The Momentum of Lies – Corrected

Headline in the FT “Spain to force banks to set aside €30bn.”  This is a bad joke. One which ordinary Spanish people are going to pay for in blood.

First, €30bn is a joke because it is not enough and the Spanish central bank and the government know it.

Second, 30bn of what? The Spanish banks don’t have 30bn of anything worth setting aside.

According to a Bank of Spain presentation quoted in an article by Bloomberg, the bad  debt provisions of  Spanish banks so far

would cover losses of between 53 percent and 80 percent on loans for land, housing under construction and finished developments.

The additional €30B announced today

 would increase coverage to 56 percent of such loans,..

The tiny little problem here, as Bloomberg points out, is that this additional sum is still ONLY for covering losses on land construction and finished developments.  Which means even this ‘new’ rescue, like those before it, has no provision in it ,

… to absorb losses on 650 billion euros of home mortgages held by Spanish banks or 800 billion euros of company loans.

That’s €1.4  trillion in residential mortgages and business loans for which the Spanish banks have made….no provision.

Now it is true that default rates have been lower in Spain than in Ireland for example. But while Ireland has unemployment of about 14% Spain’s unemployment is 24%. Very nearly 1 in every four of the workforce has no official job. Even if they are working in the black economy that still leaves the state with a vast shortfall in tax revenue. No matter which way you look at it it is impossible that Spain’s Caja’s are not going to find huge ‘suprise’ losses on their residential and business loans. Of course those losses are already there but being held off the books with central bank complicity. Why else would the central bank and government simply not make provision for such losses unless they knew they were hidden? The problem is how much longer they can be hidden.

Taking the  likely losses on those residential and business loans in to account,

…banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group.

I take that estimate with a pinch of salt because, although I do not know the Centre for European Policy Studies, it does look to me, to be fairly mainstream if not right wing. Even so I think the figures are clear that Spain’s latest bail out of its banking system is as doomed to failure as those which preceded it.

Then there is the second and more fundamental problem which is that the  Spanish banks simply don’t have €30B they can set aside as further provision for bad loans. How can I make such a stark claim? Actually its not hard.  And this is why.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This chart from Reuters shows that Spanish debt – you remember those successful bond auctions – was NOT bought by the bond market at large (non-resident holders), it was bought by Spanish banks (domestic holders). Similarly Italian debt has been bought by Italian banks.

According to data from the Spanish Treasury quoted by another Bloomberg article, in just December 2011 and January 2012 alone Spanish banks and other domestic lenders increased their holdings of Spanish debt by 26% to €220. Which means they bought over €40 billion. So exactly how successful were those Spanish debt auctions?

Similarly Italian banks increased their holdings of Italian debt by 31% to a massive €267B in the three months ending in Feb. 2012.

The graphs make it starkly clear that neither Spain nor Italy has had any truly  successful bond auctions in some time. What they have had is a suicide pact with their own insolvent banks.

Spain and Italy have desperately needed to claim that they were not locked out of the bond markets and could fund their borrowing. At the same time the largely insolvent private banks desperately needed cash and capital. Cash for day to day running and capital to meet minimum capital adequacy rules. Which just means the base of capital upon which their massive loans sit.

The solution was called the ECB’s LTRO (The Long Term Refinancing Operation), the brain child of the ECB’s new President, Mr Draghi. The LTRO was another means for the banks to borrow from the ECB but it was also intended as a back door way of the ECB bailing out the Soveriegn nations, via their banks. This was a major departure for the ECB. The banks asked for loans which the ECB granted at a nominal 1%. To give you some notion of the size of the operation to keep Europe’s banks in business, banks in Italy, Spain, Portugal, Ireland and Greece  between them borrowed 489 billion euros on Dec. 21 2011 and 530 billion euros on Feb. 29. 2012. A trillion so far. I say so far because there is every reason to suppose the ECB will decide the only way to avoid a collapse in the banks they seem determined to keep from their maker is to pump yet more money in to them (LTRO3).

The banks that took the money then used it to do several things. First and foremost they bought sovereign debt as per the plan. That way the sovereigns could claim all was well with them and the ECB could claim it was not bailing them out (not directly at least). { In the original I got the explanation of how the ECB bailed out the naitons via the LTRO exactly arse backwards. I wrote that the ECB was not supposed to bail out banks which is completely wrong. It is the nations the ECB should not bail out directly. The ECB and the Nations used the LTRO as the means of getting round this. My sincere apologies for getting this so wrong. It did not, however, affect the point of the piece.} After all they could show suprisingly ‘buoyant demand’ for their debt/bond auctions, which rather marvelously kept down the interest they had to offer. The result was that the private banks were then in possession of sovereign debt that would have paid them between 5-6%. So, money they borrowed at 1%, bought bonds that paid them 5%. That is a straight bail out from the sovereign’s tax payers of 4%.

Think about it. The sovereigns could have gone to the ECB themselves and borrowed money themselves from the ECB for 1%. Instead the sovereigns let the private banks borrow from the ECB at 1% and then the sovereign borrowed from the private banks (remember when a sovereign sells bonds/debt the buyers of that debt are lending to the sovereign) at 5%-6%.  Why? Answer – so they could say, ‘We’re not having to get bailed out by the ECB. No, we are selling our debt successfully to the market, who love us.’ It was a lie but it made it sound as if the ‘reovery plan’ and the unpopular austerity policies must be working. And at the same time it allowed the sovereigns to bail out the private banks without having to tell the people they were doing so. Two lies for the price of one.

If we now take stock for a moment of who ended up with what, the picture becomes rather ugly. The insolvent private banks pretend to be solvent, but in fact what they have is a vault full of IOUs/bonds from their nations. The Nations claim to be selling their debt but have in fact sold it only as far as down the road into banks who are only alive at all because they are being bailed out.

And what of the ECB? Well former ECB board member Juergen Stark said recently in an interview with the German newspaper, Frankfurter Allgemeine that,

 …the balance sheet of the euro system, isn’t only gigantic in size but also shocking in quality.

The ‘shocking’ quality of the assets is because the ‘assets’ in question are the bad loans that Europe’s private banks couldn’t get anyone else in the whole wide world to accept as collateral. EVery tie the ECB bails teh banks out, each time it ‘extends loans’ it has  to acceot as collateral for those loans  whatever the banks have left. Which means the ‘assets’ that the ECB wouldn’t accept last time.

All that has happened is that an elaborate debt laundering two-step has been put in place so that banks can be bailed out by nations who can be bailed out by the ECB. But it is done in such a duplicitous way that the banks appear to be merely getting a loan, the nations appear to be selling their debt as per normal and the Tax payer, who is actually footing the bill for both, is completely in the dark about the whole thing. THAT is the ECB and our European rulers in action. Feel shafted and lied to? You should.

Now however, the lie is unravelling. You see the key is that the private banks’ bad assets, those that no one believes have any real worth, are taken out of the private banks and ‘pledged as collateral’ at the ECB who in return give them loans. The ECB of course reveals no details so no one can prove a thing. The private banks then use then loans they got from the ECB buy sovereign debt with that money. (Some, the really terminal, also use it for repo in order to keep breathing day to day). The result of this gyration, from the point of view of the private banks, is to replace worthless their assets with one’s that are backed up by the sovereign nation. The ratings agencies will then look at those assets and say – this is proof of how much support the sovereign is willing to give to their banking system. They call this ‘sovereign uplift’ and add this as a positive factor in establishing the solvency and credit worthiness of the private banks. And of course the sovereigns are also being helped by the banks who are buying their debt.

In a sense the idea is to get two cripples to lean on each other. As long as the two cripples stay very still you can see them as propping each other up. But if ever one or, heaven forbid, both start to wobble then the previously positive relationship suddenly looks very negative. Instead of propping each other up they look as if they are pulling each other down. And that is where we are now. If the banks look like falling over the sovereign will be left with a massive collapse which it will, as with Spain’s recent nationalization of Bankia, try to foot the bill for. That will hugely increase sovereign debt. But who will they sell their debt to now? Even the banks who haven’t yet collapsed are badly affected because they and their ratings rely on the perceived ability of their sovereign to support them. Which becomes more and more questionable with every bank that the sovereign has to save. As the sovereign is seen as more and more vulnerable , with larger and larger debt which it seems less and less likely to be able to sell, then the banks who have bought all their sovereign’s debts are perceived as potentially being back where they started – with a vault full of dubious IOUs.

If it all seems head spinningly circular, that is because it is. It is a cycle of lies and debt  re-branding. As long as the momentum of the lie and of public belief is in the ‘forward’ direction then all seems to be well. Everyone is selling their debt, no one is being bailed out and no one is aware of who is paying. But if the lie and the momentum of belief goes into reverse then all the players start to look more not less vulnerable and at risk.

What has happened in the last week with the election in Greece and the unravelling of the lies and hidden bank insolvency in Spain, is that the momentum of the grand lie has started to reverse. If that reversal is not halted and the truth not quarantined  then I believe there will be a another clamour raised by Europe’s insolvent banks for the  ECB to announce yet another emergency funding programme.

The fog of burning acidic financial lies that have been rained down on us for  four solid years is finally meeting political reality and opposition. Suffering can be ignored and met with the police baton but it cannot be erased forever. We have yet to see what if anything M. Hollande will do in France  and what will happen in Greece and in Spain. But the momentum of their lies is, for now at least, running against our oppressors.

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86 Responses to The Momentum of Lies – Corrected

  1. Phil T. May 11, 2012 at 11:54 pm #

    Greetings Golem XIV and fellow readers of this very informative blog. Thank you for articulating the momentum of LIES. On the surface, it appears that LTRO is the Eurozone/ECB’s version of TARP that offered similar opportunities in the USA in 2008/9.

    Would you (or anyone else) care to comment on these similarities/differences and more specifically about the direction of the momentum of LIES in the USA (JPM).

    Many thanks for all you do … Phil T.

    • Mike Hall May 12, 2012 at 12:29 am #

      Phil

      James Crotty wrote a good paper in 2009 that covers a lot of the US situation.

      http://cje.oxfordjournals.org/content/33/4/563.full.pdf+html

      And one with Gerald Epstein proposing solutions to reign in the financial sector.

      http://people.umass.edu/crotty/Crotty_Epstein_challenge%20article%20Jan-Feb%2009.pdf

      Both long-ish, but quite readable.

      You also have the advantage that you still have your own currency, so ‘only’ your own politics to deal with, rather than the flawed supra-national treaties of the Eurozone (and the useless politics).

      You aren’t in such bad shape (relatively) as Europe. Your stimulus program helped (but was too small & then stopped) as has the less effective curtailing of the fed deficit. QE was simply a gift for your banks, but was Fed Reserve created money – only secondary cost effects thru’ lower returns for pension funds (same in UK).

      I suspect your own version of descent to debt peonage is in a holding pattern until Wall St. has secured Obama’s 2nd term.

      The archives of the New Economics Perspectives blog of UMKC, home blog of former US regulator William K Black, is a good source of info on the fraud etc. of the US Finance sector.

      http://neweconomicperspectives.org/

      As is

      http://www.nakedcapitalism.com/

  2. Mike Hall May 11, 2012 at 11:58 pm #

    Great piece Golem.

