Posts Tagged ‘Money’

Jeremy Corbyn wins two Labour leadership election victories but will be enough for the Blairites?<

September 26, 2016

Jeremy Corbyn wins two Labour leadership election victories but will be enough for the Blairites?

By Dark Politricks
Dark Politricks

 Jeremy Corbyn wins yet another Labour election victory
Jeremy Corbyn wins yet another Labour election victory but will it stop the Blairites attempting another coup?

Guess what…

Jeremy Corbyn has won his Labour Leadership election battle against the unknown (to me at least until this content), Owen Smith.

I don’t find it a surprise, I don’t find it a shock I find it a waste of time and a stupid exercise by Blairites and their followers who they co-erced into joining their coup as a massive custard pie in the face. They have really wasted some important months when they should have been attacking the Tories on

  • BREXIT and what’s happening with it (I have no clue).
  • Our new PM Theresa May and how she has gone back on many of David Cameron’s policies – which should really trigger a general election but as the Labour party were in no fit state to fight one they got away with it/
    The re-introduction of Grammar Schools.
  • The possibility of Scotland holding another referendum to leave the UK.
  • China building our nuclear power station and security issues around this.
  • So many other items to mention.

This is what satirist Jonathan Pie thinks about the re-election of Jermey Corbyn.

This year he won with 61.8% of the vote to Smith’s 38.2%.
Last year he won with 59.5% of the vote against the other 3 candidates.

This must tell you something. Maybe that the people and the Labour members want him as their leader no matter how much the press attack him all the time and try and portray him as unelectable?

Are the Blairites mad, do they not realise that the Labour party and the part of the country who are left wing actually WANT Jeremy Corbyn as the leader. Not some air brushed, PR managed, speaker phone in a suit, controlled by HQ who says what he is told to, and has no real opinions or beliefs of his own?

We don’t want constant US led war, like a puppy on a lead.

“Lets go bomb this country now UK our Special Friend”, and then afterwards whilst the people are all still fighting in a civil war, or forming new terrorist groups we can later control for our own ends, we can let all the US corporations get the oil rights such as Halliburton.

Plus all the contracts to rebuild the roads and hospitals that we bombed for no reason in the first place can go to US companies formed for exactly this reason.

Special Friend? The only thing special about our relationship with the USA is that we get to sleep in the wet patch afterwards and have little say when the “special” part is about to start.

We don’t want to to give banks money at 0% interest rates whilst we all have to suffer with 10%+ or if your stuck then WONGA or 1 of the hundreds of pay day loans that have sprung up much more.

Is that not a sign something is wrong?

When the public have to pay 1000s of % APR for their money? Do you know the pay day loans interest rates at the moment.

  • WONGA – 1,177% APR
  • Satsuma Loans – 1575% APR
  • Sunny – 1,299% APR
  • Square Today Short Term Loan – 1265% APR

I could go on, but that seems wrong to me, especially when all these payday banks are owned by the same main banks at the top anyway. It seems to be one of our only growth industries in the UK at the moment along with online Bingo, Poker and Gambling sites. That doesn’t say much for our economy does it?

If your a normal person, I consider myself normal believe it or not, then we don’t want our economy to built on services that milk the common person so that big banks get even richer and the poor poorer. No, we want to re-focus it so that we have a skilled manufacturing base, a decent job for university and apprentices to enter into after work not fill the shelves at Lidl.

We want high tech, high skilled people and a way for those who have fallen off the track due to ill health or long term joblessness to get back into those jobs through free training. Not punishment by taking away benefits because they have an extra room in their flat, or they don’t have a computer so that have to spend their meager benefits on bus fares into town to use the library to search for jobs as they currently have to do.

Call me stupid but we don’t want to privatize everything from education to the NHS. Privatising the National Railways when you think about it can’t be competitive anyway due to not having the ability to have 2 trains running on the same line at the same time to the same place. Isn’t that what competitiveness should all be about?

Unless you are going to allow each railyway company to build their own tracks through the country (which would take decades due to planning permission and all the rest) then you should make our railways a decent public transport option for the nation by making them fast, on time, reliable and cheap. If you did all that more people would leave their cars at home, help the environment and use the trains like they do in Spain and France.

