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The End Is Near, Part 1: The “War On Cash”
The End Is Near, Part 1: The “War On Cash”
As the saying goes, you can know a person by the quality of his or her enemies. This is also true of societies, where moral evolution can be traced by simply listing the things on which they declare war. Not so long ago, for instance, the world’s good guys — the US, Europe’s democracies and a few others — fought existential battles against fascism and communism. Then they went after poverty and discrimination. They were, at least in terms of their ideals, on the side of personal freedom and opportunity and against institutionalized control.
But then came the war on drugs, in which the US imprisoned millions of non-violent people guilty only of voluntary transaction. Not long after that we declared war on “terror,” using the enemies created by our own incompetent foreign policy as an excuse for a vast expansion of surveillance and police militarization.
And now, seemingly out of nowhere, comes a new enemy: cash. Around the world, governments and banks are making it harder to save and transact with paper and coin. The ultimate goal seems to be the elimination of private tools of commerce, in favor of transparent (to governments and banks) plastic, checks and online payment systems. The following excerpts are from longer articles that should be read in their entirety:
…click on the above link to read the rest of the article…
ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut
ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut
In what seems like a coincidental retaliation for Greece’s pivot to Russia (and following Greece’s initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that – after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks – as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this isabout as worst-case-scenario for Greece as is ‘diplomatically’ possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.
As we laid out earlier, according to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: “the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms.”
Any reduction in ELA availability would be devastating to Greece, where depositors continue to pull cash from banks accounts to the tune of several hundred million euro every week, and the central bank “seeks to match the outflow with ELA. The Bank of Greece keeps a buffer of around 3 billion euros of ELA allowance in reserve, to give it time to react to a possible bank run, one of the officials said.”
…click on the above link to read the rest of the article…
The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives
The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives
The very same people that caused the last economic crisis have created a 278 TRILLION dollar derivatives time bomb that could go off at any moment. When this absolutely colossal bubble does implode, we are going to be faced with the worst economic crash in the history of the United States. During the last financial crisis, our politicians promised us that they would make sure that “too big to fail” would never be a problem again. Instead, as you will see below, those banks have actually gotten far larger since then. So now we really can’t afford for them to fail. The six banks that I am talking about are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo. When you add up all of their exposure to derivatives, it comes to a grand total of more than 278 trillion dollars. But when you add up all of the assets of all six banks combined, it only comes to a grand total of about 9.8 trillion dollars. In other words, these “too big to fail” banks have exposure to derivatives that is more than 28 times greater than their total assets. This is complete and utter insanity, and yet nobody seems too alarmed about it. For the moment, those banks are still making lots of money and funding the campaigns of our most prominent politicians. Right now there is no incentive for them to stop their incredibly reckless gambling so they are just going to keep on doing it.
…click on the above link to read the rest of the article…
No Major Country Is More Exposed to Banks than Australia
No Major Country Is More Exposed to Banks than Australia
There are six large (with a market cap of over AUD50 billion) listed companies in Australia. The biggest four are banks, the fifth is BHP, one of the world’s largest mining companies. The sixth is the world’s most over-priced Telco, Telstra. The table below puts these companies into international perspective. They are small on a world scale, but behemoths in their domestic market.
The financial sector amounts to 44% of Australian stock market capitalization. The vast majority of the sector is comprised of banks and “diversified” banks. The remainder is insurance and real estate.
Before going further we need to understand just how small Australia is. In terms of population, Australia is the same size as Shanghai and slightly larger than Beijing; about the same as NY State; and three times larger than London. In terms of GDP Australia comes in at number twelve (IMF 2013). Australia’s GDP was USD1.5T, compared with the US at 16.7T and China at 9.5T.
Moving on.
The dominance of the financial sector is astounding. I doubt it is replicated in any other developed economy. The Australian stock market is capitalized at around AUD1.5 trillion (about twice AAPL). Almost half is represented by the financial sector. Worse, within the financial sector, the big four banks represent around 30% of total stock market capitalization.
…click on the above link to read the rest of the article…
This Could Sink Banks in Greece, Portugal, Spain, and Italy
This Could Sink Banks in Greece, Portugal, Spain, and Italy
Not that much has changed in Spain since the climax of the debt crisis during which its collapsing banks were bailed out. Some of them were recombined into a bank with a new name – Bankia – and sold to the public via an IPO that immediately sank into red ink and scandal. Spanish government debt sported yields that reflected the risks of owning it. At this time in 2012, six-month T-bills yielded over 3.2%.
But that part has changed. In this absurd era when risks no longer exist in a quantifiable manner, the Spanish government today joined a growing club: it issued its first debt – 6-month T-bills – with a negative yield. Spain!
But the European Commission is now contemplating pulling the rug out from under the banking miracles in Spain, Portugal, Greece, and Italy.
