sabato 30 aprile 2011

Hanky-Panky at the Fed

Weekend Edition
ZeroHedge, April 29 - May 1, 2011

Hanky-Panky at the Fed

Grand Theft Benny

By MIKE WHITNEY

It's the biggest flim-flam in the nation's history. But, thanks to the Congressional Research Service, the scam has been exposed and the public can now get a good look at the type of swindle that passes as monetary policy.

Here's the scoop: When Fed chairman Ben Bernanke initiated the first round of Quantitative Easing (QE), the stated goal was to revive the flagging housing market by purchasing $1.25 trillion in mortgage-backed securities (MBS) from the country's biggest banks. The policy was a ripoff from the get-go. No one wanted these mortgage stinkbombs that were stitched together from subprime loans to unqualified applicants. But because the banks were already busted--and because the $700 billion TARP was barely enough to keep the ventilator running until the next bailout came through-- the Fed helped to conceal its real objectives behind an elaborate PR smokescreen. In truth, the Fed must have colluded with the banks to move the toxic assets off their books (and onto the Fed's balance sheet) with the proviso that the banks withhold foreclosed homes from the market.

By keeping the extra homes off-market, supply went down, demand went up (slightly), and housing showed signs of a rebound. The withholding of supply was synchronized with the Firsttime Homebuyers credit, which provided an $8,000 subsidy to new home buyers. This pumped up housing sales and further concealed what was really taking place, which was a gigantic transfer of public wealth to the banks in exchange for putrid assets that no one wanted. Naturally, the process kept the market from correcting and added vast numbers of foreclosed homes to the shadow inventory.

During this same period, the Fed worked out an agreement with Congress to pay the banks interest on the reserves it created at the banks. (Note: The MBS were exchanged for reserves) At the time, many experts questioned the wisdom of the Fed's plan saying that the reserves would not lead to another credit expansion. And they were right, too. In fact, it didn't stop the slide in housing either which resumed with gusto as soon as QE ended and the banks started dumping more foreclosed homes onto the market.

So, why would the Fed add more than a trillion dollars in reserves to the banking system if it really served no earthly purpose? Was it just so the banks would be able to earn interest on those reserves? Surely, that wouldn't be nearly enough to remove the ocean of red ink on their balance sheets. So, what was Bernanke really up to?

On Tuesday, Senator Bernie Sanders office released a CRS report titled "Banks Play Shell Game with Taxpayer Dollars" that sheds a bit light on the shady ways the Fed conducts its business. Sanders "found numerous instances during the financial crisis of 2008 and 2009 when banks took near zero-interest funds from the Federal Reserve and then loaned money back to the federal government on sweetheart terms for the banks."

So, now we have irrefutable proof that the Fed was simply handing out money to the banks. More importantly, the report shows that this was not just a few isolated incidents, but a pattern of abuse that increased as the needs of the banks became more pressing. In other words, giving away money became policy. Is it any wonder why the Fed has fought so ferociously to prevent an audit of its books?

From Sander's report: "The banks pocketed interest on government securities that paid rates up to 12 times greater than the Fed’s rock bottom interest charges, according to a Congressional Research Service analysis conducted for Sanders."

Are you kidding me; 12 times more than what the Fed was getting in return?

That's larceny, my friend. Grand larceny.

More from the Sanders report: “This report confirms that ultra-low interest loans provided by the Federal Reserve during the financial crisis turned out to be direct corporate welfare to big banks,” Sanders said. “Instead of using the Fed loans to reinvest in the economy, some of the largest financial institutions in this country appear to have lent this money back to the federal government at a higher rate of interest by purchasing U.S. government securities.”

And, what they didn't lend back to Uncle Sam at a hefty rate of interest, they plunked into equities to ignite Bernanke's Stock Market Blastoff, the final phase of bubblemania.

So, let's use an analogy to explain what the Fed was doing: Imagine that you provide your son, Kirby, with a weekly allowance of $50. And Kirby--showing an uncanny aptitude for career banking--says, "Dad, I'd like to loan this money back to you at 10 per cent per annum." Would that be a good deal for you, Dad, or would dearest Kirby be taking you to the cleaners?

That's what Bernanke was doing "at rates up to 12 times greater than the Fed’s rock bottom interest charges." So the question is, if Bernanke was already involved in this type of hanky-panky, what would keep him from raising the stakes a bit and really putting his friends back in the clover? Honor? Integrity?

Not likely.

What I'd like to know is whether the Fed has been creating reserves at the banks, reserves that the banks have then converted into government bonds (USTs) and sold back to the Fed during QE2? In other words, is this another circular trade (like we see in the Sanders report) whose only purpose is to funnel more money to the banks?

And--if that's NOT the case-- then where did the banks come up with $600 billion in US Treasuries that they just sold to the Fed? After all, in testimony before the Financial Crisis Inquiry Commission (FCIC), Bernanke admitted that 12 of the 13 biggest banks in the country were underwater after Lehman Brothers defaulted. If that's true, then where did they get the $600 billion in Treasuries?

It's not a question of whether the Fed has been abusing its power. It's just a matter of "how much".

Mike Whitney lives in Washington state.

France Telecom: nuovo suicidio

IL MANIFESTO BLOG
Dal roquefort alla fusée Ariane, notizie da Parigi a cura di Anna Maria Merlo
France Telecom: nuovo suicidio
  • Ci sono state due manifestazioni, oggi, per ricordare Rémy L., 57 anni, una nel centro di Bordeaux, di fronte alla sede locale di France Telecom dove lavorava da circa un anno e un’altra a Mérignac, nel parcheggio degli uffici della società di telecom, dove aveva avuto l’ultimo posto fisso e dove si è ucciso, martedi’ alle 7 del mattino, immolandosi con il fuoco. Stéphane Richard, l’ad di France Telecom dal marzo 2010, ha promesso “un’inchiesta minuziosa e trasparente” sulle ragioni del suicidio di Rémy. “Se verranno messe in evidenza delle responsabilità dell’impresa – ha precisato – ne trarro’ tutte le conseguenze, in particolare per cio’ che concerne il riconoscimento di questo dramma come incidente sul lavoro”.

    Rémy L. era sposato, aveva 4 figli. Dal 2000 al 2007 aveva lavorato nella sede di France Telecom di Mérignac, non lontano da Bordeaux. Era militante della Cfdt. Ma nel 2007 il suo posto di controllore di gestione era stato soppresso. Rémy, che deve tener conto della vita di famiglia, rifiuta di essere trasferito lontano. In tre anni, sarà spostato varie volte di luogo di lavoro, obbligato a cambiare missione. L’ultimo posto era a Bordeaux, dove lavorava nella prevenzione “sicurezza-igiene-ambiente”. L’aveva chiesto lui, sembrava contento, dicono i colleghi del sindacato, che sottolineano pero’ che era “deluso”: con il nuovo ad, che aveva sostituito Didier Lombard spinto alle dimissioni in seguito all’ondata di suicidi degli anni 2008-2010, erano stati firmati degli accordi nazionali per prevenire i rischi psico-sociali dei dipendenti, ma poi, nella realtà, erano di difficile applicazione. Per tre anni, Rémy era stato preso nel turbine del management feroce di Lombard, “aveva cambiato servizio, mestiere, passando da contabile a commerciale”. Poi nell’ultimo anno di era occupato di seguire impiegati come lui, che avevano sofferto per i metodi cinici della direzione dell’azienda. Sul terreno, aveva constatato che, malgrado le promesse, i dipendenti erano sottoposti alle stesse cadenze di prima, agli stessi sistemi di controllo.