    If i may, I would like to expand on one aspect of the rip off.

    As you point out, the banks are borrowing have borrowed ECB ‘created’ money, to the tune of €1,000 billion in the two ‘LTRO’ handouts. On which they are making around 4% by lending on to Euro governments. That is a €40 billion +per year+ public subsidy, extracted from the real economy for no useful productive purpose whatever.

    Note also that these borrowing costs for the struggling, austerity ridden Euro ‘periphery’ countries are around 4 times those of countries like US, UK, Japan who retained their own currencies & thus control their own interest rates, not ‘financial markets’.

    Not only are struggling Euro countries being looted, but they are being robbed at the same time as economic capacity to pay is being deliberately decimated.

    This is nothing less than a financial coup, by financial elites, as represented by the ECB, aided & abetted by traiterous & ‘captured’ politicians & advisers.

    News is already filtering out of Hollande’s about face from his pre-election promises before he’s even tested the Elyse Palace’s cr@pper.

    ‘Hollande in Retreat’

    http://www.informationclearinghouse.info/article31298.htm

    Ambrose Evans-Pritchard, hardly a ‘progressive’ voice, has termed the financial elites game ‘nuclear brinkmanship’.

    http://www.independent.ie/opinion/comment/ambrose-evanspritchard-europes-nuclear-brinkmanship-with-greece-is-a-lethal-game-3104336.html

    Not for one moment in the sorry mess of the last 5 years have ordinary citizens’ interests been represented, over the financial elites, by the leaders they elected.

    • Chris May 14, 2012 at 5:26 pm #

      feel its correct that italy and Spain are ripping off rest of EU by their banks borrowing at 1% and getting 4% profit by creating a market for state bond sales. (and I imagine their states can afford this as they otherwise have to bail out their insolvent banks). However many bankers are frightened by everything folding up hence the massive sums re-deposited at .25% at EU central bank eg 300 billion re deposited after febuary 29 injection of 510 billion. Which bankers are going to win? God is the only one who may know but unfortunately he may not exist. Not a very stable world

  3. steviefinn May 12, 2012 at 12:15 am #

    To me it seems like an impossible ask, especially as there is gathering evidence that Ltro’s or QE are with each new dose fading in their effectiveness. Are we finally looking at the endgame, or will they surprise us again by pulling yet another even scraggier rabbit out of the hat ?

    Phil T.

    This one might interest you:

    http://seekingalpha.com/article/356911-quantifying-the-diminishing-impact-of-qe-on-stocks

    http://www.economist.com/node/21552582

  4. Rob Ewalds May 12, 2012 at 12:20 am #

    I am an ordinary, investigative and very concerned EU (Dutch) citizen.
    I have been following the Eurozone crisis closely, ever since the near
    collapse of Mid-East Europe remained largely uncovered by convemtional media, early
    2009. Digging deeper, more and more I landed in the ‘blogosphere’ where I found
    excellent sources of information and analysis, like your website.
    Once again, this analysis reflects my opinion on this spot-on.
    Thank you for all of your articles, I am reading and sharing them with great interest.

    Considering the EMU legal framework, I thought we entered the ‘endgame’ back in July
    2011; when Italy and Spain effectively ceased to exist as truly ‘sovereign’ nations; e.g. becoming utterly dependent on international help. At least, that’s how I see it, as a straightforward engineering guy.

    I was taken by surprise by the two ‘tricks’ the ECB pulled of its sleeve to effectively circumvent the rules and buy at least 9 months of additional time.
    Last week I am getting the gut feeling that the endgame is on the horizon again.
    I fully agree with you: only the ECB can pull it off, as things stand now.

    But… How much room does the ECB still have at this point? Will LTRO-3 be acceptable for the Germans? Do the remaining Triple-A’s find themselves so isolated that the pull the plug on the Euro?

    I think the Germans are capable of suffocating the Greeks to such extend that they will ask for an exit themselves. But what about Spain and Italy?
    More and more I get the notion that the Germans resurrected SoFFin to be able to walk away themselves…

    I would love to read your take on these matters.

    • Mike Hall May 12, 2012 at 12:56 am #

      I’ll offer a brief response.

      I suggest you reconsider things by reconfiguring in your mind who is really dictating Eurozone policy. ‘National’ interests are secondary, serving only to divide & distract. Effective isn’t it? (Except in places like this, outside the mainstream.)

      It is the financial sector elites who designed the Euro & very firmly in charge now. The ECB is their creature, as the extra-judicial ESM will be when set up in Switzerland beyond oversight or control by any EU country or law.

      It just appears policy is coming from Germany because they are the most powerful state in the Eurozone. But Germany has been reducing its workers’ pay & conditions for over a decade. It is, & was bound to be, affected by austerity in other countries. The financial elites could care less. They are still extracting wealth from the real economy & will do whatever it takes to maintain the system that enables them to do so. They see the present crisis as an opportunity to extend their power & control.

      No ‘conspiracy’ is needed. What works for their vested interests is entirely obvious & a natural progression of the last 3 decades of neo-liberalism.

      I think with this perspective the puzzle will become clearer?

      Best wishes & welcome to Golem land :)

      (I’m an engineer originally also & live in Ireland.)

  5. Dave May 12, 2012 at 6:56 am #

    Mike — thanks for your comments and links.

    It is unsurprising how little outsiders know about conditions in Germany, with HartzIV, 1.4m on E500pm or less, cheap imported labour, outsourcing eastwards, etc.

    Unsurprising ? The MSM doing their ‘job’ !

    Roger Bootle 22/4

    “It is not as bad as the ultra-pessimists suggest, but it is nevertheless pretty serious. Since the euro was formed in 1999, whereas Germany’s unit labour costs have risen by about 5pc, France’s figure is about 27pc, compared to 30 to 40pc for the vulnerable peripheral countries. This lack of price competitiveness has already resulted in a French trade deficit now running at about 2pc of GDP, contrasted with Germany’s 4pc surplus.”

    http://www.telegraph.co.uk/finance/comment/rogerbootle/9219537/If-the-euro-were-to-split-which-way-would-the-French-connection-go.html

    frog2 CiF

  6. Debra May 12, 2012 at 8:30 am #

    I can’t help wondering if the “financial elites” are as extraterritorial as many here seem to believe.
    Even financial institutions are peopled by men and women who have perhaps.. vague and distended loyalties, but whose.. nationalities are not in the airplanes and trains they jet around in all year.
    The system is STILL based on nationality, thus, the nation state, even if it is under heavy attack.
    I have always found it.. suspicious… that the Greek crisis, and Euro turmoil appeared so suddenly on the horizon, considering that the U.S. remains a country saddled with back and economy breaking… DEBT. Especially at a time when the Euro was increasingly competitive with the U.S. dollar as a reserve currency… (with the advantages and disadvantages that accompany this status, of course)
    The Euro crisis as a political one designed to keep our eyes away from the great American colonizer, whose finances aren’t doing so well ? Especially since those all powerful ratings agencies are not exactly.. objective now, are they ? They have loyalties…
    I vote for this analysis. And can’t understand why more people disregard politics in favor of analysis which is heavily dependant on those abstract NUMBERS, and accounting sheets.
    In the long run, this type of analysis is, and will always remain reductionist, and will prevent us from understanding the complexities of our situation.

    • MacB May 12, 2012 at 12:45 pm #

      Debra, this echoes a lot of what I feel about how the situation has played out. The level of actual conspiracy, versus large numbers of similar vested interests acting on their own behalf, is moot. If it walks like a duck and quacks……..

      At one point all I was reading was how short a lifespan remained to the $, how the euro was likely to take over, etc. I think the error was twofold, firstly underestimating the lengths that $ holders would/could go to and secondly daring to try and price oil in euros. In amongst all that Libya starts to stink to high heaven as well. The US Military Industrial Complex, easily the largest of its kind in history, is $ centric and oil dependent. If you don’t let them play those kids won’t just take their ball home they’ll nuke the football pitch before they leave.

      As a point of interest Greece was nothing, chickenfeed, next to California in terms of population and debt. I also think that the UK, via the City, showed themselves to be more $ than euro centric as well.

    • shaun May 12, 2012 at 12:57 pm #

      Hi debra

      « Especially at a time when the Euro was increasingly competitive with the U.S. dollar as a reserve currency… The Euro crisis as a political one designed to keep our eyes away from the great American colonizer, whose finances aren’t doing so well ? »

      While I agree with you that the timing is not by chance, I just wonder if blaming « the US » isn’t a mistake, and the culprits aren’t simply a « criminal class » ?

      By way of explanation ; One of the reasons put forward for the collapse of the USSR, is that it got into an arms race with the US (and Europe), that it couldn’t afford. (including « prestige items » such as space as well). When it collapsed, eight oligarchs started to plunder the remains. (enter Putin, etc)
      Now the US is doing very well, all by itself, following the defunct USSR. By massive spending on non-productive arms and armies. The Pentagon is supposed to cost about one trillion a year for itself and its wars(with hidden costs included), add in the « extras » such as the 4 billion given to Israel, plus the unknown amount of military and aviation fuel that it supplies them, (plus other hidden subsidies ?) plus the cost of the CIA and its’ black ops, and the DSA/TSA and ITS black ops (650 bil ?), plus arms given to « civil » police forces, the cost of mercenaries (Xe or whatever), plus military « aid » given as « aid » to lots of countries. (I don’t know whether the 900+ US bases are to be included in that lot and there are certainly other non-productive costs to add) Could all this add up to two trillion a year? So « cuts » are taken from basic infrastucture and items necessary for social cohesion, just as in the USSR. I think that the US could suddenly collapse – EVEN IF there was no financial crisis.

      So, Who profits ? The same type of people who tried and are still trying to plunder the Russians. Next in line is the EU, and then the US.
      These Oligarch-ists are not « tied » to one nationality, and do not necessarily have any ethics whatsoever.
      I call them the criminal class.

      Conspiracies ; One difference between a conspiracy theory and an analysis is that the former presupposes that things have been « organised » and the latter is that there is supposed to be an non-premeditated series of events. To be truthful I don’t know which applies, but there are certainly plunderers lurking in the depths.

  7. Mark Redwood May 12, 2012 at 9:53 am #

    I notice the conspirational nature of some of the comments above.

    I don’t believe there is a conspiracy as such. I think what we are seeing are the increasingly desperate attempts to maintain the money making status quo. It’s all about staying alive for another few weeks and months and hoping that somehow this mess will resolve itself – “hang on just a bit longer, growth is just around the corner”

    What they are trying to do is to make sure the wealthy and powerful creditors get paid. Well they can’t be, not without destroying the livelihoods of millions of people. And these creditors life blood is the very livelihoods they are in the process of destroying – they are poisoning the water of the well from which they drink.

    We think we are so enlightened, and clever. The reality is that the Babylonians knew more about this problem than we do. Ever since money was invented there has been debt. And ever since there has been a tendency for people to become so enslaved by debt that society is brought to the brink of collapse. The Babylonian answer to this? All debts are cancelled, those enslaved by debt are freed, and they start all over again.

