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The debt bomb just got bigger

The amount of debt worldwide is more than all of the bank accounts in the world, and the current financial situation in Cyprus is the inevitable next phase: Confiscation.

All pretense is now gone that central or global bankers can ‘securitize’ growth by packaging and repackaging debt; by hypothicating and rehypothicating debt; by regulating and rergulating debt. Since the bond market rally began in the early 1980s (yes, it’s that old) each crisis has been met by central and global bankers – the IMF, EU and ECB, to name a few – and their Wall St. and City of London brethren with an increase in debt, and an extension of the debt’s maturity.

The result has been – as of 2007 – the biggest mountain of on-balance sheet and off-balance sheet debt in history: A staggering $220 trillion in debt in America’s $14-trillion economy alone (when you include all public, private and contingent liabilities of unfunded entitlement programs). Deals in the global debt derivatives market now stand in excess of $1 quadrillion, riding above a global GDP of approximately $60 trillion.

But starting in 2007, and then becoming spectacularly apparent in 2008 with the Lehman collapse, the ability of the world’s taxpayers to pay either the interest or principal on this debt has hit a brick wall. And for several years now, governments around the world have tried the same old tricks of ‘extend and pretend.’ Repackage and extend the maturity, and pray that tax receipts start picking up enough to pay some of the debt off. It didn’t work. The debt bomb just got bigger. Now in Cyprus we see the inevitable next phase: Confiscation.

To pay off the debts that were incurred to finance the biggest wealth grab in history, we see in Cyprus, as well as central and global banking institutions around the world, a trend to just reach in and grab people’s money from their ‘insured’ bank accounts. We should have figured out this was coming when JP Morgan (read: Jamie Dimon) reached in and illegally stepped ahead of customers at MF Global and grabbed over $1 billion, with the help of his crony pal Jon Corzine.

Have we learned our lesson yet? They have more debts to pay than there is money in all the bank accounts in the world. This means that chances are, you – whoever you are, and whatever country you live in – will have a sizable percent of your savings stolen by banksters.

Since the crisis hit (and for several years leading up to it) we’ve been recommending on ‘Keiser Report’ to put as much money as you can in gold and silver. Our advice then and now is: The only money you should keep in a bank is money you’re willing to lose.

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It’s Not a “Fiscal Cliff” … It’s the Descent Into Lawlessness

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by George Washington
12/24/2012

The “fiscal cliff” is a myth.

Instead, what we are facing is a descent into lawlessness.

Wikipedia notes:

In many situations, austerity programs are imposed on countries that were previously under dictatorial regimes, leading to criticism that populations are forced to repay the debts of their oppressors.

Indeed, the IMF has already performed a complete audit of the whole US financial system, something which they have only previously done to broke third world nations.

Economist Marc Faber calls the U.S. a “failed state“.   Indeed, we no longer have a free market economy … we have fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption.

Let’s look at some specific examples of our descent into lawlessness.

Lawless Looting and Redistribution of Wealth

The central banks’ central bank – the Bank for International Settlements- warned in 2008 that bailouts of the big banks would create sovereign debt crises … which could bankrupt nations.

That is exactly what has happened.

The big banks went bust, and so did the debtors.  But the government chose to save the big banks instead of the little guy, thus allowing the banks to continue to try to wring every penny of debt out of debtors.

Treasury Secretary Paulson shoved bailouts down Congress’ throat by threatening martial law if the bailouts weren’t passed. And the bailouts are now perpetual.

Moreover:

The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

  • A lot of the bailout money is going to the failing companies’ shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”

And as the New York Times notes, “Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners”.

***

In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG’s credit default swaps and is not even really stabilizing AIG.

Moreover, a large percentage of the bailouts went to foreign banks (and see this). And so did a huge portion of the money from quantitative easing.  Indeed, the Fed bailed out Gaddafi’s Bank of Libya), hedge fund billionaires, and big companies, but turned its back on the little guy.

