joebhed

Major Banks Now Much Too Big to Fail

First, I hate to repeat Paulson, but......
"The American Taxpayers are already on the Hook.".
That's how the money system works.
United States Dollars.
They come from United States Taxpayers.
Irregardless.

It's time we address the inherent instability of the fractional-reserve debt-money system. Banks MUST get bigger because banks create ALL of the nation's money as debts that must be paid back with interest. In order to have all that interest money, new money must be created, as new debts.
Which is the job of the banks.
"Grow we must" is more than a saying - it is a mathematical imperative.

We need a new money system, created as equity by the government.
The Money System Common.

Dollar Update: Inflation Forces Are Brewing

currency - inflation.
means of exchange - deflation.

advice for investors - trade.
advice for the citizenry - a new money system.

Re-read Friedman's Program For Monetary Stability, and then read the Chicago Plan for Monetary Reform.

The Money System Common.

Inflation vs. Deflation: A Matter of Money Supply and Demand

OK, it's just me.
It's not worth arguing over where the "inflation" from the past ten years has gone (real estate assets).
But essentially, Friedman was and is right.
The expansion of the money supply, and its reversal, are the main factors determining movement of prices.
Getting away from theory, the situation we have today is thus: we have created these Trillions of dollars "worth" of financial exotica, ALL of which have debt-service payments coming due, requiring creation of greater quantities of new debts to make those payments. Exponentially.
Or, we go bust, soft or hard landing.
The real problem, and it was identified by Friedman and many others, is the "debt-money" system.
All the money supply is created as a debt that requires a greater repayment obligation THAN exists in the money supply ever.
The debt-money system is what is broken.
Read Steven Lachance's paper.
www.financialsense.com...
So, yes, it is truly a matter of money supply and demand, but not the matter that you describe.
Exponentially-speaking, the debt-based monetary system creates a demand for money, for which there is not, and cannot be, a supply. It is broken.

Waiting for the Next Fed Apology

Simon and derryl both hit on important points.
More so darryl.
The problem I see with Simon's analysis is his failure to make the connection that he seemed to imply that Bernanke was missing.
That of the BIG financial picture.
The Fed is ONLY the central bank US and the commercial banking system (begging the question of how the IBs have all recently moved in next door).
So, we have a completely fractured money-creation system in this country.
Over the period being discussed, it is claimed that the IBs, working at their 40:1 ratio, CREATED MORE MONEY, colloquially-speaking, than did the entire Fed commercial banking suystem working up to their paltry 20 to 1 ratios.
How can you have financial stability when the private central bank has the limited role of creating only half the nation's money, and the bankers that create the other half are completely unregulated.
derryl points out the BIS' warnings, which included the entire financial services sector.
So, actually , as a guy who sat in the IMF's "catbird" seat on global economics and finance, I would say it is Simon that owes US an apology for not recommending that money-creation be limited to the central bankers' role, and that role be one under the control of the government. Period.
The Money System Common.

Bernanke's Conundrum

OOOPS.
that shoulda been 535 .


On Jul 23 01:47 PM joebhed wrote:

> Out of the 550 representatives of the people of the United States

Bernanke's Conundrum

Out of the 550 representatives of the people of the United States of America, the actual OWNERS of the US Money System - the ONLY ones who are resonsible for aying all these $Trillions in dollar-denominated debts, perhaps a half-dozen really understand what Bernanke is saying here.
Which, to my mind, if they do, they have now discovered the "exit-strategy" strategy.
It is our strategy to have an exit strategy so that we can later talk about how and when to implement the strategy, if we only had one.
It's like that old Lenny Bruce skit about the boy going down the bad road.
Actually, Ben, a strategy is something that you select from a number of options available to you to ACHIEVE THE GOALS of the strategy.

The previous best example of the strategy-less strategy was the monetary easing that happened when the Fed punched a bunch of new holes in the money-system walls and opened new windows for business. Unlike in Japan where the monetary authority laid out its goals(unachievable, as it turned out), and "quantified" the needed commitment, we just sashayed out the imminent and exigent circumstances clause for the Fed to do anything it wants, and out came the $$Trillions.