    • Mike Hall May 12, 2012 at 11:38 am #

      I agree there’s no conspiracy needed, as such, but there is a dominant ideology that has effectively tried & largely succeeded in removing other viewpoints from the discourse over the last 30yrs.. There are also channels of supra national collusion like Bilderberg where our elected & public sector representatives mix in secret with global business & banking leaders. (I see a need for confidentiality, especially at the time discussions take place, but think we are entitled to records which can be subsequently judicially examined, as & when required. eg No Watergate tapes=no Nixon impeachment.)

      But I don’t quite agree with your ‘well’ analogy. I don’t see the financial powers as having poisoned anything as such. Rather they have bought the well & replaced the well bucket with a jam jar. They have also neglected to mention that they fitted a private underground hosepipe for themselves which runs into a rather large storage tank.

      Reports by Merill Lynch & others, on the wealth of High & Ultra High Net Worth Individuals (H & UH NWI) shows that their aggregate wealth had nearly recovered in 2009. (After mostly just unrealised ‘paper’ losses on share portfolios.) Since then their wealth has been increasing at around 5% per year. Not as much as before, but still above global GDP. When one considers how much the BRIC economies have been growing (still near double digit for China), compared with (roughly) stagnation in US/EU aggregate, it looks like their money hoover is still working.

      Then there is the other big ‘prize’ – firesale asset buying opportunities. Especially the big public monopolies that still remain. Many of these present enormous possibilities to gouge profits from citizens into the future.

      As regards the debt cancellation ‘reset’ – which is a good idea, and the ultimate option that most people thought was built in to capitalism. It rather looks as if the ‘masters of the universe’ have effectively removed this avenue.

      Integrating, by deregulation, the real economy financial services sector with a bloated ‘gambling’, ‘financialised’ economy certainly opened up the asset base from which to extract ‘tribute’. But even if it wasn’t by design, the spreading & interconnecting of derivative counter party risk, often in complex & incalculable instruments, has raised the spectre of ‘too contagious to fail’.

      If Lehman’s collapse, and the subsequent seizure of the global financial system, wasn’t ‘intentional’ as a demonstration of the truth of this – the systemic risks of defaults – I’d say the financial elites have been quietly smiling to themselves ever since.

      Anyhow, I’m concsious that I’ve been scribbling in the comments to this post far more than I usually do, so I’m going to sit back now & let others speak ;)

    • Wirplit May 20, 2012 at 1:48 pm #

      What’s a conspiracy? Does it have to be long term like the whole Italian P2 setup dating from the Second World War… lasting 50 years

      or a few mad rushed weeks in a developing crisis as for example, a certain Rebecca Brooks et al scrambling to get the allegedly incriminating archive boxes and computer hard drives to a safe place before the police arrive…

      Or the games on EU taxpayers Golem is brilliantly analysing above with the ECB and Spanish banks

      Or what happened to MF Global with its friends in very high places in the US…

      Or what is happening to the gold price just now with possibility of a falling price against a rising demand… and why this might be happening

      (a repost for an answer… that is possibly playing out as I write this
      http://tradewithdave.com/?p=10106 )

      Conspiracies dont necessarily need years in the planning they are often hastily cobbled together over a few days…. all they need is the motive and the conspirators

  8. shaun May 12, 2012 at 11:19 am #

    This is the British version,

    “But after buying 325 billion pounds of government debt with newly created money, 50 billion pounds of which has been purchased in the last three months”. So, an allegedly fiscally responsible regime leading one of the most powerful countries in the world lends money to itself in order to get some money (What the …!!!), but must print fresh new money in order to afford to buy the money that it just lent itself in order to use the money it just lent itself to pay some important bills, you know the thing that it needed the money for in the first place.

    (From a ZeroHedge contributor ; Reggie Middleton.

    http://www.zerohedge.com/contributed/2012-19-11/europicide-theyve-pointed-liquidity-pistol-their-collective-heads-cocked-it-n

    Rhetorical question; “How do you break a spring?”
    Answer; “You screw it up even harder until it snaps”

    • Golem XIV May 12, 2012 at 11:42 am #

      Thank you for the link Shaun

      All about bailing out the banks without letting the people who will have to pay, know what is being done.

      This way you ‘pay’ the banks interest. It’s called treason.

      And the punishment for treason should be hanging.

      I do now feel we are at the point where our governments have ceased to have any real care for our interest and wefare and do now fit the definition of tyrants.

      As such we, the people, do have not only the right but I believe also the obligation to withdraw our consent to be governed by then. Which means civil disobedience and revolt is both justified and necessary.

      It is now, in my opinion, a matter of chosing the time and the means to overthrow those who oppress us.

      • Mike Hall May 12, 2012 at 11:47 am #

        Absolutely David, agree 100%.

      • shaun May 12, 2012 at 1:27 pm #

        Thanks David.

        I absolutely agree too.
        Since I missed bomb throwing classes when I was younger, I would be inclined to find a reasonably « bloody-minded but pacifist » way of doing things. (shades of Swiss armed-neutrality). Seems to me it all hinges on « the WILLINGNESS of people to honour their debts. » At the moment Gov’ts are forcing, by the back door, debt payment by taxpayers. (Their own or those of the Banks ) and although in a more reasonable world some of your solutions are excellent (I’ve been following your blog for years), I am unsure if there are enough honest people in positions of « authority » to make any of them work.

        I suppose I could go to evening classes for the bombs bit, I hear the FBI runs a good line in y-fronts.

    • Mike Hall May 12, 2012 at 11:45 am #

      ‘QE’ doesn’t pay any ‘bills’ tho’, it just adds to banks’ reserves/liquidity. And this doesn’t affect their decisions to lend into the real economy much, either way. So, it’s not ‘fiscal’ policy, and not a ‘stimulus’ either, much as the polies & the tabloids will spin it as such.

  9. Bobbie D May 12, 2012 at 12:08 pm #

    It looks like this year’s Bilderberg meeting will be in the US.

    Coincidence? A conspiracy too far?

    I used to be an engineer too. Are we really disproportionately represented amongst the unbelievers? After all, why would engineers who could do sums, understood a bit of logic, and had a smattering of understanding of management of risk want to work in engineerying when they could work for or cheerlead for the Masters of the Universe?

  10. Gary May 12, 2012 at 12:20 pm #

    This dream of growth under the present policies , is a pipedream. First, we have so much debt that we cannot grow our wayout of it at any historical growth rate. So we have to start restructuring the debt, but the bankers and the politicians refuse.

    Second, until we rebuild capital, we cannot have any sustainable growth.The central banks have been serially cutting rates for 30 years, each time they do so they increase the present
    value of debt liabilities on existing debt and destroy capital(assets-liabilities). As they have approached zirp the capital destruction accelerated. Cutting rates in half doubles the present value of debt and as you approach zero rates you half the rates faster.

    Until we do both points we won’t get growth. But our politicians aretoo illiterate or too short termist, or both to do anything about it. So we plough on to disaster.

    And this business about King saying we had benign inflation is poppycock. The trouble is they attempt to measure the effects of inflation in prices. The inflation is the
    oversupply of money wrt demand in the real
    economy and the price rises are the effects.But they never
    measured the biggest prices rises ever seen in their basket of prices ie. Houses and govt bonds.

    There is an almighty bubble in those. United states t-bonds is a vast bubble. When that bursts we get instant hyperinflation. They don’t know what they are doing.

    There is an easy foolproof method of measuring inflation, just let the free market price of gold tell you. But no they won’t allow that because that will upset their paper counterfeiting operation and then they lose the ability to loot us.

    So, they must raise interest rates. Or better still, get rid of the central bank, stop printing money and let the free market raise the rates to liquidate debtand rebuild capital. Then we can grow.

  11. steviefinn May 12, 2012 at 1:03 pm #

    At the risk of seeming to not take these things seriously, which I certainly do, here is a tragically funny look at the lunacy of ” Austerity “.

    We all need to keep laughing, even with our backs against the wall:

    http://www.markfiore.com/

  12. Mike Hall May 12, 2012 at 1:09 pm #

    Gary writes:

    “….inflation is the
    oversupply of money wrt demand in the real
    economy and the price rises are the effects….”

    Demand (aggregate demand) = the (aggregate) Spending that actually takes place.

    So ‘Gary’ is saying that when we actually spend +less+ than we have money available to spend, prices go up, causing inflation. How? Magic? Fairies?

    What complete garbage.

    Inflation is caused by over supply of money wrt +supply+ (the availability of goods, services, labour etc resources, to be bought). (Unless the ‘market’ under consideration is rigged in some way.)

    Recessions, by definition, are characterised by an over supply of available productive capacity, labour etc.

    Not rocket science, but Gary does seem to be persistent in his desire to not understand even the basics.

    • Gary May 12, 2012 at 3:24 pm #

      ” So ‘Gary’ is saying that
      when we actually spend
      +less+ than we have
      money available to
      spend, prices go up,
      causing inflation. How?
      Magic? Fairies?”

      That is exactly what i am saying. When the demand for any item falls and the supply increases then the value/price of that item falls, and when this item is money more of that money will be required to buy the same goods and services. The prices of the goods and services rise.

      Economics 101, the iron cast laws of supply and demand. You should learn it sometime.

      • Anthony Butt May 12, 2012 at 5:33 pm #

        Gary – most of the QE money has been used to purchase derivitives – primarily energy and food. Hence whilst demand has fallen prices have risen.

        Goldman Sachs et al have finally disconected supply and demand as the arbiter of ‘price’, to create an oligarch controlled gouging frenzy.

        Unfortunately we can’t rely on our politicians or political systems to change this criminal behaviour, as they’re already bought and paid for.

        • Gary May 12, 2012 at 6:08 pm #

          Anthony

          You are right. This is what happens when you oversupply money, prices rise even when there is no more demand, or even less demand. Inflation masks real demand and supply of goods and services, because prices are artificially rigged by the falling value of money. This causes the entire economy to become skewed, and investors are misled into making investments into areas where there is an apparent shortage but not a real shortage. This is the birth of boom and bust. Inflation is the root cause of this cancer. This is at the heart of Austrian school theory.

          • Anthony Butt May 12, 2012 at 8:39 pm #

            Hi Gary – I appreciate your response, but i think you’ve misunderstood my point.

            The mind boggling sums of QE haven’t been channelled into productive use as hoped – i.e.for capital projects, R&D, education, industry, etc. Rather its been used to skew the market and gouge the public as they struggle to purchase essentials.

            This is gangster capitalism, legitimised and sanctioned by the FED and SEC.

          • Gary May 12, 2012 at 9:36 pm #

            Anthony

            I don’t think i misunderstood you. I am saying that this money was not channelled into productive uses precisely because it was inflationary money and this caused distortions in the economy where non productive enterprises suddenly become attractive to have a gamble on. Hazlitt said the economy becomes a casino. You will never solve employment by stoking inflation, all you do is make the inflators rich and destroy the productive economy and kill all those jobs.