A study of 124 banking crises by the International Monetary Fund found that propping up banks which are only pretending to be solvent often leads to austerity:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

***

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

In other words, the “stimulus” to the banks blows up the budget, “squeezing” public services through austerity.

Numerous top economists say that the bank bailouts are the largest robbery and redistribution of wealth in history.

Why was this illegal?   Well, the top white collar fraud expert in the country says that the Bush and Obama administrations broke the law by failing to break up insolvent banks … instead of propping them up by bailing them out.

And the Special Inspector General of the Tarp bailout program said that the Treasury Secretary lied to Congress regarding some fundamental aspects of Tarp – like pretending that the banks were healthy, when they were totally insolvent.  The Secretary also falsely told Congress that the bailouts would be used to dispose of toxic assets … but then used the money for something else entirely.  Making false statements to a federal official is illegal, pursuant to 18 United States Code Section 1001.

So breaking the rules to bail out the big, insolvent banks, is destroying our prosperity.

Lawless Justice System

A strong rule of law is essential for a prosperous and stable economy, yet the government made it official policy not to prosecute fraud, even though criminal fraud is the main business model adopted by the giant banks.

The perpetrators of the biggest financial crime in world history, the largest insider trading scandal of all time, illegal raiding of customer accounts and blatant financing of drug cartels and terrorists have all gotten away scot-free without any jail time.

There are two systems of justice in America … one for the big banks and other fatcats, and one for everyone else.

While Iceland prosecuted its top criminal bankers, and thus quickly got through its financial problems and now has a vibrant economy, the American government has done everything it can to cover up fraud, and has been actively encouraging criminal fraud and attacking those trying to blow the whistle.

The rule of law is now as weak in the U.S. and UK as many countries which we would consider “rogue nations”.    See this, this, this, this, this, this, this, this, this, this and this.

This is a sudden change.  As famed Peruvian economist Hernando de Soto notes:

In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.

Moreover, U.S. government personnel are on the take.  They have become so corrupt that regulators are literally sleeping with industry prostitutes … while they pimp out the American people.

The corruption of government officials is staggering, and the system of government-sponsored rating agencies had at its core a model of bribery.

We’ve gone from a nation of laws to a nation of powerful men making one-sided laws to protect their own interestsin secret. Government folks are using laws to crush dissent. It’s gotten so bad that even U.S. Supreme Court justices are saying that we are descending into tyranny.

It’s not a “fiscal cliff” … it’s an attempt to rape America … just like Greece and Ireland have been plundered.

Economics professor Randall Wray writes:

Thieves … took over the whole economy and the political system lock, stock, and barrel. They didn’t just blow up finance, they oversaw the swiftest transfer of wealth to the very top the world has ever seen. They screwed workers out of their jobs, they screwed homeowners out of their houses, they screwed retirees out of their pensions, and they screwed municipalities out of their revenues and assets.

Financiers are forcing schools, parks, pools, fire departments, senior citizen centers, and libraries to shut down. They are forcing national governments to auction off their cultural heritage to the highest bidder. Everything must go in firesales at prices rigged by twenty-something traders at the biggest and most corrupt institutions the world has ever known.

Economics professor Michael Hudson agrees … saying that the banks are trying to roll back all modern laws and make us all serfs.

Professor Hudson explained in 2008:

You have to realize that what they’re trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. They’re not trying to make the economy more equal, and they’re not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards, it’s the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite.

Indeed:

Foreign Policy magazine ran an article entitled “The Next Big Thing: Neomedievalism“, arguing that the power of nations is declining, and being replaced by corporations, wealthy individuals, the sovereign wealth funds of monarchs, and city-regions.

Indeed, this isn’t the “Great Recession”, it’s the Great Bank Robbery. The big banks have pillaged and looted the rest of the world.

A lawless justice system is ruining the economy.

Lawless Central Bank

The non-partisan Government Accountability Office calls the Fed corrupt and riddled with conflicts of interest.   Nobel prize winning economist Joseph Stiglitz agrees, saying that the World Bank would view any country which had a banking structure like the Fed as being corrupt and untrustworthy. The former vice president at the Federal Reserve Bank of Dallas said said he worried that the failure of the government to provide more information about its rescue spending could signal corruption. “Nontransparency in government programs is always associated with corruption in other countries, so I don’t see why it wouldn’t be here,” he said.

