This Banking Collapse Is Different From Earlier Ones

Elaine Meinel Supkis

We just went through a preview of the coming banking collapse. A total of $300 billion was pumped out of thin air and put into banks across the planet. This was a big, big Santa Claus sleigh ride! Few commentators want to really understand why this is happening and how to stop it. We must understand the hazard our empire is in. The rival empire of China has us by the throat. We must negotiate with them and extract ourselves from the mess we are in...like the mess in Iraq.

Here is the breakdown numbers from Big Picture:

Federal Reserve
Thursday: $24 billion
Friday: $38 billion (tranches of $19 billion, $16 billion and $3 billion)

European Central Bank
Thursday: €94.84 billion ($130 billion)
Friday: €61.05 billion ($83.56 billion)

The Bank of Canada
Friday: 1.64 billion Canadian dollars ($1.55 billion).

Bank of Japan
Friday: one trillion yen ($8.39 billion)

Swiss National Bank
Friday: two to three billion Swiss francs ($1.68-$2.51 billion) [estimate]

The Reserve Bank of Australia
Friday: 4.95 billion Australian dollars (US$4.18 billion)

The Monetary Authority of Singapore
Friday: 1.5 billion Singapore dollars (US$986.1 million)

The authorities in Malaysia, the Philippines and Indonesia intervened in foreign-exchange markets to support their currencies against the U.S. dollar.

First, note the Bank of Japan, the world's #2 economy, gave only a tiny infusion. Europe's amount was 25X greater! And it was also 3X bigger than the world's #1 economy, the US. Why is this? What happened that caused this huge differential in response? The euro isn't the world's reserve currency. The dollar is supposed to be that. I really am puzzled and so far no one has even brought up this question. I do a lot of looking at history and reading old newspaper articles and old academic studies. A common feature in these is, they usually profess to not know what is the cause of these clockwork-like boom/panic cycles. Each one is treated as singular. If a writer connects several, they tend to connect only 'in country' events rather than lining up all possible events and seeing a pattern emerge.

Having lived through a number of cycles, I find them to be all stemming from the same situation if we look at things as if it is an evolutionary landscape. The causes of these manias lies in the nature of growth/death cycles as well as population increases/population crashes. So let's talk about evolution.

Evolution isn't a smooth process where nature is always in balance. It is an unweildy network of many levels that evolves to create an environment. There are micro-booms and micro-busts within this system, some are very regular like insects that suddenly emerge every 7 years to mate. We have moth infestations that occur every 10 years or so. They suddenly are crawling all over everything and they strip the forest of every leaf. Then they are gone. Poof.

Generally speaking, if the climate and the landscape remains the same for a long period, everything settles into a status quo that is equally stable. There are few surprises and deaths are in harmony with births. But is only one element is changed. Weather conditions, a new disease, new predators, land bridges or invasions via the sea (humans have wrought giant changes this way!)---all this can destabilize an ecological landscape and we see population vacillations or crashes that can lead to extinctions and out of this grows a new status quo. Sometimes there are huge celestial events like meterorite crashes or comets hitting a planet and most living things die nearly instantaneously. The evolution of life forms springs from catastrophes.

Puzzling out how and why great extinctions as well as lesser ones happen takes lots of detective work. So it is with economic evolutionary events. There are vacillations over time, little ups and downs that change the landscape hardly at all and then there are great extinction events. Universally, the economic great extinction events are coincidental with the internal collapse of a great empire. The greater the empire, the bigger the extinction event. For example, the collapse of the Roman Empire's economy was so bad and so thorough, the resulting depression lasted for 1,000 years.

The history of civilization is coincidentally a record of boom/collapses which we see as changes in government and the founding of or destruction of cities and dynasties. The Old Kingdom, Middle Kingdom and New Kingdom dynastic cycles of ancient Egypt starting 12,000 years ago are one of the earliest archeological examples of mega-boom/crash cycles. Each one started modestly, over time would grow ever greater and more complex and then suddenly collapse. Just as we see the pyramids starting out as small death-houses and working upwards until each pyramid is bigger than the last and then it ceases, the culture fails, the government collapses and chaos reigns until a new, supposedly better system is established.

Sometimes a culture never re-emerges after a catastrophe. The caldera event on Santorini island annihilated the Minoan empire totally and no empire replaced it. The chaos this caused in Greece was called 'the Greek Dark Ages' and all reading and writing vanished. China has an equally long cycle of dynastic birth/death cycles. Some are nearly fatal such as when the Mongols invaded and hunted down and killed, for sport, nearly half of the population. Another such collapse was after the Europeans and Americans invaded and utterly destroyed the economy and culture and sent the Chinese people spinning down into economic destruction ending with Mao and the Great Leap Forward and the Cultural Revolution.

We are entering difficult times because of this sort of cycle. Namely, whenever an empire falters and falls, it causes great chaos and wars. And if a global empire collapses, this causes world wars and tremendous chaos. The revival of the Chinese and Russian empires coinciding with the collapse of the Pax Americus set up (badly) by the US after WWI and cemented after WWII is an important historic event and the increasing financial difficulties of world trade reflect the deteriorating condition of the American empire.

Many of the smaller banking/economic collapses like the bankruptcy of Argentina or the collapse of smaller currencies like the lira or peso can trigger banking panics and economic recessions to a minor degree, world wide. But even the smallest slip up or the slightest hiccup in the American economic system or banking community can trigger massive global vaccilations and collapses that are virtually uncontrollable due to the nature of this being caused by a global empire. The Japanese boom/bust of the late 1980s to the early 1990s was purely internal. The Japanese were forced to raise the value of the yen and this was fine fun until the US picked yet another war against Iraq, Desert Storm I, and this caused world oil prices to spike without warning and threw the world into a recession. Japan is very vulnerable to US recessions.