Why is it in Spain I could travel overnight and back to a place the same distance as London for a couple of pounds on a clean railway when here it costs me the best part of twenty pounds, and more if it’s overnight?

No it has to be all about money and putting it into the pockets of companies after we have sold the rights for a few billion. It’s a stupid mentality only dreamt up by the Tories and Blairites.

The same goes for education. Education should be for life. People should be able to re-skill throughout their lives without forking out thousands in loan repayments. You should be able to go to University for free, another Blairite scheme that has just expanded the cost of education to those that can afford it again and again.

Cut the amount of money we spend on a useless Trident scheme that relies on US GPS (so they could turn it off if we went rogue), and the trillions we have spent on wars over the last decade and we could easily afford free education for all for life.

If you are unemployed you should be able to get onto any workplace training scheme or educational course you want for free.

It costs a lot more to have a jobless person claiming benefits for their home, pocket and council tax for years on end than it would for a year or two at a college.

We also have to admit that some of the things Blair and his cronies and followers did that were very bad for the country and it’s future as well as the world’s e.g Iraq, Libya, Syria, Afghanistan and voting in the Tories time again won’t sort that out.

PFI was a nightmare for a start, one that will cost over £200 billion in the next 35 years. This will lead to hospitals and schools going broke if not already due to these huge debts they are with debts for the next 20+ years. Yes we may have build a lot of new schools and hospitals due to PFI, but the one thing we didn’t build was houses – why not?

Was that because we couldn’t find a way to allow the private sector to milk the taxpayer as they do with the others. Currently schools and hospitals have to pay contractors up to £100 or more to change a single light bulb if it breaks in a classroom instead of just calling out their handy man to do the job for them.

I remember being at school with a handy man who did all the odd jobs around the place and we all loved him more than the teachers.

He did everything that needed to be done and he cost a hell of a lot less than what schools are currently paying for fixing anything broken at the moment.

Just think of the waiting time for the private contractors to arrive for one, and then the inflated costs all to fill their pockets. What is the point apart from a one off payment from the private company to fill whatever gaping hole the treasury currently has and then face decades of debt?

Of course it doesn’t worry the MP’s who put it into action as they will be long gone by then. They are probably working for the same companies who are running the PFI schemes they helped push through parliament with their votes no doubt.

Also I don’t want to bail out the banks without jailing the directors as Iceland did. The people who led us into the 2008 crisis in the first place should be punished like any other criminal. I want some justice for all this mess and austerity everyone is facing.

Why are we giving banks money at 0% when we could be making National Bonds for investments in house building that will return a nice profit for investors, much needed jobs flooding in and most of all provide the housing people need?

These are all things Jeremy Corbyn wants to do. I can’t find a fault in it so please leave your comments to what is so stupid about these policies please.

From the Guardian

Jeremy Corbyn has pledged to “wipe the slate clean” after winning a convincing victory in Labour’s bitter leadership battle, securing 62% of the vote.

Speaking after the result was declared in Liverpool, Corbyn thanked his rival, Owen Smith, and urged the “Labour family” to unite after the summer-long contest.

“We have much more in common than that which divides us,” he said. “Let’s wipe that slate clean from today and get on with the work we’ve got to do as a party together.”

Corbyn secured 61.8% of the vote to Smith’s 38.2%. The victory strengthens his hold on a party that has expanded dramatically since the 2015 general election and now has more than 500,000 members. In last year’s contest, he won 59.5% of the vote.

Corbyn won a majority over Smith in every category – members (59%), registered supporters (70%) and trades union affiliates (60%).

 

View the original article at the main Dark Poltricks web site at Dark Politricks where you can get even more #altnews and daily politics away from the lamestream media

By Dark Poltircks

© 2016 By Dark Poltircks

The Fed as Giant Counterfeiter

February 3, 2010

Robert Murphy
Campaign For Liberty
Wednesday, February 3rd, 2010

San Jose State economics professor Jeffrey Rogers Hummel tells all his students that the easiest way to understand the Federal Reserve is to think of it as a giant, legalized counterfeiter. I had always known that the Fed and other central banks were like counterfeiters, but I still thought that the actual mechanics of open-market operations and so forth actually provided some important distinctions.