Turns out, these four countries have been smart in how they propped up their rickety banks. They and their banks have declared something a “high quality” asset even though it has a dubious value, no market price, and can’t be sold. And they have included this totally illiquid asset of dubious value in the “core capital” of the banks. This asset significantly increases the “capital buffers” and makes the bank more resistant to shock and collapse, on paper. That’s how they solved their banking crisis.
…click on the above link to read the rest of the article…
Recovery, Geopolitics and Detergents
Recovery, Geopolitics and Detergents
Increasingly over the past year or so, when people ask me what I do, and that happens a lot on a trip like the one I’m currently on in the world of down under, I find myself not just stating the usual ‘I write about finance and energy’, but adding: ‘it seems to become more and more about geopolitics too’. And it’s by no means just me: a large part of the ‘alternative finance blogosphere’, or whatever you wish to call it, is shifting towards that same orientation.
Not that no-one ever wrote about geopolitics before, but it used to be far less prevalent. Much of that, I think, has to do with a growing feeling of discontent with the manner in which a number of topics are handled by the major media and the political world. Moreover, as would seem obvious, certain topics lay bare in very transparent ways how finance and geopolitics are intertwined.
In the past year, we’ve seen the crash of the oil price, which will have – financial and political – effects in the future that dwarf what we’ve seen thus far. We’ve seen Europe and its banks stepping up their efforts to wrestle Greece into – financial and political – submission. And then there’s the nigh unparalleled propaganda machine that envelops the Ukraine-Crimea-Russia issue, which has bankrupted the economy of the first and imposed heavy economic sanctions on the latter, for political reasons.
…click on the above link to read the rest of the article…
Why Banksters Hate Peace
Why Banksters Hate Peace
All Wars Are Bankers’ Wars
Bankers hate peace …
Lee Fang reports:
The possibility of an Iran nuclear deal depressing weapons sales was raised by Myles Walton, an analyst from Germany’s Deutsche Bank, during a Lockheed earnings call this past January 27. Walton asked Marillyn Hewson, the chief executive of Lockheed Martin, if an Iran agreement could “impede what you see as progress in foreign military sales.” Financial industry analysts such as Walton use earnings calls as an opportunity to ask publicly-traded corporations like Lockheed about issues that might harm profitability.
Hewson replied that “that really isn’t coming up,” but stressed that “volatility all around the region” should continue to bring in new business. According to Hewson, “A lot of volatility, a lot of instability, a lot of things that are happening” in both the Middle East and the Asia-Pacific region means both are “growth areas” for Lockheed Martin.
The Deutsche Bank-Lockheed exchange “underscores a longstanding truism of the weapons trade: war — or the threat of war — is good for the arms business,” says William Hartung, director of the Arms & Security Project at the Center for International Policy. Hartung observed that Hewson described the normalization of relations with Iran not as a positive development for the future, but as an “impediment.” “And Hewson’s response,” Hartung adds, “which in essence is ‘don’t worry, there’s plenty of instability to go around,’ shows the perverse incentive structure that is at the heart of the international arms market.”
The President of Stanford University (David Starr Jordan) reported that banksters are the true power behind the throne, and that – for many centuries – they’ve made their fortunes by financing war.
Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London (Nomi Prins) – notes:
…click on the above link to read the rest of the article…
Paul Krugman is wrong about the UK and borrowing
Paul Krugman is wrong about the UK and borrowing
Paul Krugman once did something or other quite good on the economics of trade, winning him the Nobel Prize. He also wrote some rather good stuff in the 1990s about the euro and about how Japan might escape its then-malaise. Quite a lot of orthodox economists were (and remain) fans of his writings on these topics. But regarding his analysis of government deficit reduction programmes and the options European governments in particular have had – and more specifically about how, regardless of how much they might have been borrowing they should always borrow more…not so much.
Krugman’s latest sally into European politico-economics is to bewail the state of “Britain’s Terrible, No-Good Economic Discourse” in the run-up to the General Election. He tells his unfortunate American readers that “economic discourse in Britain is dominated by a misleading fixation on budget deficits” and that “media organizations routinely present as fact propositions that are contentious if not just plain wrong”.
US readers should be aware that his “analysis” drifts between being contrary to the facts and being nonsense. Let’s start with the stuff he says that is contrary to the facts. Setting aside for now whether such a fixation would be “misleading”, economic discourse in Britain simply isn’t dominated by a fixation with government budget deficits.
