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  • Danny B
    replied
    Rising debt service

    The private banks create debt-money and, the central bank creates base-money. The CB tops-off the private banks if there isn't enough new credit created to supply the funds for debt service. The CB targets 2% a year of inflation for the money supply. The CB makes a good profit as long as the economy is expanding. If the economy contracts, the CB has to do a LOT more printing to keep to make up the difference. Base money is interest-free. The FED tries to keep that to a minimum.
    Since the FED is owned by private banks, they don't want a bunch of debt-free money in the system. BUT, if the system threatens contraction / deflation, free-money is doled out to the private bankers.

    Uncle Sam does not get debt-free money from the FED. Sam could just print the money but, that would leave the bankers out in the cold. So, the bankers monetize treasury bonds and send dollars to the treasury. Here is a graph of what the FED balance sheet looked like before the 2008 bank meltdown.
    http://s.marketwatch.com/public/reso...0818115920.jpg
    The FED claims that they are going to sell off this debt. If nobody wanted it when it was fresh, nobody is going to want it now. A big part of this debt is mortgage backed securities.
    http://s.marketwatch.com/public/reso...0818115920.jpg
    Nobody wants them.

    The FED has $4.5 trillion is paper assets that it wants to sell but, nobody wants it. As the FED raises rates, FED GOV debt gets more and more expensive.
    "Economists with Deutsche Bank expect the extra debt the Treasury must issue to fund President Donald Trump’s tax package and the amount of debt the Federal Reserve plans to redeem at maturity this year will bloat issuance to about $1tn in 2018. That’s up more than 50 per cent from a year earlier and, when coupled with a 30 per cent rise in the amount of corporate debt that’s due to mature, leaves questions of who the eventual buyer will be.“
    “If demand for US fixed income doesn’t double over the coming years then US long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will probably go down as foreigners move out of depreciating US assets,”

    The FED must grossly increase it's QE or, nobody will buy FEDGOV debt.
    “The big four US retail banks sustained a near 20 per cent jump in losses from credit cards in 2017, raising doubts about the ability of consumers to fuel economic expansion. “People are using their cards to get from pay cheque to pay cheque,” said Charles Peabody, managing director at the Washington-based investment group Compass Point. “There’s an underlying deterioration in the ability of the consumer to keep up with their debt service burden.” Recently disclosed results showed Citigroup, JPMorgan Chase, Bank of America and Wells Fargo took a combined $12.5bn hit from soured card loans last year, about $2bn more than a year ago.”
    https://northmantrader.com/2018/01/2...rest-payments/
    The cost of debt service is rising all around.
    "Interest on debt alone was $32B for 1 month.
    During the same month the year prior it was $25B:"
    The debt-ceiling fight is going to flare up every few weeks. ,,,run out of cash and smack into the reinstated debt ceiling of $20.44 trillion some time in March."
    Will the budget battle cause investors to get nervous about U.S. debt?

    "China’s financial regulator has vowed to rescue the Chinese banking system immediately to avert a banking crisis when the bubble bursts, issuing a blanket guarantee that no major institution will be allowed to fail."
    This gives them more incentive to gamble.
    “We have too much debt in our system. If something bad happens, we have learned from the US financial crisis, and we will move very swiftly to contain the risk so that panic caused by a small institution does not spread,”
    China promises bank rescue in next crisis as market prophets warn on rising US rates

    The brightest from Harvard and Yale;
    "This brings us back to the mystery of what’s driving the US stock market higher than all others. It’s not the “Trump effect,” or the effect of the recent cut in the US corporate tax rate. "
    "The truth is that it is impossible to pin down the full cause of the high price of the US stock market."
    NO MENTION of cross-border capital flows.
    https://www.zerohedge.com/news/2018-...-turn-suddenly

