile tears are wasted on our hardened heart. Pay the victims any amount of monies they want because fuck you.

#NoNeedToSatirize: Fox News host: Not using God to sell beer means ‘the terrorists have won’

A Fox News guest host asserted on Friday that “the terrorists have won” because brewer Samuel Adams was not in invoking God in its television commercials to sell beer.

In the “Independence” television spot that began airing last month, an actor in a Samuel Adams Boston Lager commercial quotes from the Declaration of Independence.

“Why name a beer after Samuel Adams? Because Samuel Adams signed the Declaration of Independence,” the actor says. “He believed there was a better way to live: all men are created equal. They are endowed with certain unalienable rights: life, liberty, and the pursuit of happiness. Smooth, flavorful, we bow to no kings. Samuel Adams Boston lager: declare your independence.”

On Friday, the three Fox & Friends guest hosts expressed outrage that the brewer had not included the phrase “endowed by their Creator” in the commercial.

“When political correctness takes over the beer advertising industry, the terrorists have won,” said Watters, who is better known for his job as a producer on Bill O’Reilly’s Fox News show. “I mean, this is absolutely outrageous!”

“You know, maybe it’s because Sam Adams was the tea party guy — he started the Boston Tea Party — maybe the tea party’s being targeted here,” he added.

For its part, Sam Adams has reportedly explained that the Beer Institute Advertising Code advises against using “religion or religious themes” for marketing purposes.

But co-host Clayton Morris wasn’t buying that.

“If the beer code ethics code guideline, whatever bogus organization that is has more authority than our Declaration of Independence,” he argued, “why don’t you just pull out the Declaration of Independence and say, ‘I’ve got this document here, does this trump yours?’”

“Yeah, you can have a bikini cat fight in the pool with hair pulling and all that nonsense, but don’t put God,” Watters quipped.

___________________________________________________________

Yes, friends, you can no longer make this shit up.

Until next week, then, see you around the newly renovated Diner!

Thank You for Your Service- You’re Evicted

Guest article off the keyboard of Mary Malone

Published on The Burning Platform on May 28, 2013

http://www.boston.com/news/local/breaking_news/home-eviction-2.jpg

Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

Note from RE:  Another in the combined efforts of The Burning Platform and the Doomstead Diner to highlight specific ongoing problems for individuals who are being HOSED by the Fascist State.  We both recently Featured the Eustace Conway problem, here is another one which is AT LEAST as sickening, if not more so.  Make the phone calls.  Swamp the Fax Machines.  This is FUCKING BULLSHIT!

From Mary Malone:

Note: Petty Officer Joseph Worrell contacted me months ago – through the “Who’s Your Lender” thread posted on The Burning Platform. PO Worrell has very capable counsel and objected to each unlawful act committed by Emigrant Bank. Yet, Emigrant Bank was allowed to trample all over his rights and unlawfully seize his home.

PO Worrell and I came to the conclusion that the only strategy left – was to go national with the story. True to PO Worrell’s love of country and dedication to service, PO Worrell postponed the PR campaign until his return from deployment.

In his absence, while PO Worrell was serving his country, Emigrant Bank unlawfully evicted the Worrell’s from their home – violating a court ordered stay that was in place while the appeal was pending in federal court.

Emigrant Bank must be stopped. The madness must end. Please circulate this post and contact Eric Cantor and your members of congress and demand that they put an end to Emigrant Bank’s unlawful acts in violation of the SCRA.

Emigrant Bank Violates SCRA and unlawfully seizes active military home while he is deployed on missions in Afghanistan.

Petty Officer Worrell is a Reservist Navy SeaBee and combat veteran living in West Palm Beach who has served honorably for about 12 years. In 2009 he was deployed in the Persian Gulf when the home he built in Palm Beach Gardens was sold by the bank even though federal law (the SCRA) provides military members special protection from foreclosure. Unaware initially Emigrant Bank had in fact sold his house to themselves,  he returned home and continued to live in the home, and with help from a local attorney and military legal aid he started fighting to get the illegal sale overturned.

