Category Archives: Federal Reserve

Is the Run on the Dollar Due to Panic or Greed?

What’s going on in the repo market? Rates on repurchase agreements (“repo”) should be around 2%, in line with the fed funds rate. But they shot up to over 5% on September 16 and got as high as 10% on September 17. Yet banks were refusing to lend to each other, evidently passing up big profits to hold onto their cash – just as they did in the housing market crash and Great Recession of 2008-09.

Since banks weren’t lending, the Federal Reserve Bank of New York jumped in, increasing its overnight repo operations to $75 billion; and on October 23 it upped the ante to $120 billion in overnight operations and $45 billion in longer-term operations.

Why are banks no longer lending to each other? Are they afraid that collapse is imminent somewhere in the system, as with the Lehman collapse in 2008?

Perhaps, and if so the likely suspect is Deutsche Bank. But it looks to be just another case of Wall Street fattening itself at the public trough, using the funds of mom and pop depositors to maximize bank profits and line the pockets of bank executives while depriving small businesses of affordable loans.

Why the Repo Market Is a Big Deal

The repo market allows banks and other financial institutions to borrow and lend to each another, usually overnight. More than $1 trillion in overnight repo transactions collateralized with U.S. government debt occur every day. Banks lacking available deposits frequently go to these markets to fund their loans and finance their trades.

Legally, repos are sales and repurchases; but they function like secured overnight or short-term loans. They work like a pawn shop: the lender takes an asset (usually a federal security) in exchange for cash, with an agreement to return the asset for the cash plus interest the next day unless the loan is rolled over.  The New York Fed currently engages in two types of repo operations: overnight repurchase agreements that unwind the next business day, and 14 day repurchase agreements that unwind after 14 days.

The Fed re-started its large-scale repo operations in September, when borrowing rates shot up due to an unexpectedly high demand for dollars. The Fed said the unusual demand was due largely to quarterly tax payments and Treasury debt settlements. Other factors proposed as contributing to the cash strains include regulatory change and a decline in bank reserves due to “quantitative tightening” (in which the Fed shrunk its balance sheet by selling some of its QE acquisitions back into the market), as well as unusually high government debt issuance over the last four years and a flight into U.S. currency and securities to avoid the negative interest rate policies of central banks abroad.

Panic or Calculated Self-interest?

The Fed’s stated objective in boosting the liquidity available to financial markets was simply to maintain its “target rate” for the interest charged by banks to each other in the fed funds market. But critics were not convinced. Why were private capital markets once again in need of public support if there was no financial crisis in sight? Was the Fed engaged in a stealth “QE4,” restarting its quantitative easing program?

The Fed insisted that it wasn’t, and financial analyst Wolf Richter agreed. Writing on Wolfstreet.com on October 10, he said the banks and particularly the primary dealers were hoarding their long-term securities in anticipation of higher profits. The primary dealers are the 24 U.S. and foreign broker-dealers and banks authorized to deal directly with the U.S. Treasury and the New York Fed. They were funding their horde of long-term securities in the repo market, putting pressure on that market, as the Fed said in the minutes for its July meeting even before repo rates blew out in mid-September. Richter contended:

They’d expected a massive bout of QE, and perhaps some of the players had gleefully contributed to, or even instigated the turmoil in the repo market to make sure they would get that massive bout of QE as the Fed would be forced to calm the waters with QE, the theory went. This QE would include big purchases of long-term securities to push down long-term yields, and drive up the prices of those bonds ….

Prices were high and yields were low, a sign that there was heavy demand. But the dealers were holding out for even higher prices and even lower yields. … Massive QE, where the Fed buys these types of Treasury securities, would accomplish that.

But that’s exactly what the Fed said it wouldn’t do.

What the Fed was doing instead, it said, was to revive its “standing repo facility” – the facility it had used before September 2008, when it abandoned that device in favor of QE and zero interest rate policy. But it insisted that this was not QE, expanding the money supply. Overnight repos are just an advance of credit, which must be repaid the next day. While $165 billion per month sounds like a lot, repo loans don’t accumulate; the Fed is just making short-term advances, available as needed up to a limit of $165 billion.

In Wall Street on Parade on October 28, Pam and Russ Martens pointed to another greed-driven trigger to the recent run on repo. The perpetrator was JPMorgan Chase, the largest bank in the U.S., with $1.6 trillion in deposits. Quoting David Henry on Reuters:

Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline. … [T]he data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.

This $158 billion drawdown in JPMorgan’s reserve account is evidently what necessitated the Fed’s $165 billion in new repo offerings. But why the large drawdown?

Henry attributed it to regulatory changes that increased the bank’s required reserves, but according to the Martens, something more was involved. “The shocking news,” they write, is that “according to its SEC filings, JPMorgan Chase is partly using Federally insured deposits made by moms and pops across the country in its more than 5,000 branches to prop up its share price with buybacks.” Small businesses are being deprived of affordable loans because the liquidity necessary to back the loans is being used to prop up bank stock prices. Bank shares constitute a substantial portion of the pay of bank executives.

According to Thomas Hoenig, then Vice Chair of the Federal Deposit Insurance Corporation (FDIC), in a July 2017 letter to the U.S. Senate Banking Committee:

[If] the 10 largest U.S. Bank Holding Companies [BHCs] were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.

Four of the 10 BHCs will distribute more than 100 percent of their current year’s earnings, which alone could support approximately $537 billion in new loans to Main Street.

If share buybacks of $83 billion, representing 72 percent of total payouts for these 10 BHCs in 2017, were instead retained, they could, under current capital rules, increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.

Hoenig was referring to the banks’ own capital rather than to their deposits, but the damage to local credit markets is even worse if deposits are also being diverted to fund share buybacks. Banks are not serving the real economy. They are using public credit backed by public funds to feed their own private bottom lines.

The whole repo rigmarole underscores the sleight of hand on which our money and banking systems are built, and why it is time to change them. Banks do not really have the money they lend. To back their loans, they rely on their ability to borrow from the reserves of other banks, generated from their customers’ deposits; and if those banks withhold their deposits in the insatiable pursuit of higher profits, the borrowing banks must turn to the public purse for liquidity. The banks could not function without public support. They should be turned into public utilities, mandated to serve the interests of the people and the productive economy on which the public depends.

This article was first posted on Truthdig.com

The Disaster of Negative of Interest Rates

President Trump wants negative interest rates, but they would be disastrous for the U.S. economy, and his objectives can be better achieved by other means.

The dollar strengthened against the euro in August, merely in anticipation of the European Central Bank slashing its key interest rate further into negative territory. Investors were fleeing into the dollar, prompting President Trump to tweet on August 30:

The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage… And the Fed does NOTHING!

When the ECB cut its key rate as anticipated, from a negative 0.4% to a negative 0.5%, the president tweeted on September 11:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.

And on September 12 he tweeted:

European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!

However, negative interest rates have not been shown to stimulate the economies that have tried them, and they would wreak havoc on the U.S. economy, for reasons unique to the U.S. dollar. The ECB has not gone to negative interest rates to gain an export advantage. It is to keep the European Union from falling apart, something that could happen if the United Kingdom does indeed pull out and Italy follows suit, as it has threatened to do. If what Trump wants is cheap borrowing rates for the U.S. federal government, there is a safer and easier way to get them.

The Real Reason the ECB Has Gone to Negative Interest Rates

Why the ECB has gone negative was nailed by Wolf Richter in a September 18 article on WolfStreet.com. After noting that negative interest rates have not proved to be beneficial for any economy in which they are currently in operation and have had seriously destructive side effects for the people and the banks, he said:

However, negative interest rates as follow-up and addition to massive QE were effective in keeping the Eurozone glued together because they allowed countries to stay afloat that cannot, but would need to, print their own money to stay afloat. They did so by making funding plentiful and nearly free, or free, or more than free.

This includes Italian government debt, which has a negative yield through three-year maturities. … The ECB’s latest rate cut, minuscule and controversial as it was, was designed to help out Italy further so it wouldn’t have to abandon the euro and break out of the Eurozone.

The U.S. doesn’t need negative interest rates to stay glued together. It can print its own money.

EU member governments have lost the sovereign power to issue their own money or borrow money issued by their own central banks. The failed EU experiment was a monetarist attempt to maintain a fixed money supply, as if the euro were a commodity in limited supply like gold. The central banks of member countries do not have the power to bail out their governments or their failing local banks as the Fed did for U.S. banks with massive quantitative easing after the 2008 financial crisis. Before the Eurozone debt crisis of 2011-12, even the European Central Bank was forbidden to buy sovereign debt.

The rules changed after Greece and other southern European countries got into serious trouble, sending bond yields (nominal interest rates) through the roof.  But default or debt restructuring was not considered an option; and in 2016, new EU rules required a “bail in” before a government could bail out its failing banks. When a bank ran into trouble, existing stakeholders–including shareholders, junior creditors and sometimes even senior creditors and depositors with deposits in excess of the guaranteed amount of €100,000–were required to take a loss before public funds could be used. The Italian government got a taste of the potential backlash when it forced losses onto the bondholders of four small banks. One victim made headlines when he hung himself and left a note blaming his bank, which had taken his entire €100,000 savings.

Meanwhile, the bail-in scheme that was supposed to shift bank losses from governments to bank creditors and depositors served instead to scare off depositors and investors, making shaky banks even shakier. Worse, heightened capital requirements made it practically impossible for Italian banks to raise capital. Rather than flirt with another bail-in disaster, Italy was ready either to flaunt EU rules or leave the Union.

The ECB finally got on the quantitative easing bandwagon and started buying government debt along with other financial assets. By buying debt at negative interest, it is not only relieving EU governments of their interest burden, it is slowly extinguishing the debt itself.

That explains the ECB, but why are investors buying these bonds? According to John Ainger in Bloomberg:

Investors are willing to pay a premium–and ultimately take a loss–because they need the reliability and liquidity that the government and high-quality corporate bonds provide. Large investors such as pension funds, insurers, and financial institutions may have few other safe places to store their wealth.

