Skip to comments.The Global Monetary System Is In Crisis
Posted on 10/30/2010 6:16:03 PM PDT by blam
The Global Monetary System Is In Crisis
Politics / Global Financial System
Oct 30, 2010 - 10:47 AM
By: Bob Chapman
The recognition of currency war, which has been going on for years, reflects the failure of international cooperation and the failure the G-20 to find a solution of the beggar-thy-neighbor policies of almost every nation.
The result has been growing geopolitical dislocation, which G-20 has yet to find a solution for. These efforts, until recently, were turned upside down by the failure of the Copenhagen Summit in the summer of 2009, when it was discovered that global warming was a giant scam.
This was proof positive that global leadership was nothing less than a group of common criminals. Economic and financial failure has brought about global austerity measures, and bickering over trade and currencies as well. As this transpired the economies of the US, UK and Europe slid downward in socio-economic, crisis, which in some cases has degenerated into violent demonstrations.
The US and UK are in economic paralysis due to the major changes anticipated in next weeks elections of House and Senate delegates. The President isnt even going to be in Washington to witness the massacre of the Democrats.
He just refuses to deal with it, as a long line of bureaucratic appointees head back to Harvard, foundations, think tanks, the Council on Foreign Relations and the Trilateral Commission. This as the Chairman of the Fed unveils plan two of quantitative easing, the creation of money and credit out of thin air, which in reality has been going on in the bond market since early June. Another bit of subterfuge dreamed up on Wall Street.
The Fed is monetizing a stimulus plan that the administration is no longer capable of assisting, due to an enraged public. On the other hand, large dollar holders are loudly complaining that the Feds policies will cause major inflation and a falling US dollar. Of course, the flip side is if the Fed doesnt act in this manner the US economy will collapse and with it the world economy. The dumb Chinese, Japanese and oil producers should have long ago accumulated gold and gotten rid of dollars.
That was not to be as they in fact enslaved to US leadership by yields and exports. The expenditure of $5 trillion over the next two years by the Fed will only take the US economy sideways at best, and in turn take the dollar to new lower levels. All the insiders know the plan wont work, but it will buy time, perhaps so they can have another war as a distraction, as they have done many times before in history.
Even the public knows it wont work having been alerted by information pouring out of talk radio and the Internet. The US is already in austerity. Just look at real unemployment of 22-3/4%. This is getting worse not better and that means a change in control in the House and Senate could well bring about a constraining of fiscal and monetary policy.
The US is on a path to socio-political chaos as the dollar falls and the world monetary system comes unglued. Those countries in decent monetary and fiscal condition will pull away from dealing with the US and that has already occurred with Brazil that doesnt want inflationary dollar investments entering their country, thus, they have implemented a dollar investment tax. The US cannot return to the past.
Its leadership lost that opportunity in June of 2003 when they decided to go ahead and take down the economies of the US, UK and Europe in order to force the inhabitants of these countries to accept world government. A main cog in this plan was the implementation of free trade, globalization, offshoring and outsourcing, which has cost the US in just ten years 8.5 million jobs.
There is no chance now of return as countries pull away from US and UK financial markets. These moves will protect these countries for a time, but eventually they will feel the sting of economic failure and instability as trade wars and tariffs become the norm. Washington will cease to be the world leader. The currency and trade wars have only just begun. They could not be avoided by either side.
There is about to be a convergence of problems. Things that previously were not connected that will burst forth without warning. That will eventually lead to the implosion of the system.
These factors will be accompanied by social unrest, which we have just seen the beginnings of in Europe. This time of social, monetary and fiscal turmoil will last at least into 2014 before any solutions are put on the table.
An easy solution is multilateral revaluation, devaluation and default. This would be very painful, but would stop the power by todays elites in the US, UK and Europe and the unmasking of their treachery.
Throughout Europe and the US there has and will continue to be a rise in patriotic movements, which those who control governments already have labeled terrorists. These are people like us who bring truth and exposure of facts to the attention of the public.