The Service members Civil Relief Act (“SCRA”, successor to the Soldiers and Sailors Relief Act) accords certain protections and rights to individuals who are either on active military duty or recently retired. The purpose of the Act is to allow the service members to perform their valuable duties without the worry of civil prosecution, foreclosure or eviction under most circumstances.

Before a court will permit such actions, the court will require certification that a military search has been conducted to confirm that the individual is not entitled to the protections of the Act. The proof may be required again later in the proceedings before certain collections or enforcement action is sought.  Proof of that verification is usually in the form of an affidavit which may be called a “military affidavit”, “non-military affidavit”, “nonmilitary affidavit”, “Active Duty Verification Affidavit”.
Petty Officer Worrell complied with all requirements under the SCRA. The Florida judiciary – in both state and Federal Bankruptcy Court ignored the law – and allowed Emigrant Bank to unlawfully foreclose on the property, vacate the bankruptcy stay and now violate a stay halting the sale of the home while the case is under appeal in the Federal Courts.PO Worrell was recently recalled to active duty and left his wife living in the home a PBSO agent showed up Monday May 6, 2013 and taped a 24 hour eviction notice to their front door. Worrell’s attorney filed an emergency motion requesting the court stop the eviction because Worrell was outside Florida on active duty, and the case was on appeal. But on Wednesday May 8, 2013, despite receiving via fax a court order halting the eviction, several PBSO agents and representatives of the bank, still showed up at the home in Palm Beach Gardens, broke the lock, and installed a new one. Mrs. Worrell had to flee their home and leave behind nearly all they own.
A local CBS affiliate produced a story on Emigrant Bank’s unlawful foreclosure and violations of the SCRA which aired last night over Memorial Day – link to segment here:

http://cbs12.com/news/top-stories/stories/navy-reservist-evicted-home-while-active-duty-7683.shtml

The Worrell’s say the bank involved, Emigrant Bank based in New York, is a predatory lender with a ton of political capital. Apparently Congressman Eric Cantor’s wife headed up one of their units, and he allegedly pressured Congressman Michael Grimm of Staten Island into introducing a banking bill that solely benefits Emigrant Bank to the tune of $300 million. See H.R.3128.

Worrell says: “It is very strange because we believe our courts are supposed to protect our rights, not just help banks step on them. Before I can even put down my seabag or checking at my local command – far less pack up and move out, here they come to taking our home to profit unfairly from all our sweat and hard work. We believe some local officials have bent over backwards so this bank can skirt important federal law – and it just wrong”.

Please send this story to everyone on your contact list. We need PO Worrell’s story to go national to embarrass members of Congress into intervening and calling Emigrant Bank off. I’m sending the post to contacts at the American Legion in the hope that retired military will rally behind the Worrell’s and exert their influence on a corrupt Congress.

Contact Congressman Eric Cantor and tell him you want his wife’s employer, Emigrant Bank to comply with the SCRA, follow the law and respect the stay a FL judge has placed on the sale of Worrell’s home.

The law needs to be followed – even by banks connected to his office. Congressman Cantor’s contact info:

Phone: (202) 225-2815
Fax: (202) 225-0011

 

http://www.theburningplatform.com/?p=54957

Crash V 2.0

Off the keyboard of John Ward

Published originally on The Slog January 2013

Discuss these articles at the Epicurean Delights Smorgasbord inside the Diner

CRASH 2: the hide and seek of it all

Italian banks have been hiding massive derivatives losses…so now MPS bank needs a €3.9bn bailout. The Talvivaara Mining company of Finland is secretly mining uranium, and covering up dangerous accidents. Both the Germans and the Swiss think the Americans are lending out or selling more than they actually hold in gold, thus raising the spectre of ‘fiat gold’: hence their growing desire to get the gold back before things get totally out of hand. Almost nobody believes the figures for Spanish bank liquidity – and the authorities have relaxed their liquidity requirements in order to get real about this.

