Eurozone Monetary System Bust And On Verge Of Collapse

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If you needed anymore proof that the euro is on the verge of collapse, Yanis Varoufakis’s article should help confirm it. With the ECB holding interest rates at near zero and having pumped over 1 trillion into the system via LTRO, Christian Noyer (governor of the Central Bank of France) provides the strongest hint yet that nothing has worked.

Under normal conditions, the interest rates that you and I must pay on a home loan, a car loan, our credit card, a business loan are pegged onto two crucial rates. One is the rate that banks charge one another in order to borrow from each other. The other is the Central Bank’s overnight rate. Alas, neither of these interest rates matter during this Crisis. While such ‘official’ rates are tending to zero (as Central Banks try to squeeze the costs of borrowing to nothing), the interest rates people and firms pay are much, much higher and track indices of fear and subjective estimates of the Eurozone’s disintegration.

After 2008, banks failed to lend to each other.

Following the Crash of 2008, banks stopped lending to each other, fearful that they will never get their money back (as most banks became, in effect, insolvent). Thus, the interest rate at which they lend to one another simply ceased being a meaningful price (just like the prices of CDOs, following Lehman’s collapse, lost their meaning as no one bought or sold those pieces of paper). The truly scandalous aspect of the Libor scandal of recent weeks is that banks continued to use (and ‘fix’) an estimate of the interest rate at which they lent to each other (for the purposes of fixing all other interest rates; e.g. mortgage and credit card rates) when they did not lend to each other any more…

The ECB took action by lowering interest rates and stopped paying interest on overnight deposits hoping to force banks to lend.

the ECB lowered its key interest rate to 0.75% – the lowest level since the euro’s inception. At the same time, the ECB did something else that is extraordinary by its own standards: it reduced to zero the interest rate it paid private banks for depositing money with the ECB.


and having no incentive whatsoever to park their idle capital with the ECB, one might have hoped (as the ECB’s President, Mr Mario Draghi, clearly did) that banks would be more willing to lend and at a lower interest rate. However, such hopes would have been baseless.

Noyer admits the system is bust.

“We are currently observing a failure of the transmission mechanism of monetary policy. From the markets’ perspective, the interest rate facing individual private banks depends on the funding costs of the state where they are domiciled and not on the ECB overnight interest rate… Hence the monetary policy transmission mechanism does not work.” Now, this is an admission that should be on every headline in Europe, given that it comes from a governor of the Central Bank of the Eurozone’s second largest economy.

The admission gets even better. He alludes to the fact that LTRO did not have the desired affect.

“We did our best to face up to this phenomenon which is unacceptable for a Central Bank in a monetary union.” What did he mean by that? The clue comes from his follow up sentence: “In future we cannot rely endlessly on a system where the Central Bank is injecting massive liquidity to the banking system, boosting hugely its balance sheet.” Clearly, Mr Noyer was referring to the LTRO; the ECB’s attempt earlier in the year to ‘fix’ the ‘transmission mechanism’ by pumping 1 trillion euros of liquidity into the Eurozone’s banks. Reading between the lines, it is clear that, at least according to Noyer, this ploy failed (as some of us kept saying it would).

You can’t jump start a dead battery.

In short, the fear of a disintegration of the Eurozone (that is aided and abetted by silly talk of Greece’s and Portugal’s expulsion) has broken the umbilical cord that normally connects the ECB’s overnight rate with actual borrowing costs of the private sector. Now, the later reflect the fear that the member-state in which the firm or the household are will not be able to refinance itself. In a never-ending circle this fear ensures that the said member-state will not be able to refinance itself and, crucially, guarantees the ECB’s failure to lower interest rates even when it pushes its official rates to zero. This is what a monetary union on the verge of collapse looks like.



Canada – Only $4Billion in Banks’ Vaults, Yet $1.5 Trillion Loaned Out

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The banking system is amazing. Every time I see an explaination of it, it just blows me away how much these guys are getting away with it. The video clip below is from “Oh Canada” which explains the Canadian banking system. The part that shcoked me was that the amount of money in the banks vaults is only $4 billion yet they managed to loan out over $1.5 trillion. 

Of $37 billion borrowed by Canada from private banks between 1867 to 1992, Canada ended up paying back €423 billion. Of that, $383 billion (91%) was compound interest. The lesson here is to issue your own currency and you won’t have to pay interest. Ellen Brown writes about this on her blog WebOfDebt.

In 1998, the Canadian debt was $840 billion. By 2010, after paying $750 billion in debt payments, the debt stood at $800 billion. Canada only managed to knock $4 billion of its bill, thats how dangerous compound interest is.


The Bank of Canada could in fact produce money interest free. It already has the authority to do so. So, just transfer the debts owed to the private banks to the Bank of Canada and get a loan (interest free) and pay off the debt.

Full movie 1hr 36 mins, but worth the watch.

Its the same banking system scam the world over.

Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognised as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.

― William Lyon Mackenzie King, 10th Prime Minister of Canada

The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.
– Abraham Lincoln, 16th President of the United States of America
Whoever controls the volume of money in our country is absolute master of all
industry and commerce…when you realize that the entire system is very easily
controlled, one way or another, by a few powerful men at the top, you will not
have to be told how periods of inflation and depression originate. – James Garfield, 20th President of the United States of America

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