    Rémy non ha lasciato nessuna spiegazione scritta del suo gesto. Ma il luogo scelto per il drammatico suicidio parla da solo: il parcheggio dell’ultimo posto di lavoro fisso che aveva avuto. Secondo la psichiatra Brigitte Font Le Bret, che ha seguito molti dipendenti di France Telecom in situazione di sofferenza sul lavoro, la scelta del luogo ha voluto dire “agli altri che il suo atto aveva un legame con il lavoro”. La psichiatra si è interessata in particolare alla sofferenza sul lavoro dei dipendenti di France Telecom di più di 50 anni, travolti dai metodi di management brutali introdotti da Didier Lombard e che proseguono in parte con Richard. Molti erano tecnici di una tecnologia che sta scomparendo (le centraline, le reti di telefoni fissi) e sono stati trasferiti nel settore commerciale, a vendere telefonini, quindi si sono sentiti devalorizzati e inadatti. In più, questa fascia di età, oltre ad essere stata vittima dei cambiamenti di gestione, ha avuto la brutta sorpresa della riforma delle pensioni di Sarkozy dell’autunno 2010, che allunga gli anni di lavoro.

di Anna Maria
pubblicato il 27 aprile 2011
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Un Commento a “France Telecom: nuovo suicidio”

  1. Valter Di Nunzio Scrive:

    Il vero problema sottostante a queste tragedie umane, come sottolinea l’articolo, è l’enorme transizione tecnologica dell’ultimo ventennio. La convergenza di fonia fissa, fonia cellulare e televisione sulla rete digitale è resa sempre più efficiente da nuovi protocolli che riescono a riutilizzare le enormi reti telefoniche urbane in rame per trasmettere quantità di dati molto superiori anche al VDSL2 in uso in Francia dal 2005 e ADSL in uso in Italia, tagliando ovviamente fuori grandissime quote di lavoratori specializzati. Questo segnala l’enorme ritardo della politica politicante dei nostri Paesi, che straparla ancora delle telecomunicazioni e della telematica come settori emergenti, con relative scemenze suicide sulle privatizzazioni – il caso Italia è da manuale-, mentre si tratta di settori più che maturi, che devono affrontare il problema drammatico degli esuberi, esattamentecome come è stato negli ’80 per la siderurgia e negli anni ’90 per l’auto.
    La cosa veramente irritante è che non solo non ci sono piani industriali per questi settori, ma neppure c’è dibattito e informazione, salvo poi ricordarsene in circostanze tragiche come queste, scrollare le spalle e dare la colpa al mercato.

Financial Heist of the Century

Financial Heist of the Century: Confiscating Libya's Sovereign Wealth Funds (SWF)


Global Research, April 24, 2011
Il Manifesto (translated from Italian) - 2011-04-22


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The objective of the war against Libya is not just its oil reserves (now estimated at 60 billion barrels), which are the greatest in Africa and whose extraction costs are among the lowest in the world, nor the natural gas reserves of which are estimated at about 1,500 billion cubic meters. In the crosshairs of "willing" of the operation “Unified Protector” there are sovereign wealth funds, capital that the Libyan state has invested abroad.

The Libyan Investment Authority (LIA) manages sovereign wealth funds estimated at about $70 billion U.S., rising to more than $150 billion if you include foreign investments of the Central Bank and other bodies. But it might be more. Even if they are lower than those of Saudi Arabia or Kuwait, Libyan sovereign wealth funds have been characterized by their rapid growth. When LIA was established in 2006, it had $40 billion at its disposal. In just five years, LIA has invested over one hundred companies in North Africa, Asia, Europe, the U.S. and South America: holding, banking, real estate, industries, oil companies and others.

In Italy, the main Libyan investments are those in UniCredit Bank (of which LIA and the Libyan Central Bank hold 7.5 percent), Finmeccanica (2 percent) and ENI (1 percent), these and other investments (including 7.5 percent of the Juventus Football Club) have a significance not as much economically (they amount to some $5.4 billion) as politically.

Libya, after Washington removed it from the blacklist of “rogue states,” has sought to carve out a space at the international level focusing on "diplomacy of sovereign wealth funds." Once the U.S. and the EU lifted the embargo in 2004 and the big oil companies returned to the country, Tripoli was able to maintain a trade surplus of about $30 billion per year which was used largely to make foreign investments. The management of sovereign funds has however created a new mechanism of power and corruption in the hands of ministers and senior officials, which probably in part escaped the control of the Gadhafi himself: This is confirmed by the fact that, in 2009, he proposed that the 30 billion in oil revenues go "directly to the Libyan people." This aggravated the fractures within the Libyan government.

U.S. and European ruling circles focused on these funds, so that before carrying out a military attack on Libya to get their hands on its energy wealth, they took over the Libyan sovereign wealth funds. Facilitating this operation is the representative of the Libyan Investment Authority, Mohamed Layas himself: as revealed in a cable published by WikiLeaks. On January 20 Layas informed the U.S. ambassador in Tripoli that LIA had deposited $32 billion in U.S. banks. Five weeks later, on February 28, the U.S. Treasury “froze” these accounts. According to official statements, this is "the largest sum ever blocked in the United States," which Washington held "in trust for the future of Libya." It will in fact serve as an injection of capital into the U.S. economy, which is more and more in debt. A few days later, the EU "froze" around 45 billion Euros of Libyan funds.

The assault on the Libyan sovereign wealth funds will have a particularly strong impact in Africa. There, the Libyan Arab African Investment Company had invested in over 25 countries, 22 of them in sub-Saharan Africa, and was planning to increase the investments over the next five years, especially in mining, manufacturing, tourism and telecommunications. The Libyan investments have been crucial in the implementation of the first telecommunications satellite Rascom (Regional African Satellite Communications Organization), which entered into orbit in August 2010, allowing African countries to begin to become independent from the U.S. and European satellite networks, with an annual savings of hundreds of millions of dollars.

Even more important were the Libyan investment in the implementation of three financial institutions launched by the African Union: the African Investment Bank, based in Tripoli, the African Monetary Fund, based in Yaoundé (Cameroon), the African Central Bank, with Based in Abuja (Nigeria). The development of these bodies would enable African countries to escape the control of the World Bank and International Monetary Fund, tools of neo-colonial domination, and would mark the end of the CFA franc, the currency that 14 former French colonies are forced to use. Freezing Libyan funds deals a strong blow to the entire project. The weapons used by "the willing" are not only those in the military action called “Unified Protector.”

Il Manifesto, April 22, 2011

Translated from Italian by John Catalinotto

venerdì 29 aprile 2011

The TRUTH about the disastrous EURO currency

UKIP Nigel Farage - The TRUTH about the disastrous EURO currency

Tout Clearstream

À paraître

Tout Clearstream

Denis Robert

LA TRILOGIE CLEARSTREAM FAIT ENTRER LE LECTEUR DANS LES ARCANES DE LA FINANCE OCCULTE CETTE HISTOIRE PEUT PARAÎTRE EXTRAORDINAIRE : ELLE L’EST
Crée au début des années 70, Clearstream est une société chargée de faire transiter des fonds et des valeurs sur toute la planète. Ces flux représentent des trillions d’euros. Leur particularité est d’être pour une part totalement transparents, et pour une autre parfaitement opaques.
CLEARSTREAM : UNE MULTINATIONALE AUX ACTIVITÉS INAVOUABLES
Dissimulations de compte au nom d’institutions honorables, blanc seing donné à des établissements mafieux, ramifications innombrables, circuits de blanchiment de narco dollars, rétrocommissions, Clearstream concentre toute la folie financière de notre époque.
LE JOURNALISME À LA POINTE DU COMBAT : UNE ENQUÊTE DEVENUE RÉFÉRENCE
Pendant des années, Denis Robert a enquêté, dépouillé des listing, remonté des filières et découvert la face cachée d’un véritable empire. Il a aussi payé de sa personne un acharnement judiciaire sans précédent. La justice vient de lui donner raison. Les lecteurs vont pouvoir enfin découvrir un travail aussi passionnant que vertigineux.

