The Fall of Capitalism to Corporatocracy in America, Democracy is Dead #ows #peakdebt #revolution #ronpaul #crisis

It's already over. Capitalism is dead and we didn't even know they killed it until now. That's the big lie the big conspiracy. It's not that the Occupy Wall Street movement wants to end capitalism. They want to end Corporatocracy, Predatory Capitalism that mirrors Mercantilism of the 18th century.



We are no freer now, no better off than when we fought the Revolutionary War against the England (a monarchy), and the East India Tea Company (a state sponsored monopoly). Now instead of 1 master, we have a gang of 13 bankers. Instead of the African slave trade and taxation without representation, we have endless debt and countless taxes which enslaves us to the Predatory Capitalists that run our crony democracy.



The root cause of this loss of power of the people is the loss of control of the money supply which ended with the Sherman Silver Purchase Act of 1893 which demonetized silver and allowed the gold hoarding wealthy elites to take great control of our country and the Federal Reserve Act of 1913 which gave the money supply to the Federal Reserve, a private corporation ruled by those it is supposed to regulate.



Is there still hope? Buy an ounce of silver this Christmas and support your local Occupy movement and find out!

Amplify’d from www.alternet.org

6 Shocking Revelations About Wall Street's "Secret Government"

By Les Leopold, AlterNet Posted on November 30, 2011, Printed on December 1, 2011 http://www.alternet.org/story/153274/6_shocking_revelations_about_wall_street%27s_%22secret_government%22