In large part because of my frequent email exchanges with Hummel, I now realize that I was being naïve. Once you understand the details of modern central banking, you are able to step back and see that it truly is a way for the government to use the printing press to pay its bills. All of the complicated process of targeting interest rates through buying Treasuries simply hides this essential point — and perhaps deliberately so.

An Old-Fashioned Monarch With a Printing Press

Before we examine Fed operations, let’s start with something simpler. Suppose there is a powerful monarch reigning over a large, industrialized country. The monarch has managed to wean his subjects off commodity money such as gold or silver, and instead they use fiat notes, rectangular slips of paper featuring the king’s portrait. The king has a printing press at his disposal, which gives him unlimited ability to create more slips of paper with which he can buy goods throughout his kingdom.

At first, one might think that our hypothetical king has infinite wealth. But upon reflection, we see that there are actually pragmatic limits on how much new money he will print up each year. It’s true that there are no legal constraints on how many notes he can create, but the more monetary inflation he sows, the greater the price inflation he will reap.

At some point, the monarch would actually make himself poorer in the long run by running the printing press too heavily in the present. For example, if he doubled the stock of money in one year, the resulting price inflation would destabilize his economy and cause much needless capital consumption. His subjects would be less willing to invest in their businesses and retirement portfolios, knowing that he might effectively confiscate their savings again through massive creation of new money. Foreign investors too would be wary of exposing themselves to his country if he made his fiat currency too volatile.

Because of these considerations, the monarch would no doubt run off new money every year from his printing press, but he wouldn’t overdo it. He would aim for a moderate level of constant price inflation, with the purchasing power of his fiat currency slowly falling over time in a predictable manner. Each year, the new influx of money into the economy would represent a transfer of wealth from all other currency holders into the king’s possession.

Now what if our monarch is really profligate? What if he wants to spend more money than the income and tribute he earns in his position as monarch, even including the amount of new money he dares to create each year with his printing press, can support? In this case, the monarch can still resort to old-fashioned borrowing. Therefore in any given year, the monarch can only spend what he collects in tribute (taxes), debt financing, and inflation.

Modern Counterfeiting, Fed Style

At first glance, our present monetary system is nothing like the simple tale of a king with a printing press. For one thing, the US Treasury is a distinct entity from the Federal Reserve. When the US federal government runs a budget deficit, it can’t simply have the Fed print up enough $100 bills to cover the shortfall. No, the Treasury always covers its budget deficits by issuing debt, referred to as Treasuries. These are bonds, IOUs sold by the Treasury to outside investors who lend the Treasury money today in the hopes of being paid back in the future.

But wait, there’s more to the story. One of the main buyers of this Treasury debt is the Federal Reserve itself. This phenomenon is especially pronounced during emergencies such as major wars and the current financial crisis. Indeed, in the second quarter of 2009, the Federal Reserve was the effective buyer of some 48 percent of the new Treasury debt issued that period, as part of its “quantitative easing.” It’s true, the Fed doesn’t show up at the Treasury auctions and directly buy the new T-bills and so forth, but private dealers pay higher prices for the Treasuries knowing that the Fed is waiting in the wings to pick them up.

At this point let’s review exactly what happens when the Federal Reserve buys Treasuries from private dealers. Let’s say the Fed wants to buy $1 million worth of T-bills from Joe Smith. So it writes Joe a check for $1 million, drawn on the Fed itself. Joe hands the T-bills over to the Fed, where they end up on the asset side of its balance sheet. Joe then deposits the check in his personal checking account, which goes up by $1 million.

“If nothing else, the Fed’s massive buying of Treasury debt pushes up the auction price of the Treasuries, meaning the federal government can borrow at cheaper interest rates.”

So at this point the Fed has increased the money supply by $1 million. In normal times, because of the fractional-reserve banking system, Joe’s bank would lend out $900,000 of the new deposit to another customer, so that the money supply would grow even further. But that’s not what interests us in this article, so we’ll leave that train of thought.

