Posts Tagged ‘lack of fiduciary duty’

The utility of a central bank

March 10, 2011

The other night at a dinner I was expounding my take on the Western monetary system to some European diplomats when one of them in polite disbelief remarked that my position is demonstrably wrong because national central banks in Europe are non profit entities.

Which gave me food for thought.

My counter question then was: if CBs are non profit entities why do they charge interest on the money that is created on behalf of the treasury?

A CB is given the authority to create a piece of paper for which the input labor and material costs are negligible and yet it charges an usurious price for it.

The question then becomes why do we need a CB at all? Why shouldn’t Treasury create the currency?

The diplomat answered that in a Democracy the decentralization of power is essential to upholding democratic principles thus monetary policy should be left in the hands of an independent entity.

The retort of course is that a CB is not independent at all. Proof of this contention is that not only is a CB is given control of a monetary system that was not submitted to the people for ratification but it also retains the privilege to manage interest rates by presumed objective decree. But 40 years of steadily declining interest rates obviously refute the “objective” aspect of monetary policy because in a healthy economy free from government interference, interest rates would fluctuate depending on market requirements and a steady decline would be impossible.

The most damning evidence of the unnecessary nature of a CB is exactly the fact that it is allowed to create something out of nothing and charge the people for it. It is like charging to breathe air. In this construct, the CB creates a piece of paper worth 1 Euro and gives it to Treasury. But Treasury receives less than the 1 Euro created because now Treasury owes interest to the CB. In turn, this creates the absurd situation whereby if Treasury decided to return all currency to the CB, Treasury is now out of pocket by the amount of the interest. But having returned all the currency, there is no currency left to pay the interest owed. This means Treasury (i.e. the people) is forever enslaved to the CB.

The truth shall set you free (Spencer Bachus)

December 22, 2010


House Republicans on Wednes­day promoted Bachus to chairman of the House Financial Services Committee, which has wide juris­diction over banks, capital markets, housing, consumer credit and the overall health of the American fi­nancial system. […]  Bachus, in an interview Wednesday night, said he brings a “main street” perspective to the committee, as opposed to Wall Street. “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks,” he said. He later clarified his comment to say that regulators should set the parameters in which banks operate but not micromanage them.

The above requires no comment or, at least, it shouldn’t.

Fascism relentless ascent

December 17, 2010

I am not particularly well versed in the nuts and bolts of Canadian politics so have not verified this information. Nonetheless, I have no difficulty believing it is true due in large part to the fact that I had already commented on Codex Alimentarius on my facebook page some two or maybe three years ago so I was aware something similar was in the pipeline. Also, I have no difficulty believing that Canadian police might be awarded extraordinary powers that supersede previous democratic mechanisms because that is what is happening throughout the West and because it is dictated by the logical evolution of debt based fiat money.

We’ll have us our global war. The war few believe is possible in our “modern” times. As a reminder; the run up to The Great War.