We now have concrete evidence that Wall Street and Washington are running a secret government far removed from the democratic process. Through a freedom of information request by Bloomberg News, the public now has access to over 29,000 pages of Fed documents and 21,000 additional Fed transactions that were deliberately hidden, and for good reason. (See here and here.) These documents show how top government officials willfully concealed from Congress and the public the true extent of the 2008-'09 bailouts that enriched the few and enhanced the interests of giant Wall Streets firms. Here’s what we now know:  The secret Wall Street bailouts totaled $7.77 trillion, 10 times more than the $700 billion Troubled Asset Relief Program (TARP) passed by Congress in 2008.  Knowledge of the secret bailout funds was not shared with Congress even while it was drafting and debating legislation to break up the big banks. The secret funding, provided at below-market rates, gave Wall Street banks an additional $13 billion in profits. (That’s enough money to hire more than 325,000 entry level teachers.) The secret loans financed bank mergers so that the largest banks could grow even larger. The money also allowed banks to step up their lobbying efforts.  While Henry Paulson (Bush’s Secretary of the Treasury) was informing Congress and the public that only minor reforms were needed to protect Fannie and Freddie from collapse, he met secretly with leading Wall Street hedge fund managers -- among them his former colleagues at Goldman Sachs -- to alert them that he was about to nationalize the giant mortgage companies – a move that would eradicate nearly all the stock value of the companies. This information was enormously valuable because it allowed these hedge funds to short Fannie and Freddie and thereby make a fortune. While Timothy Geithner was head of the NY Federal Reserve, he argued against legislative efforts by Senator Ted Kaufman, D-Delaware, to limit the size of banks because the issue was “too complex for Congress and that people who know the markets should handle these decisions,” Kaufman recalls. Meanwhile, Geithner was fully aware of the enormous secret loans while Senator Kaufman was kept in the dark. Barney Frank, who was authoring key bank reform legislation was also not informed of the secret loans. No one in Congress was told. So what does this all mean?  1. The big banks and hedge funds were in much more trouble than we were led to believe.  As many of us suspected, all the big banks were on their knees begging for help – secretly – while telling their investors, the public and Congress that all was well. They had gambled and lost. Under the rules of ideal capitalism, they should have suffered some “creative destruction,” and seen their shareholder value eliminated through bankruptcy, and their managers replaced. The entire banking system should have been reorganized from top to bottom as well. Instead, these colossal failures were secretly rewarded.    2. Wall Street’s secret government made sure the largest banks would grow even larger, aided by the secret funding.  While Congress was debating legislation to break up the large banks and reinstitute Glass Steagall (to separate risky investment banking from insured commercial banking,) the secret government was using public funds to grow even larger through mergers and acquisitions. Because Congress and the public were unaware of the secret funding and ill-health of all the banks, the legislation was easily defeated. As the chart below makes painfully clear, too-big-to-fail banks grew even bigger.    3. The bigger Wall Street becomes, the more government it can buy.  This part isn’t secret. As the top six banks grew larger, they spent more funds lobbying to make sure that they wouldn’t suffer any unprofitable impacts from banking reform legislation. So after the biggest banks received hundreds of billions in secret loans, they upped their lobbying funds to maintain their size and power. Read ‘em and weep:   4. Wall Street’s secret government protects its own.   At first, it’s not easy to understand how Treasury Secretary Paulson, the former head of Goldman Sachs, could risk attending a secret meeting with giant hedge fund managers, many of whom used to work at Goldman Sachs. How could the nation’s highest ranking financial official dare to tip off these hedge fund elites about the imminent government takeover of Fannie and Freddie before Congress and the public were informed? Well, one answer is that Paulson felt obliged to warn his old comrades of the impeding nationalization. Maybe, he wanted to get them out of harm’s way just in case they were heavily involved in those markets. Or maybe he also wanted to give them a very valuable tip to profit by. But the deeper explanation, I believe, is that Wall Street’s key government officials – Paulson, Summers, Geithner, Orszag (the former Obama OMB chief who now makes millions working for CitiGroup), etc. truly believe the following:  Wall Street banks are the best in the world and are the cutting-edge of the American economy. They are our future. Wall Street bankers and hedge fund managers are enormously smarter and sharper than the rest of us. They deserve our admiration. Helping Wall Street to grow and prosper is precisely the same thing as helping all Americans and the entire economy. They deserve our support. Secret meetings to provide insider information are normal on Wall Street. There’s nothing wrong with warning your friends about upcoming policy decisions that might impact their profits. There’s also absolutely nothing wrong with providing trillions of dollars of secret loans to the best and the brightest and not telling Congress about it. It’s all a closed loop of self-justification and self-deception: Wall Street is brilliant. What Wall Street does is for the good of the country. Helping Wall Street profit is good for the country. Hiding the truth from democratically elected leaders is also for the good of the country because Wall Street is brilliant and knows better.  And all this is deeply believed by Wall Street and its secret government, even though Wall Street, and Wall Street alone, took down the economy and killed 8 million jobs in a matter of months. Simply brilliant!  5. Wall Street is a clear and present danger to democracy.  Usually, I am not an alarmist. In fact, I often argue against facile conspiracy theories. I want to believe that our democracy still has promise. But, the Wall Street-induced crash and the government’s response to it has me very worried. The Bloomberg News revelations suggest that Wall Street’s secret government has enormous disdain for what remains of our democracy. The financial elites obviously believe that Congress cannot be trusted to do the right thing even when it is bought and paid for by the very banks it supposedly regulates. As for the rest of us? We’re just a financially illiterate mass to be manipulated through the mass media. Our minds too can be bought and sold through careful marketing.  This financial arrogance and corruption is enormously corrosive to our democratic values. Already, many Americans, and for good reason, no longer trust their government. Already, many Americans, and for good reason, no longer vote. Already, many Americans, and for good reason, believe that democracy as we know it is a sham. Wall Street couldn’t have written a better script to maintain its domination.  6. Occupy Wall Street is fundamentally correct, but we need more. The occupiers dramatically attacked Wall Street elites and captured the country’s imagination with their 1 percent, 99 percent framework. And the idea is sticking and spreading. But that’s only the start. To reclaim our country from Wall Street’s secret government we will need to develop an enormous movement among the 99 percent. Although we hope it just happens spontaneously through Twitter and Facebook, we all know it will require hardcore organizing involving millions of us. At the moment, no one knows what form it will take. But we do know this: great concentrations of power and wealth do not give up their power and wealth without an enormous fight. Wall Street’s secret government is more than ready to protect itself, even if it means subverting democracy. Our occupiers have shown great courage in helping us reclaim our democratic rights. Let’s hope it spreads…and soon. Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009). Read more at www.alternet.org

 

See this Amp at http://amplify.com/u/a1j8fg

Saudi Arabia is Past Peak #peakoil @collapsenet

Read it and weep. Too much evidence worldwide suggests the transition is hairy. India and Pakistan and Canada are already seeing shortages. All we need is a crisis in the middle east to make it official.

