Wednesday, March 30, 2016

Proof The Federal Reserve Was Responsible for the Housing Bubble and Crash.

 This article was first published by me on Talkmarkets:

I hate to continue beating a dead horse (except this horse is a Trojan Horse and will come to life again), but clearly the Fed knew it was putting the financial system at unacceptable risk in the housing bubble.  I offer the three charts again, together this time, showing that the Fed saw all this coming.

I have said that I think it was a conspiracy, others may argue that the Fed was incompetent. But these are the brightest financial minds on the planet and I hardly think that incompetency was the issue! Besides the charts, there is more research provided here in trying to get to the bottom of this Commercial Paper fiasco, the real cause of financial instability, that regulators helped make happen!

These charts show what happened in late 2007. It was all happening at once, too obvious to ignore on the part of the Fed.

Chart 1:

Chart 2:

Chart 3:

I like the third chart because The GDP (NGDP) showed a little rebound until the middle of 2007. That corresponds to the crashing of the 10 year swap rate and rise of LIBOR in chart 2. It also corresponds to the decline of commercial paper in chart one.

So, we had these three events happening in mid 2007, and the Fed wasn't concerned? Are you kidding me?

This was way before the money market run in September, 2008. It makes no sense that the Fed was so blind. As this Fed research paper shows, the residential real estate loans based on commercial paper went from 11.6 percent in 2006 to 4.8 percent in 2007! That is a massive crash.

And yet, that commercial paper crash in the link above doesn't look as dreadful as the FRED chart 1. That is precipitous. It could be explained by shadow banking conduits, as shadow banking was the key to the crash of the CP market.

I point you to a Stanford study which is fascinating and worth looking at. The Stanford author, Bill Snyder, clearly views solving this issue as a riddle. Research goes off on a number of tangents and Stanford did exhaustive research trying to come up with the solution.

In the Stanford article, it is stated that the crisis and panic happened in August of 2007. Well, that corresponds to what I have been saying and what the charts were saying. The CP market imploding corresponded to the subprime panic. Mid 2007 was when all this action converged.

The author goes on to say that the shadow bankers had a primary role in all of this. They had mortgage loans, auto loans, credit card loans, all financed, not by deposits, but by repurchase agreements (repos) and by asset backed commercial paper (ABCP). Receivables are turned into commercial paper that investors buy.

The problem was not just the run on repos, but rather, the impact of shadow banking activities upon the commercial banks.

It wasn't the shadow bank money market run that was the main event. The main event was the fact that most of the bad mortgages were backed by the CP market, and the CP market was underwritten by the commercial banks! 

Off balance vehicles hid this commercial banking connection to the bad securities, the MBSs and CDOs and CDSs that ultimately went bad. So, when the shadow banking system contracted, the commercial banks were stuck with bad paper, and could not find buyers for the CP. That forced the CP back onto the balance sheets of the banks.

The study concluded that CP must be scrutinized and off balance sheet Enron-like special purpose vehicles (also known as SIVS) should also be targets of regulators.

 It is interesting to note that Helocs continued unabated through mid 2008.

So, massive increases in bank debt and leverage made loan losses magnified. As Wikipedia says:

In the years leading up to the crisis, the top four U.S. depository banks moved an estimated $5.2 trillion in assets and liabilities off-balance sheet into these SIV's and conduits. This enabled them to essentially bypass existing regulations regarding minimum capital ratios, thereby increasing leverage and profits during the boom but increasing losses during the crisis. Accounting guidance was changed in 2009 that will require them to put some of these assets back onto their books, which significantly reduces their capital ratios. One news agency estimated this amount at between $500 billion and $1 trillion. This effect was considered as part of the stress tests performed by the government during 2009.[130]
During March 2010, the bankruptcy court examiner released a report on Lehman Brothers, which had failed spectacularly in September 2008. The report indicated that up to $50 billion was moved off-balance sheet in a questionable manner by management during 2008, with the effect of making its debt level (leverage ratio) appear smaller.[131] Analysis by the Federal Reserve Bank of New York indicated big banks mask their risk levels just prior to reporting data quarterly to the public.[132]
This is not shadow banks, which failed miserably. No, the Fed should have known that this activity was happening with the commercial banks which undermined the financial system. After all, the commercial banks held all the deposits and were responsible for said deposits. The CP market was central to the crisis and the CP was underwritten by these depository banks. The banks were allowed, by regulators, to move assets off the balance sheet. Sorry, this was not done in secret as the above Wikipedia article notes:
Regulators and accounting standard-setters allowed depository banks such as Citigroup to move significant amounts of assets and liabilities off-balance sheet into complex legal entities called structured investment vehicles, masking the weakness of the capital base of the firm or degree of leverage or risk taken. One news agency estimated that the top four U.S. banks will have to return between $500 billion and $1 trillion to their balance sheets during 2009.[187] This increased uncertainty during the crisis regarding the financial position of the major banks.[188] Off-balance sheet entities were also used by Enron as part of the scandal that brought down that company in 2001.[189]
So again, the Fed is culpable for this off balance sheet banking that ruined the CP market resulting in the theft of trillions of dollars from the Middle Class.

We already knew that the Fed mispriced risk of MBSs in the beginning of the crisis. Then, the Fed allowed off balance banking in the big commercial banks, that ultimately destroyed the CP market. And after that, the Fed didn't increase the money supply when NGDP was falling!

The Fed did absolutely nothing good until the crash, yet the Fed knew what risk it was putting on the system and it should be held accountable. It may even be criminally accountable. It is not a government agency, after all.  

If no one is held accountable for acts of fraud and unacceptable risk taking, then the banks will be given the power to fleece America again. They have now reserved that right for themselves thanks to the Fed. Our sovereign nation is no longer really sovereign.

Monday, March 28, 2016

El Erian Has It Right. The Failure of Monetarism and Asset Purchasing

 This article was first published by me on Talkmarkets:

Mohamed El-Erian, former PIMCO guru and current Allianz economic adviser warns that corporate cash, now being hoarded, must be unlocked for growth to take place. Otherwise he fears political collapse and economic demise.

He rejects the concept that people's QE (helicopter money) should be attempted, because of the unknown political ramifications. I don't know that I agree with him. Everyone else has benefited from QE except the people! But he may be right.

But nevertheless, I know he is right that monetary policy has limitations. He is right that the monetarists and market monetarists have failed to get money to filter down to the real economy, even though assets like fine art and high end houses and stocks appreciated. Asset inflation also has a dark mispricing of assets attached, most often. That makes asset inflation a policy geared to picking winners and losers among us. That is very unAmerican.

