Manipulated Markets – is it possible that the credit crunch has been enginered?

In a 1999 interview, Nobel Prize winning economist and Stanford University Professor Milton Friedman stated: “The Federal Reserve definitely caused the Great Depression.”

Well, if they can do it once…….

The end of the free market?

What a topsy-turvy world we are living in?!?! The US Dollar is hovering at or slightly below parity to the Swiss franc, gold’s breached the $1,000 per ounce mark, stock markets are crashing, and inflation is accelerating everywhere. Some central banks – the more responsible ones – have increased rates, while Ben Bernanke keeps cutting.

This is all happening more quickly than we can yell an emphatic “Achtung!”. President Bush continues to tell the world that “we have it all under control. We are taking solid measures and will come out of this crisis as strong as ever”. Obviously, this is absolute nonsense. First of all, the measures taken will not help – if anything, they will ultimately make things worse. Moreover, even if he and his helpers could control the situation, they shouldn’t! Controlling and manipulating the economy is not the government’s job and we would all be better off if they just kept their hands off.

In this context, we found the comments of Jim Rogers on CNBC a few weeks back right to the point. Click on the following link and have a listen:

http://www.cnbc.com/id/15840232?video=682734828

Mr. Rogers calls it like he sees it…nothing more need be said!

Bankers not trusting other bankers? What’s the world coming to?

WSJ Says Major Banks may be Falsifying Reports to hide Desperation

A worrying but informative article by Carrick Mollenkamp (Wall Street Journal, April 16th) about how “one of the most important barometers of the world’s financial health could be sending false signals.”

LIBOR, the London Interbank Offered Rate, is becoming unreliable because, so the article speculates, banks are sending in false reports. In other words, banks are providing misleading information to Reuters about their financial situations.

For those readers not famililar with LIBOR, it’s a measure of the average interest rate at which banks make short-term loans to one another. Banks typically set their lending rates at a certain “spread” above Libor: A company with decent credit, for example, might pay an interest rate of Libor plus one-half percentage point. A risky “subprime” mortgage may carry an interest rate of Libor plus six or more points. If you check the small print on your loan agreement, most likely it makes reference to the LIBOR rate.

LIBOR is set every morning for ten different currencies. Although the actual rates at which banks borrow from each other are known only to the lenders and borrowers, every morning before eleven o’clock coffee,  London time, “panels”  of banks send data to Reuters, on what it would cost them to borrow a “reasonable amount” in a designated currency. The USD Libor panel, for example, consists of 16 banks, including Bank of America, J.P. Morgan Chase, HBOS and HSBC. Reuters uses the reported borrowing rates to calculate Libor “fixings.” As Reuters’ spokesman is quoted as saying, “It is their data alone we distribute. Reuters is purely the facilitator.”

LIBOR is trusted implicitly in the financial community… or should I say, it was been truisted implicitly until late last year.  The concern expressed in the WSJ article is that,  

“Some banks don’t want to report the high rates they’re paying for short-term loans because they don’t want to tip off the market that they’re desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That’s good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.”

The article goes on to quote Chris Freemott, a Naperville, Illinois, mortgage banker who depends on Libor to tell him how much his firm, All America Mortgage Corp, owes First Tennessee bank for a credit line that he uses to make loans. As Mr Freemott says, concerns about LIBOR’s reliability are “actually kind of frightening if you really sit and think about it.”

Of course, if this info makes the public newspapers, that means the cat is out of the bag. We can be sure that the banking community no longer trust LIBOR. Fundamentally, this translates into what we already knew: banks can no longer trust each other.

We live in interesting times.

The Banking Fraud, a simplified overview….

THE MODERN INCARNATION OF FRAUD

What happens when you or I, or for that matter the government, borrow money from the bank? Prepare yourself for a surprise.

Let’s say we want to borrow a £100,000 mortgage on a house. The bank or building society does what the goldsmith did and creates £100,000 out of thin air. Instead of handing us a paper certificate, it simply credits our bank account with the £100,000 and registers that £100,000 as a debt, with (say) a further £100,000 interest over 25 years. The money is simply penned into our account without any account anywhere being debited the loaned money. New money is therefore created. Alongside it a debt (in this case £100,000 plus the roughly £100,000 of interest) is created. When we repay the debt, the interest is accounted as income for the bank. The £100,000 we originally borrowed is withdrawn from circulation and is accounted as collateral for further lending, loaned back into circulation when someone else borrows.

