Iceland’s Radical Reform – Another Braindead Idea
Far too often people fail to understand banking and credit merely making superficial judgments that lack any real in-depth understanding of the world financial system. The common assumption is that the greatest curse of mankind is that commercial banks create money through lending and then securitize such loans selling them into the marketplace illustrates the childish view of finance and the difference between a Dark Age and Capitalism.
It was after the fall of Rome when all banking did not exist and neither did wages or private ownership. They simply blame ALL of banking and fail to grasp the difference between relationship banking and transactional. On top of that, they completely are blind to the fact that the issue is proprietary trading not the entire banking system. Eliminate lending, which they seem to demonize as the creation of money, and the real estate market would crash into dust, credit cards would vanish, education, medicine, an business loans would collapse, and effectively you would end up with a MadMax Dark Age. All because they want to stop what they think is the creation of money.
This extreme uneducated assumption that money should be tangible with a constant value has NEVER existed in history since even when there were gold coins they fluctuated in purchasing power value and suffered debasement. No matter what evidence you present, no they are right and history does not matter. These people argue banks are the entire cause of the boom-bust cycle and they want to destroy them like Andrew Jackson. This is of course at the heart of the problem. This is the dangerous Marxist view where they cannot understand the business cycle so they want to destroy it and flat-line the economy. This very idea has killed millions of people, yet there are those who constantly preach the same nonsense. It seems to be closet-Communists preaching eliminate all banks rather than bother to understand relationship v transactional banking and the business cycle.
Iceland seriously lacks this in-depth understanding of how the economy works and their radical proposal will certainly destroy their economy faster than anyone suspects. This effort looking to end the boom-bust cycle with uneducated view of money and banking and putting bureaucrats in charge is the worst idea imaginable. Iceland will become the new land of April Fools who also existed because of their uneducated bias.
Back in 1582, the original goal of the Gregorian calendar was to change the date of Easter. When Pope Gregory XIII introduced his Gregorian calendar, Europe adhered to the Julian calendar, first implemented by Julius Caesar in 46 BC. Because groups of people hated Catholics, they refused to change and celebrated New Years on April 1st instead of January 1st. They were mocked and called“April Fools”. These people who yell money must be tangible and wrongly assume it always has been backed by gold, are probably“Financial Fools” for no matter what you show them from history, they will never abandon that belief.
Keep in mind this is proposal is highly Marxist and eliminating the leverage effect of lending by the free market will ripple through the entire economy causing a deflationary collapse of just about everything from home prices to wages. Is it the creation of money by lending, or is it the lack of relationship banking that has been replaced with transactional banking?
Icelandic government suggests removing the power of commercial banks to create money and handing it to the central bank is some sort of solution. This is anti-free markets and if there is anything we have learned from history, government is incapable of managing whatever has to do with money. In Iceland, as in other modern market economies, the central bank controls the creation of banknotes and coins but not the creation of all money through credit. You deposit money in a bank and your statement saw you have 100 whatever and the bank lends 95 of that to someone else so you both have about 100 in book entries. This is the great evil these people are targeting without the first historical concept of what they are fighting against. They mix up proprietary trading in their mind with banking and do not distinguish between them.
Iceland’s government is now considering a revolutionary monetary proposal – removing the power of commercial banks to create money by making loans and handing it to the central bank. The proposal was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled “A better monetary system for Iceland”. He obviously does not understand finance at all. Just amazing.
This whole effort is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008 whereby they do not understand the causing of the business cycle very much like Marx himself. Mr Sigurjonsson amazingly claims the problem each time arose from ballooning credit during a strong economic cycle. He totally fails to grasp that historically this is the swing between Public and Private confidence. At times, people want private assets and then swing back and want cash. In this proposal, not even gold could rise – everything must be flat lined, which is the very objective of Communism – kill the business cycle.
Sigurjonsson argued the central bank was unable to contain the credit boom, allowing inflation to rise and sparking exaggerated risk-taking and speculation, the threat of bank collapse and costly state interventions. He is proposing that since the creation of money, which occurs as soon as a commercial bank offers a line of credit, is the entire problem. He has ignored human nature and assumes he can just turn everyone into drones eliminating human emotion. This is precisely what Communism was all about.