He basically says that asset inflation, and methods to bring that about tried by the central banks, is simply not working to cause overall prosperity. It is true that this central bank trickle down economics is not very effective.

Yes, it is better than doing nothing, as no one prospering is even worse than just rich people prospering. But this practice of asset inflation has widened the wealth divide and is simply not enough for the economy to strengthen. There must be a better way and for El-Erian, it is the unlocking of corporate profits.

I would assume that unlocking of corporate profits means paying better wages and benefits. Paying good wages was just good business, not altruism, according to Henry Ford. When are American companies going to seriously take that advice?

And if you read Logan Mohtashami, who has very helpful research, you can see that cash buyers are still making up a huge part of the housing market, even in 2016. 26 percent of buyers n January, 2016, bought with cash. This is a buying up of America for the investor class that appears to me to be very unhealthy. This is part of that unhealthy asset inflation that El-Erian is talking about.

Mohtashami is always the optimist, saying that cash buyers will drop to 20 percent of buyers in the rest of the year. But he still adds a cautious note,  saying that buyers cannot gain enough equity to move up to better homes, and we know that was a central means towards prosperity in the last century.

So El-Erian is not speaking in a vacuum. It is simply essential that corporations pay better wages, that they make the real economy prosper. With the Fed betting on low bond yields and banks doing the same, we will likely never return to the prosperity of the past, but we certainly can do better than what is going on now.

And that means the economy needs to be set up so all classes have the opportunity to get ahead. That is missing now. That is stealing from future prosperity. Business would do well to heed this warning, that future prosperity for them demands better wages now. It is just good business.

Finally, El-Erian fears that improbable events, like a Trump presidency or massive fluctuation in the price of oil, from 3 to 7 percent, become more probable as this asset inflation and wealth divide increases. That should alarm everybody. 

Wednesday, March 23, 2016

The Fed Did One Thing Right in the Great Recession. But It Wasn't Enough

 This article was first published by me on Talkmarkets:

The Fed actually did something right during the Great Recession. It created the Commercial Paper Funding Facility. The CPFF contributed to liquidity in the commercial paper markets.  The facility was closed in 2010.

Commercial paper funded real estate loans, and with the stricter guidelines implemented after the real estate crash, commercial paper actually has slowed down significantly as a means of funding consumer debt.

So, as a result, household debt has been drastically reduced:

As Stephen Williamson, St Louis Fed VP, has pointed out, the decrease in consumer debt has been mainly mortgage debt reduction. Fewer people qualify for loans. Yet, as the chart below shows, banks continue to lend robustly to somebody, but not necessarily to the American consumer:

It has been said that this lending has partly been in ABS lending, auto loans as opposed to MBS lending, mortgage loans. This would explain that direct lending. And also, the banks are taking up some slack in Europe. This lending is not creating inflation in the USA, as the consumer is languishing.

So, there are healthy and unhealthy aspects to this slowdown in lending. Consumers are able to strengthen their balance sheets but maybe not so much as rent has been increasing. At least the temptation to get HELOC funding is way down, as Dr Williamson points out. The expectation of house appreciation fueled that HELOC funding, as consumers believed their house prices would go up to offset the additional credit from HELOCs. Of course, when that appreciation stopped, the entire edifice was plunged into a Great Recession.

The expectation of house price increase was fostered by the bankers,  and especially by chief NAR economist, David Lereah. I watched David Lereah appear on CNBC daily for quite some time during the slow motion housing crash, stating that house prices would bounce back, that the dip was temporary.

Was he at fault for this misplaced optimism or was he abandoned by the Federal Reserve, who, although they did offer liquidity, seemed to plan the decline of commercial paper by design? Perhaps it was a mixture of both Fed design and Lereah's misplaced optimism. Maybe we will never know for sure. Market monetarists would certainly blame the Fed for a decline in commercial paper. Lereah did admit to lying about the housing bubble.

Certainly this decline of commercial banking is not something new. It was what happened in the Great Depression. And government was angry with the bankers for pulling back. The austerity was found in the Industrial lending category in the Great Depression. Banks will let you down to protect themselves. Borrowers must always remember this important lesson. The warning to all of us is in the link above and it is a disturbing revelation about the central bank and banks in general. It is really the dark side of banking at work here:

Many economists believe, however, that regardless of the extent of future business and industrial expansion, short-term commercial bank credit will constitute a progressively less important factor in American economic life. This view is predicated upon the belief that changes in the structure of business and industry have profoundly altered the relationship between banking and industrial enterprise. In the belief of Lauchlin Currie, technical advisor to the Federal Reserve Board: “If economic progress continues to be associated with the increasing importance of the larger corporations having access to the stock and bond markets, there is a strong probability that the commercial loan will continue to decline in the future.”

It is slightly different in our day. In the Great Depression, C loans, consumer loans, have been curtailed. In the Great Depression, it was much worse. In the Great Depression, I loans, Industrial Loans, were curtailed. We may be making some progress here. But this is clearly why banks are lending mostly to big business through the credit markets, and why again, in our day, commercial banking is declining, although moreso in real estate to consumers rather than loans to businesses.

However, loans to businesses have the built in evil of requiring small and medium business to take the high fixed side of the derivatives bets. That guarantees bank profitability. But it is also kind of low down and underhanded in my opinion. And it insures that the Fed will do everything in its power to keep long bond interest rates low and growth slow.

The Fed didn't do enough, although it did some things to protect the bankers. It didn't do enough for the mainstream economy.

At least it is something to think about going forward. 

Sunday, March 20, 2016

My Response to An Interesting Article on Talkmarkets by Libertarian Steven Saville

The article link above makes for interesting reading. This is a Libertarian view as opposed to the Keynesians. But I responded with two comments:

Author says: "The fact is that the Fed does cause severe economic downturns, but not by tightening monetary policy. In the real world, every boom that occurs on the back of money-pumping and interest-rate suppression contains the seeds of its own destruction. The reason is that the falsification of prices resulting from the central bank’s efforts to stimulate economic activity leads to widespread malinvestment."
I agree with that, because risk was mispriced. But we know that the Fed failed to make up for the destruction of the commercial paper market and for the pulling of Heloc credit by failing to increase the money supply. So, the Fed probably made the recession much worse by not taking action to make up for that obvious shortfall. The Fed knew that GDP was crashing and just did nothing.
It is the Market Monetarists who correctly pointed this out, not the Keynesians


One more point, it is clear that inflation was continuing, while GDP was falling, in 2007-8. So by monitoring inflation and by ignoring GDP decline, the Fed simply allowed the economy to be ruined. That probably was unnecessary. Look at house prices. They have bounced back, only the middle class doesn't own them now, the wealthy investors do. That seems conspiratorial to me.