In short, they are captive buyers. Banks are required to hold government securities or other “high-quality liquid assets” under capital rules imposed by the Financial Stability Board in Switzerland. Since EU banks now must pay the ECB to hold their bank reserves, they may as well hold negative-yielding sovereign debt, which they may be able to sell at a profit if rates drop even further.

Wolf Richter comments:

Investors who buy these bonds hope that central banks will take them off their hands at even lower yields (and higher prices). No one is buying a negative yielding long-term bond to hold it to maturity.

Well, I say that, but these are professional money managers who buy such instruments, or who have to buy them due to their asset allocation and fiduciary requirements, and they don’t really care. It’s other people’s money, and they’re going to change jobs or get promoted or start a restaurant or something, and they’re out of there in a couple of years. Après moi le déluge.

Why the U.S. Can’t Go Negative, and What It Can Do Instead

The U.S. doesn’t need negative interest rates, because it doesn’t have the EU’s problems but it does have other problems unique to the U.S. dollar that could spell disaster if negative rates were enforced.

First is the massive market for money market funds, which are more important to daily market functioning in the U.S. than in Europe and Japan. If interest rates go negative, the funds could see large-scale outflows, which could disrupt short-term funding for businesses, banks and perhaps even the Treasury. Consumers could also face new charges to make up for bank losses.

Second, the U.S. dollar is inextricably tied up with the market for interest rate derivatives, which is currently valued at over $500 trillion. As proprietary analyst Rob Kirby explains, the economy would crash if interest rates went negative, because the banks holding the fixed-rate side of the swaps would have to pay the floating-rate side as well. The derivatives market would go down like a stack of dominoes and take the U.S. economy with it.

Perhaps in tacit acknowledgment of those problems, Fed Chairman Jay Powell responded to a question about negative interest rates on September 18:

Negative interest rates [are] something that we looked at during the financial crisis and chose not to do. After we got to the effective lower bound [near-zero effective federal funds rate], we chose to do a lot of aggressive forward guidance and also large-scale asset purchases. …

And if we were to find ourselves at some future date again at the effective lower bound–not something we are expecting–then I think we would look at using large-scale asset purchases and forward guidance.

I do not think we’d be looking at using negative rates.

Assuming the large-scale asset purchases made at some future date were of federal securities, the federal government would be financing its debt virtually interest-free, since the Fed returns its profits to the Treasury after deducting its costs. And if the bonds were rolled over when due and held by the Fed indefinitely, the money could be had not only interest-free but debt-free. That is not radical theory but is what is actually happening with the Fed’s bond purchases in its earlier QE. When it tried to unwind those purchases last fall, the result was a stock market crisis. The Fed is learning that QE is a one-way street.

The problem under existing law is that neither the president nor Congress has control over whether the “independent” Fed buys federal securities. But if Trump can’t get Powell to agree over lunch to these arrangements, Congress could amend the Federal Reserve Act to require the Fed to work with Congress to coordinate fiscal and monetary policy. This is what Japan’s banking law requires, and it has been very successful under Prime Minister Shinzō Abe and “Abenomics.” It is also what a team of former central bankers led by Philipp Hildebrand proposed in conjunction with last month’s Jackson Hole meeting of central bankers, after acknowledging the central bankers’ usual tools weren’t working. Under their proposal, central bank technocrats would be in charge of allocating the funds, but better would be the Japanese model, which leaves the federal government in control of allocating fiscal policy funds.

The Bank of Japan now holds nearly half of Japan’s federal debt, a radical move that has not triggered hyperinflation as monetarist economists direly predicted. In fact, the Bank of Japan can’t get the country’s inflation rate even to its modest 2 percent target. As of August, the rate was an extremely low 0.3%. If the Fed were to follow suit and buy 50% of the U.S. government’s debt, the Treasury could swell its coffers by $11 trillion in interest-free money. And if the Fed kept rolling over the debt, Congress and the president could get this $11 trillion not only interest-free but debt-free. President Trump can’t get a better deal than that.

This article was first posted on Truthdig.com.

Houthi Attack on Saudi Oil Fields:  a False Flag?

On Saturday morning, September 14, 2019, a few drones – were they drones or long-range missiles? – hit the Saudis most important two oil fields, set them ablaze, apparently knocking out half of the Saudi crude production but measured in terms of world production it is a mere 5%. Could be made up in no time by other Gulf oil producers – or indeed, as the Saudis said, by the end of September 2019 their production is back to ‘normal’ – to pre-attack levels.

The financial reaction was immediate. Saudi stocks fell, the oil prices rose, then settled and later fell again. It was an immediate reaction of major banks’ algorithmic speculation with about 10,000 operational hits a second. A trial for larger things to come?

The Yemeni Shiites, the Houthis, immediately claimed credit for the attack, saying they sent some ten “suicide drones” to the major Saudi oilfields and processing center. US Secretary of State, Mike Pompeo, immediately and without a shred of evidence, blamed Iran for the ‘terror attack’.  Immediately more economic sanctions were imposed on Iran (Trump proudly said, the most severe ever put on a country), for an occurrence they had nothing to do with. The Saudis, as if confused, held off on accusations. And as of this day, they refrain from accusing Iran. And this despite the fact that there is no love left between SA and Iran which would make blaming Iran an easy feat.

Also immediately following the attack, a high Iraqi Government official assured that the attack was launched from Iraqi soil, not from Yemen. But shortly thereafter Iraqi officials vehemently denied that they had anything to do with this attack. Yet, the launch location Iraq was “confirmed” by the leading Iraqi analyst based in the US, Entifadh Qanbar, President and Founder of the Future Foundation. The Asia Times says, he follows closely developments in his home country, and he has many associates feeding him with information that has proved more than once to be accurate. [Apparently], his information about the attack coming from Iraq is backed by prior history and by Pompeo’s clear declaration.

Here is the thing: Pompeo was never clear from where the attack was launched. He just blamed Iran. He then later, following Qanbar’s statement, joined the chorus, also saying the attack was launched from Iraq, that it was not originating from Yemen. Later the location was further defined as close to the Iranian border, from a “territory held by Iran sympathizing rebels”. No matter what, Iran remains the villain.

The Asia Times further reports, [It] is growing more certain that the attacks on the Khurais oil fields and the Abqaig oil processing center in Saudi Arabia were launched from southern Iraq and not from Yemen by the Houthis. This was made clear by Secretary of State, Mike Pompeo, who said: “There is no evidence the attacks came from Yemen.”

If it all sounds like a big fabricated confusion, it’s because it is a big fabricated confusion. Iran is singled out; fingers pointing to Iran (except, miraculously those of Saudi Arabia), like a sledgehammer hitting Iran, again and again. The mainstream media loves it. Today, a week after the attack, most nobody remembers the Houthis claiming responsibility. It was Iran. Period. The media blitz won.

But let’s look at this more carefully. The Saudis have about a 70-billion-dollar annual military budget, an armada of US missile defense systems – quite a sizable budget for a country that is studded with US military bases, receives permanent US military and logistics support, technical advice and on the ground defense systems, plus bombs and missiles delivered from the US, UK and France. How come the US-UK-France backed Saudi defense was unable to detect this, albeit, sophisticated drone (missile?) attack? Some say, too sophisticated for the Houthis? Doesn’t that raise some questions?

Who wins? Yes, the table is turning and the Houthis are now on the winning side. And they clearly have taken strength. Yemen has lost tens of thousands of people, including thousands and thousands of children through bombs, famine and diarrheal diseases, including a massive cholera epidemic, in an unjust and unprovoked war that started in early 2015, carried out by Saudis as a proxy for the Washington and Pentagon handlers.

Many of the debris of weapons you find on the ground in Yemen say ‘Made in USA’ – which would lead you to conclude that America is at war with Yemen, not the Saudis. Yemen occupies a strategic geographic and geopolitical location and must not be ruled by a people-friendly government, let alone by a socialist leaning government, as the Houthis are. Besides, Yemen may have huge deep off-shore oil reserves.

Isn’t it logical that the Houthis hit back to defend themselves to eventually reach an end to the war and its indescribable atrocities? Isn’t it weird that the misery and tens of thousands of Yemeni deaths in an unjust and purely criminal aggression instigated by the US, carried out by Riyadh and lasting already for more than 4 years, that this monstrous aggression pales in the mainstream media, as compared to two blazing Saudi oil fields?  Doesn’t that say a lot about our programed-to-the-core western brains, our sense of humanity, what’s left of it?

The biggest winner may be Washington. They have a new devastating blame on Iran – more sanctions, more justification to launch a direct confrontation against Iran, possibly through Israel, or the NATO forces; the “neutral” international killing machine, an amalgam of spineless Europeans and Canada, who love to dance to the tunes of Washington, hoping to get some crumbs of the loot at the end of the day, before the empires falls.

But there is more. Almost unrelated, but if you look closer the dots click and connect. And that’s where the ‘false flag’ comes in. It is indeed very possible that the attack, by drones or missiles was launched out of Iraq – either directly by US forces, or by US-trained terrorist groups. The US has countless military bases in Iraq. A false flag; i.e., an attack at one of the major energy resources the world still uses to economically survive – hydrocarbons – will definitely enhance the planned ‘new’ economic crisis that is ‘over-due’ and has begun trickling down the melting pillars of western social infrastructure – unemployment on the rise (the real figures), to hit the western world in full swing in 2020 and counting, a financial crisis sustained by astronomical energy prices.  What better scenario to shuffle more wealth from down to up, from the poor to the rich? This attack on the Saudi oil fields may be just the beginning of more to come. Wall Street is trained in capitalizing on “crisis oil”.

In parallel with this Houthi or non-Houthi attack, according to many economists’ assessments, a crisis worse than 2008 / 2009, has indeed already been launched, as worldwide GDP growth is already slowing way beyond expectations. The year 2020 and the following years, may perhaps go down in history as the worst economic downturn since the Great Depression of the 1930s. It may also be the last one under the current western fiat money system.

