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The Birth of a Monster

The Birth of a Monster

The Federal Reserve’s doors have been open for “business” for one hundred years. In explaining the creation of this money-making machine (pun intended — the Fed remits nearly $100 bn. in profits each year to Congress) most people fall into one of two camps.

Those inclined to view the Fed as a helpful institution, fostering financial stability in a world of error-prone capitalists, explain the creation of the Fed as a natural and healthy outgrowth of the troubled National Banking System. How helpful the Fed has been is questionable at best, and in a recent book edited by Joe Salerno and me — The Fed at One Hundred — various contributors outline many (though by no means all) of the Fed’s shortcomings over the past century.

Others, mostly those with a skeptical view of the Fed, treat its creation as an exercise in secretive government meddling (as in G. Edward Griffin’s The Creature from Jekyll Island) or crony capitalism run amok (as in Murray Rothbard’s The Case Against the Fed).

In my own chapter in The Fed at One Hundred I find sympathies with both groups (you can download the chapter pdf here). The actual creation of the Fed is a tragically beautiful case study in closed-door Congressional deals and big banking’s ultimate victory over the American public. Neither of these facts emerged from nowhere, however. The fateful events that transpired in 1910 on Jekyll Island were the evolutionary outcome of over fifty years of government meddling in money. As such, the Fed is a natural (though terribly unfortunate) outgrowth of an ever more flawed and repressive monetary system.

Before the Fed

Allow me to give a brief reverse biographical sketch of the events leading up to the creation of a monster in 1914.

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

How Do You Beat The Bankers At Their Own Game?

How Do You Beat The Bankers At Their Own Game?

Those that have been following events for several years know they are under attack by an enemy that has no face and means to do them great harm. Nothing less than their sovereignty and freedom is at stake. Absolute control over people and resources is the ultimate goal.

People need to understand that the bankers need to collapse everything and leave the population in want of resources and supplies. Just like after a natural disaster when the government shows up to provide help to those that have lost everything, the bankers want to show up after the population has lost everything in a collapse, to be their savior and gain control of everyone by offering resources in exchange for compliance.

There are several actions you can take to prevent these people from gaining control over your life. 

You must be able to feed yourself-

You must have a home to live in that you own free and clear-

You need to be your own energy company-

You need to be your own bank-

You need to be able to defend what you have-

You need to have skills to operate your own business-

You need to promote a community based economy-

To put it simply, you need to get out of their game and start your own. Remember, the house always wins.

The bankers can only win the game if people are dependent on the elite for everyday necessities. The bankers have created a society of dependent people that they can exploit. They can only continue to exploit people as long as they are dependent on the bankers for the things they need. Once this dependence is broken the bankers lose much of their control on society. This dependence is broken by people who can provide their own necessities. 

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

Wall Street, Banks and Angry Citizens

Wall Street, Banks and Angry Citizens

A major question remains unanswered when it comes to the state of Main Street, not just here but across the planet. If the global economy really is booming, as many politicians claim, why are leaders and their parties around the world continuing to get booted out of office in such a sweeping fashion?

One obvious answer: the post-Great Recession economic “recovery” was largely reserved for the few who could participate in the rising financial markets of those years, not the majority who continued to work longer hours, sometimes at multiple jobs, to stay afloat. In other words, the good times have left out so many people, like those struggling to keep even a few hundred dollars in their bank accounts to cover an emergency or the 80% of American workers who live paycheck to paycheck.

In today’s global economy, financial security is increasingly the property of the 1%. No surprise, then, that, as a sense of economic instability continued to grow over the past decade, angst turned to anger, a transition that — from the U.S. to the Philippines, Hungary to Brazil, Poland to Mexico — has provoked a plethora of voter upheavals. In the process, a 1930s-style brew of rising nationalism and blaming the “other” — whether that other was an immigrant, a religious group, a country, or the rest of the world — emerged.

This phenomenon offered a series of Trumpian figures, including of course The Donald himself, an opening to ride a wave of “populism” to the heights of the political system. That the backgrounds and records of none of them — whether you’re talking about Donald Trump, Viktor Orbán, Rodrigo Duterte, or Jair Bolsonaro (among others) — reflected the daily concerns of the “common people,” as the classic definition of populism might have it, hardly mattered. Even a billionaire could, it turned out, exploit economic insecurity effectively and use it to rise to ultimate power.

