Why Donald Trump Is Right About the Economy

Oops, he's done it again... Trump is saying that we're heading for a very big, very bad recession and... he's right.

There are two schools of economic thought. Most common is Keynesian economics which have gotten us into the economic pickle we're in. Alan Greenspan, Ben Bernanke, Janet Yellen - all the Federal Reserve and Treasury wonks subscribe to Keynesian theory because, for governments, it's easy. Just print your way to prosperity. Never mind that by printing more and more bills you're diluting the value of the currency.

You and I, however, don't have the luxury of having a printing press to try printing our way out of debt. We live in the real world and it's the real world economy Trump is talking about when he says things are iffy. He is absolutely 100% right - about the stock market, the currencies and the rest of it.

In the real world you and I can't just print more money to pay off our debt. We have to keep our balance sheet in balance - assets and liabilities - and have a means of paying off the debt we acquire.

In the Keynesian world, you don't. That is the fundamental break-point and it's important for understanding the bigger picture.

For years the United States has been able to sell our treasury bills. Those are pledges that in exchange for a loan we will repay the money at a future date, plus interest. We were good with that because we were seen as a strong economy, solid as a rock with the full faith and credit.

Then things went south in the mid-2000s. The recession came along and everyone got nervous. China and the OPEC countries started grumbling. They don't like their currencies pegged to our dollar in the foreign exchange (FOREX where currencies are traded) world. Their currencies suffered by comparison because anyone who wanted to buy a 'strong' currency would invest in the dollar.

They started manipulating their currencies. The Yuan in particular. And they talked about changing the FOREX 'rules' so that OPEC would no longer sell its oil based on the value of the US dollar but on the Yuan or the Ruble.

So, without getting too far into the weeds, we are a Keynesian economy on which other economies are based through their various currencies. If we go under we will take many of the other world economies with us. The EU and the British pound will probably be badly hurt, but they are strong enough to survive. It's the other nations, to whom the US has sold treasury bills by the trillions, that will get 'killed'. If we go under, they will be holding stacks and stacks and stacks of worthless paper.

That is the risk here - that is why Trump is saying we are on the verge of a collapse.

At this point the United States is in general debt to the tune of about twenty trillion dollars.

Our REAL debt, though, including those entitlements you hear talk about, is closer to seventy trillion dollars. That is unsustainable - even under Keynesian theory because even under Keynesian economics, that is outstanding debt and if it's called... guess what happens to the almighty dollar?

We can't repay it. There's no way in a million years (literally) we can repay it. We would default and if we default on that debt, the entire world will follow. We will have zero credit and zero credibility. No one will want our money. No one will want to buy our debt - which is reflected in those treasury bills.

This morning, when I turned on the news, the talking heads were talking about their 'confusion' over Trump's statement. The 'economists are scratching their heads' was one line.

When most people hear the label 'economist' they think 'uber-smart know-it-all' regarding all things financial. What they lose sight of is the fact that before they are economists, those people are just people. They're not smarter than you or I. It's just that they just went to school and studied economics. Then they got a piece of parchment that says 'Economics'. They aren't necessarily smarter than the average bear. They just like numbers and their inter-relationships.

I like numbers, too. I like reading about money and currencies and politics and how they're all interrelated. So I pay attention to money and the markets - including gold and silver and the Baltic Dry Index (BDI).

That last is an important 'little' thing. It's an indicator of international shipping which means trade.

When China or South Korea needs to make a widget, they have to buy raw materials or parts from other places - no one country can produce all the elements that go into their widgets, so they import them. Containers are loaded up with boxes and bales and bags of widget parts. Those containers are loaded onto a ship and moved from here to there.

Once the widget is made - be it a laptop, a computer, a television or a toy, the finished good is loaded into another container and loaded onto another ship and shipped to wherever there are consumers willing and able to buy those finished goods.

This shipping is what the BDI tracks. If the BDI is high, there's a lot of movement - economies are trading money for goods and materials. If the BDI is low, that indicates a lot of those very expensive ships are sitting idle. Trade is not happening, no one is buying raw materials or shipping finished goods - and that's a sign of a weak world economy.

