Archive | Central Banks & Policymakers RSS feed for this section

Why Does Ron Paul Think Bitcoin Does Not Fit The Definition Of Money?

27 Apr

Answer by Ron Paul, Former Congressman from Texas, on Quora,

Bitcoin is a very interesting subject because for many years in Congress, I was a champion of legalizing competition in currencies.

We have a terrible monetary system today. We have a government that purposely counterfeits and debases the currencies and I believe that the alternative would be a competition. That means that anything that wants to substitute for the American dollar should be permitted. There should be no prohibitions; there should not be a monopoly and a cartel running our monetary system because it so often benefits the privileged few. We certainly saw this in the bailing out of the financial system where the wealthy bankers got bailed out it in this recent and severe recession. I am a strong believer in competition. Bitcoin is an introduction to that.

Though I don’t personally believe that Bitcoin is true money, it should be perfectly legal and there should be no restrictions on it, there should be no taxes on it. The people who operate Bitcoin would, of course, be prohibited from committing fraud but the people should be able to have competition whether it is a basket of commodities or crypto-currencies – it should be perfectly legal. For this to operate, we need to have freedom from government intervention when it comes to the Internet. I am concerned that the government ultimately wants to curtail the Internet and there have been attempts to do so.

The internet is the salvation for those of us who believe in liberty because it is an alternative way of getting around the system not only in the spreading of our ideas in this instance but in in terms of getting around the monetary system on the whole if they do permit crypto-currencies and other forms of transactions. So, this is something that we should all be concerned about whether we endorse it or not.

What we should all argue for is the use of freedom rather than having a monetary system with regulation domination that is run by a cartel and the special interests – that is the kind of system we have today. We want a system that truly challenges the government in their ability to take care of the very wealthy at the expense of the middle class and the poor.

This question originally appeared on Quora: Why does Ron Paul think Bitcoin does not fit the definition of money?

Advertisements

China’s Monumental Ponzi: Here’s How It Unravels

20 Apr

China is the greatest construction boom and credit bubble in recorded history. An entire nation of 1.3 billion has gone mad building, borrowing, speculating, scheming, cheating, lying and stealing. The source of this demented outbreak is not a flaw in Chinese culture or character—nor even the kind of raw greed and gluttony that afflicts all peoples in the late stages of a financial bubble.

Instead, the cause is monetary madness with a red accent. Chairman Mao was not entirely mistaken when he proclaimed that political power flows from the end of a gun barrel-–he did subjugate a nation of one billion people based on that principle. But it was Mr. Deng’s discovery that saved Mao’s tyrannical communist party regime from the calamity of his foolish post-revolution economic experiments.

Just in the nick of time, as China reeled from the Great Leap Forward, the famine death of 40 million and the mass psychosis of the Cultural Revolution, Mr. Deng learned that power could be maintained and extended from the end of a printing press. And that’s the heart of the so-called China economic miracle. Its not about capitalism with a red accent, as the Wall Street and London gamblers have been braying for nearly two decades; its a monumental case of monetary and credit inflation that has no parallel.

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economics from Mao’s Little Red Book!

That means there was no legitimate banking system in China—just giant state bureaus which were run by  party operatives and a modus operandi of parceling out quotas for national credit growth from the top, and then water-falling them down a vast chain of command to the counties, townships and villages.  There have never been any legitimate financial prices in China—all interest rates and FX rates have been pegged and regulated to the decimal point; nor has there ever been any honest accounting either—-loans have been perpetual options to extend and pretend.

And, needless to say, there is no system of financial discipline based on contract law. China’s GDP has grown by $10 trillion dollars during this century alone—that is, there has been a boom across the land that makes the California gold rush appear pastoral by comparison.  Yet in all that frenzied prospecting there have been almost no mistakes, busted camps, empty pans or even personal bankruptcies.  When something has occasionally gone wrong with an “investment” the prospectors have gathered in noisy crowds on the streets and pounded their pans for relief—-a courtesy that the regime has invariably granted.

So in two short decades, China has erected a monumental Ponzi economy that is economically rotten to the core. It has 1.5 billion tons of steel capacity, but ”sell-through” demand of less than half that amount— that is, on-going demand for sheet steel to go into cars and appliances and rebar into replacement construction once the current pyramid building binge finally expires.  The same is true for its cement industry, ship-building, solar and aluminum industries—to say nothing of 70 million empty luxury apartments and vast stretches of over-built highways, fast rail, airports, shopping mails and new cities.

In short, the flip-side of the China’s giant credit bubble is the most massive malinvesment of real economic resources—-labor, raw materials and capital goods—ever known. Effectively, the country-side pig sties have been piled high with copper inventories and the urban neighborhoods with glass, cement and rebar erections that can’t possibly earn an economic return, but all of which has become “collateral” for even more “loans” under the Chinese Ponzi.

China has been on a wild tear heading straight for the economic edge of the planet—-that is, monetary Terra Incognito— based on the circular principle of borrowing, building and borrowing. In essence, it is a giant re-hypothecation scheme where every man’s “debt” become the next man’s “asset”.

Thus, local government’s have meager incomes, but vastly bloated debts based on stupendously over-valued inventories of land. Coal mine entrepreneurs face collapsing prices and revenues, but soaring double digit interest rates on shadow banking loans collateralized by over-valued coal reserves. Shipyards have empty order books, but vast debts collateralized by soon to be idle construction bays. Speculators have collateralized massive stock piles of copper and iron ore at prices that are already becoming ancient history.

So China is on the cusp of the greatest margin call in history. Once asset values starting falling, its pyramids of debt will stand exposed to withering performance failures and melt-downs. Undoubtedly the regime will struggle to keep its printing press prosperity alive for another month or quarter, but the fractures are now gathering everywhere because the credit rampage has been too extreme and hideous. Maybe Zhejiang Xingrun Real Estate which went belly up last week is the final catalyst, but if not there are thousands more to come. Like Mao’s gun barrel, the printing press has a “sell by” date, too

Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to find capital for years; the chairman is suspected of borrowing up to US$38.6 million with “fake mortgages.”

But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (local government officials insist it hasn’t officially defaulted yet).

Xingrun’s business in Fenghua, a county-level city that is part of Ningbo in a manufacturing belt on China’s east coast, ran into trouble through a renovation project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the first half of 2012. Xingrun projected that it could pay off its debts within three years.

The project never got to the construction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years.

That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed at high rates from private lenders.

One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afflicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered confidence in developers’ ability to pay dizzyingly high interest rates.

Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch of a commercial bank for more credit. The local branch would take that risk because loan officers there knew that, somewhere much higher up the chain, officials promoted the lending.

That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable.

High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.

headshotFenghua is a small town, and Xingrun’s reach beyond that area is limited. Analysts have come out strong in saying that such a default has little systemic risk. The bigger picture in the region, however, can’t be ignored.

Xingrun’s woes are still the woes of the local authorities. The default will add US$305 million (RMB1.9 billion) to Fenghua province’s non-performing loan portfolio, pushing up the rate of toxic assets to 5.27% and making it Zhejiang province’s most indebted government, according to calculations by The Economic Observer newspaper.

Add Fenghua’s problems to those of the greater Ningbo region. The area reportedly has at least six years of housing stock either sitting empty or under construction. The massive buildout will put small developers under great pressure to pay back loans, especially if private debtors are calling in high-interest loans. A slowdown in property prices won’t help either. Without a rescue from provincial-level banks, Fenghua won’t be the last local government stuck in a jam.

Reprinted with permission from David Stockman.

 

ALL WARS ARE BANKERS’ WARS!

20 Apr

By Michael Rivero

 

“Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better world to live in. But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits.” — Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain

I know many people have a great deal of difficulty comprehending just how many wars are started for no other purpose than to force private central banks onto nations, so let me share a few examples, so that you understand why the US Government is mired in so many wars against so many foreign nations. There is ample precedent for this.

The United States fought the American Revolution primarily over King George III’s Currency act, which forced the colonists to conduct their business only using printed bank notes borrowed from the Bank of England at interest.

 

“The bank hath benefit of interest on all moneys which it creates out of nothing.” — William Paterson, founder of the Bank of England in 1694

After the revolution, the new United States adopted a radically different economic system in which the government issued its own value-based money, so that private banks like the Bank of England were not siphoning off the wealth of the people through interest-bearing bank notes.

“The refusal of King George 3rd to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators, was probably the prime cause of the revolution.” — Benjamin Franklin, Founding Father

Following the revolution, the US Government actually took steps to keep the bankers out of the new government!

 

“Any person holding any office or any stock in any institution in the nature of a bank for issuing or discounting bills or notes payable to bearer or order, cannot be a member of the House whilst he holds such office or stock.” — Third Congress of the United States Senate, 23rd of December, 1793, signed by the President, George Washington

But bankers are nothing if not dedicated to their schemes to acquire your wealth, and know full well how easy it is to corrupt a nation’s leaders. Just one year after Mayer Amschel Rothschild had uttered his infamous “Let me issue and control a nation’s money and I care not who makes the laws”, the bankers succeeded in setting up a new Private Central Bank called the First Bank of the United States, largely through the efforts of the Rothschild’s chief US supporter, Alexander Hamilton. Founded in 1791, by the end of its twenty year charter the First Bank of the United States had almost ruined the nation’s economy, while enriching the bankers. Congress refused to renew the charter and signaled their intention to go back to a state issued value based currency on which the people paid no interest at all to any banker. This resulted in a threat from Nathan Mayer Rothschild against the US Government, “Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war.” Congress still refused to renew the charter for the First Bank of the United States, whereupon Nathan Mayer Rothschild railed, “Teach those impudent Americans a lesson! Bring them back to colonial status!” The British Prime Minister at the time, Spencer Perceval was adamently opposed to war with the United States, primarily because the majority of England’s military might was occupied with the ongoing Napoleonic wars. Spencer Perceval was concerned that Britain might not prevail in a new American war, a concern shared by many in the British government. Then, Spencer Perceval was assassinated (the only British Prime Minister to be assassinated in office) and replaced by Robert Banks Jenkinson, the 2nd Earl of Liverpool, who was fully supportive of a war to recapture the colonies.