But how to construct the crisis? The dollar hegemony is faltering rapidly.  Trust in the US economy is in freefall. The smart heads of neoliberal thinking, FED, IMF, ECB, are at a loss of finding the ‘right solution’, but yes, the principle of looting the poor for the benefit of the rich must go on. In the last ten years, enough hard and social capital has been accumulated – social welfare, pensions, health services, public education and infrastructure, social and physical – for the kleptocrats to shuffle some trillions upwards, and let the working class start from scratch again. The example Greece is a demonstration in a crystal ball. The IMF, ECB and European Commission (EC) are to be proud of their achievement.

There is confusion and uncertainty. The FED just lowered the interest rate by 0.25% down to a range of 1.75% – 2%, with Chairman Jerome Powell’s incoherent explanations, clearly under pressure from President Trump, who wants to be reelected next year – hoping to defer a major crisis. At the same token, the lead interest in other western countries are adjusted to reflect the FED’s decision. In Switzerland, where the Swiss Franc is one of the assets of refuge in cases of crisis, the Central Bank just decided to leave interbank rates at minus 0.75%, in line with other western central banks.  Listening to central bankers, there is not going to be any significant change in low or minus interest rates in the foreseeable future. An economic aberration if ever there was one!

People – bank on it! Borrow and invest at no cost like there is no tomorrow. Help building the bubble of debt – when it bursts, you know what happens – and burst it will. It’s just a matter of time.

Yet, there seems to be an indecision – indicating a major dollar crisis is looming, but nobody quite knows how ‘major’ and how it will pan out and where; quite unusual for these heads of wisdom, running the financial globe’s kingdom.

Madame Christine Lagarde, changing ship from the IMF to the ECB (European Central Bank), the outgoing Governor of the Bank of England, Mark Carney, and the former New York Federal Reserve Bank chiefBill Dudley, hinted that the United States might have to give up her dollar dominance, the backbone for her world hegemony – and let it be replaced by a kind of Special Drawing Rights (SDR), in which the dollar might still have a dominant role, but, albeit, it would no longer be seen as an untrustworthy fiat Ponzi scheme.

The decadent dollar would be hidden among the other currencies of the basket, presumably the British Pound, the Euro, the Japanese Yen and the Chinese Yuan if the pattern of the current IMF SDR basket was to be followed. The hegemonic power of the dollar might be hidden, so that the world’s “worries” vis-à-vis the western dollar dominated economy, could be at least partially and temporarily mitigated (see Will the IMF, Federal Reserve, Negative Interest Rates and Digital Money Kill the Western Economy?

What does all that have to do with the Yemeni attack on the Saudi oil fields? Everything.

The reduction of the Saudi crude production, cut in half, though amounting only to 5% of world production, would under normal circumstances hardly affect significantly the world petrol price  unless it becomes the subject of speculation, which it obviously will, a justified “high risk” speculation. Goldman Sachs, JP Morgan and others are experts in the matter, doing the bidding for the FED, IMF, ECB, BIS – the western instruments behind the dollar system – let it milk as much as it can before biting the dust, letting it shuffle as much as it can from the bottom to the top, as is usual for a manufactured economic crisis. Mind you, they ALL are, and have been, manufactured for at least the last 100 years.

While the uncertainty about (western) global interest rates prevails  a major attack on a couple of Saudi oil fields is an ideal reason for letting oil prices skyrocket. It could make for an ideal ‘false flag’; a win-win for Washington: sustaining the manufactured economic crisis with an attack on major oil fields (maybe the first of others to come) and a good new reason to blame ran, another good reason to go to war with Iran. But will the Trump Administration dare?

In today’s world, economic progress is still measured in linear GDP output which, in turn, depends largely on available (and affordable) energy. Once the hydrocarbon damage or shortage is known or predictable in terms of escalating oil prices — pundits claim it could exceed the100 dollar mark — decisions on how to deal with interest rates are much easier. Combine this with ongoing trade wars, real wars in the Middle East and elsewhere, economic strangulations left and right, regime change efforts, refugee issues, and you have the perfect scenario for the next crisis.

To this you may add the Soros-driven massive around-the-globe climate hype, but I mean a ferocious climate propaganda machine, the highly publicized “Greta Crowd”, the “Friday for Future” school strike movement, and more, much more, prompting a special UN Climate Conference – 23 September. As Carla Stea from Global Research pointedly asks: Has the UN become a Wall Street Asset?.

All of this with the specific objective of collecting enormous sums of special ‘climate taxes’, for everything that moves and that our usual climate “scientists” are connecting with global warming, or more politically correct “climate change”. There is talk about the revival of some kind of the infamous “carbon fund”. Most of day-in-day-out manipulated westerners will happily pay the extra “fee” to clear their minds of ‘guilt’ and go on with life. Never mind, that climate change is a natural phenomenon and is primarily nature-driven, as Mother Earth has done for the four billion years of her existence.

This fits well with the attacks on the Saudi oil fields – who knows, others may follow – as the destruction, or disruption of the flow of vital hydrocarbon energy resources serves the Bigger Picture; i.e., bringing about a major worldwide economic depression. And by now we know that every recession-depression brings more misery to the poor and makes the rich richer.

So, cui bono is as usual the western corporate military and financial elite. Therefore, a false flag attack on the Saudi Oil fields — of course, with the Saudis in collusion — is not as far-fetched as one might believe at first glance. Last Saturday’s attack may be just the first one of a series of misdeeds on the Middle Eastern oil industry to drive oil prices up — a solid support to the well-prepared financial crisis.

This is first-rate economic terrorism. The dollar may survive a few years longer, while the children of Yemen, Syria, Afghanistan, Sudan, Iraq, Venezuela, Cuba, Nicaragua – you name it – will continue to be exposed to man-made misery no end. Let’s stop this criminal western shenaniganism now!  Let’s disconnect our economies from the west, of those who are aware and awaken, and turn to the East, where the future is.

• First published by the New Eastern Outlook – NEO

Desperate Central Bankers Grab for More Power

Conceding that their grip on the economy is slipping, central bankers are proposing a radical economic reset that would shift yet more power from government to themselves.

Central bankers are acknowledging that they are out of ammunition. Mark Carney, the soon-to-be-retiring head of the Bank of England, said in a speech at the annual meeting of central bankers in August in Jackson Hole, Wyoming, “In the longer-term, we need to change the game.” The same point was made by Philipp Hildebrand, former head of the Swiss National Bank, in an August 2019 interview with Bloomberg. “Really there is little if any ammunition left,” he said. “More of the same in terms of monetary policy is unlikely to be an appropriate response if we get into a recession or sharp downturn.”

“More of the same” meant further lowering interest rates, the central bankers’ stock tool for maintaining their targeted inflation rate in a downturn. Bargain-basement interest rates are supposed to stimulate the economy by encouraging borrowers to borrow (since rates are so low) and savers to spend (since they aren’t making any interest on their deposits and may have to pay to store them). But over $15 trillion in bonds are now trading globally at negative interest rates, yet this radical maneuver has not been shown to measurably improve economic performance. In fact  new research shows that negative interest rates from central banks, rather than increasing spending, stopping deflation, and stimulating the economy as they were expected to do, may be having the opposite effects. They are being blamed for squeezing banks, punishing savers, keeping dying companies on life support, and fueling a potentially unsustainable surge in asset prices.

So what is a central banker to do? Hildebrand’s proposed solution was presented in a paper he wrote with three of his colleagues at BlackRock, the world’s largest asset manager, where he is now vice chairman. Released in August to coincide with the annual Jackson Hole meeting of central bankers, the paper was co-authored by Stanley Fischer, former governor of the Bank of Israel and former vice chairman of the U.S. Federal Reserve; Jean Boivin, former deputy governor of the Bank of Canada; and BlackRock economist Elga Bartsch. Their proposal calls for “more explicit coordination between central banks and governments when economies are in a recession so that monetary and fiscal policy can better work in synergy.” The goal, according to Hildebrand, is to go “direct with money to consumers and companies in order to enliven consumption,” putting spending money directly into consumers’ pockets.

It sounds a lot like “helicopter money,” but he was not actually talking about raining money down on the people. The central bank would maintain a “Standing Emergency Fiscal Facility” that would be activated when interest rate manipulation was no longer working and deflation had set in. The central bank would determine the size of the Facility based on its estimates of what was needed to get the price level back on target. It sounds good until you get to who would disburse the funds: “Independent experts would decide how best to deploy the funds to both maximize impact and meet strategic investment objectives set by the government.”

“Independent experts” is another term for “technocrats” – bureaucrats chosen for their technical skill rather than by popular vote. They might be using sophisticated data, algorithms and economic formulae to determine “how best to deploy the funds,” but the question is, “best for whom?” It was central bank technocrats who plunged the economies of Greece and Italy into austerity after 2011, and unelected technocrats who put Detroit into bankruptcy in 2013.

In short, Hildebrand and co-authors are not talking about central banks giving up their ivory tower independence to work with legislators in coordinating fiscal and monetary policy. Rather, central bankers would be acquiring even more power, by giving themselves a new pot of free money that they could deploy as they saw fit in the service of “government objectives.”

Carney’s New Game

The tendency to overreach was also evident in the Jackson Hole speech of BOE head Mark Carney, in which he said “we need to change the game.” The game changer he proposed was to break the power of the US dollar as global reserve currency. This would be done through the issuance of an international digital currency backed by multiple national currencies, on the model of Facebook’s “Libra.”

Multiple reserve currencies are not a bad idea, but if we’re following the Libra model, we’re talking about a new, single reserve currency that is merely “backed” by a basket of other currencies. The question then is who would issue this global currency, and who would set the rules for obtaining the reserves.

Carney suggested that the new currency might be “best provided by the public sector, perhaps through a network of central bank digital currencies.” This raises further questions. Are central banks really “public”? And who would be the issuer – the banker-controlled Bank for International Settlements, the bank of central banks in Switzerland? Or perhaps the International Monetary Fund, which Carney is in line to head?

