Fractional v Transactional Banking
A lot of people are jumping on board, claiming the problem is fractional banking and the private creation of money, which is somehow wrong, should be handed to government. Money has ALWAYS been private, for it is an agreement between two people to exchange whatever for some common item everyone else agrees to accept. That has been everything from seashells to gold. It has always been the people who decide. Even paper currency cannot circulate without the consent of the people.
Fractional banking has been around for hundreds of years. So why is it only now that this is the great evil? The answer is simply – it is a diversion and not the problem. Fractional banking is taking $1 in deposits and lending it out many times. The new rage is to tout this as the creation of money by banks. Yet banks cannot create this type of money to pay their bills or taxes, because it is not really creating money out of thin air – it is merely leverage.
Being dispassionate always leads to the answer. If fractional banking was the problem, then why do banks have well over $2 trillion parked at the Fed in EXCESS RESERVES? That means, they could lend that money out multiple times and leverage it into even $10 trillion. So why are they not lending?
Welcome to the dawn of TRANSACTIONAL BANKING. If I were to be assassinated for something, it would be for trying to refocus the public’s attention to this new development that is post-1991. Robert Rubin of Goldman Sachs sold the idea of TRANSACTIONAL BANKING, claiming it would make the banks stronger, for they would generate the loans, but then package them and sell them to someone else – i.e. 2007. This was the pitch to repeal Glass Steagall in 1999. If the banks didn’t have these loans on their books, then they would not have the risk when the business cycle turned down. That meant the END OF FRACTIONAL BANKING.
The banks would rather trade with your money (repeal of the Volcker Rule) than lend money out to create jobs (Fractional Banking). So while they have no problem if the people, as is the case in Iceland, demand that the credit decisions be handed to government because from their perspective, they do not give a shit. This is now about trading, not lending.
Of course, the small regional banks will be wiped out in this manner. The big banks that profit from proprietary trading are the ones behind this disinformation. End fractional banking and you will not solve any problems, instead you’re more likely to make matters worse. If we do not deal with the real issue, the wrongful repeal of Glass-Steagall, then we are only going to make the future darker, not more secure.
JPMorgan Chase wants to charge fees to keep money in your account. They have become traders, first and foremost. Open your eyes and pick up the rug. That is where the dirt hides.
The Strange Case for Gold
QUESTION:
Hey Martin,
Years ago, I thought I was so smart. Silver was 5 and gold was 300. I was pretty young and did not have a lot of money. I purchased 30k worth of silver coins and some gold coins. My thought process was that silver, most likely is not worth 0. As both metals were rising every year, I felt it was because the fed was trapped. We can never have high rates or real rates bc the debt load was too high and once you commit to constantly easing and needing inflation you can never go back. I never thought QE and all that monetization would have taken place like it has. However all that fed action made me even more bullish on the precious metals. Not because of inflation, I never really understood why we would have a hyper inflation simply because the govt was not handing out money to people. I know damn well I was not getting a check.
After the last couple years of reading you I realized I was just lucky for that time period however I am looking forward to Sept and the way Socrates sees what is going to happen to gold and silver. As I read you, and try to get in your head I feel like you try to explain what Socrates may be seeing in real time. (AM I correct?) However, you let your Socrates Code do the timing for shifting money around. I need to ask, if Socrates sees an ultimate 5000 target on Gold what or how do you explain that?
Is it just that people realize they rather own a an ounce of gold rather then a similar amount in cash- in other words I always ask myself especially again now at these prices. Would I rather have 1200 US dollars in my hand or an ounce of gold and my answer is the gold. I have flipped plenty of ounces of silver from bars to cash in the 30s and 40s that I sort of enjoy that trip to the coin dealer.
You constantly talk about gold bugs doing a disservice but there are plenty of intelligent investors who are not gold bugs that thought gold had to go higher and have gotten caught long these last few years. Now many do not even talk about it and the ones that still do believe in gold, well most people just laugh at them. I know as I am sitting in my office with other traders/investors and they see me constantly looking for values in the precious metal sector they think I am crazy and have lost it. It is the same feeling I got when silver was 5 and gold was 300. People are looking at me like I can not be serious.
With all that said I really would like to know how you think Socrates comes up with this next move up while yourself keep talking about electronic currency (which I see thx to technology not govt right). If govt wants “us” the “sheep” to use electronic currency then what reason does Gold have going to 5k. If govt wants their people to uses electronic obviously the people should be hitting the coin dealers swapping dollar for silver and gold right now – a little each week. yes?
very curious to see what you have to say
DJ
ANSWER:
$5,000 is the maximum possible target for gold. It only becomes possible with a collapse in the confidence of government. First, the dollar must rise, and that will keep pressure on gold. This is part of the process in setting the stage for a change in the monetary system as part of the Sovereign Debt Crisis. Gold has followed most commodities and it has not broken out, nor has it even kept pace with inflation. You would have been far better off buying stock in 1980 and selling the gold. You would have made a fortune. Then buy gold when it finally cracks. Right now, you are better off with $1200 in cash than $1200 worth of gold. The dollar is king right now. EVERYTHING has its time and place. That is how to trade. But government are trying to eliminate paper money and that will change the game.
