Globalist Larry Summers calls for QE3 as US Drowns in Debt

June 5, 2012

WASHINGTON POST | JUNE 5, 2012

With the past week’s dismal jobs data in the United States, signs of increasing financial strain in Europe and discouraging news from China, the proposition that the global economy is returning to a path of healthy growth looks highly implausible.

It is more likely that negative feedback loops are again taking over as falling incomes lead to falling confidence, which leads to reduced spending and yet further declines in income. Financial strains hurt the real economy, especially in Europe, and reinforce existing strains. And export-dependent emerging markets suffer as the economies of the industrialized world weaken.

The question is not whether the current policy path is acceptable. The question is, what should be done? To come up with a viable solution, consider the remarkable level of interest rates in much of the industrialized world. The U.S. government can borrow in nominal terms at about 0.5 percent for five years, 1.5 percent for 10 years and 2.5 percent for 30 years. Rates are considerably lower in Germany and still lower in Japan.

Even more remarkable are the interest rates on inflation-protected bonds. In real terms, the world is prepared to pay the United States more than 100 basis points to store its money for five years and more than 50 basis points for 10 years. Maturities would have to reach more than 20 years before the interest rates on indexed bonds becomes positive. Again, real rates are even lower in Germany and Japan. Remarkably, the United Kingdom borrowed money last week for 50 years at a real rate of 4 basis points.

These low rates on even long maturities mean that markets are offering the opportunity to lock in low long-term borrowing costs. In the United States, for example, the government could commit to borrowing five-year money in five years at a nominal cost of about 2.5 percent and at a real cost very close to zero.

What does all this say about macroeconomic policy? Many in the United States and Europe are arguing for further quantitative easing to bring down longer-term interest rates. This may be appropriate, given that there is a much greater danger from policy inaction to current economic weakness than to overreacting.

However, one has to wonder how much investment businesses are unwilling to undertake at extraordinarily low interest rates that they would be willing to undertake with rates reduced by yet another 25 or 50 basis points. It is also worth querying the quality of projects that businesses judge unprofitable at a -60 basis point real interest rate but choose to undertake at a still more negative rate. There is also the question of whether extremely low, safe, real interest rates promote bubbles of various kinds.

The renewed emphasis on quantitative easing is also an oddity. The essential aim of such policies is to shorten the debt held by the public or issued by the consolidated public sector, comprising both the government and central bank. Any rational chief financial officer in the private sector would see this as a moment to extend debt maturities and lock in low rates — the opposite of what central banks are doing. In the U.S. Treasury, for example, discussions of debt-management policy have had this emphasis. But the Treasury does not alone control the maturity of debt when the central bank is active in all debt markets.

So, what is to be done? Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more, not less, and investing in improving their future fiscal position, even assuming no positive demand stimulus effects of a kind likely to materialize with negative real rates. They should accelerate any necessary maintenance projects — issuing debt leaves the state richer not poorer, assuming that maintenance costs rise at or above the general inflation rate.

As my colleague Martin Feldstein has pointed out, this is a principle that applies to accelerating replacement cycles for military supplies. Similarly, government decisions to issue debt, and then buy space that is currently being leased, will improve the government’s financial position as long as the interest rate on debt is less than the ratio of rents to building values — a condition almost certain to be met in a world with government borrowing rates below 2 percent.

These examples are the place to begin because they involve what is in effect an arbitrage, whereby the government uses its credit to deliver essentially the same bundle of services at a lower cost. It would be amazing if there were not many public investment projects with certain equivalent real returns well above zero. Consider a $1 project that yielded even a permanent 4 cents a year in real terms increment to GDP by expanding the economy’s capacity or its ability to innovate. Depending on where it was undertaken, this project would yield at least an extra 1 cent a year in government revenue for each dollar spent. At any real interest rate below 1 percent, the project pays for itself even before taking into account any Keynesian effects.

This logic suggests that countries regarded as havens that can borrow long term at a very low cost should be rushing to take advantage of the opportunity. This is a view that should be shared by those most alarmed about looming debt crises, because the greater your concern about the ability to borrow in the future, the stronger the case for borrowing for the long term today.