Amplify’d from seekingalpha.com

Getting Ready For 'Peak Oil'

6 comments |  by: Travis Christofferson November 28, 2011  |  includes: OIL

While researching his 2004 book, “The End of Oil” author Paul Roberts was allowed to see the Shayba oil field in Saudi Arabia’s “empty quarter.” Full of pride, Robert's Saudi engineer hosts boasted about the remarkable infrastructure built over the Shayba, rattling off a list of impressive production statistics. Saudi oilmen are usually very tight-lipped about their oil data, sanctimoniously guarding their data like state secrets. But this was a new post-911 world, and the Saudis found themselves in an unusual predicament: They needed to convince the US that they were a stable and dependable supplier of oil. Roberts shifted the discussion from his hosts' presentation of the Shayba field, when he asked them about the Qhawar field some three hundred miles to the northwest. Ghawar is by far the largest field ever discovered. From the time it was tapped in 1953 it has contributed roughly one barrel out of every twelve consumed on the planet. Like a proud parent sensing their guest had not fully appreciated the work they had done; a moment of careless bravado took over the Saudi oilmen. Unable to contain themselves, an engineer began to brag about the Shayba while throwing a few pot-shots at the rival operations at Ghawar, “The Shayba is self-pressurized, at Ghawar they have to inject water.” He continued, “At Ghawar the water-cut is 30 percent.” The hairs rose on the back of Roberts’s neck. If true this means that the Ghawar field is much further along the road to depletion than previously thought. Their secret was out.

Although the details are still being argued over, a consensus conclusion, reinforced by the market, is being solidly formed: If peak oil has not already arrived and passed, its arrival is in the very near future. Like the Ghawar field, all the easy oil fields have been found, and have largely begun an inexorable decline in production.

There is something else you should know, if you don’t already, about peak oil.

Once the peak arrives a plateau will ensue while countries and oil companies frantically try to keep production matching demand, effectively accelerating the depletion. The result is not a plateau followed by a gradual decline while we comfortably replace our energy infrastructure; rather it is like falling off a cliff. The decline will be sharp and severe.

In other words, get ready for extreme volatility in the price of oil. While gradually rising oil prices are typically indicative of a healthy economy, as the price continues past a certain level it begins to crush demand, reduce the profit margin of companies, and cripple consumers with higher costs.

Introducing GMO’s Jeremy Grantham.

Besides being one of the world's most respected and esteemed money managers, Grantham has an eerie talent for predicting future levels of returns from a wide dispersion of asset classes that almost borders on the supernatural. He is so good, in fact, that in a 2008 article the Economist heralded him as: “Almost Nostradamus.”

Today Jeremy Grantham is pounding the table about peak oil and resource depletion in general - across all commodities.

“The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value." He explains in a recent report, “We all need to adjust our behavior to this new environment. It would help if we did it quickly. But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.”

This graph illustrates how alarming the situation is with respect to oil.

Grantham goes on to say, “Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.”

Grantham’s predictions carry even more weight as we today witness the price of oil, temporally held down by the 2009 financial crisis like a beach ball underwater. Now that the forces holding the ball down are abating, we are again seeing an unrestrained price rise as we again approach $100 per-barrel oil that is reflective of the monstrous demand from both the US and emerging markets on a strained supply.

How should investors get ready for peak oil?

It will serve you well to take the advice of Stephen Leeb in his remarkably prescient 2004 book “The Oil Factor, Protect Yourself-and Profit-from the Coming Energy Crisis.” In his book Leeb illustrates the power of using the price of oil as an indicator to get into or out of the stock market. Using Leeb’s oil indicator, (which is as simple as selling stocks when the year-over-year rise in oil prices is 80% or more. And buying stocks whenever the year-over-year change falls to 20% or less) “You would have avoided the 1973-74 bear market, much of the turbulence of the early 1990s, the market crash of 1987, and some of the short bear market in 1990. You also would have sidestepped much of the massive decline that occurred at the start of this decade.” Indeed, using the oil indicator from mid-1973 to mid-2003, compared with a passive buy-and-hold strategy of an S&P 500 (SPY) index fund, you would have multiplied your original investment 70 fold vs. 35 fold.

Remarkable.

(Adding more credence to Leeb’s book: Remember that the price of oil almost hit $150 a barrel right before the stock market crash of 08/09, so you would have avoided all the pain of the recent financial crisis also.)

Why employ one good strategy when you can combine two and make a great strategy?

Looking forward, from his remarkable team at GMO, Jeremy Grantham predicts high quality blue chips and large international stocks like Microsoft (MSFT), Phillip Morris (PM) International, Johnson and Johnson (JNJ), and Conoco Phillips (COP) will out-perform other equity classes, and certainly out-perform bonds. I would suggest using Leeb’s oil indicator as a signal to get into and out of equities. But instead of jumping into and out of an S&P 500 index fund, buy the companies Grantham says will have brighter futures. This way you avoid the risk high oil prices pose to stocks while maximizing the probability for profit when it is time to re-enter the market.