So, I do not let the Fed off the hook. The Fed mispriced, risk, causing malinvestment in housing. But it also ignored the crash of GDP. So, the Fed had a part, in the housing bubble and crash, from start to finish. 

Saturday, March 19, 2016

Will Millennials Be the Greatest Generation? Frugality, Trump and Foreign Policy Ethics

 This was published by me on my personal blog at Talkmarkets:

The Millennials are not held in high regard as a generation by the pundits and bankers. They don't buy big ticket items. They live at home. They rent. They are frugal. But it may be up to them to restore the Peace of Westphalia. [There is always disputes about the ages of the generations, but the Millennials are generally thought to comprise a time of birth from 1982 to 2002. These dates are not set in stone.]

The Greatest Generation, crowned with the title by Tom Brokaw, suprisingly had traits in common with the Millennials and some that were not as redeeming as those held by Millennials. The Greatest Generation (born 1901-1924) was labeled as such because they experienced the difficult economic times of the Great Depression. They did not borrow much. When they bought houses, the houses were cheaper.

The Baby Boomers (1946-1964), did buy expensive, inflated houses and paid the price for too much debt in the housing bubble and crash, as did Generation X (born 1965 to 1982). These generations took on too much debt. Rather than praise these generations for making them money, the bankers and their media minions loathe the Baby Boomers even as they made big banking rich. Easy money from bankers allowed the boomers to take risk that proved disastrous.

Yet the bankers fear the Millennials even more. They are frugal, and they mean to stay that way. If they buy houses it will have to be a reflection of their prosperity, and that is not widespread, although about 1 in 10 make more than $100 thousand dollars per year.

The Greatest Generation is noted as such because of their character, bravery, willing to keep America free. They also were backed up by the Silent Generation (1925-1945), in that call to duty. The Boomers hated the never ending Vietnam War. Their lack of cooperation was no doubt the motive for the professional army, which fights on and on endlessly in the middle east.

It isn't lack of bravery that caused the Baby Boomers to shirk stupid and ill fated wars of greed. They never had the opportunity to prove themselves in a real war of national self defense like World War 2.

The Millennials have traits that come from Boomers and the Greatest Generation. Their frugality has been mentioned mentioned. Their desire to put off decisions about marriage and money shows they are not willing to be prisoners to credit. The Millennials also are not willing to fight wars for the American Empire and greed. They learned that from the Baby Boomers.

But one thing makes the Millennials great, and that is they are not racist. They are a tolerant generation. They are the most tolerant generation. The mainstream media would like Millennials to be less tolerant and sometimes that media points out minor flaws in the research.

But don't be fooled. Millennials are less racist than those who have gone before them. Don't let the media fool you.  Millennials hate Donald Trump's politics and that is a good sign for tolerance, which is a basic American core value. Here is Trump expressing an uncomfortable symbolism courtesy this link.

Uncomfortable Symbolism. Courtesy

Trump has denied the Hitler implications of the above photo, but even if he is telling the truth, it shows a remarkable lack of self awareness on his part, especially since he has been light in his criticism of racist groups that support him.

Would that pre-Hitler Germany had had such a tolerant generation, and maybe the most wicked man in the history of politics would never have come to power. One hopes that the Millennials will stop Donald Trump, who, while he cannot be compared to Hitler at this point, has some traits that are worrisome.

Hitler appealed to nationalism, which is not wrong in and of itself, but it was never the goal. The goal was racism, and antiSemitism. With Trump, we also have an appeal to nationalism, and yet it does not appear to be the goal. He hates most groups except white males, in my opinion. Yes, Trump has offended women, Hispanics, blacks, Muslims and native Americans.

Trump went after native American Mashantucket Nation, saying they didn't look like Indians to him. That was back in 1993. He said they were mafia infiltrated. Some things never change with the Donald. Now we hear that Trump may have had a mafia tie.

There are ominous similarities between Trump and Hitler and a Trump presidency could be very dangerous to Americans and our enemies and friends. It could be the last presidency. Can you imagine if Hitler had been armed to the teeth with nukes? He would have used them. Trump does not sound like a wallflower when it comes to nukes, but everyone should be a wallflower when it comes to the use of nukes.

The stakes are even higher now than when Hitler was in power. This is something to think about when you go to the polling booths and contemplate voting for Donald Trump. If we ever get a real nationalistic candidate that is against empire and globalism, he will seem more like JFK than like Donald Trump.

Perhaps a Millennial will rise above all this and run for president, being pro America (anti empire), but tolerant at the same time. That would truly signal a Greatest Generation come of age. The Peace of Westphalia, as I linked to above, is a symbol of sovereignty. It gave to the nations the right to handle their affairs in a sovereign way free of empire. This has always been the right order of things, in my opinion. We have seen empires come and go, yet sovereign nations remain.

If America is going to be the best nation, it can't be a George W Bush nation or a Donald Trump nation. It can't be the manifestation of raw power and illegal warmongering. No nation is perfect, but, the best sovereign nations are strong enough to be benevolent. Why can't America be this strong? 

It is up to the Millennials to demand America be this strong with a tolerant version of sovereignty. No more Bush/Trump/Obama endless war in the middle east and elsewhere would be a great goal of Millennial politics going forward. Stopping regime change and neoconservative politics is crucial for the future success of the United States and for business in the world.

We simply cannot afford to have these disruptions, like war in the Middle East, which have proved costly and hurtful to our economy. Perhaps the Millennials will gain a zeal for right thinking and rethink our national interest to reflect what our nation's interest really is, not the interests of the UK, or France, or Germany, or China, or Israel. Our interests must reflect our needs as a nation first.

And once we know what that interest is, we must be slow to war, avoid it at all costs, as it has cost our nation dearly in lives and money. I hope the Millennials are up for this battle of ideas. Our millennials must be made strong by American prosperity and by the ethics of their politics. Time to get to work, elites, so you can help make this happen. Pay these young people higher wages. Let them gain enough financial prosperity to secure excess world production, as Americans have done in the past. And then millennials, speak out about the issues that concern you regarding how the world is going. WW3 must be avoided at all costs and our national interest will serve millennials well in attaining peace in the world.