All these stories have one simple commonality: deception. Alongside the trend identified by The Slog in recent weeks (the élites are becoming less bothered about fessing up to fibs) is another more encouraging one: the MSM has been rather more on the ball about spotting the mendacity in the first place.

What the main ‘old’ media still aren’t doing, however, is addressing specific reasons why the deceptions are necessary in the first place. In fact, this isn’t even slightly hard to do. The three main élite activities taking place at the minute are:

1. A scramble for energy and new-industry sector resources;

2. The appropriation by sovereign banks of gold as a bulwark against insolvency; and

3. the injection of more unelected technocrats into key positions in order to help carry that out.

Realities which might cause a derailing panic have thus been hidden. But reporting the instances and symptoms of this process is becoming increasingly irrelevant: it’s very good for hits – if you’re chasing hits – but as always, that gets in the way of intelligent analysis of how the rest of us should respond in the face it. And anyway, those ‘in charge’ haha are no longer that fussed about the media finding out about such stuff: the die is cast now, there’s little we can do to stop it….and they know that.

I think any investor or survivalist must therefore apply two critieria to any investment – whatever it might be: first, do I really understand all the fundamentals of this sector? And second, is anyone dicking about with those fundamentals for commercial or sovereign/central bank gain?

For me, silver is looking a better and better opportunity. So using the advice offered above, remember that the metal is prone to at times terrifying volatility…that’s the downside. The upside is that Mario Draghi, Mervyn King and Ben Bernanke do not (as far as I know) have plans for it. Nevertheless, other directionalising folks much nastier than any of us may well have such plans.

As always, caveat emptor applies: ignore what the buggers say, but oggle what they do like a hawk.

Finally, as a trailer to what will be coming soon at The Slog, I leave you with this thought. Every top fiscal Wally around the Western world is busy predicting confidently that Zirp will be maintained until such time as things improve. It is my considered opinion that the main emotion in play during such assertions is hubris. Hugh Briss is a loud sort of cove, but prone to delusions of grandeur: he is the Icarus of our world, convinced he can fly close to the sun, and control its effect. He cannot.

Stay tuned.

CRASH 2: The mad, the bad, and the hysterically silly

George Osborne yesterday showed once more that he’s ahead of the game by suggesting that Britain faces “a difficult time”, the gdp results were “disappointing”, and thus the Pound is falling…so Brits abroad in the eurozone will “feel the pinch”. The Daily Mail noted all this, and then wrote that the FTSE had ‘smashed through the 6,300 barrier’. No dots were joined up or brain-cells overworked in the reporting of these facts. The phrases ‘currency wars’, ‘selling the Pound to help exports’ and ‘indescribably bonkers’ were absent.

Still, the American ‘recovery’ continues to be the only one in history wherein the Federal Government owes more money every month, over half the public sector pension fund has been thrown at the debt, and the absorption of failed banks by healthier ones is a process taking place 4-5 times a month on average. 53 banks failed in the US last year, and for those of a vengeful disposition, The FDIC has all the gory details.

Doing this sort of thing, of course, simply means that bad banks infect goodish banks with their toxicity….which quietly moves from one balance sheet to another, becoming yet another lump of pulsating radioactive gunk ready to lay the system low.

But heh – volatility is just so now baby. CBOE Holdings, buoyed by the phenomenal success of options and futures contracts based on its Volatility Index (VIX) is ratcheting up its efforts to broaden their appeal.

“The volatility business is only eight years old, but we see terrific growth,” Ed Tilly, CBOE’s president and chief operating officer, told a gathering of reporters in New York recently. “We see hedge funds, prop trading firms, (commodity trading advisors), insurance companies and other institutional users migrating to the product. It’s very important for us.”

