Angela Merkel blames Cypriots for bankers’ gamblings

By LUIS MIRANDA | THE REAL AGENDA | MARCH 26, 2013

German Chancellor Angela Merkel said today that the new rescue program for Cyprus is “right” because it forces “those who have caused the problem.” to take “responsibility” for their actions. In saying this Merkel blames the people of Cyprus for the debt incurred into by the very same banks the German leader so strongly attacks publicly but defends in private.

The head of the German government was said to be “satisfied” with the result reached this weekend, after seven days of media controversy, political unrest and turmoil that followed in the stock market and that stopped the conditions of the first bailout from taking place.

The plan as it is now known includes a 40% charge on depositors who may not even see their savings ever again. According to the plan imposed by the European Union, Cyprus will liquidate both the Laiki and Cyprus Banks and has already mandated the confiscation of almost half of the funds in accounts with more than 100,000 euros.

“The result reached is right and puts the onus on those who have created the problem. Way it should be,” Merkel argued in a brief meeting with media in Langenfeld.

She added that she is “happy” that a “fair division of the burden” has been achieved with Cyprus temporarily bribing its way out of a financial collapse by stealing 7,000 million euros from its people, while the European Union supposedly lends the country 10,000 million euros.

“First, banks must take responsibility. On the other, it has become clear that Cyprus can count on the solidarity of the European countries,” said Merkel. The Chancellor said in this regard that the EU will support Nicosia in the “difficult road” ahead. In other words, Merkel sees the Cypriot people as responsible for the banks gambling on behalf of the Mediterranean nation, whose people will now suffer greater pain than those in Greece, for example.

European Government seizing cash from private bank accounts in Cyprus

The move is part of the so-called rescue plan to get the country out of its financial crisis

REUTERS | MARCH 18, 2013

The surprise decision by euro zone leaders to part-fund a bailout of Cyprus by taxing bank deposits sent shockwaves through financial markets on Monday, with shares and the bonds of struggling euro zone governments tumbling.

The bloc struck a deal on Saturday to hand Cyprus rescue loans worth 10 billion euros ($13 billion), but defied warnings – including from the European Central Bank – and imposed a levy that would see those with cash in the island’s banks lose between 6.75 and 9.9 percent of their money.

Parliament in Cyprus put off a vote on the measure – which has shaken depositors’ confidence in banks across the continent – until Tuesday, however, and with public anger at the deal widespread the government said it was already looking to ease the pain for small savers.

Without the rescue, Cyprus would have be unable to avoid a default. That would have undermined the promise that Greece’s debt writedown last year was a one-off, but the unprecedented move to hit depositors adds a radical new dimension to the crisis across the euro zone.

The initial response of investors was unambiguous. Shares lurched lower, the euro fell to a new three-month low, while safe-haven assets such as gold and German government bonds jumped.

The cost of insuring the debt of even high-quality European banks against default also rose sharply with analysts citing fears the decision could spark contagion across peripheral regions with the potential for widespread outflows of deposits.

“If I were a saver, certainly in Spain or maybe Italy, I think I’d be looking askance at these measures and think this could yet happen to me,” Peter Dixon, global financial economist at Commerzbank said.

The European Markit iTraxx senior financials index, which tracks the most important European bank credit default swap (CDS) rates, widened by 17 basis points.

Some credit default swaps in Spanish, Italian and Portuguese banks widened more sharply with the five-year CDS for Spain’s Santander 30 basis points higher, while for Italy’s UniCredit it was 23.5 basis points wider.

However, some in the markets were drawing support from a view that the safety measures put in place at the European Central Bank should contain the fallout.

“Clearly this is a negative development for European assets but in the terms of contagion we think it is quite limited,” said Guillermo Felices, head euro asset allocation at Barclays in London.

“There are tools – such as the ECB’s OMT (bond buying program) and the option of more 3-year LTROs (ECB loans to banks) that can provide liquidity if needed – that the market will feel comfortable about when assessing the longer-term implications.”

Three of the world’s biggest central banks are also expected to signal their fresh commitment to loose monetary policies this week.

