Princes of the Yen

In this outstanding documentary, loosely based on Professor Richard Werner‘s book with the same title, we can not only better understand the post WWII japanese economic history, but also comprehend how “independent” central banks were introduced in Asia, first in Japan with the legal modifications induced by the 1989-1990 japanese stock market crash and, later, with the 1997 Asian Crisis, also in the “tiger” economies of South East Asia.

The documentary convincingly argues and documents, that modern central banking serves purposes and objectives that often have very little to do with the welfare of their own nations and a lot to do with projects of economic and social engineering and financial colonization by western financial institutions, most of them based in America. The often perverse role played by the International Monetary Fund (IMF) is compellingly explained.

One of the strengths of the documentary is to explain with precision how the transformation of the social and economic structures of whole countries, and of successful ones by the way, are planned years, in the case of Japan, decades, in advance, how are economic crisis artificially created and how, when crisis finally break out, “independent central banking” and fire sale of domestic assets to foreign investors are systematically imposed on nations that lose their economic independence…forever.

The documentary ends with a warning to Europeans about the true nature of Europe’s own “independent” central bank: the European Central Bank (ECB).

Advertisements

Aberrant Central Banks

In a report to be presented on Wednesday June 17 in London, the Official Monetary and Financial Institutions Forum (OMFIF) will reveal that central banks are increasingly investing in the stock market and that they will most likely continue to do it in the future. “A cluster of central banking investors has become major players on world equity markets” can be read in the report, according to an article published in the Financial Times. What should be considered an aberration, that is, that central banks, whose “raison d’être” is maintaining the purchasing power of the currency, engage in such market distorting and destroying activities, is presented as a, at most, minor mistake, a quirk, a curiosity, something not to be ashamed of or worried about. Here you can reach the OMFIF press release, here the FInancial Times article and here the Zerohedge comments about this conspiracy theory turned fact.

Ultra Vires ECB

Ultra vires is a latin phrase meaning literally “beyond powers”. If an act requires legal authority and it is done with such authority, it is characterised in law as intra vires. If it is done without such authority, it is ultra vires. Acts that are intra vires may equivalently be termed “valid” and those that are ultra vires “invalid”.

The verdict of the German Constitutional Court (GCC) last friday february 7 to declare the European Central Bank’s (ECB) Outright Monetary Transactions (OMT) program Ultra Vires, that is, not compatible with the EU Lisbon Treaty and with the German Constitution, but at the same time avoiding taking any binding resolutions and sending the case to the European Court of Justice (ECJ) has confused everybody.

We already discussed the issue of the GCC’s stance in relation to the ECBs programs and policies here and here and here and here. Now we update and continue this analysis.

In his editorial “The Euro after the Karlsruhe ruling” FT supports the GCC in its letting the ECJ decide on the process while at the same time criticizing that the argumentation by which the GCC considers the OMT Ultra Vires: “The judges in Karlsruhe argue that OMT goes against the ECB’s mandate since it amounts de facto to monetary financing of government debt – which is prohibited under article 123 of the European Treaty. This is also the position of the Bundesbank, Germany’s central bank, which has consistently opposed OMT. But this interpretation is highly questionable, since the ECB would only buy bonds on the secondary market. The court also claims that the bond-buying scheme goes beyond the ECB’s remit, which is limited to monetary policy. But OMT was necessary to overcome the fragmentation of the Eurozone credit market, which made it impossible for the ECB’s monetary policy to work.”

What the FT editorial forgets to mention though, is that in reference to purchases in the secondary market not being explicitly forbidden by article 123 of the European Treaty, the GCC declared that “es liegt auf der Hand, dass dieses Verbot nicht durch funktional äquivalente Massnahmen umgangen werden darf”, that is, purchasing bonds in huge quantities on the secondary market would conceptually be equivalent to acquiring them in the primary market, which is illegal, as is commented in the FAZ article “Die Angst der Verfassungsrichter”.