Click for larger image of the Geneva Gazette for July 1, 1912, reporting on the assassination of Spencer Perceval together with the declaration of the War of 1812.

 

 

“If my sons did not want wars, there would be none.” — Gutle Schnaper, wife of Mayer Amschel Rothschild and mother of his five sons

Financed at virtually no interest by the Rothschild controlled Bank of England, Britain then provoked the war of 1812 to recolonize the United States and force them back into the slavery of the Bank of England, or to plunge the United States into so much debt they would be forced to accept a new private central bank. And the plan worked. Even though the War of 1812 was won by the United States, Congress was forced to grant a new charter for yet another private bank issuing the public currency as loans at interest, the Second Bank of the United States. Once again, private bankers were in control of the nation’s money supply and cared not who made the laws or how many British and American soldiers had to die for it.

Once again the nation was plunged into debt, unemployment, and poverty by the predations of the private central bank, and in 1832 Andrew Jackson successfully campaigned for his second term as President under the slogan, “Jackson And No Bank!” True to his word, Jackson succeeds in blocking the renewal of the charter for the Second Bank of the United States.

“Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!” — Andrew Jackson, shortly before ending the charter of the Second Bank of the United States. From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson (February 1834), according to Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

Shortly after President Jackson (the only American President to actually pay off the National Debt) ended the Second Bank of the United States, there was an attempted assassination which failed when both pistols used by the assassin, Richard Lawrence, failed to fire. Lawrence later said that with Jackson dead, “Money would be more plenty.”

President Zachary Taylor opposed the creation of a new Private Central Bank, owing to the historical abuses of the First and Second Banks of the United States.

“The idea of a national bank is dead, and will not be revived in my time.” — Zachary Taylor

Taylor died on July 9, 1850 after eating a bowl of cherries and milk rumored to have been poisoned. The symptoms h displayed are consistent with acute arsenic poisoning.

President James Buchanan also opposed a private central bank. During the panic of 1857 he attempted to set limits on banks issuing more loans than they had actual funds, and to require all issued bank notes to be backed by Federal Government assets. He was poisoned with arsenic and survived, although 38 other people at the dinner died.

Of course, the public school system is as subservient to the bankers’ wishes to keep certain history from you, just as the corporate media is subservient to Monsanto’s wishes to keep the dangers of GMOs from you, and the global warming cult’s wishes to conceal from you that the Earth has actually been cooling for the last 16 years. Thus is should come as little surprise that much of the real reasons for the events of the Civil War are not well known to the average American.

 

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” — The Rothschild brothers of London writing to associates in New York, 1863

When the Confederacy seceded from the United States, the bankers once again saw the opportunity for a rich harvest of debt, and offered to fund Lincoln’s efforts to bring the south back into the union, but at 30% interest. Lincoln remarked that he would not free the black man by enslaving the white man to the bankers and using his authority as President, issued a new government currency, the greenback. This was a direct threat to the wealth and power of the central bankers, who quickly responded.

“If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.” — The London Times responding to Lincoln’s decision to issue government Greenbacks to finance the Civil War,rather than agree to private banker’s loans at 30% interest.

In 1872 New York bankers sent a letter to every bank in the United States, urging them to fund newspapers that opposed government-issued money (Lincoln’s greenbacks).

“Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers… as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country… [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders.” — Triumphant plutocracy; the story of American public life from 1870 to 1920, by Lynn Wheeler

“It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that.” — Triumphant plutocracy; the story of American public life from 1870 to 1920, by Lynn Wheeler

“Slavery is likely to be abolished by the war power, and chattel slavery destroyed. This, I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care for the laborer, while the European plan, led on by England, is for capital to control labor by controlling the wages. THIS CAN BE DONE BY CONTROLLING THE MONEY.” — Triumphant plutocracy; the story of American public life from 1870 to 1920, by Lynn Wheeler

Goaded by the private bankers, much of Europe supported the Confederacy against the Union, with the expectation that victory over Lincoln would mean the end of the Greenback. France and Britain considered an outright attack on the United States to aid the confederacy, but were held at bay by Russia, which had just ended the serfdom system and had a state central bank similar to the system the United States had been founded on. Left free of European intervention, the Union won the war, and Lincoln announced his intention to go on issuing greenbacks. Following Lincoln’s assassination, the Greenbacks were pulled from circulation and the American people forced to go back to an economy based on bank notes borrowed at interest from the private bankers. Tsar Alexander II, who authorized Russian militarey assistance to Lincoln, was subsequently the victim of multiple attempts on his life in 1866, 1879, and 1880, until his assassination in 1881.

James A. Garfield was elected President in 1880 on a platform of government control of the money supply.

 

“The chief duty of the National Government in connection with the currency of the country is to coin money and declare its value. Grave doubts have been entertained whether Congress is authorized by the Constitution to make any form of paper money legal tender. The present issue of United States notes has been sustained by the necessities of war; but such paper should depend for its value and currency upon its convenience in use and its prompt redemption in coin at the will of the holder, and not upon its compulsory circulation. These notes are not money, but promises to pay money. If the holders demand it, the promise should be kept. — James Garfield

 

“By the experience of commercial nations in all ages it has been found that gold and silver afford the only safe foundation for a monetary system. Confusion has recently been created by variations in the relative value of the two metals, but I confidently believe that arrangements can be made between the leading commercial nations which will secure the general use of both metals. Congress should provide that the compulsory coinage of silver now required by law may not disturb our monetary system by driving either metal out of circulation. If possible, such an adjustment should be made that the purchasing power of every coined dollar will be exactly equal to its debt-paying power in all the markets of the world. –James Garfield

 

“He who controls the money supply of a nation controls the nation. — James Garfield

Garfield was shot on July 2, 1881 and died of his wounds several weeks later. Chester A. Arthur succeeded Garfield as President.

In 1896, William McKinley was elected President in the middle of a depression-driven debate over gold-backed government currency versus bank notes borrowed at interest from private banks. McKinley favored gold-backed currencies and a balanced government budget which would free the public from accumulating debt.

 

“Our financial system needs some revision; our money is all good now, but its value must not further be threatened. It should all be put upon an enduring basis, not subject to easy attack, nor its stability to doubt or dispute. Our currency should continue under the supervision of the Government. The several forms of our paper money offer, in my judgment, a constant embarrassment to the Government and a safe balance in the Treasury.” — William McKinley

McKinley was shot by an out-of-work anarchist on September 14, 1901, in Buffalo, NY, succumbing to his wounds a few days later. He was suceeded in office by Theodore Roosevelt.

Finally, in 1913, the Private Central Bankers of Europe, in particular the Rothschilds of Great Britain and the Warburgs of Germany, met with their American financial collaborators on Jekyll Island, Georgia to form a new banking cartel with the express purpose of forming the Third Bank of the United States, with the aim of placing complete control of the United States money supply once again under the control of private bankers. Owing to hostility over the previous banks, the name was changed to “The Federal Reserve” system in order to grant the new bank a quasi-governmental image, but in fact it is a privately owned bank, no more “Federal” than Federal Express. Indeed, in 2012, the Federal Reserve attempted to rebuff a Freedom of Information Lawsuit by Bloomberg News on the grounds that as a private banking corporation and not actually a part of the government, the Freedom of Information Act did not apply to the “trade secret” operations of the Federal Reserve.

 

“When you or I write a check, there must be sufficient funds in our account to cover the check; but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.” — From the Boston Federal Reserve Bank pamphlet, “Putting it Simply.”

 

“Neither paper currency nor deposits have value as commodities. Intrinsically, a ‘dollar’ bill is just a piece of paper. Deposits are merely book entries.” — “Modern Money Mechanics Workbook” � Federal Reserve of Chicago, 1975

 

“I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people.” — Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924

 

“States, most especially the large hegemonic ones, such as the United States and Great Britain, are controlled by the international central banking system, working through secret agreements at the Bank for International Settlements (BIS), and operating through national central banks (such as the Bank of England and the Federal Reserve)… The same international banking cartel that controls the United States today previously controlled Great Britain and held it up as the international hegemon. When the British order faded, and was replaced by the United States, the US ran the global economy. However, the same interests are served. States will be used and discarded at will by the international banking cartel; they are simply tools.” — Andrew Gavin Marshall

1913 proved to be a transformative year for the nation’s economy, first with the passage of the 16th “income tax” Amendment and the false claim that it had been ratified.

“I think if you were to go back and and try to find and review the ratification of the 16th amendment, which was the internal revenue, the income tax, I think if you went back and examined that carefully, you would find that a sufficient number of states never ratified that amendment.” – U.S. District Court Judge James C. Fox, Sullivan Vs. United States, 2003.

Later that same year, and apparently unwilling to risk another questionable amendment, Congress passed the Federal Reserve Act over Christmas holiday 1913, while members of Congress opposed to the measure were at home. This was a very underhanded deal, as the Constitution explicitly vests Congress with the authority to issue the public currency, does not authorize its delegation, and thus should have required a new Amendment to transfer that authority to a private bank. But pass it Congress did, and President Woodrow Wilson signed it as he promised the bankers he would in exchange for generous campaign contributions. Wilson later regretted that decision.

 

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit. We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.” — Woodrow Wilson 1919

The next year, World War One started, and it is important to remember that prior to the creation of the Federal Reserve, there was no such thing as a world war.

