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ECB v Fed
ECB v Fed
QUESTION: Martin,
You mentioned in a recent blog post that the ECB, unlike the FED, can go bankrupt.
Can you explain further?
Not sure where you get the time, energy and resources to research and write all that you do buy it is truly amazing.
Regards,
M
ANSWER: The Federal Reserve does not need permission to create elastic money. It has the authority to expand or contract its balance sheet. However, it cannot simply print money out of thin air. The ECB is the only institution that can authorize the printing of euro banknotes. The Federal Reserve must back the banknotes by purchasing US government bonds. The Fed buys and sells US government bonds to influence the money supply whereas the ECB influences the supply of euros in the market by directly controlling the number of euros available to eligible member banks. This structure was created because of Germany’s obsession with its own hyperinflation of the 1920s.
Each member state retained its central bank and those central banks issue the banknotes — not the ECB. Therefore, the ECB works with the central banks in each EU state to formulate monetary policy to help maintain stable prices and strengthen the euro. The ECB was created by the national central banks of the EU member states transferring their monetary policy function to the ECB, which in effect operates on a supervisory role.
There are four decision-making bodies of the ECB that are mandated to undertake the objectives of the institution. These bodies include the Governing Council, Executive Board, the General Council, and the Supervisory Board.
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The path to monetary collapse
The path to monetary collapse
Few mainstream commentators understand the seriousness of the economic and monetary situation. from a V-shaped rapid return to normality towards a more prolonged recovery phase.
The fact that a liquidity crisis developed in US money markets five months before the virus hit America has been forgotten. Only a rising gold price stands testament to a deeper crisis, comprised of contracting bank credit while central banks are trying to rescue the economy, fund government deficits and keep the market bubble inflated.
The next problem is a crisis in the banks, wholly unexpected by investors and depositors. At a time when lending risk is soaring off the charts, their financial condition is more fragile than before the Lehman crisis. Failures in European G-SIBs in the next month or two are almost impossible to avoid, leading to a full-blown monetary and credit crisis which promises to undermine asset values, government financing and fiat currencies themselves.
We can now discern the path leading to the destruction of fiat currencies and take reasonably guesses as to timing.
How central banks view the current situation.
The financial world is bemused: what is it to make of the economic effects of the coronavirus? The official answer, it seems, is on the lines of don’t panic. The earliest fears of millions of deaths have subsided and in the light of experience, a more rational approach of easing lockdown rules is now being implemented in a number of badly hit jurisdictions. Whether this evolving policy is right will be proved in due course. But the motivation is moving from saving lives to restricting the economic damage.
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“Revolutions And Wars”: What According To Ray Dalio Comes After “Printing Money”
“Revolutions And Wars”: What According To Ray Dalio Comes After “Printing Money”
Having seemingly conquered the world of finance, Ray Dalio and Howard Marks have been competing who can be a more productive writer in recent weeks, and just two weeks after writing a lengthy thesis on the rise and fall of fiat currencies (which had no less than 43 mentions of gold for obvious reasons), Dalio is back to discussing one of his favorite topics, namely the rise and fall of empires, among which the US and China, over the last 500 years.
The third chapter of his “Changing World Order” series (preceded by Chapter 1 “The Big Picture in a Tiny Nutshell”, and Chapter 2, “The Big Cycle of Money, Credit, Debt, and Economic Activity” and its appendix “The Changing Value of Money“), takes a closer look at the rise and fall of the Dutch, British, and American empires and their reserve currencies and, in what will spark howls of outrage from both sides of the discussion, touches on the rise of the Chinese empire, which Dalio views as the next ascendent superpower “to bring us up to the present.”Ray Dalio✔@RayDalio
In this latest release of my series The Changing World Order, I will review the rises and declines of the Dutch, British, and American empires and their reserve currencies and will touch on the rise of the Chinese empire to bring us up to the present…
https://bit.ly/TCWOch3 The Big Cycles Over The Last 500 YearsNote: To make this an easier and shorter article to read, I tried to convey the most important points in simple language and bolded them, so you can get the gist of the whole thing in just a few…linkedin.com
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Permaculture and Money – Part 3
Permaculture and Money – Part 3
The Practice of Being Open
In part 1(1) of this series, we explored the relationship between money, psychology and violence, while in part 2(2) we looked at some ways in which the stories we tell as a culture to do with money could be seen as encouraging destructive patterns of behaviour. Looby Macnamara would describe such destructive patterns as “spirals of erosion”(3) and this part will explore in more detail some practical ideas for how we can transcend such erosive behaviours and create “spirals of abundance”(3) instead.