We are currently facing a new crisis in the US in the mortgage markets and in their securities, which has been aided and abetted by a disintegrating legal system. This comes to real estate at a time when it is on life support. The states cannot be of much assistance because most of them are broke, which is another distinct problem.
The US has already abdicated its role of world leader. Even leadership from Wall Street and banking is dreadful. Worse yet there is no one to take its place, as the world lies adrift in a sea of trouble. The atmosphere is explosive because no one wants to give up anything.
The financial markets will all eventually fall and the flight to gold and silver as the only real money will gain acceptance, as we predicted long ago. Americans and others have failed to see the future and theyll pay dearly for not paying attention.
One of the interesting developments of the new currency wars is a concept that, the nations that will be the most successful, are the nations that devalue the fastest. One of the things nations miss is that the cheap currency that propels exports; also raises the costs of imports.
Another fallout is others wont want to own your currency and if you devalue a currency enough it becomes worthless, or nearly so. A good example of that was in the 1930s where only tariffs were successful. As a rule those tariffs were not steep. The threat, of course, is that nations get mad at one another and war follows.
What these nations have been doing is similar to quantitative easing, or simple fiat creation of money and credit. These actions are the antithesis of sound money.
The Forex, foreign exchange market, trades $4 trillion a day and its projected to trade $10 trillion daily in the next couple of years. Money flows are already wild to say the least. Many foreign currencies have been rising versus the dollar.
Some nations such as Brazil have already instituted capital controls by putting taxes on foreign purchases of local sovereign debt. Those not into the foreign game are buying US Treasuries, gold, silver and commodities.
The FOMC and the Fed, even though they know it wont work, are becoming more and more accommodative. You will get some idea of their plan next week. The result will be a falling dollar, which is not really monetary policy, but grasping at straws in the wind. You will find nothing of sound money here and as a result markets will ultimately not survive.
Remember, we could return to the circulation of gold and silver. 76 years ago gold coins were widely circulated and silver was in everyones pocket just 47 years ago. It is not impossible. It could happen again over the next few years.
It was just two weeks ago that the dollar revisited 76.54 on the USDX. It had rallied over the past four months from 76.88. It is currently about 77.28. Every time it tries to rally it gets knocked down again. That is a long way from 89 where it was seven months ago. One thing is for sure, as long as we have ill-fated policies such as QE2 the dollar will continue to fall.
We also found it of interest that Bill Gross of PIMCO found the Fed has taken Charles Ponzi one-step further. He says, Has there ever been a Ponzi scheme so brazen? No, there has not, said Bill. When the Fed meets next Wednesday it could signify the end of a great 30-year bull market in bonds.
What should be noted is that the Fed is intent on generating another asset bubble to accommodate the sale of Treasury and Agency bonds and to give Wall Street and banking more funds to speculate with. This will renew the elitist wealth effect and in the process send the dollar lower, which in turn will increase inflation, which is already sapping consumer buying.
The Wall Street gang plan to use Fed funds to jack up the market, which is already overpriced by 20%, is an act of pyromania. In addition, the average increase in 15 commodities yoy to October is 35%. Food costs are up 48% and energy 23%. Real inflation is up 7%, not the 1.6% the Fed lies about.
Out of Chaos Comes Order.
A companion piece from Euro2020:
includes a bibliography
Conservatives need to understand that there is some truth to “it’s Bush’s fault”. Read the article and then check this out:
President Bush Signs American Dream Downpayment Act of 2003
Bush was present at the economic crisis’ conception!
ALL politicians are at fault.
I’m ready. Bring. It. On. :)
Please explain what I am missing. I do not doubt we have been sold out by the Pols, but what was the "event"? I also do not agree that inflation is the outcome. It may be in the beginning as speculators bet on commodities as a way around the negative earnings elsewhere, but ultimately it looks to me that it will give a deflationary outcome.
The system needs to collapse so that it has a chance to be born again.
all dates 2008.
Sept. 7: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, putting them into a conservatorship and pledging up to $200 billion to back their assets.