In the past couple of months, the BDI hit all time lows - and stayed there for weeks. Ships were sitting empty and idle in ports around the world. Even the Panama Canal has been affected - recently offering a 30% discount for ships passing through the canal.

Ship & Bunker, the trade magazine, has a recent article that advises against excitement over the recent surge in the utilization of hulls - 30% of ships are still sitting idle. Even though 70% of ships are in use, that 30% is still putting a heavy strain on shipping companies and their lenders - those ships still have debt on them and that debt has to be repaid.

http://shipandbunker.com/news/world/441019-dont-be-fooled-by-april-1-surge-in-baltic-dry-index-analyst-warns

That's one economic indicator. If goods aren't being bought and sold, money isn't being exchanged and that is not good for the world economy.

Closer to home, these economists are pointing at the "good" unemployment rate - the recent increase in jobs, even though the unemployment rate ticked up to 5% last week and will likely be adjusted higher in a week or ten days. That 5% is a completely pulled from thin air number, though. It's happy talk for the folks and here's why I say that.

This is a screenshot that I took from usdebtclock.org this morning:

http://usdebtclock.org/

Let's look a little closer at this, shall we?

In 2000 the median income - the average annual earnings per household across America - was $28,302. Today, April 4, 2016, the median income is $30,171 - just a little more than $14 per hour but they buying power of that $14 is much less than it was in 2000. Think back - in 2000 you could probably buy a nice lunch in most cities in America and have money left over from $10. Now I'd challenge you to find a nice lunch for less than $15 - that's inflation.

Based on the rate of inflation - generally considered to be an average of about 3% per year - median income should be $22.59 per hour now. But it's not. That screenshot is from just this morning and it's reflective of reality. So wages aren't exactly robust.

There is also the comparison between the "Official Unemployed" of 7,959,124 and the "Real Unemployed" of 15,592,681 - almost twice as many people are unemployed as the government says. Which puts the real unemployment rate closer to 10% than to the official number of 5%.
Don't take my word for this - just Google 'real unemployment rate'. Warning: look past the government sites - they have a vested interest in selling you snake oil, so look at CNBC, Bloomberg or one of the other financial sites. They're still to be taken with a grain of salt because they have a vested interest in painting a rosier picture than reality, but they're a bit more trustworthy.

In that screenshot are a few more esoteric indicators.

The number of uninsured - which indicates that there are more than forty million people who cannot afford the insurance premiums that they are required to pay under Obamacare. They're working but are caught between the rock and a hard place of their earnings and the cost of the insurance premiums. They earn too much to qualify for the government subsidy, but too little to be able to afford the premiums. People like me.

Consider your own situation because you're little different than your neighbors or friends. If you are doing better now than you were ten years ago, good for you - I'm thrilled. I'm willing to wager that you're not, though. How's your personal economy doing? How are your wages compared to ten years ago? Are you earning more now than you were ten years ago?

Those are the economic indicators that really matter. The stock market is manipulated - it's run by the investment houses and banks but it's controlled by the Federal Reserve (Central Bank that runs all of the world economies when you get down to brass tacks) and the US Treasury department. They have a little thing instituted during the early days of the 2007 / 2008 Recession.

Remember Quantitative Easing - QE and QE 1 and QE 2, etc? Well, that's part of it - it's called Permanent Open Market Operations (POMO).

To prevent the stock market from having wild swings as the markets change and people get confident or scared - pull their money or invest it - that POMO was put in place.

When the market drops significantly - more than a hundred points or so - the Treasury steps in. They infuse 'money' in the form of code (1's and 0's) to stabilize it. If it soars, they'll let it go because it looks good to the folks.

The real value of the DOW Jones, if it wasn't manipulated as it's been over the past ten years or so, would probably be in the range of 10,000 to 12,000 points. There is nothing supporting what you see when you look at the markets - there is no real intrinsic value and nothing in the fundamental net worth of those companies to support the current 17,500 level in the market.