INFOS LIVRE

Titre : tout clearstream
Auteur : Denis Robert
Date de publication : 6 mai 2011

Nombre de pages : 715
Format : 15,5 x 24 cm
Genre : Enquête
Prix : 24,80 €

ISBN : 9782352041542
Code diffuseur : 7244081

Libya: It’s Not About Oil, It’s About Currency and Loans

Libya: It’s Not About Oil, It’s About Currency and Loans

By John Perkins


WASHINGTON -(Dow Jones)- World Bank President Robert Zoellick Thursday said he hopes the institution will have a role rebuilding Libya as it emerges from current unrest.

Zoellick at a panel discussion noted the bank's early role in the reconstruction of France, Japan and other nations after World War II.

"Reconstruction now means (Ivory Coast), it means southern Sudan, it means Liberia, it means Sri Lanka, I hope it will mean Libya," Zoellick said.

On Ivory Coast, Zoellick said he hoped that within "a couple weeks" the bank would move forward with "some hundred millions of dollars of emergency support."( By Jeffrey Sparshott, Of DOW JONES NEWSWIRES –full article here - http://tinyurl.com/3hj8yyp .)

We listen to U.S. spokespeople try to explain why we’re suddenly now entangled in another Middle East war. Many of us find ourselves questioning the official justifications. We are aware that the true causes of our engagement are rarely discussed in the media or by our government.

While many of the rationalizations describe resources, especially oil, as the reasons why we should be in that country, there are also an increasing number of dissenting voices. For the most part, these revolve around Libya’s financial relationship with the World Bank, International Monetary Fund (IMF), the Bank for International Settlements (BIS), and multinational corporations.

According to the IMF, Libya’s Central Bank is 100% state owned. The IMF estimates that the bank has nearly 144 tons of gold in its vaults. It is significant that in the months running up to the UN resolution that allowed the US and its allies to send troops into Libya, Muammar al-Qaddafi was openly advocating the creation of a new currency that would rival the dollar and the euro. In fact, he called upon African and Muslim nations to join an alliance that would make this new currency, the gold dinar, their primary form of money and foreign exchange. They would sell oil and other resources to the US and the rest of the world only for gold dinars.

The US, the other G-8 countries, the World bank, IMF, BIS, and multinational corporations do not look kindly on leaders who threaten their dominance over world currency markets or who appear to be moving away from the international banking system that favors the corporatocracy. Saddam Hussein had advocated policies similar to those expressed by Qaddafi shortly before the US sent troops into Iraq.

In my talks, I often find it necessary to remind audiences of a point that seems obvious to me but is misunderstood by so many: that the World Bank is not really a world bank at all; it is, rather a U. S. bank. Ditto, its closest sibling, the IMF. In fact, if one looks at the World Bank and IMF utive boards and the votes each member of the board has, one sees that the United States controls about 16 percent of the votes in the World Bank (Compared with Japan at about 7%, the second largest member, Germany with 4%, at third place, and the United Kingdom and France with about 3.8% each, tied for fourth place ), nearly 17% of the IMF votes (Compared with Japan and Germany at about 6% and UK and France at nearly 5%), and the US holds veto power over all major decisions. Furthermore, the United States President appoints the World Bank President.

So, we might ask ourselves: What happens when a “rogue” country threatens to bring the banking system that benefits the corporatocracy to its knees? What happens to an “empire” when it can no longer effectively be overtly imperialistic?

One definition of “Empire” (per my book The Secret History of the American Empire) states that an empire is a nation that dominates other nations by imposing its own currency on the lands under its control. The empire maintains a large standing military that is ready to protect the currency and the entire economic system that depends on it through extreme violence, if necessary. The ancient Romans did this. So did the Spanish and the British during their days of empire-building. Now, the US (NdR: Like when during the Italian occupation in WWII using AM-LIRE) or, more to the point, the corporatocracy, is doing it and is determined to punish any individual who tries to stop them. Qaddafi is but the latest example.

Understanding the war against Quaddafi as a war in defense of empire is another step in the direction of helping us ask ourselves whether we want to continue along this path of empire-building. Or do we instead want to honor the democratic principles we are taught to believe are the foundations of our country?

History teaches that empires do not endure; they collapse or are overthrown. Wars ensue and another empire fills the vacuum. The past sends a compelling message. We must change. We cannot afford to watch history repeat itself.

Let us not allow this empire to collapse and be replaced by another. Instead, let us all vow to create a new consciousness. Let the grass-roots movements in the Middle East – fostered by the young who must live with the future and are fueled through social networks – inspire us to demand that our country, our financial institutions and the corporations that depend on us to buy their goods and services commit themselves to fashioning a world that is sustainable, just, peaceful, and prosperous for all.

We stand at the threshold. It is time for you and me to step across that threshold, to move out of the dark void of brutal exploitation and greed into the light of compassion and cooperation.

John Perkins

Visit us anytime on the web at www.dreamchange.org

Le Revenu de Base, un système viable?

Le Revenu de Base, un système viable? (1/7)


Le Revenu de Base, un système viable? (2/7)


Le Revenu de Base, un système viable? (3/7)


Le Revenu de Base, un système viable? (4/7)


Le Revenu de Base, un système viable? (5/7)


Le Revenu de Base, un système viable? (6/7)


Le Revenu de Base, un système viable? (7/7)

giovedì 28 aprile 2011

News stories related to the World Bank and IMF

A selection of news stories related to the World Bank and IMF, brought to you by the Bretton Woods Project:


Why IMF advice finds no takers
by Ashoak Upadhyay
http://www.thehindubusinessline.com/opinion/columns/ashoak-upadhyay/article1764084.ece
Hindu Business Line, 25 April 2011

Dirty loans and dirty hands: is the World Bank fit to serve?
http://www.huffingtonpost.com/rebecca-harris/dirty-loans-and-dirty-han_b_852565..html
Huffington Post, 25 April 2011

Portugal: Commemoration of revolution turns into protest against IMF
http://ipsnews.net/newsTVE.asp?idnews=55385
IPS, 25 April 2011

Time for a change in the IMF, World Bank leadership
http://www.jamaicaobserver.com/editorial/Time-for-a-change-in-the-IMF--World-Bank-leadership
Jamaica Observer, 24 April 2011

Arab uprisings show the impact of the World Bank and the IMF
http://www.whistleblower.org/blog/31-2010/1083-arab-uprisings-show-the-impact-of-the-world-bank-and-the-imf
GAP, 22 April 2011

The World Bank and IMF wish you a (bumpy) global economic recovery at the Spring Meetings
http://www.eurodad.org/whatsnew/articles.aspx?id=4476
Eurodad, 21 April 2011

World Bank faults itself for slow progress in East Timor
http://www.nytimes.com/2011/04/22/world/asia/22iht-timor22.html?_r=2&ref=asia
New York Times, 21 April 2011

Emerging markets clash with anachronistic institutions
http://ipsnews.net/news.asp?idnews=55284
IPS, 16 April 2011

DEFICITS DON'T MATTER

CHENEY WAS RIGHT ABOUT ONE THING: DEFICITS DON'T MATTER

opednews.com - Promoted to Headline (H3) on 4/27/11


"Deficit terrorists" are gutting governments and forcing the privatization of public assets, all in the name of "deficit reduction." But deficits aren't actually a bad thing. In today's monetary scheme, in which most money comes from debt, debt and deficits are actually necessary to have a stable money supply. The public debt is the people's money.

Former Vice President Dick Cheney famously said, "Deficits don't matter." A staunch Republican, he was arguing against raising taxes on the rich; but today Republicans seem to have forgotten this maxim. They are bent on stripping social programs, privatizing public assets, and gutting unions, all in the name of "deficit reduction."

Worse, Standard & Poor's has now taken up the hatchet. Some bloggers are calling it blackmail. This private, for-profit rating agency, with a dubious track record of its own, is dictating government policy, threatening to downgrade the government's long-held triple AAA credit rating if Congress fails to deal with its deficit in sufficiently draconian fashion. The threat is a real one, as we've seen with the devastating effects of downgrades in Greece, Ireland and other struggling countries. Lowered credit ratings force up interest rates and cripple national budgets.

