The Chess Game of Capital Controls

by Jeff Clark

 

The best indicator of a chess player's form is his ability to sense the climax of the game.

–Boris Spassky, World Chess Champion, 1969-1972

You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany.
Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits?
You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?

Why Cyprus Matters (And The ECB Knows It)

by zerohedge.com

WHEN THE RED QUEEN IS AFTER YOUR HEAD
When Zig turns to Zag and the Red Queen is after your head then extraordinary care is necessitated. To quote Holmes, "The game is afoot" on the Continent.

I have been asked, with some frequency, why the bondholders have not been tagged in the Cyprus fiasco. That answer is simple. Most of Cyprus's bonds are pledged as collateral at the ECB or in the Target2 financing program. Then one may also ask why the bonds of the two large Cypriot banks are not being hit. The answer is the same; most are held as collateral at the ECB or Target2. In both cases, remember uncounted liabilities, the government of Cyprus has guaranteed the debt. Consequently if the two Cyprus banks default it is of small matter as the sovereign has guaranteed the debt. However if the country defaults and leaves the European Union then it will matter and matter significantly as the tiny country of Cyprus would wipe out the entire equity capital of the European Central Bank. While it is not a matter of public record it is estimated that Cyprus has guaranteed about $11.6 billion of collateral at the ECB.

Preparing for Inflationary Times

by Jeff Clark
 

"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader
The CPI, in our view, does not accurately measure inflation, which accounts for some of the discrepancy our reader is pointing out. However, the proper definition of inflation is "an increase in the quantity of money," which we've had in spades. We've not experienced the concomitant increase in prices, which is what we're addressing in this article.
It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit. Economics 101 says this should lead to higher inflation – yet official Consumer Price Index (CPI) levels remain benign.
It's this unexpected development that led a reader to pen the above quote. Is the inflation argument dead? If so, does that mean gold's big run is over? It's a timely question since the current selloff in gold is largely attributed to low inflation expectations.

‘BRICS Development Bank would shift the tectonic plates of geopolitics and geo-economics’

by rt.com
 

The BRICS Development Bank is the beginning of the end of the existing monetary management system, Asia Times correspondent Pepe Escobar told RT.

RT: There’s no doubt about it, these countries that form the BRICS, they haven’t got a lot in common have they? They’ve all got different styles of government indeed some of them are economic rivals. Are they really a group to be taken seriously?

Pepe Escobar: From now on yes, let’s say until this summit in Durban, there was a lot of political talk of course and the BRICS are basically an economic group in the making. Now it’s different, now they have clear sound, actual policies to be implemented.

Want To Understand Money?

by 24hgold.com24hgold.com This was published on January 2, 2013, in Ron Paul’s Monetary Policy Anthology: Materials From the Chairmanship of the Subcommittee on Domestic Monetary Policy and Technology, US House of Representatives, 112th Congress. The scholarly contributions of Murray N. Rothbard span numerous disciplines, and may be found in dozens of books and thousands of articles. But even if we confine ourselves to the topic of money, the subject of this volume, we still find his contributions copious and significant. As an American monetary historian Rothbard traced the party politics, the pressure groups, and the academic apologists behind the various national banking schemes throughout American history. As a popularizer of monetary theory and history he showed the public what government was really up to as it took greater and greater control over money. As a business cycle expert he wrote scholarly books on the Panic of 1819 and the Great Depression, finding the roots of both in artificial credit expansion. And while the locus classicus of monetary theory in the tradition of the Austrian School is Ludwig von Mises’ 1912 work The Theory of Money and Credit, the most thorough shorter overview of Austrian monetary theory is surely chapter 10 of Rothbard’s treatise Man, Economy and State.

Cyprus and the Unraveling of Fractional-Reserve Banking

by Joseph T. Salerno

[Originally posted on Circle Bastiat, the faculty blog of the Mises Institute. Read Circle Bastiat for Austrian analysis of current economic events from today’s top Misesian and Rothbardian economists.]