Thursday, March 17, 2016

Deflation Is the End of Capitalism? A Look At Monetary Stimulus and a Real Solution

 This article was first published by me on Talkmarkets:

a real solution offered at the end of this article, I have been trying to get a handle on what deflation will look like with negative interest rates. Certainly, we are familiar with disinflation, a slowing of inflation. Yet disinflation is not deflation. Deflation is a different animal we have not experienced. Deflation could include a serious reduction of production, a serious slowing of credit, but must include a serious contraction of the money supply and a serious reduction in prices for consumer goods across the board.

Imagine a housing crash with all other prices falling at the very same time. That is deflation. Since commodities have crashed, it makes no sense for houses, made out of commodities, to remain priced as if they cannot be replaced by cheaper production of new houses. Housing in white hot areas could crash, unless there is simply no room for replacement. New modes of high speed transportation may eventually cause a decay in prices in those areas. That will be painful but is not imminent.

Deflation is the diminishing of demand, so much so that businesses have difficulty making money. My parents experienced deflation in the Great Depression. My adopted father had his wages cut, but could have become unemployed but for the importance of oil in his community. His payments stayed the same. The car was parked because they could not afford gasoline, which was dirt cheap, but they simply had no money to buy it. Good thing they lived in a small oil town. They walked.

Deflation is the absence of money, the massive contraction of the money supply. For my parents money was in great demand. A little went a long way, but few had much money. Deflation coupled with negative rates, as a means to increase the money supply will be a crushing tax on the average consumer.
Deflation reduces business revenues. In the Great Depression, as pointed out by Zero Hedge, farmers could not make a profit. You have to have food, so subsidies were issued for the farmers. 

A spiral or cycle of deflation brings unemployment, lack of profits, and requests by business for subsidies. So, we are apparently headed toward a global deflation, which certainly has a lot to do with a contraction of the money supply and price declines everywhere.

When the Federal Reserve was created in 1913, it immediately created deflation. If the Fed created deflation in 1913, is the Fed creating deflation along with all the central banks around the world now? One reason the Fed would want to do this is to force wages down in the developed nations as was what happened in 2008. Or the second reason is that the Fed wants deflation in order to ban cash and save the banks at the expense of the real world! That is creepy if true. I can't think of any other reasons why the central banks would do this.

Trusting the Fed in inflationary times is difficult enough. Trusting the Fed in deflationary times will be almost impossible.

And the government cannot be trusted, as it is in an austerity mode, when clearly Keynes said it should not be, that it should buy stuff and hire people in a deflationary scenario. So, why would Keynes be dead and the New Keynesians be all that is left? I believe it is because the NK's are really afraid of big federal stimulus, although they speak out against government austerity. They mainly want to ban cash and go negative with interest rates. The NK's, Paul Krugman being the most famous, are resigned to our Japan-like malaise.

And the central bank solution to deflation is negative interest rates as well. In Europe, negative rates are paid on bank reserves. Unfortunately, that is being passed along to some retail accounts. Scott Sumner says negative IOR is not bad in and of itself, but negative interest rates on bonds are bad. But Bill Woolsey, another market monetarist, has said negative IOR will get passed on to retail accounts. For me, that is a tax, a deflationary tax, making people feel poorer.

But, for the market monetarist, that tax creates a hot potato effect, forcing people to spend or to buy other assets, like bonds. Yet, maybe not. It could be, as Stephen Williamson has said, be a cold potato effect. If that is the case, then even market monetarism doesn't work without the banning of cash!
It is becoming clear that deflation will destroy the ability of the central bank to stimulate the economy without banning cash! Without the banning of cash, we face a deflationary spiral of epic proportions unless we find other ways to increase the money supply! But we simply cannot ban cash on moral grounds!
Scott Sumner says:
I tell people to ignore banking when studying monetary policy—focus on the supply and demand for the medium of account (base money).  Negative IOR causes a fall in the demand for base money, and thus is expansionary.  Period.  End of story.
I don't know if anyone else really understands what Scott says on this issue, because he doesn't want cash banned, at least so far. But he is an economist, so his desire for a hot potato effect could overcome his stance against banning cash. Commenters on his blog, The Money Illusion, have agreed on this point!

But, he has been right on many things, including the fact that the Fed allowed GDP to drop in 2008, increasing the Great Recession.

Truth is though, it appears the Fed wants some deflation, and wanted it in the Great Depression and in 1913 and so on. Politicians need to get a handle on this. It isn't funny anymore now that we are approaching the negative. How much deflation is "safe"?

So, we also see from Morgan Stanley that this push into the negative is simply a bad idea. Morgan Stanley economists simply have stated that going negative is a "dangerous idea". They share Williamson's cold potato view:
“The credit impulse has turned negative, new loan origination has slowed, and systemic stress in the financial system has risen,”
The market monetarists, and the New Keynesians for that matter, want people to spend cash quickly, but apparently, that hot potato effect is not going to happen without the banning of cash, and then maybe not even then. Think about it. Americans could just save more, or pile into bonds, more than now, and that will not necessarily boost the economy. Again, the banking system is saved, but the real economy continues to decline.

And certainly other solutions that worked in the past, like a massive world war would not help, as fewer people means a smaller worldwide GDP assuming some of us survive. But eugenicists have come out and said there are simply too many people. How chilling. At least the growth of world population has slowed. Back off eugenicists!

Building cities where no one lives, like China does, will not permanently help, although it helped China grow, until it slowed.

The solution to deflation on the macroeconomic level is for creditors to lend to those who create production. Production must be encouraged, as most of the value of stocks is in production of goods. The service economy cannot thrive without production. In my view, simply pushing prices for assets up is the lazy man's way of overcoming deflation (fake supply side asset bubbles don't overcome deflation), and it is a poor substitute for creating more production.

Factory production simply must be ramped up with real supply side economics. The government must provide subsidies and apprenticeships for production and should even supply workers if private business is too lazy or financially constrained to train anyone. And we have to create products that are difficult to produce offshore. This approach could make the Keynesians happy as well. The government and private enterprise established the Hoover dam, so elite factories should be doable.

This process will help with the money supply:
If the Federal Reserve increases reserves, a single bank can make loans up to the amount of its excess reserves, creating an equal amount of deposits. The banking system, however, can create a multiple expansion of deposits. As each bank lends and creates a deposit, it loses reserves to other banks, which use them to increase their loans and thus create new deposits, until all excess reserves are used up.
So, we have plenty of reserves. The government should work with the banks to target positive production of real goods. It is a no brainer.

