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Wednesday, December 30, 2015

A Crisis Worse than ISIS? Bail-Ins Begin

While the mainstream media focus on ISIS extremists, a threat that has gone virtually unreported is that your life savings could be wiped out in a massive derivatives collapse. Bank bail-ins have begun in Europe, and the infrastructure is in place in the US.  Poverty also kills.
At the end of November, an Italian pensioner hanged himself after his entire €100,000 savings were confiscated in a bank “rescue” scheme. He left a suicide note blaming the bank, where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, which have imposed an “Orderly Resolution” regime that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the “rescue.”
The pensioner’s bank was one of four small regional banks that had been put under special administration over the past two years. The €3.6 billion ($3.83 billion) rescue plan launched by the Italian government uses a newly-formed National Resolution Fund, which is fed by the country’s healthy banks. But before the fund can be tapped, losses must be imposed on investors; and in January, EU rules will require that they also be imposed on depositors. According to a December 10th article on
The rescue was a “bail-in” – meaning bondholders suffered losses – unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros.
Correspondents say [Italian Prime Minister] Renzi acted quickly because in January, the EU is tightening the rules on bank rescues – they will force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders.
. . . [L]etting the four banks fail under those new EU rules next year would have meant “sacrificing the money of one million savers and the jobs of nearly 6,000 people”.
That is what is predicted for 2016: massive sacrifice of savings and jobs to prop up a “systemically risky” global banking scheme.
Bail-in Under Dodd-Frank
That is all happening in the EU. Is there reason for concern in the US?
According to former hedge fund manager Shah Gilani, writing for Money Morning, there is. In a November 30th article titled “Why I’m Closing My Bank Accounts While I Still Can,” he writes:
[It is] entirely possible in the next banking crisis that depositors in giant too-big-to-fail failing banks could have their money confiscated and turned into equity shares. . . .
If your too-big-to-fail (TBTF) bank is failing because they can’t pay off derivative bets they made, and the government refuses to bail them out, under a mandate titled “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” approved on Nov. 16, 2014, by the G20’s Financial Stability Board, they can take your deposited money and turn it into shares of equity capital to try and keep your TBTF bank from failing.
Once your money is deposited in the bank, it legally becomes the property of the bank. Gilani explains:
Your deposited cash is an unsecured debt obligation of your bank. It owes you that money back.
If you bank with one of the country’s biggest banks, who collectively have trillions of dollars of derivatives they hold “off balance sheet” (meaning those debts aren’t recorded on banks’ GAAP balance sheets), those debt bets have a superior legal standing to your deposits and get paid back before you get any of your cash.
. . . Big banks got that language inserted into the 2010 Dodd-Frank law meant to rein in dangerous bank behavior.
The banks inserted the language and the legislators signed it, without necessarily understanding it or even reading it. At over 2,300 pages and still growing, the Dodd Frank Act is currently the longest and most complicated bill ever passed by the US legislature.
Propping Up the Derivatives Scheme
Dodd-Frank states in its preamble that it will “protect the American taxpayer by ending bailouts.” But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors. That includes depositors, the largest class of unsecured creditor of any bank.
Title II is aimed at “ensuring that payout to claimants is at least as much as the claimants would have received under bankruptcy liquidation.” But here’s the catch: under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured.
The over-the-counter (OTC) derivative market (the largest market for derivatives) is made up of banks and other highly sophisticated players such as hedge funds. OTC derivatives are the bets of these financial players against each other. Derivative claims are considered “secured” because collateral is posted by the parties.
For some inexplicable reason, the hard-earned money you deposit in the bank is not considered “security” or “collateral.” It is just a loan to the bank, and you must stand in line along with the other creditors in hopes of getting it back. State and local governments must also stand in line, although their deposits are considered “secured,” since they remain junior to the derivative claims with “super-priority.”
Turning Bankruptcy on Its Head