‘The volatility business’. Doncha love it? Here we are, it’s the 21st century, and fully grown up adults are gainfully employed building a new sector specialising in calculating the Fanshit Factor. Buy fanshit futures. Compare your own fanshit fear to the fanshit feelings of other calmer souls. Spot the fanshit index falling as more fanshit sprays your new YSL suit an interesting shade of fanshit. Be a fanshit fan: You Know it Makes Sense. Human beings are never funnier than when examining the interior of their own backsides in search of fanshit.

But desperation breeds criminality too – imagine that. Suddeutsche Zeitung reports that Germany’s bank regulator Bafin has now started an investigation against four German banks in connection with alleged manipulation of the Euribor. So far, the German authorities have only cooperated with the Libor investigations, but this is a new investigation.

Do we need a trial to establish guilt here? Probably not: they’re all guilty. Still, some sort of judicial process would be nice. I mean in the sense of politeness to the 65% of us suffering a pythonic grip while the authorities work out how to save themselves. QE does nothing that it claims on the tin. Zirp pauperises anyone on a fixed income with ‘proper’ investments. Libor manipulation screws the borrower. Welfare cuts play well in the markets while leaving all worthy recipients of it even more desperate than the authorities.

They’re called the authorities, by the way, because although they’re rarely authoritative – and never able to command authority through respect – they do have unlimited authority to do WTF they like to anyone and anything at any time they fancy. This is what makes investing such a joy at the moment. But if nothing else, the competition authorities are still on Michael O’Leary’s case, so it’s not all bad.

Ryanair has put out quarterly results showing turnover, profit and passengers continue to rise. The last of these is an especially good sign for any company in the business of getting people into the air, and predictably the results are accompanied by a bullish statement from chief executive Michael O’Leary. As O’Leary could be bullish about the imminence of an asteroid hit, that doesn’t mean much beyond his infinite determination to take over Aer Lingus.

Mad Michael claims that his plan to sell Aer Lingus routes to two separate airlines meets all concerns raised by the competition authorities. They just don’t address my concerns about the possibility of him being a wing short of an aeroplane, but then I’m picky. I once drove a six hundred mile round-trip to pick up four teenage children who unexpectedly found themselves in the Loire thanks to the immaculate scheduling and navigation skills of Ryanair. It is for this and many other reasons that I still think the price of O’Leary buying the national airline of his homeland should be the authorities insisting on rebranding it Cunnilingus.

But just when you thought Absolute Zero Sanity had been achieved, there’s always the Greek austerity problem to prove you wrong. Charis Theocharis, the new Hellenic revenues general secretary, made an astonishing claim in public last week. During his appearance at
the congress of the Association of Property Owners, a number of people
started to shout and protest about the many different taxes imposed on
property.

“I have no money to pay property taxes,” shouted someone from the audience.

An obviously stunned general secretary shouted back, “Me neither”.

CRASH 2: “We are 100% certain that it just doesn’t matter”.

Truth, Lies and Tickertape in America and Europe

It’s a desperate politician that ever uses the term ‘one hundred per cent’, but yesterday Greek Finance Minister Yannis Stournaras said he was that certain 2013 will be Greece’s last year of recession. Whether it’s a forever thing or just until 2014 we can’t be sure, but speaking to the BBC’s Mark Lowen, Yannis said the Greeks had reason to be optimistic.

Missing from his statement was why they should feel optimistic, but just to back himself still further into a newly-painted corner, Stournaras added, “Towards the last quarter of 2013, we are going to have recovery. The probability of Greece leaving the euro – Grexit – is now very small.”

I would imagine this is what passes for being ‘on message’ in the Eurozone at the moment, and if nothing else it offers an example to French ministers about how they’re expected to behave. In a desperate attempt to disarm a self-inflicted torpedo yesterday, colleagues in the Socialist administration said Labour Minister Michel Sapin was only highlighting faults of the previous government of Nicolas Sarkozy when he said France was ‘totally bankrupt’.