As for individuals, they simply need to learn how to survive during the ravages of deflation. Getting out of debt is key, as cash becomes king. That can have dire consequences for consumer demand. Debt becomes more expensive in deflationary times. But don't underestimate the power of deflation. As prices decline, wages, which are sticky, force layoffs, except with my dad in the Great Depression. He was fortunate.  But for many, deflation was and will be devastating as many are laid off.

Wednesday, March 16, 2016

Merrick Garland Could Be a Zionist. It Isn't About Being Jewish

Merrick Garland could be a Zionist. Since he is a SCOTUS nominee, that presents a problem for Americans. It has nothing to do with being Jewish. I don't care if Jews are on the Supreme Court, except most have been Zionists by design. That is the problem, Zionism, not being Jewish.  There are many non Jewish Zionists and many Jewish Zionists, and some Jews who hate everything Zionism stands for from a religious and ethical perspective.

But Merrick's wife's grandfather was Samuel I Rosenman, who was an adviser to Roosevelt and Truman. Merrick's wife is Lynn Rosenman Merrick. Zionism is definitely in the family dating way back.

Clearly, President Truman was a Christian Zionist, who believed that Zionism had a right to settle Palestine, even though the Torah prophets never gave that authority for a New Zion to men, only to the Messiah.

So, Christian Zionism is suspect as a legitimate religious doctrine as is Zionism, as to any religious verification. And certainly Zionism is clearly a political cabal, that was started in the late 1800's, and was seen as a replacement for Judaism, an ancient religion.

Well, many Jews oppose that Zionist goal, including the many non Zionist Jews in America who ignore Israel and the True Torah Jews who predated Zionists in Israel by 100 years and refuse to serve in the army or acknowledge the Zionist government in Israel!

And many people oppose the march of Zionism on America, from all ethnic and religious and racial groups! My natural father was Jewish and I am adopted, and I totally oppose Zionism as a doctrine and as a political cabal.

So, it turns out that Rosenman schmoozed with the Zionist congress leader, Stephen Wise. That means that this family may be Zionist. I don't know for certain.

Roosevelt himself once joked, when running into Samuel Rosenman, Stephen Wise (a rabbi and World Zionist Organization president) and Nahum Goldmann (who succeeded Wise in the Zionist group) outside his weekend home in the country (where Rosenman rented a home nearby): “Carry on, boys, Sam will tell me what to do on Monday … Imagine what [Nazi leader] Goebbels would pay for a photo of this scene: the President of the United States taking his instructions from the three Elders of Zion.” [GOLDMANN, N., 1978, p. 156]
Back to Garland, the nominee. Turns out, Garland sought to block the overturning of gun control for hand guns and he may want to do what the Zionists want, to disarm America. That is a major Zionist goal, that and racial and religious hatred. But that bigotry is more from right wing Zionists, Geller and Trump, etc.

But know this, since the assassination of President John F Kennedy, Zionism has been in control of the United States and the vast majority of US citizens have no clue whatsoever.

I am a liberal for gun rights. I oppose the left wing Zionist agenda of gun control, and I oppose the right wing Zionist agenda of bigotry and racism.  It is all bad for America!

Here is an example of the terrible things the Zionists do against the True Torah Jews in Israel. This is why I do not advocate the destruction of Israel. I want the Palestinians and True Torah Jews, who know Zionism is a fraud, to come to Christ. And many of the Palestinians already have. Here are the True Torah Jews being persecuted:

Monday, March 14, 2016

Asher Edelman endorses Bernie Sanders - Business Insider

Asher Edelman endorses Bernie Sanders - Business Insider

The real Gordon Gekko supports Bernie Sanders for one simple reason, the velocity of money is comatose because most of the profits go to the 1 percent. That is killing the economy. He said:

"Well, I think it's quite simple again.
If you look at something called velocity of money, you guys know what
that is I presume, that means how much gets spent and turns around. When
you have the top 1% getting money, they spend 5-10% of what they
earn. When you have the lower end of the economy getting money, they
spend 100-110% of what they earn.
As you've had a transfer of
wealth to the top and a transfer of income to the top, you have a
shrinking consumer base basically, and you have a shrinking velocity of
. Bernie is the only person out there who I think is
talking at all about both fiscal stimulation and banking rules that will
get the banks to begin to generate lending again as opposed to

Here is a chart of M2, all money stock and savings. We can see it is crashing due to the proceeds going to those who are hoarding money. This hurts the economy:


Sunday, March 13, 2016

Forget Keynesianism and Market Monetarism. New Monetarism Rules the Federal Reserve

This article was first published by me on Talkmarkets:

You can just forget the noise from the New Keynesians and Market Monetarists. New Monetarism is the economic school that rules the Fed. And you should know more about how that works out. [There is a chart below that shows the big banks are lending like crazy while inflation is practically non existent. That makes no sense, but these are not normal times.]

New Monetarists are Austrians like Greenspan was an Austrian economist. Greenspan thought that the invisible hand of self interest and deregulation would not allow the housing bubble and crash of the last decade.

Of course if you believe like I do that the Fed mispriced risk and that the housing bubble was inevitable, you wonder if the New Monetarists will be any more honest than Greenspan wasn't.

After all, it was Greenspan who said in February, 2004, that you could get a "better deal" obtaining an adjustable mortgage.

Through Stephen Williamson's blog, we can catch a real glimpse of what the New Monetarists are about. Keep in mind that the blog is not an official statement of the Federal Reserve, but really, this is the Vice President of the St. Louis Fed speaking. So people should pay attention.

NK's  and MM's want a piece of Milton Friedman, but the Fed and the New Monetarists (NM's) think they know all about Friedman. You can study all that for yourselves. But the practical implications of NM thought is to do nothing, or very little, in the working out of monetary policy.

Stephen Williamson has said on more than one occasion on his blog that deflation is not such a bad deal. He said he went to Switzerland and deflation there was not very problematic at all. Of course, the Swiss give loans, make fine watches and snow, and probably could care less about the appreciation of their currency.

The Swedes do diddly squat in the real world, in the real manufacturing world. They are the worst example of problems or lack of problems with deflation.

Dr Williamson said here that the Fed controls inflation and deflation. I thought that was a significant statement. It is especially significant when one considers that the Fed is failing to push inflation to the 2 percent target! Has the Fed lost power or does it just not care because of globalization? Read on.

As I asked more questions in the comment section of this post, Dr Williamson gave me a link to the Fed policy. The goal is 2 percent inflation. But that seems more a ceiling lately than a floor. MMs have shown that the Phillips Curve is not valid in these times and that GDP could drop even while inflation continues at or near target. But even the MMs admit that the Fed has kept the NGDP up to snuff since 2009. That could change, as inflation is running about 1.31 percent as of 2/22/16, way below the 2 percent target. 