 Under the old liquidation rules, an insolvent bank was actually “liquidated” – its assets were sold off to repay depositors and creditors. Under an “orderly resolution,” the accounts of depositors and creditors are emptied to keep the insolvent bank in business. The point of an “orderly resolution” is not to make depositors and creditors whole but to prevent another system-wide “disorderly resolution” of the sort that followed the collapse of Lehman Brothers in 2008. The concern is that pulling a few of the dominoes from the fragile edifice that is our derivatives-laden global banking system will collapse the entire scheme. The sufferings of depositors and investors are just the sacrifices to be borne to maintain this highly lucrative edifice.
In a May 2013 article in Forbes titled “The Cyprus Bank ‘Bail-In’ Is Another Crony Bankster Scam,” Nathan Lewis explained the scheme like this:
At first glance, the “bail-in” resembles the normal capitalist process of liabilities restructuring that should occur when a bank becomes insolvent. . . .
The difference with the “bail-in” is that the order of creditor seniority is changed. In the end, it amounts to the cronies (other banks and government) and non-cronies. The cronies get 100% or more; the non-cronies, including non-interest-bearing depositors who should be super-senior, get a kick in the guts instead. . . .
In principle, depositors are the most senior creditors in a bank. However, that was changed in the 2005 bankruptcy law, which made derivatives liabilities most senior. Considering the extreme levels of derivatives liabilities that many large banks have, and the opportunity to stuff any bank with derivatives liabilities in the last moment, other creditors could easily find there is nothing left for them at all.
As of September 2014, US derivatives had a notional value of nearly $280 trillion. A study involving the cost to taxpayers of the Dodd-Frank rollback slipped by Citibank into the “cromnibus” spending bill last December found that the rule reversal allowed banks to keep $10 trillion in swaps trades on their books. This is money that taxpayers could be on the hook for in another bailout; and since Dodd-Frank replaces bailouts with bail-ins, it is money that creditors and depositors could now be on the hook for. Citibank is particularly vulnerable to swaps on the price of oil. Brent crude dropped from a high of $114 per barrel in June 2014 to a low of $36 in December 2015.
What about FDIC insurance? It covers deposits up to $250,000, but the FDIC fund had only $67.6 billion in it as of June 30, 2015, insuring about $6.35 trillion in deposits. The FDIC has a credit line with the Treasury, but even that only goes to $500 billion; and who would pay that massive loan back? The FDIC fund, too, must stand in line behind the bottomless black hole of derivatives liabilities. As Yves Smith observed in a March 2013 post:
In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositors to fund derivatives exposures. . . . The deposits are now subject to being wiped out by a major derivatives loss.
Even in the worst of the Great Depression bank bankruptcies, noted Nathan Lewis, creditors eventually recovered nearly all of their money. He concluded:
When super-senior depositors have huge losses of 50% or more, after a “bail-in” restructuring, you know that a crime was committed.
Exiting While We Can
How can you avoid this criminal theft and keep your money safe? It may be too late to pull your savings out of the bank and stuff them under a mattress, as Shah Gilani found when he tried to withdraw a few thousand dollars from his bank. Large withdrawals are now criminally suspect.
You can move your money into one of the credit unions with their own deposit insurance protection; but credit unions and their insurance plans are also under attack. So writes Frances Coppola in a December 18th article titled “Co-operative Banking Under Attack in Europe,” discussing an insolvent Spanish credit union that was the subject of a bail-in in July 2015. When the member-investors were subsequently made whole by the credit union’s private insurance group, there were complaints that the rescue “undermined the principle of creditor bail-in” – this although the insurance fund was privately financed. Critics argued that “this still looks like a circuitous way to do what was initially planned, i.e. to avoid placing losses on private creditors.”
In short, the goal of the bail-in scheme is to place losses on private creditors. Alternatives that allow them to escape could soon be blocked.
We need to lean on our legislators to change the rules before it is too late. The Dodd Frank Act and the Bankruptcy Reform Act both need a radical overhaul, and the Glass-Steagall Act (which put a fire wall between risky investments and bank deposits) needs to be reinstated.
Meanwhile, local legislators would do well to set up some publicly-owned banks on the model of the state-owned Bank of North Dakota – banks that do not gamble in derivatives and are safe places to store our public and private funds.
Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at Listen to “It’s Our Money with Ellen Brown” on PRN.FM.