What we want to focus on is the effect of the Fed’s purchase on the US Treasury. By entering the bond market and buying Treasuries (with money created out of thin air), the Fed pushes up the price of the bonds. That of course means that their yield drops. So, for example, if the Treasury issues a T-bill promising to pay the holder $10,000 in 12 months, then the auction price determines how much money the Treasury actually gets to borrow now in exchange for this promise to pay back $10,000 in one year. If the demand is such that people pay $9,901 for each T-bill with a face value of $10,000, then the Treasury gets to borrow money for a year at an interest rate of 1 percent.

Already we see why the folks at the Treasury are big fans of the Fed’s “quantitative easing” program, in which Bernanke decided it was in the national interest to begin adding more than a trillion dollars’ worth of Treasury debt to the Fed’s balance sheet. If nothing else, the Fed’s massive buying of Treasury debt pushes up the auction price of the Treasuries, meaning the federal government can borrow at cheaper interest rates.

Now, if this were the whole story, it would be fishy but not nearly as bad as our hypothetical monarch with the printing press. Sure, the Fed would create new dollars (which would push up dollar prices of goods and services) in order to keep the Treasury’s borrowing costs low. But still, the Treasury would have to pay some interest on its debt, especially for longer-dated debt with higher yields, like 10-year Treasury notes. So although the mechanism we have described would encourage the Treasury to run higher deficits at the expense of average people, who suffer from rising prices, things don’t seem nearly as crooked as they were in the case of our monarch.

Ah, but we’re not done yet. Not only does the Fed’s accumulation of Treasury debt artificially push down the interest rate, but the Fed gives the interest payments right back to the Treasury! After all, interest is how the Fed “makes money.” It writes checks on itself (created out of thin air) and accumulates assets, and then earns the interest and (in some cases) capital gains on the assets. But after the Fed pays its employees, pays its electric bill, and throws the staff Christmas party, it remits the excess earnings back to the Treasury.

For example, in fiscal year 2008 the Federal Reserve distributed to the US Treasury some $31.7 billion (page 173)Download PDF of its net earnings. To repeat, much of this money consisted of interest payments that the Treasury paid out to the holders of its debt, who just so happened to be the Fed for much of it. So not only is the official rate of interest kept artificially low by the Fed’s money-creation, but the interest payments themselves are largely refunded to the Treasury, to the extent that the Fed ends up holding the Treasuries rather than outsiders.

“But after the Fed pays its employees, pays its electric bill, and throws the staff Christmas party, it remits the excess earnings back to the Treasury.”

All right, so the Fed (a) suppresses the interest rate on Treasury debt and (b) refunds virtually all of the interest payments on Treasury debt held by the Fed. And remember, the way the Fed does this is through creating new dollars out of thin air, in order to buy the Treasury debt from the original investors who lent money to the Treasury. Therefore the Fed is clearly giving aid to the US government’s deficit spending at the expense of everyone holding assets denominated in US dollars.

Still, the one thing holding back the complete recklessness of the feds is that they still have to pay off the principal of their bonds when they mature, right? In other words, all we’ve really shown is that the Fed allows the Treasury to run deficits virtually at zero interest expense, at least for debt held by the Fed. But this is still a far cry from our hypothetical monarch, who had a whole component of his expenses which he met year in and year out by running the printing press.

Sorry, but our own monetary system has the same feature. When the Treasury securities held by the Fed mature — so that the Treasury has to pay back the face value in principal — the Fed rolls over the debt. Over time, the nominal market value of the Fed’s holdings of Treasury debt continually grows. Barring a sudden reversal in this policy, the Treasury knows that it will never have to pay off this debt. For all practical purposes, any Treasury debt ultimately finding its way onto the Fed’s balance sheet is economically equivalent to our monarch running the printing press to pay his bills.[1]

We have just one last consideration. Up till now we’ve seen that the modern US government, with its complicated central bank and fiat money system, operates essentially as a king with a simple printing press, to the extent that the Fed is willing to accumulate larger holdings of Treasury debt. But what determines how much the Fed is willing to take on? At what point would the Fed decide to ease off on its open-market operations and stop creating so many new dollars to (indirectly) hand over to the government?

The ultimate constraint on the Fed’s operations is the same one our hypothetical king faced: investor and citizen backlash in response to rising prices. That is, the Federal Reserve can only absorb so much of the Treasury’s new debt each year because too much dollar-creation would lead to unacceptably high price inflation. Thus our profligate government, like the hypothetical monarch, must finance some of its spending through traditional borrowing from private citizens and other governments.

