Friday, October 30, 2015

Larry Summers Cannot Save the Fed and Misspoke About Fed Capabilites

This article was first published at Talkmarkets:

Larry Summers has spoken once again about secular stagnation on a Business Insider article entitled Larry Summers: the Global Economy Is in Serious Danger. Summers makes an excellent case for why things cannot remain as they are. He is right in saying that stimulus in the form of fiscal efforts is likely needed to expand the US economy.

But, there are two points that were contained in the article that make me not trust him anymore than I trusted him when I wrote the article Summers and Roubini Talk Negative Interest Rates, Sound Logic but Uncharted Waters.

First of all, I had mentioned that more than anything, Summers worries about and cares about the banks first. Every motive he has, to the best of my observation, revolves around what is good for the banks at that moment. It may not be a long term fix he has in mind, but he is bank first at least in the now.

So, it is no surprise that he says we should have fiscal stimulus to really put the economy on a path towards lift off. He may really want this for benefit to society, but he really mostly wants this because  he says there is a shortage of treasury bonds. He says what others have been saying, that bond markets are telling us that there are not enough bonds. He wants more fiscal spending and resulting debt, in order to produce more bonds! That is for the banks, clearinghouses, and derivatives. That creation is for the financial system most of all.

A shortage of bonds causes interest rates to experience lower yields and bond prices to go up. Banks don't want to pay too much for bonds and want more bonds available. And it isn't really normal to have this great shortage of bonds, until this new normal, that is. Summers knows this, and wants rates to go up by burying America in a sea of red.

Bonds are the new gold to the bankers, but bonds are a burden to the taxpayer, who can't grasp this new economics. Looking at Japan one can think that we could be there some day. Just how much debt can a nation handle before it becomes a big problem. Well, nations probably can handle more than 90 percent of GDP which was a Rogoff austerity idea debunked.

But nobody wants to be Japan at 200 of GDP percent either.

Gary Gordon had mentioned that long bonds are being gobbled up by foreigners.  Debt is increasing fast, as Gordon says, but Summers says it is not fast enough. But recently, China and Brazil and Russia are selling US bonds because of the crisis of capital leaving those regions.

Summers acknowledges capital flows out of emerging markets as a reason that the US government must spend. While I believe he is right that most economies, except those with massive export capabilities, cannot self restore, it is still a fearful thing to contemplate massively more in deficit spending. It is a great experiment, after all. 

I think deflationary pressures of a global economy are not over, and especially, I think that the Fed may want some deflationary pressures, so it doesn't have to act. An economist friend of the Grumpy Economist has said that the Fed bought a lot of long bonds (and I believe has created a market for a lot of long bonds as collateral), so that it cannot raise rates or risk not sending payments to the treasury as it has done for so many years. Grumpy's friend said there could be large mark to market losses if the Fed ever raised rates significantly.

So, we need to look at the ways in which the Fed has set things up to predispose it to keep rates low.

1. Grumpy's friend says the Fed can't afford to pay the treasury interest if rates are significantly raised. That is almost a hostage situation.

2. The banks have bet on low rates, taking the floating low side of the swaps bet when they issue loans.

3. The Fed pays interest on the excess reserves in order to restrain lending.

4. Long bonds are in massive demand as collateral, the new gold, and there are shortages, even with BRICS nations selling into a deep market.

So, rates are predisposed to stay low barring some unforeseen circumstance.

Summers says that all this must be overcome, that the economy can grow (without putting, I assume, those 4 predispositions in danger). But then Summers says what amounts to a mistake. He says correctly that these are the risks: too much capital goes to emerging markets, too much inflation happens or the economy overheats. But then he says, incorrectly, we can use standard approaches to combat those risks. 

But with the financial system betting on low rates, including the Fed itself, using standard approaches to a raging inflation and overheated economy will destroy the entire banking system.

As a rule, higher rates result from a stronger economy. Lower rates are the result of a weak economy. However, with the demand for treasuries as collateral going berserk, the Fed cannot count on the stronger economy to push up long interest rates as the economy overheats. The overheated economy that Summers says could be controlled cannot be controlled by a Volcker-type move. It is not true that the Fed could always use traditional means as Summers has said in the BI article.