The “Cyprus deal” as it has been widely referred to in the media may mark the next to last act in the the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s.
This trend continued with the currency crises in Russia, Mexico, East Asia, and Argentina in the 1990s in which fractional-reserve banking played a decisive role. The unraveling of fractional-reserve banking became visible even to the average depositor during the financial meltdown of 2008 that ignited bank runs on some of the largest and most venerable financial institutions in the world. The final collapse was only averted by the multi-trillion dollar bailout of U.S. and foreign banks by the Federal Reserve.

Jim Rogers Says No Paper Currency Will Be Worth Much Of Anything In 2014/5

JIM ROGERS - All FIAT CURRENCY will be WORTHLESS in 2014. Dont SELL GOLD or SILVER
Legendary investor Jim Rogers sees now as a great time to load up on gold and silver coins - and he's not alone.

A record 7.5 million ounces of silver coins were sold in January as investors hunted for a safe haven investment.

"You can't get [silver coins]. They sell out," Rogers, who owns a rare 2013 silver coin, said on Yahoo! Finance's "The Daily Ticker." "Several mints have run out of coins because everybody's worried about the future of the world."

And 150,000 ounces of American Eagle gold coins were sold in January, the highest monthly total since July 2010.

Anatomy of the Bank Run

by mises.org

It was a scene familiar to any nostalgia buff: all-night lines waiting for the banks (first in Ohio, then in Maryland) to open; pompous but mendacious assurances by the bankers that all is well and that the people should go home; a stubborn insistence by depositors to get their money out; and the consequent closing of the banks by government, while at the same time the banks were permitted to stay in existence and collect the debts due them by their borrowers.
In other words, instead of government protecting private property and enforcing voluntary contracts, it deliberately violated the property of the depositors by barring them from retrieving their own money from the banks.

Tenured Austrian Economists vs. Murray Rothbard

by Gary North

 
















The Austrian School of economics in the twentieth century was dominated by Ludwig von Mises. He died in 1973. His followers have divided into two main camps: the Rothbardians and the Lachmannites. They have adopted rival philosophies and rival strategies.
The main strategy of the Lachmannites is to get tenure at a university. The main strategy of the Rothbardians is to persuade the general public of the truth of economic liberty.
A college teacher who is granted tenure need not publish anything ever again. He will be paid for merely showing up to class. The number of classes that he teaches declines. He is immune from dismissal. This is the bureaucrat's dream come true.

Jim Rogers: Never In History Has This Been Seen

by jimrogers1.blogspot.it




"I don't trust the data from any government, including the U.S., Jim Rogers said. "We know that governments lie to us. Everybody's printing money, but it cannot go on. This is all artificial." Rogers, who for years has been an outspoken critic of the Feds policies of "Quantitative Easing" says all the money printing is creating false hope that we are in the middle of some kind of super bull market. But in reality, he says, "we're living in a fool's paradise."

What's Supposed to Happen, and What Might Happen: 3 Baseline Scenarios

 by charleshughsmith.blogspot.it

What might happen: printing money and issuing propaganda lose their effectiveness.

We all know what's supposed to happen in the global economy: we get more of everything: more stuff manufactured, more coal dug up and burned, more "aggregate demand" i.e. insatiable desire for more of everything, more innovation, more wealth, more money printed, more debt taken on to buy more stuff and more education, more tourists occupying more beaches sipping more drinks, more strip malls built, more airports expanded, more jobs created, more taxes collected-- more "growth" of everything, in every way and every day.

Beneath this expansive more-of-everything splendor, the power structure is supposed to remain unchanged: a small political-financial Elite holds all the reins of power, a manufacturing-consent propaganda machine (a.k.a. mainstream media) persuades the masses all is well, wealth continues to accumulate in the top 1/10th of 1%, money is printed/created and distributed to the State-financial partnership's fiefdoms and cartels, moderate inflation eats away at the value of wages but makes debt cheaper to service, and the Upper Caste of technocrats continue their well-paid enabling of the Aristocracy's dominance.

