Spanish Government makes official the Looting of Pension Funds

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 29, 2012

It did not take too long for the Spanish government to dip into the rapidly disappearing pension fund reserves. After presenting its 2013 budget, the Finance Minister Cristobal Montoro announced that the government led by Mariano Rajoy will make use of Social Security, retirement and other supplemental funds to help with the liquidity problems the central government faces as it becomes more expensive for Spain to meet its obligations.

The Executive now counts the 3,063 million from the Social Security Reserve Fund as part of its budget, which it now has stolen from Spanish people who saved and paid into the system for decades. The Social Security Fund has become the piggy bank to obtain quick cash after the Social Security administration itself had tapped into the reserve at the beginning of September, because it did not have enough money to make the payments to its contributors. Ironically, the government has also announced an increase of 1% in pension payments for 2013, which makes one wonder where will the money come from if the system cannot even afford to send the checks out now.

The Government approved the reform plan imposed by the European Union which is a commitments from the Memorandum that opens the door to ask for financial assistance in the form of credit to bailout Spanish banks with a maximum of 100,000 million euro, but that consultants estimate will be of around 53,000 million euros.

The State Budget for 2013 is included in the so-called Spanish Strategy for Economic Policy and a plan that includes up to 43 laws specified in the Official State Gazette (BOE).

The macroeconomic conditions used to create this new budget have not changed from the last time which was filed with the same spending ceiling. Thus, the official forecast remains that GDP will contract by 0.5% in 2013. This is a very optimistic figure when compared to other analysis services such as the one issues by Citi, who expects a decline of 3.3%.

State spending will grow in 5.6% in 2013, mainly due to interest on the debt in the next year, which will amount to some 10,000 million euros. The total amount to be paid in interests for loans requested by the Spanish government will reach nearly 38,000 million euros.

The Deputy Prime Minister, Soraya Saenz de Santamaria, said that this budget contains more spending adjustments than changes in income. In it, 58% corresponds to expenditures, while 42% refers to income. She said that the government remains committed to social spending, which will represent 63.6% of total expenditure. The only items that increase are: pensions, grants and debt interests that make up the increase in government spending.

According to the budget, tax revenue projections for this year will be met fully. For 2013, it is expected that non-financial income will increase to 4% over budget, and 2.6% on budget execution.

The government expects to collect 4.375 million euros with the implementation of new tax measures, increasing taxes and fees included in the 2013 budget. The greatest impact on revenue will come from corporate taxes, the document says, by eliminating the deduction for depreciation for large companies, which will provide 2.371 million euros.

It creates a new 20% tax on lottery prizes, which will affect 40% of the prizes that exceed 2,500 euros. In total, the tax will add 824 million euros to the state coffers. Taxes on net worth will collect 700 million euros. These 1524 million euros will join together with 90 million euros that the government will obtain from eliminating the tax deduction on the purchase of primary residences, which was announced last July.

With these figures, the government has assured Europe that it will comply with its goal to keep the deficit below 4.5% of GDP for 2013.

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Do away with Reserve Currencies and Centralized Financial Control

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 13, 2012

For way too many years, the United States has enjoyed an unfair advantage with respect to the rest of the world: most international commerce is conducted in US dollars. Both friends and foes of the US have had to purchase raw materials, parts, finished products, pay tariffs and exchange rates in dollars because the world saw the American currency as a strongly positioned instrument that was backed by the economic and military might of the United States.

The result of having a reserve currency, both for the US and for the rest of the world is clear: Americans have enjoyed decades of bounty because almost anything that is necessary to live is paid for and purchased in US dollars. From crude oil to food staples, countries and companies use the US dollar to complete most commercial transactions. But the bounty for Americans was not the only consequence — or goal, depending how you see it. Because the US dollar was the reserve currency of the world, its value was kept artificially high. People, companies and other countries bought US dollars to use them in their daily activities such as traveling expenses, for example.