An open letter to the police – please circulate

An Open Letter to the Police
This evening, December 13, 2010, a piece of draconian legislation was passed into law by the Canadian senate.  I refer to Bill C36, which is just one piece in the wider global plan called Codex Alimentarius.  The bill controls consumer products and is widely understood to be the precursor for another bill that will give Health Canada the power to take some 75% of natural health products off the shelves.
At least as important as this is the part of the bill that removes the law of trespass.  Until tonight, a police officer needed a warrant to enter private property in Canada.  No longer.  Under the new law, police can enter and seize private property at any time, for any reason, even if the person in question is not suspected of any crime.
We have to look at this with a wide lens.  The same policies regarding consumer products, natural health products, and organic farming are coming in at dizzying speed around the world.  At the same time, legislation is passing that gives police unprecedented powers to oppress the people in total disregard to human rights and the constitution of any nation.
Things are only going to get worse for a few years yet.  As the economy continues its downward trend – and it will, because it is planned that way – millions of people will take to the streets in protest, as we are already seeing all over Europe.  Millions more will peacefully start refusing to cooperate with governments that, more obviously every day, do not represent the people.
In conversation with one of the senators who voted the bill into law, I warned him that Canadians will not cooperate with it.  His answer: “The police will have to deal with that.”  In other words, big business and the government that represents it is counting on the police to do their dirty work.
It is time for the police to make a decision.  When the order comes to use guns, tasers, water cannons and so on against innocent people, what are you going to do?  When you are told to enter and search the homes of political dissidents, will you obey, or will you remember the oath you swore which says “I will, to the best of my power, cause the peace to be kept and prevent all offences against the persons and properties of Her Majesty’s subjects”?  Make no mistake, these orders will come.  We are in a situation similar to Nazi Germany in the 1930s, only this time it is on a worldwide level and there are more people awakening and refusing to cooperate.  The excuse “I was just following orders” was not enough in the Nuremberg trials, and it will not be enough this time either.  This is the time to have enough courage to follow your conscience, not your orders.  Do you want your children to live in a police state, knowing they have no privacy even in their own homes?  It is time to put the truncheons and the tasers down and refuse to follow orders to harm your neighbours.  This is the line drawn in the sand.

Something is not confirmed till government officially denies it

November 26, 2010

Klaus Regling, chief executive officer of the European Financial Stability Facility, said there is no danger the Irish debt crisis will lead to a breakup of the euro, although he called the situation “serious,” Bild Zeitung reported, citing an interview. Regling said the rescue package is big enough for all member states, according to the German newspaper. The EFSF head said neither France nor Italy are at risk, Bild reported. Regling rejected the suggestion that Germany is the “paymaster” of the crisis, according to the newspaper.

OK, so, granted, it is not an official government source making the statement. But Klaus Regling is as close to if not a direct minion of the European government. So good enough for me.

As I have done with Alumnia two years ago, or Barroso more recently or Greece, I will gladly take the other side of this bet. That little government employees should be running around arms aflailing saying that what is a mathematical certainty will not happen means that the final denuement is closer at hand than anyone thinks particularly when they use childish hyperbole such as: “the package is big enough for all member states!!” Really? All member states?

A bon entendeur salut.

Count down to global war

November 25, 2010

Sir Paul Stephenson said his officers had failed to predict the change in mood among demonstrators before the Millbank riot two weeks ago.

Britain’s most senior police officer said the violence, which saw anarchists and students run amok through buildings housing the Conservative Party headquarters illustrated that “the game has changed”.

This is exactly what will lead us into a global war.

As monetary policy has lost traction, social expenditure is being cut right at the time that social costs are rising. Across the West, students, pensioners, the unemployed, the marginally employed and, eventually, even the employed will not be happy with their situation and with the outlook life is presenting them with.

Demonstrations will become gradually more intense and large. Soon, as mobs will be looking for politicians and bankers to lynch, our virtuous leaders will plunge us into a world war.The reason is simple. The West cannot contemplate a revolution in the purportedly civilized and industrialized world. So that when sufficient numbers of people will be angry, hungry and homeless and, simultaneously, the elite will be caught-up in scandal after scandal, revolution is sure to follow.

At that point. We’ll have us a war on our hands.

Germany is asking the bondholders share the pain

November 25, 2010

And that is exactly the lawful, moral and decent thing to do.

From my favorite pinata Ambrose Evans Pritchard (full text with my comments intersperesed throughout):

German plans to push for bondholder haircuts in Europe as soon as next year have triggered a surge in default risk on European bank debt and set off further flight from Spanish, Portuguese and Irish bonds.

“Credit default swaps on Spanish five-year bonds surged to an all-time high of 312 basis points, and reached 510 on Portuguese bonds, after Frankfurter Allgemeine cited a confidential report by the German finance ministry suggesting that Berlin aims to confront creditors with the risk of serious losses two years earlier than feared.

The Markit iTraxx Senior Financials index – the “fear gauge” for banks – jumped to a reading of 158.5, the highest since the mini-panic in the late spring.