Alternative Economic Theories
In parts 1(1) and 2 (2), I mentioned theories about the possibility of a moneyless society, or a society where money takes a different role, such as Sacred Economics(4) author Charles Eisenstein and Satish Kumar, who among other roles was a practicing Jain monk as a child(5). Both of these writers can be said to be influenced by EF Schumacher, whose book Small is Beautiful (6), published in 1973, critiqued the unsustainable model of resource and profit-driven industrialised capitalism, and recommends instead a philosophy of “enoughness” and appropriate use of technology(6). Schumacher was himself influenced by Oriental thinking and in particular Buddhist ideas of moderation (see for example ref 7). In modern society, we can see an example of “enoughness” in practice in the Thai concept of “sufficiency economy” (8).
Peace Pilgrimage
The above examples show some ways in which alternative economic ideas have been influencing the world, and are somewhat encouraged in some mainstream societies. Yet if money is the very problem, it seems we need to explore more radical alternatives.
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Time to learn about money
Time to learn about money
An unexpected destruction of fiat currency has been advanced by the monetary and fiscal response to the coronavirus. Financial markets have yet to discount the possibility of such an outcome, but in the coming months they are likely to awaken to this danger.
The question arises as to what will replace fiat currencies. In the past the answer has always been gold but today there are cryptocurrencies as well, whose enthusiasts are more aware than most of fiat money’s failings.
This article describes the basics about money, what it is and the role it plays in order to understand what will be required by the eventual replacement for fiat. It concludes that gold will return as the world’s medium of exchange, and secure cryptocurrencies, unable to provide the scalability and stability of value required of a medium of exchange will be priced in gold after the demise of fiat. But then the rationale for them will be gone, and with it their function as a store of value.
The destruction of fiat money
These are strange times. Circumstances are forcing governments to destroy their money by debasing it to pay for their obligations, real and imagined. If central bankers had a grasp of what money really is, they wouldn’t have got into a position where they are forced to use their seigniorage to destroy it. They are so ignorant about catallactics, the fundamentals behind economics, that they cannot see they are destroying the means of exchange they have imposed upon their citizens with far worse consequences than the abandonment of the evils they are trying to defray.[i]
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Permaculture and Money – Part 2
Permaculture and Money – Part 2
Living and Giving Abundance
In part 1 of this article series we looked at the curious concept of money and how it can be seen to be contributing to the institutional violence of much of modern society. This part will look at some alternative ways of viewing and interacting with money, while the next part will begin to explore some practical ways in which we can all begin living more abundantly.
Stories For A New World
In part 1 we explored the idea of transcending current modes of thinking or behaving, in order to engage in new ones. As John Paul Lederach points out, if we really want to find new ways of living then we cannot simply create a vision of a different place – we also need to be aware of where we are right now (1).
As Charles Eisenstein, author of Sacred Economics, put it,
“It is not merely our attitudes about money that must change…rather, we will create new kinds of money that
embody and reinforce changed attitudes” (2)
A Change In The System…
Some alternative economic theories include ideas such as the creation of local currencies like the Bristol Pound (3), non-centralised currencies such as Bitcoin(4) or bartering or exchange systems such as those put into practice using Local Exchange Trading Systems (LETS), for example in Australia with the Australian Community Exchange System (5). All of these can be seen to represent important options for those looking to put permaculture into practice by moving away from the monoculture of solely using money.
Or Of The System?
However, such alternatives can be seen to still be based on the premise of exchanging for a fixed rate which is decided abstractly and therefore they still hold within them the inherent disconnection from nature and subsequent destructive tendencies which using money carries with it (2, 6).
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The Recent History of GDP Growth, CO2 Emissions, and Climate Policy Paralysis, All in One Table-Runner
The Recent History of GDP Growth, CO2 Emissions, and Climate Policy Paralysis, All in One Table-Runner
Note: I began designing this table-runner just before the COVID-19 pandemic blew up in the United States. In the time I have been embroidering it, rates of death and misery have soared while wealth generation and carbon emissions (the two subjects of this work) have ended their decades-long rise and have plummeted. A deadly virus is a terrible means of slowing greenhouse warming. Whenever we come out the other side of the pandemic, we must pursue a rapid, humane, ecologically sound, and guaranteed-effective course of action to drive greenhouse emissions down to zero. Here’s how. — P.G.C.