The value of the currency, especially a fiat one like the US dollar is artificial because after the central bank decides to print money beyond what a country produces — GDP — in order to run a debt-based economy, it is just a matter of time before the wheels of the truck come off. In the case of the United States, three and a quarter of the four wheels have already fallen off. The US currency has been hyper-inflated in a controlled manner since the creation of the Federal Reserve System, which is the same system of centralized power used in almost every single nation in the world; no matter if it’s a developed, developing or underdeveloped country.

Today, the value of the dollar, the Euro, the Peso or the Real do not represent the capacity of a country to produce, innovate and sell goods in local, regional or international markets through bilateral or multilateral agreements. The value of currencies is set by banking institutions and then freely manipulated by artificially-managed markets, not real capitalism or free markets.

The kind of “commercial contract” that helped the US to sets its currency as the “world reserve currency” and that provided the unfair advantage against its business partners and competitors is now reaching its end. The rise of China as one of the largest producers of finished products — through questionable standards to say the least — along with the economically weaker position of the United States in the world stage, has prompted nations to seek alternative forms of completing commercial transactions that do not use US dollars. United States competitors, especially those who lend money to the country, realized that the United States will most likely default on its debt or will simply pay with a devalued currency which will not be worth much, so they’ve decided to use their own currencies instead of the US dollar.

For example, China and Russia have closed several agreements to realize commercial transactions in their own currency as supposed to using dollars. The Chinese and the Russians, it seems, learned that by using the Yuan and the Ruble, they are not only valuing their currencies, but are also avoiding to pay the “dollar tax”, or the cost of having to buy and sell in US dollars, which had kept them in a competitive disadvantage against their commercial and military foe.

The devaluation of the dollar due to banking manipulation conducted by the Federal Reserve or the weakening of the currency in international markets — is bad news for the US and the American people, because it means that if the dollar fails to keep its status as the reserve currency, everything will be more expensive for them: raw materials, food, energy, interest rates, etc. But worse than all of that is that the demand for US dollars in the world will significantly decrease, which in itself will turn the dollar into a less attractive way to pay for and sell goods and services.

The loss in value of the American currency will also worsen another problem: the US debt. The US has been for a long time the best debtor nation in the world, for its lenders thought that since the country had the world’s reserve currency would guarantee that their loans would be paid in full. But now, reality shows otherwise. The fall of the US dollar from the pedestal of “world reserve currency” will also make it more expensive for the US to pay its current debt as well as the debt it will incur into in the coming years and decades. The weaker the dollar is, the more expensive it becomes for the US to pay its debts. This scenario is now seen in Spain, Greece, Italy and Portugal, who have handed their sovereignty to foreign banking institutions in exchange for “financial rescues”.

Although common wisdom would suggest that US indebtedness with China would be the worst possible situation while the dollar declines, there is actually a worse scenario and it does not involve China. The US main lender is not China anymore, but the Federal Reserve Banking System, a private institution that represents the interests of an international banking consortium located abroad, not in the United States.

The banking mafia will continue to willingly lend to the US because all debt created by the Federal Reserve in the name of the United States and its people will always have a way to be paid. The United States, just as many other countries in the world do, mortgage the lives of present and future people by taxing them to death in order to pay interests on the ever exploding debt. This ‘trust’ that the banking institutions have in the United States and other nations can only be broken if the US dollar fails as the world reserve currency. That is why the European bankers have created parallel fiat currencies such as the Euro, which they also intend to collapse in order to establish a sort of electronic untraceable form of currency.

At the same time and while it is still possible, wealthy individuals who have made their fortunes through deceitful practices, such as George Soros, as well as governments have begun a race to get rid of their dollar reserves — a fact that also weakens the US currency — and invest in gold, rare metals, silver and other valuable instruments. The divestment of funds from US dollars to other currencies or valuable metals or materials threatens to accelerate the fall of the once strong world reserve currency.