    Bitcoin can become reserve asset – Epoch Times The hackers will just love that.
    1/23 ‘Perfect storm’: global financial system showing danger signs – Brisbane Times OZ is hooked in pretty tight with China. They will get hit hard.
    1/23 TD Ameritrade CEO warns “never seen client cash levels this low” – Zero Hedge Remember, Americans were all-in months ago. maximum leverage brings minimum cash levels. At present, the continuing levitation of prices is from investors who see American markets as being the least worst. The margin calls from hell will hit both if them.
    1/23 Goldman: “risk appetite is now at its highest level on record” – Zero Hedge Yeah, we kinda figured that.
    1/23 Kuroda pushes back against speculation tightening is near – Bloomberg The BOJ just talks and bounces around.
    1/23 Bitcoin a ‘gift from God’ to help humanity sort out its money mess – Max Keiser

    EXCELLENT article from Armstrong.
    "If we had simply created the money instead of borrowing it, the national debt would be less than 50% of what it is today."
    https://www.armstrongeconomics.com/a...out-inflation/

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  • Danny B
    replied
    Pre-globalism tax schemes that no linger work

    Stockman does not like Trump and here, he writes about all the bad things that the GOP is doing. The guy is very smart but, not infallible. Heer are a few quotes.
    Five shutdowns occurred while you editor was a member of the US House (1977-1981) and another six during his stint as director of OMB. The idea back then, needless to say, was that shutdowns came about mainly when anti-spenders refused to capitulate to the incessant demands of the swamp creatures for more appropriations, pork and graft.

    The Donald's asinine action last fall in trigging the prospective March deportation of 700,000 Dreamers has merely created the opportunity for the xenophobic anti-immigrant faction of the GOP to take a stalled appropriations process hostage for purely partisan purposes.

    That's right. There would have been absolutely nothing wrong with adding a rider to the pending CR to avoid the insanity of shipping 700,000 innocent residents----85% of whom are employed or in school----back to the "home" countries they barely remember, if at all. And all because their parents committed a misdemeanor crossing the US border decades ago in search for work; and in an economy that is now fixing to see a 10 million reduction over the next two decades in the native born workforce owing to the quasi-barren white wombs of contemporary social fashion.

    I can assure you that illegally entering the country is not a misdemeanor. Stockman does make the point here that the native birth rate just isn't high enough.
    ,,an interim game of political chicken about 700,000 Dreamers, who at the end of the day will not be deported and who will eventually get a path to citizenship.

    That's because they, and millions of more immigrants to come, comprise the only available "growth" margin for the US work force in the decades ahead; and therefore constitute the next generation of Tax Mules which will be absolutely necessary to support today's 50 million retirees.

    The southern border was left open to compensate for the lack of births in the native population. Has anyone worked out how many births America needs in a fully automated "work force"?
    Nor does it bear upon the current momentum-driven madness of the stock market, and especially not on the nation's $19.5 trillion economy. The impact of shutdowns in the past has been zilch, and so it likely will be again. Total BS
    For crying out loud, not a single dime of the big juice from the Federal budget----entitlements, mandatory and interest expense (75% of total outlays)----will be slowed down by a nano-second owing to the "shutdown".

    After all, the reason Washington is operating on its 3rd CR of the fiscal year and struggled a whole weekend to get a fourth one lasting a mere 16 days, lies in the utter irresponsibility of the Trump GOP approach to fiscal policy.

    These clowns want to spend $120 billion on disaster relief without a single dime of off-setting cuts; raise defense by $80 billion when the Pentagon is already a $620 billion swamp of waste; appropriate $33 billion for an utterly idiotic Wall on the Mexican border when the problem could be solved by cancelling the $32 billion per year "War on Drugs" and putting up guest worker sign-up booths along the border.
    Contra Corner » The Shutdown Scam: The GOP Is Now The Second “Government Party”

    Stockman wants to see fiscal responsibility. GOV spends 24% of the GDP. What does he think will happen if GOV stops all that spending? Armstrong points out that GOV never pays off the public debt. Does it really matter if the deficit goes way up?
    Meanwhile, it is not just the trillions of added red ink to fund tax cuts for corporations and the wealthy and to finance the GOP spending spree that is at issue. The GOP is proving itself to be the second pro-government party in even more insidious and craven ways.

    To wit, it can no longer say with an iota of credibility that the short-term inconvenience of the shutdown is occurring in the name of 150 million current taxpayers and future generations of unborn Federal debt mules.
    Will these tax mules even have a job?
    To wit, the GOP is targeting $4.6 trillion of spending versus a post-tax bill revenue take which will be lucky to generate $3.4 trillion of receipts. Relative to the US economy that amounts to the absurdity of taxing 16.5% of GDP while spending 22.5%----and during month #111 thru months #123 of the current so-called business expansion.

