Marc Faber, who authors the Gloom Boom & Doom newsletter, is usually pretty bearish on stocks and bullish on gold.
Lately, though, gold doesn’t seem like it can catch a bid.
“Despite the continued reverberations regarding the Cyprus bailout and its involvement of bank deposits, gold struggled to maintain the positive momentum created in the first two weeks of March and instead now looks very likely to move lower, towards $1580/oz,” wrote Deutsche Bank commodities analyst Xiao Fu in a note this morning.
When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn’t flow evenly into the system.
Now from time to time it will lift the NASDAQ like between 1997 and March 2000. Then it lifted home prices in the U.S. until 2007. Then it lifted the commodity prices in 2008 until July 2008 when the global economy was already in recession. More recently it has lifted selected emerging economies, stock markets in Indonesia, Philippines, Thailand, up four times from 2009 lows and now the U.S.
So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide.
Faber is, of course, still bearish on U.S. stocks. He told Bloomberg that he sees “considerable downside risk” in the market.
Mario Draghi, president of the European Central Bank: his analysis of the euzozone crisis is flawed, argues Andrew Watt. Photograph: Lisi Niesner/Reuters
Over the course of the last week’s tense negotiations over a Cyprus bailout deal, much of the commentary has focused on the role of Europe’s finance ministers. But perhaps closer attention should be paid to Mario Draghi, the president of the European Central Bank. On 14 March Draghi made a presentation to heads of state and government on the economic situation in the euro area. His intent was to show the real reasons for the crisis and the counter-measures needed. In this he succeeded – although not in the way he intended.
Draghi presented two graphs that encapsulate his central argument: productivity growth in the surplus countries (Austria, Belgium, Germany, Luxembourg, Netherlands) was higher than in the deficit countries (France, Greece, Ireland, Italy, Portugal, Spain). But wage growth was much faster in the latter group. Structural reforms and wage moderation lead to success; structural rigidities and greedy trade unions lead to failure. QED.
According to the Frankfurter Allgemeine Zeitung, which reported the affair approvingly, the impact of Draghi’s intervention was devastating. François Hollande, the French president, who had earlier been calling for an end to austerity and for growth impulses, was, according to the newspaper, completely silenced after the ECB president had so clearly demonstrated, with incontrovertible evidence, what was wrong in Europe – or rather in certain countries in the eurozone – and what must be done.
Things are not as they seem, however. Draghi’s presentation contains a simple but fatal error – or should that be misrepresentation? As the note to the graphs indicates, the productivity measure is expressed in real terms. In other words, it shows how much more output an average worker produced in 2012 compared with 2000. So far so good. However, the wage measure that he uses, compensation per employee, is expressed in nominal terms (even if, interestingly, this is not expressly indicated on the slides). In other words, the productivity measure includes inflation, but the wage measure does not.
Cyprus Salvaged After EU Deal Shuts Bank to Get $13B
By Rebecca Christie, James G. Neuger & Patrick Donahue – Mar 25, 2013 10:24 AM CT
Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid.
Cypriot President Nicos Anastasiades agreed to shut the country’s second-largest bank under pressure from a German-led bloc in an overnight negotiating melodrama that threatened to rekindle the European debt crisis and rattle markets.
“It’s been yet another hard day’s night,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels early today. “There were no optimal solutions available, only hard choices.”
It was the second time in nine days that Cyprus struck a deal with its euro partners and the International Monetary Fund, capping a tumultuous week that underscored the contradictions of euro-crisis management that has dominated European policy making for more than three years. Cyprus, the euro area’s third- smallest economy, is the fifth country to tap international aid since the crisis broke out in Greece in 2009.
The first Cypriot accord, reached March 16, fell apart three days later when the parliament in Nicosia rejected a key plank, a tax on all bank accounts that sparked the indignation of smaller depositors. Efforts to win an alternative bailout from Russia, which loaned Cyprus 2.5 billion euros in 2011 when the nation was shut out of international markets, failed.
‘Playing Games’
“Nobody knows where we are heading,” said Epifanos Epifaniou, 50, who used to drive a delivery truck in Nicosia and has been unemployed for six months. “People are playing games with Cyprus. We are alone. Nobody is supporting us.”
The euro retreated 0.4 percent, trading at $1.2935 at 2:33 p.m. in Frankfurt, after initially rising as much as 0.5 percent. Stocks gained, with the Stoxx Europe 600 Index rising 0.5 percent. Italian 10-year bonds erased their decline since last month’s inconclusive election.
German Chancellor Angela Merkel lauded the agreement as lawmakers in her coalition embraced the package, which should go to a vote in Berlin in the coming weeks. The agreement goes a “long way” toward satisfying Germany’s Bundestag, Christian Democratic lawmaker Norbert Barthle said in an interview.
Bartering
The breakthrough came after Anastasiades bartered with officials including EU President Herman Van Rompuy, European Central Bank President Mario Draghi and IMF Managing Director Christine Lagarde. It was then sealed by the finance ministers, some of whom went out to dinner while the talks were ongoing.
With the ECB threatening to cut off emergency financing for tottering banks as soon as today, Cyprus’s leaders engineered another way of shrinking the island’s financial system.