And this is exactly why the Fed doesn't want it to even come close to overheating in the first place. That means we could be headed for deflation without changing the financial system, and there is nothing that the Fed can do about it. And that deflation will give all of us who fear negative interest rates and a cashless society a real crisis as Summers has warned about in the past. But he is willing to establish a cashless society if it means saving the banks, no matter what hardship it imposes upon the average guy on the street!

I believe that in order to return to a normal growing society, Bonds as collateral would have to be banned, and perhaps bonds issued by government would have to be done away with. Nothing will budge the long bonds from their low yields in the current financial system as it is set up.

The Fed never has needed control over the long bonds, because demand was not as great for them when the economy was in full throttle, because people moved out of long bonds into stocks. Hence, rates tended to rise, slowing things down naturally. That natural behavior of bonds is long gone, because Greenspan created the Conundrum, and Larry Summers needs to address the difficulty that we face because of that conundrum. And he needs to address new solutions toward eliminating the conundrum.


Saturday, October 24, 2015

Will Fed and Central Bankers Give Up Alchemy to Save the World?

 This article was first published by me at Talkmarkets:

Will central bankers give up alchemy to save the world? I have have my doubts. First of all, most people don't know that central bankers are alchemists. In fact, most people have no clue that they are able to issue debt in the form of sovereign bonds, like treasury bonds, and turn them into gold!

That is right. Who needs gold when debt can be gold? No I am not saying you can't use gold as gold, because it is a valuable asset. But debt makes more gold available. Indeed, alchemy is the business of turning mundane things into gold. It has been an idea that has fascinated for thousands of years. Yet, the bankers did what Merlin could only hope to do, turn something as ungold-like as debt into gold.

This gold, that is in the form of sovereign bonds, is used in the derivatives markets. The debt is used as collateral, and is as if it were gold. Gold is used as collateral too, but not nearly as much as sovereign bonds are used. Even Greek bonds were gold and if the interest rates go down, the debt-as-gold becomes worth more and more. If interest rates go up, the collateral becomes less valuable.

Debt is gold, but it is not money. It is collateral, an asset. Same for gold, it is used as collateral and is not really money, but rather functions today as an asset.

So, the question is, would the central bankers give this system up for productive lending? Would they get rid of sovereign bonds? They should. After all, the real economy is almost a second thought to the bankers, who are obsessed with saving the biggest banks and growing them larger.

From a study done by Richard Werner, passed onto me by Ellen Brown, we are able to come up with  ideas as to why it makes sense for the bankers to get out of the business of turning debt into gold. The Study is entitled: The Quantity Theory of Credit and Some of Its Applications. Dr. Werner starts by analyzing the current situation with the following points:

1. Asset transactions are not a part of GDP. Credit for asset transactions does not help GDP.

2. Commercial banks create credit, and in fact create most of the credit.

3. In order for the economy to prosper, real GDP credit must increase, and asset transactions credit (speculative credit) must decrease.

4. Investment credit is better than financial and consumer credit.

5. Without regulation forcing banks to lend to the real economy, they will not look out for the greater good and may in fact hurt themselves by seeking only their own profit motives.

6. Government and society let banks create credit. Government and society could take that privilege away.

7. Credit controls can direct a society toward greater productivity.

8. Credit controls can avoid boom and bust.

9. Falling interest rates did not help Japan escape a liquidity trap way before rates went to zero.

10. Lower interest rates do not drive the real economy, but rather are a result of low growth. So, to say low rates lead to high growth and high rates leads to low growth is wrong. Correctly speaking, low growth leads to low rates and high growth leads to high rates.

11. If Greenspan once assumed equilibrium in the markets, he then said he was wrong, and that self regulation of markets was a flawed assessment.

So, then solutions to the situation we are in by Dr. Werner seem to be simple. 

1. Banks should not lend in non GDP transactions at all. No speculation of that sort should be allowed.

2. Central banks should bail out troubled banks by taking the bad loans off the books and nursing them to maturity or until there is a market for the assets.