The IMF already issues Special Drawing Rights to supplement global currency reserves, but they are merely “units of account” which must be exchanged for national currencies. Allowing the IMF to issue the global reserve currency outright would give unelected technocrats unprecedented power over nations and their money. The effect would be similar to the surrender by EU governments of control over their own currencies, making their central banks dependent on the European Central Bank for liquidity, with its disastrous consequences.

Time to End the “Independent” Fed?

A media event that provoked even more outrage against central bankers last month, however, was an August 27th op-ed in Bloomberg by William Dudley, former president of the New York Fed and a former partner at Goldman Sachs. Titled “The Fed Shouldn’t Enable Donald Trump,” it concluded:

There’s even an argument that the [presidential] election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

The Fed is so independent that, according to former Fed chair Alan Greenspan, it is answerable to no one. A chief argument for retaining the Fed’s independence is that it needs to remain a neutral arbiter, beyond politics and political influence; and Dudley’s op-ed clearly breached that rule. Critics called it an attempt to overthrow a sitting president, a treasonous would-be coup that justified ending the Fed altogether.

Perhaps, but central banks actually serve some useful functions. Better would be to nationalize the Fed, turning it into a true public utility, mandated to serve the interests of the economy and the voting public. Having the central bank and the federal government work together to coordinate fiscal and monetary policy is actually a good idea, so long as the process is transparent and public representatives have control over where the money is deployed. It’s our money, and we should be able to decide where it goes.

This article was first posted on Truthdig.org.

Will the IMF, FED, Negative Interest and Digital Money Kill the Western Economy?

The IMF, has been instrumental in helping destroying the economy of a myriad of countries, notably, and to start with, the new Russia after the fall of the Soviet Union, Greece, Ukraine and lately Argentina, to mention just a few. Madame Christine Lagarde, as chief of the IMF had a heavy hand in the annihilation of at least the last three mentioned. She is now taking over the Presidency of the European Central Bank (ECB). There, she expects to complete the job that Mario Draghi had started but was not quite able to finish: Further bleeding the economy of Europe, especially southern Europe into anemia.

Let’s see what we may have in store to come.

Negative interest, we have it already. It’s the latest banking fraud stealing money from depositors to give to large borrowers. It’s a reverse cross-subsidy, the poor financing the rich. That’s the essence. It’s a new form of moving money from the bottom to the top. Now, a Danish bank has launched the world’s first negative interest rate mortgage. It provides mortgages to home owners for a negative rate of 0.5%. The bank pays borrowers to take some money off their books. Of course, as usual, only relatively well-off people can become home owners and benefit from this reverse cross-subsidy. It is a token gesture, duping the public at large into believing that they are benefitting from the new banking stint. The bulk of such operations serve large corporations.

The borrower pays back less than the full loan amount. Switzerland may soon go into the direction of Denmark. Bank deposits with central banks pay negative interest almost everywhere in the western world, except in the US – yet. It’s only a question of time until the average consumer will have to reimburse the banks for their central bank deposit expenses, meaning, the customers are getting negative interest on their deposits. That’s inflation camouflage. A sheer fraud, but all made legal by a system that runs amok, that does not follow any ethics or legal standards. A totally deregulated western private banking system, compliments of the 1990s Clinton Administration, and, of course, his handlers. As Professor Michael Hudson calls it, financial barbarism. We are haplessly enslaved in this aberrant ever more abusive private  fiat money banking shenaniganism.

RT’s Max Keiser recently interviewed Karl Denninger of Market-Ticker.org. Denninger told Keiser:

Negative yielding bond is forced inflationary instrument: you buy it, you’re guaranteed inflation in the amount of a negative yield.

He blasted the tool as plain “theft” by any government that issues these bonds, which is done in an effort to nominally expand a country’s GDP.

If the government is issuing more in sovereign debt their GDP is expanding in nominal terms. If you have negative interest rates on those government bonds, you’re creating excess space for the government to run the fiscal deficit […] in excess of GDP expansion. Nobody in any civilized nation should allow this to happen because it is theft, on the scale of that differential, from everybody in the economy,

To make sure the little saver doesn’t think about depositing his savings under his mattress or in a hole in the ground instead of bringing it to the bank, money will be digitized and cash will disappear. Madame Lagarde has already more than hinted at that, when she gave a pre-departure speech at the IMF – explaining on how she sees the future of monetary banking. The future, according to her, being no more than 15 to 20 years away, is a no-cash society. Just enough time for the elder generations, those that may still feel an instinct of rejection and have some consciousness about personal privacy, those that may resist money digitization, may have died out. The young, up-and-coming age groups may be brainwashed enough to find a cashless society so cool.

Since Madame Lagarde is moving to head the ECB in Frankfurt, it is fair to assume that Europe will be one of the largest test grounds for digitized money; i.e., towards a cashless society. In fact, it is already a test ground. Many department stores and other shops in Nordic countries — Sweden, Norway, Denmark, Finland — do no longer accept cash, only electronic money. In Denmark already up of 80% of all monetary transactions are made digitally.

Imagine, for your chewing gum wrapper, pack of cigarette, or candy bar, you swipe a card in front of an electronic eye, and bingo, you have paid, not touching any money – “that’s mega cool!”.  That’s what the young people may think, oblivious to leaving a trail of personal data behind, among them their bank account details, their GPS-geared location, what they are shopping, a pattern of data that is in ten years-time expected to amount to about 70,000 points of information about an individual’s characteristics, emotions, preferences, photos, personal contacts… what Cambridge Analytica in the superb documentary “The Great Hack” revealed as already today on average 5,000 points of data per citizen. The system will know you inside out better than you know yourself. And you will be exposed to algorithms that know exactly how to influence every action, every move of yours. Cool!

That, combined with face recognition which is advancing rapidly around the globe, will be super cool.

A horrendous trial on how an entire country, India, with the world’s second largest population, may react to demonization, was introduced in 2016 by President Modi, bending to the pressure of the western financial system, with support of the IMF and implementation funding by USAID. It amounted in a disastrous and cruel demonetization, invalidating almost over-night the most popular 100 Rupee (Rs) bank note, replacing it with a 200 Rs note which in most places, especially in rural towns, where banks are scarce, was not available. Never mind that less than half of the Indian population has a bank account, where the bank note exchange transactions had to be carried out.

The sudden disappearance of the most popular bank note – more than 80% of all monetary cash transactions in India took place in 100 Rs notes – was a proxy to digitization of money. Countless people starved to death especially in rural areas, because their 100 Rs were declared worthless and became unacceptable to buy food.

The 340,000 citizens of Iceland have already a fully digitized e-ID, now moving towards a mobile ID; i.e., accessible through your smart phone uniting every possible data that belongs to you, from medical records to insurance policies, all the way to dog, cat and car registrations. You name it. Most say they trust their government and are not unhappy with their divulging their most intimate data. Many have no or little idea, though, to what extent the private sector is involved in setting up such a hermetic countrywide data bank for the government. Even if the regulator is within the government and you trust your government, how much can you trust the profit-oriented private sector in protecting your data?

The surveillance state that you, among other clandestine intrusions into your privacy, will allow by willy-nilly accepting digitization of money, and eventually digitization of your entire private data, pales Orwell’s imagination of “1984”. Every citizen is registered in every western “security agency’s” electronic data bank, and, of course, those of the empire and Middle East affiliate, Israel, CIA, NSA, FBI, Mossad, and so on.  No escaping anymore.

It just so happens that you, dear citizen, are oblivious to all of what is going on behind your back, since your attention will be captured by massive marketing and directed towards the nefarious machinations of the corporate elite-ruled, globalized world, making you an eternal and ever-more intense consumer. You must spend the last penny of your income on trendy stuff, all those fashion things that will be pumped non-stop day-in-day-out into your brain, what’s left of it, by propaganda on television, radio, electronic cartoon-like billboards, internet, and that at every turn you take. And let’s not forget sports events.  They increase every year and are the most direct deviation tactic take-over from the Roman Empire.

The most aberrant trends will be cool, like shredded jeans, for which you pay a premium, body-paintings called tattoos, footballer hair styles, because they are fashionable and your looks are key to fit into a standardized, globalized society that has seized thinking for itself, no more interest in politics, in what your non-democratically elected representatives decide for you. It’s what Noam Chomsky calls the marginalization of the populace.

You are made to believe that you are living in a democracy where you can do what you want, shop what you want, watch what you want, and even when the elections or occasional referenda are offered to request your opinions, you are cheated into believing your choice is free. Of course, it is not. It is all programmed. Algorithms drawing on your profile of 70,000 points of information on emotions, desires and dreams, will clandestinely help the ‘system’ to enslave, cheat and master you, and you won’t even notice.

That’s where we are headed, largely thanks to digitalization of money – but not only, because surveillance will also follow all your steps on internet, on Facebook, Twitter, Instagram, Whatsapp – and many more of those especially created marketing tools, implanted in societies’ social media, that make life and communication so much easier.

And there is more to digital money. Much more. In 2014, the unelected European Commission (EC) has put on its books of regulations, following a similar decree in the US, the rule that an overextended bankrupt too-big-to-fail private bank will no longer be rescued by the state, by your tax money – which used to be called a “bail-out”. Instead, there will be “bail-ins”, meaning that the bank will seize your deposits, your savings and sanitize itself with money stolen from you. You have no choice. There will be no ‘run on the banks’  because there is no cash to withdraw. We have seen signs of this when Greece collapsed after 2010, and cash machines spitting out no more than 20 € per day, if at all. For many Greek citizens, especially the poorer class living from day to day, this meant often cruel starvation.

Bail-ins are little talked about, but they happen already today and ever more so. In 2014, the Austrian bank Hypo Alpe Adria – the Heta Asset Resolution AG, was given green light by the Austrian Banking Regulator, the Austrian Financial Market Authority (FMA), to refinance itself by a so-called “haircut” of an average 54%, meaning, stealing 54% of depositors’ money.