“There is a major fear of contagion in the eurozone,” said Gavan Nolan, chief economist at Markit. “If Portugal stays beyond the 500 level for long, that is when the pressure starts to ratchet up, as we saw in Ireland. This whole scenario of burden-sharing for bondholders is scaring people. The plans have been changed so many times, investors don’t know what to believe anymore and are sceptical about promises that senior debt won’t be touched.”

The German document said “collective action clauses” (CAC) should be introduced into all EMU bonds issued from next year. These clauses open the way for creditor haircuts in cases where countries need a rescue.

The planned date is even sooner than the 2013 target announced by EU leaders in October’s summit, which itself came as a nasty shock to the bond markets. It gives the eurozone’s struggling debtors far less time to clear up their public finances. The plans will be aired at the EU summit in December.

Elena Salgado, Spain’s finance minister, warned Germany that the proposal risked making matters worse at a delicate moment. “We don’t think this idea is quite appropriate right now, including after 2013,” she said.

GR: Elena Salgado fears for her position. That is all. The delicate moment she refers to is nothing but public anger slowly rising which, from a political point of view, means that a politician’s position is at stake. Ms. Salgado obviously finds that shutting off the spigot of fiat money simply means she, and her party along with her, will be booted out of power. There are absolutely no other considerations in her line of thinking; certainly there are no fiduciary duty considerations.

Mrs Salgado said there was “an abyss” separating her country from Ireland and Greece. “We have a solid financial sector. Austerity and reforms are producing exactly the results we forecast,” she said, insisting that the country was the victim of a “speculative attack”.

However, iFlow data from the Bank of New York Mellon shows a major withdrawal of foreign funds from Spanish debt markets, mostly coming from “real money” investors. “The flows look rather similar to what we saw in Greece,” said Neil Mellor, the bank’s currency strategist.

GR: I had taken the other side of the bet on this issue a few weeks back. Had the Spanish prime minister taken the bet then, once again, I would be a rich man.

Portugal had the added strain on Wednesday of a near total shutdown of its airports, harbours, trains and buses as unions launched their first general strike in 22 years, protesting against the latest austerity budget and wage cuts of 5pc for public workers.

“Sacrifices by workers is not the way out of the crisis,” said Manuel Carvalho da Silva, of Portugal’s CGTP union, echoing a refrain now heard in a string of European countries.

Jürgen Michels from Citigroup said Germany’s haircut proposals would make it much harder for struggling Club Med states to raise money, risking a self-fulfilling crisis. “Portugal and Spain would be probably forced to tap the current European Financial Stability Facility, which could bring the facility to its limit and even exceed it,” he warned.

Mr Michels said the results would be so destructive that Germany is unlikely to win EU backing for the idea.

However, Chancellor Angela Merkel has already announced that she will “not back down” on demands for creditor pain. In an odd statement this week she said investors had made money “speculating on the bankruptcy of countries” and must now share the burden of rescue costs.

Critics say Mrs Merkel seems unwilling to acknowledge the difference between two vastly different types of players: hedge funds who are “short” eurozone debt and therefore stand to benefit from her policy; and the pension funds, life insurers and savers (many of them German) who bought southern European and Irish debt in good faith and now stand to lose.

GR: Pension funds and life insurers would not have purchased sovereign debt had it not been falsly graded investment grade by the rating agencies. Rating agencies that are working for and are sponsored by the banks I might add. So, having already been duped (very often willingly because of political favor) over the years, now pension and insurance funds should throw even more money after bad? This is a problem created by the politicians with the assistance of the bankers. It is time we cut the funds off to them. Whatever is lost is lost anyway. We should not give them even more.

There is confusion in the markets over how different types of debt will be treated. The Irish government has already enforced an 80pc haircut on the junior debt of Anglo Irish Bank but insists that senior debt is sacrosanct. That guarantee is now worthless since Fianna Fail is certain to lose the election in January.