3. Governments should stop the issuance of government bonds. Governments should borrow from banks in their own nations, instead.

4. Fiscal stimulation should come through bank borrowing, not the issuance of bonds.

So, will the central bankers take this advice. I seriously doubt it. For one thing, they are alchemists, and they like turning debt into gold. Greenspan did not let the fledgling derivatives market come under government supervision. It now is regulated a bit, but only to insure more collateral, debt-as-gold, in the system.

It would be necessary to use something other than bonds as collateral. I have advocated that long bonds should not be used as collateral. But economists and central bankers love the way that, along with a slow economy, keeps interest rates down. But really, it is just an indication of the separation between the real economy, with low money velocity, and the asset purchase economy, that is red hot along with the demand for bonds that goes along with it.

The Federal reserve could stop paying interest on excess reserves and get banks to lend to the real economy tomorrow. But they cannot afford the real economy to interfere with their economy of speculation and derivatives and bubbles. They cannot afford the real economy to cause a wage price inflation spiral.

So they can't have the real economy heating up. They can't raise rates to slow things down if they heat up in this environment, or they will undermine this house of cards and destroy the leverage at risk in this system.

The central bankers hold to that mindset. The seeming desire of many in their employ to seek out a cashless society and break the zero lower bound, makes it unlikely that they would accept the sensible old school ideas of Dr. Werner when they have an opportunity to really control the world in a frightening way. Dr. Werner could set the world on a better path. But count on resistance.

After all, central bankers have achieved what has alluded both dreamers and magicians for centuries, the ability to create gold out of debt!

Friday, October 16, 2015

The Conspiracy of the Federal Reserve Bank, Trump Knows Nothing

 I posted this comment at Business Insider in answer to Trump, who mistakenly said the Fed keeps interest rates low for Obama:

The Fed could care less about Obama. The Fed cares about the banks because it is a bank, a private bank according to a ruling in 1982, Lewis VS the USA. And the banks can't survive without low interest rates because Greenspan expanded the derivatives system. This system is the real evil behind deregulation. I wrote about it here:
The Fed is a conspiracy. It conspires to make the economy grow slowly. The reason it does so is that low interest rates are built into the system it has built. I proved this on Talkmarkets.

The Fed is socialism for the banks, and it is a conspiracy. This is how they do it. They keep the economy from growing properly. They make it grow slow. Then the Republicans are mad that so many people are dependent on the government. The Fed really is not the government, but is a private bank. It is beholden to the banks, not the people. It is determined to keep interest rates low and slow money turn over (velocity). The Fed PREDISPOSES low interest rates and thus can't let the economy heat up. Here are the 4 ways they do it. From the article I wrote:

So, we need to look at the ways in which the Fed has set things up to predispose it to keep rates low.

1. Grumpy's friend says the Fed can't afford to pay the treasury interest if rates are significantly raised. That is almost a hostage situation.

2. The banks have bet on low rates, taking the floating low side of the swaps bet when they issue loans.

3. The Fed pays interest on the excess reserves in order to restrain lending.

4. Long bonds are in massive demand as collateral, the new gold, and there are shortages, even with BRICS nations selling into a deep market.

So, rates are predisposed to stay low barring some unforeseen circumstance.

So,Iwog, Greenspan saw the implosion of the S&L's and vowed never to let that happen again. He is the primary architect of a system doomed to low long bond interest rates and a hollowing out of the US economy. Yes, the Fed can control long rates by predisposing them to stay low in all the actions they take. They can't control long rates by manipulating the Fed Funds Rate.

Tuesday, October 13, 2015

Russia to Help Palestine Become Independent State – Putin / Sputnik International

Russia to Help Palestine Become Independent State – Putin / Sputnik International

It seems as though every issue has two sides, and the USA is on the wrong side of almost all of them. Putin appears to be on the right side of almost all the issues. Sad for America that the neocons have pulled us down. Evil Zionist globalism cannot take over the world. As you know, Zionism is not Judaism, not a religion. It is simply a nationalistic doctrine seeking world control and dominance. 