Don't believe me? Well, first look up POMO. It's there in Google. Read about it (although I warn you: it's dry as dust and you'll probably want to throttle me for suggesting the read). Then do some research. Talk to a financial adviser  you trust - one who's not selling you something because if he's your broker or if he's selling you something, he's got a vested interest in lying to you about it. After all, if you think that the DOW will head toward 30,000 wouldn't you buy?

So Donald isn't wrong. He might be premature, but he is not wrong because there is nothing supporting this economy. We're a lot like Wiley E. Coyote in the Bugs Bunny cartoons. As long as we don't look down, look for the underpinning that's holding us up, we're fine. Once we realize that we're treading on thin air... look out!

Do some reading and research. Talk to people knowledgeable about this stuff. Listen carefully to the talking heads who discuss stuff like this. The contradictions between what they say - the excuses they use - are so commonplace you'll soon realize the truth.

Best~
Philippa

Follow me on Twitter: https://twitter.com/PhilippaStories

How Can That Be, Phil?!?

Yesterday, Friday, I started this off three different times, all on the theme of How I Can Be In Love With My Life Despite Some Big Hurdles, but it was too depressing. None of the three attempts gained traction. Instead, they slipped backward, into the bog and I don't want to be in the bog. It's too... boggy. And it's depressing, so I stopped, deciding to wait until today.

Trust me, though, I am in love with my life despite those hurdles.

Some of you know some of it. Others know much of it. One or two know pretty much most of it but no one but me knows all of it. And that's okay. It's how it should be - a private corner in my life just as everyone else has.

Then I thought about "cheating" and dropping in one of the flash pieces I've written, but that didn't seem right, so I started this on Friday and I'll finish it on Saturday. Instead of my occasional two-fer-one, it'll be a one-fer-two, and that's okay, too. It'll save us both a little time.

Now it's Saturday. In the afternoon, a bit after twelve o'clock. This wasn't a morning to love, either.

I was out the door at eight-thirty. It was raining. I had to go buy gas and, because my car is old, sometimes it doesn't like being 'fed'. Sometimes, if I let it get just a little too low, I'll fill it up, start it up, move three or four feet and it will stall.

I suspect that it's either because of a dirty fuel filter (which I haven't the money to spend replacing) or because there's an air-gap in the line. No matter. Then I have to put the car in neutral (it's an automatic transmission with power steering), get out, and push. And it's a big car, a full-size station wagon, so it's heavy. And then I get to try to steer it while pushing without power steering. It's hard. But I push it out of the way so I'm not blocking other people and then I wait. After a minute or two, if I try again, it will restart and actually run and I can drive it.

Joy of joys! It didn't stall! I was able to get it to run and drive it away.

Then I went and got the oil and power steering fluid changed.

Then I went to PetSmart and bought cat food for the next few weeks.

Then - best of all! I got to go clothes shopping.

Honest to God, I would rather have dental work without Novocain than go clothes shopping. I would rather have my eyes put out. Anything rather than shop for clothes.

After two stores and about eight trips back and forth between the racks and the dressing room I finally settled... on the first pairs of pants I tried on. An hour of my life spent in futility. I'd suck as a hunter because, for me, there is no thrill of the chase. There is no excitement of catching my prey. If it wouldn't bring tears to the eyes of adults and scare the children, I would prefer to go around stark naked or in my jammies. But, I found what I was looking for and paid for it - a shocking amount.

Then, I got to come back to the hometown and go back to Costco so I could buy the refrigerated and frozen stuff I needed. Then I got to stop at the other grocery store for the yogurt and head of garlic.

Three hours after leaving I got home and walked into... an argument. The same argument I knew I was going to get because it's the same argument I always get: "why'd you spend so much?"

This is one of the hurdles in the bog that's so depressing. Mostly I overlook and avoid this hurdle. Over the years, I've learned well how to avoid it but, unfortunately, I sometimes can't miss. On days like today, everything was wrong with what I did.