 

World War One started between Austria-Hungary and Serbia, but quickly shifted to focus on Germany, whose industrial capacity was seen as an economic threat to Great Britain, who saw the decline of the British Pound as a result of too much emphasis on financial activity to the neglect of agriculture, industrial development, and infrastructure (not unlike the present day United States). Although pre-war Germany had a private central bank, it was heavily restricted and inflation kept to reasonable levels. Under government control, investment was guaranteed to internal economic development, and Germany was seen as a major power. So, in the media of the day, Germany was portrayed as the prime opponent of World War One, and not just defeated, but its industrial base flattened. Following the Treaty of Versailles, Germany was ordered to pay the war costs of all the participating nations, even though Germany had not actually started the war. This amounted to three times the value of all of Germany itself. Germany’s private central bank, to whom Germany had gone deeply into debt to pay the costs of the war, broke free of government control, and massive inflation followed (mostly triggered by currency speculators) , permanently trapping the German people in endless debt.

When the Weimar Republic collapsed economically, it opened the door for the National Socialists to take power. Their first financial move was to issue their own state currency which was not borrowed from private central bankers. Freed from having to pay interest on the money in circulation, Germany blossomed and quickly began to rebuild its industry. The media called it “The German Miracle”. TIME magazine lionized Hitler for the amazing improvement in life for the German people and the explosion of German industry, and even named him TIME Magazine’s Man Of The Year in 1938.

 

 

Once again, Germany’s industrial output became a threat to Great Britain.

“Should Germany merchandise (do business) again in the next 50 years we have led this war (WW1) in vain.” – Winston Churchill in The Times (1919) 

“We will force this war upon Hitler, if he wants it or not.” – Winston Churchill (1936 broadcast)

“Germany becomes too powerful. We have to crush it.” – Winston Churchill (November 1936 speaking to US – General Robert E. Wood)

“This war is an English war and its goal is the destruction of Germany.” – Winston Churchill (- Autumn 1939 broadcast)

 

Germany’s state-issued value based currency was also a direct threat to the wealth and power of the private central banks, and as early as 1933 they started to organize a global boycott against Germany to strangle this upstart ruler who thought he could break free of private central bankers!

 


Click for larger image
 

As had been the case in World War One, Great Britain and other nations threatened by Germany’s economic power looked for an excuse to go to war, and as public anger in Germany grew over the boycott, Hitler foolishly gave them that excuse. Years later, in a spirit of candor, the real reasons for that war were made clear.

“The war wasn’t only about abolishing fascism, but to conquer sales markets. We could have, if we had intended so, prevented this war from breaking out without doing one shot, but we didn’t want to.”– Winston Churchill to Truman (Fultun, USA March 1946) 

 

“Germany’s unforgivable crime before WW2 was its attempt to loosen its economy out of the world trade system and to build up an independent exchange system from which the world-finance couldn’t profit anymore. …We butchered the wrong pig.” -Winston Churchill (The Second World War – Bern, 1960)

As a side note, we need to step back before WW2 and recall Marine Major General Smedley Butler. In 1933, Wall Street bankers and financiers had bankrolled the successful coups by both Hitler and Mussolini. Brown Brothers Harriman in New York was financing Hitler right up to the day war was declared with Germany. And they decided that a fascist dictatorship in the United States based on the one on Italy would be far better for their business interests than Roosevelt’s “New Deal” which threatened massive wealth re-distribution to recapitalize the working and middle class of America. So the Wall Street tycoons recruited General Butler to lead theoverthrow of the US Government and install a “Secretary of General Affairs” who would be answerable to Wall Street and not the people, would crush social unrest and shut down all labor unions. General Butler pretended to go along with the scheme but then exposed the plot to Congress. Congress, then as now in the pocket of the Wall Street bankers, refused to act. When Roosevelt learned of the planned coup he demanded the arrest of the plotters, but the plotters simply reminded Roosevelt that if any one of them were sent to prison, their friends on Wall Street would deliberatly collapse the still-fragile economy and blame Roosevelt for it. Roosevelt was thus unable to act until the start of WW2, at which time he prosecuted many of the plotters under the Trading With The Enemy act. The Congressional minutes into the coup were finally released in 1967 and became the inspiration for the movie, “Seven Days in May” but with the true financial villains erased from the script.

“I spent 33 years and four months in active military service as a member of our country’s most agile military force — the Marine Corps. I served in all commissioned ranks from second lieutenant to Major General. And during that period I spent more of my time being a high–class muscle man for Big Business, for Wall Street and for the bankers. In short, I was a racketeer, a gangster for capitalism. “I suspected I was just a part of a racket at the time. Now I am sure of it. Like all members of the military profession I never had an original thought until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of the higher-ups. This is typical with everyone in the military service. Thus I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916. In China in 1927 I helped see to it that the Standard Oil went its way unmolested. During those years, I had, as the boys in the back room would say, a swell racket. I was rewarded with honors, medals and promotion. Looking back on it, I feel I might have given Al Capone a few hints. The best he could do was to operate his racket in three city districts. I operated on three continents.” — General Smedley Butler, former US Marine Corps Commandant,1935

 

As President, John F. Kennedy understood the predatory nature of private central banking. He understood why Andrew Jackson fought so hard to end the Second Bank of the United States. So Kennedy wrote and signed Executive Order 11110 which ordered the US Treasury to issue a new public currency, the United States Note.

 


Click for larger
 

Kennedy’s United States Notes were not borrowed form the Federal Reserve but created by the US Government and backed by the silver stockpiles held by the US Government. It represented a return to the system of economics the United States had been founded on, and was perfectly legal for Kennedy to do. All told, some four and one half billion dollars went into public circulation, eroding interest payments to the Federal Reserve and loosening their control over the nation. Five months later John F. Kennedy was assassinated in Dallas Texas, and the United States Notes pulled from circulation and destroyed (except for samples held by collectors). John J. McCloy, President of the Chase Manhattan Bank, and President of the World Bank, was named to the Warren Commission, presumably to make certain the banking dimensions behind the assassination were concealed from the public.

As we enter the eleventh year of what future history will most certainly describe as World War Three, we need to examine the financial dimensions behind the wars.

Towards the end of World War Two, when it became obvious that the allies were going to win and dictate the post war environment, the major world economic powers met at Bretton Woods, a luxury resort in New Hampshire in July of 1944, and hammered out the Bretton Woods agreement for international finance. The British Pound lost its position as the global trade and reserve currency to the US dollar (part of the price demanded by Roosevelt in exchange for the US entry into the war). Absent the economic advantages of being the world’s “go-to” currency, Britain was forced to nationalize the Bank of England in 1946. The Bretton Woods agreement, ratified in 1945, in addition to making the dollar the global reserve and trade currency, obligated the signatory nations to tie their currencies to the dollar. The nations that ratified Bretton Woods did so on two conditions. The first was that the Federal Reserve would refrain from over-printing the dollar as a means to loot real products and produce from other nations in exchange for ink and paper; basically an imperial tax. That assurance was backed up by the second requirement, which was that the US dollar would always be convertible to gold at $35 per ounce.

Of course, the Federal Reserve, being a private bank and not answerable to the US Government, did start overprinting paper dollars, and much of the perceived prosperity of the 1950s and 1960s was the result of foreign nations’ obligations to accept the paper notes as being worth gold at the rate of $35 an ounce. Then in 1970, France looked at the huge pile of paper notes sitting in their vaults, for which real French products like wine and cheese had been traded, and notified the United States government that they would exercise their option under Bretton Woods to return the paper notes for gold at the $35 per ounce exchange rate. Of course, the United States had nowhere near the gold to redeem the paper notes, so on August 15th, 1971, Richard Nixon “temporarily” suspended the gold convertibility of the US Federal Reserve Notes. This “Nixon shock” effectively ended Bretton Woods and many global currencies started to delink from the US dollar. Worse, since the United States had collateralized their loans with the nation’s gold reserves, it quickly became apparent that the US Government did not in fact have enough gold to cover the outstanding debts. Foreign nations began to get very nervous about their loans to the US and understandably were reluctant to loan any additional money to the United States without some form of collateral. So Richard Nixon started the environmental movement, with the EPA and its various programs such as “wilderness zones”, Roadless areas”, Heritage rivers”, “Wetlands”, all of which took vast areas of public lands and made them off limits to the American people who were technically the owners of those lands. But Nixon had little concern for the environment and the real purpose of this land grab under the guise of the environment was to pledge those pristine lands and their vast mineral resources as collateral on the national debt. The plethora of different programs was simply to conceal the true scale of how much American land was being pledged to foreign lenders as collateral on the government’s debts; eventually almost 25% of the nation itself.

 

click for full size imageWith open lands for collateral already in short supply, the US Government embarked on a new program to shore up sagging international demand for the dollar. The United States approached the world’s oil producing nations, mostly in the Middle East, and offered them a deal. In exchange for only selling their oil for dollars, the United States would guarantee the military safety of those oil-rich nations. The oil rich nations would agree to spend and invest their US paper dollars inside the United States, in particular in US Treasury Bonds, redeemable through future generations of US taxpayers. The concept was labeled the “petrodollar”. In effect, the US, no longer able to back the dollar with gold, was now backing it with oil. Other peoples’ oil. And that necessity to keep control over those oil nations to prop up the dollar has shaped America’s foreign policy in the region ever since.

But as America’s manufacturing and agriculture has declined, the oil producing nations faced a dilemma. Those piles of US Federal Reserve notes were not able to purchase much from the United States because the United States had little (other than real estate) anyone wanted to buy. Europe’s cars and aircraft were superior and less costly, while experiments with GMO food crops led to nations refusing to buy US food exports. Israel’s constant belligerence against its neighbors caused them to wonder if the US could actually keep their end of the petrodollar arrangement. Oil producing nations started to talk of selling their oil for whatever currency the purchasers chose to use. Iraq, already hostile to the United States following Desert Storm, demanded the right to sell their oil for Euros in 2000 and in 2002, the United Nations agreed to allow it under the “Oil for food” program instituted following Desert Storm. One year later the United States re-invaded Iraq, lynched Saddam Hussein, and placed Iraq’s oil back on the world market only for US dollars.