GR: From the legal point of view there is nothing sacrosanct about senior debt. Quite the contrary. That’s the role they are suppose to play by law; i.e. take the losses. Senior bond holders reap the profits when things go well. They should shoulders the losses when things don’t go well.

Opposition leaders have not clarified how they will handle the issue. However, it is becoming ever harder to explain to the Irish people why they should suffer austerity in order to ensure that foreign holders of damaged Irish bank debt should lose nothing. The country’s Labour Party already favours burden-sharing. The concern is that once Ireland cracks on senior debt, the dam will break across Europe.

Greg Gibbs from RBS said the European Central Bank (ECB) had helped cause the latest eurozone eruption by draining liquidity too soon and signalling that it aimed to end the “addiction” of struggling Irish and Club Med banks to its cheap funding window sooner rather than later.

“This tough stance is reigniting a eurozone debt crisis. The ECB needs to rethink its plans,” he said. The RBS team said the central bank should dramatically increase its purchase of eurozone debt, especially Spanish debt, starting with €100bn sovereign and corporate bonds.

José Luis Martínez Campuzano, Citigroup’s economist in Spain, also faulted the ECB for letting matters get out of hand. “We have a situation where bodies that should be playing a key role are sitting on the sidelines repeating messages that have little to do with reality and the true risks ahead. That is the case with the ECB,” he said.

However, it is unclear whether the ECB has the firepower – or the legal mandate – to carry out the sort of bond purchases seen in the US, where the US government stands behind the Federal Reserve.”

GR: What is clear whether in the US or in Europe is that monetary policy has lost traction. It has been gradually losing traction over many years but it has now pretty much reached the point of least effect if at all. Doing more of the same in the clear absence of a demand driver anywhere in the world only serves to obliterate the currency.


November 23, 2010

Do not give up your sovereignty. More to the point DO NOT GIVE UP YOUR PRODUCTIVE ASSETS!!

At this particular junction, the choice is limited and very well defined.

Either you accept the bailout and ensure that a bunch of bankers are made whole whilst the rest of the population alone shoulders the costs of this debacle.

Or you default and ensure that banks’ bond holders too shoulder the cost of this debacle.

There is pain and hardship in store whatever we do. The least we can do is ensure that bank bondholders share with everyone.

… in an investor note this weekend, Société Générale in Paris, which helps sell Irish sovereign bonds for the government, said there were calls from around Europe for Ireland to stump up “collateral” in return for its bailout loans.

Follow Iceland’s example. Let the banks fail.

You, the Irish people, were our only and last hope against the Lisbon Treaty. Make your stand now against the banks. Let the banks fail.

For those of you that fear that failing banks will result in lost savings and pensions, here is the skinny.

Whatever happens next, social expenditure will be curtailed if not, in some cases, discontinued entirely. Your pension is already compromised.

With regards to savings, whatever savings there may be, bondholders’ capital is largely sufficient to make those up. That is how the dynamic should evolve as contemplated by law. Savers are first in line to be paid back in bankruptcy. Follow bond holders, followed by second lien bond holders and so on and so forth till the shareholders. Shareholders are the first to be wiped out. Bondholders ans savers are last. As was the case for Lehman Brothers, Western banks today have largely sufficient bondholder capital to cover most bankruptcies. Thus savers are covered.

Let the banks fail. Stop fascism in its tracks. We are hurtling towards a global war and you and me will pay the price whilst a select bunch of bank bondholders will sit back and reap the profits.

Let the banks fail.

Is it not enough that during this crisis that has variously been described as the deepest and the most severe since the Great Depression of the 30s, banks have been distributing the richest and most eye popping bonuses in history??

Let the banks fail.

And by the way. We’re only talking here about a handful of banks. It is always the usual suspects. Banks have failed before in history and the world kept turning. Let them fail and force banks to share in the hardship.

NATO must prepare to launch military operations outside its border after Afghanistan!??…

November 19, 2010


Full article with interspersed comments below:

Anders Fogh Rasmussen said alliance members must be willing and able to exercise military power “beyond our borders” to combat threats such as terrorism and missile attacks.