Superimposed on this strategy I would still keep a significant percentage of cash on the sideline until we either see the sovereign debt crises that now threatens Europe, Japan, and the US resolved, or until we see a massive move down (like in early 2009) resulting in very cheap equities. I may be wrong, but an eminent market crash seems quite telegraphed and I for one, intend to be ready this time. Never dismiss the power of cash as not only tail risk insurance, but also as dry-powder for tomorrow's opportunity set. Seth Klarman said it best, “Why should the immediate opportunity set be the only one considered, when tomorrow’s may well be considerably more fertile than today’s?” Read more at seekingalpha.com

 

See this Amp at http://amplify.com/u/a1j7pm

USD Money Supply is Underreported - Inflation On the Way

Amplify’d from www.zerohedge.com

Guest Post: U.S. Dollar Money Supply Is Underreported

US Dollar Money Supply Is Underreported

March 1, 2010 – As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways.  Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of viewing things.  One area that has been impacted is the US dollar money supply.

The quantity of dollars in circulation is being underreported by relying upon the traditional and now outdated definitions used to calculate M1 and M2.  These ‘Ms’ are calculated and reported by the Federal Reserve based on the following guidelines that identify the several different forms of dollar currency used in commerce:

M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float.

M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (less than $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments of less than $50,000), net of retirement accounts.

These esoteric definitions can be confusing, so let’s bring US dollar currency back to basics as the first step to explaining why these definitions are no longer adequate.

There are two types of dollar currency comprising the money supply – cash currency and deposit currency.  Both are used in commerce to make payments.

1) Cash Currency

The cash currency we carry around in our pockets is issued by the Federal Reserve.  Take a look at one of those green pieces of paper, and you will see that they are labeled as a “Federal Reserve Note”.  A note is a debt obligation, and a few decades ago one could take that note to a Federal Reserve Bank and ask them to make good on their debt by redeeming it for silver, or until 1933, gold.

These liabilities of the Federal Reserve are no longer redeemable into anything, and are therefore “I owe you nothing” currency, a phrase made famous by legendary advocate of sound money, John Exter.  Nevertheless, Federal Reserve notes remain a liability of the Federal Reserve.

2) Deposit Currency

Deposit currency is comprised – as its name implies – of dollars on deposit in the banking system.  These dollars circulate as currency when payments in commerce are made with checks, wire transfers, plastic cards and the like.  In contrast to cash currency which circulates from hand-to-hand, deposit currency circulates from bank account to bank account.

Bank deposits take three standard forms – checking accounts, savings accounts and time deposits.  They have different maturities, or tenor, to use a banking term.

Dollars in checking accounts are considered to be the most liquid because they are available on demand.  Therefore, they are part of M1 because they are the most likely deposit currency to be used to make a payment in commerce.  Dollars in savings accounts are less likely to be used to make a payment, but nonetheless are currency because they are spendable.  So they are part of M2, which comprises those dollars less frequently used as currency.

The dollars in time deposits are used even less, but are currency and therefore available for use in commerce when they mature, or immediately if the tenor of the deposit is broken.  They are – depending on the size of the deposit – included in M2 or M3, which is no longer disclosed by the Federal Reserve.   Creating Currency

Having provided this background information, we can now get to the heart of the matter by looking at how currency is created ‘out of thin air’ by the Federal Reserve and banks and the impact of their actions on the monetary balance sheet of the US dollar.

Cash currency of course is simply printed, but every note issued is recorded on the Federal Reserve’s balance sheet.  Basically, the Fed ‘monetizes’ an asset by turning it into currency.

If, for example, a bank sells a $1 million T-bill to the Fed, the Fed ‘pays’ for it with $1 million of newly printed cash currency.  The Fed records the T-bill as an asset and the cash currency it issued as its liability.  These Federal Reserve Notes are the “currency” component in the definition of M1 above.

The creation of deposit currency is similar.  When a bank makes a loan or purchases a security, it records the loan or security as its asset and creates deposit currency as its liability.  Simple bookkeeping entries increase the bank’s assets and liabilities by the same amount.

New deposit currency is created because the bank deposits the amount of the loan in the borrower’s checking account, or similarly, credits the account of the seller of the security it is purchasing.  These dollars are now available on ‘demand’ of the borrower or the seller of the security.