There is, of course, still the question of whether more borrowing will increase anxiety about a government’s creditworthiness. It should not, as long as the proceeds of borrowing are used either to reduce future spending or raise future incomes.

Any rational business leader would use a moment like this to term out the firm’s debt. Governments in the industrialized world should do so too.

Filed under English, North America Tagged with , , , ,

How Bailouts Pass on the Burden to Taxpayers

May 17, 2012

By BOB CHAPMAN | INTERNATIONAL FORECASTER | MAY 17, 2012

Article originally published in April 4, 2012

How do you create your own monsters? Over the past month the US and Europe have been telling us they will agree to release oil reserves into the market to drive down prices. What are they waiting for? It is expected there could be serious supply disruption, but yet no action. Incidentally, in all the media we see no admission or comment that those nations’ actions were responsible for oil prices at $107.00 a barrel.

Over the past month China and India have been avoiding oil sanctions by agreeing to trade for local currencies commodities and consumer goods. The trend continues, but leaves Iran with a shortage of currencies. In addition Iran is helping Syria by supplying an oil tanker. That oil is shipped directly to China.

Appointed Greek PM Papademos informed Europe late last week that a third bailout cannot be excluded. Just as we predicted. There will be no end to these subsidies. The idea is to keep bleeding Greece forever.

This past Friday European governments called for a bigger financial emergency fund, extra engineering a firewall to fight the regions debt crisis. The firewall commitment is $1.1 trillion, and of that $320 billion has be set aside to fund the ESM due July 1st.

If you remember more then several months ago we told you it would take $4 to $6 trillion to bail out Italy and Spain. These firewall funds are supposed to protect the sovereign debt of some six countries, and $1.3 trillion cannot accomplish that. They’ll need at least four times that amount. As you can see, the entire program is deceitful and these subsidies, if allowed to, will continue for years with Northern European taxpayers footing the bill for these subsidies. They believe eventually Europe will never be able to tear away from the grip of world government. Those of you who have been paying attention are witnessing the demonstrations, violence and arrests in Spain and it appears it is escalating. Cutting the budget by 1/3 under the circumstances is stupid. That is a fall in the public debt from 8.5% to 5.3% of GDP.

In Greece, the Greeks know they cannot nor do they want to, meet the terms of their financial agreements. On April 29th an election is due and that has caused a splintering of the vote, which pollsters believe only gives the two major parties some 35% of the total vote. This means political instability and perhaps social and political chaos not seen in Sprain since the 1930s. This is what happens when people are without hope in any country. During May and June chaos will reign and the austerity-bailout deals will have to be canceled plunging Greece into default, something that should have been done three years ago, and all of this could in part been avoided.

In the Greek election that many never happen on April 29th, or maybe May 6th or perhaps May 13 Pasok and the Democracy Parties, as we pointed out before, may only get 35% of the vote together and if they do not win there will be no parties to pledge support to cutting more public spending of 5.5% of GDP. That means no bailout in a fractionalized government. Those kinds of cuts will flatten the economy totally. Greek debt is still more than 100% of GDP, or $440 billion.

It only took three months and Spanish PM Rajoy is losing support as millions of Spaniards demonstrate in the streets. The voters in Andalusia failed to give him a majority, as well. Already Rajoy is in trouble.

Avoidance of a Greek election is only going to make things worse. As it stands now Greece is going to end up in chaos and if that happens Spain and others may follow, upsetting all of Europe.

This past week’s results of EU member meetings may have set the stage for bailout, but it will be interesting to see if the funds are found to accomplish their ends. Many professionals are not convinced that all will go well in Greece, or for that matter in Ireland, Portugal, Italy and Spain. Many believe they are facing a global government finance bubble. Let’s face it; the risks are massive, because all governments and the financial sectors have all taken the route of expansive money and credit that will all end in bubbles.

Like all the creations of the last few years’ currency swaps by the Fed, commonly known as illegal loans, to the European Central Bank is just another form of welfare that they know will only try to work in the short run. A virtually free service provided by the banks that control everything. It is all risk free of course, because bankers supposedly know what they are doing. That is how they put us in the position we are in the first place. These loans, created out of thin air do not create economic goods and services or a recovery, especially who 800 banks refuse to lend any of the funds out to business to increase business and employment. Mind you this is virtually free money – like financial welfare.