Sept. 16: The Fed injects $85 billion into the failing American International Group, one of the world’s largest insurance companies.
Sept. 16: The Fed pumps $70 billion more into the nation’s financial system to help ease credit stresses.
Sept. 19: The Treasury temporarily guarantees money market funds against losses up to $50 billion.
Oct. 3: President Bush signs the $700 billion economic bailout package. Treasury Secretary Henry Paulson says the money will be used to buy distressed mortgage-related securities from banks.
Oct. 6: The Fed increases a short-term loan program, saying it is boosting short-term lending to banks to $150 billion.
Oct. 7: The Fed says it will start buying unsecured short-term debt from companies, and says that up to $1.3 trillion of the debt may qualify for the program.
Oct. 8: The Fed agrees to lend AIG $37.8 billion more, bringing total to about $123 billion.
Oct. 14: The Treasury says it will use $250 billion of the $700 billion bailout to inject capital into the banks, with $125 billion provided to nine of the largest.
Oct. 14: The FDIC says it will temporarily guarantee up to a total of $1.4 trillion in loans between banks.
Oct. 21: The Fed says it will provide up to $540 billion in financing to provide liquidity for money market mutual funds.
Was there anything else that I missed in the article? When are you going to get it, Blam, that a person that can write "global leadership [as if there were such an animal] was nothing less than a group of common criminals" and calls Wall Street a "gang" has nothing substantive to say?
Why do you call yourself TOP Quark? Why not one of the others? My son has a PhD in physics and he calls himself Charge Carrier. I suspect 'TOP' fulfills some need, eh?
You're continuously criticing someone or some thing. Why? It explains why you didn't name youself CHARM but, TOP doesn't fit you. STRANGE seems more fitting.
Why do you always show up to these articles I post that you can't stand and begin criticizing? Why not just stay your dumb ass away? Huh? Huh?
Thanks for the link and the dates.
Most of the statements in your article seem reasonable to a Non-Banker. But my question is, why are they not looking at more recent data than 2008?
From your article:
Deflation a big concern
Today, however, the Fed is more worried about deflation than inflation and is willing to flood the market with money if necessary to prevent an economic collapse.
I find that an accurate statement. I do not yet see the inflation that everyone is talking about, and think a deflation is a much more probable outcome.
Top Quack it seems every time there is an article about the fraud on Wall St. you rush to defend them with personal attacks on those who bring it to light now I’m wondering it seems either you like being raped by the Wall Street gang or your one of them which is it?
Baracks Wall Street Problem is Now Americas
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The “Toxic” Truth About TARP
According to the Congressional Budget Office, TARP will cost taxpayers only $66 billion
Tim Geithner’s Fed Ordered AIG To Keep Bailout Details Secret, Emails Show
So the latest in the housing crisis won't necessarily make for a great horror flick, but there's a second wave of toxic assets coming.
Stacey Vanek-Smith takes a look at what will happen in "Toxic Assets, Part II."
KAI RYSSDAL: Even though I personally am not gonna go near 'em, haunted houses are going to be big this weekend. Here at Marketplace, we've got a haunted house story of our own. Haunted housing market story, really.
It goes something like this: Once upon a time, home prices were rising. Home loans were scooped up and bundled into mortgage backed securities.
Investors bought those securities, the housing bubble burst, and the toxic asset was born. They terrorized the economy and made mince-meat out of our biggest financial institutions.
But enter Uncle Sam, toxic asset slayer, with billions of dollars in taxpayer bailout money. Problem solved, right? Yeah, no.
Marketplace's Stacey Vanek-Smith reports that like any good horror story, toxic assets have a sequel.
STACEY VANEK SMITH: Just when you thought they were dead and buried, toxic assets are back.
MARILYN COHEN: This is banking at its worst, part II.
Marilyn Cohen heads up Envision Capital Management. She says the carelessness we saw during the home-buying mania spawned the latest crisis over foreclosures.