Regardless whether deposit currency is created by the banking system or the Federal Reserve, the net effect is the same – the quantity of dollars increases.   The total amount of deposit currency in checking accounts is the “demand and other checkable deposits” component in the definition of M1 above.

Measuring the Quantity of Dollars

As of January 31st, the quantity of cash currency in circulation (i.e., not in bank vaults) was $860 billion.  This amount comprises 51.3% of M1, which equaled $1,676 billion on that date.  As of January 31st, the quantity of demand and checkable deposits in circulation was $810 billion.  This amount comprises 48.3% of M1.

For historical reasons unimportant to the point of this analysis, the Federal Reserve in the past has only created cash currency.  However, the unprecedented changes it has engineered over the past two years have resulted in a vast amount of deposit currency being created by the Fed.  Instead of purchasing paper from the banking system solely with cash currency – its traditional form of payment to ‘monetize’ assets by turning them into currency – the Federal Reserve since the start of the financial crisis has increasingly relied upon deposit currency to purchase paper.

Regardless how the Federal Reserve pays for the paper it purchases – cash currency or deposit currency – it is creating dollar currency and perforce expanding the money supply.  But the traditional definition of M1 does not accurately capture this process when the Fed uses deposit currency to pay for its purchase.  In fact, it is totally excluded.  Because the Federal Reserve did not create deposit currency in the past, none of the Ms take it into account.

Consequently, the traditional definitions of the Ms are outdated because they do not capture the total quantity of dollars in circulation.  Because M1 is underreported, so too is M2.

Unprecedented Deposit Currency Creation by the Fed

There has been an unprecedented amount of deposit currency created by the Fed over the past two years.  The following chart illustrates this point.  It shows the quantity of demand and checkable deposits, i.e., the amount of deposit currency, at the Federal Reserve since December 2002.

From December 2002 until the collapse of Lehman Brothers in September 2008, the quantity of deposit currency created by the Fed averaged $11.8 billion, an amount that is relatively insignificant compared to total M1.  Presently, it stands at a record high of $1,246.2 billion, which of course is highly significant.

More to the point, none of this deposit currency is captured in the traditional definition of the Ms.  The quantity of dollar currency is therefore significantly underreported, which is illustrated by the following chart.

The Federal Reserve reports M1 to be $1,716 billion as of February 15th.  When deposit currency created by the Federal Reserve is added to the traditional definition of M1, M1 after adjustment is actually 170% higher at $2,918 billion.  Its annual growth increases to 29.5%, nearly 3-times the rate reported by the Fed and more importantly, is an annual rate of growth in the quantity of dollar currency that is approaching hyperinflationary levels.

This restatement of M1 explains why crude oil is back at $80 per barrel; copper is $3.25 per pound; and commodity prices in the main are rising in the face of weak economic conditions.  The US dollar is being inflated and worryingly, the rate of new currency creation is approaching hyperinflationary levels.  Unless the Federal Reserve changes course, the US is headed for a deposit currency hyperinflation like those that plagued much of Latin America in the 1980s and 1990s. Read more at www.zerohedge.com

 

See this Amp at http://amplify.com/u/a1ij6f

Eurozone Contagion in the USA

Europe gets a cold, the US sneezes, or how does it go?

Amplify’d from economix.blogs.nytimes.com

The Euro Zone Crisis and the U.S.: A Primer

By CATHERINE RAMPELL

The potential effect of the euro zone crisis on the United States has been the subject of several recent articles, including Annie Lowrey’s on Saturday. Here’s a primer summarizing the three main channels through which the fiasco across the Atlantic could hurt the American economy: trade, stock markets and (most worrisome) a contagious credit crisis.

1) Trade. There are two ways that a European catastrophe could hurt American exports.

First, it could shrink our customer base in Europe. Europe buys 22 percent of our exports, according to the Bureau of Economic Analysis. If Greece and other countries implode, causing a severe recession in Europe, orders for American products and services would fall.

Second, the crisis could shrink the United States customer base around the world. As investors become more concerned about the stability of the euro zone, they will stop investing in the euro. When there is less demand for euros, the value of the euro gets cheaper. By comparison, the dollar gets more expensive. That makes American-made products more expensive, so American products become less attractive to customers worldwide.

2) The stock market. European stock markets and American stock markets are strongly correlated, as shown by indices for both in the chart below:

Of course, this chart doesn’t show what’s cause and what’s effect. A statistical analysis by economists at Deutsche Bank, however, has found that American markets seemed to drive European markets from the onset of the financial crisis in 2007 to March 2010, and since then the reverse has been true: movements in the European markets seemed to be leading movements in American ones.