Moreover, the Fed has broken the law by withholding information from Congress, letting unemployment rise in order to keep inflation low, and otherwise exceeding its authority under the Federal Reserve Act.

Acting in a lawless and unaccountable fashion is hurting the economy.

Lawless Attack on Democracy

The ability of the people to participate in their government’s decision-making is vital for a nation’s prosperity. But we no longer have democracy or a republican form of government in America.

The big banks own Washington D.C. politicians, lock stock and barrel.  See this, this, this and thisTwo leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City, Moody’s chief economist and many others have all said that the United States is controlled by an “oligarchy” or “oligopoly”, and the big banks and giant financial institutions are key players in that oligarchy.

Laws are being passed in secret, and not even Congress knows what’s going on.

In other words, not only the justice system, but the entire system of American representation has been corrupted, thus harming the economy.

Lawless Infringement of Freedom

Personal freedom and liberty – and freedom from the arbitrary exercise of government power – are strongly correlated with a healthy economy, but America is descending into tyranny.

Authoritarian actions by the government interfere with the free market, and thus harm prosperity.

U.S. News and World Report notes:

The Fraser Institute’s latest Economic Freedom of the World Annual Report is out, and the news is not good for the United States. Ranked among the five freest countries in the world from 1975 through 2002, the United States has since dropped to 18th place.

The Cato institute notes:

The United States has plummeted to 18th place in the ranked list, trailing such countries as Estonia, Taiwan, and Qatar.

***

Actually, the decline began under President George W. Bush. For 20 years the U.S. had consistently ranked as one of the world’s three freest economies, along with Hong Kong and Singapore. By the end of the Bush presidency, we were barely in the top ten.

And, as with so many disastrous legacies of the Bush era, Barack Obama took a bad thing and made it worse.

But the American government has shredded the constitution, by subjecting us to indefinite detention, taking away our due process rights, deploying drones above our heads, spying on all Americans, and otherwise acting in attacking our freedoms.

Indeed, rights won in 1215 – in the Magna Carta – are being repealed.

Economic historian Niall Ferguson notes, draconian national security laws are one of the main things undermining the rule of law:

We must pose the familiar question about how far our civil liberties have been eroded by the national security state – a process that in fact dates back almost a hundred years to the outbreak of the First World War and the passage of the 1914 Defence of the Realm Act. Recent debates about the protracted detention of terrorist suspects are in no way new. Somehow it’s always a choice between habeas corpus and hundreds of corpses.

Of course, many of this decades’ national security measures have not been taken to keep us safe in the “post-9/11 world” … indeed, many of them started before 9/11.

And America has been in a continuous declared state of national emergency since 9/11, and we are in a literally never-ending state of perpetual war. See this, this, this and this.

In fact, government has blown terrorism fears way out of proportion for political purposes, and “national security” powers have been used in many ways to exempt big Wall Street players from the rule of law rather than to do anything to protect us.

So lawlessness infringement of our liberty is destroying our prosperity.

Lawless Initiation and Prosecution of War

It is well-documented that war destroys the economy.

Top U.S. government employees lied us into war, and used illegal torture, assassinations and other crimes of war in prosecuting the wars they unnecessarily started. They were – at a minimum – criminally negligent for failing to stop 9/11 (and see this).

In the name of fighting our enemies – the U.S. has directly been supporting Al Qaeda and other terrorist groups for the last decade. See this, this, this, this and this.

Our use of torture has also created many more terrorists than it has prevented.

Security experts – including both conservatives and liberals – agree that waging war in the Middle East weakens national security and increases terrorism. See this, this, this, this, this, this, this and this.

Indefinite detention, drone-strikes on innocent civilians, occupation of foreign countries, and most of America’s other tactics in the “war on terror” increase terrorism.