Friday, December 11, 2015

What does this guy get out of it?

Donald Trump is a brand.  Plain and Simple.

He has not been a "Builder" for well over a decade.

As a builder he was born as the heir to a real estate empire which he pretty well destroyed.  He went deep into debt and ruined most of his partners.  He is hated in the real estate and banking industries.  Nobody trusts him.  Least of all the employees and ex-partners that he's ruined.

Because of clever use of the bankruptcy laws he escaped with a  personal fortune - which is extremely illiquid and very difficult to value because of the illiquidity of his real estate assets.  Imagine trying to sell a golf course in the suburbs during an economic downturn.

However as a reality television based brand he has been very successful.  He licenses his name on ties, cocktail napkins, belts, sheets, socks, lighters, bath towels (all made in China) and even buildings. He is the male Kim Kardashian.

But the Reality Television business is fickle and he knows it.  He has had a great run but people are getting tired of his "You're fired" shtick on his fantasy business program.  So he's risking it all on a bid for the greatest reality television post of all; the Office of President.

He's running his campaign as a reality tv program.  And he's great at it.  He's knows what to say to get the maximum attention. And he knows that only one thing counts: Maximum Attention.

If he wins, he knows he's set financially for life.  He's watched the Clintons make hundred of millions of LIQUID CASH off the presidency.  And he wants in. He knows in a downturn his illiquid assets could evaporate.  And he knows his tv program has been trending downward in the ratings.

So he has gambled everything on the Presidency.  And he has to win.  Because even if he gets the Republican nomination and loses the general election his brand will take a huge hit.  So he will do or say anything at all to win it at all costs.  The payoff is huge. So are the risks.

He's a human brand.  And like all brands he exists for the money. 

Wednesday, December 9, 2015

The Result of Financial Repression:

Image result for trump

After 30 years of Financial Repression - in the form of negative real rates which constitute a heavy tax on the household sector and an enormous subsidy to the banking sector and the corporate sector - the vast middle class of the United States feels angry and cheated.

Financial Repression also takes the form of other policy initiatives that result in an outcome where worker compensation has sorely lagged worker productivity for 30 years.  This also constitutes a tax on the household sector and a subsidy for the corporate sector.

Few understand this, but everyone feels it.

We all feel screwed.

We all feel cheated.

We all feel angry as hell.

We all want somebody to stand up and screw and cheat somebody else in return.

Enter Donal Trump.

And the more he pledges to cheat and screw OTHERS the more we love him.

Unfortunately, Financial Repression is very hard to understand.  It shouldn't be.  But it is.

And we all want to get someone back.  So rather than direct our intense anger at the source of Financial Repression: The Fed and our own Government, we direct our anger at the easiest targets: IMMIGRANTS.

The goddam brown people who are stealing our jobs and murdering our grandparents.  If we screw and cheat them we'll all feel better.  And the more Donald Trump pledges to screw and cheat people the better we like him.

Of course, the corporate/banking/government sector that spawned him - that taught him to cheat and screw - doesn't like him.  Because he'll cheat and screw them too, if it profits him.  And right now, it does.  He'll screw every last one of them if it gets him the presidency.  Everyone and everything.  And we love him for it.

We reap what we sow.

Tuesday, December 1, 2015

How Did Gold as a currency help create Democracy? And why is Democracy nearly impossible without a gold currency?

The first gold currency in the form of coinage was invented by Kroisos (Croesus) of Lydia in about 545 BCE.  He created a bimetallic gold/ silver coinage with Gold Staters of 10.7 grams down to 1/48th staters of about .35 grams.  We can see from the tiny fractions that the coinage was meant to be used for every day transactions by common citizens.

The invention of coinage was preceded by a few hundred years with the invention of Alphabetic Language.  Alphabetic Language was invented by the Phonecians in about 1000 BCE, but it wasn't until about 700 BCE that we begin to see stamped images with lettering (much like those on coinage) on the handles of ewers and other earthenware goods used in trade, as well as stamps with images and lettering on signet rings used on official correspondence.

Both these innovations greatly facilitated trade.  But the salient fact is that these innovations greatly facilitated trade between private citizens.

Before then, all trade had to be sanctioned, and initiated by the Royal House.  Wealth was stored either at the Palace or in the Temple which served also as the Central Bank.  Wealth in the form of goods, as well as wealth in the form of whatever was used as money.  It was all under the direct control of the Royal Family and the Priest Class - which were most often one and the same. 

But it wasn't simply the stamp and the lettering that permitted trade to devolve into the hands of the private citizen.  It was also the unanimous selection of Gold as the substance of official coinage.

Why Gold?  Because Gold was thought by every single society on earth to have Intrinsic Value.  What value is that?  It was thought to be imbued with a natural beauty reflected in the virtues of the susbtance: it is Unchanging.  It is inert and immutable and shiny.  Like God.

I know,  This sounds primitive.  But the Unchanging is a concept that describes God that is actually extraordinarily complex as elucidated by Parmenides and Heraclitus - philosophers whose works have never been equaled in the history of thought.  So, perhaps, not so primitive.

But this concept of inherent value is exactly the mechanism that allowed Power in the Economy to move into the hands of the Private Citizen.  Because for the first time in the history of humanity, with the advent of gold coinage the Private Citizen had the power to conduct his economic affairs by Initiating and conducting his own trades without the direct sanction of the State.  And he was able to store his wealth in his own home.