The clear US policy shift following 9-11, away from being an impartial broker of peace in the Mideast to one of unquestioned support for Israel’s aggressions only further eroded confidence in the Petrodollar deal and even more oil producing nations started openly talking of oil trade for other global currencies.

Over in Libya, Muammar Gaddafi had instituted a state-owned central bank and a value based trade currency, the Gold Dinar. Gaddafi announced that Libya’s oil was for sale, but only for the Gold Dinar. Other African nations, seeing the rise of the Gold Dinar and the Euro, even as the US dollar continued its inflation-driven decline, flocked to the new Libyan currency for trade. This move had the potential to seriously undermine the global hegemony of the dollar. French President Nicolas Sarkozy reportedly went so far as to call Libya a “threat” to the financial security of the world. So, the United States invaded Libya, brutally murdered Qaddafi ( the object lesson of Saddam’s lynching not being enough of a message, apparently), imposed a private central bank, and returned Libya’s oil output to dollars only. The gold that was to have been made into the Gold Dinars is, as of last report, unaccounted for.

According to General Wesley Clark, the master plan for the “dollarification” of the world’s oil nations included seven targets, Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran (Venezuela, which dared to sell their oil to China for the Yuan, is a late addition). What is notable about the original seven nations originally targeted by the US is that none of them are members of the Bank for International Settlements, the private central bankers private central bank, located in Switzerland. This meant that these nations were deciding for themselves how to run their nations’ economies, rather than submit to the international private banks.

Now the bankers’ gun sights are on Iran, which dares to have a government central bank and sell their oil for whatever currency they choose. The war agenda is, as always, to force Iran’s oil to be sold only for dollars and to force them to accept a privately owned central bank. Malaysia, one of the new nations without a Rothschild central bank, is now being invaded by a force claimed to be “Al Qaeda”, and with the death of President Hugo Chavez, plans to impose a US and banker friendly regime on Venezuela are clearly being implemented.

The German government recently asked for the return of some of their gold bullion from the Bank of France and the New York Federal Reserve. France has said it will take 5 years to return Germany’s gold. The United States has said they will need 8 years to return Germany’s gold. This suggests strongly that the Bank of France and the NY Federal Reserve have used the deposited gold for other purposes, most likely to cover gold futures contracts used to artificially suppress the price of gold to keep investors in the equities markets, and the Central Banks are scrambling to find new gold to cover the shortfall and prevent a gold run. So it is inevitable that suddenly France invades Mali, ostensibly to combat Al Qaeda, with the US joining in. Mali just happens to be one of the world’s largest gold producers with gold accounting for 80% of Mali exports. War for the bankers does not get more obvious than that!

Mexico has demanded a physical audit of their gold bullion stored at the Bank of England, and along with Venezuela’s vast oil reserves (larger than Saudi Arabia), Venezuela’s gold mines are a prize lusted after by all the Central Banks that played fast and loose with other peoples’ gold bullion. So we can expect regime change if not outright invasion soon.

You have been raised by a public school system and media that constantly assures you that the reasons for all these wars and assassinations are many and varied. The US claims to bring democracy to the conquered lands (they haven’t; the usual result of a US overthrow is the imposition of a dictatorship, such as the 1953 CIA overthrow of Iran’s democratically elected government of Mohammad Mosaddegh and the imposition of the Shah, or the 1973 CIA overthrow of Chile’s democratically elected government of President Salvador Allende, and the imposition of Augusto Pinochet), or to save a people from a cruel oppressor, revenge for 9-11, or that tired worn-out catch all excuse for invasion, weapons of mass destruction. Assassinations are always passed off as “crazed lone nuts” to obscure the real agenda.

The real agenda is simple. It is enslavement of the people by creation of a false sense of obligation. That obligation is false because the Private Central Banking system, by design, always creates more debt than money with which to pay that debt. Private Central Banking is not science, it is a religion; a set of arbitrary rules created to benefit the priesthood, meaning the owners of the Private Central Bank. The fraud persists, with often lethal results, because the people are tricked into believing that this is the way life is suppoed to be and no alternative exists or should be dreamt of. The same was true of two earlier systems of enslavement, Rule by Divine Right and Slavery, both systems built to trick people into obedience, and both now recognized by modern civilizatyion as illegitimate. Now we are entering a time in human history where we will recognize that rule by debt, or rule by Private Central Bankers issuing the public currency as a loan at interest, is equally illegitimate. It only works as long as people allow themselves to believe that this is the way life is supposed to be.

 

But understand this above all; Private Central Banks do not exist to serve the people, the community, or the nation. Private Central Banks exist to serve their owners, to make them rich beyond the dreams of Midas and all for the cost of ink, paper, and the right bribe to the right official.

Behind all these wars, all these assassinations, the hundred million horrible deaths from all the wars lies a single policy of dictatorship. The private central bankers allow rulers to rule only on the condition that the people of a nation be enslaved to the private central banks. Failing that, said ruler will be killed, and their nation invaded by those other nations enslaved to private central banks.

The so-called “clash of civilizations” we read about on the corporate media is really a war between banking systems, with the private central bankers forcing themselves onto the rest of the world, no matter how many millions must die for it. Indeed the constant hatemongering against Muslims lies in a simple fact. Like the ancient Christians (prior to the Knights Templars private banking system) , Muslims forbid usury, or the lending of money at interest. And that is the reason our government and media insist they must be killed or converted. They refuse to submit to currencies issued at interest. They refuse to be debt slaves.

So off to war your children must go, to spill their blood for the money-junkies’ gold. We barely survived the last two world wars. In the nuclear/bioweapon age, are the private central bankers willing to risk incinerating the whole planet just to feed their greed?

Apparently so.

This brings us to the current situation in the Ukraine.

The European Union had been courting the government of the Ukraine to merge with the EU, and more to the point, entangle their economy with the private-owned European Central Bank. The government of the Ukraine was considering the move, but had made no commitments. Part of their concern lay with the conditions in other EU nations enslaved to the ECB, notably Cyprus, Greece, Spain, and Italy. So they were properly cautious. Then Russia stepped in with a better deal and the Ukraine, exercising the basic choice all consumers have to choose the best product at the best price, dropped the EU and announced they were going to go with Russia’s offer. It was at that point that agents provocateurs flooded into the Ukraine, covertly funded by intelligence agency fronts like CANVAS and USAID, stirring up trouble, while the western media proclaimed this was a popular revolution. Snipers shot at people and this violence was blamed on then-President Yanukovich. However a leaked recording of a phone call between the EU’s Catherine Ashton and Estonia’s Foreign Minister Urmas Paet confirmed the snipers were working for the overthrow plotters, not the Ukrainian government. Urmas Paet has confirmed the authenticity of that phone call.

This is a classic pattern of covert overthrow we have seen many times before. Since the end of WW2, the US has covertly tried to overthrow the governments of 56 nations, succeeding 25 times. Examples include the 1953 overthrow of Iran’s elected government of Mohammed Mossadegh and the imposition of the Shah, the 1973 overthrow of Chile’s elected government of Salvador Allende and the imposition of the Pinochet dictatorship, and of course, the current overthrow of Ukraine’s elected government of Yanukovich and the imposition of the current unelected government, which is already gutting the Ukraine’s wealth to hand to the western bankers.

 

Flag waving and propaganda aside, all modern wars are wars by and for the private bankers, fought and bled for by third parties unaware of the true reason they are expected to gracefully be killed and croppled for. The process is quite simple. As soon as the Private Central Bank issues its currency as a loan at interest, the public is forced deeper and deeper into debt. When the people are reluctant to borrow any more, that is when the Keynesian economists demand the government borrow more to keep the pyramid scheme working. When both the people and government refuse to borrow any more, that is when wars are started, to plunge everyone even deeper into debt to pay for the war, then after the war to borrow more to rebuild. When the war is over, the people have about the same as they did before the war, except the graveyards are far larger and everyone is in debt to the private bankers for the next century. This is why Brown Brothers Harriman in New York was funding the rise of Adolf Hitler.

As long as Private Central Banks are allowed to exist, inevitably as the night follows day there will be poverty, hopelessness, and millions of deaths in endless World Wars, until the Earth itself is sacrificed in flames to Mammon.

The path to true peace on Earth lies in the abolishment of all private central banking everywhere, and a return to the state-issued value-based currencies that allow nations and people to become prosperous.

 

“Banks do not have an obligation to promote the public good.” — Alexander Dielius, CEO, Germany, Austrian, Eastern Europe Goldman Sachs, 2010

 

“I am just a banker doing God’s work.” — Lloyd Blankfein, CEO, Goldman Sachs, 2009

 


 


 


Click for larger image


 

Other articles by Michael Rivero on the fraud of Private Central Banking. 

THE ELEVENTH MARBLE 

HOW YOU BECAME A SLAVE TO THE BANKERS! 

Awaken slaves! – How The Private Central Bank Ponzi Scheme Trapped And Destroyed America 

THE FATAL FLAWS IN WALL STREET’S ECONOMIC THEORY 

BANKERS GONE WILD – HOW THE US GOVERNMENT HELPED WALL STREET GANG-RAPE AMERICA’S MIDDLE CLASS (AND MOST OF EUROPE)


Bankers are Behind the Wars

20 Apr

Posted on  by WashingtonsBlog

https://i2.wp.com/freedom-articles.toolsforfreedom.com/wp-content/uploads/2013/06/bankers-wars.jpgImage by Terry Robinson

All Wars Are Bankers’ Wars

Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London (Nomi Prins) –  notes:

Throughout the century that I examined, which began with the Panic of 1907 … what I found by accessing the archives of each president is that through many events and periods, particular bankers were in constant communication [with the White House] — not just about financial and economic policy, and by extension trade policy, but also about aspects of World War I, or World War II, or the Cold War, in terms of the expansion that America was undergoing as a superpower in the world, politically, buoyed by the financial expansion of the banking community.