The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl (CPB), the second biggest.
Cyprus Popular Bank, 84 percent owned by the government, will be wound down. Those who will be largely wiped out include uninsured depositors and bondholders, including senior creditors. Senior bondholders will also contribute to the recapitalization of Bank of Cyprus.
Debt Doubts
The squeezed banking industry will likely lead to a “sharp drop” in Cyprus’s gross domestic product this year and next, according to Reinhard Cluse, a London-based economist at UBS AG. As a result, the euro group’s debt-to-GDP ratio target of 100 percent by 2020 “must be doubted,” he said.
The Cypriot Finance Ministry said in a January presentation that bailing out the country may push debt to a peak of about 140 percent of GDP next year.
“Cyprus’s sovereign debt problems will remain an issue of concern — for European policy makers and for the markets,” Cluse wrote in a note to clients today.
Banks in Cyprus, which have been shut for the past week, will remain closed until further notice. Lawmakers in Cyprus voted last week to impose capital controls to prevent a run on deposits when they reopen.
The union representing Cypriot banking workers said today the Mediterranean island is faced with a “painful compromise,” according to a statement posted on its website. It urged employees to be ready to return to work when banks reopen.
Better Solution
“This solution we reached tonight doesn’t have the downsides that the solution of last week did,” said Dutch Finance Minister Jeroen Dijsselbloem, chairman of the euro ministers’ panel. He said the deal was beyond the range of “political possibilities” a week ago.
The Cypriot parliament won’t have to vote again because it has already passed laws on bank restructuring, officials said. On the creditors’ side, legislatures in Germany, Finland and the Netherlands may hold votes to approve loans to Cyprus from the European Stability Mechanism, the 500 billion-euro rescue fund.
Klaus Regling, managing director of the rescue fund, said approval by creditor governments in mid-April will pave the way for the first payouts to Cyprus in early May.
Lagarde said she will recommend that the IMF provide loans, without giving a figure. “There might have been a bit of friction here and there,” she said of the talks.
Solvent Banks
The next step lies with the ECB, which needs to keep funds flowing to solvent Cypriot banks to enable them to open. While Draghi and Executive Board member Joerg Asmussen left Brussels without commenting to reporters, a statement by the ministers said the bank will channel liquidity to Bank of Cyprus “in line with applicable rules.”
The seizure of larger deposits may spark tensions with Russia, the source of an estimated $31 billion in holdings in Cypriot banks according to Moody’s Investors Service. A Cypriot mission to Moscow last week failed to yield an alternative to the European-sponsored bailout.
Still, Russian President Vladimir Putin ordered his government to discuss restructuring a 2011 loan to Cyprus, Russian news service RIA Novosti cited a spokesman as saying.
The effort to go after insured deposits, while abandoned, may have harmful repercussions, said Moody’s in a note early today. “Policy makers’ recent decisions raise the risk of deposit outflows, capital flight, increased bank and sovereign funding costs and broader financial-market dislocation throughout the euro area in the future,” Moody’s said.
Nine Months
In a replay of tensions over aid for Greece at the outset of the crisis, European governments had wrangled over aid for Cyprus for nine months, exposing holes in the revamped economic management system that was built in three years of emergency policymaking, often at all-night summits.
A tightening of Europe’s budget-deficit restrictions and new rules to penalize countries with unbalanced economies or asset bubbles failed to stop the rot in Cyprus, which makes up less than 0.2 percent of euro-region output.
Hundreds of protesters massed outside the floodlit presidential palace in Nicosia late yesterday, one group brandishing a banner that said: “It’s capitalism, stupid.”