The Asian Currency Crisis was Japan's solution to its weak banks and strong yen: they played underwater currency pulls that caused a cascading event that ended with everyone revaluing all Asian currencies...much lower against the dollar. Settling in at that point, Japan reduced interest rates to 0% and wrung out their entire banking system by making it pretty much vanish and leaving only the Bank of Japan, controlled by the government and the powerful industrialists in control of all money in Japan.

Here is a very interesting history of the stock crashes of 1980-1992 by Mr. Gregory Millman:

In September 1992, the vision of united European nations sharing something like a common currency was swept away like a mirage by international currency traders who forced Britain’s withdrawal from the European exchange rate mechanism (ERM). With the economy of Britain already in recession, Prime Minister Major’s often-repeated commitment to British membership in the ERM meant sacrificing more jobs, more homes, more people on the altar of monetary stability. Currency speculators bet that the sacrifice would be too great to sustain. They won and won big. Britain withdrew from the ERM, even as speculators at-rayed their forces against the other currencies in ERM. The currency speculators moved like a tide, and government authorities who stood against them had only the reed of rhetoric, which could not stop the tide. The recent crisis in Europe was a clear case of vigilante justice in the economic sphere. But it is only the clearest. most recent and most visible case of vigilante economics at work.

When Major vowed to protect Britain’s currency against devaluation and inflation, he offered a sure bet to the speculators. Every day, according to a 1990 report of the Bank for International Settlements, the currency traders move $650 billion at the speed of light, placing bets that determine the direction of economics like Britain’s. Add up all of the Saudi oil, Japanese cars, American wheat, European aircraft, and throw in the rest of things that countries buy and sell from each other and you will get only a fraction of the $650 billion. The rest is traded for profit in a fast moving market where “the long run” means ten minutes, and that’s plenty of time to win or lose millions.
*snip*
There were only two ways that Prime Minister Major’s government could keep the pound in line. The first was to buy up the pounds coming on to the market. But although the British crown created the pound, the British government cannot afford to buy many of them. At the end of 1991, the total foreign exchange reserves of the Bank of England amounted to only $42 billion, a laughable sum compared to the $650 billion that moves through the foreign exchange markets every day.

This article is a must-read. I quote the beginning because it illustrates the power of an empire to force events long after the empire has rotted and passed on the baton to a new empire. The Japanese collapse didn't start with the Gulf War but the price hikes of that war did drive up inflation and caused interest rates to rise and it did cause a recession in the US...I had to sell a house during that time and took a $100,000 hit. But this was the underlying environment leading up to the actual currency/lending crisis which began in England. Note here that the author laughs at England's tiny FOREX reserves. Only $42 billion. If I took inflation into account to the tune of say, 3% a year, this is about $66 billion which happens to be the USA's own FOREX reserve, one of the smallest in the world of all industrial nations.

Today, the flood of money flowing through the system, the 'liquid' which they yap about all the time, is nearly double the amounts flowing back then. $650 billion happens to be twice as much as the flood of money the G7 nations had to pour into the system during the night of August 9, 2007. This began during the day but the spike in interest rates which one of my readers alerted me to that very day, went very high that night. This article also notes the British invented the pound but couldn't buy them up in the world FOREX markets because they had nothing. And this is all about gold, the ultimate dragon-lust. All empires need gold. Lots of gold. And the way we can track who is an empire is to track who has the most gold.

In 1890, England needed more gold due to the Crimean War and the need to overwhelm everyone with a navy bigger than all navies in the world. This was very expensive. To issue gold certificates, England needed a bigger and bigger gold stash. They already looted the gold out of India and China. The gold of the Spanish Empire had long vanished in the collapse of that empire 200 years earlier. England invaded South Africa to seize the gold and diamond mines there. This would replentish their gold reserves and make it 'grow'. An ounce of gold, in the hands of an emperor or empress, can be multiplied a thousand-fold. Filled with joy at the seizure of all this endless gold, England hyper-armed itself and a desperate Germany, the loser in that war, suddenly, before England could consolidate the gains of this gold mine which incidentally, was mined by SLAVES, Germany lunged at England and the war that resulted bankrupted England who had to not just issue gold certificates but had to physically transfer this gold to the US in order to get us to bankroll this ruinous war.

Ever since WWI, England has had no real gold reserves and nearly every glorious piece of this wonder-metal ended up in the USA. Who held it in Fort Knox until the currency crisis of 1972, by then, 3/4th of the gold was gone, sent to the four corners of the earth. So it is interesting to me that this article mentions these imperial finances when the topic is the collapse of the Japanese currency and economy. England, Germany and Japan all depend on the American Imperial banking center to revive their fortunes and rebuild their power. They all need the USA to be strong so they don't have to have gold reserves. All they need is some way of tapping into the US gold. Which is gone! We don't have nearly enough to protect our dollars from default in a bank run!

Japan was able to forge a new economy based on domestic weakness and lack of economic opportunity at home in order to latch onto the US and use our economic base as their own. All they had to do was to keep their yen weak and useless. Germany took the opposite tactic: they made the German currency strong so the US would depend on them to uphold the savings rate in the West. And England acted as an off-shore tax haven for US organizations fleeing taxes and controls. This urge to use the previous empire as some sort of pirate cove to loot world trade is interesting to me because ALL these schemes are predicated on predation of the US consumers.

So long as gold flowed into the US empire, all the allies and schemers could play currency games off of the dollar economy. But this ceased the day the US crossed into the downslope of the Hubbert Oil Peak. All declines and falls of empires have a geological or climatic trigger. A volcano becomes a caldera/tsunami event or there is a 100 year drought such as the one that ravaged the Toltec empires in Guatamala or killed the Old Kingdom of Egypt. The Chinese recognize this and call it 'The Mandate of Heaven' and if geological or climatic forces wreck great damage to an empire, the ruling family is brutally removed and annihilated and replaced with a new organization.