          • bill40 May 12, 2012 at 11:22 pm #

            Gary,

            I listen to your views like any other. What others do, that you do not, is supply real world evidence of their opinions. So please explain where all the inflation you so fear is occurring. IUf you were right Japan would be in hyper inflation 15 years ago. It has massive debt, prints at will and yet its’ bonds are over subscribed and inflation is nowhere in sight.

            Which country do you hoild out as an example of your extra ordinary views?

          • Gary May 13, 2012 at 8:10 am #

            Bill 40

            The hyperinflation in Japan and most other indebted countries , was first seen in the property markets and is now seen in the govt bonds market. The central banks telegraph their intent to stand ready to buy govt debt through QE and investment bank speculators front run this and buy govt debt and then turn around and sell it to the central bank. This is a risk free trade for the speculators. This sucks money out of the productive economy and it appears that we have deflation. These are the unintended consequences of govt and central banks meddling in the market. They think they are printing money to get things moving, instead they are killing the economy.

            When the sovereign bond bubbles burst , we will instantly see the effects of this hyperinflation in the general market. Imo

            Japan went from surplus and the biggest savings pool of cash in the world, to now the second biggest debtor nation in the world. They did this by printing money “to get things moving. ” After 22 years of this, nothing is moving.

            They should stop printing money, let rates rise. This will liquidate debt and raise capital. It will be painful, but not as painful as continuing the ruinous path they are now on.

          • yakima canutt May 13, 2012 at 9:42 pm #

            ‘inflation’ (Gary)
            eggzackly. inflation is an assymmetric distortion of prices/values.
            Everything does not go up in cost and down in purchasing power equally.

  13. Golem XIV May 12, 2012 at 1:24 pm #

    Mike and Gary,

    PLEASE – keep your disagreements civil (You’re the worst offender on this point Mike) and also please bear in mind that WE KNOW you disagree. So doing so ad nauseum is a bore for the rest of us.

    Agree to disagree.

    What would be more interesting is if you make your points , put forward your views positively – each explaining your views rather than negatively countering each other.

    It would make it more interesting for the rest of us.

    • Mike Hall May 12, 2012 at 1:46 pm #

      Fair enough David

  14. shaun o'hara May 12, 2012 at 4:40 pm #

    I live in Spain. All my money is in Bankia. I want to shoot a banker.
    From what I’0ve read and listened to in the Spanish press, I don’t think people have absorbed what is happening.The level of news is, ‘There’s a crisis in Bankia. The bank has been nationalized. The ex-president of bankia, Rodrigo Rato has resigned.’
    Who is to blame? The president of the Spanish central bank isn’t looking good(Miguel Fernandez Ordoñez). The president of PSOE, Alfredo Rubalcaba, says his money is in Bankia, dont worry, people. Psoe supports the nationalization.
    The only person with any credibility is Cayo Lara, the head of Iu, the only true left wing party in Spain. He wants aparliamentary investigation.
    Among the Spanish govt’s measures is an external audit of the Spanish banks. it will take 4 months.
    Meanwhile, Rodrigo Rato receives 1.2 million euros for resigning. Was he pushed or did he fall? The govt is contradictory on this point.
    15 mayo is Tuesday. This nationalization and the 10,000million euros of taxpayers money being fed into Bankia (the cuts in education and health are 10, 000 million) Will hopefully be part of the 15 mayo’s comments. Will there be civil unrest? The Madrid local government has banned ppl from occupying la plaza del sol. The .1,500 anti dusturbance police are on standby. The Catalans are more flexible.
    Will there be unrest? I wouldn’t like to predict

  15. Jim M. May 12, 2012 at 6:56 pm #

    Shaun writes…

    I live in Spain. All my money is in Bankia. I want to shoot a banker.

    A question for any philosophers and/or logicians:

    Can we infer the conclusion a priori from the two premises? (Seems fair enough to me, but I am ready to be proved wrong!)

    For non-logicians, I’m asking if living in Spain and banking with Bankia makes wanting to shoot a banker inevitable! :)

    • shaun o'hara May 13, 2012 at 4:32 pm #

      do you need an excuse to want to shoot a banker?

  16. bill40 May 12, 2012 at 9:22 pm #

    Golem,

    In my opinion what is happening is exactly what should be happening. What we have to lose is any sense of the rule of law, democracy or proper accountancy. We must also accept that the euro is forever.

    The key point to remember is that the ECB cannot run out of euros because it is the monopoly issuer of euros. The ECB can write off every liability it has and still be in exactly the same position it was, with unlimited capability to meet any debt denoted in euros.

    As previously noted thios is illegal but nobody cares. The European banks are as broke and zombified as UYK and US ones. The eurozone is in effect one country and the necessary fiscal transfers have to take place and will continue to do so.

    It’s just that nobody wants to discuss these facts. Incidently Chinas’ rating agency puts the cost of an Italy and Spain bial out at north of 7 trillion dollars, its’ only concern being that it is erring on the light side.

    The next concern is more worrying. China does not believe that all European debt is in euros, but a lot in US dollars.

    If this is the case then the euro is fucked… Completely.
    .

  17. Synopticist May 13, 2012 at 2:07 am #

    “China does not believe that all European debt is in euros, but a lot in US dollars.”
    They did those currency swaps a while back I recall, Zerohedgers were screaming about it.
    I’m sure the Chinese are secretly delighted, this stuff is keeping people from looking at the THEIR banks too closelly.

    I dont know if anyone reads this guy, he has some really good articles…http://azizonomics.com/

  18. Desmond Dillon May 13, 2012 at 8:40 am #

    hi Jim M, Shaun and all

    Peace First then Prosperity

    we are all babylonians now
    denizens of babel
    with the towers tumbling down
    ponzi values disappear
    with the money once so dear
    replaced with fear.

    hear now at long last
    that which has always been said:
    we are truly taken care of
    when Everyone is fed.

    ‘but the greed breeds debt
    but the greed breeds debt’

    then be greedy for that
    for which greed was made
    hunger for peace is an accolade
    then prosperity follows on.

    .

  19. Ormen Lange May 13, 2012 at 11:49 am #

    For those who ask themselves about the connection between US and Europe and what stands at the root of the current situation:

    http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html

    It is a lengthy read but a worthy one.

    • Gary May 13, 2012 at 1:27 pm #

      Good stuff, Ormen. That guy knows his stuff IMO

    • Mike Hall May 14, 2012 at 11:52 am #

      Looks complete drivel to me, entirely typical of the inflation hyperventilators.

      • Hawkeye May 14, 2012 at 12:16 pm #

        Mike

        Have you ever read this piece by Peter Warburton:

        http://www.gata.org/node/8303

      • Gary May 14, 2012 at 12:27 pm #

        Mike

        Could you please go through the reasons why the govt printing money as per MMT will not lead to inflation ?

        Specifically :

        1. How will a £ printed that does not grow the GDP by at least the same amount not be inflationary ?
        2. If there is inflation how would the govt equitably reduce the money supply ?
        3. How will the govt measure that there is any inflation(or not) ?

        thanks

        • bill40 May 14, 2012 at 10:10 pm #

          gary,

          1′. As I have told you before, printed money that boosts demand whilst there is spare capacity in the economy will not cause inflation. look at the disgraceful un/under employment figures for you spare capacity and lost demand.

          2. It is easy to equitably reduce money supply when the economy is expanding. In a recession cuts fall victim to the paradox of thrift.”

          3. The inflation measures we have are imperfect but will do. Property should always have been included.

          i accept your thanks in advance.

  20. bill40 May 13, 2012 at 5:55 pm #

    gary/ormen,

    Gary has supplied property as the inflation everyone is so scared of. that is quite pathetic to be honest, as this has happened, by design, everywhere. Ormens link makes no prediction and has no timescale at all. As zerohedge poinyts out, on a long enough timescale you’ll be right.

    Inflation is relatively benign everywhere and the hyperinflation nothing but a non existent neo liberal bogeyman. this is as false as ” the markets will kill you”. A sovereign government is the market and traders can like it or be dealt out of the equation with the click of a mouse.

    The problem is demand which has been stunted by illegal odious debt and severe attacks on wages and working conditions. gary and ormen seem to advocate a return to a low wage economy probably for everyone except themselves.

    i would suggest you focus on the problems that are actually happening rather than those that might. Not citing Zimbawbe anymore are you? they had hyperinflation and are recovering even with Mugabe still sadly alive.

    There is a sad truth to our system of fiat money. debt can only be repaid with more debt, there is no other way. learn to live with this fact or invent a new system.

    It’s that simple.

    PS. Tibet is nice this time of year although internet access may flucuate.

    • Ormen Lange May 13, 2012 at 10:40 pm #

      Bill, you seem to object to anything just for the sake of objection. You want predictions? Do your own work on this matter. Here’s something to help you:

      http://howfiatdies.blogspot.com/2012/05/predicting-timing-of-hyperinflation.html
      .

      • bill40 May 14, 2012 at 10:03 pm #

        ormen,

        That is amongst the most ridiculous junk I have ever read and it’s five minutes of my precious internet time i won’t get back.

        On what empirical evidence is this junk based? i object only to idiots and people who can’t even describe the system we have and how it works.

        • Gary May 15, 2012 at 8:09 am #

          If you read it in 5 mins, you did not read it.

      • bill40 May 14, 2012 at 10:11 pm #

        ormen,

        that is five minutes of my precious internet time i won’t get back. i have never read such unfounded nonsense in my life.

    • Gary May 14, 2012 at 9:30 am #

      Bill40

      The timing of an hyperinflation is a low probability event. It only happens once. At the death of each fiat currency.

      That the fiat currency WILL die is a very high probability. It is 100% certain.

      Do you feel lucky ?

      • Hawkeye May 14, 2012 at 11:21 am #

        Gary / Bill

        This topic was briefly discussed last year:

        http://www.golemxiv.co.uk/2011/04/guest-post-by-hawkeye-wall-street-fiddles-whilst-the-us-burns/

        The premise being that socialing losses has been the Modus Operandi so far, and that Hyperinflation is commensurate with this strategy and promotes / accelerates wealth concentration.

        A global game of “So Long Suckers”:

        http://en.wikipedia.org/wiki/So_Long_Sucker

      • bill40 May 14, 2012 at 9:59 pm #

        I feel very lucky thanks. I repeat my question on what timescale? One day you will be right. I want an answer to a simple question.

        When?

        • Gary May 14, 2012 at 10:37 pm #

          they could keep printing until they have destroyed every last drop of capital. Or they could pack it all in and raise rates tomorrow. Or China, Japan and all the rest could stop buying t-bonds tomorrow. Or the main oil producers could renege on the petro dollar.

          You are asking the wrong question. Ask rather “am i doing all i can to protect myself and my family if it happened tomorrow?”

          You have your own risk tolerance, plan accordingly. If anyone gives you date when the dollar will collapse, he is lying.

  21. Roger May 14, 2012 at 6:22 am #

    I have been watching The Age of Uncertainty a TV special written and Narrated by J K Galbraith I stumbled across it reading the Wikipedia article on Chartalism.
    It was produced by Dick Gilling who also Directedproduced Ascent of Man a classic well known to our Host.