Conclusion

Stripped of its fancy terminology and confusing mechanics, modern central banking boils down to a legalized counterfeiting operation. If there were suddenly a widespread public outcry to “punt the press,” we can bet our hypothetical monarch would mobilize all his allies in the media to discredit the people threatening his source of revenue. In that light, we can understand the reaction today to people calling to “end the Fed.”

Notes

[1] Actually, because private banks typically cause further money creation by pyramiding more loans on top of the Fed’s initial injection of new money, our financial system is arguably worse than the hypothetical monarch’s. In order for the king to finance a $1 billion deficit through inflation, he had to print up $1 billion worth of new currency. But if the Fed creates $1 billion in order to absorb that much in new Treasury debt, typically the actual money supply can end up rising by $10 billion. Thus modern inflation through central banking in democratic states is arguably less “efficient” than under a monarchy with an explicit printing press.

Implications For Gold In The Aftermath Of The Greek Crisis

February 1, 2010

Tyler Durden
Zero Hedge
Monday, February 1st, 2010

With the euro having dropped substantially from a high of around $1.51 to less than $1.40 in the span of a few short months, it has sent gold buyers looking for cover, mostly as a function of the linear (and at times sigmoidal) inverse correlation between gold prices and the DXY which throughout 2009 has held surprisingly strong. Yet will a dollar scramble prove that the recent flight to gold has been premature? BofA believes that while the near-term implications for gold are as of yet undecided, relying on both € (bearish) and risk (bullish) signals, the long-term drivers for gold should be price supportive, especially for EUR-based investors. Proper positioning can be adopted using OTM gold calls, which are not only no longer as rich as they were a mere month ago, but would benefit substantially should Greece indeed follow through with an actual default and result in a flaring of all risk indicators, further precipitating a flight to euro alternatives, among which the dollar, and gold, are dominant.

Bank of America suggests:

In the case of an actual default, even an orderly one, increased systemic risk is likely to support gold prices as investors look for a safe haven. The more disorderly the default turns out to be, the more upside we see on gold. However, if Greece just muddled through the crisis or ends up being bailed out, gold may not fare that well. If the Greek problem does not spread to other countries in the Euro area, gold prices are likely to suffer due to a weaker EUR against the USD.

[T]he long-term consequences of Greece’s debt crisis for gold prices are clearly constructive, in our view. Emerging Market central banks are ever more aware that gold is one of the few viable alternatives to the USD. A deterioration of Greece’s creditworthiness, even if bad for the EUR, should support gold prices in the long run, in our view.

The main question, as discussed previously, is how will EM central banks decide to allocate their trade surplus FX reserves. Contrary to some gold-bearish perceptions, it is very likely that an increasingly deteriorating Greek situation, will force EM CBs not only to unwind € holdings and use the resulting capital to purchase dollars, but to augment their gold reserves as well. Thus the price determining factor will be decided in the marginal scramble for dollars versus gold.

Emerging market central banks (EM CB) are ever more aware that gold is really one of the few viable alternatives to the USD. Top holders of currency reserves like China, Russia or India will likely need to increase their exposure to gold over the coming months and years as the value of fiat currency reserve holdings like the USD or the EUR comes into question. The obvious problem with diversification is that there is simply not enough gold to go around. So a deterioration of Greece’s creditworthiness, even if negative for the EUR, should be supportive of gold prices in the long run, in our view.

And with gold prices still, presumably, reflective of a dollar-destruction rampage courtesy of the Federal Reserve, what would be the proper way to express a cheap bullish bias toward a spike in gold prices should a risk-flaring episode come back once again? BofA suggests that clients look to gold OTM calls, which are no longer a ripoff compared to ATM calls. In fact the call skew in gold, which still bullish, is half as expensive as it was on November 20, 2009. Yet investors most likely to benefit from such appreciation would likely not be USD-based speculators but those found in a EUR regime.