But the first and largest “haircut” test took place in Cyprus, when in 2013 the Bank of Cyprus depositors lost about 47.5% in a “haircut” to bail out their bank. Of course, the big sharks were forewarned, so they could withdraw their money in time and transfer it abroad.1

It could get worse. The state, tax authority, an institution, a corporation says you owe them money which you deny, possibly for a good reason, but they have access to your bank account and just seize the amount they pretend is their due. You are powerless against these tyrannical monsters and may have to hire expensive legal service to get your stolen money back if at all. Because the “system” is run by the “system”. And once that level has been reached, a form of Full Spectrum Dominance, a key target of the PNAC (Plan for a New American Century), there is hardly any escaping. That has all happened already, in front of our publicity-blinded eyes, little spoken about, the trend is growing and this even without necessarily a digitized world.

Is it that the kind of society you want?

Then there are the rather prominent gurus who bet on gold and bitcoins to replace the faltering dollar, like a last-ditch solution. None of them is any more viable than the fiat dollar. Gold is highly volatile due to its vulnerability for manipulation – as it is largely controlled by the BIS (Bank for International Settlement, in Basle, Switzerland, also called the central bank of all central banks, and yes, the same bank that helped the FED finance Hitler’s war against the Soviet Union.  (So you see where this bank is coming from.) It is entirely privately owned and largely controlled by the Rothschild clan. And as an associated side note — few people talk about it — there is in excess of 100 times more paper gold in circulation than you could ever cash in, if you needed it. It is another one of those bank-invented ‘derivative’ bubbles that will explode and serve to enrich them when the time is ripe.

Bitcoins, the most prominent of some 3,000 to 4,000 cryptocurrencies flooding the world, is totally unreliable. A year after it was created in 2008 allegedly by an unknown person or group of people using the name Satoshi Nakamoto, bitcoin’s value in 2009 was US$ 0.08, It gradually rose and eventually jumped in December 2017 briefly above US$ 20,000, but dropped within a year to about US$ 3,500. Today bitcoin is hovering around US$ 9,500 (August/September 2019). Bitcoin – along with other cryptocurrencies – is highly speculative, lends itself to Mafia-type money-laundering and other fraudulent transactions. It is about equivalent to fiat money and certainly inept to be the backing for a monetary system.

And let’s not forget, the latest Facebook initiative — a cryptocurrency, the Libra, to be launched in 2020 out of Geneva, Switzerland – is expected to dominate within a few years 70% to 80% of the international money market. You see, the same clan that has been manipulating and cheating you with the dollar, is now ‘banking’ on you falling for the Facebook currency  as it will be so easy to use your smart phone for any kind of monetary transaction, thus, avoiding traditional predatory banking. Looks like a good thing at the outside – right? – Nope! It’s entirely privately owned and run by an unscrupulous mafia that is being set up to continue milking the masses for the benefits of an ever-smaller elite.

There is ,however, a role for blockchain cryptocurrencies, to circumvent private banking, those that are government controlled and regulated. China and Russia are about to launch their government-controlled cryptocurrencies and others – Iran, Venezuela, India – are following in the same steps. But they all ban privately run cryptocurrencies in their countries and rightly so. A combination of government-regulated blockchain cryptos and public banking, where no private profits are in the fore, but rather the well being of the citizen and the country’s economy, may be a viable solution into a new monetary scheme, protected from the kleptocracy of western banking.

Desperation about the dollar losing its world hegemony is growing – and growing fast. To salvage the western fiat monetary system, Madame Lagarde and others are also talking about some kind of Special Drawing Rights (SDR) to replace the dollar as a reserve currency, since there is no escaping – the dollar as reserve currency is doomed. The current IMF SDR basket consists of five currencies, the US-dollar (weighing 41.73%), the British Pound (8.02%) the Euro (30.93%), the Japanese Yen (8.33%) and since 2017 the Chinese Yuan, the currency of the world’s largest economy compared by Purchasing Power GDP (10.92%).

At this point thinking of any reshuffling of the SDR basket’s contents is purely speculative. However, it can easily be assumed that the dollar would remain in a very prominent position within the basket, as it should remain the leading hegemon of world economy. Let’s not forget, the US Treasury controls the IMF with an absolute veto, in other words, 100%. It can also be assumed that the Chinese Yuan would either be kicked out altogether or would be given a minor weight in the basket so to diminish its role. If this was to become the chosen option by the US Treasury, it could and probably might prompt China to withdraw the Yuan from the SDR basket, as the Yuan does no longer need SDR recognition in the world to be considered a primary reserve currency.

Unless this is stealthily done — outside of public sight and in disguise of countries still holding major US-dollar reserves — the world would unlikely accept such an alternative, especially since it is widely known among treasurers of countries around the globe that the Chinese Yuan is rapidly raising to become the key world reserve currency.

As reported by William Engdahl’s analytical essay “Is the Fed Preparing to Topple the US Dollar?”, the outgoing Governor of the Bank of England, Mark Carney, delivered at the recent annual meeting of central bankers in Jackson Hole, Wyoming, a set of ideas that went into a similar direction, towards a shift away from the dominant role of the US dollar as a reserve currency. Similar to Mme. Lagarde’s earlier remarks about an SDR-type reserve currency, he made it understood that though the Chinese Yuan, the currency of the key trading nation, may have a role in the basket, it would – for now – not be an important one. He also was clear about the current disturbing and destabilizing imbalance where a faltering dollar still pretends to hold the hegemonic scepter over the world economy.

Keeping the dollar still in a leading role, while the US economy is declining, was no longer a viable option for an increasingly globalized world economy. Carney was hinting at a multipolar monetary and reserve system for a multipolar globalized world. Similar remarks came from former New York Federal Reserve Bank chief, Bill Dudley. However, Dudley, hinted that for the United States to give up her dollar dominance, the backbone for her world hegemony, may not come voluntarily. Might that lead to a major, maybe armed world conflict?

Much of this is speculation from the western perspective. It is, however, clear that there is a tremendous and mounting uneasiness about the western dollar-based fiat monetary system, backed by nothing, not even by the western economy. You compare this with the Chinese Yuan and the Russian Ruble, both backed by gold and – more importantly – by their own economy. It becomes increasingly clear that much of the speculation and efforts by influential central banking figures to save the western monetary Ponzi scheme maybe just propaganda to calm the minds of western financiers – holding them back from jumping ship.

• First published in New Eastern Outlook (NEO)

  1. See: Peter Koenig: “Infringing upon the Eurozone’s Sovereignty on behalf of Wall Street.  The EBC’s “Haircut” Measures, Undermining Trade and Investment with Russia and China“, Global Research, November 7, 2015; and Peter Koenig, “Retrenchment, Robotization and Crypto-Currencies: The Runaway Train Towards Full Digitization of Money and Labor“, Global Research, December 27, 2017.

The Key to a Sustainable Economy Is 5,000 Years Old

We are again reaching the point in the business cycle known as “peak debt,” when debts have compounded to the point that their cumulative total cannot be paid. Student debt, credit card debt, auto loans, business debt and sovereign debt are all higher than they have ever been. As economist Michael Hudson writes in his provocative 2018 book, “…and forgive them their debts,” debts that can’t be paid won’t be paid. The question, he says, is how they won’t be paid.

Mainstream economic models leave this problem to “the invisible hand of the market,” assuming trends will self-correct over time. But while the market may indeed correct, it does so at the expense of the debtors, who become progressively poorer as the rich become richer. Borrowers go bankrupt and banks foreclose on the collateral, dispossessing the debtors of their homes and their livelihoods. The houses are bought by the rich at distress prices and are rented back at inflated prices to the debtors, who are then forced into wage peonage to survive. When the banks themselves go bankrupt, the government bails them out. Thus the market corrects, but not without government intervention. That intervention just comes at the end of the cycle to rescue the creditors, whose ability to buy politicians gives them the upper hand. According to free-market apologists, this is a natural cycle akin to the weather, which dates all the way back to the birth of modern economics in ancient Greece and Rome.

Hudson counters that those classical societies are not actually where our financial system began, and that capitalism did not evolve from bartering, as its ideologues assert. Rather, it devolved from a more functional, sophisticated, egalitarian credit system that was sustained for two millennia in ancient Mesopotamia (now parts of Iraq, Turkey, Kuwait and Iran). Money, banking, accounting and modern business enterprise originated not with gold and private trade, but in the public sector of Sumer’s palaces and temples in the third century B.C. Because it involved credit issued by the local government rather than private loans of gold, bad debts could be periodically forgiven rather than compounding until they took the whole system down, a critical feature that allowed for its remarkable longevity.

The True Roots of Money and Banking

Sumer was the first civilization for which we have written records. Its notable achievements included the wheel, the lunar calendar, our numerical system, law codes, an organized hierarchy of priest-kings, copper tools and weapons, irrigation, accounting and money. It also produced the first written language, which took the form of cuneiform figures impressed on clay. These tablets were largely just accounting tools, recording the flow of food and raw materials in the temple and palace workshops, as well as IOUs (mainly to these large public institutions) that had to be preserved in writing to be enforced. This temple accounting system allowed for the coordinated flow of credit to peasant farmers from planting to harvesting, and for advances to merchants to engage in foreign trade.

In fact, it was the need to manage accounts for a large labor force under bureaucratic control that is thought to have led to the development of writing. The people willingly accepted this bureaucratic control because they viewed the gods as having decreed it. According to their cuneiform writings, humans were created to work in the fields and the mines after certain lower gods tasked with that hard labor rebelled.

Usury, or the charging of interest on loans, was an accepted part of the Mesopotamian credit system. Interest rates were high and remained unchanged for two millennia. But Mesopotamian scholars were well aware of the problem of “debts that can’t be paid.” Unlike in today’s academic economic curriculum, Hudson writes:

Babylonian scribal students were trained already c. 2000 BC in the mathematics of compound interest. Their school exercises asked them to calculate how long it took a debt at interest of 1/60th per month to double. The answer is 60 months: five years. How long to quadruple? 10 years. How long to multiply 64 times? 30 years. It must’ve been obvious that no economy can grow in keeping with this rate of increase.