Protesters during an anti- bailout rally in Nicosia, Cyprus, on March 24, 2013. Photographer: Petros Karadjias/AP Photo
0:17
March 25 (Bloomberg) — International Monetary Fund Managing Director Christine Lagarde says the so-called troika of the European Central Bank, European Commission and IMF is “doing fine” when asked by reporters about its future backing of bailouts. She spoke earlier today alongside Olli Rehn in Brussels following an emergency meeting of euro-area finance ministers, who agreed to a 10 billion-euro ($13 billion) bailout for Cyprus. (Source: Bloomberg)
March 22 (Bloomberg) — Bloomberg Television’s Ryan Chilcote reports on how the Russian population living and banking in Cyprus could be affected by the current crisis. He speaks from Limassol, Cyprus, on Bloomberg’s “The Pulse.” (Source: Bloomberg)
1:35
March 25 (Bloomberg) — As Cyprus dodges a disorderly default and unprecedented exit from the euro currency by winning a 10 billion-euro ($13 billion) bailout, Cypriots are finding cash hard to come by. Bloomberg Television’s Ryan Chilcote reports from Nicosia. (Source: Bloomberg)
9:21
March 25 (Bloomberg) — Christopher Pissarides, the head of Cyprus’s economic policy council, talks about the island nation’s bailout package and the outlook for its future membership of the euro zone. He speaks from Nicosia with Guy Johnson and Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
6:36
March 25 (Bloomberg) — Stelios Platis, managing director of MAP S.Platis, talks about Cyprus’s deal with the European Union to shrink its banking system in exchange for a 10 billion-euro ($13 billion) bailout. He speaks from Cyprus on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
4:49
March 25 (Bloomberg) — Nicholas Papadopoulos, Cypriot lawmaker and chairman of the parliamentary finance committee, discusses the consequences of the nation’s 10 billion-euro ($13 billion) bailout. He speaks in Nicosia with Ryan Chilcote on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
4:48
March 26 (Bloomberg) — Philippe D’Arvisenet, chief global economist at BNP Paribas SA, talks about Europe’s sovereign debt crisis and the outlook for the euro. Cyprus dodged a disorderly sovereign default and unprecedented exit from the euro by bowing to demands from creditors to shrink its banking system in exchange for 10 billion euros ($13 billion) of aid. D’Arvisenet speaks in Singapore with Haslinda Amin on Bloomberg Television’s “On the Move.” (Source: Bloomberg)
Jeroen Dijsselbloem, the Netherlands’s finance minister and president of the Eurogroup, center, speaks as Christine Lagarde, managing director of the International Monetary Fund, left, and Olli Rehn, economic and monetary affairs commissioner for the European Union, listen during a news conference following the Eurogroup meeting in Brussels on March 25, 2013. Photographer: Jock Fistick/Bloomberg
Cyprus Popular Bank, 84 percent owned by the government, will be wound down. Photographer: Simon Dawson/Bloomberg
The revised accord spares bank accounts below the insured limit of 100,000 euros. It imposes losses that two EU officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second biggest. Photographer: Simon Dawson/Bloomberg
Dutch finance minister Jeroen Dijsselbloem has rowed back on his statement that future bailouts would follow the Cypriot model. Photograph: John Thys/AFP/Getty
The good news for the eurozone was that the markets reacted well to the bailout deal for Cyprus. The bad news was that the rally lasted barely until lunchtime. By then investors were running scared at the prospect that the terms imposed on one of the single currency’s smaller members would be the template for rescue packages for bigger countries.
Credit for the change of mood goes to Jeroen Dijsselbloem, who chairs meetings of eurozone finance ministers and who decided it would be a good idea to go public with the idea that Cyprus was not such a special case after all.
For the past week the message has gone out that there are no comparisons between a country that allowed itself to become the tax haven of choice for high-rolling Russians and other, better-managed, members of the eurozone.
Then, in a couple of interviews, Dijsselbloem said Cyprus would be used as the model for future bailouts.
The comments were an open invitation to any investor with more than €100,000 in a eurozone bank to remove it without delay, which some then did.
“The proverb, ‘What you don’t know can’t hurt you”, originated in 1576 as, ‘So long as I know it not, it hurteth mee not.’ But the opposite is true. Unpleasant hidden truths do the most harm. The best way to fight corruption is to expose it. Think of the World Bank as ENRON.” … Karen Hudes
When, thanks to Mark Novitsky, a federal whistleblower, I learned that Karen Hudes, who earned her J.D. at Yale, our most distinguished School of Law, and an M.Phil. in economics at the University of Amsterdam, which is also a formidable institution, had been removed from her position as Senior Counsel for the World Bank because of her efforts to expose corruption and reaffirm the rule of law in the form of appropriate standards of accounting, I was dumbfounded.
What initially appear to be obscure issues of international finance, moreover, have the potential to sever ties between us and our NATO allies and weaken the national security of the United States. The stakes involved are therefore extremely high for every American citizen.
During the World Bank and IMF Annual Meetings last October, with her encouragement, the Development Committee informed President Jim Yong Kim of the need for “a more open, transparent and accountable World Bank Group.” The reasons that motivated that request included the following series of disturbing developments:
The World Bank has disregarded the Joint Economic Committee’s 2005 inquiry into the World Bank’s “corporate governance irregularities” and “accounting problems”;
The World Bank has failed to follow the Joint Economic Committee’s advice that professional financial and accounting employees be given independent access to the World Bank’s Board and its Audit Committee;
The World Bank has failed to protect Hudes against retaliation for challenges of illegality or other misconduct through external arbitration pursuant to the 2005 Lugar-Leahy amendment, which could threaten its mission;
The World Bank has refused to comply with the Government Accountability Office inquiry into corruption requested by Senators Lugar, Leahy and Bayh for more than three years;
Treasury Secretary Timothy Geithner misrepresented progress on World Bank reform in his 11/21/12 report to the Appropriations Committees pursuant to § 7082 of the Consolidated Appropriations Act of 2012.
LIMASSOL, CYPRUS — It is not just about rich Russians and Cypriot retirees. Also vitally at stake in this island country’s banking crisis is Cyprus’s credibility as a place for international companies to continue doing business.
Take Avid Life Media, the Canadian-owned operator of some of the world’s biggest online dating sites. Only a few weeks ago it set up an office here as a base for its international operations, attracted to Cyprus — as hundreds of other foreign businesses have been — because of its reputation for financial stability, a low corporate tax rate, a friendly banking environment and most of all, a strong rule of law.
Now imagine that was the case for the most important bank of all, which affects the world’s economy. Imagine that bank accounts were being looted world-wide and you will begin to appreciate the dimensions of the problem.
