Category Archives: banking

Japan on a Larger Scale, by James Rickard

Go deep enough into debt and you can’t climb out, as Japan has found out and as the US and Europe are finding out. From James Rickard at dailyreckoning.com:

In my 2014 book, The Death of Money, I wrote, “The United States is Japan on a larger scale.” That was five years ago.

Last week, prominent economist Mohamed A. El-Erian, formerly CEO of PIMCO and now with Allianz, wrote, “With the return of Europe’s economic doldrums and signs of a coming growth slowdown in the United States, advanced economies could be at risk of falling into the same kind of long-term rut that has captured Japan.”

Better late than never! Welcome to the club, Mohamed.

Japan started its “lost decade” in the 1990s. Now their lost decade has dragged into three lost decades. The U.S. began its first lost decade in 2009 and is now entering its second lost decade with no end in sight.

What I referred to in 2014 and what El-Erian refers to today is that central bank policy in both countries has been completely ineffective at restoring long-term trend growth or solving the steady accumulation of unsustainable debt.

In Japan this problem began in the 1990s, and in the U.S. the problem began in 2009, but it’s the same problem with no clear solution.

The irony is that in the early 2000s, former Fed Chair Ben Bernanke routinely criticized the Japanese for their inability to escape from recession, deflation and slow growth.

When the U.S. recession began during the global financial crisis of 2008, Bernanke promised that he would not make the same mistakes the Japanese made in the 1990s. Instead, he made every mistake the Japanese made, and the U.S. is stuck in the same place and will remain there until the Fed wakes up to its problems.

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Counterfeiting Money Is a Crime — Whether Done by the Fed or A Private Individual, by Patrick Barron

The Federal Reserve probably counterfeits more money than anyone else. From Patrick Barron at mises.org:

A few years ago, shortly after the 2008 subprime lending disaster, the Fed sent a public relations team around the country to conduct supposedly “educational sessions” about how the Fed works and the wonderful things it does. The public was invited, and there was a question and answer session at the end of the presentation. One such session was held in Des Moines, Iowa. At the time I was teaching a course in Austrian economics at the University of Iowa, so I lusted at the prospect of hearing complete nonsense and having a shot at asking a question. I was not disappointed.

The educational part of the session lasted about an hour, and it became clear to me that the panel of four knew almost nothing about monetary theory. They may even have been hired especially for this grand tour, because all were relatively young, well scrubbed, and very personable–let’s face it, not your typical Fed monetary policy wonks or bank examiners! The panelists discussed only one of the Fed’s two remits–its remit to promote the economic advancement of the nation. Its other remit is to safeguard the monetary system. However, the panelists did touched upon the Fed’s control of interest rates and ensuring that money continued to flow to housing and other high profile areas of the economy.

Finally, at the end of the presentation, those with questions were asked to form a queue and advance one at a time to a microphone. I was last in a line of about a dozen. Here’s my recollection of what followed:

Me: You say that you (the Fed) have the power to increase the money supply. Is that right?

Fed: Yes.

Me: And you have indeed increased the money supply. Is that right?

Fed: Yes.

Me: And the money that you create was generated out of thin air. It wasn’t there before, but it’s there now. Is that right?

Fed (Getting nervous): Yes.

Me: And you say that creating this money out of thin air is beneficial to the economy. Is that right?

Fed (Now nervous as a cat on a hot tin roof): Yes.

Me: Then why do you prosecute counterfeiters?

(The audience, after a few seconds’ delay,: Yeah, why DO you prosecute counterfeiters?)

Fed: This meeting is closed.

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Salvini Is Positioning Italy for Confrontation, by Tom Luongo

Matteo Salvini is proving himself to be quite a match for the EU. From Tom Luongo at strategic-culture.org:

Italy’s Matteo Salvini is riding high right now. Having weathered a couple of cheap legal moves to derail his assault on the European Parliament this May, Salvini is working to galvanize Euroskepticism across the continent into a viable political force.

He’s got his work cut out for himself.

But, he has at least two major allies. Marine Le Pen of the National Rally in France and Viktor Orban, the leader of Hungary. Salvini and Le Pen met last week to announce they would be campaigning together for the European elections as well as a major summit in Milan soon.

This is only the beginning, however.

I’ve been saying for over a year now that Salvini needs to be the person who lays the foundation for a wholesale revolt against the European Union and Italy’s participation in the euro.

His Lega party have skyrocketed in the polls, reversing the dynamic between it and coalition partner Five Star Movement. It’s a coalition that is of the kind which frightens the political establishment in Europe because it isn’t formed on the traditional left-right false divide.

It is a populist one united on the common cause of overthrowing the corrupt, corporatist system which most western governments are fronts for.