In another orgy of free money the Fed tells us that it bought 61% of US Treasuries issued in 2011, and as we said in an earlier issue that program, Operation Twist, was a disaster. Again, the Fed was undermined by its own so-called allies. This exercise, just like the year before, has just barely kept the economy alive.

If House bill (HR-4180) by Rep. Kevin Brady (R-TX) makes it out of committee it would strip the Fed of half of its dual mandate. It would no longer have to provide full employment they would only have to insure price stability. Like the efforts of Ron Paul over countless years, who expect billions of dollars will be passed out in bribes and nothing will happen. The only way to recapture the system is to bring it down.

The Fed oblivious of history pours money and credit here, there and everywhere, keeping many currencies from failing and supposedly giving them viability. If needed more money is extended with a hope someday it will be repaid and, of course, it won’t be. The extension of debt central banks believe can go on forever, and needless to say, that is ridiculous. Something you probably missed in the Copenhagen meetings was that there was a proviso to supposedly increase competition within rating agencies by forcing rotation and to draw in European agencies. This was a move to have less rerating encounters, so as to deceive the public.

Money is readily available to banks and to an extent to major corporations, which in turn have used part of those funds in western stock markets sending them close to new highs. Most economies are sputtering at best and investors ask how can this be? Well, that is why markets are up in spite of lack of participation and volume. That means there is a limited market to sell into. The buyers are not there, so the banks have to sit on the shares. 70% of the volume is algo trades that last 8 nanoseconds. That adds no liquidity to the markets. There is no longer a retail to dump the shares on.

Now that the G-20 has decided how much money will be donated to the EFSF and the ESM, they now want $500 billion more from the IMF, 19% of which is paid for by US taxpayers. The bulk of those additional funds are to come from emerging market economies. The BRICS have said that they will not participate without an increase in their voting power.

Filed under English, Special Reports, World Tagged with , , , ,

Understand History To Understand The Current Markets

August 30, 2011

Bob Chapman
International Forecaster
August 20, 2011

The Fed has been behind all the failings of the markets, Europe now a disaster waiting to happen, about leveraged speculation and counterparty risk, now we have an escalating debt crisis, the perpetual creation of money is the theft of the value of labor due to the inflation that is caused.

Every professional has their own method of analyzing markets, finance and economies, and some do well coming up with the direction of social and political issues as well. The other 97% miss one-half to two-thirds of the time. That is not very good and one asks why? The answer is simple they really haven’t studied history as well as they should have.

Some believe that the crisis in Europe is the heart of today’s problems. It certainly is a strong integral part, but not the primary causation. The 3-year old finance bubble was created by the Federal Reserve, which began the situation starting in 1993. We saw the dotcom boom, which they could have stopped in its tracks. All they had to do is raise margin requirements from 50% to 60% temporarily. After that collapse in mid-March 2000, they decided rather than purge the systems, as they as well should have done in 1990-92, they created another bubble in real estate. They have been trying to recover from that bubble and other layover problems since we’d say 2000.

Yes you can blame Europe for its part, but the blame lies with the Bank of England, the European Central Bank, and the banks and personages, who control those entities. Those in England, Europe and in the US, who control business, finance and economics from behind the scenes, have played the parts they have in order to bring about world government. If you can perceive and accept that from an historical perspective, they you can understand what is really going on.

European banks are struggling with their fundings and credit is drying up. This is what happened in 2008. As a result Europe is a disaster waiting to happen. Europe is finally realizing this is all about debt. The socialists want it go away, just disappear but it does not happen that way. Debt and credit default swaps will in the end rule the day.

Few reflect back to 12 years ago when the Maastricht Treaty was being approved. The cornerstone was public debt that was not supposed to be more than 3% of GP. That did not last long. Then Italy and Greece, with the help of Goldman Sachs and JPMorgan helped these two basket cases qualify for the euro and euro zone by Mickey Mousing their balance sheets. We saw one interest rate fits all and we knew the euro was doomed before it got started. The condition of the euro zone and Europe is certainly terrible, but so are US debt problems. Policy decisions are bad, but not any worse than they are in the US.

