Economic and Social Consequences

Digital Currency – The Last Refuge of a Banking Scoundrel?

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In the news over the weekend, we heard the story that Andrew Haldane, the chief economist and executive director for monetary analysis and statistics at the UK’s Bank of England, has tried to run up the flagpole, the prospect of a digital only currency. America too is discussing this.

Now, why would a Banker do this?

What is a Bank? Primarily it stores savings (Capital) for its customers, and loans out this money (well we’ll call it money for now) to businesses and others to finance the development of new products and services, which add value, assist in growth, employ people, and spread prosperity throughout the nation (or currency union).

However, when a country has excess savings, these are liabilities on the bank’s books, and has been touched on several times throughout the time of this blog, these have to be paid back. However, there may be times when there are fewer good opportunities to loan money out for the banks, with huge amounts of money sitting in savings and today is one such time.

The driving force behind this excess savings is demographics. Demographics is the study of populations. The studies look at birth, and death rates, gender etc, and at how those births and deaths impact the society, and the economy. Where we build schools, hospitals, and even infrastructure like industrial parks.

After the second world war, all those returning service personnel got busy making babies. It happened in America and the Pacific region in ’47, it happened in Europe in ’46, as those two major conflagrations came to an end.

Twenty years later in the sixties, those babies, now young adults drove the swinging sixties, and Carnaby Street, the music and fashion scene as they all began doing what young people do. The children of those people reached maturity 20 years later, in the 80s and early 90s, driving Punk music, New-wave and the New Romantics, the “Acid house” scene, and the Brit-pop and Indie scenes of the 90s. This was the shadow boom as you might call it. These children of the baby-boomers are driving the economy now, as they reach their 40s, and lead consumption spending, but soon this too will slow.

Of course the baby-boomers as they are known, those born after WWII, are now frantically saving for their retirements, buying buy-to-let properties, and investing in their pension funds and therein lies the rub. All that capital going into savings has led to several booms; in Technology, in Housing, and since the 2009 credit crunch, the stock-markets in general. But since early 2012, the baby-boomers have been retiring in droves at the rate of circa 8-10,000 people per day, in the U.S. alone, and because of the low interest rates, and the drive to “save the economy” the Central Banks have loaned the people, and their representatives (governments) huge amounts of money.

America has an $18 Trillion public debt. Britain is in an even worse situation (person for person) with a public debt of £1.4 Trillion ($2Trillion+) And those Bankers are now worried that they might not get their money back.

And what IS money? When money was just Gold and Silver, the Bankers got rich, by lending pieces of paper, that were exchangeable for Gold and Silver, that they had mysteriously created out of nothing more than paper and ink. This fractional reserve lending, grew their power, and grew their immense wealth.

The Houses of Rothschild, Morgan, Seif, Rockefeller and others who ran or owned Banks became the powers behind the thrones of more countries than could be imagined.

Digital Currency Drawbacks?

If we can just take our money “out of the banks”, this should force Bank Presidents to be prudent with it, or, as we saw with Northern Rock, we get a run on the Banks. When our money (or rather currency) is just digits on a Bank Balance sheet, we cannot. This means Bankers can fund whatever they want, without worrying about us cutting off their drug supply.

But a purely digital currency has several other drawbacks too.

With a purely digital currency, EVERY transaction will register on a computer somewhere. Tax Authorities will therefore be able to trace every transaction – And TAX it. That tax goes to pay salaries of government employees, but it also pays for those in politics, who may not always disclose where that money goes: Funding Wars overseas, providing incentives and making deals in private rooms under the guise of “National Security”, and it pays off the loans that bankers make to governments – all made possible by greater tax taking.

But a further worry is that the account details of every person will also need to be held somewhere too, making the prospect of 1984 as written about by George Orwell a frightening reality.

The informal economy disappears too.

Tipping a waiter, a Cabbie, a Pizza Delivery boy or even the Bin-man come Xmas time, becomes almost impossible. The loss of these ways of showing appreciation, potentially makes poor service a given, as with no financial incentive to provide excellent service, these people may offer mediocre service at best, or even leave the industry making many restaurants forced to pay higher wages forcing up costs, and thus reducing the number of visits per week, per month or per year. Giving someone a £50 note for a Birthday present, or Xmas present becomes impossible too. Teenagers everywhere will suffer, and grand-parents will actually have to get to know them and find out what their kids actually need – or want – and they may get a few unusual requests or worse…

But, the one big drawback for everyone, is not zero interest, it is negative interest rates. Which means charging you to hold your money. Anyone with savings in an account, or perhaps as the result of a house sale, becomes just another potential donor to a Banker’s lifestyle.