The biggest threat to the dollar's credit rating, however, may be the game of chicken being played with the federal debt ceiling. Nearly 70 percent of Americans are said to be in favor of a freeze on May 16, when the ceiling is due to be raised; and Tea Party-oriented politicians could go along with this scheme to please their constituents.

If they get what they wish for, the party could be over for the whole economy. The Chinese are dumping U.S. Treasuries, and the Fed is backing off from its "quantitative easing" program, in which it has been buying federal securities with money simply created on its books. When the Fed buys Treasuries, the government gets the money nearly interest-free, since the Fed rebates its profits to the government after deducting its costs. When the Chinese and the Fed quit buying Treasuries, interest rates are liable to shoot up; and with a frozen debt ceiling, the government would have to default, since any interest increase on a $14 trillion debt would be a major expenditure. Today the Treasury is paying a very low .25% on securities of 9 months or less, and interest on the whole debt is about 3% (a total of $414 billion on a debt of $14 trillion in 2010). Greece is paying 4.5% on its debt, and Venezuela is paying 18% -- six times the 3% we're paying on ours. Interest at 18% would add $2 trillion to our tax bill. That would mean paying three times what we're paying now in personal income taxes (projected to be a total of $956 billion in 2011), just to cover the interest.

There are other alternatives. Congress could cut the military budget -- but it probably won't, since this option is never even discussed. It could raise taxes on the rich, but that probably won't happen either. A third option is to slash government services. But which services? How about social security? Do you really want to see Grandma panhandling? Congress can't agree on a budget for good reason: there is no good place to cut.

Fortunately, there is a more satisfactory solution. We can sit back, relax, and concede that Cheney was right. Deficits aren't necessarily a bad thing! They don't matter, so long as they are at very low interest rates; and they can be kept at these very low rates either by maintaining our triple A credit rating or by borrowing from the Fed essentially interest-free.

The Yin and Yang of Money

Under our current monetary scheme, debt and deficits not only don't matter but are actually necessary in order to maintain a stable money supply. The reason wa s explained by Marriner Eccles, Governor of the Federal Reserve Board, in hearings before the House Committee on Banking and Currency in 1941. Wright Patman asked Eccles how the Federal Reserve got the money to buy government bonds.

"We created it," Eccles replied.

"Out of what?"

"Out of the right to issue credit money."

"And there is nothing behind it, is the �re, except our government's credit?"

"That is what our money system is," Eccles replied. "If there were no debts in our money system, there wouldn't be any money."

That could explain why the U.S. debt hasn't been paid off since 1835. It has just continued to grow, and the economy has grown and flourished along with it. A debt that is never paid off isn't really a debt. Financial planner Mark Pash calls it a National Monetization Account . Government bonds (or debt) are "monetized" (or turned into money). Government bonds and dollar bills are the yin and yang of the money supply, the negative and positive sides of the national balance sheet. To have a plus-1 on one side of the balance sheet, a minus-1 needs to be created on the other.


DEBT TO GDP by WIKIPEDIA

Except for coins, all of the money in the U.S. money supply now gets into circulation as a debt to a bank (including the Federal Reserve, the central bank). But private l oans zero out when they are repaid. In order to keep the money supply fairly constant, some major player has to incur debt that never gets paid back; and this role is played by the federal government.

That explains the need for a federal debt, but what about the "deficit" (the amount the debt has to increase to meet the federal budget)? Under the current monetary scheme, deficits are also necessary to avoid recessions.

Here is why. Private banks always lend at interest, so more money is always owed back than was created in the first place. In fact investors of all sorts expect more money back than they paid. That means the debt needs to be not only maintained but expanded to keep the economy functioning. When the Fed "takes away the punch bowl" by tightening credit, there is insufficient money to pay off debts; people and businesses go into default; and the economy spins into a recession or depression.

Maintaining a deficit is particularly important when the private lending market collapses, as it did in 2008 and 2009. Then debt drops off and so does the money supply. Too little money is available to buy the goods on the market, so businesses shut down and workers get laid off, further reducing demand, precipitating a recession. To reverse this deflationary cycle, the government needs to step in with additional public debt to fill the breach.

Debt and Productivity

The U.S. f ederal debt that is setting off alarm bells today is about 60% of GDP, but it has been much higher than that. It was 120% of GDP during World War II, which turned out to be our most productive period ever. The U.S. built the machinery and infrastructure that set the nation up to lead the world in productivity for the next half century. We, the children and grandchildren of that era, were not saddled with a crippling debt but lived quite well for the next half century. The debt-to-GDP ratio got much lower after the war, not because people sacrificed to pay back the debt, but because the country got so productive that GDP rose to meet it. (See charts.)

That could explain the anomaly of Japan, the global leader today in deficit spending. In a CIA Factbook list of debt to GDP ratios of 132 countries in 2010, Japan topped the list at 226%. So how has it managed to retain its status as the world's third largest economy? Its debt has not crippled its economy because :

(a) the debt is at very low interest rates;

(b) it is owed to the people themselves, not to the IMF or other foreign creditors; and

(c) the money created by the debt has been used to produce goods and services, allowing supply and demand to increase together and prices to remain stable.

The Japanese economy has been called "stagnant," but according to a review by Robert Locke, this is because the Japanese aren't aiming for growth. They are aiming for sustainability and a high standard of living. They have replaced quantity of goods with quality of life. Locke wrote in 2004:

"Contrary to popular belief, Japan has been doing very well lately, despite the interests that wish to depict her as an economic mess. The illusion of her failure is used by globalists and other neoliberals to discourage Westerners, particularly Americans, from even caring about Japan's economic policies, let alone learning from them. [And] it has been encouraged by the Japanese government as a way to get foreigners to stop pressing for changes in its neo-mercantilist trade policies."

The Japanese economy was doing very well until 1988, when the Bank for International Settlements raised bank capital requirements. The Japanese banks then tightened credit and lent only to the most creditworthy borrowers. Private debt fell off and so did the money supply, collapsing the stock market and the housing bubble. The Japanese government then started spending, and it got the money by borrowing; but it borrowed mainly from its own government-owned banks. The largest holder of its federal debt is Japan Post Bank, a 100% government-owned commercial bank that is now the largest depository bank in the world. The Bank of Japan, the nation's government-owned central bank, also funds the government's debt. Interest rates have been lowered to nearly zero, so the debt costs the government almost nothing and can be rolled over indefinitely.

Japan's economy remains viable although its debt-to-GDP ratio is nearly four times that of the United States, because the money does not leave the country to pay off foreign creditors. Rather, it is recycled into the Japanese economy. As economist Hazel Henderson points out, Japan's debt is twice its GDP only because of an anomaly in how GDP is calculated: it omits government-provided services. If they were included, Japan's GDP would be much higher and its debt to GDP ratio would be more in line with other countries.' Investments in e ducation, health care, and social security may not count as "sales," but they improve both the standard of living of the people and national productivity. Businesses that don't have to pay for health care can be more profitable and competitive internationally. Families that don't have to save hundreds of thousands of dollars to put their children through college can spend on better housing, more vacations, and other consumer items.

Turning the National Debt into a Public Utility

Locke calls the Japanese model " a capitalist economy with socialized capital markets." The national debt has been "monetized" � turned into the national money supply. The credit of the nation has been turned into a public utility.

Thomas Hoenig, President of the Kansas City Federal Reserve, maintains that the largest U.S. banks should be put in that category as well. At the National Association of Attorneys General conference on April 12, he said that the 2008 bank bailouts and other implicit guarantees effectively make the too-big-to-fail banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac. He said they should be restricted to commercial banking and barred from investment banking.

"You're a public utility, for crying out loud," he said.

The direct way for the government to fund its budget would have been to simply print the money debt-free. Wright Patman, chairman of the House Banking and Currency Committee in the 1960s, wrote:

"When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. . . . [I]t is absolutely wrong for the Government to issue interest-bearing obligations. . . . It is absolutely unnecessary."