The Bank of Japan welcomes a new governor on Wednesday who is likely to begin pumping huge amounts of yen into the recession-hit economy. On the same day the Bank of England may get a new pro-growth mandate in the British government’s annual budget, while the Federal Reserve is expected to reaffirm its commitment to the current aggressive U.S. bond-buying program.

Equity markets were underscoring the more immediate worries, however, that the Cyprus deal could see savers and firms in other highly indebted countries like Italy and Spain rush to pull money out of their own banks.

By 1115 GMT the pan-European FTSEurofirst 300 (.FTEU3) had clawed back around half of its initial losses but was still down 0.8 percent in its worst morning since last month’s inconclusive Italian election.

London’s FTSE 100 (.FTSE), Frankfurt’s DAX (.GDAXI) and Paris’s CAC-40 (.FCHI) were down 0.8, 1 and 1.4 percent respectively, leaving MSCI’s global share index <.MIWD00000PUS> down 0.85 percent.

CENTRAL BANK SUPPORT

In the currency market, the euro staged a slight recovery after having dropped as low as $1.2882 in the Asian trade, to session be up 0.1 percent on the day $1.2950.

The dollar (.DXY) itself, which investors often head for when tensions in Europe rise, gained 0.45 percent.

“Euro zone politicians will be at pains today to manage down the danger of contagion to other markets. The euro will find a little bit of support from that but markets will remain jittery,” said Jane Foley, senior currency strategist at Rabobank.

Italian and Spanish bond yields both jumped sharply as the two countries remain at the centre of concern in the euro zone due to the size of their economies which some economists warn would be too big to rescue.

If savers and firms did pull their money en masse from already strained banks it could tip the region back into full-blown crisis, although the ECB’s backstop measures are designed to prevent such problems.

The widespread anxiety drove up German government bonds, the traditional favorite of risk-adverse European investors, and indiscriminately pushed up the cost of insuring against a sovereign default in the euro zone’s southern rim.

German Bund futures were up 49 basis points at 144.09 by late-morning in Europe, while gold, another safe-haven asset, rising to a 2-1/2-week high of $1,608.30 an ounce before settling at $1,601.60, up 0.6 percent. (GOL/)

U.S. crude and Brent oil both tumbled, with Brent futures $1.70 a barrel lower at $108.12 before recovering a little to trade around $108.20 by 1030 GMT. U.S. oil declined $1.10 to $92.35. (O/R)

The fiscal crisis in the United States is near, and it won’t be pretty

By LUIS MIRANDA | THE REAL AGENDA | MARCH 5, 2013

When one hears talks about the collapse of the dollar, it is hard to picture how a currency that is the base of all global transactions can simply disappear. An important point to understand is that such a collapse does not occur at once. It takes a while to happen because that is how it has been arranged. What most people are clueless about is that, not only is the death of the dollar possible, but that it has already started.

Since the dollar became the world’s currency by design, the American currency has lost a great deal of value. According to the U.S. Bureau of Labor and Statistics, one dollar today is worth only about 5% of what the green back was worth back in 1913. More recent signs of the loss of relevance the dollar has had in the global economy is the fact that major commercial power houses –American commercial partners and foes– have officially adopted new ways to conduct commercial transactions. For example, China and Russia are now using their own currencies to deal with the purchase and sale of products. Another case is that of India and Japan. They have also resourced to their own currencies to carry out trade.

The dollar has not only lost value, but also credibility. The origin of the lack of trust on what once was the base currency on which every single product and service was priced –including gold– is the United States’ thirst for debt as a ‘development’ model. Today more than ever before, the American government depends on the issuance of debt as a way to keep up with its spending. For that reason, the country’s central bank, the Federal Reserve, has come up with all kinds of circus moves to slow down an outcome that seems imminent: the complete collapse of the U.S. dollar currency.

The influence of the Fed in the way the U.S. manages its debt to GDP ratio stems from the country’s inability to make payments on the cash it has borrowed from the Fed itself, as well as China and other foreign investors who own much of the American debt. The path chosen by the Fed to temporarily deal with the American inability to make payments on its debt –which continues to grow out of control with every passing day– is to make large purchases of government bonds and to use quantitative easing –the pumping of unlimited amounts of electronic money– in an attempt to make everyone feel good about the state of the economy.