Dr Williamson showed me a FRED chart which shows that banks are lending like there is no tomorrow. I do not understand why this chart shows what it shows if inflation is so weak:


Of course, the only way this makes sense is if American banks are lending elsewhere, to Europe and China and oil. There is some evidence of that. China is trying hard not to devalue again, or those loans will be difficult to repay. That is what caused the massive shock at the first devaluation.

Likewise, in Europe, American lending is massive because the Euro banks are such a mess. But reciprocal lending back to US consumers from those areas is not happening. European banks are in really bad shape. They were in bad shape in the credit crisis era because they were far more leveraged than US banks. They are still in very weak condition.

It is a global world and it seems that  the Fed could care less, again, about the US citizen/consumer. It really is, as it always has been, about the banks. The Fed answers to the banks, and the decline of America continues while American banks have taken risks lending offshore to areas that may prove more risky than home.

Apparently the New Monetarism is just not that proactive and it fits the Fed recent behavior perfectly. Slow growth in the USA is simply not a big deal to the NM's if banks are lending with both guns blazing. Our government needs to corral the big banks for projects at home, technical ones, if the Fed remains this passive.

Friday, March 11, 2016

Dr Ben Carson Supports All Eight Donald Trumps!

Dr Ben Carson, an unusual character to be sure, has been drawn to Donald Trump and has decided to support all eight versions of Trump.

It is true that opposites attract so it is no surprise that quiet Ben is attracted to loudmouthed Trump. It is a match made in....oh wait, can't be made in heaven. After all, Trump compared Carson's temper to one of a pedophile back in November of 2015.

So, Carson has decided to support all these Trumps:

1. The entertainment Trump.

2. The intellectual Trump.

3. The businessman Trump.

4. The religious bigoted Trump.

5. The racist white supremacist Trump.

6. The asshole of all assholes Trump.

7. The punch out thug Trump.

8. The psycho Trump.

Yes, Carson said Trump could exhibit psychotic episodes and even kill people in mass murder fashion, and Carson would still support the Donald. The Donald was right about all that after all. Creepy, indeed.

Of course, Carson would be confident that Trump would only kill as a hoax, to make it look real, you know, like Obama did at Sandy Hook. 

This makes you wonder what the world is coming to!

Disclaimer: This article contains satire and humor, and while loaded with truth in my opinion, it is up to the reader to verify the claims of the article, which are made in jest and are not necessarily proven fact. Some claims are fiction.

Thursday, March 10, 2016

Miles Kimball's Sneaky Way of Destroying Cash. The Importance of Zero.

This article was first published by me on Talkmarkets:

Before I get into the importance of zero at the end of this article, I have to talk about Miles Kimball. Miles Kimball has a really sneaky way of destroying cash. The economics professor at University of Michigan has called for paper money to be valued at a discount to digital money. Of course, that will drive paper money out of existence, as people will do as many transactions as they can digitally, as unwitting pawns in the central banks' movement towards totalitarianism.

Miles is somewhat important in economic and central banking circles. He has written many articles on Quartz, and couches his quest for a digital money standard in moral terms. He says this debasing of physical cash will create honest money, and be a moral way to do things. It just proves that you cannot trust an economist with morality. Miles made this astonishing statement:

What the opponents of primacy for electronic money fail to realize is that making electronic money the economic yardstick is the key to eliminating inflation and finally having honest money.The European Central Bank, the Fed, and even the Bank of Japan increasingly talk about an inflation rate like 2% as their long-run target. Why have a 2% long-run target for inflation rather than zero—no inflation at all? Most things are better with inflation at zero than at 2%. The most important benefit of zero inflation is that anything but zero inflation is inherently confusing and deceptive for anyone but the handful of true masters at mentally correcting for inflation. Eliminating inflation is first and foremost a victory for understanding, and a victory for truth.
His seemingly strong argument is, that you could eliminate inflation if you devalued cash along with negative interest rate , or even more than digital money. But surely, your paper or coins in cash would feel an immediate inflationary shock. And what about the moral need for cash. Poor people and travelers need cash. Why should their cash be worth less than your digital money, as it becomes a regressive tax on the poor? 

And, besides, there are potential glitches in the electronic system. Systems crash. People are put in danger. What about the moral issues there, Miles?

We already have Larry Summers advocating the death of the $100 bill. That is sneaky as well, as Summers never mentioned NIRP as a reason. Now the masses see that it must be done away with to fight crime, which is not Summers' real reason for eliminating it. He wants to eliminate cash piece by piece.

So, while Miles is not afraid to tell people about diminishing the value of cash compared to digital money, he says he is eliminating inflation and implying that the cash will be around for the poor. But it won't be. And inflation won't be eliminated for paper money.

I am sick and tired of what appears to be a scam in the making. People will be scammed out of paper money thinking they are doing the right thing, not understanding either the real basis for this demise of cash nor the efforts to reduce cash in order to eliminate it later!

Surely the leaders and thinkers in this nation can do better than this. Shame on you people who seek to destroy real money. Comparing those who want to keep physical cash to those who wanted the gold standard is not fair and is an attack on reason.  

This is a rule, if you diminish cash you will ultimately eliminate it. That is why people need to start using more cash, or it will surely disappear, to the peril of society.   

Now, it isn't like Miles Kimball has nothing to offer. He worried back in 2014 that interest on junk bonds was not much higher than on treasuries, and that that meant something was wrong. Well, turns out something was wrong, and the junk bonds were revealed as risky and mispriced, when the price of oil crashed.

But when Kimball calls Larry Summers brilliant, that becomes an unholy marriage made in New Keynesian hell, as both are calling for the end of cash and severely negative rates, IMO.

Whatever people say about Scott Sumner, at least he believes that Market Monetarism does not need the elimination of cash in order for a central bank to stimulate the economy. While Scott would say that MM is not completely fair, as asset purchases could hurt people on fixed income, at least he prefers that to the elimination of physical cash, which seems to him and most rational people, to be as immoral as it gets.

While Sumner would say elimination of cash is bad on libertarian grounds (although he can't really be a libertarian due to his desire to stimulate the economy), I say it is bad on moral grounds and on economic grounds. If you take away the zero lower bound, which is physical cash, which is always worth more than negative interest rates, there will simply be no stopping the descent into negative rates.   

In other words, the importance of zero means that you could experience dire consequences if you eliminate zero. There would be nothing to stop central bankers from imposing 5 percent negative interest rates, then 10 percent negative interest rates, then 20 percent negative interest rates. Where would it stop?