After Cyprus, Who Is Next?

 by zerohedge.com

Short answer: we don't know.
We do, however, know something we have been pointing out since early 2012 - when it comes to the funding structure of European banks, there is a dramatic difference between the US and Europe. In the US, as we showed most recently two months ago, the Big Three depositor banks (JPM, Wells and Bank of America, excluding the still pseudo-nationalized Citi), have a record $858 billion in excess deposits over loans.

Should Bernanke Park the Helicopter?

by Frank Shostak

According to Ben Bernanke, pulling back on aggressive policy measures too soon would pose a real risk of damaging a still-fragile recovery.
The Fed chief is of the view that, for the purposes of financial stability, a continuation of the central bank’s aggressive stimulus, conducted through purchases of Treasury and mortgage securities, remains the optimal approach.
In response to the financial crisis and the deep recession of 2007–09, the Fed not only lowered official rates effectively to zero, but also bought more than $2.5 trillion in assets in an effort to keep long-term rates low.

The Deeper Meanings of Cyprus

by oftwominds.com

The deposit-confiscation "bailout" of Cyprus reveals much about the Eurozone's fundamental neocolonial, neofeudal structure.

At long last, Europe's flimsy facades of State sovereignty, democracy and free-market capitalism have collapsed, and we see the real machinery laid bare: the Eurozone's political-financial Aristocracy will stripmine every nation's citizenry to preserve their power and protect the banks and bondholders from absorbing losses.

The deposit-confiscation "bailout" of Cyprus confirms the Eurozone's fundamental neocolonial, neofeudal structure and the region's political surrender to financialization.

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

Let's list what Cyprus reveals about the true state of financial-political power in Europe:

1. The Core-Periphery terminology masks the real structure: the E.U. operates on a neocolonial model. In the old Colonialism 1.0 model, the colonizing power conquered or co-opted the Power Elites of the periphery regions, and proceeded to exploit the new colonies' resources and labor to enrich the Imperial core.

For Everyone Shocked By What Just Happened... And Why This Is Just The Beginning

Today, lots of people woke up in shock and horror to what happened in Cyprus: a forced capital reallocation mandated by political elites under the guise of an "equity investment" in insolvent banks, which is really code for a "coercive, mandatory wealth tax." If less concerned about political correctness, one could say that what just happened was daylight robbery from savers to banks and the status quo. These same people may be even more shocked to learn that today's Cypriot "resolution" is merely the first of many such coercive interventions into personal wealth, first in Europe, and then everywhere else.

Germany And IMF's Initial Deposit Haircut Demand: 40% Of Total

by Tyler Durden

 












As the President of Cyprus proclaims  to his people that "we' should all take responsibility as his historic decision will "lead to the permanent rescue of the economy," it appears that the settled-upon 9.9% haircut is a 'good deal' compared to the stunning 40% of total deposits that Germany's FinMin Schaeuble and the IMF demanded. This action, his statement notes, enables the rescue of 8,000 banking sector jobs and ensuring the liquidity of the banks, "allowing the economy to proceed decisively to a new beginning." Ekathimerini reports," this is the first time in the eurozone that a levy has been imposed not on the interest of bank accounts but on the capital itself," and was the only way to bridge most of the the gap between the EUR17bn Nicosia needed and the EUR10bn the ESM was offering, though tax on interest in Cypriot banks will also rise to 20-25%. It is the 40% haircut requirement that concerns us the most as clearly going forward that means other nations, starting Monday (or Tuesday given national holidays) see deposit outflows surge, as the willingness to take such steps is now painfully clear.