…click on the above link to read the rest of the article…
EU and Greece Running Out of Time – As Bank Runs Intensify, Bail-Ins Likely
EU and Greece Running Out of Time – As Bank Runs Intensify, Bail-Ins Likely
– EU and Greece running out of time as talks end “in disarray” – again
– Greece warns Merkel of ‘impossible’ debt
– Concerns Greece out of money by end of April
– Friday’s “agreement” in Brussels falls apart hours later as protagonists fail to agree on specifics
– Greece now insolvent – will run out of liquidity by end of April
– Greek banks on verge of collapse as runs continue – €1.5 billion emptied out of banks last week alone
– ‘Grexit’ could propel gold to over $2,000/oz
– Cyprus style bail-ins look increasingly possible
Greece’s place in the Eurozone is as precarious as ever as talks between Prime Minister Tsipras and European leaders in Brussels broke down – hours after reaching general agreement – and Greece warned Germany that it will be “impossible” for Greece to service debt payments due in the coming weeks if the EU fails to provide short-term financial assistance.
Greece – faced with illiquidity, insolvency and a potential banking collapse – is running out of time and appears to be on the back foot as its international creditors refuse to countenance any debt restructuring, rescheduling or forgiveness.
The warning from Greece came in a letter from Tsipras to Angele Merkel provided to the Financial Times. It comes as concerns mount that Athens will struggle to make pension and wage payments by as early as next week, the end of March, and could run out of cash completely before the end of April.
The letter, dated March 15, came just before Ms Merkel agreed to meet Mr Tsipras on the sidelines of an EU summit last Thursday and invited him for a one-on-one session in Berlin, scheduled for Monday evening.
…click on the above link to read the rest of the article…
Dumping American Junk in Europe, Draghi Asked for it
Dumping American Junk in Europe, Draghi Asked for it
This is just the beginning, a new trend that may well turn into the next craze. ECB President Mario Draghi, in his infinite wisdom, asked for it: he’d driven the ECB deposit rate deeper into the negative, to -0.2%, and has promised to buy €60 billion of assets a month, including Eurozone government debt, other debt, and even, as German politician Frank Schäffler had predicted so poignantly in July 2012, “old bicycles.”
The ECB would buy this debt from its favorite banks, driving up the price so high that the yield would drop to -0.2%, same as the deposit rate. These banks are going to make a killing on the deal. And yields of Eurozone government debt have been plunging, with the German 10-year yield now at 0.15% on its way to -0.2%.
The goal: Make investors pay for the privilege of funding all governments across the Eurozone, just like depositors are being made to pay for the privilege of lending their hard-earned money to shaky banks.
Insurance companies, but also other financial institutions, hold high-grade bonds to create predicable income streams into the future with which to pay the promises they made to holders of their life insurance policies and annuities – a big part of the private pension system. But as yields are turning negative, future income streams fizzle. It’s undermining an entire retirement system.
…click on the above link to read the rest of the article…
The Austrian Black Swan Claims Its First Foreign Casualty: German Duesselhyp Collapses, To Be Bailed Out
The Austrian Black Swan Claims Its First Foreign Casualty: German Duesselhyp Collapses, To Be Bailed Out
Precisely one week ago in “A Black Swan Lands In Southern Austria: The Ripple Effects Of “Mini-Greece Going Off In The Heartland Of Europe“, when analyzing the consequences of the collapse of Austria’s bad bank, we noted perhaps the biggest paradox of Europe’s emergency preparedness response to the Greek collapse and imminent expulsion from the Eurozone: namely that the biggest threat to German banks was no longer in some Mediterranean nation, but in its very own back yard. To wit:
Irony #2, and the biggest one of all: while German banks had spent the past 3 years preparing for the inevitable Grexit and offloading all their exposure to the now insolvent Greek state, it was a waterfall chain of events which started in Germany’s own “back yard”, courtesy of auditors who decided it was unnecessary to mark losses to market until it was far too late, and the immediate outcome is that one ninth of until recently Aaa/AAA-rated Austria is now also insolvent. And that is just the beginning.One can only imagine how many such other “0% risk-weighted” Pandora boxes lie in wait across what are otherwise considered Europe’s safest banks, provinces and nations.
Indeed, it was just the beginning, and moments ago we got confirmation that the next domino has tipped over, following a Reuters report that Germany’s deposit protection fund will take over the property lender Duesseldorfer Hypothekenbank AG (DuesselHyp), which has “run into problems” due to its exposure to Austrian lender Hypo Alpe Adria’s “bad bank” Heta.
…click on the above link to read the rest of the article…
QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street
QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street
QE Is a Sham
Richard Werner (economics professor at University of Southampton) is the inventor of quantitative easing (QE).
Werner previously said that QE has failed to help the economy. (Former long-time Fed chair Alan Greenspan agrees. Numerous academic studies confirm this. And see this.)
