Police Harassing Tourists in Bangkok & Elsewhere
The police in Bangkok are also harassing tourists. This is a rising trend as police forces around the globe are converted into IRS agents on wheels. Switzerland is using cameras to hand out tickets and the fine can be a percentage of your income for driving even 1 km over the speed limit. Italy is just a joke. By no means should you bother to rent a car there. It will be cheaper to simply hire even a limo driver. Spain is going nuts, as is the case with local police in the United States. A formerpolice chief of a tiny town in Florida, which was infamous as a speed trap, was finally cleared or white-washed of wrongdoing by a state commission after officers accused him of setting a ticket quota and acting unethically by demanding they ticket everyone. He created such discontent that the entire department has to be closed.
If we do not do a debt-to-private equity swap and eliminate taxation, we will have no life left to live. This is the simply hard fact we better start to face.
Life Expectancy Increased by Six Years During the Great Depression
There was a major discovery that surfaced from the starvation during the Great Depression. Yes, people went to bed hungry. However, eating less increased the life-expectancy by six years for the population at large. How? The less you eat the longer you live. It was first noticed that when you eat less, your body repairs itself. When you eat more, your body creates more cells and does not repair what exists. Hence, all the studies demonstrate if you eat less, you can increase your life expectancy by 20% to up to 40%. (Watch: Documentary)
Fractional Banking: Propaganda to Hide Manipulation & Trading?
COMMENT:
Armstrong,
I have to admit that you are right and I was wrong on fractional reserve banking.
Due to the ongoing conflict in what I wanted to believe and what you said would be true, I researched myself. Although I am an accountant I adopted the claims that banks can create money out of thin air.
That is not quite the truth, only insofar as they can create credit but have to pay it out (cash or transfer to another account) from the bank’s own equity capital (deposits are treated as own equity with corresponding liabilties in the balance sheet). If a loan goes bust, the amounts due to customers still exist and the bank’s equity declines by a loss due to a write off.
As you say the problem is the way banks can handle their created credit. The current regulation makes way for moral hazard, as you described as transactional vs. relationship banking. But I think that is also related to the manipulated interest rate and why there is a demand for high yield/ high risk loans.
Due to the ongoing conflict in what I wanted to believe and what you said would be true, I researched myself. Although I am an accountant I adopted the claims that banks can create money out of thin air.
That is not quite the truth, only insofar as they can create credit but have to pay it out (cash or transfer to another account) from the bank’s own equity capital (deposits are treated as own equity with corresponding liabilties in the balance sheet). If a loan goes bust, the amounts due to customers still exist and the bank’s equity declines by a loss due to a write off.
As you say the problem is the way banks can handle their created credit. The current regulation makes way for moral hazard, as you described as transactional vs. relationship banking. But I think that is also related to the manipulated interest rate and why there is a demand for high yield/ high risk loans.
I think what is still true about fractional reserve banking is that is creates malinvestment and inflates asset prices which ultimately leads to a worse bust than with a higher fractional reserve rate . At least in the extent it is at work at the moment. Interest rates on deposits are so low because banks do not need it for a small fraction is needed to fund their credit operations. That is the reason why there are large excess reserves. Their own rating systems do not qualify borrowers to receive new loans so they just leave on their central banks accounts and pocket the interest on that.
In general the main problem, as you get not tired to point out, is borrowing of governments. As long as government bonds are accepted as collateral this perpetual ordinary people slapping scheme will not end. Too bad that not many people realize how they are being slapped every single day. I consider fractional reserve banking as not crucial in the souvereign debt crisis to come, although there should be discussions about money and how to create it, who controls it, including fractional reserve rates. The whole system is rotten and corrupt.
Keep on going!
Best regards,
G
ANSWER: The problem with blaming fractional banking is that this leads to a solution of nationalizing banks like the proposal of Iceland where government will make the credit decisions. Meanwhile, transactional banking is what blew up Iceland, not fractional banking. Banks are not really interested in lending to small business or helping the economy expand. They will be more than happy to continue transactional banking and trade with the money on deposit.
The reserve ratio is important, no doubt, but the boom and bust cycle changes all the time. Each boom and bust leads to regulation of just that sector, as we will see with draconian mortgage qualifications starting August 1 in the USA. Meanwhile, the boom will simply move to equities. That is the 8.6-year cycle, which is regular but the focus changes with each wave. The government regulates the last cycle each time and fails to comprehend how the business cycle even operates.
Fractional banking is by no means the problem. I am not sure why people are focusing on that aspect. I suspect it begun by banks to deflect attention from their trading and market manipulations by letting people think the devil is the fractional banking. If that were truly the case, there would not be $2.5 trillion in excessive reserves. They would be lending it out.
The Greek Proposal – No End to the Crisis by Any Means
The Greek proposals included higher taxes and welfare charges and steps to curtail early retirement. This is simply more deflationary pressure that will crack Greece apart. However, Prime Minister Alexis Tsipras is not prepared to cut nominal pension or wage cuts first sought by lenders, which would more likely than not spark revolution. Tsipras was elected in January on a promise to end austerity measures, also appeared to have avoided raising value added tax on electricity or loosening job protection laws. He is not fulfilling the will of the people making his election highly questionable. He refuses to look at the Greek economy or the Euro. All he is doing is trying to now support Brussels over his own country – a VERY BAD MOVE.
Greece must repay the IMF €1.6 billion euros by June 30 or be declared in default, potentially triggering a bank run and capital controls. However, the IMF can also agree to some nominal payment and any payment would technically not be a default. Nevertheless, looking forward, there is no solution to the Greek crisis by attempting to raise more taxes and suppress its economy for the benefit of Brussels and the IMF. Grexit is inevitable for turning the economy down from here will only make everything far worse.
Market Talk
Today we are seeing some large price/percentage moves in many markets, which is something we should all start to accept as the new norm for the second half of this year moving forward.
Rumours started Sunday of Tspiras’s new proposal and the markets took it all at face value! DAX at best was up 3.5%; ASX closed up 9.7%; Asian stocks up over 2% (China closed but HK +1.2%); euro little changed whilst the U.S. dollar lost ground against EM (especially Turkey 1.1%). The 2yr GGB’s as a yard stick and was today trading at 23.5%.
Ty/RX 10yr spread tightened by 6bp with the last trade at time of this writing was 146bp. Bunds traded around 1.5pts lower whilst peripheral debt performed (especially BTP’s higher by over 1.5pts).
Gold lost its recent safe-haven bid losing $16 at 1184 (-1.2%)
U.S. stocks all following the feel good factor +0.8% (so far)
Both dealers and fund managers continue to have the number one concern that remains the vanishing liquidity – which is even in the Treasury market! As liquidity evaporates, the more volatility we will see because the lower the volume, the greater the price swing, which then comes back reducing the risk appetite.
If we are seeing swings like this in government bonds, then the entire spectrum of markets will be entering a different pattern altogether post-2015.75.
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