Mr Rasmussen spoke to The Daily Telegraph as Nato members prepared to gather today in Lisbon to plan the future role of the alliance.

Guido here: “to plan the future role of the alliance” – meaning, we’ve gotta find ourselves some wars boys.

After almost a decade of military operations in Afghanistan, some European Nato members have suggested that the alliance should focus on defending its home territory.

By contrast, Britain and the US believe that to remain relevant, Nato must be prepared to tackle potential security threats beyond its members’ borders.

Guido here: If you have a flourishing and expanding armament industry, at some point little backwater inventory wars no longer suffice to absorb your production. So whatchagonna do. Furthermore, since we are at the point where monetary policy is pushing its own mathematical limits, a war is just what the doctor ordered.

Durable Goods Shipments

Mr Rasmussen supported that view, urging alliance members to accept that new security threats may have to be met.

“Our core function will remain territorial defence of our populations,” he said. “But we must realise that in the modern world we have to go beyond our borders to actually protect and defend our borders.”

Guido here: There it is! We must go beyond our borders to protect ourselves. This assertion of course omits to point out that in the particular case of the USA, the UK and France we already are beyond our borders in Africa, the Middle East and throughout Asia and South America.

Afghanistan could serve a template for future threats and Nato’s response to them.

Guido here: Let’s hope not. If Afghanistan is a template of effectiveness, we’re plain fucked! The math says that on a Dolllar per result basis, these presumed troglodites on donky’s back are kicking the shit out of our modern military machine that costs hundreds of Billions to maintain without mentioning the long term medical costs and without mentioning the demoralizing effect on the troops these cave dwellers are having. Some template!

“After the Cold War, we have seen a number of new threats emerge,” he said. “Terrorism is one of them.”

The Lisbon summit will adopt a “strategic concept” or mission statement in a post-Afghanistan world.

“The purpose of the new strategic concept is to prepare the alliance to address the new security challenges – missile attacks, cyber attacks, terrorist attacks,” Mr Rasmussen said.

Guido here: the purpose of the new strategic concept is to find ways to deflect responsibility from our own failed economic and social policies that have brought us to economic gridlock with little chance to come out of it unscathed. A foreign sacrificial lamb will be found and excuses will be built-up to look good.

He also promised that a reform of Nato’s command structures will make alliance forces “more flexible”.

As well as the mission statement, the summit will also consider a European missile defence shield. The shield, based on US interceptor missiles, will rely on British radar stations to detect attacks.

The missile shield is being developed primarily because of fears of Iranian missile programmes, but Mr Rasmussen said other countries could also pose a threat.

“More than 30 countries have missile technology or are aspiring to get missile technology,” he said.

“Some of them can also hit the Euro-Atlantic area.”

Alliance leaders will later confirm a timetable for starting the “transition” of security responsibility from Nato forces to the Afghan government, starting next year and concluding at the end of 2014.

Mr Rasmussen said he was confident that Afghan forces will be ready for that responsibility in time, but accepted that the timetable could slip.

He said: “If conditions are not met fully by the end of 2014, then we will have to continue the combat mission.”

Who do the IMF or the ECB really want to bailout?

November 17, 2010

As the mainstream press appears to steadily if hesitantly move towards a more objective role, the Wall Steet Journal today reports who the real beneficiaries of the bailouts really are.

Not news to us of course.

All told, European banks were sitting on more than $650 billion of exposure to Ireland as of March 31, according to the Bank for International Settlements.”