Of course, silver was used too, as a proxy for, and convertible into Gold, wherever there was not enough gold to serve for common transactions.

And this wealth, in the form of gold and silver coinage, could not be confiscated,  degraded, inflated, without the State declaring war on its own citizenry. 

Thus Economic Power devolved from the State to the Private Citizen.  And within a hundred years of this movement, DEMOCRACY was born in Athens.

Gold (and silver) coinage was the principle weapon of the private citizenry against the State.  More than arms - as private citizens had always had arms.  More than laws - which are always exercised by the State.  More than constitutions - which can be changed on the whim of the state.

It was the privately owned Money of Intrinsic Value that guaranteed the Private Citizen could conduct his own affairs Independent of the State.

And without this Basic Tenet of Democracy, it is unclear how Democracy is even possible, as the State will have absolute control over all transactions.  Thus private transactions cease to exist.

Wednesday, November 25, 2015

The War On Cash intensifies with negative Interest rates

Hang Onto Your Wallets: Negative Interest, the War on Cash, and the $10 Trillion Bail-in

In uncertain times, “cash is king,” but central bankers are systematically moving to eliminate that option. Is it really about stimulating the economy? Or is there some deeper, darker threat afoot?
Remember those old ads showing a senior couple lounging on a warm beach, captioned “Let your money work for you”? Or the scene in Mary Poppins where young Michael is being advised to put his tuppence in the bank, so that it can compound into “all manner of private enterprise,” including “bonds, chattels, dividends, shares, shipyards, amalgamations . . . .”?

That may still work if you’re a Wall Street banker, but if you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse.

Four European central banks – the European Central Bank, the Swiss National Bank, Sweden’s Riksbank, and Denmark’s Nationalbank – have now imposed negative interest rates on the reserves they hold for commercial banks; and discussion has turned to whether it’s time to pass those costs on to consumers. The Bank of Japan and the Federal Reserve are still at ZIRP (Zero Interest Rate Policy), but several Fed officials have also begun calling for NIRP (negative rates).

The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery.

That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero.

Locking the Door to Bank Runs: The Cashless Society

The problem with imposing negative interest on savers, as explained in the UK Telegraph, is that “there’s a limit, what economists called the ‘zero lower bound’. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.”
Again, to the ordinary observer, this would seem to signal that negative interest rates won’t work and the approach needs to be abandoned. But not to our undaunted central bankers, who have chosen instead to plug this hole in their leaky theory by moving to eliminate cash as an option. If your only choice is to keep your money in a digital account in a bank and spend it with a bank card or credit card or checks, negative interest can be imposed with impunity. This is already happening in Sweden, and other countries are close behind. As reported on
The War on Cash is advancing on all fronts. One region that has hogged the headlines with its war against physical currency is Scandinavia. Sweden became the first country to enlist its own citizens as largely willing guinea pigs in a dystopian economic experiment: negative interest rates in a cashless society. As Credit Suisse reports, no matter where you go or what you want to purchase, you will find a small ubiquitous sign saying “Vi hanterar ej kontanter” (“We don’t accept cash”) . . . .
The Lesson of Gesell’s Decaying Currency

Whether negative interests will actually stimulate an economic recovery, however, remains in doubt. Proponents of the theory cite Silvio Gesell and the Wörgl experiment of the 1930s. As explained by Charles Eisenstein in Sacred Economics:

The pioneering theoretician of negative-interest money was the German-Argentinean businessman Silvio Gesell, who called it “free-money” (Freigeld) . . . . The system he proposed in his 1906 masterwork, The Natural Economic Order, was to use paper currency to which a stamp costing a small fraction of the note’s value had to be affixed periodically. This effectively attached a maintenance cost to monetary wealth.
. . . [In 1932], the depressed town of Wörgl, Austria, issued its own stamp scrip inspired by Gesell . . . . The Wörgl currency was by all accounts a huge success. Roads were paved, bridges built, and back taxes were paid. The unemployment rate plummeted and the economy thrived, attracting the attention of nearby towns. Mayors and officials from all over the world began to visit Wörgl until, as in Germany, the central government abolished the Wörgl currency and the town slipped back into depression.
. . . [T]he Wörgl currency bore a demurrage rate [a maintenance charge for carrying money] of 1 percent per month. Contemporary accounts attributed to this the very rapid velocity of the currencies’ circulation. Instead of generating interest and growing, accumulation of wealth became a burden, much like possessions are a burden to the nomadic hunter-gatherer. As theorized by Gesell, money afflicted with loss-inducing properties ceased to be preferred over any other commodity as a store of value.
There is a critical difference, however, between the Wörgl currency and the modern-day central bankers’ negative interest scheme. The Wörgl government first issued its new “free money,” getting it into the local economy and increasing purchasing power, before taxing a portion of it back. And the proceeds of the stamp tax went to the city, to be used for the benefit of the taxpayers. As Eisenstein observes:
It is impossible to prove . . . that the rejuvenating effects of these currencies came from demurrage and not from the increase in the money supply . . . .
Today’s central bankers are proposing to tax existing money, diminishing spending power without first building it up. And the interest will go to private bankers, not to the local government.