But that is the system that we have. Deficits don't matter in this scheme, but the interest does. If we want to keep the interest tab very low, we need to follow the Japanese and borrow the money from ourselves through our own government-owned banks, essentially interest-free. "The full faith and credit of the United States" needs to be recognized and dispensed as a public utility.


Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. She has written eleven books, including WEB OF DEBT: THE SHOCKING TRUTH ABOUT OUR MONEY SYSTEM AND HOW WE CAN BREAK FREE, http://www.webofdebt.com. Her other books are at http://www.ellenbrown.com.

La Via del denaro: La banca d'Italia, il signoraggio e il nuovo ordine mondiale

La Via del denaro: La banca d'Italia, il signoraggio e il nuovo ordine mondiale


Dopo un lungo periodo di gestazione, è finalmente pronto il nuovo libro di Salvatore Tamburro "La Via del denaro: La banca d'Italia, il signoraggio e il nuovo ordine mondiale" edito da Nexus.

Siamo quindi lieti di invitarVi alla prima conferenza di presentazione che si terrà Venerdì 29 Aprile alle ore 21:30 presso la Sede dell'associazione culturale Altrostile in Via Michelangelo da Caravaggio, 5 a Grassobbio (BG) (vedi locandina allegata)

In questa sede, il grande Paolo Bogni (coordinatore del sito http://www.facebook.com/l/a780642zg1R6KrYvHdEYL6SX3AQ/Anticapitalismo.it), presenterà il libro e affronterà lo scottante problema del Signoraggio Bancario con il quale una èlite globale cerca di manipolare le politiche dei singoli Stati allo scopo di realizzare un'economia globale, sotto una specie di dittatura globale, con un unico esercito e un'unica moneta.

E' importante conoscere queste problematiche, spero quindi che parteciperete numerosi e che inoltrete l'invito ai Vs. contatti.

Grazie x l'attenzione

Unhappy with Obama budget plan ?

Unhappy with Obama budget plan ?

martedì 26 aprile 2011

IMF-Fed Takeover is Actually Implementation of Basel III

Dutch bank chief wins over US on new rules. IMF-Fed Takeover is Actually Implementation of Basel III

http://www.rumormillnews.com/cgi-bin/forum.cgi?read=203033
by CGI admin, provided to Vatic Project by VK Durham, Rumormills News
25-Apr-2011

But what else would you expect from our crooked politicians?

17 April, 2011 - 14:33

The US is committed to implementing new international agreements for banks, according to the president of the Dutch central bank, Nout Wellink. The bank’s chief made his comments on Saturday in Washington at the end of spring talks of the World Bank and the International Monetary Fund (IMF).

US Treasury Secretary Timothy Geithner (VN: Traitor par excellence, a dead man once arrested and convicted) announced at the meeting of international bankers that the US had agreed ( VN: the truth is we did not agree to anything, Geithner the traitor and economic hitman for Rothschild and the Khazars, agree to it, no one else in this country agreed to anything..... LOOKS LIKE BOYCOTTING BIG BANKS IS THE NEXT STEP) to conform to the rules laid down in the so-called Basel III framework which was endorsed in November 2010. The Basel Committee was set up to foster international cooperation on banking supervision, but there were still many gaps in the implementation part of the accord. “If the Americans don’t cooperate, many other people will ask the question why they should have to,” said Mr Wellink, also chairman of the Basel Committee.

Banks object to capital hold (VN: Oh, I am sure they do, but not to worry, they own the globe now, they will do a dance for our consumption and get what they want anyway)

The biggest stumbling block in adopting the Basel III agreement relates to greater demands on capital ratios. The banks claim that these conditions will adversely affect profit margins. Banks will have to hold much more capital to prevent a repeat of the financial crisis. Besides increasing their core capital ratios, they will be forced to carry a further capital conservation buffer. Any bank that doesn’t meet these requirements could possibly be banned from paying out dividends to shareholders until the balancing sheets have improved.

“We have agreed to keep our heads and view it all in perspective,” continued Mr Wellink, “The introductory period of the new rules has been phased, which gives space for new resistance. But we will not allow this to deter us.” US commitment is crucial this time round, given that the Americans did not fully implement Basel II. “But Geithner has made it very clear that the situation is entirely different now. US Congress wants to go even further than Basel III on a number of points,” said Mr Wellink.

Crisis may not be over yet
The spring talks were attended by IMF Managing Director Dominique Strauss-Kahn, US Central Federal Reserve Chairman Ben Bernanke, his German counterpart Axel Weber and Italian Financial Stability Board Chairman Mario Draghi.

On the sidelines of the Bank-IMF meetings, the Group of 20 advanced and emerging economies moved to take on "imbalances" like European debt, Washington's multiple deficits, and, on the other side, China's huge trade surplus. The G20 countries, whose finance chiefs held talks ahead of the bank meetings, have pledged to make progress in their banking practices.

The president of the World Bank, Robert Zoellink, also warned that the global economy was “one shock away from a full-blown crisis” and said that a worsening of conditions in the Middle East and Africa “could derail global growth.”

http://m.rnw.nl/english/node/40689

Veltroni su signoraggio e Bilderberg

Veltroni su signoraggio e Bilderberg
intervista di LO SAI Arezzo


PAYPAL... se lo conosci lo eviti !!!

PAYPAL... se lo conosci lo eviti !!!
(Come una società "leader" si frega i soldi dei conti dei clienti italiani e la fa franca perché ha la sede in uno sgabuzzino nel Lussemburgo...)

4 video con le disavventure di Daniele Penna









Con eBay ormai sempre più in calo grazie alle politiche della Casa Madre e, forse, alla inettitudine della dirigenza italiana ( quella poca che è rimasta considerando che hanno licenziato quasi tutti) pare che ora, anche l’altra società del gruppo voglia seguire le sue stesse orme.

Parlo di PayPal società anonima del Lussenburgo che permette, agli utenti che, purtroppo per loro, la scelgono, di accettare pagamenti online con carte di credito, addebitando tra le piu’ alte commissioni esistenti sul web non soltanto per le vere e proprie transazioni effettuate con carte di credito ( dove c’è una reale commissione che incassano le carte stesse) ma anche quando si sposta denaro da un conto ad un altro!

A parte tutto questo, PayPal che non è una banca ma una società privata, che gestisce i nostri soldi ed a volte, in base non si bene a quali canoni e ragionamenti, bloccano i nostri account appropriandosi indebitamente dei nostri soldi per diversi mesi senza nessuna spiegazione logica ne modo di poter fare ricorso alcuno.

Sono tantissime le storie come queste che si possono raccontare in tutto il mondo, ma in questo video l’autore ha voluto fare di più.

Infatti non si è limitato a raccontare la sua disavventura con la sua voce, ma ha registrato la telefonata con l’assistenza clienti cosi che tutti possano fare le giuste considerazioni e fare la scelta migliore.

L’autore in questo caso è un personaggio d’eccezione: Daniele Penna, ovvero colui che ha portato il DropShipping in Italia nel 2004/2005 e che da qualche mese ha lanciato la nuova piattaforma che va in concorrenza diretta di eBay www.Neonisi.com ( che strana coincidenza che PayPal, società del gruppo eBay, dopo 4 anni di lavoro blocchi i suoi conti ! )

Seguiamoci il video, diviso in 4 parti, della sua introduzione e poi della registrazione della telefonata con Silvia dell’Assistenza Clienti Paypal ( raggiungibile al numero 848 390 110 ) e valutiamo da soli.

Le cause contro le banche sono vinte in partenza

Le cause contro le banche sono vinte in partenza


Il motivo per il quale le cause contro le banche sono ormai vinte in partenza è che la loro attività è così illegale che la magistratura, pur tacendo per ora sulla gravissima questione del signoraggio primario e secondario, non può però esimersi dal condannarle almeno per le violazioni ordinarie.

