Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘Treasury Department

Germany looks to Justin Bieber to solve the crisis

leave a comment »

From Simon Black of Sovereign Man
Posted May 23, 2011

THE WORLD IS NOW DIVIDED INTO ESSENTIALLY THREE CATEGORIES:
 (1) those nations that can effectively sidestep catastrophic meltdown;
 (2) those nations that cannot avoid meltdown, but can afford to kick the can down the road
 (3) those nations that must face their grim, unavoidable meltdown reality now…

The United States, for better or worse, is in category 2. Politicians can keep pretending that the wheels on the bus go ’round and ’round because, at present, there are too many other countries in category 3… namely, much of Europe.

Greece is on the brink of official insolvency… yet in an exceedingly bizarre interview with German news magazine Der Spiegel published today, Jean-Claude Junker insists that (a) Greece is not broke, (b) if Greece doesn’t make its debt payments, this is not the same as ‘default,’ and (c) it’s OK for politicians to lie because people don’t understand capital markets.

(*Note, suspension of disbelief IS required to read this interview; Junker caps it off with a metaphoric riddle, “If the donkey were a cat it could climb a tree. But it is not a cat,” which has about as much insight as “Confucius say: Man who go to bed with itchy butt wake up with smelly finger….”)

As the Prime Minister of Luxembourg and president of the Euro Group, Junker is a very important figure in European finance… and in the interview, he makes it quite clear where his priorities lie: with the bankers. As Junker states, “If Greece were to declare a national bankruptcy tomorrow, the country would have no access to the international financial market for years to come, and its most important creditors, the banks in Germany and Europe, would have an enormous problem…”

Well, certainly no one should expect Europe’s banks to suffer their own losses after making idiotic loans to corrupt governments. It’s much easier to stick the people with the bill by establishing a trillion dollar bailout fund with taxpayer money.

Problem is, people in Europe are starting to wake up and get it.

The anti-euro “True Finn” party in Finland recently surged in the polls to become the country’s third-largest political party and a major obstacle for any European bailout. This weekend, Spain’s ruling Socialist party was hammered with losses as voters voiced their utter disgust with the current government’s handling of the economy. In Germany, this year’s state election results are showing that voters are sick and tired of shouldering the financial burden for the rest of Europe. Chancellor Angela Merkel’s ruling party is losing miserably, though in a pathetically desperate move, some local governments are changing suffrage limits and allowing 16-year olds to vote.

This is the strongest indicator yet of how bad the situation in Europe has become: German banks are so over-exposed to the PIIGS sovereign debt that, in the face of political revolt all across Europe, German politicians have resorted to recruiting the Justin Bieber crowd to maintain the status quo.

Simply put, if Greece fails, the banks will collapse, and European financial markets will tank. Politicians will stop at nothing to prevent this from happening… including sticking every man, woman, and child with the bailout bill, as well as pulling socialist-minded teenagers into the voting booths to ensure they stay in power.

Eventually, though, these efforts will prove fruitless. Greece has two months of cash left… and a default by any other name is still a default. The ‘have’ nations in Europe don’t want to foot the bailout bill any more than the ‘have not’ nations in Europe want to accept deep austerity measures. This is going to cause a lot of turmoil in Europe in the short-term… and as the US government has successfully kicked its can down the road through late summer thanks to the Treasury Department plundering public pension money, investors are free to get their worry on in Europe.

I would suspect gold and silver in euro terms to do quite well as the market looks around, once and for all and realizes that there are truly no good major currency alternatives. This could be the start of a chain reaction.

Can’t blame economic policy on Osama

with one comment

by Nomi Prins
Originally posted May 5, 2011

When William Shakespeare penned the words, “All the world’s a stage” in As You Like It, it was centuries before tense photos of tense leaders would show tense concern over tense military operations.

What transpired around the killing, or killing announcement, of Osama bin Laden has been astounding. Whether you believe that bin Laden was “taken out” by this NAVY Seal operation, after nearly a decade, two wars, an over 81% increase in the military budget, and thousands of deaths, following the tragic loss of life on 9/11, or whether you believe he was dead and iced years ago and strategically used as a sign of unflappable leadership, is irrelevant. The surrounding uproar was theatre of the extravagant, no matter how you slice it.

But, theatre was invented for distraction, in culture and in politics. So while all the Osama drama was unfolding, the Treasury Department issued another plea for raising the debt ceiling, aka supporting its pro-bank policy. It went something like this:  We need to borrow more to pay social security obligations and not default on our debt, so other countries won’t question our ability to manage an economy  (as if that hasn’t already happened) and we won’t have to pay more to borrow more. If we don’t – you know what’ll happen – yep, another financial crisis.

The actual quote was: “The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.”

Though technically correct, omitting the fact that our leaders chose to float the financial system on such an unprecedented scale with no obvious Main Street benefits – hence the massive and quick debt increase – continues to show an aversion to reality.