We see pundits trying to separate sovereign debt from bank debt. They are one in the same, because the banks control the governments, and tell them what to do. Europe particularly France, was very upset last week when SoGen was rumored to be insolvent. The answer from those accused was rubbish. SoGen has a history of one of the most criminal banks in the world, so what is new. Just more criminality. SopGen and France are under pressure because they own loads of PIIG debt and are being asked to supply more funds to bail out their neighbors, a role they cannot fulfill without going under themselves. The situation France is in is three times worse what it was in 2008. Everyone expects France and Germany to bail out the bankrupts and that cannot happen. Neither the banks nor the governments can continue to do what they have been doing and at the same time control their financial systems and economies. Now you can understand why CDS credit default swaps trade above 180, when they traded at 80 in 2008. We feel that if the six countries in trouble are not allowed to default it will take the other nations under as well. There is much at stake here. Not only the insolvency but also the breakup of the euro zone and the euro and the dream of using them as a template for a new world order.

In addition it is very significant CDS for Brazil jumped from 35 to 152 as did Mexico, which is an indirect result of what is going on in Europe, UK and the mortgage bond market and by cutting back 30% on loans to small and medium sized businesses. Although they are very leveraged in their other operations, such trading and global leveraged speculation include great counterparty risk. This time exposure is somewhat different but the exposure in the theatre could be just as bad risk wise as it was in 2008. Generally speaking they are not long gold and silver bullion and shares, they are for the most part short. The venue that could be very dangerous is derivatives. The way these major banks and countries have become interconnected the danger always persists and once a fallout begins it could bring down all major banks and countries. Don’t let that fact escape you. They dodged the bullet in 2008, but they might not the next time. The carry trade is as large as it has ever been and the cost of borrowing is close to zero, again, encouraging taking on too much risk.

This past two weeks currency markets have seen large swings, especially in second and third tier countries. No one knows the size of carry trades affecting these countries. We have seen a number of countries quickly give up almost all of their dollar gains of the past several months and the Swiss and Japanese have spent billions of dollars trying to push down the value of their currencies, but to no avail. The euro and the dollar have stayed about the same, but we see the euro weaker due to ongoing financial problems, which contrary to conventional wisdom have not been solved. Throughout Europe not only has money been lent at very low rates, but also much of it is uncollectible. This broken European bubble will deflate for some time to some. It will affect all other sovereign debt negatively as well. These are the borrowers of part of that $16.1 trillion that was lent by the Fed over the last few years, which has never been paid back. European banks are buried in debt and the politicians, whom they own, will do their best to protect them. Unfortunately, there is no painless solution. The contagion is underway and the latest meeting to solve these problems was a failure. The latest European version of the issuance of quantitative easing to buy Italian and Spanish bonds will prove to be futile, just another attempt with taxpayer funds to bail out the banks. This possible “Black hole of Calcutta” at this point puts Europe in a worse position compared to the US, which is no piece of cake, and probably won’t far any better in the future. The working out of US problems will just take longer. As each day passes and in spite of the disinformation, confidence in Europe and the US falters and rightly so. The US has no periphery to support essentially Europe does and that is in favor of the US, but ultimately US problems are far more overwhelming.

The recent commitment of the Fed for zero interest rates for the next two years showed great weakness and will in time come back to haunt them. This was another reward for Wall Street speculators and another moldy bone thrown to the nations savers and elderly. There is no question Wall Street and banking, which own the Fed are desperate, to make such a commitment. The decision for QE 3 was made 15-months ago when we predicted it. We could see it coming and we know the decisions of the last 11 years and the pressure being exerted on the Fed will ultimately bring about its demise, and its days of looting the American public will be over. What the Fed and the ECB have done in greed and for their dream of world government is over. We are closing in on payback time, as desperate measures become more noticeable and a solution remains out of their reach. They will pay for what they have done to us.