But Werner is now taking off the gloves …
He said recently:
- It’s easy for central banks to take steps which would quickly create “full-blown recovery” for the economy
- But the central bankers are instead choosing to act in a way which creates massive profits for the big banks, instead of stabilizing the economy. Werner blames the revolving door between central bankers and private bankers
- The central banks have twisted the whole concept of easing … pretending that they’re trying to help the economy, when they’re doing something else entirely
- Credit should be extended to the productive economy – businesses which create goods and services – and not to financial speculators or high levels of consumer debt. Extending credit to small businesses former creates prosperity; lending to financial speculators only leads to economic instability and soaring inequality; and when too high a percentage of lending goes to luxury consumer consumption, it’s bad for the economy
- Banks create money and credit out of thin air when they make loans (background)
- It’s a myth that interest rates drive the level of economic activity. The data shows that rates lag the economy
Indeed, economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.
…click on the above link to read the rest of the article…
How Our Crazy Money System Wo
How Our Crazy Money System Works
Squirrelly and Subtle
Yes, we were in London, taking care of business. Now, we’re back in Buenos Aires. We’ve tried medication. We’ve tried prayer. We’ve tried heavy drinking – all in an effort to understand how our crazy money system works. And where it leads.
You’d think it would be easy. It’s just Central Banking 101, no? Well, no. It is squirrelly… and diabolically subtle. We doubt anyone understands it – especially those who are supposed to control it.
The basic unit for the system is a kind of money the world has never had before: the post-1971 fiat dollar. It’s paper money – worth as much as people think it is worth … and managed by people who think it should be worth less as time goes by.
What a Business!
Who are these people? Who do they work for? You might say they are “public servants.” But that implies they are working on the public’s behalf. Nooooo sireee…
They are employees of a banking cartel that is owned by private banks. These banks have a license to lend money into existence, earning interest on their loans.
It is no surprise that their share of US corporate profits has risen fourfold since President Nixon ended the quasi-gold standard Bretton Woods system. What a business! Their cost of goods sold is next to nothing. A few strokes on a keyboard and millions… billions… heck, trillions… of dollars are created.
As our friend and economist Richard Duncan points out in his book The New Depression, the amount of liquid reserves banks have to hold against their loans is now so small they provide “next to no constraint” on the amount of credit the system can create.
…click on the above link to read the rest of the article…
Which New World Order Are We Talking About?
Which New World Order Are We Talking About?
Those of us who are libertarians have a tendency to speak frequently of “the New World Order.” When doing so, we tend to be a bit unclear as to what the New World Order is. Is it a cabal of the heads of the world’s governments, or just the heads of Western governments? Certainly bankers are included somewhere in the mix, but is it just the heads of the Federal Reserve and the IMF, or does it also include the heads of JPMorgan, Goldman Sachs, etc.? And how about the Rothschilds? And the Bundesbank—surely, they’re in there, too?
And the list goes on, without apparent end.
Certainly, all of the above entities have objectives to increase their own power and profit in the world, but to what degree do they act in concert? Although many prominent individuals, world leaders included, have proclaimed that a New World Order is their ultimate objective, the details of who’s in and who’s out are fuzzy. Just as fuzzy is a list of details as to the collective objectives of these disparate individuals and groups.
So, whilst most libertarians acknowledge “the New World Order,” it’s rare that any two libertarians can agree on exactly what it is or who it’s comprised of. We allow ourselves the luxury of referring to it without being certain of its details, because, “It’s a secret society,” as evidenced by the Bilderberg Group, which meets annually but has no formal agenda and publishes no minutes. We excuse ourselves for having only a vague perception of it, although we readily accept that it’s the most powerful group in the world.
…click on the above link to read the rest of the article…
Pulling the plug, part 1
Pulling the plug, part 1
We can refuse to participate in a dead society gone shopping.
— Joe Bageant
Once we understand what feeds it, it becomes possible to think of stopping the Machine. I puzzled over this one for a long time, only to suddenly grok the obvious: the fodder for the Machine is our precious life energy!
So then. Deny it its coveted fuel: your effort, your attention and interest, your money, your loyalty, your goodwill and your good ideas. Deny it your streams of energy, one by one. Direct them instead to the Lifeworld. And don’t shout it from the rooftops! Just blend discreetly into one of the various subcultures experimenting nowadays with a saner way of life; the minions and guardians of the Machine will never even notice you.
This is the crux. Any machine can withstand tinkering, but no machine can run without fuel. Like an old mill on a dry riverbed, it will become a relic of a past that’s done with, a useless hunk of debris. Our radical withdrawal will be the end of the Machine.
Here are some of the ways of seceding from Babylon:
- Down-work, un-work
More work is the source of evils like resource depletion and stress and pointlessly complicated lives; the Earth needs us to stop working so hard! The less we work, the less we feed the Machine. Our work aids the plunder, our de-working slows and stops it, one person at a time. This is why Babylon has always reinforced the message that work is virtuous and important even as it was inventing pointless busywork, harmful work, useless work. Let’s celebrate “Freedom from Labor” Day! Working more is not the way to leisure. Leisure is the way to leisure. Find it before the Machine uses you up and spits you out.
…click on the above link to read the rest of the article…