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

Chapter 2: Laws That Make Robbery Legal.

CHAPTER 2: LAWS THAT MAKE ROBBERY LEGAL.

A law can be anything from an attempt to establish justice on earth to a device for robbery and murder.[1] Nazi race law was an example of the latter. Most people pay lip service to the idea that laws should be just; but in fact, laws are often made to favour the powerful. Laws supporting slavery and laws favouring men over women are two examples of that.[2]

Today, thousands of lobbyists spend untold amounts of money each year influencing lawmakers on behalf of their (usually corporate) paymasters. Many of the new laws they promote would not be called ‘just’ by most of us – if we knew about them. But how many voters keep an eye on new laws, to check if they are just?[3]

This chapter describes how banks became authorised in law to create money, as part of the age-old practice of ruling classes writing laws to suit themselves.

Laws allowing money (and other value) to be created as debt are surely the most unjust laws generally in force today. These laws are actually very simple, but very few people know about them, and their injustice is not often talked about. People who benefit from them prefer to ignore them – and prefer it if other people don’t talk about them either.[4]

These laws simply establish that debt can be bought and sold as if it is a commodity, like beef or beans. The legal word for this is, they make debt ‘negotiable’.[5]

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

“There Are Going To Be Shocks” – Barclays CEO Warns Another Financial Crisis Is Likely

“There Are Going To Be Shocks” – Barclays CEO Warns Another Financial Crisis Is Likely

Barclays CEO Jes Staley took a few days off from his battle to save Europe’s last functional global investment bank to travel to Davos this week, where he participated in a handful of interviews with Bloomberg and CNBC, and offered an interesting – if slightly self-serving – prediction about whether the unprecedented levels of debt rattling around the global financial system will result in another crisis like what happened ten years ago.

Staley

While he believes another great financial crisis is more or less inevitable, Staley insisted that, this time around, his industry wouldn’t be the cause. In fact, it might just be a buffer against the worst of the fallout. Because global banks have shrunk their balance sheets since the crisis (largely at the behest of regulators), they could end up shielding the global economy when credit markets – which have been fueled in part by non-bank lenders (i.e. shadow banks) – seize up.

“This time, there’s a chance the banks will be the buffer, as opposed to the cause” of the crisis, Staley, who has been the British bank’s chief executive officer since 2015, said in a Bloomberg Television interview with Francine Lacqua from the World Economic Forum in Davos, Switzerland.

Echoing a warning that has been featured in these pages more than once (and as recently as last week when we wrote that “An Unexpected Development Could Crush The Leveraged Loan Market”), Staley cited the flow of credit into collateralized loan obligations as a sign of the growing risks in the credit market, and pointed to the freeze-up in high-yield issuance in December as an indication of what a future “credit shock” could look like.

But destabilizing credit risks aren’t confined to corporate balance sheets. The growing sovereign debt burden could also become a problem.

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

Chapter One: The Money Supply: How It Came to be Created by Banks

CHAPTER ONE: THE MONEY SUPPLY: HOW IT CAME TO BE CREATED BY BANKS.

The most important fact in economics today goes unmentioned by most economists and bankers: money is created as debt from banks, and it is cancelled when debts are repaid.[1]

I have asked many economists and bankers why this is so seldom mentioned, and always I get the same response: it’s too difficult for the public and most students to understand.

In fact, it’s not so difficult to understand. A famous economist once wrote: ‘The process by which banks create money is so simple that the mind is repelled.’[2]

Why, truly, is the fact so seldom mentioned? Another venerable quotation supplies the answer: ‘The general ignorance (of banking and finance) is not caused by any peculiar difficulty of this branch of political economy, but because those who are best informed are almost all interested in maintaining delusion and error, instead of dispersing both.’[3]

I introduce these respectably-sourced quotations to show that the statement ‘money is debt from banks’ is not an outrageous and invented claim like so many statements today, but something that has been known for a long time.