When I discovered that Karen Hudes’ reinstatement, which was being supported by the finance ministers of the nations of the world, was being blocked by its recently appointed president, Jim Yong Kim, who was formerly President of Dartmouth, I was further astonished, because I had encountered Kim before. He had supported the publication for an article by a member of the computer science faculty, Hany Farid, who claimed that the backyard photographs used to convict Lee Harvey Oswald in the public mind were authentic, which was profoundly disturbing.
Hany Farid and “the backyard photographs”
That is a claim that others had long since proven false. Jack White, the legendary JFK photo analyst, had testified to the House Select Committee on Assassinations (HSCA) when it had reinvestigated the deaths of JFK and of MLK in 1976-77 and had pointed out a dozen features that disqualify them. Oswald himself had told Capt. Will Fritz, the Dallas Homicide detective who interrogated him, that the photo he was shown had his face pasted on someone else’s body. Like other claims Oswald made at the time, subsequent research has proven that he was right.
The chin is not Lee Oswald’s chin, which was somewhat pointed, but a block chin; there is an insert line between the chin and his lower lip; and the finger tips of his right hand are cut off, for example. Even more interestingly, he realized that the two communist newspapers that Oswald was holding–The Militant and The Worker–had known dimensions and could serve as an internal rule to determine the height of the person who was holding them. Using that method, he was able to establish that he was about 5’6″ tall, when Oswald was about 5’10″–which meant that either someone who was too short to be Oswald had posed for the photos or that they had been introduced too large when they were faked. Either way, they could not possibly be authentic.
When I discovered that Hany Farid, who has a lab funded by the FBI, had published the claim that he had proven them to be authentic by showing that it was possible to replicate the shadow cast by the nose in one of them, I knew he was perpetrating a fraud on the public, because (1) there are four poses taken in different positions at different times, where it would have been virtually impossible for the nose shadow to remain constant from one to another; and (2) there are many other indications of fakery besides the shadow cast by the nose that prove fakery, where even if he had been right about the nose shadow, his conclusion of authenticity would have been wrong. He was violating a basic precept of science by not basing his reasoning upon all the available relevant evidence
So I wrote to President Kim to explain why Darmouth was committing a blunder in supporting Hany Farid’s claim, which I substantiated with multiple lines of proof. Dartmouth stood pat, however, and never took steps to correct the record, even though it was a matter of immense public interest and concern. I published an article about my experience with Kim in an article co-authored with Jim Marrs in OpEdNews, “The Dartmouth JFK-Photo Fiasco” (20 November 2009) and followed up by publishing my correspondence in “Blowing the Whistle on Dartmouth: Hany Farid in the nation’s service” (26 January 2010), which I regarded as a professional obligation.
It now appears to me that Kim may have been rewarded for his contribution to the public deception about the death of JFK by being appointed to the World Bank, just as Paul Wolfowitz appears to have been appointed by George W. Bush for his contributions to 9/11 and the “war on terror”. I have long believed that, in Washington, D.C., the bigger the liar, the further you go. I now believe that, when it comes to acting contrary to the public interest, the presidency of the World Bank may be another sign of compliance with corruption, as the experiences of Karen Hudes reflects. I regard us as kindred spirits insofar as “whistle blowing” seems to be coursing through our veins.
Credit Ratings, NATO and Democracy: Too Big for Transparency?
by Karen Hudes
The World Bank and its next door neighbor, the International Monetary Fund (IMF), stand at the crossroads of the international financial system. Both organizations are referred to as the “Bretton Woods” institutions, named for the site in New Hampshire where the founding conference of 44 countries was held in 1944. The Bretton Woods institutions were created to prevent the “beggar thy neighbor” policies responsible for World Wars I and II.
The World Bank’s membership has now grown to 188 countries. The World Bank and IMF share a Board of Governors comprising the Ministers of Finance of member countries. They each have resident Boards of 24 Directors; seven Directors are appointed by 7 countries with the largest economies and 17 Directors are appointed by groups or “constituencies” of the remaining member countries.
Because of its crucial role at the heart of the world’s financial system, problems at the World Bank are going to have consequences for the world’s financial system. I know “up close and personal” because I served as Senior Counsel for the World Bank for 21 years. My qualifications included a J.D. from Yale Law School and M.Phil. in economics from the University of Amsterdam. I know the institution inside and out. And I have been blowing the whistle on improper practices at the World Bank that threaten the world’s fiscal integrity.
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Reporting Corruption up the Chain of Command
I worked in the Legal Department of the World Bank from 1986-2007. But in 2007, I was fired in retaliation for reporting corruption at the Bretton Woods institutions up the chain of command at the World Bank, through the US Treasury Department, and to the US Congress. My report was quite specific, namely: that the World Bank is out of compliance with the law, because its financial statements to the holders of its $135 billion in bonds, which are denominated in 52 currencies, are not in accord with Generally Acceptable Accounting Principles and Auditing Standards.