In particolare, il nostro atto di citazione (scaricabile da www.marra.it) è basato su tre richieste. La principale (che conto sia recepita nel tempo dei 3 gradi) è che il Tribunale, accertato il signoraggio secondario, dichiari non dovuta la restituzione del fido, mutuo, quinto di stipendio ecc.
Questo perché le banche prestano 50 volte l’importo dei depositi, sostituendosi illecitamente allo Stato nel creare il denaro cartolare, per frodare così interessi anch’essi cinquantuplicati su questi prestiti di denaro altrui. Ciò mentre la Banca d’Italia stampa al costo della carta e dell’inchiostro le banconote e, incredibilmente, le “vende” allo Stato in cambio dei BOT, CCT, BPT, CTZ, creando così il debito pubblico, frutto di questo crimine e, per azzerare il quale, basta che lo Stato stampi da sé le banconote, e fermi così anche l’immane riciclaggio ed evasione fiscale che ne deriva.

Ove il Tribunale non accolga la richiesta principale, la subordinata è allora che dichiari per il momento dovuta la restituzione del solo capitale, come previsto dalla legge anti-usura quando la banca, come generalmente accade specie nei fidi, pratica tassi usurari perché trattiene (quale che sia la causale, escluse tasse ed imposte) oltre il 50% del tasso medio in quel tipo di operazioni.

Ove infine non accolga neanche la subordinata basata sull’usura (o se l’usura non c’è, ma c’è quasi sempre), si chiede accolga la seconda subordinata di condannarla a restituire quanto trattenuto per anatocismo, commissioni di massimo scoperto, accredito differito dei versamenti, tassi passivi ultralegali o attivi sublegali quando siano indeterminabili (lo sono in pratica sempre) ecc. Cause vinte in partenza sia in relazione all’usura, e sia, se non c’è, all’anatocismo, per le commissioni di massimo scoperto e così via, perché la giurisprudenza in materia è pacifica. Per cui, forti della somma che si incassa in primo grado, si può proseguire in appello ed in cassazione per il signoraggio attendendo l’evoluzione giurisprudenziale. Argomenti che vanno usati anche nelle opposizioni ai decreti ingiuntivi.


Alfonso Luigi Marra
alfonsoluigi@marra.it, www.marra.it
“FermiamoLeBanche"
ASSOCIAZIONE PER LA DIFESA DEI CITTADINI NEI CONFRONTI DELLE BANCHE - dal 1987
Ufficio legale:
Centro Direzionale G1, 80143 Napoli, tel 0817879166 fax 0817879005

lunedì 25 aprile 2011

Derivati: Swap, costi occulti condannati

Swap, costi occulti condannati

Posted on 21 April 2011 by Gestore Forum Nazionale Antiusura

Nuova sconfitta di Unicredit in un processo sui derivati; dopo il Comune di Rimini, questa volta è Ortona (Chieti) ad avere la meglio sull’istituto di Piazza Cordusio, con una sentenza che va dritta al cuore dei problemi trattati anche nel processo sugli swap milanesi contro quattro banche (Jp Morgan, Depfa, Ubs e Db), 11 loro funzionari e due esponenti del Comune (Palazzo Marino è parte civile): quello del «costi impliciti» nei contratti.
La pronuncia 5118/2011 della VI sezione civile del Tribunale di Milano (presidente Laura Cosentini, relatore Francesco Ferrari) ha annullato tre collar swap stipulati il 10 gennaio 2006 fra UniCredit e il Comune abruzzese, a cui è stato riconosciuto un risarcimento da quasi 345mila euro. La nullità è stata decisa per il fatto che al momento della sottoscrizione i tre contratti avevano un valore negativo per il Comune, ma gli amministratori locali non ne erano stati informati preventivamente e il «rosso» non era stato nemmeno compensato con un upfront (il versamento iniziale nei confronti dell’ente sottoscrittore che spesso ha accompagnato l’avvio di swap “pubblici).
La materia è complessa, e bisogna essere cauti con i parallelismi (il processo sui derivati milanesi è anche in sede penale). Rispetto alla sentenza riminese, l’aumento di “peso” della decisione è comunque netto. Le motivazioni, che saranno depositate nei prossimi giorni, dovranno andare a fondo nella spiegazione dei «costi occulti», accanto all’inefficienza dei cap (tra il 7% e il 9%) e dei floor (tra il 4% e il 5%) posti nel collar (corridoio) swap.
Nel giugno 2008 (l’Euribor viaggiava infatti oltre il 5%), il mark to market dei derivati di Ortona (valore potenziale di mercato in caso di chiusura dei contratti) era negativo per due milioni. L’ente decide quindi di chiedere al Tribunale di Milano (competente da accordo) la nullità dei contratti e la restituzione dei flussi fino ad allora pagati (37.600 euro). La banca respinge ogni addebito, e produce una perizia in cui si sostiene che i contratti avessero un valore iniziale pari a zero, quindi perfettamente in equilibrio tra le parti. «Nel corso della causa – sostiene Massimiliano Palumbaro di Cfi Advisors di Pescara – ha però preso piede la nostra tesi dei costi occulti di 380mila euro applicati al Comune, confermati dalla perizia del consulente nominato dal Tribunale». Il fatto di non aver dichiarato «questi valori negativi di partenza – aggiunge Duilio Manella, avvocato del Comune di Ortona – è stato ritenuto in contrasto con i principi fissati dall’articolo 41 della legge 448/01». UniCredit, dal canto suo, attende le motivazioni e si riserva di ricorrere in appello.
A Palazzo di Giustizia intanto continua il processo sugli swap milanesi, che sono tra l’altro stati investiti dalla corsa degli spread trascinata dai titoli di Grecia e Portogallo e sono tornati a registrare un mark to market negativo (intorno ai 100 milioni, calcolano in Comune). Questa evoluzione, insieme all’avvicinarsi delle elezioni amministrative, sembrano far tramontare ogni ipotesi di transazione “amichevole” fra banche e Comune, che pure era circolata, e torna a puntare tutta l’attenzione sul dibattimento. Anche qui la giurisprudenza ha un ruolo chiave. Per contrastare la tesi accusatoria della truffa fondata sui costi occulti, le difese puntano anche sulla produzione di sentenze inglesi favorevoli agli istituti di credito. Ieri, per esempio, hanno chiesto l’acquisizione di una sentenza pronunciata l’anno scorso dall’Corte di giustizia di Londra che ha assolto la Royal Bank of Scotland dall’accusa di aver venduto due derivati a un’azienda (la Titan Steel) senza tener conto delle esigenze del venditore (qualificato intermediate customer) e senza informarlo pienamente sulle clausole del contratto. I giudici inglesi hanno invece ritenuto corretta la clausola di “non-reliance”, in cui la banca chiariva di non essere in alcun modo consulente del cliente. Queste clausole, sostengono le difese, sono standard e tornano identiche nei contratti con il Comune di Milano che per di più, viste le dimensioni del bilancio e la sua operatività finanziaria, è un cliente di livello maggiore rispetto all’azienda controparte di Rbs. Un tema analogo torna nella sentenza d’appello nella maxi-causa di Springwell contro Jp Morgan, chiusasi in appello a novembre a favore della banca, che dovrebbe emergere in una delle prossime udienze.

Fonte: IlSole24Ore.com

domenica 24 aprile 2011

A Sovereign Government Cannot go Bankrupt

The S&P Downgrade: Much Ado about Nothing Because a Sovereign Government Cannot go Bankrupt

By L. Randall Wray Apr 23, 2011, 4:57 PM Author's Website

The claims about “unsustainable deficits” gained new urgency this week as S&P warned that it was downgrading US federal government debt from stable to negative (see here for recent debate).

This appeared to be a blatantly political move, designed to influence the debate in Washington, adding fuel to the fire to cut budget deficits.

The deficit hysteria has nothing to do with economics, government solvency, or involuntary default. A sovereign government can always make payments as they come due by crediting bank accounts—something recognized by Chairman Bernanke when he said the Fed spends by marking up the size of the reserve accounts of banks.