COHEN: Everybody wanted to buy homes, and so we had a mountain of paperwork that had to be processed by the mortgage originators and by the title insurance companies and by the banks.
And they couldn't keep up. And they cut corners beyond anybody's worst nightmares. And it not only turned into a nightmare on Elm Street, but Maple Street and Main Street!
Now that the banks are trying to foreclose on people who aren't paying their mortgages, all that corner cutting has come back to haunt them. So the first time around, mortgage-backed securities were toxic because the mortgage loans inside of them were bad.
Now the same mortgage-backed securities are toxic again, but this time it's paperwork?
ADAM LEVITIN: Well, paperwork matters!
Georgetown Law Professor Adam Levitin says if loan documents weren't properly created or processed properly, banks can't prove they own a mortgage and can't force a delinquent borrower out of the home.
Banks have defended their moves to foreclose as legitimate. They say there are some paperwork problems, but that they can be fixed. But Levitin says it's not so simple.
LEVITIN: You're going to have to track down all the paperwork, and that's not a simple task, especially as a number of the major institutions that were involved are out of business.
There's a question about even if you can find the paperwork, whether it's possible to fix it as a matter of law.
Levitin says the complex machine financial institutions put in place to sell mortgage securities is backfiring. Because mortgage documents had to get passed through a complex web of lenders, packagers and investors, one clerical error along the way could raise questions about the rightful owner of a mortgage and could legally gut an entire mortgage-backed security.
LEVITIN: In some sense, they're toxic because they might not be there. If the chain of title isn't correct, it means that the mortgages never got transferred. So those mortgage-backed securities are actually now non-mortgage-backed securities.
That's right, zombie bonds. Levitin says the only way those investors could get their money out is by forcing the bank that sold them the bonds to buy them back, which probably means lawsuits.
MEETING SPEAKER: It's a pleasure to welcome you to our conference this morning...
Earlier this week in Midtown Manhattan, law firm Grais & Ellsworth held a meeting for investors in mortgage-backed securities. It was a full house. Attorney Talcott Franklin was talking about his class action suit he's organizing. He says investors have been flocking to him.
TALCOTT FRANKLIN: We're basically to the point where we're signing up a couple of clients a day. This is just like a snowball effect.
Which could turn into an avalanche. Some heavyweights, including the New York Federal Reserve and bond-giant PIMCO are demanding Bank of America buy back more than $16 billion worth of mortgage loans that they say were mishandled.
Scott Simon heads up PIMCO's asset-backed securities team. He wouldn't comment on the case, but says if the paperwork isn't right, that's on the banks.
SCOTT SIMON: If the loans aren't up to standards, the typical thing would be that they would buy them back. This is why contracts exist, right? So if I'm going to sell you a car for $25,000, and you bring me a Tonka toy car, I'm hoping that would be covered in my contract.
There's no telling how many lawsuits there will be over these zombie bonds. Or how serious the paperwork problem is. Some estimates say the banks could be on the hook for more than $100 billion, far more than they've set aside, but far less than the first toxic asset crisis.
In the meantime, banks, the federal government and would-be home buyers, are hoping that, like most sequels, toxic assets part II won't be as scary as the original.
In New York, I'm Stacey Vanek-Smith for Marketplace.
Thank you for the story this is another way regular people lost money plenty of people have/had money in bonds through their 401’ks or pension plans in addition to losing as a taxpayer it would be nice if they were able to recover a little of it. I think there will be many lawsuits.
Straight from the literature of both German Communists and the Nazis. You'd think that this alone would bother FromLori. It never does.
Facts don't matter either. To this "conservative:" Wall Street is nothing but a "gang" which pillages and "rapes." This has been already decided, and facts be damned. What remains is to persuade you of the same. What a good community organizer this FromLori is!
Nor does this "conservative' abide by Judeo-Christian principles. She does not know, in fact, what they are: like all good communists, she expects people to take sides. You are either a rapist or a rape victim.
It is "conservatives" such this one that have helped elect Obama. Let them continue their class warfare, even on this, supposedly conservative, forum.
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