And there you have it.
Banks are once again trying to skirt their primary legal and fiduciary responsibilities. Banks are businesses. Businesses make strategic decisions in an attempt to earn a profit. When decisions turn out to have been wrong, a business takes the loss or goes bankrupt. It is how it is supposed to work in open free economies.
But in our bank imposed, debt based, fiat monetary system, not only are banks perceived as indispensable to the normal functioning of the system but they have also placed themselves above the law. This would not be such a bad thing if it weren’t for the fact that banks have successfully maneuvered into this position with the ongoing connivance of the political, legislative, judicial and executive framework of presumably sovereign democratic countries.
Hence the reason banks can disregard entire swathes of accounting rules that apply to everyone else. Hence the reason banks enjoy selective legal treatment. Hence the reason banks get fined token amounts in cases where they have clearly and deliberately committed fraud, if not been criminally negligent, as is the case with the ongoing foreclosure debacle that incidentally is in the process of getting “settled” for yet more token amounts and where nobody will go to jail… yet again.
Mathematically, we’ve reached the limits of this monetary system. The upshot of this situation is that debt based fiat money conforms to the law of diminishing marginal utility so that as you reach the mathematical limits of the system, the progression accelerates till it implodes. We are literally 3 to 5 years away from total implosion.
You know my position. This implosion will bring global conflict just because neither our politicians nor, indeed, our electoral political systems are geared towards doing what needs to be done or taking responsibility for a crisis years in the making. Politicians and electoral politics are inherently expedient and short-termist in inspiration and in deed thus guaranteeing immunity from responsibility. A fall-guy will be found, a sacrificial lamb will be slaughtered and a war precipitated.
Ireland like Iceland before it, should tell the banks to go pack fudge. Bank bondholders should be forced to assume their roles as prescribed by law and take the loss. Public funds must no longer be used to safeguard bank’s deliberately reckless behavior. Bondholders must no longer be saved from the scheming ways of their own creation.
Someone has suggested recently that each citizen should buy a silver coin or a silver ingot. You needn’t spend much; less than US$50 will do. But each and every person in the world should buy a small quantity of physical silver either in coin form or in ingot form. Buy it and put it in your pocket; i.e. do not buy a certificate. Buy the real physical item. Whilst you are at it, you can do the same with gold. If every sentient and reasonable person in the world did so, the monetary authorities would be quickly brought under control. Help reason and decency prevail. Buy a little bullion.

A (unwitting) mention of dictatroship…?

November 1, 2010

Our weekly dose of Ambrose Evans Pritchard is, as usual, interesting. But this time, it is interesting in unexpected ways.

Two things jump out. The first and the most stunning for reasons other than economics is this (emphasis added as a hint): “These were the terms imposed by Germany at Friday’s EU summit as the Quid Pro Quo for the creation of a permanent rescue fund in 2013. A [EU] treaty change will be rammed through under Article 48 of the Lisbon Treaty, a trick that circumvents the need for full ratification. Eurosceptics can feel vindicated in warning this “escalator” clause would soon be exploited for unchecked treaty-creep.”

If there ever were any doubts as to what the Lisbon Treaty is, the above should put those to rest. The Lisbon Treaty is the single most dangerous piece of fascist autocratic legislation aimed at the concentration of executive power that has been “passed” on mainland Europe since 1930s Germany.

But we all too numb yet (or still) to realize what is happening.

The other thing that jumped out at me from AEP’s piece today is his comment that: “Chancellor Merkel is ultimately correct. A mechanism for sovereign defaults is entirely healthy. Had it been in place long ago, EMU would have been stronger. The proper timing for this was at the Maastricht Treaty, or Amsterdam, or at the latest Nice, but in those days the EU elites were still arrogantly dismissive about the implications of a currency union. To wait until now borders on careless.”

That’s a bit of a departure for AEP whom till very recently advocated a (not entirely understood by this writer) mix of fiscal austerity with massive stimulus.

You know where I stand.

We’re hurtling towards a world war that is entirely engineered by our leaders as a way to get out of their responsibility for having aided and abetted the arbitrary and unilateral imposition of a monetary system that is limited mathematically and that, in its ending phase, is inherently destructive but that in the intervening period ensures an albeit diminishing degree of financial independence to the politicians that are willing to offer the most recklessly costly programs to the electorate.

War by 2012 / 2015