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UK: Bank of England Has New Money Printing Trick

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You can always count on bankers to find new ways of bending accounting rules but in this case the Bank of England is now able to supply the UK Government with £35bn via the back door at the same time it has announced a halt to QE.

 

 

 

So now we know why the Bank of England’s Monetary Policy Committee called a halt to more Quantitative Easing this week – it’s because the Chancellor and the Governor of the Bank of England have concocted a backdoor way of doing the same thing.

The latest little (actually quite big at a tidy £35bn) money printing wheeze comes about as close to outright monetising of government spending as it is possible for the Bank of England to go without simply creating the money and handing it by the lorry load to the Treasury, a la Weimar.

What the Treasury has decided to do is take the accumulated interest payments on the stock of government debt the Bank of England has bought under quantitative easing, and credit it to the Government’s books rather than the Bank of England’s. The total is £35bn, of which the government intends to take £11bn this financial year and £24bn next.

This obviously helps the deficit in these two years quite a lot, creating space, should the Chancellor wish to take it, to ease back a little on the fiscal squeeze. For instance, he might choose to take the shadow Chancellor’s advice and further delay a scheduled increase in fuel duties. It also makes it easier for Mr Osborne to meet his fiscal mandate of eliminating the structural deficit within five years. Even the supplementary target of falling debt as a percentage of GDP by the end of the parliament – the one which City forecasters now widely believe Osborne will miss without further austerity – is marginally benefited by the latest piece of sleight of hand. It’s as if Osborne has died and been reborn as Gordon Brown, who famously manipulated his own fiscal rules to destruction.

The Government excuses its actions by saying that it is only bringing itself into line with practice in Japan and the US, the other major economies to be practicing substantial QE right now. It might also be argued that to the extent the European Central Bank indulges in bond purchases, it practices something quite similar too.

In any case, you might reasonably think that it doesn’t really matter how the government accounts for the interest on the Bank’s stock of gilts. Since the Bank of England is 100pc owned by the Treasury, the government has in essence only been paying interest to itself, so why not just stop the charade and save the money?

Wrong, wrong, wrong. The justification for keeping the interest is that it creates a buffer to fund expected losses on the gilts when the Bank of England comes to unwind its quantitative easing programme. These losses are now going to have to be met by the government directly at some stage in the future. Alternatively, the government could simply ignore them or write-them off. The Government is transferring the losses from today until tomorrow. The thin line which separates monetary from fiscal policy is being crossed in a way which substantially undermines the Bank of England’s claim to independence.

Source: Telegraph

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Turkish PM Calls For Gold Standard

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The Turkish PM, Erdogan has called for a return to the Gold Standard in a scathing attack on the IMF. Interesting that the call for the use of gold as money is becoming more mainstream.

Prime Minister Recep Tayyip Erdoğan states that instead of ruling the world under the pressure of the dollar the IMF should switch to using gold.

During his stay in Indonesia, Prime Minister Recep Tayyip Erdoğan brought up an interesting suggestion for the International Monetary Fund.

Stating that although IMF assistance may appear to be a prescription for some nations, in fact quite the opposite, the fund has often caused serious problems for countries in trouble, Erdoğan asks why it is that the fund uses dollars instead of gold.

Expressing that he doesn’t feel it is right for the IMF to act according to one nation’s currency, Erdoğan states, “The IMF extends aid on a who, where, how and on what conditions bases. For example, if the IMF is under the influence of any single currency then what, are they going rule the world based on the exchange rates of that particular currency?

Why do we not switch then to a monetary unit such as gold, which is at the very least an international constant and indicator which has maintained its honor throughout history. This is something to think about.”

IT IS IMPERATIVE THE IMF AND OECD CHANGE

Explaining that Turkey had to pay a heavy price for the agreement they made with the IMF, Erdoğan stated, “We have not made a stand-by agreement for the past three periods. In April, we will have zeroed out our debt completely and we have no intentions of working with the IMF again.”

Prime Minister Erdoğan went on to state: “One would hope that the IMF would help countries in trouble, however at present this is not the case. This is what we need to achieve.”

Erdoğan also said he believed the United Nations, the International Monetary Fund, the Organization for Security and Co-operation n Europe (OSCE) and the Organization for Co-operation and Development (OECD) need to all undergo a reform.

Source: Sabah

Mexico To Restrict Cash Transactions

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Another country has joined the list for limiting cash transactions by it citizens. Mexico has signed into law, a ban on large cash transactions carrying a minimum penalty of 5 years in prison.