In our view, gold OTM calls look appealing for investors willing to play a potential Greek default through the gold market. Volatility levels have been declining and 3M ATM implied vols are now trading at levels last seen in late 2007. While the gold options market continues to price in appreciation, together with the CNY and the JPY, the call skews in gold have become less pronounced. That is, OTM calls are no longer as rich as they used to be when compared to ATM calls. In the event of a default, gold prices and volatility are likely to spike. If Greece’s problems are contained and the EUR (and gold prices) suffers, investors are protected on the downside. USD-based investors may find gold to be an ineffective hedge in this event. However, EUR-based investors could, in our view, hedge by buying gold calls in EUR, as the price of gold in EUR terms should remain well supported.

The biggest concern for outright gold longs will be whether the transfer in mentality from one of continuous dollar debasement in which the demand would come from traditional USD-based investors seeking to hedge and capture stock gains by allocating increasing capital to gold, to a perspective of gold as an increasing investment allocation for central banks, who seek to abandon the euro as a capital flow and pursue less risky exposure. Should this increased central bank demand be coupled with lack of incremental selling by those who already are in possession of Gold spot and future positions, and the probability for increasing gains in the fiat-alternative seem to accelerate. Lastly, for some additional insight into the crystallizing plight of the German government vis-a-vis Greece, as well as the increasingly torn fabric of the European Monetary Union, we strongly recommend the latest piece by Evans-Pritchard, “Should Germany bail out Club Med or leave the Euro altogether?”

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Who owns the Bank of England

January 26, 2010

By Dark Politricks

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” – Woodrow Wilson, after signing the Federal Reserve into existence

The Bank of England was created in 1694 by a Scotsman William Paterson who famously said:

The bank hath benefit of interest on all moneys which it creates out of nothing. – William Paterson

Up until 1946 when it was nationalised the Bank of England was a private run bank that lent money it created out of nothing to the English government and was paid back with interest. A famous story related to the bank and the Rothschilds is the Battle of Waterloo in which Nathan Rothschild used his inside knowledge of the outcome to play the market by selling his English bonds and giving the impression that the French had won therefore causing a rush by other brokers to sell quickly which drove the price down to 5% of their original worth. Once the bottom had dropped out the market he then re-bought as much as he could and in doing so he multiplied his wealth twenty times in 3 days of trading. At the same time of being immensely wealthy he also became the single largest debtor to the English government which ultimately gave him control over the bank of England.

English bonds were a debt guaranteed by future tax revenue of the English government, therefore the taxes the citizens paid were going to pay the 8% interest that the English government had to pay to borrow the money. As Nathan now controlled the majority of the English bonds he could determine the price and therefore the supply of the English currency which gave him great power over the countries finances.

“I care not what puppet is placed on the throne of England to rule the Empire. The man who controls Britain’s money supply controls the British Empire and I control the British money supply.” – Nathan Rothschild

The bank of England was nationalised in 1946 but because the government was broke after the second world war they had no money to buy out the shareholders so instead they were issued with government stocks and although the government now earned money from the profits they had to pay interest on any new stock they issued to pay for the shares.

n 1977, the Bank set up a wholly owned subsidiary called BANK OF ENGLAND NOMINEES LIMITED, a private limited company with 2 of its 100 £1 shares issued. The objectives of the company are:

“To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them….”

This company is very special as its protected by the official secrets act, its Royal Charter status and is exempt from the normal disclosure requirements that other companies have to comply with to meet section 27 of the Companies Act 1976. The reason being is that the major players in the world of finance including the Queen of England and other Royal families use this company to purchase shares and remain anonymous.

However even though the Bank of England is now state owned its important to note that up to 97% of the UK’s money supply is privately controlled being in the form of interest bearing loans created by the big commercial banks. The bank holds very little government stock and the Bank’s profits primarily come from the issuing of coins and notes for use by high street banks. Therefore it seems the BOE has reduced in size and importance over the years and is now mainly a regulatory body that oversees the existing banking system. Referred to as “the lender of last resort” one of its main functions as the bankers bank is to support banks that get into difficulty such as during the recent financial melt down.

On the surface at least it seems that the Bank of England has returned to state control however in America the Federal Reserve is still a privately controlled bank. The history of the US banking system has been one in which control of the money supply has alternated between Congress and privately owned banks and the founding fathers and early presidents of the USA were very much aware of the dangers concerning who controlled the nations money supply.