Flashback five years. George W. Bush’s second Treasury Secretary, John Snow, plead the same thing. (He wasn’t unique, of course, Congress has acted at Treasury Secretary request to raise the debt ceiling 78 times since 1960, 49 times under Republican presidents, 29 times under Democrats.) Snow threatened he was being forced to cut payments to civil servants, among other things, but didn’t mention the real reason for the debt hike requirement, like the Iraq war or the tax cuts that stifled revenue collection. He had used similar arguments at the end of 2004, at time when the debt ceiling was about half what it is today.

Raising debt ceilings is a bi-partisan institution. The show is always the same. The Treasury Secretary begs Congress. Congress debates than agrees. No one questions the real reasons we pursued the excess borrowing.

Read the rest of this entry »

The fraud started at the very top: with government leaders

leave a comment »

by George Washington
Originally posted November 2, 2010

http://georgewashington.blogspot.com

The government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are. But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud. Here are just a few of many potential examples:

• The government-sponsored rating agencies committed massive fraud (and see this)

• The Treasury department allowed banks to “cook their books”

• Business Week wrote on May 23, 2006:

“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations.”

• Regulators knew of and allowed the use of debt-hiding accounting tricks by the big banks

• Tim Geithner was complicit in Lehman’s accounting fraud, (and see this), and pushed to pay AIG’s CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes, Geithner was “very much in the center of the action” regarding the secret bail out of Bear Stearns without Congressional approval. William Black points out: “Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth”

• The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted

• Freddie and Fannie helped to create the epidemic of mortgage fraud

• The government knew about mortgage fraud a long time ago. For example, the FBI warned of an “epidemic” of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen

• Bernanke might have broken the law by letting unemployment rise in order to keep inflation low

• Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not

• Arguably, both the Bush and Obama administrations broke the law by refusing to close insolvent banks

• Congress may have covered up illegal tax breaks for the big banks

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In 2004, the FBI warned publicly of “an epidemic of mortgage fraud.” But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ….

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor. The government that permits this to happen is complicit in a vast crime. In other words, the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys.

As William Black told me today: In criminology jargon: they created an intensely criminogenic environment. I have no knowledge whether the national security aspects played any role, but the anti-regulatory dogma was devastating.

Trigger Points, Black Swans, and other unpleasant realities

leave a comment »

by Giordano Bruno
Originally posted October 27, 2010

Neithercorp Press

AN AVALANCHE IS NOT AN “EVENT”, IT IS AN EPIC; A SERIES OF SMALLER EVENTS DRIFTING AND COMPACTING ONE AFTER ANOTHER until the contained potential energy reaches an apex, a point at which it can no longer be managed or inhibited. A single tremor, an inopportune echo, an unexpected shift in the winds, and the entire icy edifice, the product of countless layered storms, is sent crashing down the valley like a great and terrible hand.

In this way, avalanches in nature are quite similar to avalanches in economies; both events accumulate over the long span of seasons, and finally end in the bewildering flash of a single moment.

The problem that most people have today is being unable to tell the difference between a smaller storm in our economy, and an avalanche. Very few Americans have ever personally witnessed a financial collapse, and so, when confronted with an initiating event, like the stock market plunge of 2008, they have no point of reference with which to compare the experience. They misinterpret the crash as a finale. Untouched, they breathe a sigh of relief, unaware that this is merely the beginning of something much more complex and threatening.

So, without personal experience on our side to help us recognize a trigger point incident; the catalyst that brings down our meticulously constructed house of cards, how will we stand watch? Will we miss the danger parading right in front of our faces? Will we be caught completely off-guard?

The key in avoiding such a scenario is in identifying the primary pillars of our particular financial system, and tracking them carefully. Once we are able to cut through the haze of distractions and minor events promoted mostly by the mainstream media, and focus on that which is truly important, our ability to foresee danger greatly increases. But what are the crucial mainstays of our economy, and what kind of disastrous occurrence could possibly bring them tumbling down?

Mortgage Crisis Redux

The health of property markets is a vital indicator of the stability of almost any country, but most especially in the United States. The reason why the bust in mortgage values is so dangerous to our particular economy is because Americans allowed themselves to become completely dependent on debt in order to sustain their consumption. We have been surviving on mortgage loans and Visa cards for nearly two decades! The fantastical boost in stocks and retail during the late 90’s and early 2000’s was an illusion built on artificially low interest rates and easy credit. Of course, it doesn’t help that corporate interests outsourced most of our industrial foundation to the third world leaving us with an emaciated jobs market utterly reliant on the service sector. Many people were given few options besides taking loan after loan using homes they couldn’t afford in the first place as collateral.