    Well the Age of Uncertainty is a revelation from an age of intellectual honesty I could not but help a straight comparison to Nial Fergusons the Ascent of Money the cheerleading and soundbite fawning of that series which I have now watched in full would not have got past the edit room of this Galbraith master piece.

    Having read Michael Perlemans the invention of Capitalism nearly 2 years ago now I have resolved to look out some more of Galbraiths prodigious output. I was interested in the observation that David Ricardo, Malthus and the Mills ( father and Son) all worked for the East India Company, how it exploited India is an uncomfortable parallel to the Global Corporate exploitation now extant and its determined pursuit of Ricardo’s iron law of wages.

    No doubt I’ll be sharing some other revelations, to me, from this 35 year old TV series all 15 hours of it. Another hugely influential and intellectually stimulating series that seems to have been suppressed is the Connections series by James Burke. I am confident that the Late Professor Galbraiths 1977 televisual opus will awaken many avenues of thought and keep me busy reading for many years to come ( I re-watched the complete connections series a few years ago, again its insights and production values put modern bubblegum TV to shame.) .

    • Hawkeye May 14, 2012 at 9:04 am #

      Roger

      Thanks for reminding me about “Age of Uncertainty”. I read the book a few years ago, and it is an excellent overview of economic history, so looking forward to the TV series.

      If you are also into James Burke then I recommend “The Day the Universe Changed”, which is sublime.

      Puts current BBC output to shame.

      • Roger May 15, 2012 at 4:13 pm #

        Hi Hawkeye,

        I have just watched episode two and see our illustrious Host is more familiar with this series than I state above. One Adrian Malone was Executive producer.
        Its a hell of a series I hope more here will seek it out and enjoy it as well.

  22. Roger May 14, 2012 at 6:59 am #

    From Chapter 4: The Bank

    Dangers to the Gold Standard

    Extracts from “Money: Whence it came, where it went” by John Kenneth Galbraith (First Published 1975), Page 53

    “A greater danger to gold was war. The gold standard in the last century owed much to the intelligent management of the Bank of England – for a brief moment, central banking was an art. It owed much more to the British peace. In the next century warring governments would, as did that of Pitt, turn to their central banks for the money that they could not raise in taxes. And no bank, whatever its pretence to independence, would even think of resisting.

    Most dangerous of all would be democracy. The Bank of England was the instrument of the ruling class. Among the powers the Bank derived from the ruling class was that of inflicting hardship. It could lower prices and wages, increase unemployment. These were the correctives when gold was being lost; euphoria was excessive. Few or none forsaw that farmers and workers would one day have the power that would make governments unwilling to impose these hardships even in so righteous a cause as defence of the currency.

    However, it was early seen that the interests of the rich in these mattes could differ from those of others. Writing in 1810, Ricardo observed that:

    The depreciation of the circulating medium has been more injurious to monied men. . . It may be laid down as a principle of universal application, that every man injured or benefited by the variation of the value of the circulating medium in proportion as his property consists of money, or as the fixed demands on him in money exceed those fixed demands which he may have on others.(19)

    Farmers, by contrast, were helped:

    He [the farmer], more than any other class of the community is benefited by the depreciation of money, and injured by the increase of its value.(20)

    In England the triump of Ricardo’s monied class was complete or nearly so. In the United States, however, it was subject to the sharpest of challenges. In one form or another, this challenge was to dominate American politics for the first century and a half of the Republic. Only the politics of slavery would divide men more angrily than the politics of money.”

    (19) Ricardo, vol. 3, Pamphlets and Papers, 1809-1811, p. 136.

    (20) Ricardo, Pamphlets and Papers, pp. 136-7.

    http://lachlan.bluehaze.com.au/books/galbraith_money.html

    “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”

    “There’s no question that this is a time when corporations have taken over the basic process of governing.” in a PBS television interview on The Newshour shortly before his death.

    http://en.wikipedia.org/wiki/John_Kenneth_Galbraith

    The Talk pages are as ever very illuminating, Galbraith is demonised in equal measure to quaters in which he is lionised.

    At a personal level.

    Freidman= Shifty Galbraith = mischievous

    My Grandma= Speak as you find.

  23. Roger May 14, 2012 at 7:09 am #

    Sorry to go on about this work but it is striking how current these subjects are its a kind of Rip VAn Winkle of a TV series except If one had watched this in 1977 and awoke today there would appear to be few suprises.

    Overview
    ========
    Written, narrated and hosted by John Kenneth Galbraith.

    The ideas of economists and social philosophers shape actions and events even when we are unaware of their sources. They have a decisive influence on the great rush of revolution and change through which the world has passed in the last two hundred years. Professor John Kenneth Galbraith traces these ideas and their consequences from Adam Smith, through Marx and Lenin, to Keynes and to the thinking that gave shape to the concepts of the Cold War, the corporation and, now, the conflicts and concerns of the Third World.

    Episodes, Runtimes (mm:ss), Descriptions
    ========================================
    • Episode 01 – The Prophets and Promise of Classical Capitalism (56:12): The ideological development of classical capitalism in Britain and France and its flowering into an accepted certainty in the United States in the late 19th century. It discusses the contributions of Adam Smith, David Ricardo and Thomas Malthus.

    • Episode 02 – The Manners and Morals of High Capitalism (55:51): The robber baron industrial capitalists of the late nineteenth century and examines their conspicuous consumption concept of earning and spending money. It discusses ways in which this concept affects our attitudes today.

    • Episode 03 – Karl Marx: The Massive Dissent (56:11): The film opens with a view of Marx’s tomb. Galbraith enumerates the different qualities of Karl Marx. We are shown the home where he was born in Trier, Germany, and his early life history is recounted. Hegel and the University of Berlin stand out as a high-point.

    • Episode 04 – The Colonial Idea (55:17): Focuses on colonialism and the colonial adventure, which Galbraith considers historically and as a continuing legacy.

    • Episode 05 – Lenin and the Great Ungluing (56:08): The outbreak of the first world war, with its absurd unreason, should have triumphantly fulfilled Marx’s prophecy of the end of capitalism. The war and the events leading up to it are illustrated on stage by posturing knights. The life of Lenin is counterpointed with the scenes of war.

    • Episode 06 – The Rise and Fall of Money (56:09): This program focuses on the history and function of money in society, which Galbraith considers through an analysis of the cycles of instability and inflation that plague the system.

    • Episode 07 – The Mandarin Revolution (56:18): This program focuses on the world-wide slump that threatened economic disaster after World War I and the role of economist John Maynard Keynes’ ideas on saving the West.

    • Episode 08 – The Fatal Competition (56:13): This program investigates the origins and development of the military and industrial economy as a result of the cold war and the continuing rivalry between the United States and the Soviet Union.

    • Episode 09 – The Big Corporation (56:09): The corporation, as a myth and reality, is examined and dissected. Multi national corporations are prominent today, their image is similar no matter where the corporation is headquartered. Corporations are also leading the way in advancing capitalism as a form of governance that is in contradiction to and often times conflicting with democracy.

    • Episode 10 – Land and People (56:06): This program focuses on the role of land in determining wealth and poverty and its effect on social and foreign policies.

    • Episode 11 – The Metropolis (56:06): This video portrays problems of the industrial society as seen in the urban metropolis, which best reflects its uncertainty and crisis.

    • Episode 12 – Democracy, Leadership, Commitment (56:04): Focuses on the processes and operation of democracy with a look at the American experiment. It combines Galbraith’s personal memoirs of leaders that he has known, from Franklin Delano Roosevelt to Mohandas Gandhi and Martin Luther King, Jr, with emphasis on the role of individual action in government and organization.

    • Episode 13 – Weekend in Vermont – Part 1 (58:00): Professor Galbraith at his Vermont home with a group of political leaders, discussing the economic state of the world. His guests include Henry Kissinger, Edward Heath, Shirley Williams, Jack Jones and Professor Ralf Dhrendorf. The discussion includes inflation, unemployment, and international economic problems.

    • Episode 14 – Weekend in Vermont – Part 2 (44:42): Professor Galbraith at his Vermont home with a group of political leaders, discussing the economic state of the world. His guests include Henry Kissinger, Edward Heath, Shirley Williams, Jack Jones and Professor Ralf Dhrendorf. The discussion includes inflation, unemployment, and international economic problems.

    • Episode 15 – Weekend in Vermont – Part 3 (53:45): Professor Galbraith at his Vermont home with a group of political leaders, discussing the economic state of the world. His guests include Henry Kissinger, Edward Heath, Shirley Williams, Jack Jones and Professor Ralf Dhrendorf. The discussion includes inflation, unemployment, and international economic problems.

    * Note: Originally released on VHS cassette, each of the above videos was converted to AVI format by persons unknown and are presented here as found.

  24. Skeptic May 14, 2012 at 1:01 pm #

    Golem,

    You paint a very grim picture very beautifully!

    Many thanks for your continued writings.

  25. John Souter May 14, 2012 at 1:38 pm #

    As a retired professional engineer and businessman who often in the past pondered on my choice of profession and the business associated with it, as against those of my legal, financial and service associates who seemed to have infinite elasticity and freedom from rule on the products they offered or the results obtained by them. (Similar in many respects to the politicians – but I’m pleased to say I’ve had little direct dealings with any)

    The legal professionals were paid whether their strategies and specifications (they call them opinions) won or lost. The financial experts grew from bean counters to supplying product with the ultimate default clause of projections are merely estimates and investments can go down as well as up. (They rarely mentioned their service would still apply even if they managed to loose the lot)

    So I wondered, as both an engineer and businessman, were we to tender, for lets say the design and construction of a bridge or a major part of an oil platform, if we were to include a similar default clause – This design and specification included in the tender may work or may not – whether, if the latter proved to be the case, we would be exonerated from all fault and our investment would be protected?

    It was tempting but, while it may have slipped through on ‘public’ contracts we would probably have wasted our time and effort on the commercial ones.

    Pity really because had it worked we might have today a thriving manufacturing base based on this pigs may or may not fly proposition rather than the financial alchemists getting the benefit from it today.

    As to sorting the present idiocy out there’s only one realistic option – re-invigorate the demand for real democracy and (metaphorically speaking) put the fear of death on the establishments and their human resource controllers euphemistically known as the people’s representatives.

    Why waste time and your life as the toffee on an apple where the core is rotten?

  26. Joe R May 14, 2012 at 2:20 pm #

    This is a rubbish article Golem, like the Bloomberg piece it is based on. YOU are guilty of parroting the the right wing panic and lies here.

    Take this huge one from the Bloomberg article -

    “They should have gone down the Irish route, bit the bullet and taken on the losses. Every time they announce a small new measure, the goal posts have already moved because of deterioration in the economy.”

    The Irish Government and Banks did not bite any bullets early on – this is easy to show.

    One recent example another Irish owned bank ( no.4 ) is being nationalised NOW even though it was always clear it would have to be. Note they avoid the word nationalised in the article. -

    http://www.independent.ie/business/irish/permanent-tsb-to-become-third-irish-bank-after-nonperforming-loans-stripped-out-3093239.html

    This liar in the Bloomberg piece is speaking in his liars jargon saying “ do not default Spain! get your taxpapers to pay the unsecured private bank bondholders and all will be well here in my bank in the City of London, and with other banks around the world, etc“. “ oh and BTW f**k eveerybody else in particular the Spanish people“. Wake up Golem.

