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News of Russian banks connecting to Iran’s financial messaging system strengthens the resistance against US-imposed sanctions on both countries and accelerates global de-dollarization.

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Photo credit: The Cradle

The agreement between the Central Banks of Russia and Iran formally signed on 29 January connecting their interbank transfer systems is a game-changer in more ways than one.

Technically, from now on 52 Iranian banks already using SEPAM, Iran’s interbank telecom system, are connecting with 106 banks using SPFS, Russia’s equivalent to the western banking messaging system SWIFT.

Less than a week before the deal, State Duma Chairman Vyachslav Volodin was in Tehran overseeing the last-minute details, part of a meeting of the Russia-Iran Inter-Parliamentary Commission on Cooperation: he was adamant both nations should quickly increase trade in their own currencies.

Ruble-rial trade

Confirming that the share of ruble and rial in mutual settlements already exceeds 60 percent, Volodin ratified the success of “joint use of the Mir and Shetab national payment systems.” Not only does this bypass western sanctions, but it is able to “solve issues related to mutually beneficial cooperation, and increasing trade.”

It is quite possible that the ruble will eventually become the main currency in bilateral trade, according to Iran’s ambassador in Moscow, Kazem Jalali: “Now more than 40 percent of trade between our countries is in rubles.”

Jalali also confirmed, crucially, that Tehran is in favor of the ruble as the main currency in all regional integration mechanisms. He was referring particularly to the Russian-led Eurasian Economic Union (EAEU), with which Iran is clinching a free trade deal.

…click on the above link to read the rest…

Hyperinflationary Hell: Lebanese Central Bank Devalues ‘Lira’ By 90%

February 1, 2023

Hyperinflationary Hell: Lebanese Central Bank Devalues ‘Lira’ By 90%

Cash is now king in Lebanon, where a three-year economic meltdown has led the country’s once-lauded financial sector to atrophy and turned the country into a Venezuelan-esque hyperinflationary hell. The country has been hit hard by events over the past few years, starting with COVID.

In August 2020, the city of Beiruit was practically destroyed by a massive blast which killed at least 200 people and triggered as much as $15 billion in damage…

In March 2021, violent protests erupted across Lebanon as the currency collapse accelerated and with it the economy and people’s living standards.

And most recently, In December 2022, the Lebanese parliament failed for the eighth consecutive time to elect a new president, as a majority of lawmakers opposed the options laid on the table.

The prolonged power vacuum only exacerbates the situation, as Beirut is currently unable to enact sweeping reforms demanded by international lenders as a condition for releasing billions of dollars in loans.

All of which has sent the ‘parallel’ FX rate to a stunning 60,000/USD (compared to the official Pound – often nicknamed ‘Lira’ – rate of 1500/USD)…

Source: LiraRate.org

As Reuters reports, Zombie banks have frozen depositors out of tens of billions of dollars in their accounts, halting basic services and even prompting some customers to hold up tellers at gunpoint to access their money.

This has prompted bank runs…

Not a week goes by without Lebanese depositors storming their own banks in a desperate attempt to access savings frozen after the country’s economy collapsed.

Banks began imposing draconian limits on withdrawals and transfers in 2019, leaving depositors able to access only a fraction of their savings in dollars and Lebanese pounds.

and heists…

The National has recorded 27 depositor bank “heists” since the start of the year, including armed and unarmed hold-ups and sit-ins.

…click on the above link to read the rest…

The evolution of credit and debt in 2023

January 15, 2023

The evolution of credit and debt in 2023

The evidence strongly suggests that a combined interest rate, economic and currency crisis for the US and its western alliance will continue in 2023.

This article focuses on credit, its constraints, and why quantitative easing has already crowded out private sector activity. Adjusting M2 money supply for accumulating QE indicates the degree to which this has driven the US tax base into deep recession. And the wider effects on credit in the economy should not be ignored.

After a brief partial recovery from the covid crisis in US government finances, they are likely to start deteriorating again due to a deepening recession of private sector activity. Funding these deficits depends on foreign inward investment flows, which are faltering. Rising interest rates and an ongoing bear market make funding from this source hard to envisage.

Meanwhile, from his public statements President Putin is fully aware of these difficulties, and a consequence of the western alliance increasing their support and involvement in Ukraine makes it almost certain that Putin will take the opportunity to push the dollar over the edge.

Credit is much more than bank deposits

Economics is about credit, and its balance sheet twin, debt. Debt is either productive, in which case it can extinguish credit in due course, or it is not, and credit must be extended or written off. Money almost never comes into it. Money is distinguished from credit by having no counterparty risk, which credit always has. The role of money is to stabilise the purchasing power of credit. And the only legal form of money is metallic; gold, silver, or copper usually rendered into coin for enhanced fungibility.