The color of money is the color of calamity
This table-runner illustrates, from left to right, the increase in atmospheric carbon dioxide concentration from 1946 to the present. Each year is represented by two adjacent stripes: one in gradually deepening shades of green representing that year’s U.S. gross domestic product (adjusted for inflation) and one in increasingly intense shades of yellow-orange-red, representing CO2 concentration.
There are nine shades for GDP and eleven for CO2, with shades indicating roughly equal intervals of increase in each. The shades of both types of stripes darken as the years go by, in accordance with the increases that occurred in both GDP and CO2. (For hi-res, zoomed-in images of the table-runner, see here.)
The shades of yellow-orange-red in the table-runner darken more and more rapidly as the years pass, illustrating how emissions of CO2 accelerated as industrial output and fossil-fuel use rose more rapidly throughout the world. The concentration of CO2 rose at an annual rate of about 0.8 ppm from 1945 to 1980; 1.5 ppm from 1980 to 1995; and 2.1 ppm from 1995 to 2019. (The United States accounted for almost 20 percent of the rise in atmospheric CO2 during those years.)
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Fed’s Quantitative Easing Strategy Holds Long-Term Benefits for Crypto
Fed’s Quantitative Easing Strategy Holds Long-Term Benefits for Crypto
These are perilous times, and it hasn’t escaped anyone’s notice that the United States Federal Reserve is doing its part to alleviate the suffering — which began with the coronavirus pandemic and has spread to the global economy. It’s printing more money.
“There is an infinite amount of cash at the Federal Reserve,” Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, told Scott Pelley of CBS on March 22, adding: “We will do whatever we need to do to make sure there is enough cash in the financial system.”
The U.S. Federal Reserve itself reinforced that message on March 23, announcing that it would “continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning.”
The death of capitalism?
Reactions to these affirmations of quantitative easing, or QE, have been swift from sectors of the crypto community: “With these words, the last vestige of #capitalism died in the US,” wrote Caitlin Long, who established the first crypto-native bank in the United States. “[The] Fed’s monetization U.S. debt is now unlimited.”
Mati Greenspan, the CEO and co-founder of Quantum Economics told Cointelegraph: “The Fed said it is willing to buy the entire market” if necessary to stabilize markets. Meanwhile, on the fiscal side, Congress’s $2 trillion stimulus package includes handouts like “helicopter money” — i.e., a $1,200 payment to every tax-paying adult who has an annual income below $75,000. “Inflation is pretty much a foregone conclusion at this point,” he stated elsewhere.
Garrick Hileman, head of research at Blockchain.com, told Cointelegraph: “The response by central banks to COVID-19 is truly unprecedented, with Fed and Bank of England officials using terms like ‘infinite,’ ‘unlimited’ and ‘radical.’” They’ve been using such extraordinary language in the hope they’ll prevent equity and credit markets from seizing up. “Only time will tell if they have gone too far.”
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Spirits in the Material World
SPIRITS IN THE MATERIAL WORLD
There is no political solution
To our troubled evolution
Have no faith in constitution
There is no bloody revolution
The Police – Spirits in the Material World
As I was driving home from work last week, an almost forty-year-old song began emanating from my radio. I’ve always appreciated the music of The Police, but was never a huge fan. Spirits in the Material World was a relatively minor hit from their 1981 Ghost in the Machine multi-platinum album. I’ve probably heard it hundreds of times over the last four decades, but the lyrics struck me as particularly apropos at the end of a week where lunatic left-wing politicians staged a battle royale of ineptitude, invective, and idiotic solutions, in front of a perplexed public in a Vegas casino. Sting wrote the lyrics to this song in 1981 at the outset of the Reagan presidency. It is less than 3 minutes in length, but says much about humanity and the world we inhabit.
The interpretation of Sting’s (Gordon Sumner) lyrics depends upon your position in the generational kaleidoscope of history. As a boomer, Sting came of age during the 1960s and 70s. He was thirty years old in 1981 as the Second Turning (Awakening) was winding down and Reagan’s Morning in America was about to launch the Third Turning (Unraveling) in 1984.