BUT the ultimate issue is one of liberty and trust. A business deal of old, demanded nothing more than the money, and a handshake. This relied on trust of the money, and the person. In a digital world, all trust comes down to is your credit rating, and your government granted identity number. Perhaps ultimately your radio frequency identification (RFID) chip implanted under your skin, so you don’t even need to carry a bank card.

But it also opens up a world of potential to deny you access to things the government thinks you shouldn’t see, or get access to. In effect WE become slaves to government, and the people who pull their strings, instead of government working for us. And that is the most important reason, why it should NEVER be considered the only way to pay.

“Bank paper must be suppressed and the circulation restored to the nation to whom it belongs.
“The power to issue money should be taken from the banks and restored to congress and the people.
“I sincerely believe that banking establishments are more dangerous than standing armies.
“I am not among those who fear the people. They and not the rich, are our dependence for continued freedom. And to preserve their independence, we must not let our rulers load us with perpetual debt.”

Thomas Jefferson – Former President of the U.S. of A.

And in his farewell address to the people, March 3, 1837, President Andrew Jackson solemnly warned the people against the Banker’s power, after the recent financial crisis; as the “Credit Crunch” is still ringing in our ears, it appears VERY apposite

“We are not left to conjecture how the moneyed power, thus organized, and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country, when the Bank of the United States waged war upon the people in order to compel them to submit to their demands, cannot yet be forgotten.

The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, a scene of cheerful prosperity suddenly changed into one of gloom and despondency, ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors.

No nation but the freeman of the United States could have come out victorious from such contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few; and this organized money power, from its secret conclave, would have dictated the choice of your highest officers, and compelled you to make peace or war, as best suited their own wishes. The form of your Government might for a time have remained, but its living spirit would have departed from it.”
(Read more at: The Coming Battle 2013 )

And Finally, if the above comes to pass, what will our International trading partners make of a currency, that can be conjured up on a computer by a banker? If China sells us Cars, Computer Equipment, Smart-phones etc, and all they get in return is a ledger entry on a computer, what confidence will they have that those digits will be worth anything, when they decide to spend them, possibly years later. What would you do if you were China?

If we are ever to have international finance based on trust, then there is only one solution – currency must be in the final analysis, backed by precious metals. and those metals represent true value, even if their value may vary from time to time – but Gold is still gold, and Silver is still silver. Platinum, and Palladium too are useful – usable in catalysts, jewelry and other uses. Silver is usable in 10,000 uses and rising, and its value and availability are about to get a whole lot rarer, and a whole lot more expensive as a result.

So if this does come to pass, who is really in charge in the UK? The Government? or its Financiers?

If you want to move your money out of the Bankers’ way? Then Click Here to get started.
PS:
After posting this I discovered a video clip by Max Keiser of the Keiser Report, which mentions the speech by Andy Haldane. Let me know what you think below.


W.

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Revenge on the Bankers (Part II)

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My day began on Friday with news that England & Scotland had renewed their Marriage vows, though not before David Cameron had blubbered like an errant husband, saying – “LOOK! I can change”, just so we wouldn’t have to have this discussion again, anytime soon.

And then later the post came, and the Book, safely packaged arriving in a bubble-wrap envelope. Great, I had been beginning to worry that it hadn’t been sent, or that somehow the post office had lost my address. But I needn’t have been concerned.

It’s the new Bill Bonner book “Hormegeddon”, and I hastily tore open the package, read the accompanying letter, and then settled down with a quickly made cuppa to digest Bill Bonner’s wit, erudition, and learning from over 40years as a trained economist. The pearls of wisdom if you like.

A synopsis of the opening chapter is not about to follow, but the basis of the book is that a little of something can be beneficial, but when you get a whole lot of it, it eventually ends badly. Like receiving a glass of water, or a whole ocean full… And Bill has applied this insight to social systems, politicians, and economics in his own inimitable style.

Some time ago now, I wrote about taking revenge on the Banksters, who having used fractional reserve banking, have increased their control of the economy, and the productive assets of a nation, by allowing them to create currency out of thin air, to give to those on the inside, which allows the Central Bankers and the owners of those printing presses, to buy assets at knock-down prices, in an economic bust, which they themselves have engineered.

By not having currency tied to any particular asset class, making the currency of every major economy, purely paper based and thus essentially valueless, they have got to the point where one suspects, the analogy in Hormegeddon is about to befall us.