Sumerian kings solved the problem of “peak debt” by periodically declaring “clean slates,” in which agrarian debts were forgiven and debtors were released from servitude to work as tenants on their own plots of land. The land belonged to the gods under the stewardship of the temple and the palace and could not be sold, but farmers and their families maintained leaseholds to it in perpetuity by providing a share of their crops, service in the military and labor in building communal infrastructure. In this way, their homes and livelihoods were preserved, an arrangement that was mutually beneficial, since the kings needed their service.

Jewish scribes, who spent time in captivity in Babylon in the sixth century B.C, adapted these laws in the year or jubilee, which Hudson argues was added to Leviticus after the Babylonian captivity. According to Leviticus 25:8-13, a Jubilee Year was to be declared every 49 years, during which debts would be forgiven, slaves and prisoners freed and their property leaseholds restored. As in ancient Mesopotamia, property ownership remained with Yahweh and his earthly proxies. The Jubilee law effectively banned the outright sale of land, which could only be leased for up to 50 years (Leviticus 25:14-17). The Levitican Jubilee represented an advance over the Mesopotamian “clean slates,” Hudson says, in that it was codified into law rather than relying on the whim of the king. But its proclaimers lacked political power, and whether the law was ever enforced is unclear. It served as a moral rather than a legal prescription.

Ancient Greece and Rome adopted the Mesopotamian system of lending at interest, but without the safety valve of periodic “clean slates,” since the creditors were no longer the king or the temple, but private lenders. Unfettered usury resulted in debt bondage and forfeiture of properties, consolidation into large landholdings, a growing wedge between rich and poor, and the ultimate destruction of the Roman Empire.

As for the celebrated development of property rights and democracy in ancient Greece and Rome, Hudson argues that they did not actually serve the poor. They served the rich, who controlled elections, just as rich donors do today. Taking power away from local governments by privatizing once-communal lands allowed private creditors to pass laws by which they could legally confiscate property when their debtors could not pay. “Free markets” meant the freedom to accumulate massive wealth at the expense of the poor and the state.

Hudson maintains that when Jesus Christ preached “forgiveness of debts,” he was also talking about economic debt, not just moral transgressions. When he overturned the tables of the money changers, it was because they had turned a house of prayer into “a den of thieves.” But creditors’ rights had by then gained legal dominance, and Christian theologians lacked the power to override them. Rather than being a promise of economic redemption in this life, forgiveness of debts thus became a promise of spiritual redemption in the next.

How to Pull Off a Modern Debt Jubilee

Such has been the fate of debtors in modern Western economies. But in some modern non-Western economies, vestiges of the debt write-off solution remain. In China, for instance, nonperforming loans are often carried on the books of state-owned banks or canceled rather than putting insolvent debtors and banks into bankruptcy. As Dinny McMahon wrote in June in an article titled “China’s Bad Data Can Be a Good Thing”:

In China, the state stands behind the country’s banks. As long as authorities ensure those banks have sufficient liquidity to meet their obligations, they can trundle along with higher delinquency levels than would be regarded safe in a market economy.

China’s banking system, like that of ancient Mesopotamia, is largely in the public sector, so the state can back its banks with liquidity as needed. Interestingly, the Chinese state also preserves the ancient Near Eastern practice of retaining ownership of the land, which citizens can only lease for a period of time.

In Western economies, most banks are privately owned and heavily regulated, with high reserve and capital requirements. Bad loans mean debtors are put into foreclosure, jobs and capital infrastructure are lost, and austerity prevails. The Trump administration is now aggressively pursuing a trade war with China in an effort to level the playing field by forcing it into the same austerity regime, but a more productive and sustainable approach might be for the U.S. to engage in periodic debt jubilees itself.

The problem with that solution today is that most debts in Western economies are owed not to the government but to private creditors, who will insist on their contractual rights to payment. We need to find a way to pay the creditors while relieving the borrowers of their debt burden.

One possibility is to nationalize insolvent banks and sell their bad loans to the central bank, which can buy them with money created on its books. The loans can then be written down or voided out. Precedent for this policy was established with “QE1,” the Fed’s first round of quantitative easing, in which it bought unmarketable mortgage-backed securities from banks with liquidity problems.

Another possibility would be to use money generated by the central bank to bail out debtors directly. This could be done selectively, by buying up student debt or credit card debt or car loans bundled as “asset-backed securities,” then writing the debts down or off, for example. Alternatively, debts could be relieved collectively with a periodic national dividend or universal basic income paid to everyone, again drawn from the deep pocket of the central bank.

Critics will object that this would dangerously inflate the money supply and consumer prices, but that need not be the case. Today, virtually all money is created as bank debt, and it is extinguished when the debt is repaid. That means dividends used to pay this debt down would be extinguished, along with the debt itself, without adding to the money supply. For the 80% of the U.S. population now carrying debt, loan repayments from their national dividends could be made mandatory and automatic. The remaining 20% would be likely to save or invest the funds, so this money too would contribute little to consumer price inflation; and to the extent that it did go into the consumer market, it could help generate the demand needed to stimulate productivity and employment. (For a fuller explanation, see Ellen Brown, “Banking on the People,” 2019).

In ancient Mesopotamia, writing off debts worked brilliantly well for two millennia. As Hudson concludes:

To insist that all debts must be paid ignores the contrast between the thousands of years of successful Near Eastern clean slates and the debt bondage into which [Greco-Roman] antiquity sank. … If this policy in many cases was more successful than today’s, it is because they recognized that insisting that all debts must be paid meant foreclosures, economic polarization and impoverishment of the economy at large.

• This article was first posted on Truthdig.com

Trump’s Effective Intimidation of the Powerful Federal Reserve

The Federal Reserve (the Fed) – the United States’ version of a Central Bank – is a strange duck. It is the U.S. government’s most powerful regulatory agency. It, after all, regulates money and interest rates. Yet, its budget comes entirely from the banking industry and relationships with the financial industry. So Congress, which appropriates money for all other federal agencies, has little leverage over the Fed’s operations.

This independence – except from the big banks – is by design, when the Fed was devised by President Woodrow Wilson over one hundred years ago. The Fed, a secretive, private government inside a public government presents problems for a democratic society. The alternative was deemed worse by its boosters, allowing “politics” to determine the Fed’s Board of Governors decisions.

It is as if the Federal Reserve/banking complex does not deal with political power by its own definition. The Fed entrenches the power of the banks without accountability inside Washington. Ask Republicans in Congress whether they generally oppose government regulation of a business and most will say “yes.” Ask whether they want to deregulate the Federal Reserve and they will say “Of course not.” Somebody has to assure monetary stability.

But the Fed’s announced quarter of a percent cut in interest rates, which were already low by historical standards at 2.25 to 2.50 levels, will affect people, beyond abstract monetary theories. Tens of millions of Americans who rely on income from their savings accounts and money market accounts will receive less money. Some will jump into the high flying stock market, presumably to get more income and introduce real risk to their principal.

The $2.9 trillion Social Security trust fund will receive less income from lower yielding Treasury Bonds. That’s not good for seniors. It is also really bad for pension funds, not to mention the returns on certain life insurance policies.

The Fed mumbled something about the trade war and a recent small decline in manufacturing indices as reasons to head off trouble.

But companies are piling up idle capital without knowing what to do with it other than to spend trillions of dollars on unproductive stock buybacks. There is no shortage of capital. Lowering the interest rate will just encourage more unnecessary corporate debt, with its deductible interest payments, instead of corporations using their available equity.

Venerable business columnist Allan Sloan does not think that a quarter-point cut by the Fed “will generate job-creating investments in the United States by companies that are uncertain about the future because of trade wars, threatened trade wars, interrupted supply chains and other actual and potential instabilities”(See Allan Sloan’s article here).

Sloan gave other cogent reasons against a Fed interest rate cut, while conceding that it might help borrowers. That assumes gouging lenders (pay day loans, auto loans, credit card charges) pass the savings along.

Conventional critics of the Fed’s cut this week point to already low interest rates and what they call a hefty economy, modest inflation, and a low unemployment rate.

Some former Fed governors called out the Fed for not clearly and specifically explaining its decision to cut rates. As former Fed Governor and Deputy Secretary of the Treasury, Sarah Bloom Raskin, said: “The Fed has really had a bit of a communications blunder… If Americans don’t understand exactly what is happening and why, they may think that Chairman Jerome Powell is caving into presidential bullying.”

No kidding. Trump has been pounding the Fed and threatening to take away Chairman Powell’s Chair for months. He is demanding sharp reductions in interest rates. He renewed his denunciation after the Fed’s quarter of a percent cut this week, tweeting that it was nowhere near enough!

Presidents almost never do this publicly to the Fed. But Trump, the failed gambling czar knows better. Intimidation through the mass media again and again works for Trump.

Although the Fed wanted to resist his pressure, hey, why take greater chances with crazy Donald? Instead, they threw him a bone.

How to Pay for It All: An Option the Candidates Missed

The Democratic Party has clearly swung to the progressive left, with candidates in the first round of presidential debates coming up with one program after another to help the poor, the disadvantaged and the struggling middle class. Proposals ranged from a Universal Basic Income to Medicare for All to a Green New Deal to student debt forgiveness and free college tuition. The problem, as Stuart Varney observed on FOX Business, was that no one had a viable way to pay for it all without raising taxes or taking from other programs, a hard sell to voters. If robbing Peter to pay Paul is the only alternative, the proposals will go the way of Trump’s trillion dollar infrastructure bill for lack of funding.

Fortunately there is another alternative, one that no one seems to be talking about – at least no one on the presidential candidates’ stage. In Japan, it is a hot topic; and in China, it is evidently taken for granted: the government can generate the money it needs simply by creating it on the books of its own banks. Leaders in China and Japan recognize that stimulating the economy is not a zero-sum game in which funds are just shuffled from one pot to another. To grow the economy and increase GDP, demand (money) must go up along with supply. New money needs to be added to the system; and that is what China and Japan have been doing, very successfully.

Before the 2008-09 global banking crisis, China’s GDP increased by an average of 10% per year for 30 years. The money supply increased right along with it, created on the books of its state-owned banks. Japan, under Prime Minister Shinzo Abe, has been following suit, with massive economic stimulus funded by correspondingly massive purchases of the government’s debt by its central bank, using money simply created with computer keystrokes.