I never imagined how intractable the corruption at the World Bank was. A reliable stakeholder analysis, based on game theory modeling, shows that failure to adhere to the rule of law by the World Bank will bring about a world-wide currency war that will make what we lived through in 2008 pale by comparison. The stakeholder analysis began predicting success in bringing the World Bank into compliance after the European Parliament invited me to testify on May 25, 2011. My testimony included a chronology of the cover-up. President Kim has already prompted Germany to repatriate the equivalent of $36 billion in gold. As I told Sen. Harry Reid in 2008, “the greatest security risk to the US is in alienating its partners by acting as a hegemon”.
The Failure of Press Coverage
One reason it is so difficult to end the corrupt regime at the World Bank is because there has been virtually no press coverage. It is possible to conclude from this that democracy in the United States has been weakened by the reduction in the number of corporations who own the bulk of US media outlets (from 50 to 5 in less than twenty years.) Barclays Bank, JPMorgan Chase & Co, The Goldman Sachs Group along with a few others use interlocking corporate ownership to control 40 percent of total wealth and 60 percent of global revenues.
This concentration of power rests on disproportionate corporate investments of one percent of all corporations. Theorists at the Swiss Federal Institute of Technology in Zurich, using natural systems mathematical modeling and comprehensive data on the actual corporate ownership of 43,000 transnational corporations, discovered this concentration of power. When questions are raised about “who controls the world”, this one percent looks like a very promising candidate. The crux of the matter is that the corporations control the mass media and, through the mass media, control the politicians.
Although there have been occasional articles about these issues, where some of my commentaries about them have appeared in print, for the most part, interest in these questions from the public has been few and far between, where recent interviews with Deanna Spingola and with Jim Fetzer, who are alternative media radio hosts, have been the exception. Here are some links to our recent interviews:
“Spingola Speaks” with Karen Hudes, 22 January 2013, HOUR 1
“Spingola Speaks” with Karen Hudes, 22 January 2013, HOUR 2,
“The Real Deal” with Karen Hudes, 6 March 2013, 1.5 HOURS,
“The Real Deal” with Karen Hudes, 20 March 2013, .5 HOUR,
[NOTE: Both interviews are followed by discussion with Mark Novitzky.]
The Early Years of the World Bank
The longest-serving General Counsel of the World Bank, Aaron Broches, helped to write the charters of the World Bank and IMF at the Bretton Woods conference in 1944. According to Broches, corruption intensified during former Secretary of Defense Robert McNamara’s presidency of the World Bank from 1968-81. In 2007, the Board fired another president from the Pentagon, Paul Wolfowitz, after Wolfowitz gave a 35% salary increase to his girlfriend at the World Bank, Shaha Riza.
The Europeans asked for an inquiry. The investigation headed by Paul Volcker, unfortunately, did not address the corruption. The Europeans reacted by calling for an end to the 66 years’ “Gentlemen’s Agreement” that the US appoints the President of the World Bank and the Europeans appoint the Managing Director of the IMF. Had the press reported my warnings to the authorities about the corruption, the US could have avoided substantial tarnish to its reputation and the loss of the Gentlemen’s Agreement.
My efforts to expose and correct the failure of the World Bank to adhere to standard accounting procedures has been enduring. In 2005, for example, the Dutch Government asked the Audit Committee to end a campaign of retaliation against me for reporting to the Executive Board about an inaccurate evaluation on a failed Banking Sector project in the Philippines. Then Senator Richard Lugar (R-IN) and the Senate Committee on Foreign Relations have written three letters to the World Bank on my behalf, asking for an end to the ongoing cover-up.
My Efforts to Expose Corruption
In 2007, I also met with Chris Armstrong in Senate Finance, Jayme Roth in Senator Bayh’s office, and Nicole Willet in Senator Clinton’s office. Senators Lugar, Leahy and Bayh began asking GAO to investigate the World Bank in 2008, and the Audit Committee is requiring an independent audit of the World Bank’s internal controls. The Audit Committee also referred my case to the Bank’s Institutional Integrity Department (INT). INT, which reports to the President of the World Bank, is used to intimidate staff. Paul Volcker ignored INT’s sinister role and simply recommended that whistleblower retaliation cases should be removed from INT’s mandate.
I met with the Ministry of Foreign Affairs of the Dutch Government on 24 September 2007. The Dutch are not happy with the Volcker Report and the ongoing cover-up. Moreover, previous Dutch Executive Directors, Herman Wijffels and Ad Melkert, disclosed that ‘third parties’ attempted to intimidate them and other members of the World Bank’s Board through shocking invasions of their private lives. The US violation of the safe-conduct normally accorded to diplomats is an egregious breach of honor. Article VII, Section 8 of the World Bank’s Articles provides immunities to Executive Directors, officers and staff.
Ben Heineman (who was a member of the Volcker Panel) spoke at the Yale Law School on October 5, 2007. On October 8, 2007, at the suggestion of minority staff on the Senate Foreign Relations Committee, I contacted Kenneth Peel at Treasury, to encourage the Bush Administration to end the cover-up on the Philippines Banking Sector Reform Loan and restore the rule of law to the Bank. But the upshot of my efforts to correct improper procedures was to have me removed from my position as Senior Counsel, which has had an intimidating effect.