The Fed’s intention is to make clear to the world that the U.S. has meaningful ways to prevent a default, because since all important transactions are carried out in dollars and the dollar is the world’s currency, the private central bank can issue fake money for as long as it wants. The obvious consequence of indefinitely pumping cash into the economy is hyperinflation, which has not happened because banks were ordered not to put the money they were given out into the market in the form of loans.

It seems that the Fed has everything figured out and that the collapse of the dollar will not come as soon as some economists have predicted, but the reality is very different. According to a study conducted by four prominent economists, it is almost crunch time for the Fed and the U.S. government. Right now, the least of the problems for the central bank and the American government is not lack of credibility, but a strong change of a fiscal crisis. The report was prepared by David Greenlaw, Managing Director and Chief U.S. Fixed Income Economist at Morgan Stanley; James D. Hamilton, Professor of Economics at University of California at San Diego and Research Associate of the National Bureau of Economic Research; Peter Hooper, Managing Director and Chief Economist, Deutsche Bank Securities Inc; and Frederic S. Mishkin, Alfred Lerner Professor of Banking and Financial Institutions, a Graduate of the School of Business at Columbia University and former Chairman of the Federal Reserve Bank.

What these four men found, is that the actions of the Federal Reserve caused massive inflation to a level where the dollar’s purchasing power has gone down in free fall . As the very same Federal Reserve policy books say, the goal is to devalue the currency by at least another 30 percent. The 89-page report states that reductions in fiscal revenues and excessive increase in government spending, the close relationship between sovereign debt and the levels of interests to be paid on the debt, a significant relation between debt loans and borrowing costs and the direct effects of the fiscal crises on monetary policy have been combined to render a single outcome: massive losses for countries and institutions such as the U.S. Federal Reserve that will exceed available capital.

What this means is that, if things continue business as usual, even the Fed will become unable to sustain the current fiscal crisis. According to the report, the Fed may enter unknown territory where the amount of debt created will exceed its capital holdings. What will happen when the Fed gets to its limit and can no longer maintain the current debt-based system? According to the authors, the more a country’s debt is held by foreigners the greater the political incentives for the government to default on that debt. This is what has been seen in developing countries. The day of reckoning for the Fed may come as early as 2016. If better fiscal and monetary policies are adopted, the disaster could be put off until 2018.

It is then necessary to remember who are the United States’ investors. As of December of 2012, the Federal Reserve System, which is a branch of the international banking cartel came up as first. In second place is China, with $1202.9 billion. After China, other countries like Japan, Brazil, Switzerland and Russia appear in third, fourth and fifth places. With the U.S. debt reaching and passing 100% of its GDP and the government borrowing and printing money as if it were going out of fashion, the only possible outcome is what we have seen in modern cases of fiscal irresponsibility.

Countries get in debt up to their eye balls to fulfill the promises made at home during by irresponsible politicians during political campaigns. Since the government does not have any money to actually pay for the expenses it creates, it is only ‘normal’ to get in debt to be able to meet demands for more social programs and to pay interests on old debt. But since the governments do not borrow locally, they subject their country, (i.e. the people) to having to work all their lives to make payments on the debt generated on the debt it has gotten into. The ability of a government to make debt payments is finite. Cases in point Argentina in 199o, Greece in 2008 to 2012, Portugal and Spain in 2013 and the looming fiscal crisis the United States will have to face in the near future.

The supposed programs to help nations pay their debt is nothing more than an attempt to slow the collapse of the global economy and the that assures foreign debt holders they will have enough time to loot the countries for all they have gotten. That is the ultimate form of payment used by the international banking cartel uses to recover their so-called investments. Different from Argentina, Greece, Portugal and Spain, it is hard to see how the Americans will allow the bankers to suck every drop of blood for not paying its debt, which is why negotiations have been held to find the least painful way to phase the dollar out. Although the bankers want every single penny back, they prefer to get it in the most peaceful way possible as supposed to having to face street protests as it has happened in Egypt, Libya, Syria, Argentina, Spain and Portugal.