German Commerzbank Suggests Wealth Tax In Italy Next

by Tyler Durden

While some argue that Cyprus was "one of the biggest money-washing machines for Russian criminals," and others that Cyprus ex-Pat community and energy resources brough deposits (not to say their high deposit interest rates), it seems the European Union (IMF et al.) have decided that the route to crisis stabilization, just as we outlined here over a year ago and updated here, is through a wealth tax.
However, as Handelsblatt reports, the gross distortions of wealth distribution among both core and peripheral nations (evident in the chasm between 'mean' and 'median' net assets - or wealth) makes some nations more 'capable' of 'giving' and as Commerzbank's chief economist notes, median wealth in Italy is EUR164,000 (as opposed to Austria's median of around EUR76,000 and mean of around EUR265,000) meaning that in theory Italy has no debt crisis (with net assets at 173% of GDP) - significantly more than the Germans at 124% - "so it would make sense, in Italy a one-time property tax levy," he suggested.
"A tax rate of 15% on financial assets would probably be enough to push the Italian government debt to below the critical level of 100% of gross domestic product." So there you have it, the 'new deal' in Europe, as we warned, is 'wealth taxes' and testing the "capacity of Cypriots" appears to be the strawman on what the public will take before social unrest becomes intolerable.

The Petro Business Cycle

By James J Puplava CFP

 

 

 

 

 

Oil is the lifeblood of modern society, powering over 90% of our transportation fleet on land, sea, and air. Oil is also responsible for 95% of the production of all goods we buy and ultimately drives the natural rhythms of recession and recovery. We define this as the "Petro Business Cycle".

The post-crash world we have inhabited since the credit crisis of 2008 has been defined as "The New Normal"—a phrase used to describe an economic and market environment much different than the three decades that preceded it. In contrast to the past, the "New Normal" will mean a lower living standard for most Americans. It will be a world of lower economic growth, higher unemployment, stagnant corporate profits, and the heavy hand of government intervention in all aspects in the economy. For investors it will be an environment marked by volatility, zero interest rates, and disappointing equity returns.
The age of leverage is coming to an end as consumers, businesses, and governments are forced to rein in their balance sheets. For consumers it will mean less discretionary spending as higher taxes and inflation erode the purchasing power of wages. Businesses will have fewer profit opportunities and find it more difficult to replicate the growth rates of the booming '80s and '90s. Governments will struggle with the illusion that their fiscal and monetary stimulus will produce long lasting effects on the economy. Eventually profligate government spending will give way to an age of austerity now beginning to spread across Europe. It will either be done voluntarily or involuntarily by the heavy hand of the market.

Italian Election: Awakening Consciousness?

By John Perkins

Who would have predicted that a comedian-turned-political activist, Beppe Grillo, and the anti-austerity Five Star Movement would win the Italian election? What caused this massive rejection of Prime Minister Mario Monti's austerity policies?

U.S President Obama, German chancellor Merkel, and other European leaders who backed Mario Monti must be puzzling over these questions. The recent Italian elections support a trend I have been describing for several years: a global awakening in consciousness. Voters in Italy resoundingly rejected the two parties that had dominated, both of which advocated austerity and other measures that favor the 1% at the expense of the 99%. The electorate propelled to power the practically unheard of the Five Star Party.

Fed Injects Record $100 Billion Cash Into Foreign Banks Operating In The US In Past Week

Source: H.8

Those who have been following our exclusive series of the Fed's direct bailout of European banks (here, here, here and here), and, indirectly of Europe, will not be surprised at all to learn that in the week ended February 27, or the week in which Europe went into a however brief tailspin following the shocking defeat of Bersani in the Italian elections, and an even more shocking victory by Berlusconi and Grillo, leading to a political vacuum and a hung parliament, the Fed injected a record $99 billion of excess reserves into foreign banks. As the most recent H.8 statement makes very clear, soared from $836 billion to a near-record $936 billion, or a $99.3 billion reserve "reallocation" in the form of cash - very, very fungible cash - into foreign (read European) banks in one week.