Additionally, many American companies depend on revenue from Europe, as you might have guessed from the export numbers noted above. Deutsche Bank analysts estimate that about 15 to 20 percent of corporate revenues of companies in the Standard & Poor’s 500-stock index are generated by Europe. For companies in the materials, energy and tech sectors, the share earned in Europe is even higher.

When these companies do badly, and their shares drop, the pain is felt much more broadly in the United States. Declines in the stock market mean less valuable portfolios for Americans across the country, causing consumers to feel poorer and be less willing to spend money.

This is known as the wealth effect. We saw it when housing values first plunged, leading Americans to realize they weren’t as rich as they thought they were.

3) Debt exposure and a contagious credit crisis. This is the biggest worry, since global financial markets are deeply interconnected.

Europeans owe lots of money to one another — and to other countries — as you can see in this debt graphic. For example, American banks own a lot of French debt, and French banks own a lot of Italian debt. If Italy defaults, French banks are in trouble. If those French banks then default, American banks are likewise compromised. With these banks insolvent (or at the very least illiquid), it becomes harder for American companies and consumers to borrow.

The contagion can also spread rapidly because once one country falls, investors get antsy about the fate of their investments in similarly indebted countries. So investors start selling off those assets en masse too, creating a self-fulfilling prophecy and causing those countries to implode. And so the domino effect continues.

Even just worrying about these types of scenarios can seriously damage financial markets, because people stop lending if they suspect someone major somewhere won’t be able to pay the debt back. Already banks are tightening their lending standards for borrowers who have significant exposure to Europe, according to the Federal Reserve’s latest Senior Loan Officer Opinion Survey on Bank Lending Practices.

Part of the reason the global Great Recession began (and was so devastating) was that healthy credit markets are crucial to the functioning of any economy. If there is a broad tightening of credit, economic activity seizes up as well. Read more at economix.blogs.nytimes.com

 

See this Amp at http://amplify.com/u/a1icq8

USD Money Supply is Underreported, Hyperinflation Underway #1 Reason to #EndTheFed #ronpaul #OccupyCongress

if this doesnt get the conversation going in Congress, we should occupy the halls until everyone is listening. We will end up like the Weimar Republic and Nazi Germany with hyperinflation if we do not stop the Federal Reserve monopoly from depressing the USD and inflating the cost of living and destroying the middle class.

Amplify’d from www.zerohedge.com

Guest Post: U.S. Dollar Money Supply Is Underreported

Copper Crude Crude Oil Federal Reserve Federal Reserve Bank Guest Post Hyperinflation John Exter Lehman Lehman Brothers M1 M2 M3 Money Supply None

Submitted by James Turk, of FGMR.com

US Dollar Money Supply Is Underreported

March 1, 2010 – As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways.  Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of viewing things.  One area that has been impacted is the US dollar money supply.

The quantity of dollars in circulation is being underreported by relying upon the traditional and now outdated definitions used to calculate M1 and M2.  These ‘Ms’ are calculated and reported by the Federal Reserve based on the following guidelines that identify the several different forms of dollar currency used in commerce:

M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float.

M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (less than $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments of less than $50,000), net of retirement accounts.

These esoteric definitions can be confusing, so let’s bring US dollar currency back to basics as the first step to explaining why these definitions are no longer adequate.

There are two types of dollar currency comprising the money supply – cash currency and deposit currency.  Both are used in commerce to make payments.

1) Cash Currency

The cash currency we carry around in our pockets is issued by the Federal Reserve.  Take a look at one of those green pieces of paper, and you will see that they are labeled as a “Federal Reserve Note”.  A note is a debt obligation, and a few decades ago one could take that note to a Federal Reserve Bank and ask them to make good on their debt by redeeming it for silver, or until 1933, gold.

These liabilities of the Federal Reserve are no longer redeemable into anything, and are therefore “I owe you nothing” currency, a phrase made famous by legendary advocate of sound money, John Exter.  Nevertheless, Federal Reserve notes remain a liability of the Federal Reserve.

2) Deposit Currency

Deposit currency is comprised – as its name implies – of dollars on deposit in the banking system.  These dollars circulate as currency when payments in commerce are made with checks, wire transfers, plastic cards and the like.  In contrast to cash currency which circulates from hand-to-hand, deposit currency circulates from bank account to bank account.