Even though we expect at least a few more years of unrestrained leveraged speculation, it will then come to an end. It has become a crucial factor for monetary policy championed by both Sir Alan Greenspan and Ben Bernanke. Wall Street and baking love it, because their positions allow them to create inside information, which allows them to make money consistently with little or no risk. We also have the SEC and the CFTC perpetually looking the other way aiding and abetting their criminal behavior. If you add in that there are no limits to what they can do you essentially have an ongoing free for all. This is unrestrained finance via a policy of zero interest rates. This gives Wall Street and banking a license to steal.

All this has caused a bubble and that bubble is in the process of bursting, a product of fiscal and monetary stimulus. That is not only in the US, UK and Europe, but worldwide As a result confidence in the global system is being lost. De-leveraging of bullish bets in markets of bonds and stocks is underway. Ironically these speculators are short gold and silver and the shares. Short covering is in process with some even switching to the long side in the gold and silver bullion and share markets. How any economist could believe that leveraged speculation reduces risk is beyond us. Fortunately the other shoe has dropped and such theory has been disproved.

The result of all this is that we have an escalating debt crisis worldwide and now the experts in and out of government do not have any solutions as to how to rectify the situation. The sovereign debt crisis has been underway since the early 1970s. This experience shows you how long bad things can last. Before this is over trillions of dollars will be defaulted upon. The days of overwhelming stimulus to gain traction in the economy or economies is in the process of being ineffective. We like to call it the law of diminishing returns. The $2.3 to $2.5 trillion we project that the Fed will have to create in the coming fiscal year will at best produce GDP growth of zero. The minute the Fed and Congress stop feeding the system we will be looking at negative growth of 5%. We are headed toward crunch time and there is no avoiding it. Uncertainty and instability are America’s and the world’s next challenge. Currencies are going to react widely. Gold and silver will fly along with the gold and silver shares as a result of debt and falling economies accompanied by inflation. The big problem will not only be de-leveraging, but also the opaque derivative markets and the Exchange Traded Funds, many of which are leveraged. Yes, it will be a very rough ride, so you had best get ready for it. We never had a recovery and the trappings of growth are quickly falling away. Extending the time line for all these problems is coming to an end, but it probably will not be abrupt. There will be all kinds of terrible events, but it looks like the elitists are going to play this out over an extended time frame before they attempt to pull the plug. That means these problems could be extended out five or even ten more years on a degenerating basis. That also means we will continue to have limited wars for financial gain and distraction. The strategy has been and will continue to be to keep creating money and credit and allow inflow to reduce the size of the debt. These comments regarding debt quoting Bernanke and throwing money from helicopters and Greenspan’s admission that the US cannot be downgraded, because it can always print money are flippant and very unprofessional. What they have both done rather than allow the US government to default is to perpetually create money and credit to paper over the economy’s failure. This process increases inflation that quietly steals the value of purchasing power like a thief in the night. Both men can be classified as thieves for having done to the American people and others by stealing the fruits of their labor. This trick used by money masters and politicians for centuries is little understood by the public and most cannot understand how it works and the ultimate ramifications. These characters and others create additional debt, which is followed by other nation’s central banks, which has created a race to the bottom and eventually all nations cannot pay their debts and default. Eventually in order to prevent a collapse in the financial system a meeting is held such as was held at the Smithsonian talks in the early 1970s, or the Plaza Accord in 1985 and the Louvre Accord in 1987. All currencies are revalued and devalued and there is multilateral debt settlement. We believe that is how all this will come about.

Evidentially a deal has been made from behind the scenes to relieve the Fed of having to produce $850 billion in stimulus and that task has been delegated to Mr. Obama. The President, while calling for budget cuts, is calling for $850 billion for stimulus 3. Observing recent actions by Congress some idiotic excuse will be made up and like magic stimulus 3 will appear. We also suggest that the President will use the London rioting as a cause for such stimulus. Remember never let a crisis go to waste. It is sure to be sold in the behalf of preservation of order. We do not believe the powers behind government will get the desired results.