Both Egypt and China as well as the Roman Empire did this for eons successfully. I find it amusing that this should be the natural, organic response to disaster. For if things fall apart and the rulers cling to power, we get the really bad disasters. The complete collapse of the entire civilization. And this happens a lot. Russia's violent removal of their ruling elites during WWI revitalized the empire and it grew massively in size, nearly doubling! This also brought about the collapse because the rulers froze the empire into this non-stop depression.

Money vanished and there were lines for buying simple stuff and corruption flourished in the bribery/black markets. Indeed, I find that regardless of political dogma, all rulers who get hit by some sort of failure nearly always turns this into a grinding depression because this is the only way they can stay in power which is why the great mass of humanity spends a good 80% of its history in grinding poverty and despotic enslavement.

The USA is a strange land. We are 'liberal' and 'revolutionary' yet we are also a slave state that uses the military to steal, rape and burn and which has conquered many lands and is alternately kind and terribly brutal. A schizophrenic empire that wants to suck up all earthy produce yet feels sorry for the very poor and is very solicitous of trade rivals, trying hard to bring everyone into eternal wealthh which drives us into even more wars of theft and brutallity. The manic-depressive nature of American culture has extended across the earth and this has brought a long period of technological advances, scientific advances, financial advances and utter destruction, depravity and doom, we are the creators of the looming Apocalypse, the End of Times.

Our entire economic philosophy is cock-eyed due to the nature of our strange empire that talks freedom but constantly enslaves. The Adam Smith world meets Charles Darwin and the Bible and mashes it all together with Bryant's 'Cross of Gold' even as armies restlessly scour the earth for gold mines, oil wells and coal. We boast of our religious sanctity even as we make merry as if this is a Satyriconic Fellinian circus act.

All of this takes me back to my point: there are always currency collapses in a gold-starved fiat currency world. Since everything is relative to each other and the only benchmark is the US dollar which has lost most of its gold and even its foreign currency reserves, this means everything is fundamentally destablized and is always in danger of falling apart just as we are watching right now. And if it were the pound, the ruble or the yen falling apart, the world might shiver but it would only depress things briefly at the heart of the Empire, the US. The 1992 event barely slowed us down except for the higher cost of gas. But then suddenly, Russia opened its oil markets to the world and world oil prices collapsed. Saudi Arabia and Iraq both nearly went bankrupt. Israel's powers grew, the US had a nice boom bigger than the fake Bush boom.

All was well at the Heart and Japan picked itself up and rebuilt its industrial power in a much more insidious fashion, carefully removing the yen from world markets so it could not crash again except if the Bank of Japan wanted to manipulate world trade. But this latest bank meltdown, one of the biggest I have seen, on the scale of 1969, 1974, 1979, 1989 and 2001---dwarfs them all. For it isn't merely from the price of energy shooting up or the price of gold going up and up and up (it went up this week). It is different from all the other panics.

For the balance of power has now definitely shifted. And it has shifted away from the US and to Russia and China. People have become accustomed to nothing bad happening when we get our decal banking collapses because nothing really changed after each collapse. The US dollar was the default currency before and after each collapse. In the 1929 collapse, the US didn't rule the Seven Seas, it wasn't the most powerful empire on earth and, burned by WWI's anti-imperialist ideology and propaganda about freedom being betrayed by Britain who only wanted to extend its imperial powers and abilty to enslave, the US didn't use its military to seize world power from Britain and rule the earth. We sat at home and tried to avoid WWII.

So the 1929 global meltdown was purely the issue of Britain and Germany. The US got socked by it. But not essentially weakened. The US went into the Great Depression as the world's creditor nation and it came out of the Great Depression even more, the world's creditor nation and WWII made this nearly total, the US was the ONLY banking entity at the end of that war!

But starting with the 1970's collapse of Bretton Woods, the collapse of Bretton Woods II, the collapse of the Plaza Accords, and now the Doha rounds, the US dollar hegemony has been living on borrowed time....literally. Before 1970, we were still the world's strongest creditor nation and empire. Since then, our debts have grown at tremendous speed. We had no trade deficit until the first 1970's banking collapse and since then, it has worsened drastically. Each time we negotiate currency relative values and set new rules, we immediately break them in the sense that we instantly try to evade the restrictions and the letter of the treaties and so do all the other capitalist rival nations we trade with.

The US could do this with impunity because there was no rival to challenge the rule of the dollar. There were many nations that became creditor nations even as the US empire went deeper and deeper into debt, this debt was evenly spread across the earth with all our trading partners running surpluses with us, buying up our bonds and offering us good interest rates because they all wanted to keep this relationship going as long as possible since it was seemingly making them richer.

But the US is a dangerous customer. We arrogantly felt we could toss aside our debt obligations by either running up huge inflation schemes that means we repay loans with debased currency or we attacked nations openly like our many invasions in the Middle East or usurpations in South America. Any leader of a creditor nation who thought they could defy the US and dump our debts into open markets ended up assassinated, invaded or overthrown. For example, King Faisal was assassinated right after he successfully created OPEC. The Saudis who have run the country ever since have been a total-creditor milch cow for the US. They really had no choice.

This 40 year autumn of our empire has been a fun ride for the ruling class. They have gotten tremendously rich playing the currency up and down game with America's creditors. They have driven our empire so deep into debts, I am unable to express how bad this is. How about a Pacific and Atlantic of red ink? Never, not even after England was wrecked by WWI and WWII, has an empire sucked up so much red ink! Everything is now in the trillions of dollars! An iron rule of history is, when an empire becomes totally in debt to everyone, it collapses and its power evaporates very quickly.