    The collapse in employment and aggregate wages has made it painfully obvious that the State can't survive on just taxes from workers. Stockman is thinking in pre-globalism strategies.
    only tool left to stop the nation's fiscal doomsday machine---a government shutdown to bargain for deep spending cuts---into a complete scam and farce.

    Needless to say, that's the real reason why this time is so very different. They will kick the can again on February 8 and several more times thereafter---until they run out of cash and smack into the reinstated debt ceiling of $20.44 trillion some time in March.
    The Treasury will be borrowing up to $1.2 trillion on FY 2019 just as the Fed is unloading $600 billion from its bloated balance sheet.
    Aside from all this, interest rates are going up. It will be increasingly expensive to service public debt. The treasury needs $trillions more at the same time that the CB intends to cut back. Every month that goes by, it will become more and more obvious that FED GOV won't be able to service the debt. It is already obvious that it can't pay it back.
    Are "they" trying to create an impasse where the FED refuses to monetize U.S. treasury debt? Will this be used as an excuse for the Treasury to take over money creation?


    Thomas Edison, “But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good. "
    The FED GOV can't pay off the debt. FED GOV can't pay service on the debt unless the FED prints the money. FED GOV is pedal-to-the-metal in borrowing and spending. Will the default cascade be used as an excuse to rile up the "end the FED people"? Will the Treasury create some kind of crypto / blockchain organization to manage the money supply?

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  • Danny B
    replied
    Trust,,, the dollar is still king

    Trust moves along with confidence.
    "This year, however, the gap all but vanished, with trust in government in particular plummeting 30 percentage points among the informed public. America is now home to the least-trusting informed public of the 28 countries that the firm surveyed,"
    https://www.theatlantic.com/internat...tm_source=feed
    Here is a graph that shows stocks vs CPI, GDP, wages and salaries. The stock market has outrun ALL of them.
    http://realinvestmentadvice.com/wp-c...sis-012018.png

    The writer seems to think that this is proof of impending doom. The bonehead makes NO MENTION of cross-border capital flows. His site is called "Real Investment Advice"
    https://realinvestmentadvice.com/cot...ks-the-bubble/

    Jim Willie, "community of nations works to avoid the King Dollar." "broadbased dumping of USTreasury Bonds "
    Armstrong, "China reduced its holdings by 1% or $ 12.6 billion to $ 1,176.6 trillion and Japan reduced its positions by $10 billion to $ 1,084 trillion. I seriously doubt that the foreign US bondholders slightly reducing their holdings in November by 0.1% to $ 6,343 trillion qualifies as “dumping” dollar debt."

    Armstrong, "The dollar is used worldwide because it is trusted while other countries routinely cancel currencies. India made headlines last year cancelling their high denomination notes overnight. This may force people to pay their taxes and prevent them from hoarding cash. But it is also why the US Treasury and Board of Governor’s staffs estimate that nearly 60% of all U.S. banknotes in circulation, or close to $500 billion, is held outside the United States. "
    "There was a 1996 article on this, they called the Money Plane when everyday, planes full of $100 bills were flying to Russia. They were shipping $100 million per day. This is why the dollar is the world’s RESERVE CURRENCY. The majority of it is used outside the country because everyone else cancels their currency routinely. The US currency has NEVER been cancelled so the very first note from 1863 can still be spent"
    https://www.armstrongeconomics.com/i...world-economy/

    Notice that the Russian Mafia ONLY wanted paper. There is a HUGE difference between paper currency and paper bonds. Here is a pic of a stash of cash from a Colombian drug lord. https://i.imgur.com/yj8U6.jpg
    He reported a shrinkage from decomposition, etc of about 10%. He could have converted it to gold but, the paper dollar is more widely accepted than gold. While dollar notes are widely accepted, dollar bonds are NOT. The Italian Mafia has printed up hundreds of them. Each one is tracked and registered with the Treasury.
    The paper dollar has the advantage of longevity over every? other currency. Not sure about the Swiss Franc. When U.S. GOV goes flat broke, the paper dollar will still be the premium paper instrument. U.S. bonds will be a different story.