So, Mr. Chairman, if you don't mind, rather than telling us all the tools in that handy little magical toolbox at the Fed that can result in an interest rate increase, why not tell us how the selected strategy will impact things like, you know, full-employment and price stability.

That could actually be an indication that the strategy could accomplish something.
So, Doctor Ben, what is the strategy?

The Bubble Blowers: Goldman Sachs and Cap and Trade

Cap and trade is a carbon tax on derivative steroids.
Ultimately it is a tax that will be paid by consumers for achieving some public policy objective.
I fail to see how there can be any justification for the taxpaying consumers to be paying any more than is necessary to achieve the same objective.
Don't create this carbon future dynasty at Goldman.
You get all the benefits of the cap and trade system with a straightforward carbon tax, cheaper and quicker.
Maybe the Senate will take a look.
Probably not.

TIPS Are Untested: What Happens When Inflation Takes Over?

In defense of the Greenback, it contains certain qualities that are desperately needed in the financial world today, in fact now more than ever.
One quality would be equity.
Equity money.
As compared to debt-money.
Which is what we have now where all money is created as a debt.
And where, in doing so, we create a new debt obligation that can never be repaid.
And then we end up with a debt crisis.
Which is really the insolvency of the debt-money system.
And the only way out of the insolvency of the money system is to continually create more and more debt.
Thereby requiring even more debt-service payments.
Because the debt money system lives on debt.
So, not creating unpayable debts would be another of the good qualities of Greenbacks.
Unless these are not the same Greenbacks.

Is Treasury's TARP Debt Already Monetized? Part II

There are two historic moments that must be remembered when discussing almost any question regarding this financial mania.
The first was the systematic, almost instantaneous, removal of hundreds of billions from the system back in September; the second is Paulson arm-twisting the top of the biggest bankcorps in America to accept all these excess reserves.
The former was the proof that the system was broken and needed an instant fix, or else.
The latter was the certain delivery of a response that we got the message.
We tend to think of the effects of these actions in terms of how they have impacted the banking and financial services industries, and therefrom into the overall economy.
However, the underlying cause for all these actions is the failed money system of the Federal Reserve.
That is, the debt-money, fractional-reserve system that creates all new money through issue of bank loans.
So, can the money system be broken?

Read "How Debt Money Goes Broke".
www.financialsense.com...

It's a subject not often talked about because of the obvious geo-political problems involving similar monetary systems.
Which is a problem that I hope somebody is working on.

Nassim Taleb has recently involved himself with pointing out to anyone who will listen that the experts AGAIN do not understand the problem - which is that there is too much debt.
He recognizes fully the need for more equity in the money system.
He hasn't put it all together yet.
He doesn't know where to get that equity.
But he's getting close.

And, why is there is too much debt?
It is because all money is created as a debt.
It is because all money comes into existence by creating a financial obligation that can never be repaid.
It creates a new amount owing, a debt, that can never be paid back.
While bubbles and busts, and deflation and inflation have become the accepted norms that result from this debt-money system, there comes a time when , as Steven Lachance puts it, you can't create enough new debt-money fast enough to make the debt-service payments that are due on the debt-money already out there.
There's no money to pay the interest bills.
There always needs to be more people wanting more debts in order to keep the system going.
There no reverse on this engine.
Thus, the extra Trillions.
Intravenous feeding of the insolvent debt-money system.
It is not the banks or the banking system that are insolvent.
It is the debt-money system.
We either need more financial alchemy by Doctor Bernanke, or we need a new money system.
Greenbacks.

Paul Volcker: The Voice in the Wilderness

I can't criticize Volcker for acknowledging out loud that "we" own both parties. Whether he said it or not.

The most honest statement that I ever heard him make, among many, was back in January when, in modest support of the Obamadollar Stimulii proposal, he clarified what no other politician or economist has dared to say, before or since.
"The problem" said Volcker, "is that we do not have the money to make the debt-service payments on the debts that are out there".

It was an admission that the nature of the so-called credit crisis was in fact that the debt-money system of fractional-reserve banking was insolvent. (ALL we create is debts.)