The Roman empire didn't have many power rivals in the West when it collapsed. Various vagabond bands poured into the corrupt, deflated empire and overran it. In good times, they would have been easily defeated. But there was no empire until the rise of the Islamic Revolution, to supplant it. When the US stumbled into the La Brea Debt Pits, the Soviet Union was able to expand its borders and its powers. But it was as sick as the US and soon floundered. So by our 3rd currency collapse, the Soviet Union, in debt to Germany, collapsed. China was just awakening at that point. So the US was able to weather these banking collapses caused by our indebtedness to all our trade partners without turning a whisker. Our economy kept taking off so we got careless and thought there is no need to worry about ringing up endless debts.

The reckless spending took off under both Bushes. The trade deficit took off even more. The more we were in debt to Japan and Europe, the worse our trade deficit with both. Nothing bad happened so we thought we could do this over and over again to infinity. But one thing we had to do was prevent inflation. With that, people would refuse our dollars. So we cooked up this scheme called 'free trade'. This meant we could outsource everything to a cheap country, run in the red all over the place and have no inflation so we were 'solvent'. This is a very childish notion that refuses to see what happens next: we can't buy anything because we are too deep in debt! Even with this fact in mind, most people running America think, 'There is no alternative. They HAVE to keep lending to us and they MUST keep interest rates low even if there is inflation!'

Enter the dragon: this developing banking collapse...and it will collapse, they all do....is in a new matrix. Unlike before, there is a euro which is stronger and stronger even if Europe is a political midget. Their currency is imperial right now. France and Germany still have to hash out who is the real boss in this marriage of inconvenience. But the dragon is quite different. It is an empire, ipso facto. It is huge. Its population is equal to Europe and the USA AND Japan's. It has a huge landmass. It is centrally located, bordering on not only many countries but also some great ocean ports from which it can easily dominate the world's seas, unlike Russia.

China is dynamic and growing. A restless population pushing hard, working harder. It leaders are ruthless and will force the populace forwards and not tolerate frittering away wealth on non-income producing activities. It, too, has a fiat currency but it has rulers who can make fiat choices. And it is the world's leading banker. Everyone owes China. Everyone. China doesn't just hold dollars, it holds euros, yen and rubles. It has a grip on the finances of every past empire and potential rivals. The Chinese have openly warned us, we have to be nice to the world's top banking entity or else.

Our hubris is, we can't learn this harsh lesson without being whacked, first. I noticed immediately, when the world was scrambling to put together $300 billion they didn't have in their banks, China, the only entity which could plonk down $300 billion without blinking, didn't put down a single yuan. Nothing. This is a signal to everyone, they are now going to force the world into a banking crisis, one that the US will not recover from. The US has already, during previous banking disasters, given China goodies. In the 1970's crisis, Nixon ran off to Mao to make deals. In the 1978 crisis when interest rates were shooting to the moon, Carter rushed forwards the recognition of China right when my dad was in very delicate negotiations between Chou Enlai and Taipei! I thought my dad would be assassinted over that! I chewed out the State Department.

In the Asian Currency Crisis, the US suddenly and without any warning again, gave China 'Most Favored Nation' status. Indeed, the gains China has made always coincided with the US needing help! Each time, it was in a rush with secret negotiations and it always took the world by surprise. As I know the parties involved in all this, I assure everyone, the Chinese love to track the news and they wait for these events to move forwards their agenda. They are doing this today! The US didn't give China anything this time around and so far, we have mucked along, hoping England and Germany will pull us out of the fire set by Japan yet again.

Things are now happening at such a dizzy pace that I struggle to keep up with events. Usually, I write about astronomy and geology as well as evolution and these things really interest me more than money. But we are at a historical moment, one I have foreseen long ago: our empire is over a trillion in debt not to a bunch of Lilliputian national powers but to the biggest potential empire on earth which commands well over a billion citizens who are proud to be Chinese! They have a shopping list which is mostly the names of nations which we must hand over. Right now, nearly all of them are in Asia. Top of this list is Taiwan. Second, the Koreas. Third and most important of all: Japan.

So, in conclusion, we are now in a different trap than before. The Japanese were our creditors and our masters but they are very small and cannot stop us if we want to nuke them again. Europe is our poodle who wages when we bark orders to them. They are politically and economically still very divided even though the euro is rapidly displacing the dollar as the world's default currency.

But China is different from all of these. China has nuclear bombs. China has a space program. China has a technological base that is growing at tremendous speed. The majority of patents last six months went to Chinese! China has a huge military and a huge naval building complex at a series of ports (unlike the US). China has a top-notch diplomatic corps that is incredibly intellligent and very well-read. I am in total awe with their work. They leave no stone unturned in their quest to expand Chinese imperial powers.

And they have reeled in some astonishing, big fish. Number one being, Russia. If the World's biggest potential empire forms a strong alliance with the world's #3 empire, this means they both beat the US empire even with our advantage of Europe and Japan! For Japan is merrily destroying our industrial base, destroying our power and Europe is trying to prop us up but they can't because they hate each other too much.

Money talks. We have no money. We can wave our wands and create $50 billion in one night but this taxes our tottering systems and we must go off to China to turn this straw into gold. And if China says no, we have no where else to go. No one has trillions to lend. No one!

From Yahoo:

The biggest risks appear concentrated among ARMs that began with an initial interest rate of 4 percent or less. CoreLogic estimates 1.4 million ARMs totaling $521 billion fell into this danger zone from 2004 through 2006. That represented nearly 10 percent of the $5.38 trillion in home loans originated during that period.