Different faces but the same old story is being replayed in a small part of the Euro-zone, Cyprus, and that story is one of the Cypriot banking crime syndicate gambling with depositor funds on the debt markets, this time it’s Greek bonds, yes, these master-eds of the universe used depositor funds to pile into soon to go bankrupt Greece because of the high yields they offered so that the bankster’s could bank bonuses on the basis of fictitious profits as illustrated by the fact that they have dumped an infinitely pile of losses (Greek Bond’s ) onto Cypriot tax payers, far beyond anything that any other Euro-zone member has had to face to date.
The Damage Has Been Done Expect a Bank Run
The emerging details early Monday morning in the face of a literally eye popping deadline are that of at least 40% of deposits over Euro 100k will be stolen in the two largest cypriot banks, one of them Laiki (2nd largest) will definitely be wound down, many mainstream commentators have jumped onto the fact that the depositors will receive shares in the banks which might be fine if the shares were given AFTER the banks were restructured i.e. bad assets being written down, but they are not instead the depositors are likely to be handed what amounts to worthless toilet paper in exchange for their hard cash.
The damage has been done, as the one thing that the banking system relies on has been destroyed and that thing is confidence. No depositor in Cyprus has any confidence in any cypriot bank and will try to transfer out of the Cyprus tax haven at the earliest possibility so there will be a bank run on cypriot banks the unfolding of which will be inline with the capital controls have been put in place.
The damage has been done to the Cypriot economy as its biggest industry the finance sector has been destroyed to result in huge job losses.
The damage has been done as all businesses have been impacted severely due to both many businesses having had their bank deposits stolen and for Cyprus having become a cash economy, where credit is scarce and not trusted by suppliers, so expect many non finance related business to go bust over the coming months.
The damage has been done to the reputation of Cyprus, where it is now seen as a high risk destination for tourists and investors for the reason of perceived instability, just as Greece’s tourist industry has suffered.
The damage has been done geopolitical as Turkey profits from this crisis as Northern Cyprus is not only stable, but like the mainland is prospering. Also there is the potential for conflict with the suggested sale of Natural gas deposits around Cyprus as they effectively belong to both North and South Cyprus, whilst this does not mean a military conflict it will make investors more reluctant to enter a potential conflict zone given the flammable nature of natural gas.
Why Should Germany Bailout the Cyprus Tax Haven?
As ever the blame is being leveled at Germany for German tax payers not digging deeper into their pockets to bailout Cyprus as illustrated by the Cypriot born Dragon’s Den star Theo Paphitis laying the blame at the Germans for not finding the extra Euro 6 billion rather face the truth that the Cypriot Bankster’s and the Cypriot politicians are WHOLLY responsible for the current crisis because this crisis has its roots in actions several years AFTER the 2008 financial crisis i.e. Cypriot bankster’s used depositor funds to gamble on Greek bonds and off course lost heavily which is why the banks went bankrupt.
Bank Holiday Financial Armageddon – The Path to Hyperinflation
Well over a year ago I attempted to map out how euro-zone financial armageddon might play out for the UK that would start with a Bank Holiday that would keep getting extended until the Government had worked out the mechanisms for stealing your savings. The big difference between the UK and euro-zone members is that the UK can and would print an unlimited amount of currency to prevent nominal loss to depositors Cyprus style, the consequences of which would be a collapse in sterling and resulting very high inflation whereas that option has not been available to the likes of Cyprus by virtue of having the Euro so it is forced to outright steal depositor funds.
What is Probably Likely to Happen IF the Euro-zone Collapses
I expect the UK government would nationalise the bankrupting banks either in part or full as they did with Northern Rock, Lloyds and HBOS, for if depositors in any significant number actually started to lose any of their deposits then that would result in a catastrophic loss of confidence in the UK financial system and spark runs on all banks.
My best minimum advice is to prepare for the worst rather than leave it to chance, because if the government is facing a bank rescue bill that runs in the trillions it may decide that the pain of closing the banking system for a few weeks (Extended Bank Holiday Month) is better than the implications of more than doubling the national debt which would make George Osbourne’s £140 billion annual deficit look like peanuts.
A closure of the banking system (Bank Holiday Month) will result in a huge drain on cash in the economy, therefore I suspect the Bank of England has already secretly prepared itself for this eventually by printing a huge quantity of actual bank notes by the container load, ready to ship out as soon as the crisis bites, which would be necessary to cover a closure of the banking system the effect of this would be highly inflationary, because printing actual bank notes is the same as that which happened during Weimar Germany sparking hyperinflation when people ended up buying loafs of bread with Wheel barrows full of worthless currency, this is what would happen, inflation would go through the roof, forget 5% per year, we would be at 5% per month! So a closure of the banking system would probably not be the worst of what could follow.
Similarly the Cyprus banks have been on a Bank holiday since 18th March that keeps getting extended with the latest news suggesting that they will re-open on Tuesday 26th March, though I wouldn’t bank on it, given that a bank run by frightened depositors is certain, they will likely remain closed for the whole of this week.
Meanwhile the ECB keeps shipping in cash to distribute at falling withdrawal limits from Euro 500 per day to 100 from today per account via ATM cash machines that tend to run dry within minutes of their daily refills.