According to FT’s Alphaville “the decision to refer the OMT to the ECJ shouldn’t cause a political storm in Germany: the political institutions that matter long ago made their peace with the OMT. But the confusion about what the OMT does — Gerhardt alone nails it there — hardly helps.”. They argue that the german parliament, the Bundestag, has already had opportunity to boycott the OMT, and that the fact that it has chosen not to, would give democratic legitimacy to the ECB’s plan.

Also in the FT’s piece “Germany’s Constitutional court and the bond-buying plan” argues for a partial victory for the ECB, since they expect “the ECJ to sing from the ECB’s hymn sheet”, but they also have caveats: “The ECB is not completely off the hook, however. Until the ECJ makes its decision, uncertainty about the legality of OMT will persist. Some of the leading plaintiffs who brought the case in Germany argued on Friday that the ECB would not dare to activate its bond-buying scheme so long as the ECJ was considering the case – an exercise that could take at least a year.”

Gunnar Beck a law professor at London University, is cited in the same article  and blasted the GCC’s decision as “legally indefensible”, emphasizing that the constitutional court’s decision marks the first time it has handed a case to the European court:  “Up to now the [constitutional] court had consistently maintained that it alone – and not the EU courts – had the final say on whether the EU institutions exceeded their competence. Because if this matter were left to the court of justice of the EU, Germany would lose any control over the transfer of sovereign rights to the EU under the EU Treaties.” and “Today’s decision therefore amounts to nothing less than a surrender of sovereignty by Germany’s highest court.”

We can find a good summary of the GCC’s resolution in “Ein Richterspruch mit Risiko” @ Zeit Online where the main points are clearly synthesized: 1) The OMT program would have “Verteilungseffekte” (distribution effects), in that it would favor bonds of some countries (supposedly the ones from the most indebted countries, Greece, Portugal, Italy, Spain, Ireland) over those of other members of the Eurozone, which would amount to state financing, something that the ECB is not allowed to do. 2) The OMT program should not have as objective the artificial modification of government bond rates of the different countries of the Eurozone, bond prices should not be manipulated (“Eingriffe in die Preisbildung am Markt”), but that is precisely what the OMT is supposed to do. 3) Finally, the GCC leaves an open door for a “decaf” OMT that would comply with conditions 1 and 2 already mentioned and, also, the size of the program would not be unlimited (“whatever it takes”) but with a definite and finite size beforehand.

So what can we conclude of it all?

  1. Although the GCC’s remit of the OMT case to the ECJ appears to be a victory for Draghi’s co-opted ECB, the fact stands that it will be more difficult for the ECB to implement its OMT program while its legality has already been declared null by a 6 to 2 vote at the GCC and there is a pending case relating to the same issue before the ECJ. Although everybody assumes that the ECJ will give a favorable ruling as to the legality of the OMT program, what if it did not? Does the ECB want to run the risk of having started a program whose legality has been denied by the GCC and on which the ECJ has yet to issue its ruling?
  2. At the very least the GCC has argued and conveyed the idea that the OMT is illegal, and that if the ECB finally decides to use it, it will be with “dirty hands”. Also, and it is not a negligible victory, the pressure on the ECB to avoid using the OMT before the ECJ has issued its verdict will be enormous.
  3. Opposition by german citizens to the OMT, and to the ECB policies in general will not disappear with this resolution. The idea that Mario Draghi’s ECB has been co-opted, will, if anything, increase, creating a moral hazard issue that the ECB  will find increasingly difficult to ignore.
  4. The importance of the final outcome of this case goes well beyond the economic and financial consequences of the possible implementation of a “money printing” program by the ECB. Its main significance lies in the question of whether legality in Europe has any meaning anymore, whether to fulfill globalist (?) dreams international treaties and national constitutions can be superseded.
  5. Perhaps this resolution should be analyzed and judged in the context of what governments and parliaments have done since the global economic and financial crisis exploded in 2008. If something characterizes the economic and monetary policies in the West in the last 5 years, is, on one side, almost unlimited money creation by central banks, labeled differently depending on the country (QE, LTRO, pegging of the Swiss Franc to the Euro, the japanese “three arrows program” etc. etc.), and an almost biblical reluctance on the part of governments to rein in the financial sector that has had to be rescued, at tax payers’ cost, everywhere. Like Simon Johnson argued a few years ago in “The Quiet Coup”, the financial sector has co-opted the state. He was talking about the USA, but the same argumentation could be applied to most western countries. What some people call New World Order (NWO) or Neofeudalism, has advanced, not gone backwards, in this crisis. That being so, was it perhaps not too much to expect the GCC to swim alone against this NWO tide? By voting against the OMT 6-2, naming it illegal, and referring the case to the ECJ, they have perhaps shown as much courage as they’ve been able to summon and, in any case, much more than governments and parliaments.