‘Totally’ is another of those ‘one hundred per cent’ statements. Not that you can be slightly bankrupt, but either way retreating from such an observation represents a toughie. His boss Pierre Moscovici said: “What he meant was that the fiscal situation was worrying”, but nobody in history ever rang up the administrators to say the situation was totally worrying. As if to prove the point, a poll yesterday by Le Figaro had 80% of readers agreeing that France was bankrupt. You ain’t outta the woods yet, Pierre baby.

But if things seem anything from rosey to awful on the mainland, things are catastrophic on Cyprus. You know there’s a big issue at stake when they drag in the clerics, and last week the island’s orthodox leader Archbishop Chrysostomos II requested financial assistance for the rapidly sinking island nobody wants to sink. However, Chrysostomos turned towards Russia, asking his counterpart in Moscow to try to persuade President Rasputin to grant another emergency loan….on top of the 2.5 billion euros Cyprus got from Russia just 13 short months ago.

According to Fitch, in fact, the total Cyprus now needs is 17 billion euros, which represents seventeen eighteenths of the gdp there. I’d call that ‘worrying’ even on a good day and 25 mgs of Valium; but then, I’m getting hazy on what ‘bankrupt’ means. I’m also unclear as to when Archbishops began to have numbers like monarchs: does this suggest delusions of grandeur, we ask. Or is he the follow up to the last movie, Archbishop Chrysostomos I, in which the Bish looked West but saw only a Belgian skull writing kamikaze poetry?

We may never know, but it’s good to see that the Phantom Finn Olli Rehn has joined the certainty club. “It’s essential that everybody realises that a disorderly default of Cyprus could lead to an exit of Cyprus from the Eurozone,” he said, adding pointedly and yet pointlessly, “It would be extremely stupid to take any risk of that nature.”

That’s another fine mess you got us into, Olli: but as the irrepressible Mark J Grant pointed out yesterday, a big slice of the formula for Europe is that ‘no country will leave the Euro under any circumstances so not only is money thrown about, but deficit goals are relaxed, relaxed and ignored as demonstrated quite clearly in Spain, Greece, Portugal, Italy and Cyprus. The actual financials in these European countries have gone from bad to worse but it is irrelevant, as there has been a change in the mindset of the Europeans which is being reflected in the minds of investors – which is that “it just does not matter”’. He is of course right on the money, reflected by the fact that Catalonia has just requested another 9 billion euros in aid from Mariano Rajoy’s Madrid Government.

Grant’s brilliant piece was marred only by the growing inability of folks under forty to get the compose/comprise verb right. Something is either composed of, or it comprises. You can’t comprise of something any more than you can compose of music. English is full of comprises, but it does no harm to know the rules.

Knowing the rules has never held the Italians back, and the smell surrounding Monte dei Paschi di Siena Bank (MPS) is getting more pervasively gaggo by the hour. Siena prosecutors have been looking at the MPS accounts, and found suspicious bank transfers for €17bn in 11 months from May 2008 to April 2009 to various other institutions. That’s a figure I’d rank beyond suspicious and heading towards smoking gun held in bright-red cordite-stained hand. I mean, €17bn is a lot. The money went to ABN Amro, Santander and Abbey National, and has an air of f**king enormous bribe about it.

Talking of bribes, Federal Reserve Chairman Bernanka’s latest round of bond buying will reach $1.14 trillion before he ends the programme in the first quarter of 2014, according to estimates in a Bloomberg survey of economists.

Despite the US being in complete, obvious and unstoppable recovery, Benny the Banke will press on with purchases of $40 billion a month of mortgage bonds, and $45 billion a month of Treasuries – although more than a few Fed officials warn his unprecedented balance-sheet expansion will “impair efforts to tighten policy when necessary” as one mole put it.

I am very happy to be quoted as offering the view that this is a one hundred per cent certainty. But as they say in Brussels, “it just doesn’t matter”. Thank God for that: we are saved.

Knarf plays the Doomer Blues

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