Consumers today already have very little discretionary money. Imposing negative interest without first adding new money into the economy means they will have even less money to spend. This would be more likely to prompt them to save their scarce funds than to go on a shopping spree.
People are not keeping their money in the bank today for the interest (which is already nearly non-existent). It is for the convenience of writing checks, issuing bank cards, and storing their money in a “safe” place. They would no doubt be willing to pay a modest negative interest for that convenience; but if the fee got too high, they might pull their money out and save it elsewhere. The fee itself, however, would not drive them to buy things they did not otherwise need.

Is There a Bigger Threat than a Sluggish Economy?

The scheme to impose negative interest and eliminate cash seems so unlikely to stimulate the economy that one wonders if that is the real motive. Stopping tax evaders and terrorists (real or presumed) are other proposed justifications for going cashless.  In a cashless society, our savings can be taxed away by the banks; the threat of bank runs by worried savers can be eliminated; and the too-big-to-fail banks can be assured that ample deposits will be there when they need to confiscate them through bail-ins to stay afloat.

And that may be the real threat on the horizon: a major derivatives default that hits the largest banks, those that do the vast majority of derivatives trading. On November 10, 2015, the Wall Street Journal reported the results of a study requested by Senator Elizabeth Warren and Rep. Elijah Cummings, involving the cost to taxpayers of the rollback of the Dodd-Frank Act in the “cromnibus” spending bill last December. As Jessica Desvarieux put it on the Real News Network, “the rule reversal allows banks to keep $10 trillion in swaps trades on their books, which taxpayers could be on the hook for if the banks need another bailout.”
The promise of Dodd-Frank, however, was that there would be “no more taxpayer bailouts.” Instead, insolvent systemically-risky banks were supposed to “bail in” (confiscate) the money of their creditors, including their depositors (the largest class of creditor of any bank). That could explain the push to go cashless. By quietly eliminating the possibility of cash withdrawals, the central bank can make sure the deposits are there to be grabbed when disaster strikes.

If central bankers are seriously trying to stimulate the economy with negative interest rates, they need to repeat the Wörgl experiment in full. They need to first get some new money into the economy, money that goes directly to the consumers and local businessmen who will spend it. This could be achieved in a number of ways: with a national dividend; or by using quantitative easing for infrastructure or low-interest loans to states; or by funding free tuition for higher education. Consumers will hit the malls when they have some new discretionary income to spend.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at Listen to “It’s Our Money with Ellen Brown

Wednesday, November 11, 2015


Q Does cutting taxes create more demand?

A Only where it creates more discretionary spending.

Q Where would it not create more discretionary spending?

A. When taxes are cut on those who have infinite discretionary spending.

Q Why?

A.  Because there is no such number as Infinity plus one.

Q. Does Cutting Income Tax spur growth?

A.  Only in so far as other types of taxes are not raised.

Q.  Like what other types of taxes are there?

A.  Policy Taxes:  Negative real rates, for example, are massive taxes on the household and savings sectors and a massive subsidy for the banking and corporate sectors.  As are Tarrifs.  As are polices that incentivize stock buy backs at the expense of worker compensation.  All these taxes crush demand.  This is why cutting only income taxes will have very little effect on demand.

Q Will Repealing and Replacing Obamacare save money and spur the economy?

A.  Definitely not in the short and intermediate term.  Possibly the the very long term if it is replaced with a very efficient system.

Q Why not in the short term?

A.  Because it is Very Expensive to create the bureaucracy necessary to repeal and replace a policy that has created enormous systemic apparatus that must be dismantled.'

Q.  Will deporting 11 million illegal aliens spur the economy?

A.  Obviously not.

Q.  Why not?

A.  Because it would be extraordinarily expensive to create the Massive  Bureaucracy necessary to perform such a Herculean task.