THIS IS HIGHLY INFLATIONARY. As I have explained several times over the year that printing and distributing actual bank notes is the road to Hyper inflation because it sends the velocity of money through the roof as no one wants to hold onto money that is constantly losing its value. Whilst inflation can be contained in Cyprus due to its small economy, however Germany KNOWS from its own experience of what the contagion risks are if the same started to take place in larger Euro-zone nations that would require infinitely more bank notes to be printed in the event of banking crisis bank holidays, which most obviously points to Greece as being next. Therefore the ECB will likely enact severe cash withdrawal limits right across the euro-zone due to the inflationary consequences.
Whilst Cyprus dithers its away through the current crisis, this will however set a dangerous destabilising precedent in that bank deposits can no longer be deemed to be SAFE anywhere! for the fundamental reason that it is impossible for bankrupt states to guarantee anything! Let alone 100% of deposits. Instead at the crunch point they will seek to STEAL ALL OF YOUR WEALTH as I originally warned several years ago in the Inflation Mega-trend Ebook of Jan 2010 (FREE DOWNLOAD) (and earlier in articles), which is why people need to seek to protect their wealth by removing it from banks and parking it in assets that are less susceptible to the Inflation stealth theft such as property that I will seek to illustrate again later in this article.
Risk of Contagion
The risk is now of contagion of bank runs spreading across the euro-zone because the likes of Spanish Banks are STILL BANKRUPT! The People of SPAIN Understand this, they also now understand that they could be NEXT to have their savings stolen by a state that cannot guarantee anything! As one thing is virtually guaranteed that Cyprus is NOT the end of the story, for after the bailout of the cypriot banks within a few months another euro-zone countries banks will also explode in spectacular style, the warning signs of which will be made manifest in that nations bond markets.
Know this truth – NO BANK Holds Funds to even pay out 1/10th of Depositors!
What You Need to do to Protect Your Bank Deposits
I have been warning of the risk that the periphery sovereigns pose to the bank deposits for several years now and repeatedly suggested that all depositors in PIIGS banks should move funds out of periphery banks and into either hard assets or the likes of German bonds with detailed steps of what should be done as illustrated in this article – How to Protect Your Bank Deposits, Savings From Euro-zone Collapse Financial Armageddon
In which respect I enacted my emergency Financial Armageddon plan last week, where the focus was to move funds from high risk euro-zone banks to low risk wholly UK owned banks. Everything went smoothly apart form one transaction of early Friday afternoon for £16,000 which has gone awol! The transaction was supposed to leave Santander early Friday afternoon and arrive at a small UK private bank in about 2 hours time (Faster Payment service). Whilst logging in later in the afternoon I could see that the transaction had been marked as having left Santander but there was no sign of arrival of funds at the destination bank.
Now well over 60 hours later the funds have still not arrived, further more attempting to log into Santander since late Friday has resulted in the following maintenance message.
Whilst Santander states it is scheduled maintenance, however there was NO prior warning of maintenance nor does it explain the fact that funds that were supposed to take a couple of hours to arrive have still not arrived well over 48 hours later. I guess all will be revealed early Monday when either the opening shots of Financial Armageddon have been averted or not.
This illustrates the risks that the whole banking sector poses in that when it shuts down it will be in an instant, and then it will be too late to draw your funds out so you really need to act well before Financial Armageddon strikes. And certainly d not pay attention to any soothing words out of the Bank of England as illustrated by the fact that one of the last statements out of the central bank of Cyprus prior to freezing the banking system was that depositors money was safe in Cypriot banks.
The key message is stick to the depositor guarantee limits of Euro 100,000, £85,000 per banking licence.
UK Stealth Theft of Bank Deposits
For countries such as UK the theft has been by STEALTH by means of high inflation that equates to approx 14% STOLEN from UK savers over the past 4 years i.e. the amount that savers have lost after REAL Inflation (CPI+1.5%) and Taxes (20%) as savings interest rates have been artificially depressed by the Bank of England so as to funnel wealth into the bankrupt banks and monetize the governments large budget deficit. All Cyprus is doing is stealing directly from depositors because as being in the euro-zone it CANNOT PRINT MONEY AND INFLATE as the UK and US have been doing.
UK Budget Detonates its Latest Inflation Nukes
Forget all of the propaganda that spouts from politicians or its economic propaganda mouth piece the OBR. For the truth remains as I voiced right at the beginning that the coalition government would continue to increase debt, each and every year of the coalition government towards a target of £1.33 trillion by March 2015 which is set against coalition / OBR propaganda for paying down debt.
Democracy Now! U.S. and World News Headlines for Monday, March 25
Published on Mar 25, 2013
Visit http://www.democracynow.org to watch the entire independent, global news hour. This is a summary of news headlines from the United States and around the world as reported by Democracy Now! on Monday, March 25, 2013. Visit our website to read the complete transcript, search the vast news archive, or to make a donation to support our non-profit news program.