We talked about the oil and power steering fluid change before I left. It was still ammunition for this afternoon. "Why'd it cost so much?" To which I could respond, "How the hell do I know? It's what they charge!" or "I don't set the pricing, sorry." Neither of which would help, so I shrug and keep my mouth shut.

We talked about the pants that I needed two nights ago. On this, I don't know whether to laugh or smile or blush, but when I took one of the pairs of pants I wear to work out of the dryer the other night, I was horrified to see that the seat was gone. It was two holes, one on either side of the mid-seam.

Now I'm going to sit here and convince myself that those two holes were where my lower sittin' bones wore through and when I was standing and walking around work those two holes were not visible. Please don't tell me otherwise or I might just die of embarrassment. But they were one very well worn pair of pants.

So, I showed those Holy Sunday Britches to hubby and said, "I have to buy some clothes." He fussed and whined and complained but couldn't very well say, "No" given the evidence.

Today I bought two pair of pants. And I heard about that, too. Even though these are pants that are going to make the other pants I have last longer through not being worn constantly, and even though these are pants I will wear to work, and even though I now have five pairs of pants for work instead of four, he complained.

And I bought food for my lunches, and he complained.

I bought food for my breakfasts and, you got it, he complained.

So I got to go out and do all those things, then do something I hate, and then I got to come home and listen to an hour of whining.

BUT! Out of the fifteen waking hours today, I spent about one in the misery of shopping and about one in the misery of listening to hubby. Tomorrow I won't have to do those things, and tomorrow I don't have to go out and shop. Tomorrow, if I play it right, I can be up, downstairs, cooking and out of the kitchen before he even gets up, then I won't have to listen to him complain about my being in the way.

This is usual. This is my life and, despite this, I do love it because aside from the gnat buzzing in my ear there is so much else to enjoy and take pleasure in. Even sitting alone in my car while others change my oil and I don't have the gnat. Walking through Costco, picking and choosing things that I will make into something I will like without the gnat is pleasurable. It is the choice I make, to ignore the gnat, the bad and the ugly, and look for the quiet times, like now and like the driving around time this morning, alone, listening to the radio with no one complaining.

My future, when the gnat is gone for good and all, is something to which I look forward, and I will get there and then my life will be just about perfect. In the meantime it is those small moments, those little things and short times alone that allow me to say: Yes, I really do love my life.

I hope you love yours, too.

Best~
Philippa

Follow me on Twitter: https://twitter.com/PhilippaStories

Drama Queen and the Dragon in the Room

No doubt most people who have read this blog in the past few days think I’m a blithering idiot and I’ll admit, maybe I am. Then again, maybe I’m not.

I am not a market investor. I do not trust brokerage houses, or Wall Street, or anything to do with stocks, bonds, commodities or equities of any kind. If I cannot hold ‘it’, whatever ‘it’ is, in my hot little hand, I want no part of it.

My husband, back in 1989, quit his job to become a day trader. He began playing the market – longs and shorts, puts and calls – and we made some money. In the process, he became fascinated by the operation of the various markets: stocks, bonds, commodities. His enthusiasm spilled over onto me, willing or not. It has, for the past twenty-five years, been the primary topic of conversation in our house.

We talk at length about market manipulation and algorithms and all sorts of other shady things. Watching the markets as we do we were not surprised to hear about ‘front running’ markets. That is a trick where fund managers intercept electronic transactions and trade ahead of them via algorithm. That way they are guaranteed to have the price of their ‘whatever’ go up. Their order hits, they buy and golly gee whiz be damned, a second later another order shows up and boosts the price. Then the first guys have a choice: buy, hold or sell?

They can buy more or hold what they have if they think another order is going to come through. Otherwise they can sell and take the profit off their trade, then do it again the next time and again and again and make a whole load of money.

‘Flash Boys’ is a book on the subject that was released a while back. When it was talked about all over the financial news stations, no eyebrows in our house were raised. It was a shrug and a ‘yeah, so?’ Since then a number of other books on the subject have been released.