Bank deposits take three standard forms – checking accounts, savings accounts and time deposits.  They have different maturities, or tenor, to use a banking term.

Dollars in checking accounts are considered to be the most liquid because they are available on demand.  Therefore, they are part of M1 because they are the most likely deposit currency to be used to make a payment in commerce.  Dollars in savings accounts are less likely to be used to make a payment, but nonetheless are currency because they are spendable.  So they are part of M2, which comprises those dollars less frequently used as currency.

The dollars in time deposits are used even less, but are currency and therefore available for use in commerce when they mature, or immediately if the tenor of the deposit is broken.  They are – depending on the size of the deposit – included in M2 or M3, which is no longer disclosed by the Federal Reserve.   Creating Currency

Having provided this background information, we can now get to the heart of the matter by looking at how currency is created ‘out of thin air’ by the Federal Reserve and banks and the impact of their actions on the monetary balance sheet of the US dollar.

Cash currency of course is simply printed, but every note issued is recorded on the Federal Reserve’s balance sheet.  Basically, the Fed ‘monetizes’ an asset by turning it into currency.

If, for example, a bank sells a $1 million T-bill to the Fed, the Fed ‘pays’ for it with $1 million of newly printed cash currency.  The Fed records the T-bill as an asset and the cash currency it issued as its liability.  These Federal Reserve Notes are the “currency” component in the definition of M1 above.

The creation of deposit currency is similar.  When a bank makes a loan or purchases a security, it records the loan or security as its asset and creates deposit currency as its liability.  Simple bookkeeping entries increase the bank’s assets and liabilities by the same amount.

New deposit currency is created because the bank deposits the amount of the loan in the borrower’s checking account, or similarly, credits the account of the seller of the security it is purchasing.  These dollars are now available on ‘demand’ of the borrower or the seller of the security.

Regardless whether deposit currency is created by the banking system or the Federal Reserve, the net effect is the same – the quantity of dollars increases.   The total amount of deposit currency in checking accounts is the “demand and other checkable deposits” component in the definition of M1 above.

Measuring the Quantity of Dollars

As of January 31st, the quantity of cash currency in circulation (i.e., not in bank vaults) was $860 billion.  This amount comprises 51.3% of M1, which equaled $1,676 billion on that date.  As of January 31st, the quantity of demand and checkable deposits in circulation was $810 billion.  This amount comprises 48.3% of M1.

For historical reasons unimportant to the point of this analysis, the Federal Reserve in the past has only created cash currency.  However, the unprecedented changes it has engineered over the past two years have resulted in a vast amount of deposit currency being created by the Fed.  Instead of purchasing paper from the banking system solely with cash currency – its traditional form of payment to ‘monetize’ assets by turning them into currency – the Federal Reserve since the start of the financial crisis has increasingly relied upon deposit currency to purchase paper.

Regardless how the Federal Reserve pays for the paper it purchases – cash currency or deposit currency – it is creating dollar currency and perforce expanding the money supply.  But the traditional definition of M1 does not accurately capture this process when the Fed uses deposit currency to pay for its purchase.  In fact, it is totally excluded.  Because the Federal Reserve did not create deposit currency in the past, none of the Ms take it into account.

Consequently, the traditional definitions of the Ms are outdated because they do not capture the total quantity of dollars in circulation.  Because M1 is underreported, so too is M2.

Unprecedented Deposit Currency Creation by the Fed

There has been an unprecedented amount of deposit currency created by the Fed over the past two years.  The following chart illustrates this point.  It shows the quantity of demand and checkable deposits, i.e., the amount of deposit currency, at the Federal Reserve since December 2002.

From December 2002 until the collapse of Lehman Brothers in September 2008, the quantity of deposit currency created by the Fed averaged $11.8 billion, an amount that is relatively insignificant compared to total M1.  Presently, it stands at a record high of $1,246.2 billion, which of course is highly significant.

More to the point, none of this deposit currency is captured in the traditional definition of the Ms.  The quantity of dollar currency is therefore significantly underreported, which is illustrated by the following chart.

The Federal Reserve reports M1 to be $1,716 billion as of February 15th.  When deposit currency created by the Federal Reserve is added to the traditional definition of M1, M1 after adjustment is actually 170% higher at $2,918 billion.  Its annual growth increases to 29.5%, nearly 3-times the rate reported by the Fed and more importantly, is an annual rate of growth in the quantity of dollar currency that is approaching hyperinflationary levels.