For instance, many years ago, if you looked up ‘Banking and Credit’ in the Encyclopaedia Britannica you would find the following paragraph: —

‘When a bank lends… two debts are created; the trader who borrows becomes indebted to the bank at a future date, and the bank becomes immediately indebted to the trader. The bank’s debt is a means of payment; it is credit money. It is a clear addition to the amount of the means of payment in the community.’[4]

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

How California stayed with gold when the rest of the U.S. adopted fiat money

How California stayed with gold when the rest of the U.S. adopted fiat money

We are ten years into the age of bitcoin. But people are still using national currencies like yen, dollars, and pounds to buy things. What does history have to say about switches from one type of monetary system to another? In this post I’ll dig for lessons from California’s successful resistance to a fiat standard that was imposed on it in the 1860s by the rest of the U.S.

Not long after the war American Civil War broke out in 1861, a run on New York banks forced most of the country’s banks to stop redeeming their banknotes with gold. A few months later Abraham Lincoln’s Union government began to issue inconvertible paper money in order to finance the war. These notes were popularly known as Greenbacks.

$1 legal tender note, or greenback

Thus the 19 states in the Union shifted from a commodity monetary standard onto a fiat monetary standard. But Californians, who had been using gold as a payments medium for the previous decade-and-a-half, chose not to cooperate and continued to keep accounts in terms of gold. As a result, California stayed on a gold standard while the rest of the Union grappled with fiat money.

This had very different repercussions for prices in each region. As the Union issued ever more greenbacks to finance the war, the perceived quality of these IOUs deteriorated. Through much of 1863 and 1864, their price fell relative to gold. Because prices in the Union were set in terms of greenbacks, consumer and wholesale prices rose rapidly.

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

Turkey’s Debt Crisis Deepens, Erdogan Bails out Banks His Way

Turkey’s Debt Crisis Deepens, Erdogan Bails out Banks His Way

Shifting bad consumer & business debts from banks to the public, but the way this bank bailout got packaged is pretty nifty.

Turkish President Recep Tayyip Erdoğan has launched a raft of measures ostensibly designed to reanimate the economy, including offering direct financial support for people with credit-card debt. The plan will enable Turkey’s maxed-out consumers to go to the biggest state-run lender, Ziraat Bank, and apply for debt rescheduling at low rates of interest. “Any retail client from any bank can apply,” Erdogan said.

Credit-card debt is a major problem. Since 2010 consumer credit has increased almost five-fold on the back of low interest rates (at least in certain foreign currencies), government incentives, and loose loan standards. By August 2018, when these pillars supporting Erdogan’s debt-fueled economic miracle began to buckle, outstanding non-housing consumer debt, peaked at 532 billion Turkish lira ($97 billion at today’s exchange rate, chart via Trading Economics):

About half of this amount is credit card debt. About one-third of the credit-card debt was considered to be non performing. A good portion of this debt is denominated in foreign currency, such as the euro or dollar, to get access to the low interest rates available in those currencies. And this foreign-currency debt is now, after the lira’s exchange rate has fallen, very hard to service. In other words, the government’s scheme is likely to have plenty of takers.

“The debts of citizens who are having repayment problems will be collected under a single umbrella, via Ziraat Bank,” Erdogan said. “They will pay off their debt with a loan from Ziraat and will pay it back according to the level of their monthly earnings.”

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

Money: How Its Past Predicts Its Future

Money: How Its Past Predicts Its Future

btc_gold1.PNG

What is money, where does it come from and more importantly where does it go?

At first glance, it might appear inexplicable and bizarre that our governments and our rulers have managed to keep their stronghold over the monetary system for 2000 years, especially when one thinks about the countless ways in which they abused that power and used their monopoly to the detriment of their own citizens. It was a mass delusion that facilitated this, a blind belief that they, and they alone, can be trusted with this vital task while looking out for our best interests as well. However, now, as mistrust against our rulers is justifiably deepening, it is becoming increasingly clear that only we as individuals can ensure our best interests and it is only a matter of time before the entire ill-founded edifice comes crumbling down.

To answer all these questions about money, we need to first understand its history — keeping in mind that those who don’t know history are condemned to repeat it. Everything started when people settled down and instead of living off nature they started adding value to it; this was the beginning of private property rights. In addition, men started to realize that some people are better at performing specific duties than others and thus set into motion what we today understand as the division of labor. This increased economic output and in general terms, everyone became better off. This transition in how work was performed in an economy made trade between individuals a necessity. Thus barter, or the exchange of real goods and services against other real goods and services, became commonplace. Barter also had its disadvantages, because it required what is known as a “double coincidence of wants” in order to function.