Christopher Cagan, CoreLogic's director of research and analytics, predicts about 1.1 million ARMs totaling $325 billion will sink into foreclosure as rising monthly payments squeeze borrowers. After accounting for the money recovered through property sales, he expects the losses from the fallout to total $112 billion, with the damage spread out over six years.

Every last ARM and every last LEG will die. And we DO NOT HAVE $325 billion or $521 billion or god spare us all, $5.38 trillion. And if we think, sans Chinese loans, we can keep this $5 trillion ship afloat using only Japanese and European money, we are nuts. They can't do it. They cannot do this if we are also running a trade deficit with China of $250 billion a year! The other countries can only lend what we send to them in trade. And it is only China that has the sums we need! And China knows this. I remember when they figured out the joys of compound interest and the real estate book I gave them showing how lenders force debtors to pay off most of the entire loan's interest in the first half of the loan and only after the halfway point, does the principal pay off at a faster and faster rate. This guarantees the entire fiduciary risk is packed away before events might make it shakey! They loved this idea! They devoured the charts in the real estate tables. Boring numbers that have great meaning when one sees all the possiblities.

From Bloomberg:

``The Fed has almost unlimited ability to supply liquidity if they feel that is appropriate,'' said Alice Rivlin, a former Fed vice chairman who's now at the Brookings Institution in Washington.

Fed policy makers just three days ago held their target for the federal funds rate, the overnight lending rate between banks, at 5.25 percent. Fed Chairman Ben S. Bernanke and his colleagues acknowledged in their statement that markets were ``volatile'' and risks to growth had risen. Yet they reiterated, in language used since March, that inflation was the ``predominant'' concern.
*snip*
``They certainly calmed the markets,'' said Chuck Lieberman, a former New York Fed economist who's now chief investment officer of Advisors Capital Management LLC in Paramus, New Jersey. ``There's nothing that has been done yet by the Fed that implies that they will or for that matter will not cut the funds rate.''

Here it is in our faces: complete hubris, total stupidity. The US has NO ability to supply even slight liquidity! This boast might impress Americans and maybe a few Europeans. It impresses no Japanese and it makes the Chinese laugh grimly. If the US can put out unlimited money, why don't they? Why are they raising interest rates? The housing boom is dead. But Wall Street is still stumbling along, screaming for 1% loans. If the US wants a boom economy, why not open the taps all the time? The childish boasting about being able to take our fiat currency and simply make it infinitely bigger is a bad sign. It shows we are too weak to tell the truth. We are like some drunken gambler boasting to his wife, 'I haf losh of money in da bank, bitch!' as he staggers off to drink another round.

After the real bankers pegged interest rates at 6%, you would think the Fed will admit, this is the real interest rate! Instead, they had to spend the equivalent of our entire FOREX reserves to drive the interest rates down to the level they set just four days earlier. They pretend that they graciously kept the rate at slightly above 5% as a favor and to 'prevent' inflation. But it was all a lie. And this lie isn't done yet! We might have to create another $300 billion to keep rates at this false level! And forget dropping rates which is what all the funny money guys want!

From the Independent:

There are those in the market who think M. Trichet's attempts to ease the difficulties of the past few days have actually exacerbated the scale of the crisis. The role of a central banker involves a certain amount of tightrope walking. Take too relaxed an approach when trouble heads your way and the chance may have gone to nip an impending disaster in the bud. Yet react with too heavy a hand, and you run the risk of triggering a panic.

The ECB has responsibility for the vital task of maintaining financial stability across the Eurozone and having watched inter-bank lending rates spike upwards overnight on Wednesday, it clearly felt compelled to act, particularly once BNP Paribas said it was freezing several funds with major liabilities. Nor was its intervention unprecedented - the bank has released money into the markets relatively regularly to smooth short-term instances of instability.

Right. The guy rushing into the burning house to try to douse the fire caused it. This cause and effect business is serious. If there was no reason to panic, then yes, he was stupid. But I have been screaming 'FIRE' for two years! There is a fire, it was already raging. The $300 billion used to hose it down only slowed it down slightly. It is still very much burning.

As for the Bank of England, it has so far not felt it necessary to step in as a lender of last resort, even though London is unarguably the most important financial centre in Europe.

This may have as much to do with another important issue for central banks as it does the Bank's concern about spooking the markets. Governor Mervyn King is on record, only this week, warning that a central bank runs the risk of "moral hazard" by stepping into resolve market failures. Act too often as a lender of last resort and borrowers become less inclined to behave prudently in the first place.

All of which is not to say the ECB should not have intervened at all yesterday or the day before - or that the current crisis is not a serious threat worthy of response. It would be unfortunate, though, if in the act of attempting to restore stability the ECB caused an even bigger wobble.

As if anyone learns lessons! The entire entertainment system and educational system of England is set to mislead about imperialism and finances. England really thinks it was a tiny island beset by Germany and Japan in WWII, for example. England let everything slip off the cliff before! Like, in 1929. This is not a popular policy. And this hand's off attitude has stripped the British empire of most if its possessions as the banking system in distant corners stumble and fall.

From the International Herald Tribune:

"Trust was shaken today," said Thomas Mayer, the chief European economist at Deutsche Bank. "Credit depends on trust. If trust disappears, then credit disappears, and you have a systemic issue."

Among the questions haunting investors: How much exposure do European banks have to risky U.S. mortgage loans? And given the steady drip of bad news - sometimes days after the same banks issue confident statements - do they even know their level of exposure?

"The banks are getting hit on a number of fronts," Simon Adamson, a banking analyst at CreditSights, a research firm in London, said. "You're seeing devaluation across a number of asset classes, so it's very difficult for them to calculate fair-market value of their assets."

With confidence ebbing, the European Central Bank has abandoned its watch-and-wait stance. In a statement issued Thursday morning, the bank noted, "there are tensions in the euro money market."

Monday will be interesting indeed. Will there be more bad news? The chances of bad news every day is not possible. Every slight upturn of the news will see wild buying on certain stocks as everyone piles into the same few life rafts. Every smidgen of bad news will trigger a panic. This is how all bear markets start. They shoot up and down for a few months and then go into a gentle glide downwards. The US stocks didn't hit the absolute bottom until the end of 1933. It lost over 75% of its value and most investors lost 100% of their money because of the bankruptcies. This crisis is far from over. It won't end until the US makes a deal with China. Here is another very interesting article about all this.

From Asian Times:

The Rockefeller interests of "Amalgamated Copper" had a plan to destroy the Heinze combine, which owned the Union Copper Co. By manipulating the stock market, the Rockefeller faction drove down Heinze stock in Union Copper from 60 to 10. The rumor was then spread that not only Heinze Copper but also the Heinze banks were folding under Rockefeller pressure. J P Morgan joined the Rockefeller enclave to announce that he thought the Knickerbocker Trust Co would be the first Heinze bank to fail. Panicked depositors stormed the tellers' cages of the Knickerbocker Bank to withdraw their money. Within a few days the bank was forced to close its doors, making Morgan's prediction self-fulfilling. Similar fear spread to other Heinze banks and then to the whole banking world. The crash of 1907 was on.

The Panic of 1907 was a credit crunch that spread from New York to the whole country, closing banks and businesses. It was the major impetus for the formation of the Federal Reserve System. While the nation had considered central banking systems in the past, it was the severity of the Panic of 1907 that inspired congressional action leading to establishment of the Fed.

The birth of the Federal Reserve is a big turning point in our empire. Understanding the bank/stock panics that was exploited by the ruling class to put our entire nation in hock to them is key to seeing what will happen next as they bankrupt us for good.

More from the dawn of the Federal Reserve:

Ironically, the initial idea of the need for a central bank came from the populist movement, which began in Lampasas County in Texas when a group of desperate farmers formed in 1877 the Knights of Reliance to educate themselves speedily against the time "when all the balance of labor's products would become concentrated into the hands of a few, there to constitute a power that would enslave posterity". Uninhibited by the awesome high science of economics, average citizens in the late-19th-century United States were pragmatically aware of the political implications of monetary policy. The Farmers Alliance, renamed from the Knights of Reliance, held regular traveling lectures that quickly concluded that the causes of their members' financial ruin were the gold standard and the private banking system that enforced its confiscatory terms.

The populists proposed a solution in August 1886 in a convention in Cleburne, Texas. The "Cleburne Demand" called for federal regulation of the banking system and a fiat national currency to meet the liquidity needs of an expanding economy. Public pressure was making increasingly vocal demands for a plan to eliminate Wall Street control and exploitation of the economy for narrow private benefit.

In response, Morgan's ally, senator Aldrich, arranged to become chairman of the National Monetary Commission, which received a mandate from Congress to study the US monetary system and make reform recommendations. Paul Warburg, whose brother Max was in charge of the Reichsbank, the privately owned national bank of Germany, emphasized the absolute necessity of setting up a new national banking system that would prevent Wall Street from putting the US economy through devastating "boom and bust" cycles as it had in the past.

Note that the entire premise of the Federal Reserve was to stop the 'boom/bust' cycle. It failed in this, utterly. Indeed, looking at the rate of liquidity they pump out or remove, it is clear they create these boom/bust cycles at will. It is only that at the tops and bottoms of these cycles, they lose control and usually, at the downside, they lose political power. They are always seeking to manipulate the fiat currency for their own benefits and note how we just went through a phase triggered entirely by them that has enriched them and put our nation and nearly everyone here, deep in debt to them! Their one major miscalculation was, they also put us all deep into debt to China! Which is a nuclear armed empire.

From Market Watch:

"Banks get hit by scandals and reversals of this size periodically because it's a cyclical business," Dick Bove, an analyst at Punk Ziegel & Co. said. "If they're able to hold onto their capital, they recover and no one even remembers."

Another blase idiot. Of course, they forget. Criminals and cheats love to forget what they did in the past so they can do it again! And this was all deliberate. They hate being reminded of the past. They paper over these banking disasters by paying people to say, 'No one knows why this happened' even as they stuff the money into their own pockets. Note also how these guys admit this is a cycle and don't care. England used to say this, too. Years ago. But they are no longer an empire, they are an appendage of the US empire.

From US Markets:

Donald Trump was just on CNBC saying that he longs for the days of Alan Greenspan. He believes that Ben Bernanke has held short rates too high too long. He went on to say that Ben should hold an emergency meeting of the FOMC to cut interest rates. He believes that the coming recession could be one of the worst in a long time.

The President of the Federal Reserve Bank of Richmond wrote a nice rebuttal to Trump's tirade. It was published as the President's message in the "RegionalFocus," spring of 2007. The summary point of the article was, "Monetary policy works best when it allows the real economy to respond appropriately to economic fundamentals, rather than attempts to insulate the economy from shocks by tolerating swings in inflation."

Donald Trump is a bankrupt idiot. He wants free money because he is a jerk. We all want free money. We really don't want to hear that intra-bank interest rates are over 6%. And the Fed remains fixated on inflation and not on global monetary fiat policies based on unbalanced trade.

From US Market:

In managing your own portfolio, calm and rational is probably the better way to go. Hopefully you have some sort of trigger point for some sort of defensive action and all you need to do is stick to it, this is also something I repeat over and over.

No matter what you think about this, it has happened before, been worse and come back.

Another idiot. Previous bank collapses simply made us stronger because we had no rivals. We had to kill literally millions of people before we ended up with no rivals. We are fortunate Russia and China were communist during WWII and afterwards. But now they are capitalist and they are our bankers. The past won't repeat here.

From MSNBC:

Kristin Schantz, a 26-year-old manager for a human-resources company in Kenosha, Wis., got some unpleasant news in the mail last week. In a form letter, Capital One told her the interest rate on her credit card was about to almost double—she’d been bumped up from a fixed 8.9 percent rate to a "variable rate that equals the prime rate plus 6.9 percent"—or about 15.8 percent. Schantz, who says she’s “never late with payments,” is irate. The letter blamed rising interest rates across the economy for the decision.

How on earth can she borrow money at 8.9% on an open loan scheme when the intra-bank rate is suddenly 6+%? All credit cards will be pulled soon if this continues. And buying on credit will, like in 1929, 1974, 1979, etc, vanish.

More incedulous people waking up to reality:

A credit-card squeeze carries real risks for the U.S. economy overall. “The shift from home-equity borrowing to credit cards is quite costly,” says Smith. Not only are mortgage interest rates about half that of credit-card interest rates, but the interest paid on credit cards isn’t tax-deductible. Smith believes that already-strapped households with little or no savings to rely on will be faced with increased financial obligations that will eventually lead to slower growth in consumer spending. And with consumer spending accounting for about 72 percent of gross domestic product, any slowdown could have a big impact.

All we do is buy on credit. And the banker is China and this is so painfully obvious. The US has no choice but to pay the piper and the piper will make certain we pay. Pretending China will lend to us while we whine like babies and spit in China's face is pure foolishness.

We will have a very interesting fall. Or downfall this fall.

Culture of Life News Main Page

Comments

[Don Parker]

I recently been made aware that a security certificate used by your site is none other than one which is tied to www.imf.org which actually belongs to the "international monetary fund". So who the hell are you working for 'anywho'??????

[blues]

How were you "made aware" of this, Parker?

[blues]

Well, I have a website. Mine is on a basic commercial hosting outfit in Utah, not plugged into a service like TypePad (as this one is). I have no idea about my certificate, except I know Firefox doesn't gripe about it being "incorrect." Mine could be parked next to the Chinese Triads, for all I know. If Elaine had something to hide, I would not expect to find it.

[Elaine Meinel Supkis]

HAHAHA. Tell the IMF I am working for them! Gads! Their collective heads will spin...they know who I am, by the way. Bush knows me too! And the CIA has known me since I was a baby, probably when my mom was pregnant.

And the FBI knows me. And quite a few other people know me and I live on a mountain and they strive to ignore me. I wish I ran the IMF. Or the CIA. Hell's bells, this is their greatest fear.

[ruby]

I have a question, what will happen when the banks collapses in terms of their outstanding loans, ie the money i owe them, who will collect that money?
And reversely, if i have money in the bank, savings, will that be all gone [as the feds are basically bankrupt i can't see how the 100,000 insurance would be of any assistance]?
Lastly, what do one do to safeguard capital in this upcoming scenario, and i don't think gold will be worth much as you can't eat it?

Appreciate your informative blog, and looking forward to your reply.

Thanks,

Ruby

[craig]

You say you are a problem for the real rulers of this world. Would you mind telling us who they are, por favor?

[Brian Watling]

Your blunt assessments of the deep financial morass we are sliding into and those who have put us there are quite charming. The fact that you seem to attract so much counterfire certainly lends weight to your assessments...and the fun has just begun.

If Parker wonders who you are working for I would suggest Parker is sloppy in doing his homework. He should read more of your work.

[Brian Watling]

Craig why don't you make like Parker and read what she writes?

[Don Parker]

Blues;

Within the last week when opening Elaine's weblog,I get a message from within Firefox that I am attempting to establish a connection with "www.internationalmonetaryfund.com". However, the security certificate is from IMF.ORG.

[Elaine Meinel Supkis]

Ruby, the government with no assets prints money and we get inflation. We will get inflation in the end unless we reform our relationship with all other trading nations.

And the IMF business: this is a pop up that is due to me linking to them. I think it is a computer glitch with Firefox. None of the other browsers do this.

[blues]

Parker:

Elaine lives in Apple Wonderland.

If you are in Windows, you should get and run:

>>> Must have the LATEST de-bugged version of Firefox:

http://www.mozilla.org/products/

>>> NoScrip:

http://noscript.net/

>>> a-squared malware scanner:

((----- Copy & Paste -----))

http://freewarearena.com/html
/Downloads/details/id=1304.html

>>> Spybot SD

((----- Copy & Paste -----))

http://freewarearena.com/html
/Downloads/details/id=1138.html

You should not have two antivirus programs on one machine, but if you have an old non-updatable one, uninstall it and try:

>>> Avast Antivirus (Serious antivirus -- requires free 'renewal' during first few weeks.)

((----- Copy & Paste -----))

http://freewarearena.com/html
/Downloads/details/id=382.html

Must have a firewall:

>>> Comodo Firewall (Real firewall, must have, will slow things down if demons try to access web!)

((----- Copy & Paste -----))

http://www.personalfirewall
.comodo.com/

Or if Comodo is a problem, uninstall it (only one firewall per computer) and try:

>>> Outpost Firewall Free

((----- Copy & Paste -----))

http://www.majorgeeks.com/Outpost
_Firewall_Free_d1056.html

It could conceivably have to do with your IP service. (Not AOL, I hope!)

>>> Soon I will dump the Microsoft conspiracy, and move to gNewSense Linux:

http://www.gnewsense.org/

It's the only distribution that is endorsed as free from private components by the Free Software Foundation.

[rain]

Ruby has asked questions I have asked myself. I think all of the banks in this country are are under the federal reserve. The federal reserve has a web site that answers questions. When a bank collapses it is taken over by a larger bank. The accounts are insured by the FDIC. I don't think anything is said as to when you will get paid. Since we are at war I suppose there are changes we can look forward too.
I do suggest you look into Argentina and how that government handled its banking system. How do you safeguard capital? What would you do with $46 billion in cash. Even if its 1/2 in United States dollars thats $23 billion. Deflation expectations?

[Al]

I did a little bit of reading on the subject of Argentina right now. They froze all accounts for 12 months to prevent a further run on their banks. At a later date the state provided what were called Compensation Bonds to the banks to make up for losses in loans/deposits due to currency devaluation. Whether this windfall was passed on to the people or whether it just went into the banks pockets I couldn't find out.

[DeVaul]

That's interesting, Al. I wonder, though. What about people who owe money, like most Americans do? If their bank account is frozen, then how do they pay their mortgage or credit card bills?

Also, are they freed from these liabilities as part of the "great compensation", or are they expected to return to making payment on the loans? Are they charged interest during the time they cannot make payments because their accounts are frozen?

I sure would like to know what happened to the little guy in that huge mess.

[John]

Attention all aspiring intarwebb sleuths:

The "invalid site certificate" from "imf.org" is due to only one thing, which is that Elaine hotlinked to a chart off their website.

Except for the main 'money matters' page, or that post iteself, the warning does not appear. If you say "no" when prompted, the only thing that happens is that this chart does not appear.

Nice try at making something out of nothing, though.

[Al]

Hi DeVaul, apparently getting any $ out was near impossible, involving lots of red tape and paperwork and then only small amounts of ones available funds might be withdrawn.

I haven't been able to dig up what happened to individuals with respect to their debt.

[Elaine Meinel Supkis]

Many Argentinians lost their homes and a number of them began to starve to death. Women in fur coats were begging for food! China, by the way, saved the day and loaned Argentina money after the IMF tried to loot the nation.

And who else froze bank accounts? How about the US with its 'bank holidays' during the Great Depression? And that was one grim time. The government DESTROYED FOOD while people were begging for it on the streets.

[Al]

So China helped circumvent the IMF the same way Chavez has for Ecuador, Bolivia and other SA countries. Helping to kill the IMF which is one more nail in the figurative coffin our politicians, media and religious leaders want to put him in.

[DeVaul]

Thanks for the info, Al. And you too, Elaine.

I was just curious because most of my money, well all of it, is in a bank run by the state of Kentucky. Theoretically, they could pay my loans (from the same bank) by transferring my ghostly deposits from one account to another, just like I do on-line. At least that is what they should do if the government froze my account. I will be too busy begging for food.

[Dan]

Now that we face hard times ahead, it is probably best that you know as much as you can about money (fiat money). This is a good article, but check out this report.

http://dailyreckoning.com/rpt/fiathistoryWP.html

-Cheers!

[Elaine Meinel Supkis]

I read daily reckoning regularily. But they are short sighted and focus on the obvious.

[DeVaul]

I no longer read The Daily Reckoning either, for the same reason as Elaine just gave. They seem mostly concerned with the price of gold and how to make money while people starve in the streets. Not my bag.

Dan,

I already know about our money system. Learning about fiat money was a real kick in the gut for me, but thanks for the info.

[sherry]

Would it be wise to get all money out of the stock market and take the hit on income tax and penalties?

Also, how about getting out money out of the banks too?

I had a dream back in Feb. 2007 and 3 men were visiting the US and as soon as they left, all money and credit cards were stolen from our purses.

I heard the words "impending judgement".

[ruby]

So what does one do with the money [savings] in the bank? Will it disappear - poof gone?

Does or can anyone know?

We are looking at inflation, but then what about deflation, isn't that a consequence too of this giant credit bubble and overvalued assetts?

[Elaine Meinel Supkis]

I have been rich and I have been poor. Both have positive sides. Trust me on this. My son, when I lived in a mansion I paid CASH for in New Jersey of all places, was spoiled rotten. We had the high life and I was even a political power!

Then we got real, real poor. Less than $500 a month. Bush Sr and then Bush Jr, later, intimidated the media into silencing me totally. I lived in a tent complex my son and I built up over 10 years time. The New York Times not only knew about this, some reporters visited my tent. ABC also visited and even got licked by my ox team.

SILENCE! Nothing! I was invisible! They all talked about what a wonderful story this was and then never spoke to me again.

But I assure everyone, those 10 years in the tent complex is what my son remembers fondly! He turned into a fabulous adult thanks to it! MONEY ISN'T EVERYTHING! Love, a zest for life, being creative even with very little, loving life itself is important. My husband was suicidal the first four years of this business but our wonderful friends helped pull him through it all and we look back in time fondly to that period even with all its woes.

As I said to myself when a child and going in and out of surgery: 'If you feel pain, you are alive. And if you are alive, you can hope for a better future.'

[sharon]

Ruby, I love your comment and know from my own experience that it is true.

Some of the happiest times in my life have been the times I've been poorest. The children who went through these time with me have become wonderful adults. They learned practical skills that are a mystery to many adults--and so did I. Children also learn from this experience to have their values in order.

When you're poor, your sense of self-worth has to come from who you are, not from what you've got. The outcome is, you become a substantial person, somebody deserving of love and respect--because who you are is all you've got.

These times of financial adversity have invariably been the times when I've had the truest friendships and the closest family relationships.

There is something in that adage, "Life is sweetest closest to the bone."

[Elaine Meinel Supkis]

Yes, Sharon, you are right. Dale Carnegie talked about this and he supported taxes on inheritances for this reason. Because inheriting money makes the following generations weaker, not stronger.