Admittedly, Ben Bernanke inherited a can of worms from Sir Alan Greenspan. Ben has been able to accumulate $3 trillion worth of an assortment of Treasuries, Agencies and CDS, and MBS’s, also known as toxic waste, over the past few years. Those moves decidedly have been negative for the rating of US government debt. The rating really should have been lowered five years ago during the Greenspan years and perhaps even sooner than that. Due to massive increases since 2006 by the Fed we now already are in a bubble.

The 12 person congressional debt commission, we like to refer to as the Obama Enabling Act, patterned after Adolph Hitler’s legislation of 1933, which allowed him to become dictator of Germany, supposedly will produce moderate spending cuts. Knowing that Standard and Poor’s has warned this “Star Chamber” proceeding, which bypasses Congress, that there are not substantial cuts in Social Security and Medicare, that S&P will again lower the US debt rating. Everyone seems to overlook that fact. That means that if there is not large Social Security and Medicare cuts and an increase in taxes, S&P will strike again, and the bond market will burst, and Mr. Bernanke’s house of cards will collapse. As we explained previously the debt extension could have been passed in 15 minutes, but it wasn’t because the powers behind government the Council on Foreign Relations, wanted to chop up SS and Medicare, and to put this panel in place. All is never what it seems to be.

Filed under World Tagged with , , , , , , , , , , , , , , , , , , , , , , ,

Manipulated Markets Make a Come Back

August 10, 2011

Does it make sense that during the deepest depression since 1929, the U.S. Stock Market comes back up from a 6oo+ point decline? Only a manipulated system where speculators have complete control could recover from a rout that showed how little confidence investors have in the market today.

by Luis R. Miranda
The Real Agenda
August 9, 2011

While countries are in dire straits to make payments on mostly illegally acquired debts and the price of oil continues to fall; while little to nothing is produced or manufactured in the industrialized world and no ingenuity makes it big anywhere in the world; while the most important currencies continue to tumble and other financial markets turn more sour; while unemployment continues to grow from the low 20′s and more people make use of food stamps and unemployment benefits; while more jobs are exported to third world nations that support slave work for their populations and inflation is only tamed by artificial manipulation of the currencies; while numerous people look to gold and silver as their salvation, surprisingly the stock market came back from the pantheon and surged to recover from the slide seen just a few hours ago.

There is very little that can't be done when someone or something controls fiat currencies, rating agencies, and financial markets.

But not only did the stocks came back strong; they had the largest gains in more than two years. Along with this “come back” the U.S. dollar got weaker and the Swiss franc rose the most since 1971. Even the very same Standard & Poor Index managed to recover almost 5 percent, the most significant gains since 2009. In the meantime, the origin of the financial disaster, the privately owned banks headed by the Federal Reserve announced their intent to print more worthless money into the economy as a way to “boost” confidence. Even though QE1 and QE2 failed to provide any confidence, or for that matter failed to provide anything positive, the FED believes it is appropriate to bring up QE3. With this, the FED shows its interest to purchase more government bonds, which will consolidate its position as the largest holder of U.S. government debt.

“The Fed is clearly setting up a situation that could offer them the potential to do something significant, if necessary,” Bruce McCain, who helps oversee $22 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “That could be viewed as a positive,” added McCain. “People are starting to realize that what we’ve had in the market was an overreaction.” Really? Positive? How so?

Artificial Surge after the Decline

How can a stock market come back from a 600+ point decline in just a few hours if one considers that the cause of such loss -the downgrade of the U.S. debt rating- has not been dealt with? It simply boggles the mind, doesn’t it? The United States credit rating was lowered from AAA to AA+ by Standard & Poors, a rating agency that is paid by the banks to evaluate financial products and which is in part responsible for the current financial catastrophe. Together with Moody’s, S&P was created the by the banking system to carry out “independent” evaluations of financial products as well as credit confidence on institutions, state and local governments and of course whole nations.

According to Bloomberg, Stocks came back from a loss of $ 1 trillion after S&P downgraded the U.S. credit rating last Friday evening. The results of the downgrade were not felt until Monday, when the Markets opened all over the world. The S&P index sank about 11 percent and the stock market lost 648 points or more than 6 percent. But just 24 hours later, everything was different. “The MSCI All-Country World Index rose 2.1 percent for its biggest gain of the year”, says Bloomberg. “The index started the U.S. session valued at about 12.1 times profits, down from 21 in 1995..The MSCI Emerging Markets Index pared today’s drop to 2.2 percent after tumbling as much as 4.4 percent.”