Similarly Chairman Greenspan said that Social Security can never go broke because government can meet all its obligations by “creating money” (see here).

Instead, sovereign government spending is constrained by budgeting procedure and by Congressionally-imposed debt limits. In other words, by self-imposed constraints rather than by market constraints.

In addition, government needs to be concerned about pressures on inflation and the exchange rate should its spending become excessive. Finally, it should avoid “crowding out” private initiative by moving too many resources to our public sector. However, with massive unemployment and idle plant and equipment, no one can reasonably argue that these dangers are imminent.

Ironically, the ratings agencies recognized long ago that sovereign currency-issuing governments do not really face solvency constraints. A decade ago Moody’s downgraded Japan to Aaa3, generating a sharp reaction from the government. (more here) The raters back-tracked and said they were not rating ability to pay, but rather the prospects for inflation and currency depreciation. After ten more years of running deficits, Japan’s debt-to-GDP ratio is 200%, it borrows at nearly zero interest rates, it makes every payment that comes due, its Yen remains strong, and deflation reigns. In other words, the ratings agencies got it all wrong—as they usually do.

So, as I predicted two days ago, the market reacted to the US government’s credit downgrade with a big “Ho-Hum”.

Is the Government Running Out of Money?

The Federal Government has been handed a temporary reprieve by Congress: it won’t be shut down just yet. That gives the Democrats and Republicans more time to haggle over which items to cut. The premise is that the government is “running out of money” as President Obama has put it so eloquently in numerous speeches. Let us first examine that claim and then move on to the real subject of debate: Can a sovereign government run out of money?

The answer is easy: No!

Indeed, a sovereign government neither has nor does not have money. The money government uses to spend is created as it spends. That might sound bizarre or even dangerous. But, in fact, on that score it is not so different from any other spender. (see previous discussion)

Can Your Bank Run Out of Money?

Look at it this way. As economists who adopt the (French-Italian) “Circuit” approach have long argued, when a firm wants to spend it approaches a bank . The bank accepts the firm’s IOU (called a loan on the bank’s balance sheet) and creates its own IOU (in the form of a demand deposit). From the firm’s perspective, the loan is its debt and the demand deposit is its asset. The bank “intermediates” because its IOU (the demand deposit) is more widely accepted in payment than is the firm’s IOU.

Of course, the firm is not going to hold the demand deposit since the whole object of borrowing was to spend. The demand deposit will then get shifted to the seller. Now, it is of course possible for the firm to finance its spending by using a sales receipt—a credit to its demand deposit and matched by a debit to the seller’s account.

But at the aggregate level, all the demand deposits were created as the accounting offset to loans. In other words, sales receipts in the form of demand deposits required some previous bank loan. At the aggregate level, bank “money” is created and therefore equal to bank loans—that is where bank money comes from.
Can the bank “run out of money”? No. It neither has, nor does not have money. It creates the money when it makes a loan; and the purpose of this activity is to finance some kind of spending—on goods, services or assets.

Can this money creation be “excessive” in the sense of causing prices to rise? Yes. Can it be “speculative” in the sense that it helps to fuel an asset price bubble? Yes. Can it be “foolish” in the sense that the borrower defaults and the bank ends up holding a worthless IOU? Yes. Can bank lending and thus money creation be constrained by government regulations and supervision? Yes. Finally, can—and should—the bank exercise self-restraint? Yes.

So, just because we say the bank can always create money “out of thin air” by making a loan and creating a demand deposit that does not mean that it should lend “until the cows come home”, or that it does not face regulatory or self-imposed constraints.

Ultimately, good banking practice requires good underwriting—to ensure it does not end up with too many trashy IOUs; and from the macro perspective, government wants to limit bank “money creation” to finance spending in order to prevent inflationary conditions in markets for goods, services and assets.

Is Sovereign Government Different? Users and Issuers of the Curency

Almost everything that has been said above about the finance of the spending of a private firm applies to a government. Government spending occurs simultaneously with a credit to a private bank account—that is to a demand deposit at a bank. The offsetting liability on the government’s books is a credit to the bank’s reserves at the central bank (which is the “private” bank’s asset). The government cannot “run out of money” because the “money” is created when it spends.

I have detailed many times how the government actually does this—following rules for spending that Congress, the Treasury, and the Fed have worked out—and will discuss the details a bit below. But first let us compare government and nongovernment spending through “money creation” in general terms.

Government spending and hence “money creation” has all the same potential drawbacks listed above (most importantly, inflationary consequences when excessive), save one. A private borrower might fail to make payments on loans through no fault of his own. Of course, there are also deadbeat borrowers who choose not to pay. But private firms (and households) need income, or saleable assets, to raise funds to pay their debts. Default is a possibility.

Sovereign government is somewhat different. We usually say that its “income” is tax revenue—a bit different from wages or profits since taxes are at least in some sense discretionary. Further, the government’s potential “customer base” is the whole economy and potentially all economic activity—anything that can be taxed.

However, that really does not get to the more important difference: government is the sovereign issuer of the currency.

A sovereign government cannot be forced into involuntary default—it cannot go bankrupt in its own currency. Let us see why, comparing a sovereign government with the situation of a “user” of the currency.

As my professor Hyman Minsky used to argue, anyone can “create money” in the sense that anyone can issue an IOU to make purchases. In other words, you can spend by issuing an IOU to your bank, with the bank crediting your demand deposit—which you use for the purchase. The “money” is created simultaneously with the spending.

When we talk about a private borrower/spender (household or firm), the bank is concerned with credit-worthiness. There are, indeed, additional constraints facing the bank, including reserve ratios and capital ratios—plus whatever other regulations and oversight government puts on its regulated banks. In practice, reserve ratios do not constrain banks because the development of inter-bank lending markets (called the fed funds market in the US) plus access to the central bank’s discount window ensure that banks can always get reserves—at a price.

Capital ratios can bind, although again in practice the constraint is loose since a bank faced with a good borrower can move assets off the balance sheet, seek additional capital, or use creative accounting to finesse the requirements.

And, as I argued above, growing lending and spending can have consequences at the aggregate level: inflation and currency depreciation should spending be too large relative to capacity. That is why governments use a range of policies to try to constrain lending and spending—monetary and fiscal policy as well as direct limits on bank lending and (in rare cases) wage and price controls.

When government refuses to oversee and regulate private banks, underwriting standards tend to fall—which allows lending and spending to grow quickly, which can have inflationary consequences. But worse, it can lead to a catastrophic financial crisis—as we are witnessing.

What is particularly strange is the way that we treat sovereign government. The treasury’s bank is the central bank—which handles its payments and receipts. The treasury writes checks on its demand deposit at the central bank and moves tax receipts from its accounts at private banks to the central bank when it wants to spend. In the US, the Treasury tries to end each day with a deposit of $50 million at the Fed. In all these respects, the Treasury and Fed relation is much like that between a household or firm at its bank. With one big exception: the credit worthiness of the sovereign issuer of a currency cannot be called into question by financial markets because it can always make payments as they come due.

The Strange Constraints Put on Treasury

We put two constraints on our Federal Government that we do not put on private firms and households:

a) The Treasury cannot issue IOUs to its own bank;
b) Congress imposes a debt limit on Treasury

Amazingly, we do not constrain any household or firm in such a manner. We do prevent firms or households from issuing IOUs to their banks—indeed, we would argue that such a constraint would be silly. Nor do we directly impose a specific debt limit on households or firms or even state and local governments, because we believe that “markets” can determine how much any nonsovereign entity ought to issue.

But we do impose these limits on the sovereign government that issues the currency. These constraints are adopted on the misguided belief that they will prevent the government from “spending too much”, which would cause inflation and currency depreciation. Hence, it is supposed, we cannot trust Congress and the President to keep spending under control—the budgeting process alone is not a sufficient constraint. They would happily spend so much that we’d quickly become the next Zimbabwe. Thus, we will prevent the Treasury from “borrowing” directly from the Fed since that would result in “printing money”, and if Congress could pay for everything by “printing money” it would approve every pork barrel project constituents dreamed-up. And without a debt limit, Congress would bury government under a crushing debt load that would threaten its solvency.