***

In the beginning of World War I, Woodrow Wilson had adopted initially a policy of neutrality. But the Morgan Bank, which was the most powerful bank at the time, andwhich wound up funding over 75 percent of the financing for the allied forces during World War I … pushed Wilson out of neutrality sooner than he might have done, because of their desire to be involved on one side of the war.

Now, on the other side of that war, for example, was the National City Bank, which, though they worked with Morgan in financing the French and the British, they also didn’t have a problem working with financing some things on the German side, as did Chase …

When Eisenhower became president … the U.S. was undergoing this expansion by providing, under his doctrine, military aid and support to countries [under] the so-called threat of being taken over by communism … What bankers did was they opened up hubs, in areas such as Cuba, in areas such as Beirut and Lebanon, where the U.S. also wanted to gain a stronghold in their Cold War fight against the Soviet Union. And so the juxtaposition of finance and foreign policy were very much aligned.

So in the ‘70s, it became less aligned, because though America was pursuing foreign policy initiatives in terms of expansion, the bankers found oil, and they made an extreme effort to activate relationships in the Middle East, that then the U.S. government followed. For example, in Saudi Arabia and so forth, they get access to oil money, and then recycle it into Latin American debt and other forms of lending throughout the globe. So that situation led the U.S. government.

Indeed, JP Morgan also purchased control over America’s leading 25 newspapers in order to propagandize US public opinion in favor of US entry into World War 1.

And many big banks did, in fact, fund the Nazis.

The BBC reported in 1998:

Barclays Bank has agreed to pay $3.6m to Jews whose assets were seized from French branches of the British-based bank during World War II.

***

Chase Manhattan Bank, which has acknowledged seizing about 100 accounts held by Jews in its Paris branch during World War II ….”Recently unclassified reports from the US Treasury about the activities of Chase in Paris in the 1940s indicate that the local branch worked “in close collaboration with the German authorities” in freezing Jewish assets.

The New York Daily News noted the same year:

The relationship between Chase and the Nazis apparently was so cozy that Carlos Niedermann, the Chase branch chief in Paris, wrote his supervisor in Manhattan that the bank enjoyed “very special esteem” with top German officials and “a rapid expansion of deposits,” according to Newsweek.

Niedermann’s letter was written in May 1942 five months after the Japanese bombed Pearl Harbor and the U.S. also went to war with Germany.

The BBC reported in 1999:

A French government commission, investigating the seizure of Jewish bank accounts during the Second World War, says five American banks Chase Manhattan, J.P Morgan, Guaranty Trust Co. of New York, Bank of the City of New York and American Express had taken part.

It says their Paris branches handed over to the Nazi occupiers about one-hundred such accounts.

One of Britain’s main newspapers – the Guardian – reported in 2004:

George Bush’s grandfather [and George H.W. Bush’s father], the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany.

The Guardian has obtained confirmation from newly discovered files in the US National Archives that a firm of which Prescott Bush was a director was involved with the financial architects of Nazism.

His business dealings … continued until his company’s assets were seized in 1942 under the Trading with the Enemy Act

***

The documents reveal that the firm he worked for, Brown Brothers Harriman (BBH), acted as a US base for the German industrialist, Fritz Thyssen, who helped finance Hitler in the 1930s before falling out with him at the end of the decade. The Guardian has seen evidence that shows Bush was the director of the New York-based Union Banking Corporation (UBC) that represented Thyssen’s US interests and he continued to work for the bank after America entered the war.

***

Bush was a founding member of the bank [UBC] … The bank was set up by Harriman and Bush’s father-in-law to provide a US bank for the Thyssens, Germany’s most powerful industrial family.

***

By the late 1930s, Brown Brothers Harriman, which claimed to be the world’s largest private investment bank, and UBC had bought and shipped millions of dollars of gold, fuel, steel, coal and US treasury bonds to Germany, both feeding and financing Hitler’s build-up to war.

Between 1931 and 1933 UBC bought more than $8m worth of gold, of which $3m was shipped abroad. According to documents seen by the Guardian, after UBC was set up it transferred $2m to BBH accounts and between 1924 and 1940 the assets of UBC hovered around $3m, dropping to $1m only on a few occasions.

***

UBC was caught red-handed operating a American shell company for the Thyssen family eight months after America had entered the war and that this was the bank that had partly financed Hitler’s rise to power.

Indeed, banks often finance both sides of wars:

 

(The San Francisco Chronicle also documents that leading financiers Rockefeller, Carnegie and Harriman also funded Nazi eugenics programs … but that’s a story for another day.) 

After all, wars are the fastest way for banks to create more debt … and therefore to make more profit.  No wonder they love war.

The Federal Reserve and other central banks also help to start wars by financing them.  Thomas Jefferson and the father of free market capitalism, Adam Smith, both noted that the financing wars by banks led to more – and longer – wars.

And America apparently considers economic rivalry to be a basis for war, and is using the military to contain China’s growing economic influence.

Multi-billionaire investor Hugo Salinas Price says:

What happened to [Libya’s] Mr. Gaddafi, many speculate the real reason he was ousted was that he was planning an all-African currency for conducting tradeThe same thing happened to him that happened to Saddam because the US doesn’t want any solid competing currency out there vs the dollar. You know Gaddafi was talking about a gold dinar.

Senior CNBC editor John Carney noted:

Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.

Robert Wenzel of Economic Policy Journal thinks the central banking initiative reveals that foreign powers may have a strong influence over the rebels.

This suggests we have a bit more than a ragtag bunch of rebels running around and that there are some pretty sophisticated influences. “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising,” Wenzel writes.

Indeed, many claim that recent wars have really been about bringing all countries into the fold of Western central banking, and that the wars against Middle Eastern countries are really about forcing them into the dollar and private central banking.

The most decorated American military man in history said that war is a racket, and noted:

Let us not forget the bankers who financed the great war. If anyone had the cream of the profits it was the bankers.

The big banks have also been laundering money for terrorists. The big bank employee who blew the whistle on the banks’ money laundering for terrorists and drug cartels says that the giant bank is still aiding terrorists, saying:

The public needs to know that money is still being funneled through HSBC to directly buy guns and bullets to kill our soldiers …. Banks financing … terrorists affects every single American.

He also said:

It is disgusting that our banks are STILL financing terror on 9/11 2013.

And see this.

According to the BBC and other sources, Prescott Bush, JP Morgan and other leading financiers also funded a coup against President Franklin Roosevelt in an attempt – basically – to implement fascism in the U.S. See thisthisthis and this.

Kevin Zeese writes:

Americans are recognizing the link between the military-industrial complex and the Wall Street oligarchs—a connection that goes back to the beginning of the modern U.S. empire. Banks have always profited from war because the debt created by banks results in ongoing war profit for big finance; and because wars have been used to open countries to U.S. corporate and banking interests. Secretary of State, William Jennings Bryan wrote: “the large banking interests were deeply interested in the world war because of the wide opportunities for large profits.”

Many historians now recognize that a hidden history for U.S. entry into World War I was to protect U.S. investors. U.S. commercial interests had invested heavily in European allies before the war: “By 1915, American neutrality was being criticized as bankers and merchants began to loan money and offer credits to the warring parties, although the Central Powers received far less. Between 1915 and April 1917, the Allies received 85 times the amount loaned to Germany.” The total dollars loaned to all Allied borrowers during this period was $2,581,300,000. The bankers saw that if Germany won, their loans to European allies would not be repaid. The leading U.S. banker of the era, J.P. Morgan and his associates did everything they could to push the United States into the war on the side of England and France. Morgan said: “We agreed that we should do all that was lawfully in our power to help the Allies win the war as soon as possible.” President Woodrow Wilson, who campaigned saying he would keep the United States out of war, seems to have entered the war to protect U.S. banks’ investments in Europe.

The most decorated Marine in history, Smedley Butler, described fighting for U.S. banks in many of the wars he fought in. He said: “I spent 33 years and four months in active military service and during that period I spent most of my time as a high-class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.”

In Confessions of an Economic Hit Man, John Perkins describes how World Bank and IMF loans are used to generate profits for U.S. business and saddle countries with huge debts that allow the United States to control them. It is not surprising that former civilian military leaders like Robert McNamara and Paul Wolfowitz went on to head the World Bank. These nations’ debt to international banks ensures they are controlled by the United States, which pressures them into joining the “coalition of the willing” that helped invade Iraq or allowing U.S. military bases on their land. If countries refuse to “honor” their debts, the CIA or Department of Defense enforces U.S. political will through coups or military action.

***

More and more people are indeed seeing the connection between corporate banksterism and militarism ….

Indeed, all wars are bankers’ wars.

Yellen’s Dog Is Eating Homework Congress Didn’t Even Assign: Reflections On The Greatest Mission Creep Ever

20 Apr

America is being run by an unelected gang of essentially self-perpetuating PhDs. The notion of an economics coup d’ etat is not so far-fetched. After all, the Eccles Building controls the levers of the nation’s fiscal policy; is the pied piper of the entire financial system; intentionally inflates financial bubbles which powerfully impact the distribution of wealth and income; and is the master builder of the nation’s towering edifice of $59 trillion in credit market debt that flattens growth, jobs and incomes on Main Street.