Large Cash Transactions Banned In Mexico … Outgoing Mexican President Felipe Calderon has signed into law a ban on large cash transactions. The ban will take effect in about 90 days and it is part of a broader effort to control monetary flows within the country. Under the law, a Specialized Unit in Financial Analysis operating within the Attorney General’s Office will be created to investigate financial operations “that are related to resources of unknown origin.” For real estate transactions, cash payments of more than a half million pesos ($38,750) will be forbidden and, for automobiles or items like jewelry, art, and lottery tickets, cash payments of more than 200,000 pesos ($15,500) will be forbidden. The law carries a minimum penalty of five years in prison. – Forbes

and as the Daily Bell put it

The power elite intends to lock down the world, it seems, in order to track every monetary transaction of any significance.

We wrote about this trend previously in “Spain Bans Cash.” Here’s an excerpt:

… As we have long predicted, the phony “sovereign debt” crisis in Europe is being used to justify all sorts of authoritarian measures.

…..

these national bans continually pressure more and more freedoms, including the freedom of shielding one’s wealth from prying eyes. And that’s just the point …

In the last 2 years the following countries have made similar restrictions.

Source: The Daily Bell

Serfdom Up Ahead?

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An article by Michael Krieger of Libery Blitzkrieg blog sums up the global financial system and what lies ahead if we don’t react now. Krieger makes the point that things are going to get much worse than 2008 and no amount of money printing will work this time. The levels of corruption are staggering and more and more people are awakening which is quite disturbing to the global elite.

The Tipping Point
Serfdom has simply been pushed too far.  Globally.  What we are about to witness, incredibly, is not just a change in the way that one or two countries or even a specific region of the world operates.  No, what we are about to witness is a complete transformation globally, a change that I believe will be incredibly positive and will ultimately free us from the shackles upon the minds of humanity as a species.  The internet has allowed us to connect with one another in a manner never before possible, and this tool has permitted us to blast through the lies of the global elite that is desperately trying to hang on to control.  Whether it was the intention from the outset or not, what globalization has created is a very small class of incredibly wealthy people that are extraordinarily corrupt as a group and also above the law.  They are able to hide enormous amounts of money.  They are able to insider trade.  They are able to deal drugs.  They can do whatever they want, yet if anyone below them does the same they are prosecuted in a manner that resembles Medieval torture.

Many people say to me, “but Mike, aren’t things always corrupt, hasn’t it always been this way?”  To this I answer yes and no.  Of course within any complex societal and political structure there will be elements of corruption.  This is obvious.  However, there are cycles of corruption and degrees.  At some point, particularly toward the end of a cycle where globalization creates this “super corrupt class” of individuals roaming the planet doing as they please with us pawns, you reach a tipping point.  That tipping point has already been reached.  What we are witnessing now all over the world are merely the effects of that tipping point clashing with the corrupt global elite that refuses to budge an inch and reform even though it is in their best interest to do so.  No, they are so arrogant and criminal after decades of doing what they please with zero consequences they would rather attempt to implement a global police state rather than deal with the nightmare of their actions and make the world a better place.  Therefore, it is up to us, as a species, to reclaim what is our birthright.  Freedom.

As I wrote the other day on twitter, what we have today is not Socialism or Capitalism, it is Ponzism.  I am talking on a global level.  Basically every country and every region.  The biggest pitfall we must avoid as a species is allowing the global power structure to pit us against one another.  These guys don’t fight wars, they send you to fight them.  Don’t fall for it.  Their number one trick once things get bad within their own nations is to attempt to create a war.  This checks two very important boxes for them.  First, it creates a distraction for the general public and even makes them think that they are part of a team that needs to be cheered.  It’s like a big football game but with thousands or millions dying on the field.  Second, it allows the government to do pretty much anything they want in the name of “winning the war” or “national security.”  This is exactly why the “war on terror” was the perfect war for a kleptocratic elite.  It is a war with no end, so theoretically they can constantly claim war as an excuse for taking away civil liberties.  The problem for them at the moment though is that the American people are waking up to this scam.  Therefore, a larger and much deadlier war is in their best interests.  If it is in their best interest you can be sure it is in our worse interests. Therefore, we must do everything we can to prevent it.

China
Unless you have been living under an economic rock for the past six months, you are aware that China is in the midst of a serious economic slowdown.  As I have said for years and continue to say, this is not a small bump in the road.  This is a major contraction.  Similar to the U.S., China had a choice in the 2008 slowdown.  They could have taken the hit and moved toward measures to rebalance the economy away from an over emphasis on investment and construction spend and toward consumption, but they did nothing of the sort.  Rather, they doubled down on their prior mistakes and mal-investments in an epic bet on the ponzi economy.  After a brief sugar high, this has now failed.

