Inspiring Moments in Banking?

FDIC placard from when the deposit insurance limit was $2,500.  Today, deposits are guaranteed to $250,000.  Is that evidence of inflation?  (Photo credit: Wikipedia)

In “Big depositors in Cyprus to lose far more than feared, Reuters reported that,

 

“Big depositors in Cyprus’s largest bank stand to lose far more than initially feared under a European Union rescue package to save the island from bankruptcy, a source with direct knowledge of the terms said on Friday.

“Under conditions expected to be announced on Saturday, depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.”

 

That description of the terms for ending the Cyprus Crisis is not absolutely clear.  However, I read that description to mean that anyone with over 100,000 euros in a Cyprus bank may lose 100% of his savings, but will receive shares in the newly recapitalized bank (recapitalized with his savings) equivalent to 37.5% of the value of his savings.  Thus, the depositor may be forced to buy stock he doesn’t want in his own failing bank with 37.5% of his savings, and then be forced to effectively donate the other 62.5%  to capitalizing that same failing bank.

You can use all the fancy words you want to justify that confiscation, but the confiscation differs from outright theft only in the fact that the Cyprus government—being a co-conspirator in that theft—has sanctioned that theft by law as “legal”.

Does that taking inspire your confidence in your bank?

If bankers can seize depositors’ funds in Cyprus, can they do it here in the US?

 

Fall of Another Empire of Debt

A comparison between Germany’s Wiemar Republic (which laid the foundation for the Hitler regime and WWII) and the current US gov-co and economy.  The video is not profound, but it’s informative and good.

video    00:06:42

 

Viva Iceland!

Deutsch: Wappen von Island English: Coat of arms of Iceland Íslenska : Skjaldarmerki Íslands (Photo credit: Wikipedia)

Iceland fell into bankruptcy a few years ago.  The IMF tried to impose draconian controls over Iceland’s government and economy in return for providing a bail-out.  The people of Iceland told their government and the international bankers to stick it.

Iceland went through a difficult year or two, but their economy is now restored and reportedly growing at 2.9% per year–one of the strongest growth rates on the globe.

Here’s a brief video (in Spanish; read the English subtitles at the bottom of the screen) that explains that the people of Iceland have forced their government to forgive and erase most of the population’s mortgage debts! They are reportedly putting the bankers and politicians on the “Bench of the Accused” which apparently means they are putting them on trial for corruption.

What a story!  Given Iceland’s example, the rest of the world needs to also stand up and against the greed, corruption, fraud and treason of the bankers and their puppet politicians.

OMG!  Freedom is breaking out.  Maybe only in the tiny country of Iceland.  But freedom, nevertheless, is breaking out!  That’s cause for celebration.

video     00:00:32

http://www.youtube.com/watch?feature=player_embedded&v=uyxzg58JkYI

 

 

The War Between the Credit-worthy and the Credit-unworthy

Image by 401K via Flickr

•  By definition, the only legitimate way a debt-based currency gets into an economy is by lending it.  This lending doesn’t take place just once.  Primary lenders lend to secondary lenders who lend to tertiary lenders, etc..  I.e., the Federal Reserve System lends currency to the Federal Reserve Banks which lend that currency to private banks which lend it to their customers.  The chain of lenders and borrowers can be lengthy and complex.

It’s always possible for people at the bottom of the lender-borrower “pecking order” to acquire currency without actually borrowing it.  For example, they can work for it.  However, for those who have no credit in a debt-based monetary system, their access to currency will be so restricted that they’ll probably live in or near poverty.

 

•  The plight of the credit-unworthy illustrates a fundamental problem with any debt-based monetary system.  By definition, you can’t lend currency to the credit-unworthy and expect to be repaid.  For proof, witness the sub-prime mortgage debacle of the past decade.  Some seemingly smart people lent currency to the credit-unworthy and apparently expected to be repaid.  They fought economic reality and reality won.  The result was a credit collapse in A.D.2008 that nearly caused a global depression—and may yet do so.

 

The Emperor’s Butt Nekkid!

Image by mikeseye via Flickr

In A.D. 1837, Hans Christian Andersen published a fable entitled “The Emperor’s New Clothes”—the story of an Emperor who cared for nothing but his appearance.  He hired two deceitful tailors who promised him the finest suit of clothes made from a fabric invisible to anyone who was unfit for his position or “just hopelessly stupid”.

The Emperor couldn’t see the invisible clothes but, for fear of appearing unfit for his office, he pretended that he could.  His ministers also pretended as did the people.  The community pretense persisted until a child, too young to understand the need to maintain the lie, blurted out that the Emperor was naked, the people were shocked back into reality, and the lie of “invisible clothes” ended.