The decline of the US dollar has emboldened countries like China to seriously consider letting its currency fluctuate freely in the open market. This practice is set to begin at some point in 2015 and will continue until 2017, the Chinese have said. Do the Chinese feel that by 2015 the dollar will be weak enough that it won’t be able to directly compete with the Yuan? Perhaps. But in a financial world where almost everything is fake, there is no reason to believe that the American government or the banking institutions that it represents will not come up with a way to slow down or stop the collapse of its currency. Many financial experts expect the opposite, though. Some of them even believe that the collapse of the dollar will happen some time between the Winter of 2012 and the Spring of 2013.

If there is one thing the world has learned is that independent nation-states that establish commercial agreements in a bilateral or multilateral fashion are better off that those which are prisoners of a common currency with a centralized financial power system. The only reason why the world is dominated by common currencies and so-called unions is because those schemes facilitate monopolies and control, which is what the international banking mafia wants. The Euro is a clear example of how monopoly works perfectly well when a group of oligarchs intends to artificially create economies to later collapse them so that they can consolidate power. It works beautifully. For the rest of us, let’s do away with reserve currencies that provide unfair advantages as well as centralized power that only renders benefits for the Anglo-Saxon power elite.

Europe to experience economic contraction in 2012 and 2013

A new report issued by the European Central Bank forecasts a downward trend in growth and similar inflation.

By LUIS MIRANDA | THE REAL AGENDA | AUGUST 9, 2012

The “let’s do the same thing and expect better results” crowd is getting what they wanted in the Euro zone. The latest analysis issued by consultants hired by the ECB explains that the European economy is bound to contract n 2012 and continue on that trend in 2013. No surprises here, unless you are one who believes in banker controlled economies as supposed to market driven ones.

The results of the corporate elite’s policies that were supposed to help bankrupt nations to stay afloat, while they think of new non-solutions, crashed to the ground in Greece but that did not stop the bankers from applying the same so-called solutions in Spain, which is a more significant member of the European economy. So the story repeated itself there as well.

The experts consulted by the ECB have revised their forecasts for growth in the euro area this year and forecast a contraction of 0.3% versus the 0.2% forecast in May, which speaks against all measures adopted so far by Brussels and its accomplices in the banking power structure. The non-solution at hand that is being proposed is to once again cut in interest rates.

In the survey, the European Central Bank (ECB) held between 16 and 19 July and published today in the August monthly bulletin, experts conclude that growth will continue its downward trend for this year and next. With this review, the regulator says that the euro zone has room to lower interest rates in September.

“The results also imply that inflation expectations for 2012 and 2013 have experienced virtually no change compared with the previous survey,” the ECB said.

As for the inflation forecast in the longer term, the average remains unchanged at 2%. That is under current conditions, which are not likely to stand, as the euro region digs itself into a deeper hole by continuing their policies of further indebtedness, which will only prolong and worsen the crisis. Consequently, inflation will certainly not stay at 2%.

The ECB president Mario Draghi said last week that “the governing board of the entity discussed a possible lowering of interest rates, but decided that it is not the right time.” Some experts expect the ECB to reduce the price of money, currently at 0.75% at its September meeting. As in other occasions, the European Central Bank will wait until the last minute to act, and its actions will not be the real solutions needed to bring the euro economy back. As we have now heard the main stream media confess it, that is the goal of the banking elites: to delay the collapse as much as possible while inflicting pain to the nations that are in financial trouble, because this will assure the maximum consolidation of power and resources.

Expectations of growth of gross domestic product (GDP) by 2012 have been revised slightly downwards by 0.1 percentage points and currently stand at -0.3%. For 2013, forecasts of growth in the euro area have declined significantly, by 0.4 percentage points to 0.6%. Under current conditions, once can expect, that even with cooked numbers, Europe will have no growth at all after 2013, especially if more nations such as Italy and France need to be rescued as well.