The New Keynesians like Kimball and Larry Summers, (who has thought about Scott Sumner's market monetarism but really is an NK), have to explain where the descent to negative would stop. But they would likely be sneaky about it like they are now. So, let's just keep the zero lower bound, paper and coin cash, and forget about it.

So, you want to constrain the madness of  NK economists? Then you better keep the zero, or people will likely save even more to make up for the tax of forced bank accounts with negative rates imposed upon them, or they will look around for other things to use as money, or turn to barter. You think the economy is slow now, I suggest we don't want to find out how slow it could get then.

Wednesday, March 9, 2016

Here Are the Pieces of the Republican Party When It Splits Up

The pieces of the Republican Party when it splits up will focus on narrow issues, such as:

1: Business
2. Intellectual
3. Fox News
4. Libertarian
5. Trump and Sub Trump Parties

Even the Washington Post is capable of good satire once in a blue moon.

Tuesday, March 8, 2016

Negative Rates Bad, Negative IOR Good Says Scott Sumner. The IOR Debate

This article was first published by me on Talkmarkets:

I will try to simplify some basic concepts regarding market monetarism and the velocity of money and negative interest rates and negative Interest on reserves (IOR). The basics are not complex and I have done my best to sort it out. But the conclusions are for the reader to determine. The nuts and bolts of determining the effects of payment on reserves by the Fed make for interesting reading, so I will give Cullen Roche's opposing opinions regarding the debate over IOR at the end of the article.

As Scott Sumner has said regarding the MMers' stand against negative interest rates:

In a monetarist model, lower market interest rates are contractionary for any given monetary base, because they reduce velocity.  It’s the Keynesians who are likely to claim that lower rates are expansionary.  Now of course Friedman was talking about market interest rates, not IOR. Lower IOR is theoretically expansionary, and so far markets have reacted to negative IOR announcements as if they are expansionary.

Will that be true in the future?  Nothing is certain, as monetary policy is very complex...
Sumner says low interest rates are a sign of deflationary pressures, if I read him right. And he is likely correct, since the New Keynesians have not built a robust economy through lower interest rates. they got us off the mat, or at least big business off the mat, but that is about all. And, by the way, negative interest rates, as we see elsewhere in the world, appear to be failing as well as Sweden has pushed negative rates for years with no increase in their inflation targeting. (Market monetarists oppose inflation targeting and prefer NGDP targeting.)  

Now, one can argue that velocity is forever reduced by such a large amount of excess reserves, as banks have reduced interbank lending. But the market monetarists say that is not true, that negative IOR, ie., the Fed charging the banks for excess reserves they hold at the Fed, is expansionary.  Remember IOR is not negative interest rates on bonds.

And Scott goes on to say that banks do not have to hold excess reserves, as negative IOR takes affect. Banks could buy assets or bonds. I think buying bonds would be a bad idea due to the demand for them. Buying assets may be a good idea, that could start out good and maybe go bad later.

But at least there would be some stimulation to protect all that bad credit that could cause another credit freeze. However, there is moral hazard in protecting those who used inferior collateral to finance oil expansion.

So, while, I am not sold on Market Monetarism, I think the MMers have something to offer when the only option that the financial system will allow is New Keynesianism. It will not allow a total meltdown of credit, as Austrian economists want.  

So, Scott Sumner says that monetary policy can be loosened by negative IOR while credit policy could be tightened. He states that credit policy should never be confused with monetary policy. But, and I am inferring this, the New Keynesians like Paul Krugman confuse the policies all the time and put too much stock in interest rates and inflation and not proper stock in the current state of GDP at any given time. 

Market monetarism says banks don't have to lend excess reserves, but that banks can buy stuff with excess reserves.  But it is not as if there would be serious inflation if some excess reserves were loaned out, in this deflationary environment. The Richmond Fed disagrees, but market monetarists would most likely snicker at this article.

 Cullen Roche agrees with market monetarists that the Fed could buy physical assets as the Bank of Japan (BOJ) does. However, he does not believe negative IOR will work. Cullen, who contributes to Talkmarkets many interesting articles, has said two significant things in the past regarding IOR.

First Cullen says this about excess reserves:

Paying interest on reserves doesn’t constrain the bank from making new loans.  Ie, it doesn’t reduce the efficacy of monetary policy working through credit channels.  Banking is a business of spreads and since the spread on a creditworthy customer’s loan will almost always yield a better return than the IOER there’s nothing in the payment of IOER stopping banks from making loans just because they earn IOER.
 He says the NY Fed says this, essentially. But the Fed has also said

It is important to keep in mind that the excess reserves in our example were not created with the goal of lowering interest rates or increasing bank lending significantly relative to pre-crisis levels.
So, while Cullen may be right, something is constraining the big banks from lending significantly into this economy. The banks are constrained. The MMers say it is the payment of IOR, that needs to be reversed!

Second, Cullen quotes the Fed:

This role [of reserves] results from the assumptions that reserve requirements generate a direct and tight linkage between money and reserves and that the central bank controls the money supply by adjusting the quantity of reserves through open market operations.  Using data from recent decades, we have demonstrated that this simple textbook link is implausible in the United States for a number of reasons. First, when money is measured as M2, only a small portion of it is reservable and thus only a small portion is linked to the level of reserve balances the Fed provides through open market operations.  Second, except for a brief period in the early 1980s, the Fed has traditionally aimed to control the federal funds rate rather than the quantity of reserves.  Third, reserve balances are not identical to required reserves, and the federal funds rate is the interest rate in the market for all reserve balances, not just required reserves.  Reserve balances are supplied elastically at the target funds rate.  Finally, reservable liabilities fund only a small fraction of bank lending and the evidence suggests that they are not the marginal source data for the most liquid and well-capitalized banks.  Changes in reserves are unrelated to changes in lending, and open market operations do not have a direct impact on lending. 
Therefore, Cullen agrees with the Fed that the banks lending behavior is not guided by excess reserves.

Third, in the same article above, Cullen discusses the money multiplier and the velocity of money, both explained here.

Cullen says that the money multiplier is not valid as long as reserves are not loaned, and quotes the Fed:
All of these points are a reflection of the institutional structure of the U.S. banking system and suggest that the textbook role of money is not operative. While the institutional facts alone provide compelling support for our view, we also demonstrate empirically that the relationships implied by the money multiplier do not exist in the stem from the demand side, and that a better test for the lending channel is to check whether bank loans are financed by reservable deposits.  Our findings suggest that this is not the case.
The money supply is not being increased or decreased while all the money goes to reserves. since 2008. Printing money does not increase inflation or velocity of money or the multiplier or economic activity.