Capitalism in Crisis: Richard Wolff Urges End to Austerity, New Jobs Program, Democratizing Work
Published on Mar 25, 2013
http://www.democracynow.org — As Washington lawmakers pushes new austerity measures, economist Richard Wolff calls for a radical restructuring of the U.S. economic and financial systems. We talk about the $85 billion budget cuts as part of the sequester, banks too big to fail, Congress’ failure to learn the lessons of the 2008 economic collapse and his new book, “Democracy at Work: A Cure for Capitalism.” Wolff also gives FOX news host Bill O’Reilly a lesson in economics 101.
A People’s Revolt in Cyprus: Richard Wolff on Protests Against EU Plan To Seize Bank Savings
Published on Mar 25, 2013
http://www.democracynow.org — The eyes of the financial world are on the small Mediterranean island of Cyprus today. The government of Cyprus has brokered a last-ditch $13 billion bailout deal with European officials to stave off the collapse of its banking sector. Under the deal, all bank deposits above approximately $130,000 will be frozen and used to help pay off the banking sector’s debts. An earlier version of the deal collapsed last week when Cypriots took to the streets to protest paying a tax of up to 10 percent on their life savings. The plan led to mass demonstrations as well as panicked bank withdrawals as Cypriots rushed to protect their savings. “It’s a demonstration of people power in this little corner of the world that’s very impressive and the basis, I think, for some optimism about opposition,” says Richard Wolff, economics professor emeritus at University of Massachusetts, Amherst and visiting professor at New School University. He is the author of several books including most recently, “Democracy at Work: A Cure for Capitalism.”
Many could not get even get online to access their accounts! We at Truth Frequency cannot help but wonder if this is a test to see how people will react to a bank holiday or a sudden collapse of the economy. Just a few weeks ago Bank of America customers were also unable to access their accounts.
Bank runs are a very touchy subject. We have to realize that the banks only hold 10% of all money in their reserves thanks to the fractional reserve system. One must only peruse Modern Money Mechanics to realize how money is created and handled. First, it’s noteworthy to mention that only 3% of all money actually exists in paper or metal form. The rest is nothing but digits in a computer system. But it’s even more chilling to think about the fractional reserve system and how banks only have 10% of their money on hand. Therefore if only 10% of the money was withdrawn, the economy would crash. Factor in the very fact that only 3% exists in paper form and disaster is imminent! It’s really a catch-22 situation: Withdraw all of your money from the bank and crash the economy, or leave your money in the bank where it’s sure to be stolen.
However, we have to realize that money in any form is not actually yours. It belongs to the Federal Reserve. It was loaned out to the US government with interest attached and then given to you for use as a promissory note that one day you will pay back to debt. So let’s do some simple math here. If you borrow 10 dollars from me and the interest is a dollar and I create that ten dollars out of thin air, you have to pay me back eleven dollars. So you do what you need to do, come back to me and you’re ready to pay back the $10. However since I’ve only created $10, you have to borrow another $10 to pay me back the dollar. So you borrow another $10 making your loan $20, you pay me back the $10 plus $1 and you’re left with $9. So you’ve paid back the original $10 plus interest but you’re still stuck with the second $10 loan plus $1 interest. But you only have $9!! So what are you going to do? Borrow another $10, which gives you $19 in your hands. You pay back the $10 loan plus $1 interest and you’re now left with $8 in your hand. But you still owe me for the recent $10 loan plus $1 interest.
Does this sound crazy? This is EXACTLY what the Federal Government does with the Federal Reserve. The Federal Reserve prints up some fancy looking pieces of paper called “dollars” and the Federal Government prints up fancy pieces of paper and they call them treasury bonds. And through that exchange, We The People work 1/3rd of the year to pay the “income tax” which goes directly into the pockets of the Federal Reserve Bankers to pay back the interest accumulated from this transaction (According to the Grace Committee – Ronald Reagan). So considering a third of your income goes to pay back the interest, the interest is more like 30% rather than 10% as used in the example above.
So now you realize why we have to constantly borrow money to keep the economy going. Now let’s get back to the fractional reserve system. Banks do not actually loan out money but rather they loan out “credit”. This credit is based on their “fractional reserves”. So let’s say you put $1000 in the bank. Because the bank is only required to hold 10% of their reserves then they now have $9,000 worth of new lending power. So then your neighbor goes to the bank and asks for a loan for a $9,000 car. The bank takes the credit they created based on your deposit and pays the financing company for your friend’s loan. But this money never actually leaves the bank or even given in cash. What happens instead? The financing company receives a check for the amount then deposits it into their bank. So now that they deposited $9,000 into their bank, that bank now has $81,000 worth of lending power based on that $9000 deposit ($9,000 times 10 equals $90,000 minus 10% for the reserve equals $81,000). And the system keeps going and going and going.
Different faces but the same old story is being replayed in a small part of the Euro-zone, Cyprus, and that story is one of the Cypriot banking crime syndicate gambling with depositor funds on the debt markets, this time it’s Greek bonds, yes, these master-eds of the universe used depositor funds to pile into soon to go bankrupt Greece because of the high yields they offered so that the bankster’s could bank bonuses on the basis of fictitious profits as illustrated by the fact that they have dumped an infinitely pile of losses (Greek Bond’s ) onto Cypriot tax payers, far beyond anything that any other Euro-zone member has had to face to date.