Stocks Rally? What Rally?

In the Stock Market, the Dow Jones climbed almost 430 or 4 percent, failing to completely recover from the recent loss. The stocks experienced the 1oth more significant gain in its history. Can you believe it? In the middle of a Depression, the stocks rally the much?

Meanwhile, in the S&P, shares got to the front of the line due to the numerically significant gains. In total, they accumulated some 8.2 percent all together. This is the biggest rally since May 2009, which meant a complete recovery from Monday’s low. Bank of America Corp., which is now being sued by AIG for fraud, managed to gain 17 percent while other players like Hartford Financial Services got back 16 percent.

Of course the main stream media is giving all credit to the Federal Reserve, due to its announcement that it intends to “boost” the economy by injecting worthless cash into it. The FED’s head, Ben Bernanke and his aides came out to try to calm the demise a bit, although not everyone at the FED agreed with the move to bring along a new quantitative easing move. Three members from the policy committee dissented and instead called for maintaining interest rates low for a longer period of time.

As the docu-film “The Inside Job” impeccably exposes, there is very little that can’t be done when someone or something has the power to create money out of thin air, create rating agencies, control those agencies to give AAA ratings to whatever they choose and electronically manipulate the financial stock and bond markets whenever it’s convenient in order to perpetuate the fraudulent debt-based system the world has worked under since 1913.

False Policy Changes

The best way to perpetuate the above cited financial system is to have the available tool continuously reinforce the falsehood of the Central Bank sponsored plans. So, Moody’s has come out to praise the FED’s move to maintain the interest rates at a quarter of a percent in order to bolster the downturn. It’s a  ”major policy change,” said Augustine Faucher, director of macroeconomics at Moody’s. “By providing a more explicit time line for raising rates, the Fed is telling markets it is concerned about recent economic weakness and the potential for a near-term contraction, and is dedicated to spurring stronger economic growth,” Faucher added.

Just as this statement by Faucher is baseless, so is the belief that because the U.S. dollar is the world’s reserve currency, it can stand more beating than any other one. In fact, one of the reasons why the U.S. has not been downgraded further is that its currency is still consider valuable. Ironically, the dollar has lost 98 percent of its value since it became the subject of manipulation by the bankers. Moody’s has stated that the U.S. dollar can support larger levels of debt than other currencies. How do they figure that with a currency that is so devalued. They can’t figure it out. They just make it up.

The one world reserve currency scheme is only beneficial to those who control it, because the rest of the nations need to do business while devaluing their own. In sound economics, the value of paper money is based on a country’s production or manufacturing, therefore, the U.S. dollar can no longer be such reserve currency. U.S. manufacturing has eroded so badly, that it has cost the jobs of some 18 million people in the last few years.

If the U.S. dollar is still the world’s reserve currency, why are there other currencies that have better exchange rates than the dollar itself? I am no economic expert, but if the Swiss Frank rates higher than the dollar in currency exchange markets, shouldn’t the Frank be the reserve currency? Or even better, shouldn’t a commodity like gold be the reserve currency given its capacity to withstand recessions, depressions and financial market manipulations? It should. The reason why gold is not the reserve currency or at least the commodity over which a paper money currency is supported is that bankers cannot monopolize it, “hug” it or manipulate it.

High Market but Low Results: The World Economy in Shambles

While the banks try to extend the suffering period for the middle and low classes, countries in Europe are scrambling for a life boat to jump on. Although France and Germany are said to be negotiating an agreement to buy Spain’s and Italy’s debt in order to avoid a deeper economic collapse, some sources claim that the rescuers believe the Italian debt is too large to save. Both Nicolas Sarkozy and Angela Merkel began to hear opposition voices that are calling for a different position from the German and French governments. The reason for this is that an eventual bailout of Italy and Spain could cost the rescuers their AAA rating. This is seen as a possible trigger to drag the world’s economy further into the precipice.