His passionate idealism and search for spiritual solutions to the problems of the day had not been extinguished. The raging inflation of the 1970s had led to the worst recession since the Great Depression. The Cold War was at its coldest. Politicians had been discredited as criminal (Nixon) or incompetent (Carter). Sting and many others of his generation had lost faith in the political system. His viewpoint fit perfectly into the Strauss and Howe assessment of our last Awakening period (1964 – 1984).
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Peter Schiff: The Real Safe-Haven Money Is Going Into Gold
Peter Schiff: The Real Safe-Haven Money Is Going Into Gold
Stock markets tanked on Monday. The Dow Jones was down over 1031 points. It was the biggest drop in two years for the Dow. The Nasdaq shed 355 points. The S&P500 was down 111.
As stocks dropped, the bond market was red-hot. Prices soared and yields dipped to record lows. Bonds are considered a safe-haven, but in his latest podcast, Peter said US Treasuries aren’t a safe-space. When it’s all said and done, the only safe-haven left standing will be gold.
Coronavirus fear was the immediate catalyst for the sell-off as the virus spread outside China, but Peter noted that US stock markets were already vulnerable before the virus outbreak.
Remember, we’re talking about the US stock market that’s at bubble territory, nosebleed valuations, long in the tooth, the longest bull market in US history that has been fueled by the most monetary and reckless fiscal policy in US history. But this is a bubble in search of a pin. So, maybe the coronavirus is going to be the pin. But if we had a healthy market, if we had a healthy economy, it wouldn’t matter about the coronavirus. It’s because the economy is sick. That’s the problem, not the people who are infected with this virus.”
Peter said it looks like the coronavirus is going to have a bigger effect on the global economy than he originally thought. But there is a lot to worry about even if we didn’t have the coronavirus.
So now, when you have this too – you have another straw on a camel’s back that is ready to just implode at any moment because he’s already barely able to support all the straws that are already up there. I mean, hey, why not sell? Why not lighten up in the stock market?”
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Mapping out the Banking Elite’s Goal for a Cashless Monetary System – Part Two
Mapping out the Banking Elite’s Goal for a Cashless Monetary System – Part Two
In the first part of this article we traced the development of the ‘Utility Settlement Coin‘ – a project that began in 2015 and which has now evolved through the inception of a consortium called Fnality International. Fnality are comprised of a number of the world’s biggest banks including Barclays and UBS, all of whom are shareholders in the scheme. Their objective as stated on the company’s website reads:
Fnality International has been founded to create a network of decentralised Financial Market Infrastructures (dFMIs) to deliver the means of payment-on-chain in tomorrow’s wholesale banking markets.
In practice, what Fnality are seeking to deliver is the construction of a distributed ledger technology based global payment system, one that can ‘facilitate tokenised, peer-to-peer markets‘.
Before we look into this more, let’s examine some of the key figureheads behind the project. First there is the CEO Rhomaios Ram, who for the best part of two decades worked for Deutsche Bank in roles that included European Head of Currencies & Commodities and Head of Transaction Banking in the UK and Ireland. The Chairman of Fnality, Jim Turley, has also worked at Deutsche Bank in various different positions. Outside of commercial banking, Turley once served on the board of the New York Fed Foreign Exchange Committee.
But perhaps the standout name on Fnality’s management team is Daniel Heller, the firm’s advisor on regulatory affairs. Described as an expert in financial sector regulation and financial stability, Heller has a track record of having served at both the Bank for International Settlements and the International Monetary Fund. At the BIS he was head of the Secretariat of the Committee on Payment and Settlement Systems, whilst at the IMF he was the executive director for Switzerland, Poland, Serbia, Azerbaijan, and four Central Asian republics.
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The Coming Exponential Silver Price Movement
The Coming Exponential Silver Price Movement
As the global highly-leveraged debt-based financial system comes under serious stress, investors are going to finally realize that the silver market is very tiny and extremely undervalued. This is when we will likely see the exponential silver price movement. And, it’s not a matter of “IF,” but rather a case of “WHEN.”