    Spains total bad debts on its loan book stands at 8%. Its been increasing slowly but steadily since the start of the crisis in 2008 – thats after an initial jump then. They were there before, at 8%, in 1994 only they had the peseta then, to devalue and get them out of it. No bailouts then. They devalued they called the haircut and thats how the it worked.

    Irelands non-performing loans stood at well over 20% back in 2010 before figures were no longer published widely – as not to scare people further. It is higher today.

    It will not be Spains the bad debts that destroy it will be how they lock themselves to the euro and to paying them back, that and financial rumours ( like your piece ) that do them in.

    There are huge, huge differences between Ireland and Spain. Actually no significant figures graphs are the same for the two. Spanish pillar banks are major worldwide banks unlike BOI or AIB. Sandander has highly profitable operation in Latin America for example. They will not go under.

    Spanish unemployment was never full, even at the height of their boom. It has always been relatively high. They dont emmigrate to find work, as the Irish do. This also distorts figures.

    As for changing the a debt profile to mainly internal rather than external debt, this is the normal recommended course for any country with economic problems big or small. Panicky rumour mongering ( like yours ) normally starts outside a given country, and exploits language gap (as you are doing) to grow the rumour, so its a better course to have your debt internalised where every body can see whats going on and rumours do not run wild and affect the debt price. It is standard practice.

    For example Japan has (and has had for many years ) a public debt level at neary 200% of GDP, way higher than France and Italy or Beligum but its mostly internal. Japans debt rating is Aa2 so its well above junk and they can still buy debt at serviceable prices.

    • Golem XIV May 14, 2012 at 4:22 pm #

      Joe R,

      I don’t at all mind you taking issue with anything I write and am grateful if anyone points out innaccuracies so that I can correct them. But I do take exception at being told I am parrotting anybody or anything especially parroting right wing lies.

      You’re right the Bloomberg article is taking the ‘Spain mustn’t default, it must pay up and bail out its banks line’. I am not. I think that is clear not just from this article but from everything I have written since middle 2007.

      I agree that what Bloomberg says about Ireland is total gibberish. I have NEVER said any such thing. I don’t say it in this article either. So by all means castigate Bloomberg but don’t elide their opinions stupidity with my article or confuse their opinions with mine.

      The fact that you quote Bloomberg and then tell me to wake up suggests you suppose I think as Bloomberg does. If you have that impression then I think perhaps you have either not read anything I have writen for the last 4 years or are simopy so angry you want to hit someone and I just happened to be nearby.

      You make the point that Spain and Ireland are quite different. I agree. I think I made that point myself. I also agree that what could harm Spain – what is harming Spain is locking its people in to austerity measures that , it is claimed, are necessary in order to pay bail out its banks. Again I have made the point that the banks should not be bailed out and should paty their own debts, till I am tired of writing it.

      As for the wisdon of buying one’s own debt – you say it is recommended – perhaps it is. That doesn’t mean I am not allowed to say that I think it resembles a suicide pact, in how it is being done, when it is being done and the scale on which it is being done.

      If you find this scaremongering then fine. Why not just say that without all the fury venting and blaming me for the stupid things Bloomberg writes?

      Santander is a far better bank than any of the Irish ones. My childs piggy bank is better run and far more solvent than the Irish Banks. That doesn’t stop teh fact that the Cajas are a stinking pile of corruption with piles of bad loans still being hidden and marked to model prices. I have said that too for years and years and feel that the facts asa they slowly come out are proving me correct. Do you deny the mess in Bankia?

      As for Japan – I think they too have simply created a suicide pact. I think that pact has allowed them to continue following ther chosen theory of borrowing and building up debts between people/pensions, State and banks. I think this chosen path is in large part why Japan has stagnated and its salaries have declines for two decades.

      It seems to me Joe you get furious whenever I have the temerity to criticze Spain. Please bear in mind two things: I am not criticizing the Spanish people. I am against their banks and rulers not them. I think the Spanish people are being lied to and saddled with greater and greater debts.Second I also criticize teh banks and rulers of America, Germany, Italy and GB.

      I think Germans are about to find out how they have been lied to about the extent of the debts they have taken on and what they will lose when other coubntries default. Most Germans are unaware of what TARGET2 means for them.

      • Joe R June 5, 2012 at 4:02 pm #

        I dont want to get into a full argument – I have stopped looking at your blog since these posts. But note I take umbridge as an Irish person not on behalf of Spanish people. I do not like revisionism in history, particularly from wankers-with-an-agenda like Bloomberg.

        And If you quote a largely bullshit article in support of your opinion I take this as an endorsement of that bullshit. Most people would I think.

        Your work and reports on financial products and derivatives can be great but your ignorance of economic history and theory is catching up with you very obviously when you stray outside this area.

        You were wrong on Switzerland too, you missed the economic effect of the construction boom there and blamed the inward movement of money there for price fluxuations. You were looking to support your theory only. So you cherry picked an argument there, which proved to be incorrect.

        What I saw of your Irish appearence in NCAD was off the mark too. Max Keiser made the same mistake as you, live on the Vincent Browne show, and he was corrected on the spot – it is out there on you tube if you want to watch and it is very funny too.

        I know you disregard economics as a subject or more particularly as a science, but this deliberate ignorance of yours is catching you far too often even for me, a humble amateur, to take seriously anymore.

  27. John Souter May 14, 2012 at 3:10 pm #

    Here’s what I think is really missing in out world.

    Trust me, I’m a ….!
    (extract from The People Business)

    Trust, a small word with a big meaning.

    One that lies happily above truth in most dictionary’s in the happenchance of soul mates co-joined by their integrity. Trust has no measure, it’s either there or it isn’t; if its there it can be given and if given it can be earned. No relationship between sentient beings can survive without it, no community flourish, no nation progress or world know contentment; it is truly priceless and, as such should be costless, but it isn’t.

    Trust can be misplaced, adulterated by commerce to the point where its antithesis has to be coined in order to protect its true meaning – anti-trust. Hard as it is to have earned trust but not be given it in return, it’s better than being given trust and not earning it by regarding its pricelessness as something that can be squandered for painless gain.

    In our world it is a rare commodity and one I suspect is getting even rarer; while its antithesis –anti trust – is spreading from the world of commerce – where it had a purpose – to our everyday world of living and the life that affords us in a pandemic turmoil of anti or no trust. So to whom or what do we award our trust and to whom or what do we deny it.

    In the smaller units of society, parents, family, friends, trust is fairly freely given though it’s usually monitored and metered by experience. Innocence in young children doesn’t question, merely assumes trust. Sometimes trust is forced on you as the antithesis to despair – such as the patient with a brain tumour who has to trust his surgeon knows what he’s doing. And, if that patient doesn’t sense his trust is warranted he’ll shop around till he finds one who does. Trust is an everyday thing in millions of everyday ways that are only noticed when something happens to disrupt them. Which then raises the question as to why we consider it to be so rare?

    To answer that I suppose it’s necessary to try and define who and what we don’t trust – though I suspect a list of those we do would be shorter. In fact if I’m right in my hypothesis, why bother with a list at all, instead I’ll go with my instincts and give a few examples.

    Top of the heap must be governments; primarily because they’re formed by politicians for political reasons and are backed by bureaucrats both of whom profess their commitment to trust when in fact they corrupt it and as a result bastardise the results. By their example they distort the democratic process into a self serving tyranny where truth is subordinated to convenience and trust to the lies of illusion. This paradigm of politics filters down from parliament to parish and has the same effect as that which attracts fly’s to shit.

    Where governments fail is in their –Fit for Purpose & Reasonable Test – and they miss the mark by taking their eye off the ball given by the people and the corresponding goals that are expected of them. Which are, that the lot for the people will be better than it was when they got in; or, at least it will not be worse. This is all we expect of them. Not that they should please all of the people all of the time, or that they should be flayed for getting some aspects wrong – just that they show competent commitment and effort to pleasing most of the people most of the time.

    After all they supposedly serve a reasonable populace. In recent times few, if any, have been assassinated or suffered physical threat to body, family or property. So why should that populace expect any less of them from their acts and omissions when they act as executives for that abstract concept called State. In truth, no man can serve two masters, and we all know the one they choose, which by definition, makes them not fit for purpose towards the other.

    It’s a big job running a country; an easier job ruining one. Because of this most of us wouldn’t aspire towards having the necessary qualities or qualifications; but these aspirants claim they do and offer themselves for our consideration. The problem is defining what we are being offered. In short, are their aspirations towards improving our lot, or merely their’s. Are they groomed by the university of life or the colleges of politics – is their integrity to populace or party. Who knows until such time as they enter the hallowed halls of governance and the many who have clamoured are reduced to the few who will pay any price to be chosen. But they’re in and all it has cost them is a sliver of their silvery tongue forming empty promises and – though to them it’s a cost without loss and therefore meaningless – the loss of our trust.

    So, in one way, or many, this Ship of State, its command, crew, passengers and the cargo it carries has managed to lose trust from both its course and manifest. It carries none, is aiming for none and in its hubris is not concerned by its lack, which may yet prove to be an oversight of Titanic proportion and result.

    Yet, serious as this lack is in governance, it develops into a toxin that permeates throughout the institutions that supposedly serve and protect our everyday lives.

    Our police no longer serve justice or maintain the rights of our liberties to enjoy in peace, privacy and freedom the best we can make of the choices life gives us. Now they are the instruments of State, honed to suppress dissent in order to protect the property and interests of the State they serve and the ‘friends’ it’s in cahoots with. The Media, is propaganda writ large but softly and insidiously whispered. Where protest is portrayed as violence and its purpose ignored while alleged costs are ad- nausea trumpeted.

    Where those by dint of fortune, provenance or disillusion find ‘Welfare’ has to be earned by wading through a drudgery of grudge – where the inquisition of ‘means’ is very mean indeed if you have the misfortune to be poor. But if you’re a banker, estate owner or farmer, they call welfare subsidy and the means they adopt there is, “Just fill this in here and that there and we will see the cheque gets in the post.” It seems charity has now to be measured by the billions – £15b to scroungers – £65b to tax avoiders – £150b allowances (no nothing to do with the meltdown – this is before and still happening) to banks. But hey – the £15b amongst the unwashed are the easy touch and cracking down on them will make the rest think twice to apply, even if they are entitled to a bit of a hand up.

    By now you could be thinking we’ve got rid of faith and exposed the claims and rigours adopted by charity so where lies hope? In answer I’d like to tell a story.

    In recent years a Supreme Court has been set up in England. The purpose of this was supposedly to create a firm division, a separation, between the Judiciary and its administration of the Law, and the Executive who pass it into Statute. This is what we’re told; how truthful or comprehensive this explanation is your instinct is as good as mine. Some consider the Supreme Court has a covert purpose to subvert the independence of Scottish Law, others to soften the impact of the ECHR it could be all, or none, or more; who knows! But that’s not part of the story.