Although U.S. markets artificially revived themselves on Tuesday, other countries were not as lucky. In Italy, the bond market saw a loss of 11 percent on its 10 year note. Just as the FED has done in the United States, the European Central Bank kept Italy and Spain afloat through the purchase of their bonds for a second day in a row. That was not enough to save the Spanish 10 year notes, as they collapsed eight basis points to 5.08 percent on Tuesday.

Meanwhile, oil prices hit some of the lowest levels for the year by getting down to $79.30 a barrel. Conversely, gold prices soared and added 4.1 percent to get to a record price of $1,782.50 an ounce.

Filed under World Tagged with , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Ron Paul Embarrasses Ben Bernanke as he says Gold is not Money

July 13, 2011

Forbes
July 13, 2011

Chairman Ben Bernanke faced-off with Fed-hating Representative Ron Paul during his monetary policy report to Congress on Wednesday.  The head of the Fed was forced to respond to accusations of enriching already rich corporations while failing to help Main Street, while he was pushed on his views on gold.  “Gold isn’t money,” Bernanke said. (See video below).

While most of Bernanke’s reports to Congress serve politicians to pursue their own agendas by gearing the Chairman towards their issues, with Republican Rep. Bacchus talking of the unsustainability of Medicaid and Rep. Frank (D, Mass.) asking about the need to raise the debt limit without cutting spending, it was a stand-off between Bernanke and Ron Paul that took all the attention. (Read Apocalyptic Bernanke: Raise The Debt Ceiling Or Else).

Rep. Ron Paul, Republican for Texas, asked Bernanke why a capital injection of more than $5 trillion “hasn’t done much” to help the consumer, who makes up about two-thirds of GDP in the U.S., and prop up the economy, while it helped boost corporate profits.  “You could’ve given $17,000 to each citizen,” Ron Paul claimed.

Bernanke, clearly on the defensive, told Rep. Ron Paul that his institution hadn’t spent a single dollar, rather, the Fed has been a “profit center” according to the Chairman, returning profits to the federal government.  As Bernanke began to sermon Rep. Paul on the history of the Fed (“we are here to provide liquidity [in abnormal situations],” the Chairman said), he was interrupted.

“When you wake up in the morning, do you think about the price of gold,” Rep. Paul asked.  After pausing for a second, Bernanke responded, clearly uncomfortable. that he paid much attention to the price of gold, only to be interrupted once again.

“Gold’s at about $1,580 [an ounce] this morning, what do you think of the price of gold?” asked Rep. Paul.  A stern-faced Bernanke responded people bought it for protection and was once again cut-off, with Ron Paul once again on the offensive.

“Is gold money?” he asked.  Clearly bothered, Bernanke told the representative “no, gold is not money, it’s an asset.  Treasuries are an asset, people hold them, but I don’t think of them as money,” said Bernanke.

Rep. Ron Paul again jumped in, noting the long history of gold being used as money, and then asked Bernanke why people didn’t hold diamonds, clearly hinting at his fiat money criticism of the U.S. monetary system.  The Fed Chairman told Rep. Paul it was nothing more than tradition, and, as he was attempting to develop his argument, Rep. Ron Paul quickly asked the acting authority of the House of Representative’s Committee on Financial Services, Rep. Bacchus, to excuse him for exceeding his time, as he returned the floor to the Committee. (Read Bernanke To Rep. Paul Ryan: QE2 Created 600,000 Jobs).

The interesting exchange served as one of the few times Bernanke has been publicly pushed off his comfort zone by an elected official.  Rep. Ron Paul brought up the issues that he’s famous for, namely, a sort of allegiance between the Fed and the nation’s most powerful institutions, the illusion of fiat money, and the gold standard.  Bernanke, angered and bothered, had no option but to respond. (Read Bernanke’s Contradiction: Minutes Reveal QE3 Talk And Exit Strategy).

Filed under World Tagged with , , , , , , , , , ,

← Older posts

Related Links:

Togel178

Pedetogel

Sabatoto

Togel279

Togel158

Colok178

Novaslot88

Lain-Lain

Partner Links