To take one case in point, consider further the matter of fiscal policy and the Washington machinery by which $4 trillion of economic resources are allocated directly, and countless trillions more indirectly owing to tax policy and Federal matching grants.

This entire apparatus is now frozen in place because the Fed’s QE policy amounts to a giant fiscal fraud. Even if it sticks to the taper, the Fed’s balance sheet will have expanded by 5X—from $900 billion to $4.5 trillion—in 70 months. Yet it has no intention whatsoever of unwinding this stupendous emission of fiat credit. Indeed, selling-down its massive piles of treasuries and MBS would ignite the mother of all melt-downs in the fixed income markets, which have gorged on over-valued paper that was priced by the Fed’s huge, artificial bid in the debt markets.

So if this $4.5 trillion balance sheet is permanent, then the Fed’s post-crisis money printing spree amounts to a massive monetization of the public debt. Too be sure, all of this was done in the name of rubbery abstractions like “accommodating” recovery, supporting the “labor market” and “stimulating” consumption and investment spending, but the real world effect was quite different and far more tangible: It allowed Washington to treat the financing cost of our $17.5 trillion national debt as a free good.

In a world in which even the official inflation rate (CPI) has averaged 2.4% during the last 14-years, there is no other way to describe a policy that actually drove the 5-year Treasury note yield to a low of 75 bps, and pulled the weighted average cost of the total Federal debt down to about 2.5%—which is to say, zero, nichts, nada or nothing in real terms.

And part of this fiscal scam is even more egregious than the Fed’s own acknowledgement that is artificially suppressing  the treasury coupons. What the Fed is also doing is issuing second-hand “greenbacks”— those notorious non-interest bearing IOU’s that financed the Civil War. Since the crisis the Fed has returned $400 billion of “profits”, including $80 billion each in the last two years, to the US treasury, thereby off-setting upwards of 25% of the interest cost on the Federal debt.

But then again, how is it that the Fed is more profitable than the  wholesale, retail, entertainment, food service and hospitality industries of America combined? Self-evidently, its the magic of printing press money: The Fed buys treasuries and MBS with a coupon; pays for them by issuing new liabilities without a coupon; collects the spread which gets recorded as a “profit”; and then returns this ‘profit” to Uncle Sam at year-end. Had the Treasury Department dusted off Lincoln’s playbook, instead, it could have simply issued “greenbacks”, and dispensed with the round trip. In less polite company it might be called a fiscal circle jerk.

Based on its historic rate of expansion the Fed’s balance sheet would be about $1 trillion today. So during the past 70 months, the monetary politburo has issued about $3.5 trillion worth of Abe Lincoln’s “greenbacks”.

But here’s the thing: Even as Lincoln took many matters in his own hands like suspending habeas corpus, closing newspapers and imprisoning dissenters, he did bother to get an act of Congress to print his paper money. And as much as the beltway bandits of today’s Washington have enjoyed the quasi-free financing of $9 trillion in new public debt since the crisis—even they would have never passed something called the “Greenback Authorization Act of 2009″.  We do indeed have a rogue central bank operating in the deep waters of extra-constitutionality.

Then consider the orgy of debt issuance in the business sector. During the last year, every single record from the 2007 blow-off top has been exceeded. This encompasses $1.1 trillion of investment grade corporate debt, including a staggering $49 billion issue by Verizon to fund what was essentially an LBO of its own subsidiary. Next in line is about $600 billion in leveraged loans—-more than 60% of which have been “cov-lite” style spit and prayer loans. And then there are $400 billion of new junk bonds proper, along with the return of that bell-ringer for speculative tops called leveraged recaps, wherein the LBO barons freight down their debt mules with even more debt in order to pay themselves a dividend.

In all, business sector debt stood at about $11 trillion on the eve of the 2008 crisis, and has now vaulted upward to $13.5 trillion. Yet nearly the entire gain has gone into the preferred financial engineering games of bubble finance—namely, LBOs, cash M&A deals and stock buybacks. Indeed, in the latter case the big corporates are now borrowing hand-over-fist to fund buybacks at nearly a $1 trillion annual rate. Compare that to investment in productive plant and equipment where real outlays are still running $100 billion or 8% below its late 2007 level.

Needless to say, this massive leveraging and strip mining of cash from the business economy is not the unseen hand of the free market at work. It is the consequence of the Fed’s very visible pegging and rigging of the financial markets.

Fast money speculators are subsidized by the Greenspan/Bernanke/Yellen put, which drastically compresses the cost of market risk insurance and artificially fattens the margins on carry trades.  So enabled, the hedge funds then bray incessantly for M&A deals and stock buybacks, which option-gorged corporate executives are eager to undertake—especially with more borrowed money.

And then yield-chasing money managers scoop up the resulting junk bonds, cov-lite leveraged loans and investment grade issues alike because the Fed has bought out the belly of the treasury curve, meaning there is nothing else to buy that will keep the fixed income PMs employed.

Likewise, also comes the $5k Wall Street suits—streaming into America’s busted sub-prime neighborhoods fixing to become single family landlords. Yet without the Fed’s gift of cheap financing, there is not a snowball’s chance that these clueless spread-sheet jockeys would own a single, single-family home— let alone upwards of 500,000 at last count.

In short, the Fed has interposed itself throughout the very warp and woof of the nation’s business economy. It does this in a manner that makes a mockery of our purported mechanism of economic governance—that is to say, the spontaneous actions and decisions by millions of producers, consumers, investors and savers on the free market in response to honest price signals arising from the vineyards of commerce and industry. Instead, in a manner like the “caribou” soccer of 6-years olds, today’s economic actors have no choice except to ceaselessly chase the Fed around the economic fields.

So where did the Fed get this mind-boggling grant of plenary power?  Fed Chair Yellen explained it succinctly in a recent speech:

The U.S. economy is still considerably short of the two goals assigned to the Federal Reserve by the Congress of low and stable inflation and maximum sustainable employment.

Yellen was obviously referring to the Humphrey-Hawkins Act of 1977—-one of the most pernicious pieces of legislation ever enacted, and one I am proud to say I voted against as a freshman Congressman. Yet even in those halcyon days of Keynesianism, few in Congress believed that they had mandated the Fed to pursue rigid quantitative targets for inflation and unemployment—let alone precisely a 2% annual gain in the PCE less food and energy or 6.5% on the U-3 measure of unemployment, which didn’t even exist then. By contrast even the voluble Senator from Minnesota saw the law as essentially an expression of congressional sentiment that it would be swell to have more jobs and less inflation.

headshotAnd most certainly, the Congressional majority that passed the act did not in its wildest imagination foresee that the route to the quantitative inflation and unemployment targets it didn’t mandate would be through the canyons of Wall Street and the made-up monetary doctrine of “wealth effects” as the surest route to their achievement.

So the last 35 years have brought the greatest exercise in mission creep ever undertaken by an agency of the state. That explains why the monetary politburo persists in its absurd quest to force more debt into an economy which is already saturated with $59 trillion of the same. To pretend, as does Yellen and most of the monetary politburo that they must plow ahead printing money at lunatic rates because Congress so mandated it, is the height of mendacity.

The Fed has seized power and is not about to let go—-common sense be damned, and the constitution, too.

Reprinted with permission from David Stockman.

 

Larry Summers’ Unmentionable Meme

13 Apr

Published by The Daily Bell

The right agenda for the IMF … The world’s finance ministers and central bank governors will gather in Washington this week for the twice yearly meetings of the International Monetary Fund. Though there will not be the sense of alarm that dominated these meetings after the financial crisis, the unfortunate reality is that the global economy’s medium-term prospects have not been so cloudy for a long time. The IMF in its current World Economic Outlook essentially endorses the secular stagnation hypothesis — noting that the real interest rate necessary to bring about enough demand for full employment has declined significantly and is likely to remain depressed for a substantial period … A proper growth strategy would recognize that an era of low real interest rates offers opportunities as well as risks. It should focus on the promotion of high-return investments, rather than seeking to encourage investments that businesses find unworthy at current rock-bottom rates. – Larry Summers, Reuters Opinion

Dominant Social Theme: Let’s DO something. Let’s make sure we don’t wait for markets to act. We’re smarter than that.

Free-Market Analysis: Reading this article by top economist Larry Summers, one is reminded of just how debased the monetary conversation is these days.



Yes, the Great Recession is not over, and credit to Mr. Summers for acknowledging that. But what is his solution? Incredibly, it seems to be that weary nostrum called “pump priming,” though he has dressed it up in fancier terms.

He writes: “A proper growth strategy would recognize that an era of low real interest rates offers opportunities as well as risks.”

Is Summers addressing his remarks to individuals in the marketplace? Nope … Summers, ever the elitist, is promulgating what it is that “policymakers” ought to be doing.

Here’s more:

… Inflation is well below target throughout the industrial world and is likely to decline further this year. Without robust growth in industrial world markets, growth in emerging markets is likely to subside — even without considering the political challenges facing countries as diverse as Brazil, China, South Africa, Russia and Turkey.

Facing this inadequate demand, the world’s key strategy is easy money. Base interest rates remain essentially at floor levels across the industrial world and central banks signal that they are unlikely to increase anytime soon. Though the United States is tapering quantitative easing, Japan continues to ease on a large scale and Europe seems to be moving closer to starting it.

This all is better than the tight money policy of the 1930s that made the Great Depression great. But it is highly problematic as a dominant growth strategy. We do not have a strong basis for assuming that reductions in interest rates nominal or real from very low levels will have a major impact on spending decisions.

… A strategy of indefinitely sustained easy money leaves central banks dangerously short of response capacity when and if the next recession comes.

… In the United States, the case for substantial investment promotion is overwhelming. Increased infrastructure spending would likely reduce burdens on future generations. Not just by spurring growth, but by expanding the economy’s capacity and reducing deferred maintenance obligations.