…click on the above link to read the rest…

Zoltan Pozsar’s Gold-mageddon Deconstructed

December 27, 2022

Zoltan Pozsar’s Gold-mageddon Deconstructed

“[B]anks have been managing their paper gold books with one assumption, which is that [Nation] states would ensure gold wouldn’t come back as a settlement medium.” -Zoltan Pozsar

Before we go any further, we read ZeroHedge’s report on this letter Dec 7th entitled: Zoltan Pozsar: Gold To Soar…When Putin Unveils Petrogold (ZH Prem) and have been thinking on it since. Here is one of those thoughts pertaining to Gold’s evolving market structure

The statement at top is arguably the most important sentence in Zoltan’s recent post entitled: Oil, Gold ,and LCL(SP)R. It is how he closes that note.

If you have read his letter (excerpt below) you may prefer quotes pertaining to Gold’s price jump from $1800 to $3600 or Pozsar’s follow up statement to the price of Gold potentially doubling where he wrote: Crazy? Yes. Improbable? No.

Those statements certainly are nice to read for real-money advocates; especially coming from one of the most respected economists on the street these days. We cannot lie it makes us smile as well.

However, for anyone with precious metals exposure, like a bank or presumably you reading this piece (thank you for that), the quote at top should rule them all. Here’s why…

Why Banks Short Gold

Zoltan, possibly inadvertently, gives readers the rationale by which banks have been profitably shorting Gold since the 1990s. Here is our translation of that same sentence at top.

Translated from the original Zoltanese:

Banks have been using rehypothecation for decades fearlessly with approval of global governments who promised them Gold would never be used as a settlement medium—i.e. have a practical use — again.

…click on the above link to read the rest…

The “Barbarous Relic” Helped Enable a World More Civilized than Today’s

December 12, 2022

The “Barbarous Relic” Helped Enable a World More Civilized than Today’s

One of history’s greatest ironies is that gold detractors refer to the metal as the barbarous relic. In fact, the abandonment of gold has put civilization as we know it at risk of extinction.

The gold coin standard that had served Western economies so brilliantly throughout most of the nineteenth century hit a brick wall in 1914 and was never able to recover, or so the story goes. As the Great War began, Europe turned from prosperity to destruction, or more precisely, toward prosperity for some and destruction for the rest. The gold coin standard had to be ditched for such a prodigious undertaking.

If gold was money, and wars cost money, how was this even possible?

First, people were already in the habit of using money substitutes instead of money itself—banknotes instead of the gold coins they represented. People found it more convenient to carry paper around in their pockets than gold coins. Over time the paper itself came to be regarded as money, while gold became a clunky inconvenience from the old days.

Second, banks had been in the habit of issuing more bank-notes and deposits than the value of the gold in their vaults. On occasion, this practice would arouse public suspicion that the notes were promises the banks could not keep. The courts sided with the banks and allowed them to suspend note redemption while staying in business, thus strengthening the government-bank alliance. Since the courts ruled that deposits belonged to the banks, bankers could not be accused of embezzlement. The occasional bank runs that erupted were interpreted as a self-fulfilling prophecy. If people lined up to withdraw their money because they believed their bank was insolvent, the bank soon would be…

…click on the above link to read the rest…

Nigeria Limits ATM Withdrawals To $45 Per Day To Force Govt-Controlled Digital Payments

December 8, 2022

Nigeria Limits ATM Withdrawals To $45 Per Day To Force Govt-Controlled Digital Payments

A staggering number of Nigerians love Bitcoin, but hate government cryptocurrency (CBDCs).

In April, leading cryptocurrency exchange KuCoin noted that 35% of the adult population in Nigeria – roughly 34 million adults aged 18-60, own bitcoin or other cryptocurrencies. But when it came to the country’s Central Bank Digital Currency (CBDC), the eNaira, it was a massive failure.

According to Bloomberg, only 1 in 200 Nigerians use the eNaira – despite government implemented discounts and other incentives, implemented as desperate measures to increase adoption.

Now, the government is looking to boost digital payments by limiting ATM withdrawals to just 20,000 naira, or roughly US$45 per day, Bloomberg reports, citing a circular sent to lenders on Tuesday. The previous withdrawal limit was 150,000 naira (US$350).

Weekly cash withdrawals from banks are now limited (without fee) to 100,000 naira (US$225) for individuals, and 500,000 naira (US$1,125) for corporations. Any amount above this will incur a fee of 5% and 10% respectively.