Terrorism feeds the cycle of war … and is thus harming our economy. (and because terrorism spooks people, they spend less, which further harms the economy).

So lawlessness in starting and prosecuting war is destroying our prosperity.

Postscript:  We’re not facing a “fiscal cliff”.  We’re facing a descent into lawlessness.  Stopping the fraudulent schemes, endless bailouts and imperial adventures is the place to start.

Source

Directed History of Coming Depression Grinds On

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Wednesday, May 09, 2012 – by Staff Report

Never Mind Europe. Worry About India …The economic slowdown in India is one of the world’s biggest economic stories, but it is commanding only a modicum of attention in the United States … It may not even look like a slowdown because by developed standards, India’s growth — estimated by the International Monetary Fund at 6.9 percent for 2012 — is still strong. But a slowdown it is: the economy has decelerated from projected rates of more than 8 percent, and negative momentum may bring a further decline. The government reported year-over-year growth in the October-through-December quarter of only 6.1 percent. What is disturbing is that much of the decline in the growth rate is distributed unevenly, with the greatest burden falling on the poor. If the slower rate continues or worsens, many millions of Indians, for another generation, will fail to rise above extreme penury and want. The problems of the euro zone are a pittance by comparison. – New York Times

Dominant Social Theme: Hmm, it seems the BRICs are having problems.

Free-Market Analysis: We’ve been banging on about a worldwide slump for years now, ever since it occurred to us that once Europe and the US “went out” in 2008, from an economic standpoint, the BRICs were all that was left.

And the BRICs are more like the proverbial straw hut these days.

China, of course, has certain problems but it’s Brazil and India that are the countries attracting the most attention.

Brazil is in the news (from our standpoint) because of a coming devaluation in Argentina that may have a significant impact on the dollar economy of both Brazil and the “Switzerland of South America,” Uruguay.

Now India is beginning to receive mainstream news coverage as well. This is only to be expected.

The elites that want to run the world are seemingly building a worldwide economic depression – a fact that cannot be gainsaid if one understands that the world’s economy is an entirely artificial one these days.

There are now, after about 100 years, perhaps 150 central banks in existence – and this gives the tiny handful of dynastic elites that control them tremendous power.

Such monopoly central banking – printing money from nothing – allows the elites that control these banks to create tremendous booms and then busts that centralize more and more power in fewer and fewer hands.

That seems to be what’s going on now. It suits the purpose of the power elite to create a further global slump that will then result in further global governance and even a single worldwide currency (now apparently being planned).

The world is basically a three-legged stool, supported by Europe, the US and the BRICs at this point. The world’s economy will stumble and fail along with the BRICs, if that’s what is happening. And it seems to be.

Of course, the elites work quietly in the background. They naturally don’t want to admit to an engineered takedown of the world.

But their bought-and-paid-for media can be plenty vocal when given the opportunity. Perhaps that’s what is going on now.

We noticed it a while ago regarding China, and now both Brazil and India are getting press about domestic economic troubles.

When the mainstream media is recruited to this sort of reporting, you can bet the elites WANT it publicized.

The narrative seems to us neatly laid out. The initial bubble-and-bust in 2008 provoked a good deal of controversy. But it is likely that the crumbling of the BRICs, coming some four years later, will not look to most like a connivance.

Of course, it must be. The degradation of the world’s economy should be laid at the feet of the system that is currently empowered: Monopoly/mercantilist fiat-paper central banking.

We’re not supposed to notice, of course. But we DO notice. It’s not OUR world. It’s not OUR economy. It’s theirs.

But so long as we borrow this world, we’ll do our best. We’ll downsize, try not to borrow. Maybe buy more gold and silver. Try to drop out of the consumerist society as much as possible. Buy some farmland.

Store some food.

All prudent moves. We can’t control the larger confluence of forces that are driving the world’s economy down. We can’t work on that scale, of course. Only a handful can and apparently do.

But we can arm ourselves with knowledge. We can appreciate this weary world’s directed history.