Naturally, a bunch of people “inside” rushed forward and tossed the BS flag. But if the guy who wrote the book, Michael Lewis, was on the inside, saw it happening and didn’t like it because he actually has a moral compass so outted what’s well known within the industry, isn’t it just possible that the naysayers are just covering their hinies?

Whatever.

The point is that I am not a complete nincompoop when it comes to markets and trading and understanding the lingo. I’m not an expert, either. I’m a person who knows more than the average person because I’ve been talking the talk for a quarter of a century. I pay attention and I graze, looking through a variety of sources and putting the pieces of the puzzle together until it makes sense and fits the overall scheme under discussion by all parties.

So, back to the economies and the news.

Up until today, what Greece is going through, the speculation, referendum and talk about a ‘Grexit’ has been overshadowing, to some extent, what’s been happening in China. With all eyes focused on the drama queen in the Med nothing was left to spare to the dragon in the room. Now, though, that focus is changing – rapidly.

Starting last night, during the early morning in China and Bloomberg’s looking up from Greece for a moment, there was an ‘oh shit’ moment. They started talking, actively and with some energy, about China and the Chinese markets.

In China over the past few years, stocks have flown high on speculative trading. Now, as usually happens, the parabolic curve has tipped over and the market is in free-fall. The government has stepped in, throwing money at the conflagration to no effect.

Since June 12 – in less than four weeks – the Shanghai Composite has lost 32% of its value. Almost $33 or €33 or whatever currency marker you want to use out of every one-hundred is gone. Vaporized because it was paper and there was nothing supporting its value.

More than one-half of all of the companies listed on the exchange have decided to pull their stocks – they will no longer offer shares for sale. That is as of this week.

The People’s Bank of China is stepping up, offering money – but it is government money. The government will print, the people will be taxed, and nothing will fundamentally change. According to Bespoke Investment Group, China’s stock markets have lost a whopping $3,250,000,000,000 ($3.25 trillion).

In China, regulators are now allowing people to put up their homes – the houses in which they live – as collateral against margin trades! I kid you not, the report about that is here, in this article (fourth bullet point near the bottom of the first page):

http://www.marketwatch.com/story/chinas-stock-market-crash-is-just-beginning-2015-07-08

I graze broadly when I’m interested in something. Forbes, CNN, CNBC, The Economist, Financial Times, New York Times, whatever. In my graze last night, reading and skimming, I saw several interesting, and alarming, points.

First, several articles and Op Ed pieces commented on the similarities between what’s happening in the world economies now and what happened in the run-up to the 1929 crash on Wall Street. Just because Wall Street has moved to the Far East doesn’t change the effects a major market crash would have on everyone and everything else.

Hong Kong, India and a number of other markets, including currencies, are already feeling the pinch, and it’s only going to get worse. As one starts to rattle, it’s going to shake the next, all the way around the world, through all of the markets. It’s just as is happening in Europe on a much smaller scale since Greece’s referendum. Only China is the elephant and Greece is the gnat.

This is the biggest problem with having things so inter-related. It’s like being a conjoined twin. If the system of one fails, the system of the second will follow suit and there’s no getting around or saving it. Same thing here. We are too tightly conjoined to be able to stand alone, on our own.

What happens in China is not going to stay in China. At 11:11 this morning local time, the Dow Jones Industrial Average was off slightly more than 180 points. This afternoon, ten minutes before the NYSE closes for the day, it’s down 231 points. It was down yesterday and I’m pretty sure it’s going to be down again tomorrow. Looking at the one month chart, it’s off about 700 points, so it’s much less than 1% of the overall market value. However, is this the start of a major bear market?

If we are a conjoined twin with China and the EU, how far down will we go?

How is the China effect going to impact business and production here, in the US? If we cannot buy cheap goods from China, our prices will go up, what effect will that have on the cost of living?

Lots of questions – far more than I have room to ask here.

Another issue is the commodities markets and, no, I’m not talking about pork bellies. It’s the metals that are interesting.

China has vast gold holdings – bullion, the hard stuff, not the paper ETFs that aren’t worth the ink with which they’re printed.