Wild stories of no gold in Fort Knox, etc. have hurt so many people who trusted these promoters, for that is all they are – not analysts. They often do not even understand what fiat means, they just assume if it is not gold then it is fiat. They fail to grasp that even gold can be fiat if declared to be money at some fixed rate, and that real money is simply the total productivity of the people of a nation. Japan proved that point rising from WWII without gold. China rose after communism and will surpass the USA all because of the people, not because they owned gold. Japan was a tiny nation that had to import everything due to a lack of natural resources. They rose to surpass Europe with all their gold reserves. This is the real wealth of a nation – the productive capacity of the people.
Nevertheless, I have constantly warned that gold is the HEDGE AGAINST GOVERNMENT and not the hedge against inflation. It is not even this nonsense that gold is tangible and paper is fiat. This is really very damaging to gold for they turn this into some sort of crazy belief cult. With the trend toward NEGATIVE INTEREST RATES, which is really a tax on money, the only means of defense will be to move your money out of banks and indeed to spend it. Unfortunately, gold will still present some problems for they are hunting that as well and where do we store it when it is illegal to store gold in a safe deposit box? Gold will rise in bull market as I have been saying when the TIME is right. I recommend COINS rather than bars, and liquidity will be key. So sorry, paper gold will be the instrument for trading and all the nonsense about that will fade as always as soon as gold rises. Then they will cite the paper gold price as proof the rally is real.
The bulk of serious money will not run to gold because it has been slandered so much by these promoters who have used every scheme in the book to claim they are right and never wrong. The bulk of the major money will flock to equities for they will at least be out of the banks. There is not much left on the planet. Real Estate will rise in some classes but keep in mind that taxes on this can rise sharply and you cannot pick it up and move. That was the collapse of the City of Rome itself. People just walked away from their property.
I will never hold another conference in Philadelphia for they wanted a city income tax on me just having an event there. So why would anyone in their right mind do anything in Philadelphia? This is how Rome collapsed as well. You just walk away.
The Shift in Public Confidence: 2015.75
There are many aspects that are lining up with the turn in the ECM (Economic Confidence Model) from the Blood Moon and the Jewish Year for forgiving the debts, to France imposing restrictions on cash in September, and even in Germany the laws that protected about half a million people so-called dachas there in East Germany expire. To date, a law protecting the tenant against dismissal by the municipality will also expire October 3, 2015. Everywhere we look, there are changes coming to a head, right down to the U.S. Federal budget with 2015.75.
Understanding why there is a regular rhythmic pattern to the world economy has baffled many. I believe this is caused by the convergence of so many aspects of life that the turning points are a rhythm of everything, yet simultaneously, we are individual creatures of our own fate.
The ECM is the global composite where each and every financial instrument has it’s own unique cyclical frequency. However, the complexity of cyclical movement is far more than the untrained eye can ever see. Simultaneously, the 8.6-year frequency also applies in two primary ways. First, the ECM 8.6 frequency will operate on each market as illustrated above. Gold peaked on January 1, 1980, which is 1980.0575. Adding the first quarter frequency of 2.15 years brings us to 1982.2075, which is March 16/17, 1982 (16.92 days into March). We can see that this turning point produced a temporary low to the day. Such precision is just astonishing, yet it raises a vast array of questions that I believe will set the stage for a new way of investigating the environment in which we live.
The second aspect of this ECM model is the convergence. In other words, we are able to see where the boom and bust will take place by determining which market sector aligns with the major turning points. Of course the 1987 crash bottomed to the day with the ECM confirming that was the low. The same took place in 1994 where the U.S. share market bottomed right to the day, once again confirming this was an important low. Therefore, it has been the alignment of the individual market with the major ECM global frequency that determines the outcomes.
This next turning point should be the peak in the concentration of capital and confidence in government. From there on out, 2015.75 should mark the change in trend where people will start to disbelieve government on a grand scale. The debt markets that peak precisely with the target are going to get the worst of it. What we do need to pay attention to is there a decline in the share market first that send capital rushing into the short-term government paper to create the final rally?