Wednesday, October 28, 2015


In order to enforce all the Legal Taxes and all the Policy Taxes that are currently crushing the middle class the government has figured that they need to track, record and then ultimately outlaw cash transactions.  If everything is electronic they can take out "their share" on a per transaction basis.  And then again at the end of the year.  And in between, if necessary,

So what's the remedy?

The major time tested remedy has always been GOLD.

Ah, you object,  "But gold isn't Money!"

Yes, that's a very fashionable objections.  But it is simple minded doggerel that rests on the misunderstanding of money..

What is Money?

Money, you say,  is simply a medium of exchange.  Everyone says so.

But what does that mean?

Anything and Everything can be a medium of exchange.

If I'm bigger and stronger than you and I want your car, my fist can be the medium of exchange.  I'll trade you a punch in the nose for your car.  What are you going to do about it?  Then my fist is money.  Or if I just have to threaten you and you turn it over, then my threat is money.  By your definition of money.

This is precisely why the Greeks and then the drafters of the Constitution in this country decided that only Gold can be money.  Because they were tired of a punch in the nose being money.  They knew money MUST BE A STORE OF VALUE.  That way nobody has power over your transactions.  You are the boss of your transactions.

This is the genius of the Greek conception of gold as money.  It is the basis for democracy - of the system of society wherein the Private Citizen has ultimate power over his own transactions.

And it is still so today.  More so than ever, because we are in a global economy. And if a government in one place decides to outlaw gold or tax it outrageously, there are always ways of trading it in another place.  Or another country.  It's not necessarily easy.  But it is well possible.

And it is the only form of money that provides any protection from the Punch In the Nose form of money currently being championed by dimwits thugs the world over.

Saturday, October 24, 2015


So, if we have a massive tax on consumption for the household sector, how come consumption remains robust in the United States?

Well, since everything produced in the country must be consumed or saved, we can either compensate the household sector in other ways - OR we can TAX the Savings which will force the Household sector to consume more of the measly earnings they are permitted to keep.


What is QE?  In short it is the practice of keeping real interest rates extremely low or negative.

In part it is the Government subsidizing the Banking Sector by purchasing unmarketable securities from the banking sector.  These securities on the open market would force rates ever higher to encourage investors to assume the risk of owning securities in danger of defaulting.

This hold rates artificially low.

In part it is the Government printing and buying its own bonds which subsidizes corporations, manufacturers, real estate developers and local Governments by keeping real interest rates negative - that is below the rate of inflation.

When one sector or group of sectors is subsidized another sector is penalized - or TAXED.  Which sector is the loser?  Depositors in Banks - or Savers - which is largely the Household sector.

So through Policy the Household sector - which is another name for the vast middle class is being subjected to massive Regressive Taxes both on the Consumption and on their Savings.

Ordinarily these massive regressive taxes would impel the Household Sector to A) leave the banking system.  B) leave the Corporate System.  and C) Enter into various entrepreneurial enteprises based on barter and cash transactions.


Thursday, October 22, 2015


The chart above is usually interpreted as illustrative of the gap between US worker productivity and US worker compensation.

Another way of interpreting this chart is as the illustration of a massively regressive US Tax transferring wealth directly from the middle class to the top 1 percent.

How is that?

The gap the between the productivity and the compensation of US labor is exactly equal to a targeted CONSUMPTION TAX on the US household sector.

How is this a consumption tax?  Because as workers a forced to retain a declining share of what they produce - which is all that is meant when productivity growth outstrips wage growth - then the workers - who are synonymous with the Household Sector - have been stripped of their means of consumption - which is all that is meant by disposable income.

The fact that this Consumption Tax is imposed through Policy that favors The State and Corporations over the Household sector rather than by Tax Law is completely irrelevant.  Especially to the Household sector - the Workers - that comprise the vast middle class.

The fact that this trend has been going on for over 40 years proves that this Policy is both real and entrenched.

How does this benefit the 1 percent?  The ncreased output translates directly into Increased Dispoable Income for the employers of the Household Sector - which is to say The US Government and US Corporations.

But, unfortunately that's not the end of the sad story of the US war on the Middle Class.


Saturday, October 17, 2015

Volker Rule instituted in England

Britain's biggest banks to be forced to separate retail banks from investment arms

Bank of England fails to back down on ring-fence rules despite pressure from banking lobby







The City's biggest banks must ring-fence their retail operations from riskier investment banks Photo: Getty Images
Britain's biggest banks will have to run their retail banking operations as independent banks, almost entirely separate from their investment banking and overseas operations, as the Bank of England made it clear that there will be no relaxation of the incoming ring-fencing rules.
As a result, regulators hope the high street lenders will be able to continue running the retail arms with no difficulties even if their investment banking arms get into trouble.
Basic services such as payments and bank account access should be able to continue even if the parent group collapses.
The new rules will apply to all of the big banks
Those ring-fenced units must hold bigger capital buffers to protect themselves against a downturn, and have their own independent IT, human resources, processing and risk teams.
However, in one minor concession, the retail banks will be able to pay dividends to their parents, as long as they tell the regulator first and show the payouts will not harm their resilience and stability.