Regardless, without the support of solid industry and innovation in a system to supply employment opportunities and create true wealth (not debt), we have only “derivatives” and toxic securities, worthless bits of paper representing liabilities that will never be repaid. Now that these contracts are known to be worthless, there is only one thing left to prop up the economy; fiat printing of the U.S. dollar.

Back in 2008, I called the bailout of Fannie Mae and Freddie Mac a “black hole” of debt which would siphon the last remaining vestiges of wealth from the American taxpayer, and this is exactly what has happened. Every quarter, MSM analysts claim the housing market has “bottomed” and is ready for a rebound, yet, every quarter the mortgage crisis gets just a little bit worse. It is now projected that Fannie and Freddie could end up costing taxpayers over $1 Trillion:

Read the rest of this entry »

Let’s talk about… inflation

leave a comment »

International Forecaster June 2009 (#6) – Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
Posted Sunday, 21 June 2009 

The following are some snippets from the most recent issue of the International Forecaster.  For the full 29 page issue, please see subscription information below.
US MARKETS
Since hyperinflation is clearly in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?
By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is.  It does not come from people willy-nilly charging more for their goods and services.  People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.

          What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back.  As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.  This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns.  The Fed must therefore inflate and swim for shore, or die.  And inflate they will.  We can absolutely guarantee it.  Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.
On a microeconomic scale, prices for specific goods and services are usually set by supply and demand (that, of course, would be in a free economy which we no longer have, so manipulation becomes an input for pricing specific goods and services in our economy, and is sometimes even the main input, as with gold and silver prices).  However, the microeconomic factors which determine prices for goods and services are by far trumped by the macroeconomic factors of supply and demand.  The supply side on a macroeconomic scale is determined by the amount of goods and services that are produced for sale in the overall economy.  The demand side on a macroeconomic scale is the amount of money and credit available to the overall economy with which those goods and services can be purchased, or expressed another way, the amount of money and credit that is available to chase after those goods and services.
This is why the price of gold and silver must eventually skyrocket. The microeconomic supply, demand and manipulation factors which currently have sway over gold and silver prices will eventually be trumped by the macroeconomic factors, namely, a profligate increase in the supply of money and credit to unheard of levels which will drive prices up across the board.  The Fed cannot suppress the price of all goods and services as it rampantly expands the supply of money and credit, and can only influence a chosen few, such as gold and silver, which are suppressed because they are the canaries in the coal mine.  When everything else gets more expensive, and as fiat currencies are shown to be the “worthless paper” they really are, gold and silver will become the only real safe-havens from the resulting inflation and financial deterioration.  That will then generate a demand for precious metals that is so great, it will drive the price of gold and silver up until they catch up with the overall supply of money and credit, and there is nothing the Fed can do to stop it, short of pulling the plug on money and credit and destroying our economy, along with the privately owned Fed itself and its Illuminist cronies with it.  This eventual destruction is planned to be sure, in order to pave the way for a one world Orwellian police state.  The trick for the Illuminists is how to get out of their paper assets and convert them to real assets on the cheap before pulling the plug on money and credit.  The problem is that as they bail out of paper, and into tangible assets, along with other foreign creditor nations anxious to trade their “worthless paper” in for things of real value, their bailing activities will drive inflation, and the price of gold, silver and other tangible assets, to unheard of levels, thereby dramatically decreasing the amount of tangible assets that they can absorb with their dollar reserves and their sales proceeds from the dumping of paper assets.  The US and its creditors will be competing with one another in the race to dump dollar-denominated paper assets in exchange for precious metals, commodities, real estate, factories and equipment and other tangible assets, as well as shares in companies which own such assets, including shares in gold and silver producers.