We can educate others. Above all, we can control our own psychology and desires. We can refuse to give in to pessimism.

Conclusion: We can take what Ludwig von Mises famously called human action to better our own lifestyles and those of our loved ones. We can protect ourselves. And we should.

Source

Your Quick Guide To The IMF-World Bank Meetings Today

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by Simone Foxman

World leaders are meeting in Washington, D.C., to attend a joint IMF-World Bank meeting.

Their focus? The funding available to the IMF, specifically to support the ongoing debt and bank crises in Europe.

Countries in Europe and Asia have expressed interest and even firm commitments in contributing more money to the fund. The U.S. and Canada, however, have said they won’t contribute any more cash to an effort EU leaders should be able to resolve themselves.

While we could hear more pledges over the course of the day, so far Japan, Switzerland, Poland, Sweden, Denmark, Norway, and the euro area have all made dollar commitments totaling $320 billion, according to Bloomberg:

Read more: BI

Euro currency could collapse and trigger another Great Depression, IMF warns for the first time

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End of the Euro?: The IMF warns that one country leaving the single currency could force its entire collapse

By Hugo Duncan
PUBLISHED: 12:45 EST, 17 April 2012
UPDATED: 04:28 EST, 18 April 2012

The eurozone could break up and trigger a global economic slump to rival the Great Depression, the IMF warned last night.

In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out.

It was the first time the Washington-based institution has accepted the prospect of the eurozone splitting up and follows fears over the health of the Spanish economy.

The IMF predicted a return to recession in the eurozone this year but upgraded its growth forecasts for Britain.

However, it warned that the world remains at risk of collapsing into a slump that would rival the Great Depression – with ‘acute risks in Europe’ the major threat.

‘Things have quietened down but there is a very uneasy calm,’ said IMF chief economist Olivier Blanchard. ‘I have a feeling that at any moment things could get very bad again.’

Speaking at the launch of the half-yearly report in Washington, Mr Blanchard said there was ‘no plan’ in place to deal with a country leaving the euro.

However Greece is widely expected to default on its crippling debts and quit the doomed single currency.

‘If such an event occurs, it is possible that other euro area economies would come under severe pressure as well, with a full-blown panic in financial markets,’ the IMF report said.

‘Under these circumstances, a break-up of the euro area could not be ruled out. This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse.’

U.S. investment bank Lehman Brothers imploded in September 2008 – plunging the world economy into the worst recession since the 1930s. The IMF said that although ‘the outlook for the global economy is slowly improving again’ it is ‘still very fragile’.

It warned of the ‘possibility that several adverse shocks could interact to produce a major slump reminiscent of the 1930s’.

The IMF forecast growth of 0.8 per cent in Britain this year – more than the 0.6 per cent it predicted in January, but less than last September’s target of 1.6 per cent. Its 2013 forecast was unchanged at  2 per cent.

Asked about the IMF’s comments on the eurozone, a Downing Street spokesman said: ‘The eurozone still needs to get its house in order. Those issues still exist and no doubt will be a focus of discussions at the coming meeting of the IMF towards the end of the week, which the Chancellor will be attending.’

The IMF said Britain will outperform Germany and France this year – their economies are expected to grow by just 0.6 per cent and 0.5 per cent respectively.

The Italian and Spanish economies are forecast to decline by 1.9 per cent and 1.8 per cent, while a slump of 4.7 per cent is expected in Greece following a 6.9 per cent drop in 2011.

But the report warned that output in the eurozone could fall by 3.5 per cent over the next two years if the debt crisis escalates.

This would knock 2 per cent off the world economy, said the IMF, while a 50 per cent rise in the oil price would lower output by a further 1.25 per cent.

In the absence of such ‘shocks’ the global economy is expected to grow by 3.5 per cent this year, down from 3.9 per cent in 2011, with the U.S., Canada and Japan leading the way in the developed world.

‘Because of the problems in Europe, activity will continue to disappoint in the advanced economies as a group, expanding by only about 1.5 per cent in 2012 and by 2 per cent in 2013,’ said the report.

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