Deutsche Bank Economist: The Fed Is in Danger of Making a Mistake of Historical Proportions - Bloomberg Business

Deutsche Bank Economist: The Fed Is in Danger of Making a Mistake of Historical Proportions - Bloomberg Business

Our globalist Fed is making a mistake by keeping interest rates at zero. Even though the Fed leaders say they don't want negative interest rates, they need to raise rates a good deal to cushion against lowering them in the next downturn. They are acting like that doesn't matter, and are going to experiment with negative interest rates. They will limit cash that can be taken out of banks and will force depositors to keep most of their checks in the bank, down the road. It could be coming to America, as it has already come to Greece. 

Monday, October 12, 2015

Asperger Syndrome Government Hoaxes

Asperger Syndrome Government Hoaxes

There has to be an answer to the government and its media continually throwing Asperger's children under the bus by accusing fake shooters of having the syndrome.

One would hope that the government would come to its senses, but the truth is, the globalists have taken away the sovereignty of the nation over a long process.

Please share the Facebook page where ever and when ever you can. 

Friday, October 9, 2015

Fed Weakness, Future Insatiable Bond Demand with Short Supply

 This article by me was originally published on Talkmarkets:

The Federal Reserve and many central bankers are sincere about saving America from negative interest rates caused by derivatives markets' demand for long bonds. But the Fed could not save us from the housing bubble of the last decade and won't likely save us from negative interest rates and a powerful push towards the cashless society.

Supply and demand are key to understanding the long bond market. And that supply and demand may result in profound changes in our economic system, not for the better.

Long bond markets are likely rarely manipulated, as stocks are when corporate buybacks reduce supply of stocks available. There has been an accusation made that banks are trying to push yield up and price down, because they want the best deal for their insatiable appetite for bonds.  Manipulation of auctions to raise yield seems counter intuitive. You would think that all those warnings of yields rising would make banks want to avoid doing illegal things to make them rise, if they are going to rise anyway.

I believe that the banks know otherwise, that the yields are headed downward, and that the price of bonds they want to buy will go inevitably higher. That is why, if the allegations are true, that banks seek to push prices for bonds down.

While I am not permitted to link to it, Blackrock has a study out which was not to be used by the retail investor, but only by institutions. I don't plan on using it, but clearly the demand for bonds in that study far exceed the supply through 2016. Blackrock estimates that in 2017, that would change, but it is only an estimate, and it is only for the regulated asset owners who often times are forced by their rules to keep buying.

In the section of the Blackrock pdf. report, titled After Liftoff, by Peter Fisher, there is a chart that shows demand from regulated asset owners to be 5 trillion dollars and supply to be 5.8 trillion dollars for 2017. So, for regulated asset owners there will be a .8 trillion dollar oversupply as an estimate only from Blackrock. Previous to that there is a huge under supply.

But regulated asset owners do not make the market themselves. They are central banks, insurance companies, pension funds and and banks. But many other parties are required to put up bonds as collateral in the derivatives markets. Hedge funds, businesses borrowing from banks, private investors, make up a huge market and they could make the supply and demand picture remain as it is now. The insatiable desire for bonds as collateral could continue for years, maybe decades. In the age of austerity, rising prices for bonds could be the new normal.

While I don't have figures on those non regulated asset owners, we do know that derivatives markets continue to grow. While the mortgage securitization and CDS markets have slowed, they never were the bigger markets anyway. Interest rate derivatives is by far the largest derivatives market. This market, as well as energy derivatives are growing like gangbusters. That means it is likely that treasury bonds will experience insatiable demand for as far as the eye can see.

As we saw back in 2009, collateral needs for derivatives were growing by leaps and bounds and non regulated asset owners were a huge part of the market. And this recent alert would make it seem as though more collateral will be needed than first thought.

Central bankers may want to save us from the abyss, and even Blackrock speaks of lift off. Bill Gross implores the Fed to raise rates. The fear is that the Fed won't get high enough above zero to prevent a testing of the effective lower bound in the next downturn.