To me, Volcker's problem is exactly the same as every dickhead mentioned in this article, and on SA generally.
They went to different schools with the same curriculum.
How can any of them have any idea for solving the problem caused by the debt-money system being insolvent?
THAT was clearly not in the curriculum.
"How Debt Money Goes Broke".
www.financialsense.com...

While reading that, keep in mind Paulson dragging the heads of the largest bankcorps into the anteroom, threatening their existence if they did not accept the excess reserves he was shoving down their throats.
For good reason, by the way.

Starve the Economic Beast, Part 3

The tragedy of the monetary commons. Illiteracy.

Heaping "plenty" of blame on Bushes and Repubs seems only lip service, as Obama and FDR are the targets of these malpolicy charges.

There are those who say we have no other option.
There are those who say: "We MUST deflate our way back to equilibrium" in order to go on from there."

I say, either way, we'll do it all again if we fail to establish a permanent, honest money system not based on debt-issue by private banks.

Abolish the Fed.
Abolish fractional-reserve (debt-issue) money.
Establish full-reserve banking and a debt-free money system.

The Chicago Plan for Monetary reform.
Milton Friedman's "Framework for Economic Stability".
The American Monetary Act reforms of the American Monetary Institute.

The Debt Money System is Broken. Here's how:
www.financialsense.com...

We need a counter-cyclical, macro-focused, money system that results in more EQUITY in the system than is allowed under the 100 percent debt-money system of the Fed.

Ron Paul is right to abolish the Fed.
But place the people back in charge of money, not another private cartel.

Solution to Our Economic Mess? Limit Leverage!

The Chicago Plan for Monetary Reform.
Friedman's "Financial and Monetary Framework for Economic Stability."
Fisher and Soddy's Full-reserve banking.
Leverage? What leverage?
Commercial banks on full-reserve lend real money into the economy.
Savings/Investment banks lend at 2 to 1, but put no risk on the other banking sector.
Forget uber-regulation.
This is the definition of self-imposed regulation.
The depositor is in charge of the financial economy.
Let the banks get back to banking.

Fed Starting to Panic over TALF Collateral Concerns

So, what happens when the few $hundred billion of these loans hit the wall and there is a loss to the "FED"'s operations?

It's not our problem, unless we're taxpayers.
I have seen no discussion of this, but it appears that the loss would hit the Fed's balance sheet and its Operating statement, creating a reduction in its "profits".
As we all know, the Fed grace is in its ability to repay to Treasury the "excess" profits from its operations.
So a loss that results in reduced profits from operations seems like it results in a reduced repayment to the Treasury, which seems like it must be made up by, guess who, the taxpayers.
Not to worry.
We're regulating.

The Debt Conundrum, Part 2

The CAUSE !
The CAUSE !
You forgot to mention the CAUSE.
A lot about the effects. And the symptoms.

Robert Hemphill, Credit Manager at the Atlanta Fed, when he realized how things actually work here:

""This is a staggering thought. We are completely dependent, on the Commercial Banks. Someone has to borrow every dollar, we have in circulation, cash or credit. If the Banks create ample synthetic money, we are prosperous; if not, we starve.
We are, absolutely, without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible. But there it is.
It is the most, important subject, intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse, unless it becomes widely understood, and the defects remedied very soon."

Feel that civilization collapsing, a.k.a. financial crisis?
The debt-money system is the CAUSE of our evolution into a debt-ridden society and nation.

We can blame it on the guvmint if it makes us all feel better.
But until we remedy that quintessential defect described by Mr. Hemphill, that ALL money MUST come into existence as a debt, the solution will evade even the most intelligent of people.
What is needed right now is the beginning of the discussion of the exit-strategy to replace our debt-money system.
If you REALLY want to transform debt into "equity", then start creating money(equity) without debt.
Just a thought.

Summers on Regulation: What Larry Left Out

thanks for that LOL.


On Jun 13 03:00 PM Tom Armistead wrote:

> nO, WHAT LARRY SAID WAS WE HAD A FOREST FIRE.
> dON'T NEED TO LOOK FOR THE CIGARETTE BUTT THAT STARTED IT,
> tHERE WAS TOO MUCH TINDER IN THE FOREST...sTUFF HAPPENS...