    1/22 Inequality gap widens as 42 people hold same wealth as 3.7bn poorest – Guardian
    1/22 More than 10% of $3.7 billion raised in ICOs has been stolen – Reuters

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  • Danny B
    replied
    Capital flight = deflation,,, Cryptocoin, not yet

    "So The S&P has NEVER been this over-valued, NEVER been this overbought, and NEVER gone this long without even a minor correction."
    https://www.zerohedge.com/news/2018-...has-never-done
    New money is flowing in by the $billions every week.
    The Chinese are a VERY recent arrival on the investment scene. They just are NOT sophisticated enough to resist gambling with ponzi schemes. They are getting taken to the cleaners.
    https://www.zerohedge.com/news/2018-...chinas-history

    Many of them don't trust the government, Over Half of Chinese Millionaires Are Thinking About Leaving China - The Sounding Line
    Then, there is Europe.
    2012 IMF warns of threat to EU banks from capital flight | Business
    2012 IMF warns eurozone on capital flight - Financial Times
    2016 Capital Flight in Eurozone Continues | MishTalk
    2017Eurozone Capital Flight Intensifies: Target2 Imbalances Widen Again ...
    2018 Banking union is not enough to save the eurozone - Financial Times
    Eurozone inflation falls further below central bank target - Independent.ie

    Capital flight is responsible to a great degree for the inflation in American asset markets.
    Martin Armstrong – Down 39000 or Higher! « Financial Survival Network
    There is always a possibility that asset markets can go further up into the stratosphere. Bankers wanted global capital markets with no impediments. The PBOC has created more new debt than the ECB and BOJ put together. The flip side of capital flight is; DEFLATION. Globalism has benefited just 6 States. Much the same, unlimited capital flows have had negative effects on all but a few States.
    Armstrong talks vaguely abut a new "Bretton Woods." This would take unprecedented cooperation. Pox Americana isn't going to cooperate with anybody.

    1/22 IMF calls for global coordination on potential bitcoin regulation – Strategic Coin
    1/22 U.S. rating agency to issue cryptocurrency grades Wednesday – Bitcoin
    1/22 The bull and the bear case for cryptocurrencies – Forbes

    Bitcoin is just a bunch of nonsense.
    1/19 Hackers have stolen about 14% of digital currencies – GATA
    As long as the State wants access to EVERYTHING, crypto has no future.
    1/10 FBI chief calls unbreakable encryption ‘urgent public safety issue’ – Reuters
    The NCS itself was hacked. How safe is your cryptocoin?
    1/22 15 year old hacker impersonated CIA director in massive data breach – Zero Hedge

    The blockchain has great possibilities. Some of the crypto coins have good possibilities.
    1/20 Menacing malware shows the dangers of industrial system sabotage – Wired
    1/17 Trust war: dangerous trends in cyber conflict – War on the Rocks
    1/16 The future of high-tech espionage – Wired

    Untraceable stores-of-value have no future if they exist ONLY in cyberspace.

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  • Danny B
    replied
    Will the State use the Blockchain to end banking?

    This post is about a new subject that I am trying to grasp,,, as far as the possibilities and probabilities.
    1. The State never willingly gives up control.
    2. Computers are very good at keeping track of everything.


    The G-30 published a 100 page document on a study of Central Banking. In the Synopsis page, they state, "Central banks were first established in the 17th century, with the primary purpose of providing war finance to governments"
    http://group30.org/images/uploads/pu...ralBanking.pdf
    Originally, the King couldn't start a war if he couldn't pay for it. Often, he could get the bankers to loan the money for war. It made sense to loan money to both sides so that the bank would always get repaid. At times, State finances weren't great enough for war and, the State went off the gold standard to expand the currency supply. War is good business for bankers because a leader will spend whatever is required to ensure victory.
    "President Lincoln needed money to finance the War from the North. The Bankers were going to charge him 24% to 36% interest."