But you have to wonder if the ones calling for a cashless society and negative nominal interest rates, like Larry Summers and his friends, are the ones reading things correctly. They wish to eliminate cash as the barrier to dropping interest rates below zero.

Truth is, the Fed will become even more powerful if cash is eliminated from the culture and the zero lower bound is eliminated with the elimination of cash. The Fed appears to be very weak right now in its efforts to raise rates and return to past memories of normalcy.

But that future Fed power to impose negative rates in the next downturn comes with a price. The elderly, the poor, those with failing eyesight, and travelers could be very vulnerable to a cashless society. We all could be vulnerable, but those groups would suffer the most.

For travelers, for example, cash is king. The travel industry could be destroyed if there is established a cashless society, and businesses dependent on travel will suffer greatly.

Disclaimer, I am not an investment counselor or attorney. This is not professional investment advice.

Thursday, October 8, 2015 Zionism, Kabbalah, Masonry and World Federation Zionism, Kabbalah, Masonry and World Federation

Determining what secret societies support Israel and the New World Order may be clarified in this article.

From the article:

...The final person to talk about the Federation was none other than the
self avowed atheistic founder of Israel itself. David Ben-Gurion made
this troubling, unbiblical statement:

Jerusalem, the United Nations (a truly United Nations) will build a
Shrine of the Prophets to serve the
federated union of all continents;
this will be the seat of the Supreme Court of Mankind, to settle all
controversies among the federated continents, as prophesied by Isaiah.”

So, while the Jesuits, who likely support some version of a New World
Order, are less obvious in support of Israel and are at least divided,
Kabbalah and Freemasonry have been linked directly to the New World
Order that is inclusive of Israel holding a central role.

Friday, October 2, 2015

Freemasonry: Why the Queen of England Pretends to be a Christian

Freemasonry and the British Monarchy: Why the Queen of England Pretends to be a Christian

I try to stay away from the often confusing subject of Freemasonry, because it is a secret organization and difficult to follow in all its subplots. But clearly, many Freemasons in the world are in positions of power, in the US, UK, Israel, etc.

So, the rulers of this world, if they have a religion, are not Christians, but rather, are atheists/Satanists. The extent of this is difficult to discern, but no matter. Christ will destroy them all with His Second Coming.

In some ways, the higher degrees of Freemasonry remind me some of Kabbalah, where at the top levels, good becomes bad and vice versa. That should be enough to make Christians want to stay away from all of it!

I do not advocate using the knowledge about Freemasonry to be antiSemitic as many are. But clearly, leaders of Israel have been Freemasons, and have a close connection to the British monarch and the royals, like royal Rothschilds, who funded Israel and Zionism in the beginning.

I don't agree with the author of the article that Christians have feast days.  But at Christmas, the Queen Elizabeth said this, which is clearly not a Christian doctrine:

"We are celebrating a birthday – the birthday of a child born nearly2,000 years ago, who grew up and lived for only about 30 years. That one person, by his example and by his revelation of the good which is in us all, has made an enormous difference to the lives of people who have come to understand his teaching.” (1975)

You can find a concise understanding of Christian truth at

Thursday, October 1, 2015

Millennials Need to Wake Up About Derivatives and the Cashless Society

This article was first published with minor editing on Talkmarkets by me:

Millennials need to wake up about the coming cashless society. The reason why is because they have not been thinking critically about how it will affect America, and because they are the victims of a media blitz claiming to speak for them. But the real danger to millennials and all Americans lies in the details of a coming cashless society.

Let's look at the media blitz, Millennials. I took a sample on the first page of Google, searching for the positive take on a cashless society. There are hundreds of similar articles.

Damon Darlin, who could be a darlin' of those who seek a cashless society, wrote this NY Times piece:

Cashless Society? It's Already Coming

Mr Darlin says he has been using Apple Pay, and that it will replace your wallet, but not your credit cards. He goes on to say that young people think it strange to have more than 20 dollars, and so their behavior is resulting in the end of cash. He likes the fact that Millennials prefer debit cards instead of cash. He never mentions that the central banks want cash. He never mentions that the people who are most pushing for the end of cash are the bankers and their economists. Why would he withhold that crucial and pertinent information which is vital to any citizen, even if it is a millennial?