The GCC could have done better, it could and it should have declared the OMT illegal without remitting the case to the ECJ, but in a world in which the NWO finds almost no opposition, it could also have done worse. In the end, we doubt Mario Draghi is happy with the GCC’s resolution and, inasmuch as he is unhappy with it, the GCC snatched a small victory from the jaws of defeat.

A United Europe? Think twice

In a revealing article published today by Die Welt, some of the elements of this year’s wish list of the representatives of the global elite, meeting this week in Davos for their yearly fest, are, if indirectly, mentioned.

As expressed by Axel Weber, president of UBS, in this year’s list there is the desire that in the event of a second banking crisis in Europe (assuming the first one was ever finished) the european banking system would be recapitalized, bailed out, with public money. More importantly, perhaps, another element of the list would be advancing the agenda for the “United States of Europe”.

After a few paragraphs of platitudes of what some of the Davos participants think about the present economic situation in the world, “good but more reforms are needed” etc. etc. we come to the meaty part of the article, where Mr. Weber expresses his opinion about both the process of rehabilitation of the european banking system and of the potential results in the upcoming elections for the European Parliament on May 25th.

On the issue of the european banking system, fears Axel Weber:

“….fürchtet er, dass die Sanierung der Banken die nächste Bankenkrise provozieren könnte: Die Bilanzen von 130 Banken in Europa werden demnächst von der EZB streng geprüft. Im November sollen die Ergebnisse veröffentlicht werden.”

“Das kann zu einer gewissen Unsicherheit führen”, says Weber. “Wir werden nicht erst im November, sondern schon einige Wochen vorher sehen, dass Spieler gegen die möglichen Verlierer der Bilanzprüfungsübung wetten und sie abstoßen….Und es werden wieder die Staaten sein, die den Banken frisches Kapital geben müssten”

That is, the capital needs resulting from the results of the stress test that the ECB will impose on 130 european banks later this year might require european states to recapitalize them, again, with public money.

On the issue of the upcoming European Parliament Elections on May 25th, according to Mr. Weber:

“EU-skeptische Kräfte könnten eine entscheidende Kraft werden. Dabei ist die Entscheidungsfindung in der EU ohnehin schon kompliziert”

That is, Euro-sceptic parties might become a decisive force in the new European Parliament, complicating even more the decision making process in the EU.

On the one side, we are warned, a new banking crisis is possible, given the still very weak capital situation of most european banks. If that came to pass, then it would be expected that governments would bail banks out again (with tax-payers money).

Even more important, in our view, is the unease that the Davos mandarins feel about the upcoming European Paliament Elections on May 25. It is feared that anti-Euro, anti-EU parties, perhaps channeling a deep public feeling of having been betrayed by traditional political parties, might win enough seats in the next European Parliament to block, or at least delay the march towards a sort of “United States of Europe”, towards the TTIP, Transatlantic Trade and Investment Partnership, a sort of “free trade” agreement between the EU and the USA, and toward other globalist dreams, “dreams” presented as the solution to most, if not all, the problems that Europe faces.

This kind of statements reveal, we think, the fear that these elections, even for a parliament with very limited powers, might signal an inflection point in what has become a non democratically sanctioned path towards levels of european integration that many citizens in the European Union, for different reasons, reject.

The Davos elites know what they want: a centralized Europe. The reasons why seem obvious: a distant and highly centralized bureaucracy that controls all of the continents’ economic and political policies is much easier to manipulate than a set of independent states, each with its own agenda. This objective will be presented under the soothing aspect of a democratic continent “finally” united, but what really lies behind such an entity might not be so benign. Citizens feel it, and elites fear citizens acting on their justified fears.