All of this has occurred without driving up prices, the dire result predicted by US economists who subscribe to classical monetarist theory. In the 20 years from 1998 to 2018, China’s M2 money supply grew from just over 10 trillion yuan to 180 trillion yuan ($11.6T), an 18-fold increase. Yet it closed 2018 with a consumer inflation rate that was under 2%. Price stability has been maintained because China’s Gross Domestic Product has grown at nearly the same fast clip, by a factor of 13 over 20 years.

In Japan, the massive stimulus programs called “Abenomics” have been funded through its central bank. The Bank of Japan has now “monetized” nearly 50% of the government’s debt, turning it into new money by purchasing it with yen created on the bank’s books. If the US Fed did that, it would own $11 trillion in US government bonds, four times what it holds now. Yet Japan’s M2 money supply has not even doubled in 20 years, while the US money supply has grown by 300%; and Japan’s inflation rate remains stubbornly below the BOJ’s 2% target. Abe’s stimulus programs have not driven up prices. In fact, deflation remains a greater concern than inflation in Japan, despite unprecedented debt monetization by its central bank.     

China’s Economy: A Giant Ponzi Scheme or a New Economic Model? 

Critics have long called China’s economy a Ponzi scheme, doomed to collapse in the end; and for 40 years China has continued to prove the critics wrong. According to a June 2019 report by the Congressional Research Service:

Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained expansion by a major economy in history.” Such growth has enabled China, on average, to double its GDP every eight years and helped raise an estimated 800 million people out of poverty. China has become the world’s largest economy (on a purchasing power parity basis), manufacturer, merchandise trader, and holder of foreign exchange reserves.

This massive growth has been funded with credit created on the books of China’s banks, most of which are state-owned. Even in the US, of course, most money today is created on the books of banks. That is what our money supply is – bank credit. What is different about the Chinese model is that the Chinese government can and does intervene to direct where the credit goes. In a July 2018 article titled “China Invents a Different Way to Run an Economy,” Noah Smith suggests that China’s novel approach to macroeconomic stabilization by regulating bank credit represents a new economic model, one that may hold valuable lessons for developed economies. He writes:

Many economists would see this approach as hopelessly ad hoc, haphazard, and interventionist — not the kind of thing any developed country would want to rely on. And yet, it seems to have carried China successfully through several crises, while always averting the catastrophic financial crash that outside observers have been warning about for years.

Abenomics, Helicopter Money and Modern Monetary Theory

Noah Smith has also written about Japan’s unique model. After Prime Minister Abe crushed his opponents in October 2017, Smith wrote on Bloomberg News, “Japan’s long-ruling Liberal Democratic Party has figured out a novel and interesting way to stay in power—govern pragmatically, focus on the economy and give people what they want.” He said everyone who wanted a job had one; small and midsize businesses were doing well; and the BOJ’s unprecedented program of monetary easing had provided easy credit for corporate restructuring without generating inflation. Abe had also vowed to make both preschool and college free.

Like China’s economic model, Abenomics has been called a Ponzi scheme, funded by central bank-created “free” money. But whatever it is called, the strategy has been working for the economy. Even the once-dubious International Monetary Fund has declared Abenomics a success.

The Bank of Japan’s massive bond-buying program has also been called “helicopter money” — a policy in which the central bank directly finances government spending by underwriting bonds – and it has been compared to Modern Monetary Theory, which similarly posits that the government can spend money into existence with central bank funding. As Nathan Lewis wrote in Forbes in February 2019:

In practice, something like “MMT” has reached a new level of sophistication these days, exemplified by Japan. . . . The Bank of Japan now holds government bonds amounting to more than 100% of GDP. In other words, the government has managed to finance itself “with the printing press” to the amount of about 100% of GDP, with no inflationary consequences. [Emphasis added.]

Japanese officials have resisted comparisons with both helicopter money and MMT, arguing that Japanese law does not allow the government to sell its bonds directly to the central bank. As in the US, the government’s bonds must be sold on the open market, a limitation that also prevents the US government from directly monetizing its debt. But as Bank of Japan Deputy Governor Kikuo Iwata observed in a 2013 Reuters article, where the bonds are sold does not matter. What is important is that the central bank has agreed to buy them, and it is here that US banking law diverges from the laws of both Japan and China.

Central Banking Asia-style

When the US Treasury sells bonds on the open market, it can only hope the Fed will buy them. Any attempt by the president or the legislature to influence Fed policy is considered a gross interference with the sacrosanct independence of the central bank.

In theory, the central banks of China and Japan are also independent. Both are members of the Bank for International Settlements, which stresses the importance of maintaining the stability of the currency and the independence of the central bank; and both countries revised their banking laws in the 1990s to better reflect those policies. But their banking laws still differ in significant ways from those of the US.

In Japan, the Bank of Japan is legally free to set interest rates, but it must cooperate closely with the Ministry of Finance in setting policy. Article 4 of the 1997 Bank of Japan Act says:

The Bank of Japan shall, taking into account the fact that currency and monetary control is a component of overall economic policy, always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government’s economic policy shall be mutually compatible.

Unlike in the US, Prime Minister Abe can negotiate with the head of the central bank to buy the government’s bonds, ensuring that the debt is, in fact, turned into new money that will stimulate domestic economic growth; and he is completely within his legal rights in doing it.

The leverage of China’s central government over its central bank is even stronger than the Japanese prime minister’s. The 1995 Law of the People’s Republic of China on the People’s Bank of China states:

The People’s Bank of China shall, under the leadership of the State Council, formulate and implement monetary policies, guard against and eliminate financial risks, and maintain financial stability.

The State Council has final decision-making power on such things as the annual money supply, interest rates and exchange rates; and it has used this power to stabilize the economy by directing and regulating the issuance of bank credit, the new Chinese macroeconomic model that Noah Smith says holds important lessons for us.

The successful six-year run of Abenomics, along with China’s decades of unprecedented economic growth, have proven that governments can indeed monetize their debts, expanding the money supply and stimulating the economy, without driving up consumer prices. The monetarist theories of US policymakers are obsolete and need to be discarded.

Kyouryoku,” the Japanese word for cooperation, is composed of characters that mean “together strength” – “stronger by working together.” This is a recognized principle in Asian culture and it is an approach we would do well to adopt. What US presidential candidates from both parties should talk about is how to modify the law so that Congress, the Administration and the central bank can work together in setting monetary policy, following the approaches successfully modeled in China and Japan.

First posted under another title at TruthDig.org

How to Pay for It All: An Option the Candidates Missed

The Democratic Party has clearly swung to the progressive left, with candidates in the first round of presidential debates coming up with one program after another to help the poor, the disadvantaged and the struggling middle class. Proposals ranged from a Universal Basic Income to Medicare for All to a Green New Deal to student debt forgiveness and free college tuition. The problem, as Stuart Varney observed on FOX Business, was that no one had a viable way to pay for it all without raising taxes or taking from other programs, a hard sell to voters. If robbing Peter to pay Paul is the only alternative, the proposals will go the way of Trump’s trillion dollar infrastructure bill for lack of funding.

Fortunately there is another alternative, one that no one seems to be talking about – at least no one on the presidential candidates’ stage. In Japan, it is a hot topic; and in China, it is evidently taken for granted: the government can generate the money it needs simply by creating it on the books of its own banks. Leaders in China and Japan recognize that stimulating the economy is not a zero-sum game in which funds are just shuffled from one pot to another. To grow the economy and increase GDP, demand (money) must go up along with supply. New money needs to be added to the system; and that is what China and Japan have been doing, very successfully.

Before the 2008-09 global banking crisis, China’s GDP increased by an average of 10% per year for 30 years. The money supply increased right along with it, created on the books of its state-owned banks. Japan, under Prime Minister Shinzo Abe, has been following suit, with massive economic stimulus funded by correspondingly massive purchases of the government’s debt by its central bank, using money simply created with computer keystrokes.

All of this has occurred without driving up prices, the dire result predicted by US economists who subscribe to classical monetarist theory. In the 20 years from 1998 to 2018, China’s M2 money supply grew from just over 10 trillion yuan to 180 trillion yuan ($11.6T), an 18-fold increase. Yet it closed 2018 with a consumer inflation rate that was under 2%. Price stability has been maintained because China’s Gross Domestic Product has grown at nearly the same fast clip, by a factor of 13 over 20 years.

In Japan, the massive stimulus programs called “Abenomics” have been funded through its central bank. The Bank of Japan has now “monetized” nearly 50% of the government’s debt, turning it into new money by purchasing it with yen created on the bank’s books. If the US Fed did that, it would own $11 trillion in US government bonds, four times what it holds now. Yet Japan’s M2 money supply has not even doubled in 20 years, while the US money supply has grown by 300%; and Japan’s inflation rate remains stubbornly below the BOJ’s 2% target. Abe’s stimulus programs have not driven up prices. In fact, deflation remains a greater concern than inflation in Japan, despite unprecedented debt monetization by its central bank.     

China’s Economy: A Giant Ponzi Scheme or a New Economic Model? 

Critics have long called China’s economy a Ponzi scheme, doomed to collapse in the end; and for 40 years China has continued to prove the critics wrong. According to a June 2019 report by the Congressional Research Service:

Since opening up to foreign trade and investment and implementing free-market reforms in 1979, China has been among the world’s fastest-growing economies, with real annual gross domestic product (GDP) growth averaging 9.5% through 2018, a pace described by the World Bank as “the fastest sustained expansion by a major economy in history.” Such growth has enabled China, on average, to double its GDP every eight years and helped raise an estimated 800 million people out of poverty. China has become the world’s largest economy (on a purchasing power parity basis), manufacturer, merchandise trader, and holder of foreign exchange reserves.