    A few years back, when the razzmatazz of the sub prime was being hawked around I got involved in a minor way with a Consumer Forum which owed its creation to a young law student who, realising how much his bank was costing him took them to court on the charges they were levying on his account; on the bases they were a penalty charge, way above any relationship to the actual costs of their administration and in layman terms a cash cow being exploited by the banks. He won, some of the media reported it (guess the ones who didn’t) and the banks began to suffer, if not the death, at least the discomfort of a thousand cuts, with millions more pending. If memory serves I think it cost them around £16 million in the first year. At the time we thought this was great, a chink in the armour of the ‘those’ who have by raiding the purses of the those who hath not. The euphoria led to high expectations; figures in the billions were prophesised and the more cautious wondered whether the banks would be able to withstand the onslaught. (Little did we know just how much our naivety would be exposed within a few years.) My role was minor, to act a few times as a Mackenzie friend though more often merely to advise and encourage, as generally, the policy adopted by the banks was to settle out of court and thereby thwart the possibility of a precedent being set. Instead they sought to petition for trial to be set between the banks with the plaintiffs being represented by an institution of the government. For whatever reasons the banks got their way and the Office of Fair Trading was selected by the Government to act for the plaintiffs.

    It was then that the arcane and esoteric labyrinths’ of the law sabotaged the purpose of the action. The banks challenged whether the OFT had the right to investigate and present the case. They lost in the High Court and in the Court of Appeal and the considered opinions were, were they to take it to the European Court they would lose there as well; instead they waited and took it to the Supreme Court and won?

    Like many, my disappointment was scarred by disbelief and the confusion created by my ignorance of the legal process. After all the bases of the argument was clear and the justification either for or against was quite simple so how could the previous judges get it wrong? It was only later that I learned the issue of charges hadn’t been tested; that millions were invested by the banks and as many millions by the taxpayer to decide whether an institute of a democratic government, selected by them to investigate the validity or otherwise of the charges had the right to test them in court. The Supreme Court said “No”.

    Last week, I happened to find myself watching a programme called Justice on BBC 4 – it may have been on before; most programmes have- in this one the content was on the issues the Supreme Court had handled and included interviews with some of the judges who had handled them.

    They came across very well; wise in the law and its application, committed to justice as applied by the law and approachable toward avuncular in their purpose. My attention was sharpened when one of them referred directly to the bank charges case. Here he was making the case for the law to take precedence over emotion – to the best of my recollection he said – he wanted the OFT to win for the sake of the millions of people who stood to gain from it, but as it stood the OFT didn’t have the right to investigate written into its articles and covenants? (I doubt if articles and covenants were the words he used; but you’ll get the jist.)

    As a layman I find this logic and the rationale behind it disturbing. That the authority of a democratic government to appoint one of it’s departments – the one whose purpose is the supervision of fair trade – only to be told it has not the authority to investigate a commercial enterprise for possible abuse of its customers makes a nonsense of the department, the government that appointed it and ultimately the democracy both it and the court is supposed to serve. And if the law is of the opinion it comes above the democratic process it has no right to claim it serves justice.

    Which leaves the question, where, when and should emotion step in? In the 1930’s the Nazi’s decided Jews were second class citizens. Laws were passed and judges passed sentence under them and by their actions gave tacit support to the holocaust. I suppose a few stepped down or whatever judges do when they throw in the wig and gown. But if the emotion called compassion had been aggressively acted on it could arguably have shortened the rope and scope a madman was given to play in.

    I’m not arguing the quandary placed before the Supreme Court was as evil as the one faced by Germany in the 30’s; nor am I arguing that governments shouldn’t be challenged by and in the courts – within that context I would argue for the citizen to have an automatic right to take his government to court – but when the fundamental rights and freedoms of people are undermined by the law, or priced out by the demands of its procedures to the benefit or advantage of institutions, then the Law is an ass which, in it’s consumptive dictat has chosen attrition instead of constant nutrition by adaption in order to counter the threats posed to undermine these fundamental rights.

    A legal process which seeks to protect its self is in danger of becoming just as tyrannical as any other government or institution which adopts the same practices of infallible omnipotence.

    In the populace the confusion created by these actions transforms from bewilderment to doubt and possibly suspicion as to motive and purpose.
    Such as; were the government aware of the deficiencies in the powers the OFT had? Were they in league with the banks all along…… And if not, why not force the banks into the European Court?

    And in view of the fact that by now the bubble of probity claimed by the banks had burst in full view and cost to the public – was the Supreme Court ‘influenced’ by the possibility that another blow could sound the industry’s death knell; no matter how big they were?

    Given the situation facing them, was the decision of the Supreme Court knowing the decisions of the previous courts, based on the letter of the law or on the pragmatism of convenience?

    And whether it was or not, what does the confusion created by the decision do for the embodiment of trust.

    Any democratic process worthy of the name must be constantly reviewed and developed in order to protect, maintain and add to these fundamental principles of rights of the people they are designed to serve. In a fast moving world the stasis of the status quo or the inertia of tradition is not an option. The demand of democracy is that any government selected serves the people, not its own vanity. And any elected opposition argues for improvement or rejection on the issues raised before it, not on the brooha of irresponsible negativity. Technology has given us the means where every issue of import being debated by parliament could, by ringing a number then pressing one digit have an immediate response from the electorate. Possibly cutting the need for representatives by half, and, as a consequence increasing the requirement for open and honest debate and disclosure of all relevant facts.

    Hierarchies, hegemonies and the privileges of secrecy have no legitimacy in a democracy. Nor does it license commitments to treaties or obligations that are sold to the public by lies, obfuscation or duplicity that in any way serve to distort their purpose. Within a democracy government is contracted to serve the people, not the interests of professional lobbyists, their clients, nor institutions of establishments commercial or public. The administration, income and dispersion of the public purse should reflect the values and wishes of the people, not the vanities or objectives of establishment hierarchies.

    Just as truth requires honesty, trust needs openness and integrity in order to thrive; provide both and you strengthen the bedrock of democracy and the pay-off is in the trust, interest and commitment the people give to it.

    Trust, is the foundation The People Business must be built on.

    John Souter 07/04/11

    • backwardsevolution May 14, 2012 at 10:34 pm #

      Trust, the foundation of all connections. Well said, John Souter!

  28. backwardsevolution May 14, 2012 at 3:13 pm #

    “Glass-Steagall is a good idea, but it doesn’t go far enough. The correct solution, as I have repeatedly pointed out, is One Dollar of Capital.

    This is the only solution to both preventing banking panics and long-term economic stability.

    One Dollar of Capital:

    Stops counterfeiting of the currency. Without the ability to create unbridled credit money the commercial banks and Fed can no longer create pretend GDP, which instantly reflects into asset prices in a bubble, foisting the costs off on those who cannot take advantage of those asset price increases. This is how your wealth and future have been systematically and intentionally looted over the last 30 years, and it’s one of the oldest games out there when it comes to banking. President Jackson knew it, as did others before him; this scam job literally goes back to Hammurabi! This old con must go away.

    Ends — without question — systemic risk. Since there is no longer unbacked emission into the economy, there is no longer any possibility of systemic risk. A bank that wishes to loan more than the immediate liquidation value of an asset must attract actual capital from stockholders or bondholders to lend; it cannot create credit money unless it can show a perfected security interest against an asset that is worth more than the credit money created.

    Returns credit to its legitimate function in the economy — self-liquidating lubrication for trade. A self-liquidating loan is not inflationary and has no longer-term impact on the economy. It permits the use of credit for legitimate lubrication of commerce; trans-national trade, for example, relies on letters of credit to guarantee payment for goods in transit; the goods are the asset securing the paper. Likewise, a loan for 80% of a house’s market value is secured by the house, and if marked to the market on a reasonable basis (e.g. every three months or so) it is safe as additional capital calls will certainly occur before the value goes negative.

    One Dollar of Capital simply says that you cannot issue unbacked loans. Period. You can lend against an asset, but only to its immediate liquidation value in the marketplace. That’s it.”

    http://market-ticker.org/akcs-www?post=205931

    • backwardsevolution May 14, 2012 at 4:04 pm #

      Above post continued:

      “Our current paradigm requires a roughly 6% excess asset valuation in banks. We retain this standard. Banks are then free to choose how close to that line they wish to dance; invasion of that 6% safety threshold results in immediate liquidation of the firm. If they wish to lend at 94% of a house’s value they can, but any movement against them results in the position going underwater. Most will choose to build in some sort of reasonable cushion — like 20% down — to prevent this.

      All derivative positions must be individually reserved; nobody may depend on someone else’s promise to cover a transaction as a promise is not capital. If I wish to be short a derivative that requires me to deliver a given instrument then at the instant that position goes into the money against me I must be able to clear the underlying trade and must possess the actual capital to do so. If I can’t clear the trade at any instant in time then my firm is liquidated — period.

      It’s not that difficult to understand folks. Oh sure, the mavens of Wall Street have screamed bloody murder about any such proposal, claiming that this would “damage American competitiveness in financial services.”

      My retort in 2008 was “If you wish to juggle jars of nitroglycerin I hope you don’t mind if I ask that you do it in your country rather than in ours.”

    • Gary May 14, 2012 at 9:59 pm #

      Now we are talking. There is much progress being made in the arena of ideas and understanding . That’s what makes blogs like these great IMO

  29. backwardsevolution May 14, 2012 at 5:14 pm #

    From Marketticker again:

    “This is not finished: it is about Greece, but it is also about Spain, and Italy and maybe France,” said Jacques Porta, who helps manage 500 million euros ($657 million) at Ofi Patrimoine in Paris. “The whole thing seems very dangerous. You have to be cautious, and that translates as not being in equities but being in cash.”

    No, really? What have I been saying now for four years? We’ve done exactly nothing to resolve the problems that underlie our banking system — excessive leverage.

    What’s important is to understand why.

    Here it’s quite simple. It’s why politicians won’t talk about it, including Presidential candidates Romney and Johnson along with President Obama.

    The credit money that these banks “created out of thin air”, if it is removed from the system (and removing the excessive leverage must inevitably mean removing that credit money) immediately reverses the monetary inflation that has powered higher prices in stocks, education, and (believe it or not, still) housing. This credit money has been and is nothing other than legalized counterfeiting of the currency.

    When, not if, this is forced to stop, all that monetary inflation comes out of the system. Prices collapse, especially for assets. And the feral government’s addiction to deficit spending, which has falsely inflated GDP by more than 10% for the last four years, instantly ends, all at the same time. [...]

    But none of them will have this discussion with the American people, and yet we must, because this is part and parcel of rationalizing the size of government — and returning it to a size in which every dollar of spending that the government undertakes on behalf of the people is supported with a dollar of current tax revenue — and not borrowed funds.

    We’re not doing it here and they (in Spain, Greece, France, etc) are not doing it “there.”