“[The] Bank of the United States… is one of the most deadly hostility existing, against the principles and form of our Constitution… An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries. What an obstruction could not this bank of the United States, with all its branch banks, be in time of war! It might dictate to us the peace we should accept, or withdraw its aids. Ought we then to give further growth to an institution so powerful, so hostile?” –Thomas Jefferson

“We began planning the Revolutionary War in order to issue our own money again” – Benjamin Franklin

“I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” – Thomas Jefferson

“Banking was conceived in iniquity, and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from them, and all great fortunes like mine will disappear. And, they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be the slaves of the bankers, and pay the cost of your own slavery, then let bankers continue to create money, and control credit.” – ABRAHAM LINCOLN

“Whoever controls the volume of money in our country is absolute master of all industry and commerce…when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” – James Garfield

The following video takes a look at how after a contrived banking crisis the Federal Reserve came to being during the dead of night in 1913.

Less Than a Tenth of Bank Of America’s Assets Comes From Traditional Banking Deposits

January 13, 2010

George Washington Blog
Wednesday, January 13, 2009

I have long pointed out that the too big to fails make very little of their money off of traditional depository functions.

For example, last October, I argued:

Some very smart people say that the big banks aren’t really focusing as much on the lending business as smaller banks.

Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks’ own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.

Now that the economy has crashed, the big banks are making very few loans to consumers or small businesses because they still have trillions in bad derivatives gambling debts to pay off, and so they are only loaning to the biggest players and those who don’t really need credit in the first place. See this and this.

So we don’t really need these giant gamblers. We don’t really need JP Morgan, Citi, Bank of America, Goldman Sachs or Morgan Stanley. What we need are dedicated lenders.

I just ran across an example for one of the TBTFs.

TuneUp Utilities 2010

Specifically, Bank of America – the U.S. largest bank – has only $83 billion in deposit accounts (what they call “transaction accounts”).

But B of A has between $1.3 and $1.5 trillion in total bulk assets and liabilities.

In other words, far less than a tenth of B of A’s overall assets come from traditional banking functions.

Why do we need to save the too big to fails again?

View the original article at George Washington Blog

Is The U.S. Government Buying Stocks?

January 3, 2010

From George Washington Blog

As I pointed out in December 2008, Nouriel Roubini wrote the month before that the government might buy U.S. stocks:

The Fed (or Treasury) could even go as far as directly intervening in the stock market via direct purchases of equities as a way to boost falling equity prices. Some of such policy actions seem extreme but they were in the playbook that Governor Bernanke described in his 2002 speech on how to avoid deflation.

Given that Roubini was previously a top assistant to Tim Geithner, he probably knows what he’s talking about.

Now, Mike Whitney rounds up evidence that the government may, in fact, have been buying stocks:

Is the Fed manipulating the stock market?  TrimTabs CEO Charles Biderman seems to think so, and he makes a strong case for his theory in an article at zerohedge.com.

Biderman focuses his attention on the mystery surrounding the stock market’s 9-month rally and asks, “Where is the money coming from?”  After all, the market cap has increased by more than $6 trillion since March 9. That amount of money should be fairly easy to trace; right?

Wrong.

Biderman: “The most positive economic development in 2009 was the stock market rally. (But) We cannot identify the source of the new money that pushed stock prices up so far so fast.  For the most part, the money did not from the traditional players that provided money in the past.”

Huh?  So, this vast infusion of liquidity–which helped the banks to avoid painful deleveraging–did not come from the usual suspects?
That’s right. According to Biderman, the money did not come from (a) companies (”which were a huge net seller”) (b) retail investor funds,  (c) retail investors, (d) foreign investors, or (e) pension funds. (or hedge funds).

Biderman again:  “As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures.  Moreover, several officials have suggested the government should support stock prices.  For example, former Fed board member Robert Heller opined in the Wall Street Journal in 1989, “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.”  In a Financial Times article in 2002, an unidentified Fed official was quoted as acknowledging that policymakers had considered buying U.S. equities directly, not just futures.  The official mentioned that the Fed could “theoretically buy anything to pump money into the system.”