This restatement of M1 explains why crude oil is back at $80 per barrel; copper is $3.25 per pound; and commodity prices in the main are rising in the face of weak economic conditions.  The US dollar is being inflated and worryingly, the rate of new currency creation is approaching hyperinflationary levels.  Unless the Federal Reserve changes course, the US is headed for a deposit currency hyperinflation like those that plagued much of Latin America in the 1980s and 1990s. Read more at www.zerohedge.com

 

See this Amp at http://amplify.com/u/a1hqv5

As Economic Wars Continue, Greece Turns to Iran for Oil #peakoil #currencywars #energywars #peakdebt

Greece's creditors are pulling financing for everything including oil, but energy is the DNA of capitalism and that means the Greek economy can NEVER payback the bailout money and MUST default. The rug is being pulled out from under them... USA stirs up angst over Iran and Greece goes to them for oil...meanwhile there are shortages of fuel all around the globe.. this is peakoil and economic war

Amplify’d from arabnews.com

Greece turns to Iranian oil as default fears deter trade

Outgoing Prime Minister George Papandreou waves to the media as he leaves the presidential palace in Athens. (Reuters)

By REUTERS

Published: Nov 11, 2011 23:35 Updated: Nov 11, 2011 23:43

LONDON: Greece is relying on Iran for most of its oil as traders pull the plug on supplies and banks refuse to provide financing for fear that Athens will default on its debt.

Traders said Greece has turned to Iran as the supplier of last resort despite rising pressure from Washington and Brussels to stifle trade as part of a campaign against Tehran’s nuclear program.

The near paralysis of oil dealings with Greece, which has four refineries, shows how trade in Europe could stall due to a breakdown in trust caused by the euro zone debt crisis, which is threatening to spread to further countries.

“Companies like us cannot deal with them. There is too much risk. Maybe independent traders are more geared up for that,” said a trader with a major international oil company.

“Our finance department just refuses to deal with them. Not that they didn’t pay. It is just a precaution,” said a trader with a major trading house.

“We couldn’t find any bank willing to finance us. No bank wants to finance a deal for them. We missed some good opportunities there,” said a third trader.

More than two dozen European traders contacted by Reuters at oil majors and trading houses said the lack of bank financing has forced Greece to stop purchasing crude from Russia, Azerbaijan and Kazakhstan in recent months.

Greece, with no domestic production, relies on oil imports and in 2010 imported 46 percent of its crude from Russia and 16 percent from Iran. Saudi Arabia and Kazakhstan provided 10 percent each, Libya 9 percent and Iraq 7 percent, according to data from the European Union.

“They are really making no secret when you speak to them and say they are surviving on Iranian stuff because others will simply not sell to them in the current environment,” one trader in the Mediterranean said.

Leading Greek refiner Hellenic Petroleum denied having any difficulty in buying crude and declined to comment on the exact breakdown of oil supplies. Greece’s second biggest refiner Motor Oil Hellas declined to comment.

Greece’s four refineries, belonging to Hellenic and Motor Oil, together can process around 400,000 barrels per day. That figure has fallen to around 330,000 bpd in recent months due to maintenances and upgrades.

“Our crude slate is broadly unchanged over the last few months and we are always viewing to optimise our refining operations,” a Hellenic spokesman said.

“Our supply agreements are based on purely commercial considerations, no other factors interfering,” he said.

Shipping data obtained by Reuters showed four cargoes taking crude from the Middle East outlet of Sidi Kerir on the Egyptian Mediterranean to Greece in September. Three sailed in October. Traders said all carried Iranian Heavy crude and more was coming in November.

“Iran is the only one who might be working on an “open credit” basis right now, given its own difficulty in selling crude,” one trader said.

Imports of Iranian oil to the United States are subject to sanctions but are still fully legal to Europe and Asia. The European Union said this week it may consider oil sanctions against Iran within weeks, after a UN agency said Tehran had worked to design nuclear bombs.

Iran denies trying to build atom bombs and an Iranian official, who declined to be named, said Tehran has no difficulty in selling its oil.

However, shipping sources said that interest in Iranian crude, which is cheaper than competing Russian grades but politically sensitive, has prompted the country to continue storing crude in the Red Sea, to make it available for swift delivery.

The rest of the oil industry drastically cut crude storage last year after forward prices for crude moved to a discount to prompt, making such operation loss-making.

Iran is storing crude in four very large crude carriers (VLCCs) in the Red Sea. Read more at arabnews.com

 

See this Amp at http://amplify.com/u/a1hqla