          The obvious answer is, of course, that they can’t pull this off on the cheap, and they will use the resulting hyperinflation to wreck the rest of the economy while they are desperately attempting to bail out of dollar-denominated paper assets behind everyone’s backs, as part of their Big Sting Two criminal enterprise.  They will attempt to accomplish this insider trading scam in secret through unregulated dark pools of liquidity such as Project Turquoise and Baikal, as well as through the unregulated gambling casino which some dare to call the OTC derivatives market.  They will use their sales proceeds to buy all the real, tangible assets they can get their hands on and leave everyone else holding a bag full of “worthless paper,” aka Federal Reserve notes, US Treasury bonds and GSE bonds.  But the amount of “worthless paper” is so great, and there are so many substantial players who will be trying to do the same thing, that market chaos will result, and the paper assets will deteriorate, and the price of tangible assets will simultaneously appreciate, at a rate that leaves everyone breathless.  Truly, this will be a situation where he who loses the least, and he who buys gold and silver and their related shares early on, are the ultimate winners.  The biggest losers will be those who fail to take physical delivery of their precious metals, such as gold and silver ETF shareholders and holders of mint certificates, who will be thoroughly Madoff’d, as well as holders of any leveraged gold and silver futures positions who will be wiped out by manipulations before the final run-up, thus losing all their investment capital.
The elitist oligarchs who run America, Canada and Western Europe and their privately owned central banks own tens of thousands of tons of gold already, and will seek to take the proceeds from the sale of their paper assets and use them to increase their gold holdings in an attempt to maintain monetary dominance over major players like China and Russia, who will also attempt to add to their holdings by many thousands of tons.  There is only so much gold to go around, and when all the big players become gold bugs themselves, gold, and also silver, will go ballistic.  They want the gold mine (literally), while you get the shaft.  That is, has been, and always will be, “The Plan.”  Bernanke and Geithner are now Obama’s twin Tattoo’s, with our apologies to the producers of “Fantasy Island,” a show which has become a perfect metaphor for what the US economy with its so-called “Green Shoots” has become.  De plan, boss, de plan.  De plan indeed.
On a technical macroeconomic basis, an economy suffers from inflation when the amount of its total money and credit available over a period of time (the demand) grows at a rate in excess of the rate of growth in its total value of goods and services produced over that period of time (the supply), which valuation is based on price levels in effect at the beginning of that period of time.  In more simple terms, inflation occurs when the rate of expansion of the supply of money and credit exceeds the rate of expansion in the production of goods and services.  In fact, in the past when we still had a modicum of integrity in measuring economic statistics, inflation was defined as an increase in the supply of money and credit, period.  Higher prices were simply a symptom of inflation, not a definition of inflation.  The supply of money and credit was what was inflated, not the prices of goods and services, which simply rose as a direct outcome of the inflated supply of money and credit.
Since central banks are currently in control of the supply of money and credit in most modern economies, it is the bankster-gangsters who are, ergo, solely responsible for any overall increases in inflation, and that goes double for any large increases.
In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system.  All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury.  In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank.  So much for checks and balances and avoidance of conflicts of interest.
We now have the Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%.  That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing.  Based on all the foregoing, we’ll give you three guesses as to what the outcome will be somewhere down the road when the Fed’s ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.
Inflation comes in basically three varieties.  Normal inflation, which is basically harmless, is a temporary increase in prices caused by an increase in the supply of money and credit by the central bank which is intended to precisely anticipate the rate of growth in the production of goods and services.  You have more money and credit, but you also have more goods and services being produced. The temporary bout of minimal inflation caused by the anticipatory increase in the supply of money and credit is offset or absorbed by the greater pile of goods and services that is accumulating, so prices remain stable over time.  This is obviously not an exact science, so there are some up-ticks if the money supply grows a little too fast, but over time this can be corrected.  It is best to overshoot a little so as not to start an economic contraction, which, if left unchecked, could lead to a recession or depression.
The next type of inflation we would characterize as elevated inflation.  This is what we have currently at a rate of about 10% and growing.  This type of inflation results where the central bank consistently grows money and credit at a rate far in excess of the rate of growth in the production of goods and services, measured in terms of GDP growth, over an extended period of time.  What the Illuminati have done for over 20 years now, was to have the Fed, which they privately own, raise the level of growth in the supply of money and credit to ludicrous levels, while they simultaneously ordered their lackeys at the BLS to lie about the rate of the resulting inflation by using hedonics (statistical manipulations) that were intended to greatly understate inflation.         As a result, when real GDP was calculated, the GDP deflator, which is based substantially on the official (and falsely low) rate of inflation, and which is used to calculate real GDP, was obviously far too low.  This farce resulted in higher levels of real GDP than were warranted by the data, because inflation was not being properly taken into account.
This is how they covered up the destruction of our economy via free trade, globalization, off-shoring and outsourcing, along with both legal and illegal immigration (slave labor).  If the true figures were used, our real GDP would show that the rate of growth in our economy has been virtually flat to negative since 1990.  That means all the growth in our stock markets since the early 1990’s has been nothing but false puffery, which resulted from profligate growth in the supply of money and credit, and not from growth in production.  For this reason, when the Dow finally bottoms, we expect it to track back to its levels during the early 1990’s, which means roughly 2,500 to 3,500.  That level will destroy everything, especially the wealth of our middle class, but the elitists themselves are going to take it on the chin.  They are afraid the system will implode before they can bail, and that they will go down with the ship also.  We wholeheartedly confirm their fears.

By Bob Chapman, The International Forecaster
http://news.goldseek.com/InternationalForecaster
Posted Sunday, 21 June 2009 


PART ONE Part Two will be posted mid July

SINCE HYPERINFLATION IS CLEARLY in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?

By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is. It does not come from people willy-nilly charging more for their goods and services. People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.

What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back. As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.

This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns. The Fed must therefore inflate and swim for shore, or die. And inflate they will.  We can absolutely guarantee it.  Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.

Read the rest of this entry »