“The main determinants of the downward revisions are stepping up fiscal consolidation measures in some countries in the euro area and the greater uncertainty surrounding the resolution of sovereign debt crises,” the report said. Also, “maintaining the downside risks to growth in GDP in the euro area, resulting primarily from an escalation of the sovereign debt crisis.” And what is the ECB or the IMF doing to solve the sovereign debt crisis? Nothing. That is the big pink elephant in the room, but the bankers are simply staring at it without proposing a single solution. This inaction stems from the same reason explained above. A slow, prolonged collapse will assure better results for the bankers.

“These risks are also mentioned a further deterioration in confidence, increased levels of uncertainty and a fall in external demand as a result of a slowing global economy,” according to the ECB. The inflation forecasts for 2012 and 2013 obtained from the survey are located at 2.3% and 1.7% respectively, implying that not been revised figures for 2012 and have been revised 0.1 percentage point decline in the 2013.

This downward revision for 2013 was primarily “to lower prices for energy and raw materials, the less favorable growth prospects and the fact that wage pressures have been more limited,” according to the ECB. He added that inflation expectations for 2014 are at 1.9%. Risks to the outlook for price developments remain generally balanced over the medium term.

Upside risks come from further increases in indirect taxes, resulting from the need for fiscal consolidation, and some increases in energy prices over the medium term plan. The main downside risks are related to the impact of lower growth than expected in the euro area, especially due to the escalation of tensions in financial markets that could affect the balance of risks to the downside.

Europe to Save its Banks, not Greece

by Floyd Norris
NYTimes
February 10, 2012

It now appears that Europe is prepared to pay what it needs to pay to save its banks.

But not to rescue Greece.

Once again, there is optimism that a new round of European talks are going to result in an announcement of a Greek bailout. On Thursday, the Greek political parties caved in and agreed to a new austerity package that will satisfy the latest European demands.

When other loose ends are tied up, it appears the Greeks will have given up their principal bargaining chip — the threat that if they are allowed to collapse, they will take the European financial system with them.

If that happens, then at some point down the road, when it turns out that Greece has again fallen short of its deficit reduction targets, Germany will again demand more sacrifices. If the Greeks refuse, then the rest of Europe could be in a position to let Greece go.

It might or might not stay in the euro zone, but a bankrupt Greece would be left to fend for itself, with much of the rest of Europe saying — just as it did two years ago, when Greece’s distress was just becoming clear — that it is a small country of little importance to the rest of Europe.

Perhaps Europe, in its stumbling and sometimes disorganized fashion, will have accomplished a large part of what it set out to do. It will have put a fence around the Greek tragedy and preserved — most of, if not all — the euro zone. As for rescuing Greece, well, you can’t win them all.

The current European attitude was best captured by a document that was circulated as part of the now-abandoned German proposal to force Greece to accept a “budget commissar” to supervise its spending.

“Greece has to legally commit itself to giving absolute priority to future debt service,” said the document, said to have been circulated by German officials. “State revenues are to be used first and foremost for debt service.” Whatever money was left over could be used for other purposes, such as paying police salaries or purchasing hospital supplies.

That was shot down because it sounded so undemocratic and authoritarian, said Whitney Debevoise, a partner in Arnold & Porter with long experience in international bond negotiations. “Plan B is the escrow.”

Escrow does sound like something neutral. But it apparently means the same thing. European aid to Greece would go into an escrow account, to be released as Europe saw fit and withheld if Greece again failed to live up to its promises to cut its budget deficit. But of course the money would be released for debt payments on the restructured bonds. For at least a few years, banks and others that own the new Greek bonds would be assured of collecting their interest payments.

“The euro area will be able to call the bluff of the Greek government,” said Jacob Kirkegaard, an economist at the Peterson Institute for International Economics.

“Greece says, ‘If we default, all hell breaks loose,’ ” he said. “The reality is that the threat from Greek contagion becomes a lot less credible.”