While most precious metals analysts focus on the systemic risks in the financial system to own Silver, I believe the real problem has to do with the HUGE ISSUES we are now facing with ENERGY. In my newest video, The Coming Exponential Silver Price Movement, I discuss the two reasons why I believe we are going to BIG MOVE in the silver price.
In the video, I show why the huge U.S. Total Debt to GDP of 346% is unsustainable due to the coming collapse of the U.S. Shale Oil Industry. Without oil production growth, there is no GDP growth. And, when there is no GDP growth, then the entire highly-leveraged debt-based financial system starts to disintegrate.
When Americans are faced with the task of “Protecting Wealth,” they will find out that “PAPER” or “DIGITS” will not make the CUT. Why? Paper money and Digits are based on future energy production. Thus, they are ENERGY IOU’s. However, Silver is money or wealth because it is a store of Energy Equivalent Value.
Also, in the video, I discuss some updated charts on U.S. Physical Silver Investment from 2010-2018 (Source: Metals Focus Silver Investment Report for the Silver Institute– OCT 2019):
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Don’t Mess With the U.S. (Financially)
Don’t Mess With the U.S. (Financially)
I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.
Because as you’ll see below, it can directly impact your wealth.
Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.
These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.
The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.
Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?
We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.
It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.
From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.
This is warfare. It’s just a different form of warfare.
It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.
North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.
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The Bank of England’s Governor Fears a Liquidity Trap
The Bank of England’s Governor Fears a Liquidity Trap
The global economy is heading towards a “liquidity trap” that could undermine central banks’ efforts to avoid a future recession according to Mark Carney, governor of the Bank of England. In a wide-ranging interview with the Financial Times (January 8, 2020), the outgoing governor warned that central banks were running out of ammunition to combat a downturn:
If there were to be a deeper downturn, more than a conventional recession, then it’s not clear that monetary policy would have sufficient space.
He is of the view that aggressive monetary and fiscal policies will be required to lift the aggregate demand.
What Is a Liquidity Trap?
In the popular framework that originates from the writings of John Maynard Keynes, economic activity is presented in terms of a circular flow of money. Spending by one individual becomes part of the earnings of another individual, and spending by another individual becomes part of the first individual’s earnings.
Recessions, according to Keynes, are a response to the fact that consumers — for some psychological reasons — have decided to cut down on their expenditure and raise their savings.
For instance, if for some reason people become less confident about the future, they will cut back their outlays and hoard more money. When an individual spends less, this will supposedly worsen the situation of some other individual, who in turn will cut their spending. A vicious cycle sets in. The decline in people’s confidence causes them to spend less and to hoard more money. This lowers economic activity further, causing people to hoard even more, etc.
Following this logic, in order to prevent a recession from getting out of hand, the central bank must lift the growth rate of the money supply and aggressively lower interest rates. Once consumers have more money in their pockets, their confidence will increase, and they will start spending again, reestablishing the circular flow of money, so it is held.
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The Ethics of a Gold Standard
The Ethics of a Gold Standard
The efficacy of a metallic monetary system is beyond dispute at least among real economists which eliminates just about 95% of whom are now engaged in the “profession.” Money, which gold is, allows for specialization, the division of labor, and provides the means for mankind to escape from barter and, thus, a primitive existence. Like free trade, money naturally integrates mankind both among and between peoples.
A system of central banking with an unbacked paper currency is the antithesis of a gold standard. Manipulation of currencies by central banks, mostly through debasement, hinders trade, creates distortions, and ultimately leads to the dreaded business cycle. Murray Rothbard aptly describes the baneful results of state intervention in the monetary system:
. . . government meddling with money has
not only brought untold tyranny into the world;
it has also brought chaos and not order. It has
fragmented the peaceful, productive world
market and shattered it into a thousand pieces,
with trade and investment hobbled and hampered
by myriad restrictions, controls, artificial rates,
currency breakdowns, etc. It has helped bring
about wars by transforming a world of peaceful
intercourse into a jungle of warring currency blocs.*
While the economic efficiency of a gold standard is important, the ethical case for it is more compelling and was the reason why gold, as money, lasted as a medium of exchange for so long. Gold/money has to be created through honest-to-goodness production and exchange. The often dangerous mining of gold takes labor, capital goods, and land. Turning raw gold into coinage is another process which requires a high level of specialization and production techniques. Both are honest and morally sound activities which make for the betterment of life all around.
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