(Aside: take a tree, a single tree and make it into sawdust – that is what the gold ETFs do to gold bullion. The tree had value, until it was ground into sawdust. Then it has no value, just like the gold ETF you probably hold in your retirement account. It’s a paper IOU, a promise that cannot be redeemed even if you wanted to. Try – take your shares of paper gold and try to redeem one ounce worth. You will be laughed at and told ‘sorry, you can’t do that’ or ‘sorry, it’ll be six months before we can deliver it to you’.)

So, will China dump gold into the world market in order to cover their economic implosion? If they do, that will be a temporary punch in the gut to the price of gold. All gold prices – bars, rounds, ETFs, stocks of gold producers – everything will drop like a rock. But when the paper money reaches its intrinsic value (zero), gold will revert to its historic relevance and become ‘money’ again. Then the value of it will soar because physical gold is in limited supply. Paper gold – those ETF shares so many hold – will have value only as toilet paper.

Time will tell and guessing is simple exercise to no real purpose. So, I’ll sit here on the sidelines and watch the action unfold.

Good luck to you in this mess!

Best~

Philippa

Follow me on Twitter: https://twitter.com/philippastories

Roosting Chickens

Sunday, July 5, 2015. The Day of Reckoning for Greece and the EU. The day their chickens come home to roost.

There’s been a lot of talk about it, back and forth over which way the chips will fall. In the end, it’s not going to make a hill of beans worth of difference, I’m afraid. We'll find out what's been decided in a matter of a few hours, and then the drama will really begin.

If the Greeks vote ‘yes’ to stay with the EU and reject their government’s demand for a ‘no’ vote, it’s going to be a hard row to hoe. By voting yes, they will be declaring that they are willing to accept more austerity. That will grant the EU a win and allow the ECB and other members of the Eurozone to dictate terms to the Greek citizens. The Greek people will become, in real terms, serfs or slaves (take your pick) to the rest of the EU.

If they vote ‘no’, it is a rejection of the EU and they will then have to try and find their own way through the stinking quaking bog they’ve created.

No matter how it goes, the Greek people are screwed, and the credibility of Greece as a ‘going concern’ is non-existent.

Do you remember Cyprus and the ‘bail-ins’ of depositor’s bank accounts? Greece is preparing to do the same thing, now. This is part of an article from the Financial Times that was posted yesterday, July 4th:

“The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

“A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000.”

http://www.ft.com/cms/s/0/9963b74c-219c-11e5-aa5a-398b2169cf79.html#axzz3exL7UfAg
 

Because the banks have been closed for the past week, and because depositors in those banks have been restricted to limited withdrawals, the liquidity of the banks is known. There haven’t been the daily fluctuations that are typical, so they’ve had time to audit what they have, in-house, and decide how much to take – to steal from the accounts of the bank’s depositors.

In Cyprus, the bail-in affected depositors with more than €100,000. In Greece, it’s a ‘measly’ €8,000. The plan, based on the article quoted from the Financial Times, above, is that if you have €8,000 or more in your account, the Greek government will take, through the banking system, at least 30% of your worth.

This is money that the people of Greece earned and saved. It is not the bank’s money, nor is it the government’s. It was deposited in trust to a ‘trust’ institution – a bank. Now that trust isn’t worth a Tinker’s dam.

After the Cyprus bail-in idea was first floated, the G20 nations started talking about it as a broad-approach to preserve the international banking system if needed. They instituted it, made it international banking law, at last year’s G20 summit in Brisbane, Australia.

It doesn’t affect just little countries, or Eurozone countries. It affects everyone – all of the people in the world, including Americans – the U.S. Constitution and private property ‘rights’ be damned.

There is a ‘white’ paper written by an attorney from the Federal Reserve Bank of New York. It’s available in PDF form on the internet. It’s called ‘Why Bail-In? And How!’ It’s dry as dust but what’s telling is it talks about ‘creditors’ but not ‘depositors’. It goes on for twenty-two pages, justifying and explaining, talking about how the ‘megabanks’ must be protected at all costs – including the cost of you and me and the other ