Typewriter Salvation

Typrewriter

Armstrong Economics and The Guardian both report of the latest breakthrough in anti-eavesdropping, anti-NSA technology: the typewriter. Depending on how old you are, you might not even have seen, much less used, one. Well, it is a device that allows you to type letters, documents, in a non-electronic environment, the way it was done well into the 1960s, a device that, until the NSA finds an AI-based way to detect subtle changes in air pressure caused by fingers typing a continent away might be the best solution for those that need to share sensitive written information and who, at the same time value privacy, an endangered species, unfortunately.

The Bundestag is leading the way:

“The head of the Bundestag’s parliamentary inquiry into NSA activity in Germany said in an interview with the Morgenmagazin TV programme that he and his colleagues were seriously thinking of ditching email completely.”

“Asked “Are you considering typewriters” by the interviewer on Monday night, the Christian Democrat politician Patrick Sensburg said: “As a matter of fact, we have – and not electronic models either”. “Really?” the surprised interviewer checked. “Yes, no joke,” Sensburg responded.”

Typewriters in,  America’s prestige out.

 

 

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.

TYReads The End Of German Hyperinflation

Today 90 years ago, on the 15 of November 1923, by fixing the value of the recently created Rentenmark at a rate of 1 trillion (1.000.000.000.000) Papermark per 1 Rentenmark, and one month later, by setting the rate of the Rentenrmark against the US Dollar at a rate of 4,2 Rentenmark per 1 US Dollar, the exchange rate that had prevailed between the Reichsmark and the US dollar before World War I, Hjalmar Schacht, the then new president of the Reichsbank, ended the German Hyperinflation of 1922-1923, a monetary phenomenon that it is often argued paved the way for the later onset of Nazism. Thorsten Polliet of The Ludwig von Mises Institute has written this article about it.

90 Years Ago: The End Of German Hyperinflation by Thorsten Polleit @ The Ludwig von Mises Institute

On 15 November 1923 decisive steps were taken to end the nightmare of hyperinflation in the Weimar Republic: The Reichsbank, the German central bank, stopped monetizing government debt, and a new means of exchange, the Rentenmark, was issued next to the Papermark (in German: Papiermark). These measures succeeded in halting hyperinflation, but the purchasing power of the Papermark was completely ruined. To understand how and why this could happen, one has to take a look at the time shortly before the outbreak of World War I.

Since 1871, the mark had been the official money in the Deutsches Reich. With the outbreak of World War I, the gold redeemability of the Reichsmark was suspended on 4 August 1914. The gold-backed Reichsmark (or “Goldmark,” as it was referred to from 1914) became the unbacked Papermark. Initially, the Reich financed its war outlays in large part through issuing debt. Total public debt rose from 5.2bn Papermark in 1914 to 105.3bn in 1918. In 1914, the quantity of Papermark was 5.9 billion, in 1918 it stood at 32.9 billion. From August 1914 to November 1918, wholesale prices in the Reich had risen 115 percent, and the purchasing power of the Papermark had fallen by more than half. In the same period, the exchange rate of the Papermark depreciated 84 percent against the US dollar.

The new Weimar Republic faced tremendous economic and political challenges. In 1920, industrial production was 61 percent of the level seen in 1913, and in 1923 it had fallen further to 54 percent. The land losses following the Versailles Treaty had weakened the Reich’s productive capacity substantially: the Reich lost around 13 percent of its former land mass, and around 10 percent of the German population was now living outside its borders. In addition, Germany had to make reparation payments. Most important, however, the new and fledgling democratic governments wanted to cater as best as possible to the wishes of their voters. As tax revenues were insufficient to finance these outlays, the Reichsbank started running the printing press.

From April 1920 to March 1921, the ratio of tax revenues to spending amounted to just 37 percent. Thereafter, the situation improved somewhat and in June 1922, taxes relative to total spending even reached 75 percent. Then things turned ugly. Toward the end of 1922, Germany was accused of having failed to deliver its reparation payments on time. To back their claim, French and Belgian troops invaded and occupied the Ruhrgebiet, the Reich’s industrial heartland, at the beginning of January 1923. The German government under chancellor Wilhelm Kuno called upon Ruhrgebiet workers to resist any orders from the invaders, promising the Reich would keep paying their wages. The Reichsbank began printing up new money by monetizing debt to keep the government liquid for making up tax-shortfalls and paying wages, social transfers, and subsidies.

From May 1923 on, the quantity of Papermark started spinning out of control. It rose from 8.610 billion in May to 17.340 billion in April, and further to 669.703 billion in August, reaching 400 quintillion (that is 400 x 1018) in November 1923.[2] Wholesale prices skyrocketed to astronomical levels, by rising by 1.813 percent from the end of 1919 to November 1923. At the end of World War I in 1918 you could have bought 500 billion eggs for the same money you would have to spend five years later for just one egg. Through November 1923, the price of the US dollar in terms of Papermark had risen by 8.912  percent. The Papermark had actually sunken to scrap value.

With the collapse of the currency, unemployment was on the rise. Since the end of the war, unemployment had remained fairly low — given that the Weimar governments had kept the economy going by vigorous deficit spending and money printing. At the end of 1919, the unemployment rate stood at 2.9 percent, in 1920 at 4.1 percent, 1921 at 1.6 percent and 1922 at 2.8 percent. With the dying of the Papermark, though, the unemployment rate reached 19.1 percent in October, 23.4 percent in November, and 28.2 percent in December. Hyperinflation had impoverished the great majority of the German population, especially the middle class. People suffered from food shortages and cold. Political extremism was on the rise.

The central problem for sorting out the monetary mess was the Reichsbank itself. The term of its president, Rudolf E. A. Havenstein, was for life, and he was literally unstoppable: under Havenstein, the Reichsbank kept issuing ever greater amounts of Papiermark for keeping the Reich financially afloat. Then, on 15 November 1923, the Reichsbank was made to stop monetizing government debt and issuing new money. At the same time, it was decided to make one trillion Papermark (a number with twelve zeros: 1,000,000,000,000) equal to one Rentenmark. On 20 November 1923, Havenstein died, all of a sudden, through a heart attack. That same day, Hjalmar Schacht, who would become Reichsbank president in December, took action and stabilized the Papermark against the US dollar: the Reichsbank, and through foreign exchange market interventions, made 4.2 trillion Papermark equal to one US Dollar. And as one trillion Papermark was equal to one Rentenmark, the exchange rate was 4.2 Rentenmark for one US dollar. This was exactly the exchange rate that had prevailed between the Reichsmark and the US dollar before World War I. The “miracle of the Rentenmark” marked the end of hyperinflation.

How could such a monetary disaster happen in a civilized and advanced society, leading to the total destruction of the currency? Many explanations have been put forward. It has been argued that, for instance, that reparation payments, chronic balance of payment deficits, and even the depreciation of the Papermark in the foreign exchange markets had actually caused the demise of the German currency. However, these explanations are not convincing, as the German economist Hans F. Sennholz explains: “[E]very mark was printed by Germans and issued by a central bank that was governed by Germans under a government that was purely German. It was German political parties, such as the Socialists, the Catholic Centre Party, and the Democrats, forming various coalition governments that were solely responsible for the policies they conducted. Of course, admission of responsibility for any calamity cannot be expected from any political party.” Indeed, the German hyperinflation was manmade, it was the result of a deliberate political decision to increase the quantity of money de facto without any limit.

What are the lessons to be learned from the German hyperinflation? The first lesson is that even a politically independent central bank does not provide a reliable protection against the destruction of (paper) money. The Reichsbank had been made politically independent as early as 1922; actually on behalf of the allied forces, as a service rendered in return for a temporary deferment of reparation payments. Still, the Reichsbank council decided for hyperinflating the currency. Seeing that the Reich had to increasingly rely on Reichsbank credit to stay afloat, the council of the Reichsbank decided to provide unlimited amounts of money in such an “existential political crisis.” Of course, the credit appetite of the Weimar politicians turned out to be unlimited.

The second lesson is that fiat paper money won’t work. Hjalmar Schacht, in his 1953 biography, noted: “The introduction of the banknote of state paper money was only possible as the state or the central bank promised to redeem the paper money note at any one time in gold. Ensuring the possibility for redeeming in gold at any one time must be the endeavor of all issuers of paper money.” Schacht’s words harbor a central economic insight: Unbacked paper money is political money and as such it is a disruptive element in a system of free markets. The representatives of the Austrian School of economics pointed this out a long time ago.