In conclusion, the current system of debt creation as the base for development has reached the end of its life cycle. The consequences to come should the United States continue to print or issue fake money to pay its debt instead of cutting down spending and making big international corporations liable for evading the payment of corporate taxes, will make it impossible for the U.S. government to pay its debt and for the Fed to issue fake money to sustain the current system. The only reason the U.S. has not collapsed as a debtor nation is due to the demand for U.S. Treasuries at home and abroad, which has been maintained due to the dollar’s status as the world currency. That status however, is a subjective and ephimerous concept. The moment more nations decide to trade with their own currencies, or to set up sound monetary systems such as the one Muammar Gaddafi intended to create in Libya –the gold dinar–, the more credibility and trust the dollar will lose. Lack of trust and the impossibility to meet fiscal obligations will end up destroying the dollar.

As the authors put it simply, high debt leads to higher interest rates and higher debt. The high levels of debt reach a tipping point –fiscal crisis– in which the interest rate shoots up. In the case of the U.S. it has many of the possible triggers of that shoot up in interest rates and the only thing that is holding them from going through the roof is an imaginary belief that the U.S. is still that powerful economic entity that it appeared to be many years ago.

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Spanish public debt reaches 77.4% of GDP

By LUIS MIRANDA | THE REAL AGENDA | DECEMBER 14, 2012

Government debt in Spain grew another 1.55% in the third quarter with respect to the second quarter to reach 817.164 million euros, or the equivalent to 77.4% of GDP. This is the highest level ever since the cork popped out of the crisis bottle in 2008.

According to data released by the Bank of Spain, the rise is a result of the increased debt of the central government, which has added 2.24% more to the total reached before this quarter, 695.519 million euros, and that represented 65.9% of the gross domestic product (GDP).

Meanwhile, state government debt declined by 0.48% to 167,460 million euros, or the equivalent to 15.9% of GDP, while the debt of municipalities fell 2.65%, to 43.802 million euros, which is equal to 4.1% of GDP.

Along with the release of data for the third quarter, the Bank of Spain has also updated the second to include the impact of the debt payment plan to Spanish lenders, although the changes do not affect the total amount.

Thus, at the end of the second quarter sovereign debt had grown by 14.9%, placing the burden of debt on GDP at 15.9%, the highest in history and two points over the previous quarter.

Additionally, local businesses increased their debt by 22% in the second quarter, raising the ceiling to 4.3% of its debt to GDP margin, a level that had not been seen before. When it comes to autonomous communities, Catalonia is the most indebted in absolute terms, with 45.754 million euros of debt at the end of the third quarter, followed by Valencia with 25,574,000 million and Andalusia with 18,495,000 million.

In relative terms, Castilla-La Mancha ranks first as an indebted community, with a debt equivalent to 5.7% of GDP, and is followed by Valencia (25%), Catalonia (23%) and Baleares (20.3 %). At the end of the third quarter, public companies owed 55.973 million euros or 5.3% of GDP, which means 0.81% more than in the previous quarter.

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Do you want a recovery? Let the foreign banks fail

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 24, 2012

Although the financial crisis is said to have begun in 2008, its actual inception started many years before. As explained yesterday, the so-called recovery that almost every politician says governments are seeking is a sham. There are no plans drawn to have a recovery of the kind spoken of on the main stream media. In fact, it is totally the opposite.

It is true; the crisis that we are experiencing is the worst since the Great Depression of the 1930’s, but the conditions that created the crisis are the same that have existed for the past century. The system of creating money out of thin air enables the money makers to inject fake capital into economies, in what is called investments. After the economies get addicted to ‘free’ quick money to build their businesses, the issuers of the fake money take it away quickly or demand immediate return on those ‘investments’, which causes the decapitalization of those economies and consequently their collapse.

The causes of what seemed to have unraveled in 2008 began at the start of the 20th century with the adoption of the debt-based economic model. According to its precepts, governments yield the power to issue money to a group of international bankers who issue the it on behalf of governments around the world at a profit of as much as 30 percent or so. The interests accrued due to the issuance of the money — which is given to governments as a credit — is charged on those governments’ credit card and are immediately added to the tabs of the people who work to sustain government spending.

