The global economy cannot operate without fiat money - it is too big. To be
successful a thriving economy needs an expanding money supply. Unfortunately our
expanding money supply has been achieved by commercial banks creating new money
as a debt to them. Their greed ensured it got out of hand and now they are
destroying money as quickly as they can "shrink their balance sheets" as they
call it. It should never have been allowed to happen. The new money needed by
thriving economies should have come in as debt free money created by the
BOE/Treasury to pay government expenditure on normal outlays or on new
infrastructure - or, of course as lower taxes. Just as with money created by the
banks as debt, too much will cause inflation and too little will result in
recession, deflation and ongoing depression - which is where we are now. But at
least money created as cash does not have that debt to service. It is the
creation of money as debt that has got us into the mess we are in. Ironically it
is also the creation of money as debt that has prevented the excess that has
been created causing hyper inflation. I'm afraid the banks are not fit for
purpose; they are self programmed to cause Boom and Bust... Well, the current experiment with fiat money has certainly demonstrated that
central banks cannot be trusted to run the system. That aside, the principle of fiat money only has peripheral connection with
the size of the money supply - and will always tend towards fraud. There is no
reason not to have an asset-correlated money supply assuring that money supply
only increases in line with productivity. Anyway, it appears that Stein's law
applied to consumer leveraging has finally kicked in so the necessary correction
may well happen on its own and the central bankster-induced super-bubble burst.
Let's see what the Keynesians have to say as the consumer deleveraging gains
pace...
Access Investments-Building Awareness - European Union-ROMANIA
Thursday, June 27, 2013
Fiat money ...and than some...
The global economy cannot operate without fiat money - it is too big. To be
successful a thriving economy needs an expanding money supply. Unfortunately our
expanding money supply has been achieved by commercial banks creating new money
as a debt to them. Their greed ensured it got out of hand and now they are
destroying money as quickly as they can "shrink their balance sheets" as they
call it. It should never have been allowed to happen. The new money needed by
thriving economies should have come in as debt free money created by the
BOE/Treasury to pay government expenditure on normal outlays or on new
infrastructure - or, of course as lower taxes. Just as with money created by the
banks as debt, too much will cause inflation and too little will result in
recession, deflation and ongoing depression - which is where we are now. But at
least money created as cash does not have that debt to service. It is the
creation of money as debt that has got us into the mess we are in. Ironically it
is also the creation of money as debt that has prevented the excess that has
been created causing hyper inflation. I'm afraid the banks are not fit for
purpose; they are self programmed to cause Boom and Bust... Well, the current experiment with fiat money has certainly demonstrated that
central banks cannot be trusted to run the system. That aside, the principle of fiat money only has peripheral connection with
the size of the money supply - and will always tend towards fraud. There is no
reason not to have an asset-correlated money supply assuring that money supply
only increases in line with productivity. Anyway, it appears that Stein's law
applied to consumer leveraging has finally kicked in so the necessary correction
may well happen on its own and the central bankster-induced super-bubble burst.
Let's see what the Keynesians have to say as the consumer deleveraging gains
pace...
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Europe's finance ministers have finally agreed new rules to handle the cost of future bank bailouts, which will see losses forced onto creditors such as large depositers as well as bond holders and shareholders.
After another late-night session in Brussels, ministers hammered out rules that will mean creditors are 'bailed in' to help cover the cost of future rescue deals. It's meant to end the era of taxpayers automatically picking up the tab, and should help Europe move towards proper banking union.
The key to the deal is that 8% of a failing bank's total liabilities – first shareholders, then junior bondholders, then 'uninsured deposits' (over €100,000) – must be effectively 'wiped out' before public funds can be used.
Deposits of under €100,000 remain protected. And the deal also puts big deposits held by large companies ahead in the firing line before those of smaller companies and individuals.
Michael Noonan, the Irish finance minister, described it as a revolutionary change in the way banks are treated in the European Union.