If the value of money was tied to any commodity, and that commodity went up in price, the population as a whole would know instantly, that price inflation was taking place.

Of course, when you have a tie to any commodity it has to be agreed which commodity.

At various times throughout history, different commodities have been used.

In early history, people stored whatever they had an excess of. The arable farmer stored grain, that was in excess of his needs, and he traded some with the farmer who had Dairy cows, and other livestock.

The hunter stored furs, and traded some for grain when he found a farmer with excess grain.

Of course the problem for many of these commodities was that they were perishable, and so deteriorated in damp or poor conditions.

People realised that a more permanent medium was needed, so that excesses built up in the good years could be traded for things in the lean years.

This was the start of money. Money is really just savings converted into a form that is more useful.

No savings? No money. No problem.

Of course when some people learned about metals, and began making tools like swords, tips for arrows, belt buckles, stirrups for the better control of horses, and adornments. People began to realise the value of these metals as a store of wealth. And the most precious of those metals were silver and Gold.

These two metals were found in many places in tiny amounts, but also didn’t deteriorate. Gold mined in the 5th Century BC, will still resemble Gold mined last year. And Silver whilst it may have lost some of its shine, will still weigh almost exactly what it did a hundred, or thousand years ago.

Gold, of course, retains its lustre long after it is mined and refined, and even mixed with silver, copper and other metals still retains its size shape, weight and colour. This together with its shine, made it desirable, and thus when in the 6th Century BC, as populations were growing in what is now modern day Turkey, people used this strange metal – called “Electrum” – a mixture of these, in the earliest coins.

By the early middle ages, merchants who travelled in their business were prone to being accosted and their money robbed, which made the carrying of these precious metals dangerous. The Goldsmith realised that if he stored the merchant’s gold and gave the merchant a gold receipt, the merchant could transfer that gold to another by merely signing over some of that wealth, and thus the check was born, and the Gold receipt could be used to pay for things. Thus the Bank note was born.

Later the Goldsmiths began lending money and charging interest, and thus Banks were born. As the economy grew, so did the power of the Goldsmiths, now called Bankers, and as more and more people kept their wealth in the vaults of the Bank, the Bankers realised they could lend out more than they had in storage, and thus fractional reserve banking was born.

As the economy boomed during the 16th to 20th centuries as first the Spanish, the Portuguese, then later the Dutch, French and British began their pursuit of global empires, Banks provided capital for these explorers, and got their pound of flesh, whether the trip was a success or not, though the borrower frequently had to pledge their home, or other chattels.

Over the 250 years since Nathan Mayer Rothschild, sent his five sons to London, Paris, Frankfurt, Naples and Vienna to found the Rothschild empire, things have only gotten bigger.

These sons founded a Rothschild Bank in each of these cities, a truly international Banking system, that allowed the Rothschilds to benefit from local contacts, and to play each country off against the others, when they came to blows, as they had a tendency to do in old Europe.

President Lincoln, was a man who refused to do business with these Rothschilds, who demanded large interest rates to fund the civil war, and for his sins was shot when he began printing the nation’s currency.

Slowly over several generations, these Banker’s wealth and power over the economy grew, especially when they got together and formed Central Banks and colluded with other Central Banks – the largest of these – the ECB, PBoC, BoJ, Fed, and the Central Bank of Central Banks – the BIS (Bank of International Settlements) based as it is in Basel, Switzerland, home of the notoriously secretive Banking fraternity.

Since 1913, the Fed in particular, has exerted greater control over the world, as the printing presses of the United States were used to fund wars, and the military industrial complex. And the savings of the Chinese, Russians, Indians, Brazilians and other developing nations were used to prop up the dollar further extending this power.

Is this all coming to an End?

A slow start to controlling these Bankers in America was taken a few days ago, on 17th September, as a Bill was passed in the U.S. House of Representatives.

Congressman Paul Broun – U.S. Republican, promoted the Bill H.R. 24, the Federal Reserve Transparency Act (Audit the Fed), which passed in the U.S. House of Representatives with strong bipartisan support. H.R. 24 has over 220 co-sponsors and passed overwhelmingly by a 333-92 margin. Broun, released the following statement after the Bill passed…

“Today’s passage of the Audit the Fed bill brings us one step closer towards bringing much-needed transparency to our nation’s monetary policy. For the past 100 years, the Federal Reserve, a quasi-government agency, has acted under a veil of secrecy – controlling our monetary policy and thus, our economy…

While in recent years, the Fed has been granted a greater role in overseeing the regulation of our financial system, current law specifically prohibits audits of the Federal Reserve’s deliberations, decisions, or actions on monetary policy. This lack of accountability and transparency has led to grievous consequences – and it must end.”

In reality, the Fed is a private organisation with its only shareholders, the 6 or so Banking Families who sneaked out of New York in November 1910 to an (at the time) unknown location to create the organisation, that would strangle the U.S. economy several times over the next 100+ years.

Along the way, the Fed has relieved lots of people of their gold, and is alleged to be responsible for the deaths of various Presidents, and others who threatened their little racket.

We have all heard of the depression that occurred commencing in 1929. In order for the U.S. President to commit to the works that would help get the economy working again, he had to spend money he didn’t have, and the only people who could print or produce the money in America at the time was the FED.

However, the credit of the U.S. was not quite as good as it has been over the last 40+ years, and so the Fed forced the President to confiscate the gold and silver of the nation at a fixed price ($25.00/troy oz) and then re-value it when they had almost 7,000 tons to $35.00 an ounce, which with the other 13,000 tons of Gold they took from overrun Europeans, stood the test of time, until 1971, when Nixon ended the Bretton Woods agreement unilaterally.

So, to get to the meat of this piece, one day soon, this power of the Bankers will come to an end – probably VERY badly.

WHY? How? The Internet!

The Internet has changed dozens of industries in the 40years since DARPA (Defence Advanced Research Projects Agency) funded the first basic research into computer communications.

Amazon, Google, Apple, Microsoft, HP, Dell, E-bay, Netflix, MySpace, Facebook, Alibaba et-al. The Internet and these Tech giants have revolutionised whole industries, and the business models that worked before the Internet, have had to be revised, now that potential customers, can meet with potential suppliers electronically. This process is given the grand title of “disintermediation” and it is worrying the Bankers.

Crowd-funding is replacing the traditional role of Banks providing start-up capital; Electronic Stock-brokers are allowing people to trade the markets from home, or wherever their smart-phone happens to be; Digital Money and electronic payments systems initially made Bankers’ life simple, they didn’t even need the printing presses so much, but now with Crypto-currencies, people can trade value without even using their banks – all through the power of the Internet.

The most widely known of these new fangled currencies is Bitcoin, but there are around 80 of these currencies, and their value and power are growing with every passing day. And you can receive FREE Crypto-currencies daily, including Bitcoin from Qoinpro.

Bitcoin is currently valued at over $400, and its two smaller siblings – Litecoin and Feathercoin (which you also receive from Qoinpro) are like Silver and Copper to Bitcoin’s Gold or Britain’s Pounds, shillings and Pence.

Gold and Silver too are not being forgotten in this new world, as organisations are now trading Bitcoins for Silver and Gold making the banking industry all but superfluous in its historical sense. Only the Bullion Vault holders, are doing well, and who are increasingly based in the Far-East as several new vaults have opened there, and just 18months after their opening, they’re almost full to capacity.

As both of these precious metals fall to interim lows, those on the inside of the precious metals markets, are saying that now, as the economy is supposedly on the mend, is exactly the right time to be accumulating.

Many miners too are haemorrhaging as the metal price falls due to paper derivatives being used to manipulate the metal price, but many can’t continue to operate at these levels.

Only the industrial metals miners are keeping supplies coming. Because their precious metals are a by-product of their operation, the price is almost irrelevant to them, as whatever they get is in addition to their industrial mineral operations, but most of the majors who produce the bulk of the metals will either have to cease trading, or close down operations or both.

This is ultimately leading to a supply crunch – particularly in silver.

Silver is both a precious metal and an industrial metal, and demand is soaring.

Every Chinese, Korean and Japanese made i-Phone, Samsung Galaxy, Notepad, Tablet, PC, Nokia, LG, Sony, Toshiba, Canon camera, Nikon, Lumix, Panasonic, MAZDA, Toyota, or British made Ford, Jaguar, Land Rover, or German made BMW, Mini, Mercedes, Audi, or VW… In fact almost every vehicle in the world which is increasingly carrying increasing amounts of electrical and electronic equipment uses silver.

Imagine – China produces 9 million vehicles per year, Britain at its peak produces almost 2million vehicles, and then there’s America, Brazil, France, Italy, Australia, and India as well as all the other smaller nations who build vehicles including Russia and the former Soviet States.