The action is the latest in a string of central bank orders aimed at limiting the use of cash and expand digital currencies to help improve access to banking. In Nigeria’s largely informal economy, cash outside banks represents 85% of currency in circulation and almost 40 million adults are without a bank account.

The central bank last month announced plans to issue redesigned high value notes from mid-December to mop up excess cash and it’s given residents until the end of January to turn in their old notes. The bank also plans to mint more of the eNaira digital currency, which was launched last year but has faced slow adoption. -Bloomberg

What’s more, new rules which will take effect Jan. 9 will ban the cashing of checks above 50,000 naira (US$112) over-the-counter, and 10 million naira (US$22,480) through the banking systems. Point-of-sale cash withdrawals have been capped at 20,000 naira ($45).

…click on the above link to read the rest…

The macroeconomics of bank-created money and a Modern Debt Jubilee as a way out of the private debt trap

December 8, 2022

The macroeconomics of bank-created money and a Modern Debt Jubilee as a way out of the private debt trap

My friend Dr. Sabri Oncu has established an innovative seminar program at Kadir Has University in Turkey. Called the “Kadir Has Lectures on Global Political Economy”, it has had lectures from a number of non-mainstream economists, including Ann Pettifor, Frances Coppola, Yanis Varoufakis, and Jan Kregel.

Forthcoming lecturers include Louis Philippe Rochon and Matias Vernengo. You can find the series here: https://www.youtube.com/playlist?list=PLF796nZs0vOE-Rbrquqdfdrm0ck92lMjI

In my lecture, I explain how bank credit adds to aggregate demand and income, and therefore how capitalism’s great crises–the Great Depression, the Great Recession, the Panic of 1837, and so on–were caused by credit turning negative.

I also explain how we could remedy the economy via a “Modern Debt Jubilee”. Of course, since Neoclassical economists dominate economic policy, I know that this policy has no better than a snowflake’s chance in Hell of being implemented.

I’ve attached the PDF of my slides here as well (unfortunately Substack doesn’t support Powerpoint files: if you want to download them, please go to the Patreon page https://www.patreon.com/posts/75639086.

Keen2022macrobomdandmoderndebtjubilee

6.01MB ∙ PDF File

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Tim Watkins: Anatomy of the Crisis

December 1, 2022

Tim Watkins: Anatomy of the Crisis

Canadian Banks Slammed For Continued Fossil Fuel Investments

November 29, 2022

Canadian Banks Slammed For Continued Fossil Fuel Investments

Canadian banks are receiving backlash from investors for their continued investments in fossil fuels.
All Canadian banks were revealed to have increased their exposure to fossil fuels between 2020 and 2021, by between 25 percent—TD and BMO—and 132 percent for CIBC.
The report is the latest example of investor pressure on financial institutions to reduce their lending to fossil fuel companies.

An investor group has criticized Canadian lenders for investing heavily in fossil fuels despite the Paris Agreement, noting that all of the largest Canadian banks still need to be ready for net zero.

In a report titled Net Zero Policy Report Card, Investors for Paris Compliance graded Canada’s largest banks on several indicators, including fossil fuel investments, climate targets, and emissions reporting.

In fossil fuel investments, all banks were revealed to have increased their exposure between 2020 and 2021, by between 25 percent—TD and BMO—and 132 percent for CIBC.

According to the report, RBC invested $48.5 billion in fossil fuels last year, up 101 percent on 2020, and Scotiabank increased its exposure to the sector by 87 percent to $38 billion.

TD’s fossil fuel investments rose to $26.4 billion, and BMO’s went up to$23.5 billion. CIBC invested $27.8 billion in fossil fuels in 2021, Investors for Paris Compliance said, noting that the sixth bank under review, National Bank, had no data published on its fossil fuel industry exposure.

The report is the latest example of investor pressure on financial institutions to reduce their lending to the fossil fuel sector and focus on emission reporting and reducing measures in line with international Paris Agreement commitments.

This, however, stands in stark contrast with warnings, including from the IEA, that not enough is being invested in the new supply of fossil fuels, including coal, which this year saw a real renaissance.

…click on the above link to read the rest…

Germany Preparing For Emergency Cash Deliveries, Bank Runs And “Aggressive Discontent” Ahead Of Winter Power Cuts

November 16, 2022

Germany Preparing For Emergency Cash Deliveries, Bank Runs And “Aggressive Discontent” Ahead Of Winter Power Cuts

While Europe has been keeping a generally optimistic facade ahead of the coming cold winter, signaling that it has more than enough gas in storage to make up for loss of Russian supply even in a “coldest-case” scenario, behind the scenes Europe’s largest economy is quietly preparing for a worst case scenario which include angry mobs and bankruns should blackouts prevent the population from accessing cash.