However, the market monetarists believe that velocity of money can be affected by central bank policy. In fact, the market monetarists believe that the Fed actually hurt the economy in 2008, by constricting the money supply through payment of IOR to the big banks. 

So, at the blog, the Money Illusion, Scott Sumner said this in opposition to inflation targeting:

The interaction of the supply of base money and velocity (or the Cambridge k) determines NGDP.  The central bank controls the supply of money, and the demand for base money is mostly determined by nominal interest rates, but also tax rates (as currency is held for tax evasion.)  When not at the zero bound, they aren’t close substitutes.  Nominal interest rates are strongly and positively correlated with the output gap, and with expected NGDP growth.  That means expected future base growth has a strong and positive impact on current interest rates (when not at the zero bound.)  If the central bank does NGDP level targeting, then the specific NGDP growth path chosen is by far the most important determinant of nominal rates, and hence velocity.  Output gaps are determined as in other natural rate models, by unexpected changes in NGDP.  (Notice we use NGDP growth where other models use inflation.)
So, the debate is not solved. Cullen Roche makes the case that payment of IOR does have much to do with the volume of lending, while the market monetarists say that the Fed hurt lending, both in the economy and with interbank lending, starting with the payment of interest on the excess reserves. It is a debate for economists to figure out. But certainly, something is restraining lending by the big banks. Comments are welcome! 

Saturday, March 5, 2016

Larry Summers 100 Dollar Bill Ban and Westfalia Lost

This article was first published by me on Talkmarkets:

Much has already been written about Larry Summers seeking a ban on the hundred dollar bill. Perhaps the strongest push back came from Tyler Durden. It is recommended reading for sure.

But there is more to know about this process that must be understood by real patriots. Here are the three most important and alarming facts that must be understood from Larry Summers' words.

1. The announcement from Larry Summers was allowed to be published to all local TV stations. I about fell out of my chair when I saw the announcement on channel 13 in Las Vegas. The Los Angeles CBS local station carried the story as did many others.  Monetary matters just don't make it down to the average man in the street very often. This clearly means that the people who control American media want or have been ordered to report, a move towards cashlessness. It won't happen overnight. But the $100 dollar bill is a symbol of monetary freedom. The war on cash will be on full force if it is abolished.

2. As Tyler Durden mentioned, this onslaught against cash was couched in terms of crime. Crime is simply not the central reason for banning cash. Nirp is! It is dishonest for Larry Summers, who has made his views known on the possibility of negative interest rates to couch the argument against 100 dollar bills in a fashion that leaves out NIRP as a policy. The local news attempted brainwashing the public by not bringing up the possibility of NIRP as we relentlessly slide toward lower yields on the long bonds. This should be a crime in and of itself!

But speaking to crime, banning large bills has implications for helping criminals. People will want to hide smaller bills if larger ones disappear. But they will be easier to find. Criminals will start looking for wads of $20's. Forcing families to hide larger bills will exacerbate crime.

3. People need to understand the concept of the Westphalian Peace, and the background of the professor at Harvard, who Summers looked to for the study on getting rid of the big bill, was a former British banker, formerly CEO of Standard Charter, Peter Sands. We have to understand what is going on here.

The center of world finance is still the British Empire. Ask Jamie Dimon about that when his London Whale lost the 6.2 billion dollars for JP Morgan. The center of finance is the UK, and it is a global system that reaches to the USA, to France, to Germany, to Israel and to Hong Kong, etc. The average citizen is under financial attack in all those nations as efforts exist to limit cash and ultimately follow the Scandinavian nations' lead in the abolition of cash.

The elite who back this consolidated new world order have designs on super sovereignty, a one world currency, in my opinion. In the meantime, it has designs on implementing NIRP, and needs cashlessness in case people would resort to pulling their money out of the banks. It may not be necessary, but it sounds like the elite do not want to take any chances of massive bank runs.  This empire, if you will, does not care about the US constitution, or of freedom, or of any sovereign power of the nations.

For Henry Kissinger, a serious proponent of this new world order, the concept of Westphalian Sovereignty, which is the concept that rules interactions between the nations, is breaking down .

Kissinger said this in the link above:

The Peace of Westphalia became a turning point in the history of nations because the elements it set in place were as uncomplicated as they were sweeping. The state,not the empire, dynasty, or religious confession, was affirmed as the building block of European order. The concept of state sovereignty was established.

 Well, we know the elite are breaking the concept of sovereignty down. This not only impacts the banking system, it also is a rational for regime chance in the middle east. There is no room for Westphalian Sovereignty in the middle east, as Iraq and Libya have fallen, and Syria is next if doctrines of regime change, similar to that taught by Oded Yinon are fully realized.

But back to the banks and globalism. Westphalian doctrine was at work, at least in part, in the Great Depression, when FDR imposed Glass-Steagall upon the banks. But this power was not to be found in the Great Recession, when the middle class was fleeced by the elite for trillions of dollars. Glass-Steagall and other crucial laws were undone in the Great Recession by a banking empire that did not operate according to the rules of Westfalia.

So, when I say that Larry Summers is not a patriot in seeking negative interest rates and the abolition of cash, I am saying that he likely opposes the original Westphalian concept as does Kissinger, as did Cheney, as did the Bush family. This process of destruction of sovereignty is ongoing. It is carried on by both political parties. Unlike the Romans, who bludgeoned nations into limited sovereignty, this neo Roman Empire does so by monetary pressure. No place has this been more evident than in the Eurozone. We see Germany bludgeoning the peripheral nations with the common Euro. It is excruciating to watch.

Yet Kissinger says the Eurozone is a return to a Westfalian order. If you believe that I have some land in Florida I want to sell you. The water will evaporate, someday.

As far as the middle east is concerned, the destruction of sovereignty through regime change opposes sovereignty. There is simply nothing moral about the west's colonization and intervention in the middle east, no matter how delightfully Henry Kissinger paints the process.

Likewise, there is nothing moral in Larry Summers' efforts to turn banking upside down, seeking negative interest rates and cashlessness. That is a manifestation of globalist empire and must not be permitted to proceed, or we will indeed proceed at great peril. A Westfalia-based system needs to be reestablished over the banking system. Otherwise, it the concept of national sovereignty will be lost for all time.

Empires colonize. Empires oppress the subjects. Empires force banking solutions on the people. Can anyone deny that a Westfalia-like sovereignty is at grave risk of destruction in Summers' and Kissinger's New World Order?