Silver is used in them all. And with digital payments using crypto, how long can the Banks hold out before the system implodes again?

One way to get these Crypto currencies is Qoinpro, who are giving them away free, and will become a coin exchange in the fullness of time charging a small transaction fee as people use their crypto-currencies.

And as for precious metals. China holds just 1% of its $4trillion worth of reserves in Gold. Many believe they will need to have upto 40% of their reserves in Gold. At just 10% that equals $400,000,000,000 worth of Gold at current prices ($1250.00/oz) which would be the equivalent of 320 million troy ounces, or 9,953.11 metric tonnes.

As a result, I believe China will not stop buying Gold until it has around 10,000 metric tonnes.

In 2009, when they last announced their Gold holdings in April, they had just over 1,000 metric tonnes.

Given that they have been buying in increasing amounts and in 2013, that was circa 2,000 metric tonnes, the price longer term is likely to go a lot higher, once their ambitions become more widely known.

And silver which historically has been 1/16th the price of Gold, will likely return to its historical norm.

But perhaps even more, as silver comes out of the ground at just 9:1 it is not outside the bounds of possibility that silver will reach this dizzy height.

Another week – Another Disaster (Mon 11/11/2013)

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As we learn of Typhoon Haiyan which thrashed through the Philippines over the week-end, totally devastating that country, On this Remembrance Day, we would do well to perhaps think also of those poor souls who lost their lives – Over 10,000 by the latest reckonings – and no doubt this figure will rise as the latest information comes in, With Vietnam now on the receiving end of the now tropical storm, we need also to consider what the costs will be to the wider economy.

Many purchasers of tech products will no doubt have seen “Made in Vietnam” or “Made in the Philippines” stamped, if not on the outside of the box, then on components and sub-assemblies on the insides.

Global supply chains now extend over many countries, and particularly in South-East Asia, with the skills and abilities of the people to build and repair the many damaged factories and logistics chains perhaps unavailable as these people are occupied just surviving and re-building their own lives and homes – will this affect global markets?

This may have devastating consequences for Global Corporations with facilities in the area of the Storm.

Insurance corporations too, may well be hard hit, as the strongest storm ever recorded with wind speeds in excess of 320Kph were recorded. With Hurricane Sandy still so fresh in Americans minds, Katrina of a few years ago, and now the most recent of these storms causing billions of dollars worth of damage, many will be questioning, “What do we need to do to stem these devastating events?”

One answer maybe to take personal responsibility and to slow consumption of oil-based commodities – particularly those which do not get re-cycled. Though even here, one has to consider whether the amount of energy spent in re-cycling, exceeds that which would be used to produce another product of like or greater capability – “What’s the point of re-cycling my old phone, if I also need a new one, which uses less energy to produce and uses energy more efficiently going forward, and recycling would use more energy than that retrieved?” we might ask.

One also has to consider the cost of capital and energy used in building the plant and equipment used to carry out the re-cycling with efficiency.

In a world of limited money (as was the case before the world of elastic currencies) the users of capital would compete for scarce funds, and this would drive up interest rates, as happened in 1906 when the San-Francisco earthquake caused devastation to that city, and Insurance corporations had to disburse to companies and individuals to help in the re-building process, which caused a liquidity trap, and helped precipitate the 1908 financial crisis, which eventually ushered in the Federal Reserve some 5 years later.

These are not easy questions to answer. Without the statistics readily to hand, individual consumers cannot make these decisions easily. This therefore places greater emphasis on transparency and full-disclosure made available by enforcing legislation at the State and International levels.  European legislation here therefore has a bigger role to play in proposing and enforcing these legislative practices.

But we might also wonder, if some countries return to commodity backed currencies (Precious metals being the most likely) then the chance of that happening again increase unless savings increase in line with interest rates. BUT, what would rising interest rates do for the Western economies, given how much has already been borrowed from the printing presses of the Federal Reserve and PBOC and Banks of England and Japan? 

The South East Asian area has had more than its fair share of disasters in recent years too, with the Boxing day Tsunami of 2004, and the one which devastated Fukushima in Japan in October 2011, and to make matters worse, there is increasing volcanic activity in the region with explosions and plumes in Sumatra, and Sunda Islands of Indonesia, Papua New-Guinea and all along the edge of the Australasian tectonic plate.

Is this the start of an era which calls upon the whole world to come together, to assist one another, or are we going to revert to type and become protective of our individual territories and economies, that resulted in the events of the early 20th Century? 

We shall see…

W.