Perhaps it would not be a bad idea to remember Aldous Huxley‘s admonition in Brave New World Revisited when talking about the best way to resist tyranny: decentralize.

“Under the relentless thrust of accelerating over-population and increasing over-organization, and by means of ever more effective methods of mind-manipulation, the democracies will change their nature; the quaint old formselections, parliaments, Supreme Courts and all the restwill remain. The underlying substance will be a new kind of non-violent totalitarianism. All the traditional names, all the hallowed slogans will remain exactly what they were in the good old days. Democracy and freedom will be the theme of every broadcast and editorialbut Democracy and freedom in a strictly Pickwickian sense. Meanwhile the ruling oligarchy and its highly trained elite of soldiers, policemen, thought-manufacturers and mind-manipulators will quietly run the show as they see fit.”

“Or take the right to vote. In principle, it is a great privilege. In practice, as recent history has repeatedly shown, the right to vote, by itself, is no guarantee of liberty. Therefore, if you wish to avoid dictatorship by referendum, break up modern society’s merely functional collectives into self-governing, voluntarily co-operating groups, capable of functioning outside the bureaucratic systems of Big Business and Big Government.”

A  United Europe?  Think twice.

Mr. Draghi & the “european banking union”

ECB on collision course with Germany on banking union @ Financial Times

Financial Times publishes this article about the reluctance of Germany to the intent of the ECB to get total supervisory and resolution control over all banks in the eurozone. The so-called “european banking union” plans seek to place eurozone banks under the overarching supervision of the ECB, followed by the creation of a bank resolution scheme for the bloc and, eventually, a common deposit scheme.

“In the 32-page opinion to EU institutions in Brussels, the ECB said the new agency, known as the single resolution mechanism, should be “strong and independent” with clear, unitary powers to force failing banks to either recapitalize or shut down.”

“The stance puts Mario Draghi, ECB president, in direct conflict with Wolfgang Schäuble, the German finance minister, who has repeatedly said the EU’s new bank bailout system should instead start as a “network” of national authorities because EU treaties do not allow for a single decision maker for all of Europe.”

“Differences between Brussels and Berlin over the way forward for a new EU bank executioner – which many officials believe is the biggest shift in sovereignty for the eurozone since the creation of the single currency itself – has slowed progress towards banking union to a crawl.”

Mr. Draghi’s haste in trying to get total control of the european banking system, something well beyond what was envisioned both in the intentions and the written law of the EU and ECB treaties, is another, perhaps the definitive, step towards protecting the banking industry from accountability and democratic (even if very mild and imperfect at present) control.

Germany’s reluctance is very logical, since once the ECB gets supervisory and resolution authority over all banks in the eurozone, it will have all the tools to perpetuate a “dual economy”, with a financial sector that not only finances itself at rates (basically zero) that have nothing to do with the rates at which citizens and small and mid enterprises have to finance themselves (if at all), but whose supervision would be in “friendly hands”. Friendly hands to them, banks, but unfriendly to citizens, whose savings are being constantly debased by a zero-interest-rate-policy that increasingly looks no longer like a temporary fixture but as a permanent feature of a new neo-feudal financial architecture.

It is a pity that such aspects are seldom mentioned when discussing the implications of the innocently named “european banking union”. One would hope that Germany would stand firm (even if partially for selfish reasons), but fear it will not. The “european banking union” is not a positive development for those who believe in a democratic Europe and a restrained and accountable financial sector.

4 April 2013 TYR reads

Helicopter QE will never be reversed @ The Telegraph Ambrose Evans-Pritchard hints at what the nature of the end-game of this monetary era might be…and it is printing money…forever. With an apparently neutral style and quoting potentially apocalyptic outcomes if permanent money printing by Central Banks is not considered ( “A breakdown of the global trading system might be one, armed conquest or Fascism may be others – or all together, as in the 1930s.”), the idea of a radical change of the monetary and economic system, without democratic consent, is being gradually introduced to a public opinion that is largely unable to understand the consequences of such monetary policies. He concludes: “Bondholders across the world may suspect that Britain, the US and other deadbeat states are engineering a stealth default on sovereign debts, and they may be right in a sense. But they are warned. This is the next shoe to drop in the temples of central banking.”