So with the economy back in steep decline, the authorities fear pumping massive stimulus in as they did four years prior due to their justifiable fears of sparking rampant inflation.  Meanwhile, thanks to social networking, citizens have become more aware of the incredible corruption and theft of their leadership, whether in the political or business world.  They are increasingly acting out about it and it is becoming so blatant that even China’s legendary control of media is unable to direct the plot.  The most recent outburst came from the Foxconn (a major supplier to Apple) factory in Taiyuan, China which employs 79,000 people.  While details are sketchy, most accounts point to the riot, which reportedly involved 2,000 people, being sparked by a fight between security guards and workers.

Of course, China’s leadership was well aware of all of this before the Foxconn incident came onto the scene, so what is a good authoritarian regime to do?  Well, you attempt to direct the rage and angst to an outside enemy.  In this case Japan.  Zerohedge has a great report on the anti-Japanese violence and hatred that burst onto the scene recently.  The link to their piece Postcards from a Furious China really says it all.

Europe
Like the Middle East, the Southern countries of Europe have been in and out of rage now for almost two years.  The most recent explosions onto the streets of Greece and Spain are particularly disturbing since the inept clownish leadership on the Continent had supposedly “solved” the crisis for the third time just a few weeks ago.  Or was it the fourth time?  Really, who’s counting anymore…

Let’s start with Spain.  While Greece is still on fire, Spain is where the real action is due to the size of its economy and the importance it has to the political EU hacks.  Not only were there enormous protests this week in the capital Madrid in reaction to austerity measures, but there is also a very significant secession movement picking up steam in Catalonia.  This isn’t about leaving the euro, this is about leaving Spain!  For those that aren’t aware of Spanish geography, Catalonia is the wealthiest region in Spain and it is where Barcelona is located.  First, we saw enormous protests in Catalonia about a month ago, which I covered here.  Now we see that last night the regional parliament approved a referendum on independence that will apparently be voted on during regional elections on November 25.  Reuters covers the story here.

While this is hugely important, let’s not overlook the massive demonstrations in Madrid this past week.

Now let’s talk Greece.  I think a lot of people brushed off this week’s protests as “oh it’s just the Greeks in the streets again.”  This is a mistake.  These demonstrations were different and here is why.  From the UK’s Guardian:

 
 

In a departure from other mass protests, members of the police force, army, navy and judicial system joined public and private sector employees on the streets. One police officer, who preferred not to give his name, said the Greek state “should feel deep shame” at imposing cuts on the very people whose protection it sought.

Once the people that are being paid to defend the regime start opposing the regime it is game over.  It appears we are there in Greece.  Full article here.

The United States
This is the big one of course.  While we have seen outbursts from the Tea Party and Occupy Wall Street movements ever since the banker coup of 2008, these movements have not been as sustained as demonstrations in other parts of the world.  This is about to change.  I am firmly of the view that the Obama Administration has pulled out every  trick in the book in order to get reelected this year, and that this strategy will probably succeed.  What I think the vast majority of people voting for him as well as investors fail to comprehend is that once this guy gets in and doesn’t need to worry about getting reelected he will leave everyone outside of his puppet masters out in the cold.  You think he has been bad for the poor and middle class so far via his inflationary policies?  Well you haven’t seen anything yet.  I believe there is a decent chance he will push “austerity” on the public as soon as he is reelected.  All the suckers that voted for him will be up in arms and the only ones that will be protected, as usual, will be the crony capitalists that own him.  Even if he doesn’t do this, his other option is merely to keep spending and force The Bernank to print more money.  The cost of living will surge and the poor and middle class will get crushed no matter what.  I covered this in my recent piece “2013: When Money Printing Meets Supply Constraints.”  The American Spring will get going in 2013.

 Just Say No…to War
The writing is on the wall folks.  The global economy is headed back down into depths that will prove worse than 2008, and this time no amount of money printing and propaganda will be enough to hold things together.  TPTB know this.  We need to remember that this isn’t just a battle between the masses within our distinct nations and the 0.01% of oligarchs that have used the past four years to harvest more of our wealth.  This is also a battle between humans collectively and themselves.  We need to grow up as a species and take charge of our destiny.  We need to stop falling for their tricks and fighting their stupid wars while they hide in their castles, parliaments and skyscrapers.  The first thing we need to do is say no.  No more.  It’s time to evolve.

China Joins The Party And Turns On The Printing Press

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Amidst the story of Chinese city Dongguan (pop 10million) in the largest province is on the verge of bankruptcy, it has been reported that the Chineese Central Bank is going to join the party and get in on the “beggar thy neighbour” act. The injection of liquidity is to help foster a soft landing to an ever ailing economy. Over $57 billion to be added along with an investment of $1.6 trillion in infrastructure.