As just one example: Can it possibly be rational for the 21st-century U.S. air traffic control system to rely on vacuum tubes and paper tracking of flight paths? Equally important, government could do much at no cost to promote private investment — including authorizing oil and natural gas exports, bringing clarity to the future of corporate taxes and moving forward on trade agreements that open up foreign markets.

… Strong actions are imperative to restore the banking system to the point where it can be a conduit for a robust flow of credit as well as measures to promote demand in the periphery nations where competitiveness challenges remain.

… These include, most importantly, political steps to reassure against populist threats in a number of countries and provide investor protection and backstop finance. In this regard, the U.S. Congress’s passage of IMF authorization is crucial. Creative consideration should also be applied in mobilizing the trillions of dollars in public assets held by central banks and sovereign wealth funds, largely as safe liquid assets, to promote growth.

Dear reader, what kind of nonsense is this? It’s really incredible. Does Summers realize this is the 21st century?

Summers and his colleagues have made a living – a damn good one – as apologists for state power. Leviathan’s every destructive move is never analyzed by people like Summers. Instead, they treat the state’s serial disasters as a jumping off point to argue for MORE state action.

This is how Summers can make the case that “trillions of dollars in public assets” ought to be “mobilized.” The mobilizing ought to be done by the power elite, of course – globalist bankers and their political henchmen.

Summers and people like him simply cannot conceive of an economy that doesn’t have significant command-and-control elements.

It doesn’t occur to Summers, for instance, that the US traffic control system ought to be privatized, nor that airports ought to be privatized as well. Competition works, after all, but not in Larry Summers’ world. Nope. Mr. Summers wants the GOVERNMENT to upgrade traffic control facilities.

Summers can write these editorials for Reuters, but we wonder how many people take them seriously anymore other than Summers’ own colleagues and elements of the mainstream press (such as the Reuters editors that commission them).

A little more than a year ago, we wrote the following:

A Pew Survey has found that three-quarters of the United States population doesn’t trust government … From our point of view, it is … a manifestation of a larger disaffection that has been exacerbated by what we call the Internet Reformation. The Internet allows people to understand their world in ways they didn’t before and tends to put discontent into a larger perspective.

Severe Disaffection: Seventy-five Percent of US Citizens Don’t Trust Government

Summers is said to be one of the “best and brightest” of his generation, yet he can do no better when it comes to addressing this endless Great Recession than to suggest various Keynesian big government solutions that have never even really been tried because it is so obvious they don’t work.

The corporatism and authoritarianism that Summers so eloquently and determinedly represents is on the wane in the 21st century. In fact, people and their governments are moving in opposite directions. This is one dominant social theme that the power elite has not had a hand in creating and would dearly like to reduce or eliminate.

The IMF meeting will take place in Washington, as Summers mentions, and perhaps leaders there will endorse some of Summers’ ideas. But this will only further highlight the divide between ordinary people and those who presume to make decisions for them.


Conclusion

There are conflicting trends emerging – and these trends are powerful, even unstoppable. The West is destined to live through some interesting times.



Published by The Daily Bell – www.thedailybell.com – All Rights Reserved.

The U.S. Dollar: Currency Masquerading as Money

13 Apr

 

People consider Federal Reserve notes, U.S. dollars, to be real money. This includes their digital equivalent in bank and credit card statements and Treasury-issued base metal coins. As a unit of account, all goods and services, and land and labor are priced in U.S. dollars. Declared legal tender, Federal Reserve notes are the country’s medium of exchange.

This year marks the 100th anniversary of the Federal Reserve System. It is the third central bank in the country’s history. The first two were short-lived compared to the Fed. The First National Bank, chartered in 1791, lasted 20 years, as did the second one, from 1816 to 1836.

When the Fed opened its doors for business in 1914 and for a while thereafter, until 1933, gold was money. People used gold coins to make purchases and pay debts—Double Eagles ($20 Liberties, minted 1850-1907; and $20 St. Gaudens, 1907-1933), Eagles ($10 Liberty Head, minted 1838-1907; and $10 Indian Head, 1907-1933), and $5 Half Eagles (1795-1929). Paper dollars were redeemable in gold, like the $20 Treasury-issued gold certificate shown here:

789

These dollar bills were redeemable “IN GOLD COIN, PAYABLE TO THE BEARER ON DEMAND,” with gold then valued at $20.67 per troy ounce. Americans over age 90 (0.6% of the population) can remember gold coins being used as a medium of exchange. Few Americans today have ever handled a gold coin.

When the Fed began issuing Federal-Reserve-note paper dollars they were also “Redeemable in Gold on Demand at the U.S. Treasury or in Gold or Lawful Money in any Federal Reserve Bank.” That changed in 1933 when the President signed an Executive Order making it illegal for U.S. citizens to own gold (gold jewelry and numismatic gold coins excepted). Then they became “Redeemable in Lawful Money,” eliminating any hard asset backing. Since 1963 the declaration on U.S. dollars simply states that, “This Note is Legal Tender for All Debts, Public and Private.”[1]

(Federal Reserve notes initially circulated along with two other kinds of U.S. dollars: 1) National Bank notes issued by the U.S. Treasury and redeemable in U.S. bonds in its possession, beginning in 1862 to finance the Civil War and up until 1966, when they stopped being printed; and 2) silver certificates, first printed in 1878 and redeemable in silver coins or bullion. The Treasury stopped printing them in 1967, and in June 24, 1968 reneged on redeeming the ones in silver still in circulation.)

The U.S. dollar has lost more than 95% of its value since the Fed began printing them. And now it can create them just with keystrokes entering numbers on a computer. As Richard Maybury, in his Early Warning Report,puts it, “At one time the biggest problem was paper money. Now it’s vapor money. The government can create trillions of dollars just by pushing a few computer keys.”[2] The government concedes that the dollar has lost 95% of its value over the last 100 years. Goods and services that cost $10 in 1914 now cost $200. Respected economic analyst (and fellow Dartmouth alumnus) John Williams, however, employing methods the government formerly used to gauge price inflation, calculates that the U.S. dollar has lost 99% of its value since the Fed opened its doors. Goods and services that cost $10 in 1914 now really cost $1,000 [3].

Americans do not comprehend this fact and generally view the Federal Reserve in a positive light, like my friend Ted, a prominent Seattle attorney my age (73). Like many educated people with a progressive bent who countenance government intervention in our lives, he argues that the Fed has an important job to do: “to keep inflation under 2 percent, or some other amount reflective of actual productivity increases.” The economy needs an elastic currency to accommodate increases in GDP and productivity, and a central bank to print money when needed, especially “to help folks out” affected by disastrous events like 9-11 and Katrina, and large institutions threatened by the current global financial crisis. Limited to having a fixed amount of gold as the nation’s currency won’t do. From this Keynesian perspective, gold is a relic—and as Maynard Keynes would have it, a barbarous one at that. Freed from gold, my friend writes, “The ‘money supply’ needs to grow to accommodate increases in GDP from increased productivity.”

The U.S. government severed the dollar’s last link with gold in 1971. While people could no longer redeem the dollar for gold coins, its international convertibility was maintained. Foreign countries and their central banks could redeem dollars for gold bullion—(400 oz.) gold bars, priced at $35/oz. After World War II, with the money supply (M2) at $147 Billion, the U.S. had 21,770 tonnes (699,905,500 ounces) of gold, which backed 17% of the money supply. By 1964 the money supply had grown to $400 Billion, and U.S. gold reserves dropped to 13,885 tonnes, covering 4% of the official quantity of money. By 1971 the amount of gold backing the dollar had shrunk to 1%, rendering default inevitable.

Freed from any gold restraint the dollar now became a purely fiat currency. (Fiat comes from the Latin word fiere, which means “let it be done.” A fiat currency is “money” that is not convertible into coin or specie of equivalent value, where government edict arbitrarily fixes its value.[1]) Accompanying the dollar’s loss of a gold backing were the 5 cent cup of coffee, candy bar, beer, movie, cigar, and average $25,000 cost of a house, which also disappeared.

Since 1971 the St. Louis Fed’s Adjusted Monetary Base (circulating currency and bank reserves), has risen from $70 Billion to $3,885 Billion today, a 55-fold (5,500%) increase. With the government no longer able to hold its price at $35/oz., gold now functions as a barometer of fiat currency expansion. Its rise in price to $1,895/oz. on September 5, 2011 is a 54-fold increase! At gold’s current depressed level around $1,300, it still is a 37-fold increase. The Dow Jones Industrial Average has tracked U.S. dollar growth less well. Its rise from 890 in 1971 to 16,400 today is an 18-fold increase, half that of gold at its current price.

The U.S. dollar has lost value at an increasing rate since 1971. What cost $100 in 1971 costs $2,428 now, a 96% decline. The dollar lost 75% of its value from 1914 to 1971 and 96% from 1971 to 2014, adding up to a 99% decline over the 100-year period from 1914 to 2014. (I used the Inflation Calculator on shadowstats.com to obtain these numbers.[3])

Such a precipitous decline in the U.S. dollar’s purchasing power disqualifies it as real money. A critical attribute of money is that it be a store of value. The American dollar was money in its truest sense only when it was backed by gold, and to some degree by silver. Not only did it function as a unit of account and medium of exchange, it also served as a store of value. The dollar maintained its purchasing power from the Colonial period in the 1600s up until 1914, when the Fed was formed and World War I began. It lost value twice during this time, in the American Revolutionary War when Continental dollars printed to finance it became worthless, and with National Bank notes, printed to pay for the Civil War. But during periods of economic growth accompanied by price deflation, 1820-1855 and 1873-1910, the purchasing power of the U.S. dollar increased 50%.[4,5]

As originally defined, inflation means an increase in an economy’s quantity of money. Now, however, the state and its Keynesian economists define inflation as a rise in selected consumer prices, diverting attention from increases in the quantity of money, the true cause of climbing consumer prices. From a Keynesian perspective, if selected prices don’t climb then there is no inflation—irrespective of how much money banks create or how much inflation of the money supply bloats equity and real estate prices. Bill Buckler, in his financial newsletter The Privateer, puts it this way: “For more than three generations, governments and central banks have inflated the quantity of money in circulation while at the same time engaging in futile efforts to counter the economic effects of their own inflation. They have used price controls, rationing, more regulations, higher taxes and even subsidies to bring some high prices down. When all that failed, they resorted to ‘cooking the books’ by ignoring any inconvenient price rises.”[6] Seen in this light, the Fed’s goal of keeping inflation under 2% is not credible.