Paper money, produced “ex nihilo” and injected into the economy through bank credit, is not only chronically inflationary, it also causes malinvestment, “boom-and-bust” cycles, and brings about a situation of over-indebtedness. Once governments and banks in particular start faltering under their debt load and, as a result, the economy is in danger of contracting, the printing up of additional money appears all too easily to be a policy of choosing the lesser evil to escape the problems that have been caused by credit-produced paper money in the first place. Looking at the world today — in which many economies have been using credit-produced paper monies for decades and where debt loads are overwhelmingly high, the current challenges are in a sense quite similar to those prevailing in the Weimar Republic more than 90 years ago. Now as then, a reform of the monetary order is badly needed; and the sooner the challenge of monetary reform is taken on, the smaller will be the costs of adjustment.

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.

Germany says “Ja” to Bitcoin

Despite strong opposition by the american government, Bitcoin appears to be winning some important battles. You can read more about the virtual currency in Bitcoin a virtual currency that defies the NWO.

Bitcoin recognized by Germany as legal tender @ >CNBC.com Some excerpts:

“Virtual currency bitcoin has been recognized by the German Finance Ministry as a “unit of account”, meaning it is now legal tender and can be used for tax and trading purposes in the country.”

“Bitcoins is not classified as e-money or a foreign currency, the Finance Ministry said in a statement, but is rather a financial instrument under German banking rules. It is more akin to “private money” that can be used in “multilateral clearing circles”, the Ministry said.”

” “We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,”said Frank Schaeffler, a member of the German parliament’s Finance Committee, who has pushed for legal classification of bitcoins.”

Bitcoin: the Berlin streets where you can shop with virtual money @ The Guardian Some excerpts:

“Florentina Martens has had the same experience since opening her Parisian-style cafe Floor’s two months ago just a couple of streets away. “There is not a prototype Bitcoin payer,” she said. “It’s random people. Not only nerds, let me put it that way.” ”

” “It’s an easier way of digital payment than credit cards, which cost me a lot of money as a business and to which I’m forced to sign up for years,” she says.”

”  “The truth is, I really want to believe in it. And I like the fact that Bitcoin scares people in suits, because if this thing were to really take off, it would bankrupt a lot of bankers.” ”

“Crypto-currency experts meeting Patzer at a recent Bitcoin soiree in the back of Floor’s cafe prefer to talk of the recent dip as a correction rather than a crash, which has brought Bitcoin back to a realistic price while it has retained its underlying value.” ”

” “I would look at these spikes and corrections as the birth pangs of an entirely new system,” said Mike Gogulski, a Bitcoin developer. “It represents an opportunity to transform the way we deal with the flows of wealth and human energy.” “

False Flag im Oktoberfest?

“If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy.”
– U.S. President James Madison

According to Wikipedia, “False flag (or black flag) describes covert military or paramilitary operations designed to deceive in such a way that the operations appear as though they are being carried out by other entities, groups or nations than those who actually planned and executed them. Operations carried during peace-time by civilian organisations, as well as covert government agencies, may by extension be called false flag operations if they seek to hide the real organisation behind an operation.”

“The name “false flag” has its origins in naval warfare where the use of a flag other than the belligerent’s true battle flag as a ruse de guerre, before engaging an enemy, has long been acceptable. Such operations are also acceptable in certain circumstances in land warfare, to deceive enemies in similar ways providing that the deception is not perfidious and all such deceptions are discarded before opening fire upon the enemy.”

It might be more than a coincidence that, around the same dates as the recent Boston Marathon bombings, Google Trends  measured a peak in interest in cyberspace in the expression “false flag”, as the article Awareness of “False Flag” Terrorism at All-Time High @ Washiington’s Blog explains.

In this other very recent article, Everyone’s Talking about “False Flags … Isn’t that Another Bogus Historical Conspiracy Theory? Washington’s Blog explores the history of False Flag operations and mentions some proven examples. He ends the article saying that “Any discussion about a specific terrorist attack cannot start with the assumption that it couldn’t be a false flag attack, or that it must be a false flag attack. The facts of each attack must be examined on their own merits before reaching any conclusion.”

In this context, the recent declarations of Andreas Kramer, son of the member of the former (?) NATO-sponsored Gladio-stay behind organization,  testifying under oath before court in Luxemburg ,  in which he accuses his father of helping organize the 1980 Oktoberfest Bombing in Munich, in which 13 people were killed, see this and this, are of interest, and question quite a few of the accepted “truths” of post war Europe.

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.