This massive growth has been funded with credit created on the books of China’s banks, most of which are state-owned. Even in the US, of course, most money today is created on the books of banks. That is what our money supply is – bank credit. What is different about the Chinese model is that the Chinese government can and does intervene to direct where the credit goes. In a July 2018 article titled “China Invents a Different Way to Run an Economy,” Noah Smith suggests that China’s novel approach to macroeconomic stabilization by regulating bank credit represents a new economic model, one that may hold valuable lessons for developed economies. He writes:

Many economists would see this approach as hopelessly ad hoc, haphazard, and interventionist — not the kind of thing any developed country would want to rely on. And yet, it seems to have carried China successfully through several crises, while always averting the catastrophic financial crash that outside observers have been warning about for years.

Abenomics, Helicopter Money and Modern Monetary Theory

Noah Smith has also written about Japan’s unique model. After Prime Minister Abe crushed his opponents in October 2017, Smith wrote on Bloomberg News, “Japan’s long-ruling Liberal Democratic Party has figured out a novel and interesting way to stay in power—govern pragmatically, focus on the economy and give people what they want.” He said everyone who wanted a job had one; small and midsize businesses were doing well; and the BOJ’s unprecedented program of monetary easing had provided easy credit for corporate restructuring without generating inflation. Abe had also vowed to make both preschool and college free.

Like China’s economic model, Abenomics has been called a Ponzi scheme, funded by central bank-created “free” money. But whatever it is called, the strategy has been working for the economy. Even the once-dubious International Monetary Fund has declared Abenomics a success.

The Bank of Japan’s massive bond-buying program has also been called “helicopter money” — a policy in which the central bank directly finances government spending by underwriting bonds – and it has been compared to Modern Monetary Theory, which similarly posits that the government can spend money into existence with central bank funding. As Nathan Lewis wrote in Forbes in February 2019:

In practice, something like “MMT” has reached a new level of sophistication these days, exemplified by Japan. . . . The Bank of Japan now holds government bonds amounting to more than 100% of GDP. In other words, the government has managed to finance itself “with the printing press” to the amount of about 100% of GDP, with no inflationary consequences. [Emphasis added.]

Japanese officials have resisted comparisons with both helicopter money and MMT, arguing that Japanese law does not allow the government to sell its bonds directly to the central bank. As in the US, the government’s bonds must be sold on the open market, a limitation that also prevents the US government from directly monetizing its debt. But as Bank of Japan Deputy Governor Kikuo Iwata observed in a 2013 Reuters article, where the bonds are sold does not matter. What is important is that the central bank has agreed to buy them, and it is here that US banking law diverges from the laws of both Japan and China.

Central Banking Asia-style

When the US Treasury sells bonds on the open market, it can only hope the Fed will buy them. Any attempt by the president or the legislature to influence Fed policy is considered a gross interference with the sacrosanct independence of the central bank.

In theory, the central banks of China and Japan are also independent. Both are members of the Bank for International Settlements, which stresses the importance of maintaining the stability of the currency and the independence of the central bank; and both countries revised their banking laws in the 1990s to better reflect those policies. But their banking laws still differ in significant ways from those of the US.

In Japan, the Bank of Japan is legally free to set interest rates, but it must cooperate closely with the Ministry of Finance in setting policy. Article 4 of the 1997 Bank of Japan Act says:

The Bank of Japan shall, taking into account the fact that currency and monetary control is a component of overall economic policy, always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control and the basic stance of the government’s economic policy shall be mutually compatible.

Unlike in the US, Prime Minister Abe can negotiate with the head of the central bank to buy the government’s bonds, ensuring that the debt is, in fact, turned into new money that will stimulate domestic economic growth; and he is completely within his legal rights in doing it.

The leverage of China’s central government over its central bank is even stronger than the Japanese prime minister’s. The 1995 Law of the People’s Republic of China on the People’s Bank of China states:

The People’s Bank of China shall, under the leadership of the State Council, formulate and implement monetary policies, guard against and eliminate financial risks, and maintain financial stability.

The State Council has final decision-making power on such things as the annual money supply, interest rates and exchange rates; and it has used this power to stabilize the economy by directing and regulating the issuance of bank credit, the new Chinese macroeconomic model that Noah Smith says holds important lessons for us.

The successful six-year run of Abenomics, along with China’s decades of unprecedented economic growth, have proven that governments can indeed monetize their debts, expanding the money supply and stimulating the economy, without driving up consumer prices. The monetarist theories of US policymakers are obsolete and need to be discarded.

Kyouryoku,” the Japanese word for cooperation, is composed of characters that mean “together strength” – “stronger by working together.” This is a recognized principle in Asian culture and it is an approach we would do well to adopt. What US presidential candidates from both parties should talk about is how to modify the law so that Congress, the Administration and the central bank can work together in setting monetary policy, following the approaches successfully modeled in China and Japan.

First posted under another title at TruthDig.org

Guns and Chips and Irony

I had Doctor Daniel Brown from Harvard spend 70 hours with Sirhan over almost three years [and] he comes away with this staggering, staggering evaluation. He says Sirhan was hypnoprogrammed ….. a technique of using chemicals as well as hypnosis ….. The program on him makes him forget everything within a certain time frame ….. He remembers when he gets a pinch on the neck [that] what he sees is not Senator Kennedy. It’s a paper target of a human being.

— William Pepper, 2013, speaking at Concordia University in Montreal, Quebec, Canada

Two issues made explicit in the U.S Constitution had to do with personal protection and the creation of money. Regarding the Second Amendment, its single sentence is blunt: “A well regulated Militia, being necessary to a free State, the right of the people to keep and bear Arms, shall not be infringed.” (Infringe: to limit or control) The authors, informed by history, knew that governments typically grow despotic, and that being armed provides a measure of protection for citizens against a government grown oppressive and unaccountable. In Thomas Jefferson’s words, “…. to protect themselves against tyranny in government.”

Yet there is a growing call for governmental control of guns in the hands of citizens, the call coming from within the citizenry itself, and the reason is evident: Every so often in recent years an apparently deranged individual goes on a shooting spree in a school or public space. With each shooting the chorus to rein in gun ownership grows ever louder, and ever more politicians, sniffing out prevailing public sentiment, make gun control a campaign issue. Ideas range from the registration of all firearms to the outlawing of weapons that might give citizens parity with, say, a militarized police force.

But here’s an interesting question: Might devious elements within a government, intent on disarming its populace, resort to the creation of false-flag scenarios designed to frighten and to produce justification for ever-tightening control? Might it be a question of “LIHOP” (let it happen on purpose) or “MIHOP” (make it happen on purpose), to use the lingo of what CIA-tutored media figures call “conspiracy theorists”? It’s just a question. I’m not so cynical as to imagine such intent, but the notion that such could be the case definitely exists among many who are inclined to ferret out details of certain events like the sinking of the Maine, the Lusitania, Operation Northwoods, Pearl Harbor, the Gulf of Tonkin. Things like that.

The fact that elements of the U.S. Government have developed and refined mind control techniques, such as those apparently applied to Sirhan Sirhan, is old news. The CIA’s Program MKUltra was born more than 60 years ago, and although it was reported as having been officially terminated in the 1970s, anyone who would accept that as fact resides in the kind of comfortable mental Happy Place that seems to be an American specialty.

Shootings themselves make excellent ‘news’, as they produce an uptick in public attention (and anxiety), which is important to those with a stake in maintaining narratives and crafting prevailing public opinion. And when poignant biographies of victims are aired as news items, with touching facial photos, evocative descriptions of their generosity and good works, and how they were so beloved, the victims are transformed for viewers into something akin to neighbors, and the shootings become a viewer’s neighborhood issues. Something must be done! And so public demand for gun control continues to grow.

Would central banks jump to the rescue and offer a fully anonymous digital currency? Certainly not. Doing so would be a bonanza for criminals.

— Christine Lagarde, IMF Director, 2018, speaking at the Singapore Fintech Festival

It is Congress that was granted the power “to coin money [and] establish the value thereof”, or at least that‘s how the U.S. Constitution would have it. But times changed, as did our governors, so in 1913 the Congress and President decided, despite multiple warnings from Jefferson to Lincoln (and others in between and since) to turn that process over to a private banking interest given the grossly misleading title “Federal Reserve”.

Those whom we allowed to become the masters of our money are now herding us toward an electronic global currency. The concept has been widely discussed since at least 1988 when a cover article in The Economist predicted a single world currency by 2018 along the lines of a theoretical “Phoenix”. The stepwise route described would be at first allowing — then later encouraging — the use of some form of private-sector money to be used in addition to existing national currencies. Thereafter, over time, the public would come to prefer it on the basis of its greater convenience. While the 2018 prediction was itself a miss, cryptocurrency had by that time become all the rage in some quarters, and the concept of cryptocurrency as a global reserve currency is now being discussed.

Meanwhile, the use of credit- and debit cards continues to rise, in some European countries virtually the sole means of making purchases. Banks and credit unions are now offering incentives for their use, even as powerful governmental forces are advocating the banning of cash altogether. Follow the threads and the world that emerges is one in which our every transaction is an electronic record. Consider, though, that a personal “chip”, that dreaded item of ultimate control in the worst of all dystopian futures, needn’t be a microscopic subcutaneous transmitter. A plastic card willingly (and, in a cashless society, necessarily) produced with every exchange works perfectly for recording the where and what of each individual’s every movement.

With cash a relic of the past, there would be no place to protect savings were The Economy to require negative interest rates and “bail-ins”; accounts would be docked automatically. Anyone deemed an irritant to the government would simply have his or her “chip” turned off (It happens!) leaving the offender absolutely disabled in a cashless world. With the loss of one’s card an ever-present possibility, instinct would naturally tend toward protective self editing, and the inevitable result would be a population rendered ideal from the standpoint of an oppressive and unaccountable government: obedient and submissive.

And the irony? If governmental and social forces now in motion continue unabated and unopposed, Americans, who proclaim themselves “lovers of freedom”, will have essentially disarmed and chipped ourselves. Having been made fearful, we don’t merely allow, we insist, on governmental control of personal arms. And through a process of multigenerational social engineering, our attachment to our plastic identifiers has been so reinforced and normalized that we have failed to realize what they represent and how they can be used against us.