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Big Old Problem Just Re-Erupted on Eurozone’s Southern Flank, by Don Quijones

Italy is in recession, has debt out the wazoo, and its banking system is in bad shape. From Don Quijones at wolfstreet.com:

Italy’s fiscal health is once again in serious decline.

On Wednesday, Italy’s coalition government slashed its growth forecast for the Italian economy in 2019 to 0.2% – the weakest forecast in the Eurozone – from a previous forecast of 1%. Italy is already in a technical recession after chalking up two straight quarters of negative GDP growth in the second half of 2018.

The government’s budget for this year was based on the assumption that the economy would expand by 1% this year. Now, it seems the economy may not grow at all; it could even shrink.

One direct result of this is that Italy’s current account deficit for 2019 will be substantially higher than the 2.04% of GDP Italy’s government pledged to stick to late last year. And that can mean only thing: another standoff between Rome and Brussels over the direction of fiscal policy is in the offing.

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Taiwan, the BRI and the geopolitical chessboard, by Pepe Escobar

The US and China a vying for supremacy in Asia. China would be the betting favorite. From Pepe Escobar at atimes.com:

What remains of Western unity does not represent a vision of the future any more

Taiwan, the BRI and the geopolitical chessboard

Workers construct piers for the bridge over the Amur River, which will connect Russia and China, part of the Belt and Road project. Photo: AFP/Eugene Odinokov/Sputnik

It’s all about the cross-strait median. No, that’s not a drink in a Hong Kong bar. It’s the de facto maritime border between continental China and Taiwan.

Last Sunday morning, two Chinese J-11 fighters crossed the median and stayed on Taiwanese air space for about 10 minutes – even after Taiwanese interceptors were dispatched. Tsai Ing-wen, the President of Taiwan, defined the incursion by the PLA Air Force as “reckless and provocative.”

And, ominously, demanded the “forceful expulsion” of Chinese fighter jets if it ever happened again. Well, that used to happen, quite frequently, but only up to 1999, when Beijing and Taipei clinched a deal to make them stop.

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The Japanification of the World, by Charles Hugh Smith

As it grows faster than the underlying economy, debt becomes quicksand from which the economy cannot extricate itself. From Charles Hugh Smith at oftwominds.com:

Zombification / Japanification is not success; it is only the last desperate defense of a failing, brittle status quo by doing more of what’s failed.

A recent theme in the financial media is the Japanification of Europe.Japanification refers to a set of economic and financial conditions that have come to characterize Japan’s economy over the past 28 years: persistent stagnation and deflation, a low-growth and low-inflation economy, very loose monetary policy, a central bank that is actively monetizing debt, i.e. creating currency out of thin air to buy government debt and a government which funds “bridges to nowhere” and other stimulus spending to keep the economy from crashing into outright contraction.

The parallels with Europe are obvious, but they don’t stop there: the entire world is veering into a zombified financial, economic, social and political status quo that is the core of Japanification.

While most commentators focus on the economic characteristics of Japanification, social and political stagnation are equally consequential. If we only measure economic/financial stagnation, it appears as if Japan and Europe are holding their own, i.e.maintaining the status quo via near-zero growth and near-zero interest rates.

But if we measure social and political decay, the erosion is undeniable. Here’s one example. Few Americans have access to or watch Japanese TV, so they are unaware of the emergence of the homeless as a permanent feature of urban Japan. The central state propaganda media is focused on encouraging tourism, a rare bright spot in Japan’s moribund economy, and so you won’t find much media coverage of homelessness or other systemic signs of social breakdown.

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BIS General Manager Outlines Vision for Central Bank Digital Currencies, by Steven Guinness

The globalists are cooking up all sorts of mischief for us, including central bank digital currencies. From Steven Guinness at stevenguinness2.wordpress.com:

The behaviour of central bankers is rarely (if ever) given sustained coverage in the national press. Outside of prominent economic channels, developments from within institutions such as the International Monetary Fund and the Bank for International Settlements are seldom remarked upon. Instead, attention is restricted to the latest round of political theatrics which serve to disguise the actions and intentions of globalist planners.

As the furore of Brexit gained in intensity last month, BIS General Manager Agustin Carstens gave a speech at the Central Bank of Ireland 2019 Whitaker Lecture. Under the heading, ‘The future of money and payments‘, Carstens mapped out what has been a long standing vision of globalists – namely, to acquire full spectrum control of the international financial system through the gradual abolition of what Bank of England governor Mark Carney has called ‘tangible assets‘ i.e. physical money.

The ‘future of money‘ narrative is one that both the BIS and the IMF have been actively promoting since the advent of Brexit and Donald Trump’s presidency. Here are some links to speeches made by both Christine Lagarde and Agustin Carstens:

Central Banking and Fintech—A Brave New World?

Winds of Change: The Case for New Digital Currency

Money and payment systems in the digital age

Money in the digital age: what role for central banks?

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