The ring-fence rules apply to HSBC, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Santander UK and the Co-operative Bank, as they all had core deposits of more than £25bn when this process began. Challenger banks which expect to grow to that size by 2019 also need to consider preparing for the changes.
Those banks' retail units will face their own stress tests as well as those applied to their parent group, under which the Bank of England's Prudential Regulation Authority checks to see how the bank will cope with tough economic conditions.
From 2019, each bank's retail banking arm must treat its investment banking operations as if it is an entirely unrelated company. That means for risk purposes, as well as capital buffers and even the financial terms of transactions, the retail arm cannot give other parts of the banking group any favourable treatment.
George Osborne gives his speech at the Conservative Party ConferenceGeorge Osborne, the Chancellor, said in July the Government would not back down on ring-fence rules
Cross-selling is still allowed, as long as it is carried out on commercial terms and the ring-fenced bank would be able to survive without those deals in place.
However, the changes are not costless.
The ring-fenced bank will have to hold more capital, as once the rest of the group is split off, the unit's risks become more concentrated. In addition, the retail bank had to hold more capital against its exposures to other parts of the group.

That is expected to amount to as much as £3.3bn extra capital. Next year the Financial Policy Committee will decide how much extra capital the retail arms should hold to cover their risk to the financial system, which could add another 3pc to those units' capital requirements.
In addition, the operational separation of the banking units is expected to cost roughly £200m per bank as a one-off cost, plus around £120m per year.
Analysts said the changes also present serious administrative challenges for banks.
“Ring-fenced banks will have to become autonomous from the rest of their groups in a whole host of ways – from needing their own risk management resources, to re-engineering their relationships with financial market infrastructures (including the Bank of England itself), and disentangling the complex financial connections between different parts of the group. The requisite investments in systems, data capabilities and compliance architecture will be considerable," said Deloitte's Clifford Smout.
“There is a lot of detail to digest here, and industry faces a challenge to incorporate all this new information into revised – and ‘near final’ – implementation plans for the regulators in just three months.”

Thursday, October 15, 2015

IT's coming...

Sweden is becoming the world's first cashless society

Transactions are increasingly happening on smartphones

Sweden is becoming the world s first cashless society
For decades, economists have been talking about 'cashless societies' - where all transactions are performed digitally. No country in the world has yet made that a reality, but a few are getting close, and the forerunner is Sweden.
Industrial technologists at Stockholm's KTH Royal Institute of Technology have just published a study that shows how fast cash is disappearing in Sweden. "Our use of cash is small, and it's decreasing rapidly," says Niklas Arvidsson, an author of the study.
Arvidsson's team calculated that there are just 80 billion Swedish crowns (about €8 bn) in circulation in the country's wallets and cash registers - down from 106 billion just six years beforehand. "And out of that amount, only somewhere between 40 and 60 percent is actually in regular circulation," he says.
Walking the streets of Sweden's second city, Gothenburg, it's almost impossible to find a shop that doesn't accept bank cards for payment, and most locals tend to carry no coins or notes on their person. Many also make use of an app called Swish, a collaboration between Swedish and Danish banks that permits fast, simple money transfers on smartphones.

Money Laundering and Terrorist Financing

Banks are also going down the same path - several branches have opened that won't accept cash. "At the offices which do handle banknotes and coins, the customer must explain where the cash comes from, according to the regulations aimed at money laundering and terrorist financing," says Arvidsson. Any suspicious cash transactions are reported to the police.
But there is concern, noted in the report, about those being left behind by the transition. Homeless people and undocumented immigrants, as well as the elderly, can struggle to access digital services through computers and smartphones. In a cashless society, vulnerable sectors of society will be increasingly reliant on Sweden's generous social security system.
Also, Arvidsson says it may be difficult to replicate Sweden's success internationally. "Swish is a brilliant idea, but to introduce it internationally is a challenge, not least because it takes a long time to change other countries' banking systems from scratch," he said. "But it is not impossible that a Swish-based banking revolution can also occur abroad."