As Reuters reports citing four sources, German authorities have stepped up preparations for emergency cash deliveries in case of a blackout (or rather blackouts) to keep the economy running, as the nation braces for possible power cuts arising from the war in Ukraine. The plans include the Bundesbank hoarding extra billions to cope with a surge in demand, as well as “possible limits on withdrawals”, one of the people said. And if you think crypto investors are angry when they can’t access their digital tokens in a bankrupt exchange, just wait until you see a German whose cash has just been locked out.

Officials and banks are looking not only at origination (i.e., money-printing) but also at distribution, discussing for example priority fuel access for cash transporters, according to other sources commenting on preparations that accelerated in recent weeks after Russia throttled gas supplies.

The planning discussions involve the central bank, its financial market regulator BaFin, and multiple financial industry associations, said the Reuters sources most of whom spoke on condition of anonymity about plans that are private and in flux.

Although German authorities have publicly played down the likelihood of a blackout and bank runs – for obvious reasons – the discussions show both how seriously they take the threat and how they struggle to prepare for potential crippling power outages caused by soaring energy costs or even sabotage…

…click on the above link to read the rest…

Since when did banks produce energy?

October 14, 2022

Since when did banks produce energy?

It takes a special kind of cynical self-interest to make people pay twice for something they already cannot afford, while claiming you are doing them a favour. This though, is the energy price relief package announced by Liz Truss yesterday. The package plays that old political card of being not quite as bad as it might otherwise have been, while still being a lot worse than it was.

Politically, the announcement confirms a great deal of what we suspected. In recent years there has been a growing belief that the Versailles-on-Thames technocracy pulls the strings and that incoming prime ministers are simply given their script on arrival in 10 Downing Street – this is born out by an energy package – drawn up by technocrats over the last six weeks – which is wholly at odds with Truss’s policy announcements during her leadership campaign. The announcement also demonstrates that despite her third-rate tribute act, Truss is no Margaret Thatcher, nor even the economic liberal that she claims… because a true libertarian – and likely Saint Margaret herself – would have allowed the energy companies to go bust rather than ignore the inflationary impact of state intervention… so now we know.

The package itself involves capping the average energy bill at £2,500 for the next two years, rather than the immediate rise to £3,549 and the anticipated rise above £6,000 in 2023. There is also a reduction on the regressive standing charge for electricity as the various green levies are removed. A reduction in VAT is also expected in future, and the national £400 bill reduction, together with the £650 for people on low incomes remains and may be extended next year.

…click on the above link to read the rest…

Even The Banksters Are Being Forced To Admit That The U.S. Economy Is Really Starting To Come Apart At The Seams

October 11, 2022

Even The Banksters Are Being Forced To Admit That The U.S. Economy Is Really Starting To Come Apart At The Seams

It’s wake up time. For months, there has been a tremendous amount of denial out there. So many of the “experts” assumed that the Federal Reserve and other central banks had everything under control and that things would “return to normal” before too long. But that hasn’t happened. Instead, the wheels seem to be coming off the bus and nobody seems to know what to do. The Fed appears to be determined to keep raising interest rates in a desperate attempt to fight inflation, and this has forced other central banks all over the globe to raise rates as well in order to keep their currencies from absolutely tanking. But all of these interest rate hikes are taking us into a major global economic downturn, and central bankers in Europe are literally screaming at the Fed to end the madness.

But the Fed is not going to end the madness, and so things are going to get really bad.

In fact, Bank of America is now projecting that the U.S. economy will lose 175,000 jobs a month during the first quarter of 2023…

As pressure from the Fed’s war on inflation builds, nonfarm payrolls will begin shrinking early next year, translating to a loss of about 175,000 jobs a month during the first quarter, the bank said. Charts published by Bank of America suggest job losses will continue through much of 2023.

“The premise is a harder landing rather than a softer one,” Michael Gapen, head of US economics at Bank of America, told CNN in a phone interview Monday.

In my opinion, if our job losses are that small during the first three months of next year I think that will be a huge win.