Biderman is referring to the Plunge Protection Team. Here’s a clip from an article I wrote in 2007 which helps to clarify the PPT’s origins:

“The Working Group on Financial Markets, also know as the Plunge Protection Team, was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown of October 1987. Its members include the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the SEC and the Chairman of the Commodity Futures Trading Commission. Recently, (2007) the team has been put on high alert because of increased market volatility and, what Hank Paulson calls, the systemic risk posed by hedge funds and derivatives….

Ambrose Evans-Pritchard of the UK Telegraph notes,  “Secretary of the Treasury Hank Paulson has called for the PPT to meet with greater frequency and set up a command centre at the US Treasury that will track global markets and serve as an operations base in the next crisis. The top brass will meet every six weeks, combining the heads of Treasury, Federal Reserve, Securities and Exchange Commission (SEC), and key exchanges.”

This suggests that the PPT could, in fact, be the driving-force behind the ongoing stock market rally.

Biderman: “This type of intervention could explain some of the unusual market action in recent months, with stock prices grinding higher on low volume even as companies sold huge amounts of new shares and retail investors stayed on the sidelines. For example, Tyler Durden of ZeroHedge has pointed out that virtually all of the market’s upside since mid-September has come from after-hours S&P 500 futures activity.”

True. The market has been behaving erratically for some time now. Could it be the “invisible hand” of Fed chair Ben Bernanke nudging equities ever-higher?

Consider the comments of former Clinton advisor George Stephanopoulos who verified the existence of the PPT in an appearance on Good Morning America on Sept 17, 2000. He said:

“What I wanted to talk about for a few minutes is the various efforts that are going on in public and behind the scenes by the Fed and other government officials to guard against a free-fall in the markets . . . perhaps the most important the Fed in 1989 created what is called the Plunge Protection Team, which is the Federal Reserve, big major banks, representatives of the New York Stock Exchange and the other exchanges and they have been meeting informally so far, and they have a kind of an informal agreement among major banks to come in and start to buy stock if there appears to be a problem. They have in the past acted more formally . . . I don’t know if you remember but in 1998, there was a crisis called the Long term Capital Crisis. It was a major currency trader and there was a global currency crisis. And they, with the guidance of the Fed, all of the banks got together when it started to collapse and propped up the currency markets. And, they have plans in place to consider that if the markets start to fall.”

View the original article at George Washington Blog

Money as debt

September 24, 2009

Where does money come from? Have you ever asked yourself this question.

Did you know that the Bank of England and the Federal Reserve are both private institutions that have the power to create money at the stroke of a pen or the tap of a keyboard. Or that the money they hold in reserve has no relation to the amount of money they can create to loan out.

Did you know that your government borrows money from these private institutions and then pays interest on the money loaned instead of creating its own money? Do you not find that strange?

Did you realise that banks don’t loan out deposited money that they have in reserve but instead create the money as debt when you sign the loan application form. As soon as you sign that form the money is brought into existence and the only actual real tangible assets involved in this transaction are those that the debtor puts up as security on the loan.

Did you know that if there was no debt in the world there would be no money? That the growth of the economy relies on exponential growth of this combined debt and its only the time delay between taking out a loan and paying it off that keeps the whole economy from collapsing.

Here are some famous quotes from bankers and politicians regarding debt and our monetary system.

I am afraid that the ordinary citizen will not like to be told that the banks can and do create and destroy money. And they who control the credit of a nation direct the policy of governments, and hold in the hollow of their hands the destiny of the people.” – Richard McKenna Chairman of the Midland Bank (1924)

“Wars in old times were made to get slaves.
The modern implement of imposing slavery is debt.”
Ezra Pound American poet 1943

Wars in old times were made to get slaves. The modern implement of imposing slavery is debt.” – Ezra Pound American poet 1943

Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside of the control of Congress and manipulates the credit of the United States.”  – Barry Goldwater US Senator

Someone has to borrow every dollar we have in circulation, cash or credit.” – Robert Hemphill Credit Manager of Federal Reserve Bank, Atlanta, Ga.

I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.” – Thomas Jefferson – US Founding Father 1816

Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” – William Lyon Mackenzie King Prime Minister of Canada

The following video is a very famous online movie which helps explain the current monetary system and how we have arrived in this sorry state in a very easy to follow manner. It should be mandatory viewing.