Response to the Movie is Amazing – Are We Making Progress
Everywhere the FORECASTER has been shown, it has been sold out. Where I have attended we have had a Q&A session that has gone on for more than an hour. It has been making national TV news in Germany and now journalists are lining up all across Europe. All of this is not because of me as an individual, it is because of the message of the film about the system, which was my only reason for agreeing to do the film. I am not exactly the type to solicit sympathy I have never sat back saying poor me but have always been on the go asking what’s next in this drama we call life.
The response has been truly amazing acceptance of the message and it demonstrates that so many people feel that something is terribly wrong. My sincere hope is that we stir the masses so that this time when the ECM turns down hopefully enough people will sayNO to this awful trend that is moving in high gear toward Economic Totalitarianism. This is what I am still fighting for. I do not want to live in the world they are creating. They can only see their own immediate power and will take whatever action is necessary to retain it. They think nothing about the world they are leaving behind even for their own children. This is the dark cloud that is on the horizon that we need people to see to make any change.
Everything society has fought for and constructed since World War II has been undermined. Politicians are now moving to eliminate all paper money and our freedom to buy or sell will be next. They used the Swift Code to take nations out of being able to participate in the world economy until they complied with their demands. They even threatened the Vatican. Australia is moving to now tax money itself and this is a Conservative government. It no longer matters as long as we have career politicians for they see themselves as the elite and we as the great stupid herd to be milked for their pleasure. They justify more and more taxes and blame us for everything. Never once is there any consideration that just perhaps they have consumed everything and wasted the resources of the people.
Here is a comment from a viewer who managed to get his father to see the film. This gives hope that perhaps the film can make headway in illuminating the real problems we face
First thing I ever read from Martin Armstrong was an article “It’s just time”. It was back in 2009. I had just heard my wife was ill, we didn’t know how bad at the time, and we were retreating in Germany for the weekend at my dad’s to sink in the news. I remember these days very well.
Not only the devastating news we had to deal with, but also the beautiful place we were at, the view over the Rhine river, the fire place, and me also reading this article, I HAD TO READ, that my best friend had send me.
It hit me right then and there. This was important. “It’s just time”. I had to tell my dad also. He had to read this. He just couldn’t. He refused. I have been trying ever since. Now I do relate to stubbornness, so we have been clashing very hard. Full blown arguments. Classic case. Finally agreeing to disagree the relationship eventually healed but the frustration remained. Until yesterday.
He lives in Stuttgart these days.
As I read Martins blog everyday, I knew his movie the Forecaster had its German premiere over there yesterday, and I knew Marcus Vetter, the director, and Martin himself would attend. I informed my dad. He likes going to the movies anyway. He really had to go to this one for sure, and so he did. He took his girlfriend and two friends with him and they got to watch the movie together. With me not being there, they could view unbiased, and when he got the chance afterwards for questions and answers(and me being very jealous now) with Martin, he finally is budging. What I couldn’t do in five years took only fifteen minutes. Maybe he’s just one of those people that have to hear it from the man himself. I don’t know.
As I read Martins blog everyday, I knew his movie the Forecaster had its German premiere over there yesterday, and I knew Marcus Vetter, the director, and Martin himself would attend. I informed my dad. He likes going to the movies anyway. He really had to go to this one for sure, and so he did. He took his girlfriend and two friends with him and they got to watch the movie together. With me not being there, they could view unbiased, and when he got the chance afterwards for questions and answers(and me being very jealous now) with Martin, he finally is budging. What I couldn’t do in five years took only fifteen minutes. Maybe he’s just one of those people that have to hear it from the man himself. I don’t know.
But thank you Martin anyway. This tour is already a success !!
(I do hope my dad already understands Einstein, because I really don’t know what to do …)
Marx’s Birthday – The Most Influential Economist in History
Term Limits: The Solution for Eliminating Career Politicians
It really does not matter which party we are discussing. The problem with politics has been that the PEOPLE have been so complacent, that the politicians feel as if they can do anything with total immunity. The Clintons set up a Canadian branch for their charity so that they would not have to disclose it, just like Cheney’s old company moving to Dubai. Frank Giustra runs the Canadian setup for the Clintons, and the heat has come down on him, alleging that his hands are dirty. He now admits that there are in fact 1,100 undisclosed donors to the Clinton Foundation, all of a foreign origin.
Hillary’s commodity trading back in 1994 was the tip of the iceberg. This is just the way things are done. The question is rather simple: Why do politics attract people who want to get rich quick? The only way to force honesty is with term limits. We can’t afford career politicians any longer. Especially lawyers, for they are trained in knowing how to circumvent the law legally.
Government should reflect the people – not a single profession. We need laws that prohibit someone from being the head of anything, such as the IMF, unless they have experience in the financial markets. Even then, they must be strictly limited to 1-year terms, never to return.