5 Payment Trends to Know About Millennials in 2015

This Mastercard article is quite disturbing, really. Essential points are, Millennials want a secure future so they want that thumbprint ID; Millennials call the fashion police every time they see a bulky wallet; Millennials are always on the go. So the author, Brittany Berliner, says that she simply has no reason to pay with cash. She also withholds information that the bankers and their economists are pushing for the end of cash and that millennials are ready to scrap cash for the very shallow reasons she gives, like the unsightly fashion error of a fat wallet.

Millennials Checked Out on Using Cash

Nerdwallet interviews some Millennials and one is so excited that we are facing a cashless future. He believes people in the future won't even know what cash was. Of course, neither the author of the article nor the interviewees discussed for the record the banker and economist obsession with eliminating cash in order to offer interest rates. I wonder how these millennials will react to having interest taken out of their accounts with no recourse but to allow it or spend?

Survey Shows Shift Towards Cashless Society Driven by Millennials

We know that many Millennials don't trust bankers and don't like being burdened by long term loans. They saw parents burned by easy money loans. But this article, like all the others, does not make millennials aware that their bankers want this cashless society, you know, the same ones that wanted the housing bubble last decade.

Can We Ever Become a Cashless Society?

This author has an interesting take. He says we spend so much money on ATM fees, think what savings will befall us when cash is eliminated? Of course he is skeptical of the speed of change but others in the discussion speak about cashless societies appearing in the next 10 years. Again,there is nothing written here about the desire of bankers to charge negative interest rates and force you to spend or leave your money in the banks.

So, you millennials don't trust bankers? Well, what if you all migrate to digital currency and the banks charge a negative interest rate because core inflation is non existent? And then they don't count food and gasoline in that core inflation metric and your real inflation goes through the roof? They could be taking interest from your captive digital accounts in the cashless society while you feel the pinch of real rising costs in your budget. Without wage inflation, meaning raises, asset inflation acts as a tax on your ability to spend and pay your bills.

Now how will you millennials feel about the cashless society? And what if you are in a pinch for cash and your account is on hold because you couldn't make an automatic payment, and you don't have access to cash? These questions must be asked and more people need to know why they need to be asked and what the answers are. The answer is that you could fall off the digital grid, and if you do, you face dire and even life threatening consequences.

So, millennials, where are we in the process? The Fed helped create three financial monsters:

One is that the banks mostly take the low floating side of the swaps (insurance) they issue when they lend money. This makes low interest rates necessary to the big banks' bottom lines.

Two is that the demand for treasury bonds is artificially high because of the need to protect those derivatives with collateral. The bonds are in massive demand for collateral as derivatives grow. This is forcing the negative interest rate direction and is forcing a cashless society.

Three is that banks get interest paid to them by the Fed on excess reserves they hold. This Zombifies the banks and they don't lend into the real society. An article from the New York Fed warned about this third point way back in 2012. This lack of lending is deflationary in and of itself!

So, we are at the cash hoarding process, or close to it. We are entering a possible negative interest regime, where the financial system will see banks wiped out of deposits as many people take them elsewhere or home to a rodent proof safe. The talk of the cashless society is accelerating, right this moment. There could be shortages of cash if the banks do not create more. The solution of the globalists to these potential problems is a cashless society.

You won't see these things being discussed in your millennial targeted feel good articles about a cashless society. But remember, you were the guys who grew up seeing what the financial system can do when it wants to be predatory. And how better to exert predatory behavior over you than to require that you spend or pay interest.

What looks like the inevitable must be stopped or seriously modified so the Average Joe has access to cash. If there are emergencies, cash will be needed. If your account, millennial reader, has a glitch, you will need cash.

If you think the feel good articles on the cashless society are how the media really feels about you you should read my article regarding the attacks on millennials because they are not buying houses. This is what the media and their sponsors, often time financial interests, really feel about you.