In a sense, the debt-based economic model originated on the irresponsibility from the part of the bureaucrats who manage the  government. Instead of spending the people’s money responsibly, the bureaucrats thought it was a better idea to borrow cash at immense interest rates, rather than decrease spending. Then, they decided to accept bribes and advice from international bankers to finance their out of control expenditures while charging the interests of the debt on the working classes.

The same system initiated in 1913, is still used today everywhere there is a central bank. Whether the bank is a private entity or an agency of the government is irrelevant. The bureaucrats elected to represent the people borrow money from the IMF and the World Bank, for example, in exchange for adopting specific policies that will guarantee the international bankers their ownership of the labor force for many generations into the future.

The money paid by working people to the central governments is not used to improve the communities where they live. They go to pay the interests on the debt acquired by the same central government in the name of the people. The type of improvements promised by politicians during their political campaigns are not paid with taxpayer money, but with the cash borrowed from the international bankers. The bankers arrive to nation-states and offer loans to governments that do not have enough liquidity to carry out the promises made during the political campaign. The government accepts all the conditions on the loan contract and effectively sign away sovereignty to the money makers.

The collapse of the kind the world is experiencing now is the last step of the plan that bankers have put together and implemented to become the sole owners of everything out there. The important difference between previous crises and the current one is that this may just be the last time bankers need to use their plan. That is because this time the bankers may simply walk away with everything, so no more manufactured crises will be needed.

The question is then, how do we stop the bankers from doing the same they’ve done in Greece, where they’ve looted it all? It is very easy, actually. All of Europe and the rest of the world needs to do the same that Iceland did. Instead of saying that international financial institutions were too big to fail, Iceland decided to kick them out. As it turns out, around 90 percent of the debt held by the Icelandic government was debt created by the banks and only 10 percent was actual debt incurred into by the people. After that fact was carefully determined, Iceland decided to take the other path towards a real recovery.

Believe it or not, Iceland decided to let the banks fail, which is exactly the opposite of what was done in Italy, France, Greece, Spain, England and the United States, to cite a few countries. Everywhere else where the crisis touched international banks, governments decided that it was a bad idea to tell the banks to get out of their countries and to take their debt with them. Instead, they printed more fake money to ‘rescue’ those banks and passed the debt to the people, who will have to pay interests on that debt for generations to come. This move not only did not solve the problem because the only thing it accomplished was to increase the debt, but also worsened economic conditions as no real solutions to the crisis were enacted.

At the beginning of 2008, the banks operating in Iceland owed the equivalent of 6 times the country’s GDP. The government there decided to nationalize the 3 most important debtor banks, which caused the devaluation of the local currency — the króna — by 85 percent. This seemed to spell trouble for Iceland, but contrary to common wisdom it actually help the nation have a real recovery while it maintained much of its independence and sovereignty. The government went bankrupt by the end of the year, but the country avoided having to make the citizens responsible for the debt generated by the international banks.

Along with the devaluation of the króna, Iceland experienced soaring inflation immediately after the declaration of bankruptcy. Meanwhile, the government decided to take all monies and deposit them in the recently nationalized banks in order to start all over again. The move by the Icelandic government meant a short period of real pain, but also gave the opportunity to the people there to start fresh, with no debt and with spending under control.

By 2010, just two years after the declaration of bankruptcy and the nationalization of the banks, Iceland experienced its first signs of economic growth, which marked the beginning of the recovery. By letting the international banks fail, Iceland not only punished irresponsible bankers for their overreach, but also prevented their people from becoming slaves to the banks. The country also admitted to having some real debt — a tiny portion of the total — and is now working on a successful path to a full recovery.

The lesson we get from all this is the following: We cannot fight fire by dumping gasoline on it. If the origin of the current crisis is the debt-based economic system, no solution will emerge when all we do is create more debt to pay the existing one. The reason why most countries decided to choose the issuance of more debt — as nations in Europe are doing now — is because their politicians are bought and paid for by the bankers to make that decision. If the opposite is done, that is, if the debt generated by the banks is rejected and they are left to fail, we will have many other successful recoveries. It is so simple that even Paul Krugman understands it.

So if you want your country to be free from fake money and fake debt, ask your government to renounce the debt-based development model, which is not even a development model. If all you want is a real recovery, let the banks fail.

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