…click on the above link to read the rest of the article…

If you thought the Coinbase bankruptcy disclosures were bad…

May 16, 2022

If you thought the Coinbase bankruptcy disclosures were bad…

Just wait ’til you see your government’s bail-in rules

One of the subplots that made for a bad week in crypto included a largely manufactured crisis around “The Coinbase bankruptcy disclosure”. After posting an earnings miss, the next shoe to drop was the discovery in the latest version of the Coinbase Terms of Service, the addition of text that included the following:

“Custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”

This verbiage became a big deal with every corporate media outlet dumping all over it. It trended on Twitter and quickly went viral, almost as if this was some sort of revelation.

It’s not. It’s basically the oldest adage in crypto, “not your keys, not your coins” spelled out in writing.

Do you really think if you’re holding your crypto on some exchange that suddenly becomes insolvent it’s going to make a difference if a paragraph to that effect appears in the ToS or not? Good thing Mt Gox or QuadrigaCX didn’t have that in their ToS otherwise everybody with assets in either exchange would have been really screwed, right?

You’re screwed no matter what. At least Coinbase is calling your attention to it.

Don’t hold your crypto on the exchange, any exchange, full stop. Even the largest crypto exchange CEOs will tell you that.

But if you’re one of those people for whom this is something to be up in arms about, I’ve got news for you:

…click on the above link to read the rest of the article…

Serf-Expression

March 14, 2022

Serf-Expression

Eventually the “flock of timid and industrious animals” changes their minds about how much exploitation by the few is acceptable.

You may have noticed the news flow beyond the hot war in Ukraine is largely focused on capital: financial capital (markets, liquidity, interest rates, commodities, central bank tightening, etc.) and political capital (geopolitical maneuvering, sanctions, revising energy and defense policies, etc.)

Notice who’s left out, unnoticed and invisible? The serfs, the bottom 90% who have been decapitalized in the developed world and exploited in the developing world for the past 45 years.

With capital ascendant, the vast majority of financial and political gains flowed to the top tier of speculative capital (banks and billionaires) while the purchasing power of labor (i.e. wages) has been in a 45-year descent. (See chart below)

This disemboweling of labor transferred $50 trillion from labor to capital in the U.S. alone. Financialization and globalization devalued labor and working-class assets such as savings and boosted leveraged speculative bets only available to financiers and corporations, for example, stock buybacks funded by the tsunami of free money for financiers unleashed by the Federal Reserve and other central banks. (See chart below)

Even though the corporate media gives it no notice, serf-expression will become increasingly consequential. No, serf-expression is not a typo for self-expression, the core doctrine of modernism. By serf-expression I mean the serf’s expression of what is no longer acceptable. Another term for this is cultural revolution. I address social and cultural revolutions in my new book, Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States.

Is a Cultural Revolution Brewing in America? (April 9, 2021)

When the serfs no longer believe in the divine right of banks and billionaires, then the concentration of economic and political power in the hands of the few will no longer be acceptabl…

…click on the above link to read the rest of the article…

Bank Run? Canada’s Top Banks Mysteriously Go Offline

February 17, 2022

Bank Run? Canada’s Top Banks Mysteriously Go Offline

Days after Canadian Prime Minister Justin Trudeau said he would invoke emergency orders to crack down on demonstrators by freezing their bank accounts, five major Canadian banks went offline on Wednesday night, as customers reported their funds were unavailable, according to technology website Bleeping Computer.

Royal Bank of Canada (RBC), BMO (Bank of Montreal), Scotiabank, TD Bank Canada, and the Canadian Imperial Bank of Commerce (CIBC) were all hit with unexplainable outages on Wednesday evening. Users began reporting issues with banks around 1600-1700 ET, Downdector data showed.

Canadian Twitter users reported they couldn’t access their funds at the ATMs. One user took a photo of an error message at one of RBC’s ATMs that read, “Tap transactions aren’t available for this card.”

In response, RBC tweeted, “We are currently experiencing technical issues with our online and mobile banking, as well as our phone systems.”

“Our experts are investigating and working to get this fixed as quickly as possible, but we have no ETA to provide at this time. We appreciate your patience.”

BMO customers also reported issues. One customer said, “I’m having trouble and money transfer just auto gets rejected for no reason. Not going over my limit, all info is verified correct and receiving bank says no issues on their end.”

There were countless stories of banking customers who experienced trouble accessing their funds yesterday evening. No bank explained the source of the outrage, but essential to note the outage comes, as we said above, days after Trudeau invoked the Emergencies Act.

The power gives the federal government direct access to banks to force any business conducted with Freedom Convoy protesters and affiliates to freeze their bank accounts. Trust in the banking system among depositors is crucial to prevent bank runs. Freezing accounts of people linked to the protests can incite fear.

…click on the above link to read the rest of the article…

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