The deal also leaves some discretion for national goverments to decide whether to step in, as Jurgen Baetz of Associated Press explains:
Those forced losses will go as high as 8% of a bank's total liabilities, only then would national governments kick in and top it up with a bailout possibly worth another 5% of the liabilities.
The negotiations were complicated because some nations feared being bound by overly rigid European rules. Others warned that too much flexibility would create new imbalances between the bloc's weaker and stronger economies and a lack of common rules would destroy certainty for investors and erode trust in the financial system.
Another key point: member states are expected to set up "ex-ante resolution funds", eventually holding a sum equal to 0.8% of national deposits, to fund their own contributions.
The draft deal still needs the approval of the EU parliament, and is expected to begin in 2018.
I'll pull together reaction to the deal, and more details, shortly.
The deal comes before an EU summit where countries could agree further steps to move closer to full banking union. Leaders will also discuss plans to fight Europe's youth unemployment crisis.
Also coming up today -- a general strike is taking place in Portugal in protest at the country's ongoing austerity measures; and new GDP data for the UK is released at 9.30am BST.
Updated at 8.10am BST
8.07am BST
Bank rules agreed: media round-up
In the Financial Times, Alex Barker describes the deal as the eurozone's "flagship effort to bolster Europe’s patchy national defences against bank failure".
Barker explains how ministers finally agreed some flexibility:
Under the compromise, after the minimum bail-in is implemented, countries are additionally given an option to dip into resolution funds or state resources to recapitalise the bank and shield other creditors. The intervention is capped at 5 per cent of the bank’s total liabilities and is contingent on Brussels approval.
This issue of national flexibility bedevilled the talks for months, as member states jockeyed to tailor the rules to suit their own banks and past experiences of handling financial crises. A German-led group pushed for strict, automatic bail-in procedures, while France and some non-eurozone countries demanded more national discretion.
Jurgen Baetz of Associated Press writes that the deal gives "new credibility" to Europe's push for banking union.
He writes:
Following the 2008-2009 financial crisis, countries like Ireland, Britain and Germany each had to pump dozens of billions of fresh capital into ailing banks to avoid the financial system from collapsing.To avoid that happening again, finance ministers discussed who should contribute in which order and how much to a bank's rescue - a so-called bail-in - so that ordinary taxpayers aren't left with the bill.
"Bail-in is now the rule," stressed Ireland's Finance Minister Michael Noonan, adding the rules put an end to moral hazard by making it clear that banks will suffer before the government might come in to help, if at all. "This is a revolutionary change in the way banks are treated," he added.
But John O'Donnell and Robin Emmott of Reuters warn that banking union is far from agreed:
Thorny issues lie ahead, not least whether countries or a central European authority should have the final say in shutting or restructuring a bad bank.
The European Commission, the EU executive, is expected to unveil its proposal for a new agency to carry out this task of "executioner" as early as next week, officials said.
"The most important discussion has yet to start and that is how decisions on restructuring will be made," said Nicolas Veron, a financial expert at Brussels-based think tank Bruegel. "It's premature to say that Europe is getting its act together."
What the ministers said
Speaking to reporters after the deal was agreed, Dutch finance minister Jeroen Dijsselbloem argued it was a significant step forward:
If a bank gets in trouble we will now, throughout Europe, have one set of rules on who pays the bill," he said.
French consumer confidence hits alltime low
Gloom in France -- consumers are at their most pessimistic since records began in 1972, according to data released this morning.
The French statistics agency INSEE reported that consumer confidence slid again, to its lowest level since it began monitoring morale in 1972. French consumers are also more downbeat than ever before about their future living prospects.
At just 78, the reading was somewhat shy of analyst forecasts of 81, and far from the long-term average of 100.
The French economy is currently in recession, with unemployment moving steadily higher, and the government trying to cut public spending to hit EU deficit targets. Consumers have plenty of reasons to worry.
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