The escrow system may also persuade more bondholders to go along with the “voluntary” restructuring. Anyone who did not, hoping that the handful of unexchanged bonds would be paid since the cost would not be that great, would run the risk that Europe would release funds to pay debt service on the new bonds, but not on unexchanged old ones.

There have been Greek rescue packages before, followed by new crises. But this could be different.

By the time it becomes clear that Greece cannot meet its new promises, the recapitalization of major European banks may be completed, and in any case they will have no immediate worry of a Greek default. The European Stability Mechanism, the new European bailout fund, will be in place, and perhaps the International Monetary Fund will have raised more capital. The much-talked-about “firewall” could be a reality, preventing contagion.

Read Full Article…

Key lesson from Iceland crisis is ‘let banks fail’

AFP – Three years after Iceland’s banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.

The North Atlantic island saw its three biggest banks go belly-up in the October 2008 as its overstretched financial sector collapsed under the weight of the global crisis sparked by the crash of US investment giant Lehman Brothers.

The banks became insolvent within a matter of weeks and Reykjavik was forced to let them fail and seek a $2.25 billion bailout from the International Monetary Fund.

After three years of harsh austerity measures, the country’s economy is now showing signs of health despite the current global financial and economic crisis that has Greece verging on default and other eurozone states under pressure.

“The lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible,” Islandsbanki analyst Jon Bjarki Bentsson told AFP.

“Even if our way of dealing with the crisis was not by choice but due to the inability of the government to support the banks back in 2008 due to their size relative to the economy, this has turned out relatively well for us,” Bentsson said.

Iceland’s banking sector had assets worth 11 times the country’s total gross domestic product (GDP) at their peak.

Nobel Prize-winning US economist Paul Krugman echoed Bentsson.

“Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net,” he wrote in a recent commentary in the New York Times.

“Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver,” he said.

During a visit to Reykjavik last week, Krugman also said Iceland has the krona to thank for its recovery, warning against the notion that adopting the euro can protect against economic imbalances.

“Iceland’s economic rebound shows the advantages of being outside the euro. This notion that by joining the euro you would be safe would come as news to the Spaniards,” he said, referring to one of the key eurozone states struggling to put its public finances in order.

Iceland’s example cannot be directly compared to the dramatic problems currently seen in Greece or Italy, however.

“The big difference between Greece, Italy, etc at the moment and Iceland back in 2008 is that the latter was a banking crisis caused by the collapse of an oversized banking sector while the former is the result of a sovereign debt crisis that has spilled over into the European banking sector,” Bentsson said.

“In Iceland, the government was actually in a sound position debt-wise before the crisis.”

Iceland’s former prime minister Geir Haarde, in power during the 2008 meltdown and currently facing trial over his handling of the crisis, has insisted his government did the right thing early on by letting the banks fail and making creditors carry the losses.

“We saved the country from going bankrupt,” Haarde, 68, told AFP in an interview in July.

“That is evident if you look at our situation now and you compare it to Ireland or not to mention Greece,” he said, adding that the two debt-wracked EU countries “made mistakes that we did not make … We did not guarantee the external debts of the banking system.”

Like Ireland and Latvia, also rescued by international bailout packages and now in recovery, Iceland implemented strict austerity measures and is now reaping the fruits of its efforts.

So much so that its central bank on Wednesday raised its key interest rate by a quarter point to 4.75 percent, in sharp contrast to most other developed countries which have slashed their borrowing costs amid the current crises.

It said economic growth in the first half of 2011 was 2.5 percent and was forecast to be just over 3.0 percent for the year as a whole.

David Stefansson, a research analyst at Arion Bank, told AFP Iceland hiked its rates because it “is in a different place in the economic (cycle) than other countries.

“The central bank thinks that other central banks in similar circumstances can afford to keep interest rates low, and even lower them, because expected inflation abroad is in general quite (a bit) lower,” he said.

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