    But we all must have this conversation, and we must do so now, as the wolf is literally at the door. We’ve spent our resources on “mitigating” the dislocation in 2008 and do not have the resources to attempt to stop a second collapse — a collapse that is certain to come unless the policies that are making it mathematically inescapable are altered.”

    http://market-ticker.org/akcs-www?post=205922

  30. steviefinn May 15, 2012 at 1:06 am #

    Phew !! it’s getting a bit like a meeting between Venizelos & Tspirus to form a happy coalition on here.

    Just a vid from positive money, good stuff, I think….., well somebody might like it, don’t pick on me if you don’t happen to.

    ” If you can keep your head while…………….”

    http://www.youtube.com/watch?feature=player_detailpage&v=d3mfkD6Ky5o

  31. Roger May 15, 2012 at 7:50 am #

    Stevie I very much enjoyed the 97% owned film, Positive money continue to do great work in raising awareness, there are two versions. I think the longer one is better if some of the basics have already been pursued by those interested in these matters.

    I have been doing some reading on Scapegoating today researching some lyrical content for a new song I was writing yesterday I was struck by this .

    http://en.wikipedia.org/wiki/Ren%C3%A9_Girard

    Economics and globalization

    The mimetic theory has also been applied in the study of economics, most notably in La violence de la monnaie (1982) by Michel Aglietta and André Orléan. Orléan was also a contributor to the volume René Girard in Les cahiers de l’Herne (“Pour une approche girardienne de l’homo oeconomicus”).[17] According to the philosopher of technology Andrew Feenberg:

    In La violence de la monnaie, Aglietta and Orléan follow Girard in suggesting that the basic relation of exchange can be interpreted as a conflict of ‘doubles’, each mediating the desire of the Other. Like Lucien Goldmann, they see a connection between Girard’s theory of mimetic desire and the Marxian theory of commodity fetishism. In their theory, the market takes the place of the sacred in modern life as the chief institutional mechanism stabilizing the otherwise explosive conflicts of desiring subjects.[18]

    In an interview with the Unesco Courier, anthropologist and social theorist Mark Anspach (editor of the René Girard issue of Les Cahiers de l’Herne) explains that Aglietta and Orléan (who were very critical of economic rationality) see the classical theory of economics as a myth. According to Anspach, the vicious circle of violence and vengeance generated by mimetic rivalry gives rise to the gift economy, as a means to overcome it and achieve a peaceful reciprocity: “Instead of waiting for your neighbour to come steal your yams, you offer them to him today, and it is up to him to do the same for you tomorrow. Once you have made a gift, he is obliged to make a return gift. Now you have set in motion a positive circularity.”[19] Since the gift may be so large as to be humiliating, a second stage of development—”economic rationality”—is required: this liberates the seller and the buyer of any other obligations than to give money. Thus reciprocal violence is eliminated by the sacrifice, obligations of vengeance by the gift, and finally the possibly dangerous gift by “economic rationality.” This rationality, however, creates new victims, as globalization is increasingly revealing.
    ends.

    This idea of the mimetic projection of desires, the whole idea of objectification transforming into rivalry for the object or greater display of devotion to the desire in competition with other suitors is very powerful.Ultimately the one big lie is the lie we tell going against our own authentic virtue our own delusional justifications ( Selling Out).It makes us highly suggestible marks and ultimately is what allows ever heavier yokes to be draped around our shoulders. Lambs to the slaughter anyone?

  32. backwardsevolution May 15, 2012 at 8:13 am #

    Max Keiser (always a good listen) interviews John Titus (sp), a lawyer who quit his job to make a new documentary entitled “Bailout”. Mr. Titus says he wanted to make the documentary because he didn’t feel the true story had gotten out to the public.

    Listen at the 13:07 mark.

    http://www.youtube.com/watch?feature=player_embedded&v=ZESqQOctsXA

  33. JayD May 15, 2012 at 10:20 pm #

    Off topic but…we have our Conservative (U.K) M.P. coming to a parish council meeting this week at which he will answer questions.For my sins I have a seat on the council with a brief that is meant to incorporate ‘sustainability’. The question I have come up with is…
    Do you think that economic growth, based on a financial system
    that creates wealth from the issuance of debt, is in any sense of
    the word sustainable and furthermore desireable?
    …..However I would welcome suggestions from out there if anybody has any ideas.

    • Mike Hall May 15, 2012 at 11:00 pm #

      Ask him why, as sovereign issuer of their own currency, the UK still pretends it needs to borrow, or even raise taxes in order to spend. (Note taxes have an important role in extinguishing money in desired sectors for distributive & aggregate demand regulation, but they do not finance spending.)

      That is to say, the UK gov is precisely +not+ analagous to a household which, as a currency user, does need income (or borrowing) before spending.

      This is the correct functional description of the UK monetary system as explained by MMT.

      When your MP replies (as he will) that this is wrong, ask him why Professor of International Finance, former central banker & globally respected expert on Monetary Systems, Bernard Lietaer says that this description (per MMT) +is+ correct. Quote:

      “Academically, MMT has never been challenged. From what I study on it, they are right.”

      http://mikenormaneconomics.blogspot.com/2012/04/bernard-lietaer-on-modern-monetary.html

    • Mike Hall May 16, 2012 at 12:13 am #

      As to your question re:

      “….economic growth, based on a financial system
      that creates wealth from the issuance of debt, is in any sense of
      the word sustainable and furthermore desireable?..”

      I would say…it depends on how efficiently the private banks use their privileged franchise in ‘creating’ new money as debt to allocate capital to productive use in the real economy.

      If they do it prudently, no problem. But I would offer two primary problems with their recent behaviour (developed & accelerated over the last 2 to 3 decades).

      1. The ‘high st’ function of allocating capital to the real economy has become fully integrated (following continuous lobbying for deregulation) with the casino ‘financialised’ economy of (poorly named) ‘investment’ banking & ‘shadow’ banking. Economist James Crotty describes this ‘New Financial Architecture’ (NFA) in his 2009 paper on the structural causes of the GFC:

      http://cje.oxfordjournals.org/content/33/4/563.full.pdf+html

      A shorter piece from a UK Greens think tank provides a shorter but useful perspective on the changes in banking over the last several decades:

      http://www.greenhousethinktank.org/files/greenhouse/home/Banking_inside_final_3.pdf

      2. Effectively leaving the role of efficient capital allocation (for productive, job creating purposes) solely to the private banks (gov stepping back) has not produced the ‘trickle down’ or appropriate & sustainable balance of returns between capital & labour that the Thatcher/Reagan era (onward) said it would.

      Banks have increasingly shunned long term investment lending for the real economy in favour of the higher returns of short term, but ultimately riskier lending for ‘flipping’ assets. (From the ‘tangible’ like real estate & commodities to incomprehensible ‘financial products’, CDOs, derivatives and all the rest of the systemically risky bets.)

      Rather than ‘trickle down’, it has been ‘hoover up’ resulting in the increasing need for consumer debt to maintain aggregate spending (GDP growth). The consumer debt overhang (plus mortgage debt for over priced houses) is the reason why a prolonged period of stagnation (if not recession) is occurring right across Europe & the US. So many citizens are now in a prolonged period of deleveraging, so aggregate demand has slumped & unemployment thus remains high.

      However, unemployment, relative to the post war period up to the 70s, has been continuously high. This is not just a loss for those unemployed, it represents £billions in foregone prosperity – goods & services not produced, lost forever. These costs are staggering, but rarely, if ever, discussed in the media. Andy Haldane of the BoE wrote a paper on these costs of the present GFC, comparing them with the compensation that a ‘Tobin’ financial transaction tax might offer. (Conclusion – insufficient.)

      http://www.bis.org/review/r100406d.pdf

      On this last point, MMT, otherwise ‘agnostic’ on the relative size of public/private sector, offers a simple proposition with its Job Guarantee (JG).

      The JG is a voluntary scheme offering a ‘non-competing’ minimum wage job in the socially useful community/voluntary sector. (ie jobs not normally considered ‘affordable’ by public or charitable sectors).

      It is an ‘employed’, rather than ‘unemployed’ buffer stock of labour. A government paid (but not ‘normal’ public sector) ‘employer of last resort’ scheme.

      The simple propostion is this.

      The JG is inherently, always, counter cyclical.

      If the private sector can actually deliver what it always promises – jobs – then there will be no one (or only a tiny few) who needs a JG job. If the private sector cannot do this, the government paid JG steps in.

      The JG participants get to maintain some skills, remain active & more employable. Society gets some socially useful jobs done, plus the extra spending of their wages helps to keep the economy going & counter the recessionary downward spiral pressures, whilst the private sector gets its ‘upturn’ going.

      Sound fair? (And infinitely better for all than wasteful unempoyment?)

      Professor Bill Mitchell’s MMT blog:

      http://bilbo.economicoutlook.net/blog/

    • Hawkeye May 16, 2012 at 9:36 am #

      JayD

      It might be worth revisiting what “Sustainable” actually means, and whether Economic Growth, year-in, year-out is at all a sustainable objective.

      There are many good writers on the subject of sustainability in the context of linking our energy use, economic growth and environmental impacts. Chris Martenson’s Crash Course is a good primer. I also recommend the work of Richard Heinberg, Tim Jackson, Herman Daly, Gail Tverberg, Ugo Bardi & Nicole Foss.

      Here’s a couple of links:

      http://physics.ucsd.edu/do-the-math/2011/10/sustainable-means-bunkty-to-me/

      http://steadystate.org/what-is-the-limiting-factor/

      http://ourfiniteworld.com/2012/04/26/can-we-expect-the-economy-to-keep-growing/

      • JayD May 16, 2012 at 9:01 pm #

        Thanks for the input. Hawkeye, I agree and had thought the question implied my scepticism but now see that the doubt is cast more on the debt based money by the way the question is phrased. So much for my double whammy!!
        I also had the Localism Bill with its ‘presumption in favour of sustainable development’ in mind when trying to think of a question to put him on the spot with. Whatever he’s almost certain to lie/ spin the party line when he opens his mouth anyway! Thanks again

        • steviefinn May 16, 2012 at 11:52 pm #

          Jay D

          Good luck with that, As you probably know, Farage is a banker apologist, amongst other things:

          NF
          “My name is Nigel Farage. I was born an Anglican but I was also born a capitalist because I worked in the City of London during the Thatcher heydays of the 1980′s and I don’t think that money is wrong, evil or bad.

          It has become fashionable to bash the bankers, to say we must limit what people can earn (and) we must stop them having big bonuses, and this is all based on a huge misunderstanding. We cannot have nurses, doctors, schools and a civilised society unless we have wealth creation. If we tax punitively those that are most successful in this country they will leave our shores and go and work somewhere else.

          Well, I was christened into the Anglican church and I chose as a teenager to be confirmed into it but I am a very lapsed Anglican now, I feel very disconnected. We have a Christian Socialist as Archbishop of Canterbury in Rowan Williams and he has joined the chorus of attacking the banks and the bankers, and money, and capitalism, and all through the crisis, ever since the banks started collapsing back in 2008, all we have had from the Church of England is endless negativity. Without the money the City of London has generated this country would literally be sunk.”

          I wonder whether he would approve of a certain hippy type carpenter running the church ? a fella who was apparently not to keen on usury.

  34. banking May 28, 2013 at 7:16 am #

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