Our house is held as security so if we fail to keep up our repayments, the creditor takes possession of it. The repayments themselves can vary through no fault of our own, according to interest rates set by the banking industry.

After 25 years of blood sweat and tears we finally pay back the last installment of the £200,000 capital-plus-interest we owed and the house in finally ours. It is not ours until that point.

The lender, who loaned us money which did not exist until the moment he created it out of nothing, winds up with £100,000 of interest on the loan: that is real, spendable income that comes courtesy of our real work and real wealth creation. The numbers have been simplified to highlight the nature of the fraud and in practise the process is hidden under a great deal of complexity but this in essence is the process of money creation.

Each time the banks create money they create a debt that is greater than the spending power they create. One can see too that each time they are creating a debt for the borrower, they are ultimately creating debt free money for themselves.

Before the goldsmiths’ scam began, the money in circulation was hard currency – usually gold or silver minted into coins which then circulated as the tokens used to represent goods and services. That minting and circulation of coinage was usually administered by the government or king.

However as soon as the goldsmiths’ certificates became used in lieu of gold, paper money had made an appearance. As soon as the goldsmiths began issuing paper notes for gold they did not actually have, the goldsmiths were themselves creating new money and lending it into circulation.

One can see that this establishes debt as the basis of our currency. Where once, long ago, the British pound represented something -so much gold or silver – it now represents so much debt, which is not only nothing it is less than nothing.

Extracted from: Your Business Under Siege…and the reasons why. Published by the BAMR, email: BAMR@bamr.fsnet.co.uk Tel: 01342410962 (UK)

who is in control?

“Whoever controls the volume of money in any country is absolute master of all industry and commerce. And when we realize that the entire system is very easily controlled, one way or another, by a few very powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
U.S. President James Garfield. A few weeks after making this statement, he was assassinated on July 12, 1818.

The Bank of England and British Government, where the fraud started.

In 1694 the world’s first privately owned central bank was created. It was to be called the Bank of England. The Bank’s charter included the following immortal words: “The bank hath benefit on the interest on all monies which it creates out of nothing.”
By the end of the 1600s England was in financial ruin, gold and silver supplies were running low and a costly civil war followed by costly wars with France and Holland, all in a fifty year period, had left her heavily in debt.

Government officials met with the financiers to negotiate the loans they needed. King William was £20 million in debt and he could not pay his army. Apparently it did not occur to William or anyone that if William needed to pay his army or get the economy going, all he had to do was have the government print its own money and use that to pay the troops -something that Abraham Lincoln would do successfully during the American Civil war nearly two hundred years later!

King William’s “friends”, the bankers, were willing to loan him the money he needed but the price they wanted for their “help” was high. They wanted a government-sanctioned but privately owned central bank that could; through fractional reserve lending, create money out of nothing and loan it to the government

Instead of exercising its right to create money and spend it into the economy, the government had the bank create it, then lend it to the government so that the government could spend it into the economy, then pay the loans back later at interest. That completely unnecessary complication was to have devastating consequences for the futures of the English people.

As well as delivering extraordinary power over the nation into the hands of a privately owned business corporation, it began the National Debt, a debt that would go on increasing remorselessly over the ensuing years until it had reached around £380 billion in 1996, costs us around £30 billion a year in interest payments and is still climbing.

Although the new central bank was an entirely privately owned corporation, the name chosen for it led generations of Englishmen to believe that it was part of their government, when it most certainly was not.

The bank was chartered in 1694 and began the business of lending out several times the money it supposedly had in its reserves.

In exchange for this unique and immensely profitable privilege, the bank would very kindly lend the English, and later British, government as much money as it wanted, at interest, provided the debt was secured by direct taxation of the people.

And it continues to this very day…….witness Alistair Darling’s spending spree to rescue Northern Rock and subsequent bank failures, all at our expense!

more dangerous than armies……

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from banks, and restored to the people.” Thomas Jefferson