He argues that the central bank can only try to influence the money supply with its monetary policy tools. Under the so-called Sovereign Money proposal, the country’s central bank would become the only creator of money. Then you will have bureaucrats eventually bribed to provide loans to friends. The banking crisis of ancient Athens in 354BC was precisely that. The government controlled the money deposited in the temple and it was being secretly lent out to friends to speculate in real estate.
Sigurjonsson wrote that “Crucially, the power to create money is kept separate from the power to decide how that new money is used”.
“As with the state budget, the parliament will debate the government’s proposal for allocation of new money,” he wrote.
Sigurjonsson’s proposal is that Banks would continue to manage accounts and payments, and would serve as intermediaries between savers and lenders. What he misses entirely, is that the banks were influenced by the NY boys who sold this idea of transactional banking to Europe, which has blown up in the face of bankers everywhere. But the NY Boys are back at it again. This isNOT relationship banking and they sold products in Iceland that buried the people saddling them with risk they did not understand. In Iceland, foreign capital poured in to lend money on inflation-indexed mortgages signed before the 2008 financial crisis typically denominated in foreign currency. Greeks borrowed in Swiss francs to save interest and lost when the Swiss went up 30%. I saw the same thing during the 1980s in Australia. This is bankers selling loans in foreign currency as a scheme to save money, yet this does not increase the domestic money supply for it is still denominated in another currency. So this proposal misses the entire problem. Regulate that loans domestically CANNOT be offered by banks in any currency other than the local currency for local transactions and we would be getting closer to the mark. This is the two-tier monetary system I have been talking about.
Iceland was hit hard as the crash of US investment bank Lehman Brothers caused the collapse of its three largest banks. The NY Boys let Lehman go to get a monopoly. Bear Stearns refused to participate in the Long-Term Capital Management bailout back in 1998 so letting Lehman and Bear collapse was NY politics. They rushed to save AIG ONLY because Goldman Sachs would have collapsed and they were protected since they stuffed their people in government everywhere based upon all the information and belief running around so many sources.
Iceland then became the first western European nation in 25 years to appeal to the International Monetary Fund to save its battered economy all because the NY Boys blew them up. This was not the fact that they create money through lending.
But as always, the analysis is shallow and they do not understand the world of international finance. It is not the creation of money by lending. This is the proprietary products and trading inspired by the NY Boys sold to the world.
Covering-Up Obama-Boehner Conspiracy?
The Department of Justice (DOJ) has illustrated just how corrupt Washington really is. Yes they indicted Menendez, but they let Lois Lerner walk. Lois Lerner is the IRS former executive who was at the heart of a scandal involving the deliberate targeting of political opponents of the Obama administration. The DOJ has waited for almost two years ago to dispose of this case quietly even after Lerner herself apologized for targeting Tea Party groups attempting to qualify for tax-exempt status. So how can she just walk away?
The answer lies in who is implicated. Sen. Bob Menendez was most likely the scapegoat for indicting him they pretend there is some justice. Indicting Lerner would mean a trial and she would then have to expose who told her to do target the Tea Party. That implicates other Democrats where as Menendez is on his own.
The DOJ can pretend this is about justice but they time these things together for a clear reason. They made both announcements hoping the press will focus only on Menendez while the IRS scandal is swept under the carpet.
There is yet another aspect to this cover-up. That is Boehner himself targeted Tea Party candidates to get rid of them. So you do not have just the Democrats conspiring against the Tea Party, you have the Republican Establishment as well. Boehner removed every person who supported Ron Paul from any finance committee. Putting Lerner on trial just may have revealed a Obama/Boehner Conspiracy.
Reading the Euro
QUESTION: Marty, back on March 10th you said you had support at the 105, 103 and 100 levels in the cash euro. You then called for a bounce after the low was reached at the 10461 price level on March 13. You also said “The Break-Line reaches 80 cents on the next 8.6 year wave” back on March 6. I further understand you always state where you are wrong as a trader and that is the 140 level now. You said that the next major monthly sell signal is at 98 also on March 6. You also said the earliest target for the break of the euro will be 2018 on March 9. You have been talking about this support at the 103 level since Jan 22. My question is this. Putting all this together, you clearly do not expect the 80 cent level to be broken it seems before 2018. You have also stated that if you elect a reversal far away, the market will bounce back to that level before proceeding. You have just stated that two other reversals were also elected at 10970 and 11983. You have stated that the trading range is defined as par to this 11600-11700. area. So I assume you expected a bounce back to this 10970 to 11100 price zone before any resumption of the decline. I am correct in reading all this?