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

Yellow Vests Advocate Taking Money Out of Banks in France to Topple Macron

The Yellow Vest Movement in France is turning to an all-out war against Macron. Many are now advocating withdrawing their money from backs in order to topple Macron. Yellow Vest activists ‘Gilets Jaunes’, are now supported by up to 70% of the population. This new effort stepping up their pressure to de-throne President Macron and regain French sovereignty from the hands of the EU elites and globalists is becoming really intense as they call on the people to remove Euros from French banks to destabilize the regime.

Now we are witnessing the further spread of the Yellow Vest Movement as Taiwanese demonstrators have also launched their ‘yellow vest’ movement to protest taxes. The Yellow Vest Movement has also now emerged in Lebanon as people there to are calling for “Revolution” to unfold.

Is This Downturn A Repeat of 2008?

Getty images

Is This Downturn A Repeat of 2008?

Crashes differ, so be cautious about your assumptions

Even people who don’t follow the stock market closely are aware that the global economy is weakening and appears to be heading into recession.

For those who track the stock market, the signs are ominous: the U.S. was the last major market to notch gains this year and in October the U.S. market followed the rest of the global markets into an extended slide which has yet to end.

Just as sobering, key sectors such as oil, banking and utilities have crashed with alarming ferocity, reaching oversold levels last seen in 2008 as the global financial system was melting down.

These sectors crashing sends an unmistakable signal: the global economy is heading into a potentially severe recession and assets will not be rising in value in a recessionary environment. So better to sell risk-assets like stocks now rather than later, and rotate the money into safe assets such as Treasury bonds.

And indeed, households now own more Treasuries than the Federal Reserve–a remarkable shift in risk appetite.

Many other indicators of recession are in the news: auto and home sales and global trade are all slumping.

Are we in a repeat of the global financial meltdown and recession of 2008-09? The sharp drop in equities is certainly reminiscent of 2008. Indeed, the December decline is the worst in a decade. Or are we entering a different kind of recession, the equivalent of uncharted waters?

And if we are entering a recession, what can central banks and governments do to ease the financial pain and damage? We can’t be sure of much, but we can be relatively confident central banks and states will respond to the cries to “do something.”  This poses two questions: what actions can central banks/states take, and will those policies work or will they backfire and make the recession worse?

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

2018 Year in Review

2018 Year in Review

The year everything changed

Every year, friend-of-the-site David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year’s is no exception. As with past years, he has graciously selected PeakProsperity.com as the site where it will be published in full. It’s quite longer than our usual posts, but worth the time to read in full. A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline. — cheers, Adam

David B. Collum
Betty R. Miller Professor of Chemistry and Chemical Biology – Cornell University
Email: dbc6@cornell.edu
Twitter: @DavidBCollum

“Dave: You are roundly tolerated.”

~Danielle Dimartino Booth, former Fed advisor and founder of Quill Intelligence

Introduction

Every December, I write a Year in Reviewref 1 that’s first posted on Chris Martenson & Adam Taggart’s website Peak Prosperityref 2 and later at ZeroHedge.ref 3 This is my tenth, although informal versions go back further. It always presents a host of challenging questions like, “Why the hell do I do this?” Is it because I am deeply conflicted for being a misogynist with sexual contempt—both products of the systemic normalization of toxic masculinity perpetuated by an oppressively patriarchal societal structure? No. That’s just crazy talk. More likely, narcissism and need for e-permanence deeply buried in my lizard brain demands surges of dopamine, the neurotransmitter that drives kings to conquer new lands, Jeff Bezos to make even more money, and Harvey Weinstein to do whatever that perv does. The readership has held up so far. Larry Summers said he “finished the first half.” Even as a fib that’s a dopamine cha-ching.

“If you think you are too small to make an impact, try spending the night in a room with a mosquito.”