Let’s examine these constraints in order.

The first constraint means that Treasury can sell its IOUs (bills or bonds) to anyone EXCEPT its own bank. It can sell bonds to households, firms, or private banks but NOT to the Fed (there is a small exception that we need not go into here). So when the Treasury is deficit spending (meaning it needs to write checks for more than its deposit at the Fed), it cannot simply issue an IOU to the Fed. It must instead sell its bills and bonds to private households, firms or banks.

Here’s the problem. To spend, the Treasury must have deposits in its account at the Fed. It does no good to sell its bonds to the private sector, receiving a demand deposit at a private bank—because it cannot write a check on that account. Just as you can only write checks against your account at your bank the Treasury can write checks only on its account at its bank—the Fed. So, for example, it can sell a bond to Bank XYZ and receive credit to an account it holds at Bank XYZ. To spend it needs to transfer the demand deposit to its account at the Fed. This is accomplished by debiting the Treasury’s account at Bank XYZ, and simultaneously debiting that bank’s reserves at the Fed. The Fed then credits the Treasury’s demand deposit.

In normal times, banks do not hold excess reserves. (These are not normal times—banks in the aggregate now hold a trillion dollars of excess reserves thanks to “Helicopter Ben’s quantitative easing. We will ignore that for now.) In that case, Bank XYZ would find itself short of reserves after the Treasury transferred its deposit. There are several ways a bank can get the reserves it needs: borrow in the fed funds market, borrow from the Fed at the discount window, or sell bonds to the Fed. Note that if there are no excess reserves in the banking system, turning to the fed funds market will only cause the fed funds rate to rise. This is the signal the Fed responds to—either lending reserves at the discount window or engaging in an open market purchase to relieve the pressure in the fed funds market. Ultimately, the Fed is the source of reserves banks need.

Note that if the Fed lends reserves to banks, we end up in a position in which banks have essentially borrowed reserves from the Fed in order to “lend” to the Treasury (holding government bonds). If on the other hand the Fed buys the bonds in an open market operation, we end up in a position in which the Fed holds the Treasury’s bonds, so has effectively “lent” to the Treasury—but only indirectly because it used Bank XYZ as the intermediary. Recall that all these operations are required because we prevent the Fed from buying the bonds directly from the Treasury, thereby providing the Treasury with the demand deposits it needs to write checks. So it is doubly ironic that this prohibition then requires either that the Fed lend reserves to banks so they can buy the bonds, or that it buy the bonds from the banks.

Now, in normal times it really does not matter that we have adopted such a roundabout method of allowing the Treasury to do what any other spender can do—issue an IOU to its own bank. It all operates smoothly with the Fed using a private bank as intermediary to do what Congress prohibits it from doing directly. That is to say, what prevents the Treasury from spending its way toward Zimbabwe land is that it has a budget that must be approved by Congress and the President. The prohibition on Fed purchases of bonds directly from the Treasury is not a constraint at all. If we got a Congress and President that wanted Zimbabwean inflation, they could produce that result by agreeing on a budget of quadrillions of dollars of spending. So in normal times, we rely on rationality in Washington to constrain spending.

But these are not normal times. For two reasons. First because we are trying out Chairman Bernanke’s pet theory: quantitative easing—which is based on the belief that if you buy up all the earning assets held by banks and stuff them full of excess reserves that pay only 25 basis points, they will decide to lend. No, they won’t. Instead, they buy Treasury bonds, and then sell a portion on to the Fed that buys them through quantitative easing.

Second, we keep bumping up against the self-imposed debt limit imposed on the Federal government—not by markets but by Congress. We need to understand that the overall debt limit is repeatedly approached because we are running persistent deficits. And that is because tax revenue has been destroyed by the economic downturn caused by Wall Street’s excesses. So Congress must repeatedly raise the debt limit so that the Fed, Treasury and private banks can perform their little charade to allow the Treasury to spend the budgeted amounts. With a few brief exceptions, total outstanding Treasury debt has grown since the founding of the nation—with Congress raising the debt limit as required to let Treasury issue the bonds that banks, households, and firms want to buy.

This is usually done as a matter of routine. But the Republicans want to hold the debt limit hostage to politics—following Rahm Emmanuel’s dictum that a “crisis” should never be wasted. They intend to gut the social programs they do not like on the pretense that this will reduce the budget deficits that threaten the US with bankruptcy. In fact, cutting the social programs will not significantly reduce overall spending (because they are too small) and the US government cannot be forced into involuntary bankruptcy. Hence, neither argument follows on from the facts.

Indeed, if the US does default on any of its payment commitments, it will be because Republicans force it to do so—by forcing government to shut down because Congress will not raise the debt limit. That is the nuclear option that party politics run amuck could lead to.

Conclusion: The Only Thing to Fear is Fear Itself

I realize that whenever the actual operating details are made clear, the response always is: OMG if the government can spend simply by “keystrokes” then we are doomed to Zimbabwean inflation and eventual default on debt. Hence, we need to limit government’s ability to spend—and this can be done by preventing it from “borrowing from” the Fed, and setting a debt limit.

In reality, it is Congress that holds the fate of the US in its hands. The budgeting procedures are what keep inflation at bay, and the normal financing “triangular” operation that uses the balance sheets of the Treasury, Fed and private banks ensure the government meets its payment commitments.

Unfortunately, by using the debt limit as its hammer to destroy social programs, Congress is now threatening to disrupt financing—raising a possibility (albeit very small) that government might be forced by politicians to do what markets CANNOT force it to do: default on its commitments.

So, ironically and through the backdoor, the Republicans might actually bring on a Greek-style debt crisis on the argument that they are defending us from a Zimbabwean-style hyperinflation.

Marra sul Parlamento Europeo e Bilderberg

Marra sul Parlamento Europeo e Bilderberg. Tamburro & Lo Sai Napoli



Avv. Marra su crisi economica e Marchionne-FIAT

Avv. Marra su crisi economica e Marchionne-FIAT. Tamburro & Lo Sai Napoli



Alfonso Luigi Marra sulle cause contro le banche

Alfonso Luigi Marra sulle cause contro le banche. Salvatore Tamburro & Lo Sai Napoli


sabato 23 aprile 2011

Citigroup investigated by Greece

Citigroup investigated by Greece on debt restructuring rumours

Citigroup is being investigated by the Greek authorities after one of its staff warned the bank's clients of the possibility of the country announcing a debt restructuring this weekend.

Citigroup is being investigated by the Greek authorities after one of its staff warned the bank's clients of the possibility of the country announcing a debt restructuring this weekend.
Many market observers already believe some form of Greek debt default is now inevitable, a year after the country's multi-billion euro bailout by the European Union that sparked nationwide protests against austerity measures. Photo: Reuters

"There seems to be some increased noise over Gr debt restructuring as early as this Easter weekend," wrote the Citigroup employee, adding that Greek officials were denying that they had any such plans.

The email prompted Greece's finance ministry to ask the local prosecutor to launch an investigation into the market rumours, which the country blames for its continued economic woes.

In a statement Citigroup said: "We are co-operating with the authorities and do not consider there to have been any wrongdoing by Citi or its employees."

The investigation came as Greek credit default swaps hit a record high of 1,335 basis points, up 53 points, meaning the annual cost of insuring £10m of the government's debt would cost more than £1.3m.

Many market observers already believe some form of Greek debt default is now inevitable, a year after the country's multi-billion euro bailout by the European Union.

In another note to clients, Citigroup on Thursday said it thought the chances of a "debt event" before the end of the year were rising.

Most expect the Greek government and its creditors to agree to a rescheduling of the country's debt repayments to help it meet its obligations.