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Unaware and Misinformed–Exactly How They Like Us

January 13, 2017

UNAWARE AND MISINFORMED – EXACTLY HOW THEY LIKE US

I should start this out with a disclaimer. I worked as a financial planner and stock broker for 25 years and really didn’t begin to grasp the true mechanics of the financial system until nearly 10 years in. It took even longer for the magnitude of the crony capitalist corruption to sink in. I was indoctrinated by book and exam, scored extremely high in the various licensing and accreditation examinations (meaning I had fully swallowed my programming) and successfully parroted what I had learned.

It was only when the stink from the long dead skunk in the woodpile became overwhelming and could no longer be ignored did I begin to probe and seriously question both the financial ‘authorities’, the prevailing financial meme and myself. So when I come across others who are following the same path while blindfolded I am not casting stones. Instead, I am illustrating how we are all deeply immersed in many alternative reality memes even as I focus on this one in particular.

That said, let me begin.

I walked into a branch of ‘my’ bank the other day to make a deposit. It was mid afternoon and clearly a slow period for the bank because there were four tellers available and not another ‘customer’ in sight. Proving to all I was well trained and obedient, I followed the velvet and gold rope lined customer cattle chute and waited passively at the head of the ‘line’ to be summoned.

Thankfully the wait was not long.

The teller (Anna) greeted me pleasantly (obviously grateful for the distraction I afforded her) and asked how she could be of assistance. Stating my purpose, I plopped down my fake fiat and promptly engaged her in small talk. Having worked in the main branch of a bank as the resident financial planner (aka financial product salesman) for nearly ten years, I fully understand how monotonous the teller position can be at times.

 

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

George Friedman: Italy Is the Mother of All Systemic Threats

September 17, 2016

George Friedman: Italy Is the Mother of All Systemic Threats

Italy has been in a crisis for at least eight months, though mainstream media did not recognize it until July. This crisis has nothing to do with Brexit, although opponents of Brexit will claim it does. Even if Britain had voted to stay in the EU, the Italian crisis would still have been gathering speed.

The high level of non-performing loans (NPLs) has been a problem since before Brexit. It is clear that there is nothing in the Italian economy that can reduce them. Only a dramatic improvement in the economy would make it possible to repay these loans. And Europe’s economy cannot improve drastically enough to help. We have been in crisis for quite a while.

Banks were simply carrying loans as non-performing that were actually in default and discounting the NPLs rather than writing them off. But that only hid the obvious. As much as 17 percent of Italy’s loans will not be repaid. This will crush Italian banks’ balance sheets. And this will not only be in Italy.

Italian loans are packaged and resold, and Italian banks take loans from other European banks. These banks in turn have borrowed against Italian debt. Since Italy is the fourth largest economy in Europe, this is the mother of all systemic threats.

Bail-Ins, Not Bail Outs

The only way to help is a government bailout. The problem is that Italy is not only part of the EU, but part of the eurozone. As such, its ability to print its way out of the crisis is limited. In addition, EU regulations make it difficult for governments to bail out banks.

The EU has a concept called a bail-in, which means the depositors and creditors to the bank will lose their money.

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

Hillary’s Scary New Cash Tax

March 8, 2016

Hillary’s Scary New Cash Tax

Hillary’s Scary New Cash Tax

 

 

Have you heard of “negative interest rates”?

It’s become a phenomenon with economists and the media.

There’s a good chance you’ve read an article about it. We’ve covered it many times in the Dispatch.

I’m writing to tell you something about negative interest rates you haven’t heard. You certainly won’t hear about it in the mainstream press.

What’s coming at you is a historic event. It’s something our grandchildren will hear stories about…much like the Great Depression or the Cold War.

What’s coming could send the price of gold much higher in the coming years…and hand gold stock owners 500%+ gains.

If you know what’s coming, it could mean the difference between having lots of free cash in retirement or barely getting by.

To understand the gravity of this moment, let’s cover one of the most bizarre ideas in the world…

negative interest rates.

In a normal world, your bank pays you interest on your savings. It takes your money, pools it with other people’s money and loans it out.

The bank makes money by paying out less in interest on your deposit than it earns in interest from borrowers.

For example, it might pay out 3% to depositors while earning 6% from borrowers.

This is how it has worked for decades.

Negative interest rates turn your “normal” bank account upside down.

Negative interest rates could only exist in a crazy world where idiot politicians are in control.

Unfortunately, that’s just what we’re dealing with right now.

Politicians all over the world are ordering banks to charge depositors(you) a fee for storing cash.

It’s a perversion of saving. It’s a perversion of capitalism. It’s a perversion of planning for the future.

And it’s going to result in disaster.

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

 

The Banking System Can’t Lend Out Reserves, But a Bank Can – Ludwig von Mises Institute Canada

December 28, 2014

The Banking System Can’t Lend Out Reserves, But a Bank Can – Ludwig von Mises Institute Canada.

This post will seem simple to some, but I want to correct a slight confusion I’ve seen over the last several years in the economics blogosphere. (I was motivated to write because of an exchange with Nick Freiling, who loves the Austrian School but thought I had made a basic mistake in a recent piece I wrote about the Federal Reserve’s policies.) Specifically, Freiling and many others have challenged the standard claim that commercial banks lend out reserves when they make loans to customers. The critics argue that since the public will generally end up depositing their checks with their own respective banks, the granting of loans will merely rearrange which banks hold certain levels of reserves, but the banking system as a whole can’t “lend them out” because there would be nowhere for them to go. Hence, the critics allege, the talk of the Fed (say) raising the interest rate that it pays on reserves in order to discourage lending is nonsense; in Freiling’s words, there is (allegedly) no tradeoff between loans and reserves.

This argument from the critics is wrong. It rests on a confusion between micro-incentives and system-wide outcomes. In particular, the interest rate that the Fed pays on reserves can most definitely affect the willingness of commercial banks to make loans on the margin.

Before jumping directly into the issue, let me start with an analogy with actual currency held in people’s wallets or purses. (I see Nick Rowe thought of the same analogy last summer.) Forget about banks. Suppose there are $100 billion in actual currency in the economy, held by a population of 100 million people, and that this is the only money that these people use. That means on average each person holds $1,000 in currency.

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

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