The decades-long monetary inflation of the U.S. dollar is now producing a spike in consumer prices. Food prices in the U.S. are up 19% in the first 3 months of 2014, a 76% annualized price inflation rate, raising concerns that hyperinflation looms.

John Williams has published a two-part, 108-page Special Commentary titled Hyperinflation 2014: The End Game Begins, First Installment (revised and updated, April 2); and Great Economic Tumble, Second Installment  (April 8, 2014). He predicts that this is what will happen to the U.S. dollar.[3] With hyperinflation, prices increase so rapidly that the involved currency soon becomes worthless. In its final stage, prices rise considerably by the day and even by the hour, to the point that the currency’s largest pre-hyperinflation note (U.S. $100) becomes worth more as kindling for a fire than as currency. Williams writes, “A direct result of Fed and U.S. government efforts to delay systemic collapse, as long as possible, the hyperinflation will have been born beyond the reach of official containment, the child of last-ditch efforts to salvage a system that had been methodically pushed into long-range insolvency by decades of political and policy malfeasance by the federal government and Federal Reserve.” He predicts that the 99% loss of the U.S. dollar’s purchasing power that occurred over the last 100 years could be repeated in the span of less than 12 months starting in 2014.

This has been the recorded fate of 389 fiat currencies in 170 countries, each one becoming worthless.[1] This outcome has been the fate of all state-controlled fiat money throughout human history. The United States has already made this list with its Continental dollar (from whence comes the phrase, “Not worth a Continental”). Two notable examples are the Weimar German mark and the Zimbabwean dollar. Early in 1922 a loaf of bread cost 1 mark. Then it suddenly increased to 700 marks. In July it cost 100,000 marks for a loaf of bread and in September, 2,000,000 marks. Hyperinflation in Zimbabwe from 2006 to 2009 was worse. Towards the end authorities issued Zimbabwean dollars in 100-trillion-dollar (with 26 zeros) denominations that had a value equivalent to that of a single original Zimbabwe two-dollar bill. Signs were posted cautioning against their use in toilets, like this one here:

894

Paper dollars are made of cloth (not paper)—20-25% linen and 75-80% cotton interspersed with colored synthetic fibers. They clog toilets.

If the U.S. dollar succumbs to hyperinflation, the turmoil that Americans will experience will be even worse than what people endured in Zimbabwe because they had a well-functioning black market in U.S. dollars as a backup. (Paid Zimbabwean dollars, people would go to the black market and convert them to U.S. dollars quickly.) Most commerce in the U.S. today is done electronically with credit and debit cards, PayPal, wire transfers, and soon increasingly with smart phones programed with NFC (near field communication) technology.

The United States does not have a backup black market system to soften hyperinflation’s devastating impact. The federal government needs to make physical gold and silver legal tender  and freely exchangeable with Federal Reserve notes (without tax consequences). As a congressman, Ron Paul introduced legislation to do this, known as the “Free Competition in Currency Act,” without success. Should hyperinflation occur and destroy the dollar and gold stay barred from functioning as a medium of exchange, the U.S. economy would be relegated to functioning on a barter system, until a new form of money could be established.

In a barter economy, goods and services (and land and labor) are directly exchanged for other goods and services without money facilitating the exchange. In a hyperinflationary collapse, barterable items would include, among other things, household items like toilet paper and toothpaste, manufactured goods, freeze-dried food, family heirlooms, and airplane-sized bottles of liquor. In Colonial America, the North Carolina legislature, in 1715, assigned values to various commodities in relation to each other—for tobacco leaves, corn, wheat, chees, deerskins, tallow, beaver and otter furs, butter, beef and pork, and whale oil. South Carolina, in 1719, issued legal tender notes redeemable in rice, known as “rice bills.” Without money available to facilitate exchange one can picture what people wanting to purchase theater tickets might use to barter for them.

trt

Real money is a commodity, one that customers and sellers mutually and voluntarily agree to use. It thus, as a commodity, has intrinsic value. And, to function as money, it must have properties that make it a convenient, durable, and divisible medium of exchange. Throughout recorded history, beginning 5,000 years ago with Sumerian silver rings used for money continuing up to the last quarter of the 20th century, humanity has chosen precious metals, gold and silver, as the best form of money.

Gold has intrinsic value as jewelry and for industrial uses—it can be hammered into a sheet 5-millionth’s of an inch wide; an ounce of gold can be drawn into a wire 50 miles long; it does not tarnish; it is chemically inert and can withstand acid and indefinite immersion in sea water; and, after silver, it conducts heat and electricity better than any other metal. Gold never wears out (a U.S. $1 bill has an 18-22 month lifespan). It doesn’t rust, mildew, crumble, break, or rot. Plus, gold is divisible (unlike diamonds); consistent, having only one grade, 24 carats (pure gold); and in the amounts needed as money, it is easy to carry.

Austrian economists and students of the school, like Ron Paul, have shown that the amount of gold so far mined in the world, 174,000 tonnes, is enough to satify society’s requirements for it to serve as a medium of exchange.[7] As the economy expands the amount of gold needed for commerce does not need to increase. Instead, the purchasing power of a finite stock of gold-backed money will increase, as it did in the past during the Industrial Revolution and other periods of economic growth and prosperity. But with the U.S. dollar now a fiat currency masquerading as money this, as Bill Buckler puts it, is what has happened: “Welcome to the twenty-first century. Why bother producing economic goods when you can produce ‘money,’ in any quantity, out of the thinnest of air? Why bother any more with the old wives tale that money is ‘a medium of exchange,’ an economic mechanism which makes the trading of GOODS for GOODS much easier. Why bother with economic GOODS at all, just add ‘money’ and stir. Presto, instant economic ‘growth.’ If it was not so tragic, it would be screamingly funny.”[8]

Fiat money funds war. Ron Paul points this out, writing, “It is no coincidence that the century of total war coincided with the century of central banking.” The state has barred gold from its historic role as money to our detriment. Its medium of exchange has become a medium of control. Austrian economist Hans Sennholz saw this clearly. Writing in 1985, he concludes: “The lesson from seventy years of Federal Reserve manipulation can be no other than this: the Federal Reserve System not only is a vital tool of political control over our lives, but also an implacable foe of the enterprise system  and an influential avant-garde of the command system.”

Gold-backed money curbs political power. Hans Sennholz notes, “To return to sound money is to return to free money, free from any infringements by politicians and bureaucrats. Monetary freedom, like all other economic freedoms, clears the way for energy, intellect and virtue… Political control weakens individual self-reliance and energy, causes want and poverty and, in the end, breeds tyranny and oppression.” The godfather of Austrian Economics, Ludwig von Mises, puts it this way: “It is impossible to grasp the meaning of the idea of – sound money – if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the class with political constitutions and bills of rights.”

My attorney friend bought gold in 1980 when it was $800/oz. and soured on it when gold fell to less than $400 and stayed there. Now, however, 34 years later, the best investment one can make during these uncertain times may well be, along with having physical gold in one’s possession, to buy $1,000 bags of “junk” silver coins—in dimes, quarters, half-dollars, or dollar denominations. With silver currently at $20/oz., a $1,000 bag contains $14,200 worth of silver (710 troy ounces). The U.S. treasury stopped minting silver coins in the 1960s, switching to base-metal ones, with its quarters now feeling more like subway tokens.

China has stopped buying U.S. Treasuries and instead is purchasing large quantities of gold, and people in Japan are lining up to buy gold. Perhaps Americans should too. It is worthy of note that the Chinese and Japanese characters for money and gold are the same.

References

  1. Ralph Foster, Fiat Paper Money, The History and Evolution of Our Currency, 2012
  2. Richard Maybury, Early Warning Report on http://www.chaostan.com.
  3. John Williams, Shadow Government Statistics, Analysis Behind and Beyond Government Economic Reporting, on http://www.shadowstats.com.
  4. Chris Casey, “Deflating the Deflation Myth,” on http://www.mises.org, April 2, 2014;
  5. and Guido Hülsmann, “Deflation and Liberty,” on www.mises.org, March 27, 2014.
  6. John McCusker, “How Much is that in Real Money?: A Historical Price Index for use as a Deflator of Money Values in the Economy of the United States” Proceedings of the American Antiquarian Society, Volume 101, Part 2, pg. 297-373,October 1991.
  7. William Buckler, The Privateer: The Private Market Letter For The Individual Capitalist. Early January Issue, 2008; Number 594. (Bill Buckler, Captain of The Privateer, retired in 2013 and shut down the Privateer’s website.)
  8. Ludwig von Mises, Theory of Money and Credit, 1912, and Human Action: A Treatise on Economics, 1949; Hans Sennholz, Money and Freedom, 1985; Murray Rothbard, What Has Government Done to Our Money? And the Case For a 100 Percent Gold Dollar, 1980; Richard Salsman, Gold and Liberty, 1995; and Ron Paul, End the Fed, 2008,
  9. William Buckler, The Privateer, in a 2007 issue.