~African proverb

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

The Fed Relies Indirectly on the Banks & Cannot Stimulate the Economy Directly

QUESTION: Hello,
Since the Fed ‘created’ ‘money’ after 2008 that was then deposited back at the Fed by the recipient banks ( say,75% of it), it is not easy to see why the Fed is to blame for the credit explosion since 2008- nor for the very slow ( like a paralytic centipede) hike in Fed Funds that seems already as I write to be seen as a problem.
Surely it is the banks who truly created the money ( out of nothing as usual) by financing the purchase of EXISTING assets at ever-rising prices (and also consumer spending) rather than new business expansion?
In other words, the fault is at the bottom to be laid at the door of the banks. They created the wrong kind of credit bubble ( not that any such is ever a good idea).
What say you, Sir?
Many thanks
B.

ANSWER: There is a deeper problem that nobody addresses. The entire Keynesian philosophy of increasing the money supply was based upon the practice whereby private money was being created during each crash since 1857. It worked perfectly. Here is a Depression Scrip for $1 to supplement the money supply during a crisis. There was nothing wrong with this concept.

The original design of the Federal Reserve in 1913 was PERFECT!!!!!! It “stimulated” by purchasing corporate short-term paper which created an elastic money supply. The paper naturally matured and thus the money supply contracted. When Congress usurped the Fed in World War I and ordered it to buy only government bonds to fund the war, they NEVER returned the Fed to its original design.

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

The Yield Curve Flattens And Bank Stocks Plunge. Here’s The Connection – And The Prediction

The Yield Curve Flattens And Bank Stocks Plunge. Here’s The Connection – And The Prediction

Despite all the ominous press being devoted to the soon-to-be-inverted yield curve, it’s not always clear why such a thing matters. In other words, how, exactly does a line on a graph slipping below zero translate into a recession and equities bear market, with all the turmoil that those things imply?

The answer (which is both simple and really easy to illustrate with charts) is that banks – the main driver of our hyper-financialized society – still make at least some of their money by borrowing short and lending long. They take money that’s deposited into savings accounts and short-term CDs (or borrowed in the money markets) and lend it to businesses and home buyers for years or decades. In normal times long-term rates are higher than short-term to compensate lenders for tying their money up for longer periods. The banks earn that spread, which can be substantial if borrowers make their payments.

When the yield curve flattens and then inverts — that is, when short rates exceed long rates — banks lose the ability to make money this way. They lend less, which restricts building and buying and spooks the broader markets.

So, here’s the flattening, apparently soon-to-invert yield curve:

yield curve bank stocks

And here’s how bank stocks are behaving in response. The following chart is for the BKX bank stock ETF that includes all the major US banks. Note how it was stable for the first nine months of the year and then fell off a cliff as it became clear that the yield curve really was going to invert.

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

Why Everything That Needs to Be Fixed Remains Permanently Broken

Why Everything That Needs to Be Fixed Remains Permanently Broken

Just in case you missed what’s going on in France: the status quo in Europe is doomed.

The status quo has a simple fix for every crisis and systemic problem:

1. create currency out of thin air

2. give it to super-wealthy banks, financiers and corporations to boost their wealth and income.

One way these entities increase their wealth and income is to lend this nearly free money to commoners at much higher rates of interest. I borrow from central banks at 1% and lend it to you at 4.5%, 7% or even 19% or more. What’s not to like?

If a bank is insolvent, it can borrow money at 1% from central banks. If Joe Blow is insolvent, the only loan he can get is at 23%, if he can get any credit at all.

3. China has a variant fix for every financial crisis: build tens of millions of empty flats only the wealthy can afford as second or third “investment” flats. If the empty flats start dropping in price, government entities start secretly buying flats to support the market.

4. Empty malls, bridges to nowhere and ghost cities are also a standard-issue fix in China. Built it and they will come, until they don’t. But who cares, the developers and local governments (i.e. corrupt officials) already pocketed the dough.

You see the problem: making rich people richer doesn’t actually fix what’s broken, it only makes the problems worse. So why can’t we fix what’s broken?

It’s a question that deserves an answer, and the answer has six parts:

1. Any meaningful systemic reform threatens an entrenched, self-serving interest/elite which has a tremendous incentive to squash, co-opt or water down any reform that threatens their monopoly, benefits, etc.

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

Olduvai IV: Courage
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