97% Of Spanish Social Security Pension Fund In Domestic Bonds @ Zerohedge “It appears, since the Spanish government does not explicitly have its own Fed to monetize debt, that it has merely plundered another quasi-governmental entity to do the bond-buying reach-around.”

Bank of Japan unveils aggressive easing @ Financial Times “The BoJ said it would double Japan’s monetary base from Y135tn ($1.43tn) to Y270tn by March 2015, mainly by buying more long-term government bonds.”. “We can’t escape deflation with the incremental approach that’s been taken until now,” Mr Kuroda said after the announcement. “We need to use every means available.”.

As Mr. Evans-Pritchard mentions in his article, “There were two extreme episodes of money printing in the inter-war years. The Reichsbank’s financing of Weimar deficits from 1922 to 1924 – like lesser variants in France, Belgium and Poland – is well known. The result was hyperinflation. Clever people made hay. The slow-witted – or the patriotic – lost their savings.”. The policies and situations described in the articles above suggest that it might happen, again.

Bitcoin a virtual currency that defies the NWO

Bitcoin the emerging monetary phenomenon created by a pseudonymous Satoshi Nakamoto in 2009 is no longer a joke, but a potential real threat to the neofeudal NWO whose visible components are the western Central Banks, from the Federal Reserve (FED) , to the European Central Bank (ECB), to the Bank of Japan (BoJ), to the Bank of England (BoE), to others.

Bitcoin poses a direct challenge to fiat based Central Bank created currencies that are continually being debased in order to maintain a “dual” economic system in which the banking industry is continually being subsidized (thru access to cheap money via the Central Bank, thru continuous bailouts paid by taxing the rest of the economy, thru covert inflation achieved by distorting the inflation measures).

It is likely that if the threat posed by Bitcoin materializes, Central Banks will fight it (they have already started), but whatever the outcome, Bitcoin is the most brilliant and lethal tool devised so far to fight a social order described decades ago, in “1984”. Forget, “Occupy Wall Street”, forget “indignados”, Bitcoin might be “it”.

It should thus not be a surprise that, as Zerohedge reported today, “US Begins Regulating BitCoin, Will Apply “Money Laundering” Rules To Virtual Transactions”.

So…What is Bitcoin?

According to Wikipedia, “Bitcoin (sign: BTC) is a decentralized digital currency based on an open-source, peer-to-peer internet protocol. It was introduced by a pseudonymous developer named Satoshi Nakamoto in 2009.”

“Internationally, bitcoins can be exchanged by personal computer directly through a wallet file or a website without an intermediate financial institution. In trade, one bitcoin is subdivided into 100-million smaller units called satoshis, defined by eight decimal places.”

According to Erik Voorhess, that provides an excellent introduction to Bitcoin in his blog, “Bitcoin is two things: it is a digital currency unit and it is the global payment network with which one sends and receives those currency units. Both the currency unit and the payment network share the same name: Bitcoin.”

“As a currency unit, consider Bitcoin like other currencies. The world has euros, dollars, yen, gold and silver ounces, and now it has Bitcoin as well. The properties of the Bitcoin currency unit are as follows:”

  • There will never be more than 21 million in existence, and they are released over time at a declining rate (at the time of writing, about 8.5 million Bitcoins exist).
  • As new coins are released on the set schedule, they are given at random to those who contribute computing power to securing the network. This is called “Bitcoin Mining” but it should more accurately be called “Bitcoin Auditing.” Those who contribute more computing power to this work have better odds of receiving the new coins, but the rate of new coin creation never increases (in fact it diminishes over time until all 21 million coins exist). Inflation is thus pre-determined and ever-decreasing toward zero. The below graph shows the release schedule and inflation rate:

  • Each Bitcoin is divisible by one hundred million. You can thus possess 0.00000001 Bitcoins.
  • Bitcoins are perfectly fungible, they are divided and combined seamlessly in your account.
  • It is theoretically impossible to make a fake Bitcoin (to fully understand why this is true, one needs to study cryptography and fairly advanced mathematics).
  • As a currency existing in a perfectly free market, Bitcoins always have a market price. At the time of this writing, this price is about $4.80 each. Because Bitcoin is global, there are also market prices for Bitcoin in every major national currency from yen to Brazilian reals.
  • Bitcoins are traded like other currencies on exchange websites, and this is how the market price is established. The most prominent exchange is MtGox.com

“So those are the details of Bitcoin as a currency unit, but Bitcoin is also a payment network. As a payment network, Bitcoin replaces the function of banks (especially the Federal Reserve as money creation is not at the whim of any person nor group), inter-bank funding networks (like SWIFT and SEPA), payment processors (like PayPal) and remitters (such as Western Union). The entirety of these massive industries as they relate to the creation, storage, accounting, and transfer of money has been usurped by Bitcoin. If Bitcoin succeeds, it is likely that PayPal and Western Union would be removed from the marketplace. The Federal Reserve (and every central bank) would be made redundant. “Disruptive technology” is thus an understatement.”

Is Bitcoin “money”? Does it have the characteristics that define that elusive concept called “money”. According to the traditional definion, “money” should be a store of value, a medium of exchange and a unit of account. Let’s see:

  • Is it a store of value?. Yes. Why?. Because it cannot be counterfeited and because it is scarce. Only 21 million Bitcoins will ever be issued by 2140. Being a store of value is based on being scarce, and Bitcoin is scarce.
  • Is it medium of exchange?. Yes. Why?. It is used to purchase and sell products and services.
  • Is it a unit of account? Yes. Why?. It is fungible, divisible and can be used to accumulate wealth.

Bitcoin is an experiment, and it could fail. Its success depends on its creators fulfilling the pledge never to issue more than 21 million units, on keeping it scarce. But so far it is succeeding. Check the price of the Bitcoin in USD in this chart provided by Blockchain: It went from 10 USD in July 2012 to 70 USD this last week. Check also the market capitalization of the Bitcoin market in this chart also provided by Blockchain: It went from 100 million USD in July 2012 to about 800 million USD this last week.

Its success also depend on it being widely accepted. This condition has the characteristics of a self-reinforcing loop: The more it is accepted, the higher the chances of it succeeding as a medium of exchange. So far the prospects are good. Transactions mediated by Bitcoin are growing fast.

As Bitcoin is decentralized, it can be hard to find all the resources one might want. Below is a list of some of the most useful websites and tools for learning about and engaging the Bitcoin economy (compiled by Erik Voorhees)

Paytunia.com – Very nice online ewallet service with Android app. Store your coins here.

BitSpend.net – Enables you to buy ANYTHING online by paying with Bitcoin. Very cool.

Bitcoin.org – Official site of the Bitcoin project, download the wallet software here.

MtGox.com – The leading Bitcoin exchange. Buy and sell Bitcoins here.

BitcoinTalk.org – The official discussion forum, and large enthusiast community.

Wiki.Bitcoin.it – Encyclopedia of most aggregated Bitcoin knowledge, very extensive.

Bitcoin.it/wiki/trade – Partial list of companies that accept Bitcoin as payment.

Blockchain.info – Tool for viewing accounts, payments, and numerous economic statistics.

BitcoinCharts.com – Shows current market prices and economic statistics.

Preev.com – Super easy Bitcoin<->fiat calculator, multiple currencies supported.

BitcoinMonitor.com – Live view of transactions as they happen on the Bitcoin network.

Paysius.com – Enables businesses to automatically accept Bitcoin payments on their website.

Bit-Pay.com – Another excellent merchant solution for businesses that wish to accept Bitcoin payments.

Coinabul.com – Leading gold and silver bullion seller for Bitcoin

Coinapult.com – Send Bitcoin via Email or SMS

WorkForBitcoin.com – Bitcoin job board – freelance projects which pay in Bitcoin.