ANSWER: Yes. If the Euro simply went below 80 cents right now, then that would have warned of a dollar high with 2015.75, which does not appear to be likely in the scheme of all things. Nevertheless, we will provide the numbers to show where that view is RIGHT and WRONG. You must ALWAYS define those points. The European economic decline is likely to increase the pressure on separatism in Europe. That will shake the confidence in the Euro. Because we also have a 2017 War Cycle turning point on both civil and international, this may be the target for that type of action.
The problem with Brussels is very clear. They are trying to force a political solution to an economic problem. This never works. Economic problems can ONLY be solved with economic solutions, not political.
As far as the 140 number, you ALWAYS must define where you are right and where you are wrong. That is the 140 level. That shouldNEVER be read as a forecast, for I seriously doubt we will get back above the 123 level at the very very very best. This 10970 to 111000 area is the first key resistance zone. After that we have the 116-117 level. Support will be scaled in now between the 10365 level down to 9800. The 9800 level is the defining where the next breakdown exists. So between there and here, this is churning now. We should not just go beyond that on the downside.
China to Become Financial Capitol of World – But Not Yet.
QUESTION: Hi Martin,
I read that China is going to be the core economy of the world. Does this mean we should focus our funds on Chinese banks, tech firms, oil companies etc? Especially since the NSA saga, tech companies from the US will have a harder time doing business in China and this in turn help Chinese tech firms grow even faster with the support of their government and economical demand?
Your thoughts please?
–
Thanks and regards,
E
E
ANSWER: No not yet. China should bottom by 2020. They are in the growing stage and it takes time. The West with the NSA is destroying the very core that created the global economy with they attack upon the private sector. They are not hunting terrorists – it is you and your money. They could not prevent the Boston Bombing nor even the latest attack. Look at the pilot suicide. Now they have revealed he was searching the internet to secure the door and commit suicide. This proves they can call everything up you didAFTER THE FACT. They cannot prevent anything.
This is the same thing as the Mouth of Truth in Venice and the Stassi in East Germany. When government feels threatened, they turn against their own people and it marks then end of times for that political system. So unfortunately they are tearing apart the very reason why you create a civilization – everyone comes together for cooperation creates and economy by theINVISIBLE HAND. This is what Smith observed which is far more robust than if we were still individuals and tribal. The NSA is doing the very thing that destroyed Rome and every other society. So the West is FINISHED.
The Solution I set forth is trying to hold on to something. The British Empire collapsed, but in Britain they continued. Britain now has the highest debt in Europe on a per capita basis and this was the reason which we saw the Scottish vote to separate. The USA is being destroyed by the same process. Boehner’s audacity to hire people to defeat the Tea Party Republicans and to throw off any committee such people having to do with finance demonstrates this is all about them – not you.
You will begin to see China rally even stronger on the next cycle. I have stated before, by the end of this current Private Wave where the government of the West commit suicide, China should be the financial capitol of the world in 2032.
We ourselves are preparing our Chinese sites. Our services are not blocked in China as most others for we are non-political. You will see our site in a matter of days in China. We have staff located there now as well.
Police Just Robbing People
QUESTION:
Thank you so much for all you do!
I read your recent post regarding Police Arresting People for Just Having Money. We’ve been dealing with this for a while in Tennessee. The public at large is starting to get tired of it as this has been a common occurrence in our state for several years now. A Legislator in our state has introduced a bill to curb such a practice (http://www.adisgruntledrepublican.com/2015/03/policing-for-profit-may-be-coming-to.html), but will face serious opposition from local governments across the state. Regardless of pass or fail, do you see such individual cases as a positive sign for post 2015.75 shifts in the right direction for US governance and economic reform?
AE
ANSWER: Unfortunately, this is all about revenue. This has nothing to do with crime. They are using the laws to fill their pockets and this is part of the peak in this government abuse cycle for 2015.75. They will continue to get more aggressive and this creates the deflation, but at the same time, this is what will eventually lead to civil unrest. This whole thing has gone way too far. They are then imposing fines and imprisoning people who cannot pay those fines bringing back Debtor’s Prison. We are leaving a total mess behind for our families. They have no future all because these people cannot keep their hands out of other people’s pockets.