Tuesday, September 29, 2015

Central Bank attack on cash is an attack on Liberty: FT

September 23, 2015 6:21 pm

In cash we trust — abolish it and you invite tyranny

Andy Haldane’s call to get rid of the money in our wallets has an unfortunate echo of Maoist China
British Pound notes©EPA
Central banks have never been so powerful, yet their ability to set the cost of borrowing, put limits on bank lending and poke their noses into every corner of the financial system is insufficient for some. Now the Bank of England’s chief economist wants to abolish the cash in your wallet and charge you for a digital equivalent.
Andy Haldane argues the world economy is entering a third leg of a long crisis: an emerging market disaster is following the Anglo-Saxon and eurozone crises of 2008 and 2011 respectively. In these circumstances he wants to be able to stimulate spending in Britain but says he cannot easily do so because interest rates are constrained not to fall below 0 per cent. He worries that if the BoE set a negative interest rate — in effect charging savers to hold their money in the hope they would spend instead — people would switch to cash, stick it under the bed and thereby get around the efforts to encourage more consumption.

Attach a gloomy assessment of the efficacy of quantitative easing and other means of stimulating spending, and his answer is to get rid of cash and replace it with a digital wallet on which negative interest rates can be charged.

The case might be logical, but that is not a sufficient condition for public policy. Mr Haldane thinks banning cash and switching to digital money would be a “great technological leap forward” but his words have more than an unfortunate rhetorical echo of Maoist China. It is illiberal and prioritises a skewed view of theory over public acceptability.

For the vast majority of the time when interest rates are positive, Mr Haldane’s plans are simply unnecessary. He would ban the use of paper currency and coinage that has been used for centuries in pursuit of a theoretical contingency. Some 48 per cent of all transactions in the UK use cash, defying regular predictions of its demise and making it by far the most popular payment method. No wonder wiser heads at the BoE, such as Victoria Cleland, the chief cashier, say cash is here to stay.

At times when interest rates would ideally fall below zero, the central bank still has more tools in its armoury than Mr Haldane cares to consider. Nordic countries have shown that significantly negative rates can be imposed on bank deposits without the feared shift towards people hoarding cash under mattresses, so there is already more room for conventional monetary policy to work. In addition, it is clear that in the event of a slump a broad-based tax cut financed by central bank purchases of the resulting public debt would provide the necessary stimulus.

Mr Haldane asserts that such action would send monetary credibility “down the most slippery of slopes”. This fear is far from well grounded; and, as Professor Simon Wren Lewis of Oxford observes, ruling out monetary financing of tax reductions for fear they might be popular is hardly a sensible position for an unelected central banker.

The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty

Some argue there would be beneficial side effects from abolishing notes and coins through the regularisation of illegal activities. Really? What is the more likely response of a drug dealer and client who mutually want to conduct a trade: “Let me sell you the dope on a traceable payment system”; or “Let’s use euros instead”? Cash would have to be abolished everywhere and the BoE does not have those powers, thankfully.

The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty, as professors Stephen Cecchetti and Kermit Schoenholtz observe. It is better if the government creates trusted, anonymous notes and coins rather than some private agent.
Mr Haldane’s proposal to ban cash has all the hallmarks of a public official confusing what is convenient for the central bank with what is in the public interest. Cash is unlikely to die a natural death — and, until it does, long may it live.

Sunday, September 13, 2015



Image result for GILLIGAN"S ISLAND THE MILLIONAIRE                       Image result for Donald Trump

Egocentric, Bloviating, Narcissistic, Facile, Irascible and Fabulously Wealthy this character embodies all the qualities prized by voters in 2016 to make him by far and away the Presidential Front Runner.


       OF Course, The Billionaire  has now divorced his old bag of a wife and married the Movie Star - much to the delight of Social Conservatives everywhere,


Image result for GILLIGAN"S ISLAND THE Millionaire's WIFE                    Image result for HIllary in a hat

Somehow the Shallow, Materialistic Narcissist with no discernible qualifications has been Re-imagined as the only Democrat in the Field, and as such the anointed Front Runner.


Image result for GILLIGAN'S ISLAND THE Professor          Image result for BEN CARSON


Image result for GILLIGAN"S ISLAND MARY ANN               

THE SKIPPER: Despite the fact that this bozo's ignorance got them stranded on the Island in the first place, it never occurs to anyone to strap him to a bunch of coconuts and shove him off into the ocean.

 Image result for GILLIGAN"S ISLAND THE SKIPPER           Image result for christian presidential candidates


Image result for GILLIGAN'S ISLAND GILLIGAN             Image result for JEB BUSH