That fable illustrates how a community or even a nation can be integrated around a lie and how that community can seem to function properly so long as everyone embraces that lie.  But, if anyone tells the truth and exposes the lie, the community will lose confidence in the lie and disintegrate.

 

Credit as a Function of Morality

Image via Wikipedia

When it comes to moving money, there are only three fundamental mechanisms:  gift, debt and theft.

If Alfred voluntarily gives $1,000 to Donna without receiving Donna’s promise to repay, the transaction is a gift.

If Alfred gives $1,000 to Donna, and Donna reciprocates by providing Alfred with her promise to repay that $1,000 (perhaps with interest), that transaction is a debt.

If Donna takes $1,000 from Alfred without Alfred’s consent and without providing Alfred with Donna’s promise to repay, that’s theft.

Americans live in a “debt-based” economy.  There is no gold or silver coin (real money) in circulation.  As a result, our fiat currency is loaned into circulation and necessarily debt-based.

The essence of every debt is a promise to repay.  The essence of every nation’s debt-based monetary system is that nation’s ability to make good on their promises to repay their debts—and determination to do so.

 

The Year of the Rats

Image by Sergey Yeliseev via Flickr

Austin Goolsbee was President Obama’s chief economist.  I saw him interviewed on one of last Sunday’s TV-news talk shows.  He looked anxious and defensive.  But he gamely argued that the previous month’s bad job and manufacturing reports were only one-month aberrations and did not compromise the ongoing “recovery”.

So, I was surprised when it was announced the next day that Mr. Goolsbee had resigned from his White House post.  I don’t know if he actually resigned, or was fired.  But his departure can’t be viewed as evidence of an economic recovery.

The “rats” are leaving—or being driven from—what increasingly appears to be a sinking ship.

 

National Debt = National Death

Image via Wikipedia

When the federal government first entered into significant borrowing, the debt was excused under the pretext that “we owe it to ourselves”.  I.e., the feds borrowed money from the American people and would have to repay the debt (and interest) to the American people.  America would not be significantly hurt by these debts.

The idea that “we owe it to ourselves” is a fairly reasonable argument because it presupposes that the American people could control the magnitude of the federal government’s debt by their willingness or reluctance to lend to the federal government.

So long as the feds borrowed only from Americans, If Americans didn’t consent to lend more money to the feds, the feds would have to operate “hand to mouth” based strictly on its annual revenues.  Americans could compel the gov-co to “balance the budget” by simply refusing to lend it more money.

 

Visualizing the National Debt

Image by cobalt123 via Flickr

The attached video offer a very nice, less-than-2-minutes-long, explanation of the national debt and the government’s current attempts to reduce it.

Although this video focuses on President Obama’s earlier promise to “somehow” cut the budget by a “massive” $100 million, the Republican Party’s current “effort” to cut the budget by $56 billion is just as pathetic.  In the context of this video, the President’s $100 million is represented by a mere quarter of a penny.  In the context of this video, the Republicans’ proposed $56 billion cut would be represented by about 140 pennies–which, as you’ll see, is also a triviality given the dimension of the problem.

Implication:  While politicians grandstand about trying to fix the national debt, that debt will not be significantly reduced by our politicians until we are in the midst of a real economic catastrophe.

video  00:01:38

http://wimp.com/budgetcuts/

 

The Bankruptcy of the United States; James Traficant’s Speech

Image via Wikipedia

According to Wikipedia, “James Anthony Traficant, Jr. (born May 8, 1941) is a former Democratic Representative in the United States Congress from Ohio (from 1985 to 2002). He represented the 17th Congressional District, which centered around his hometown of Youngstown and included parts of three counties in northeast Ohio’s Mahoning Valley. He was expelled [from Congress] after being convicted of taking bribes, filing false tax returns, racketeering, and forcing his aides to perform chores at his farm in Ohio and on his houseboat in Washington, D.C., and was released from prison on September 2, 2009, after serving a seven-year sentence.”

I don’t know the details or timing concerning Mr. Traficant’s conviction in A.D. 2002, but if the criminal allegations against him were true, I would’ve expected him to have been made Speaker of the House rather than expelled from Congress.

In fact, many people believe that Mr. Trafficant was ultimately tried and sentenced in A.D. 2002 for having made an extraordinary speech in A.D. 1993 to Congress.  In that speech, Congressman Traficant alleged 1) the U.S. government is bankrupt; 2) the federal government was dissolved by the Emergency Banking Act of A.D. 1933; 3) the “receivers” of the US bankruptcy were the “international bankers via the United Nations”; and 4) the US monetary system was a fraud.

As I said, this was an extraordinary speech.  He was lucky to have merely been jailed; he might’ve been shot.