China´s Central Bank has decided to join the Fed and ECB in their ´pump in money´ move, injecting a record $57.9bln into the financial system. This is to help create a soft landing for the number two economy amidst the global turbulence.

Such injections can help cut lending rates, but full-fledged success shouldn’t be expected before 2013, Vedomosti daily quotes analysts from the Economist Intelligence Unit.

China’s Government is also trying to heat up its economy by investing $1.6trln in infrastructure.

Despite helping the Chinese economy out of the recession in 2009, such measures this time around could turn out to be inefficient, say HSBC analysts. Today the country faces problems of so-called artificial overheating: sky–high inflation is coupled with a “destructive bubble” in a housing market and growing debt, analysts specified.

As the global economic outlook becomes increasingly gloomy, export oriented China, sometimes referred to as the World Workshop, is set to grow at a much slower pace of around 7% over the next decade, Jim O’Neill, Chairman of Goldman Sachs Asset Management, told Reuters.

The profits of Chinese industrial giants fell 6.2% year on year in August to reach $60.4bln, following a 5.4% drop in July, says the National Bureau of Statistics of China.

 

Source: RT.com

Paper Currency Is In the Final Stage of the ‘super cycle’

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Money manager Felix Zulauf while been interviewed on King World News joined a long list of people warning of the end of the current monetary system.

“The global banking system, particularly in the industrialized world, is still highly undercapitalized.  That’s the big problem.  So if anything goes wrong, bank balance sheets are highly leveraged and you have a problem.  The central banks were running behind the curve.”

“Over the last couple of months, central banks have woken up and they see the risks, particularly the move by the ECB here in Europe means that they are ‘all in’ now.  That means they will finance whatever it takes to not let the system go down.  For the short-term this gives you some assurance.  For the long-term it’s a different story because there is a cost associated with this….

“The cost is that the fiat currency, paper currency standard, is in the final stage of the ‘super cycle.’  Fiat currency systems always collapse at the end.  We are in that stage of the super cycle where things are accelerating.

 I don’t know how many years we still have, but you can assume that central banks, as the ECB stated just recently, will do everything necessary to prevent a collapse of the system.  That means they will even finance bankrupt governments, they will finance bankrupt banks, they will finance every bankrupt entity that is important to the system.

 That means they debase our paper currencies further and further, and in an accelerating way.  This is very bullish news for all of the gold holders of course.  A good year or so ago, gold had accelerated into a sort of a climax peak above $1,900.  It has taken almost a year to correct that sharp advance.

I think gold has absorbed the selling pressure very well, and has gone through a lengthy, cyclical corrective process, into the low $1,500s.  There was always a risk that it could break down once more to make for a climax low, but I don’t think this is likely anymore.  The odds of that happening have decreased.

The recent announcements of Draghi and Bernanke means there is no going back as the Central Banks are going full out to protect the system.

The recent change at the ECB that they are ‘all in’ is a big plus for gold because it’s a big negative for paper currencies, and gold is just the other side.  So while gold has run up into the $1,700s, we could any time see a setback of $50 or $60 or so.  That would be normal.

When asked how the collapse of the fiat system will unfold, Zulauf responded,

“That’s a difficult one because I cannot tell you when it occurs, but usually in a super cycle you have to debase your currency more and more.  You monetize your debt more and more.  Your level of debt on a public-sector basis, and on a system-wide basis goes higher and higher until the system collapses.

 I think we first see, over the next couple of years, the transfer of government debt from private balance sheets to central bank balance sheets.  I do believe the 30 year bull market in government bonds is over.  I mentioned in the media (Barron’s) Roundtable that one should be selling half of what he owns, and should sell the other half in September at the latest.

I think the whole game is over.  Bonds are very overvalued.  The real return is negative.  Normally bonds yield at least as much as nominal GDP growth.  Nominal GDP growth at the present time is about 3% or 4% in the US.  I’m not suggesting we go right there tomorrow (in terms of yield), but bonds are very overvalued. I have stayed bullish, but it’s over.  The game is over and we have to look for other assets.”

 Felix also predicted a plunge in stocks:  “I think over the next two years or so we will probably see 1,000 in the S&P again (a decline of more than 30%).”

Felix also added: “Obviously policymakers are completely lost in this environment.  Therefore, when the market forces are such that it jeopardizes they system, and they dislike it, then they change the rules.  For instance, if interest rates of government paper shoots up, like it was the case for Spain or Italy, then the central bank comes in and provides the money, and buys whatever it takes to move the interest rate to levels it likes.

Source: King World News

Sweden To Go Cashless

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The Swedes make good sheep. Only 3% of all transactions are with cashless as society is poised to go fully digital. Welcome to the Matrix.

 

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