    Lincoln turned down the N.Y. bankers and printed "greenbacks" to finance the war. After the Battle of Bull Run, the South was just a few miles from D.C and could have easily taken it. But, the bankers wanted to prolong the war. They also didn't want the North to lose.
    JUDAH BENJAMIN: THE BIG JEW OF THE CONFEDERACY

    Banks & war,,, they go hand-in-hand. BUT, the State and the banks have an uneasy alliance.
    "The War of 1812 proved a financial catastrophe for the United States. One of the main reasons financing the war proved difficult and costly for the United States is that few preparations had been made prior to a declaration of war in June of 1812. Another factor was the dissolution of the national bank, the charter for which expired in 1811"
    GOV killed the national bank in 1811 and got a war in 1812. Later, Andrew Jackson killed the Central Bank in 1833.
    What if the State could somehow operate independent of the banking system?

    Natalya Kaspersky
    "Bitcoin is a project of American intelligence agencies, which was designed to provide quick funding for US, British and Canadian intelligence activities in different countries. [The technology] is 'privatized,' just like the Internet, GPS and TOR. In fact, it is dollar 2.0. "

    "I used to think “fintech” meant the end of physical cash - replaced by mobile payments platforms owned by big multinational firms and currently led by China, in established currencies regulated by national governments and international agreements.

    I now wonder whether the ultimate fusion of technology and finance will mean “the end of money,” at least as we have known it for the last millennium."
    "Dimon’s first point was that “blockchain” — a globally distributed ledger of financial transactions made secure by advanced cryptography and competition among “miners” (computers competing to execute and record transactions, and being compensated for doing so) — has massive upside. But to become central to mainstream commerce, blockchain will have to lose its unregulated open source roots"

    "All are powerful indicators that the leading edge of “conventional” finance is taking very seriously the prospects for very radical financial innovation."
    "Finance meets technology, harnessing the combined power of Wall Street and Silicon Valley. Not only the end of cash, but also the end of money. That is the prospect and potential of fintech"
    The Banking Mafia loves a "cashless society" when they have the TOTAL Control & Records of ALL financial operations as well as total control (allowing or denying) of every single individual activity. If the nodes in the blockchain are all controlled by the banks you not only have one currency but one central authority.

    OK, so, the State never shrinks. Many millions of bureaucrats want to continue to draw salaries. Since the State is not a producer, it must take from the actual producers. The bank is not a producer so, it must take from the actual producer. Who has the guns? Who has an absolute control structure?

    I think Lynette Zang may be onto something with this ACC chain. Just as your car, your trailer, your boat, your house, your business etc are already on the IRS and property tax records, these will be recorded onto digital centralized blockchain or hashgraph ledgers whether you like it or not. You will only get digital currency "credits" for these on the "government digital ledger" if you have physical assets, former fiat currency you have turned in Indian Rupee style, stock certificates, social security benefits, pensions or even surrendered physical gold and silver that have been entered on the ledger. If you don't list these, then guess what, no digital currency credits for you, and you won't be able to buy anything, because you will be "digitally broke."

    Indeed, we may wind up going to the extremes: local barter vs new world order digital currency. But the bottom line, this digital currency will have to be backed by something, as simple unbacked fiat currency dies a slow death, and you, the peon, will bear the burden of providing the GOV with proof of your assets if you want to partake in the new digital world. Welcome to the new world of ultra control.
    Lynette Zang has several interesting vids.
    https://www.youtube.com/watch?v=IzKxMYaGrlQ

    Everything that might be of value to the State is registered to your SS number. Previously, it was impossible for the State to keep track of EVERYTHING. Is the State creating a situation where it no longer needs the bankers?
    Martin Armstrong's program, Socrates writes it's own reports without any human intervention or prompting. War is very inefficient but, profitable to the bankers. Will an AI-controlled financial system do away with war because it is so inefficient?

    The State will have to come up with some EXTREMELY innovative solutions to deal with the problems that will show up after the default cascade. Granted, politicians are the worst people to run a State. While there are a lot of forces trying to greatly diminish the population, this would completely erase the State as we know it. We are rapidly falling into global cooling with the crop losses and plagues that are attendant.
    Will the State erase the banking system in the face of great adversity to maintain the power of the State?

    How will the State react when money stops working?
    https://www.washingtonpost.com/news/...=.3cbaa0a20259

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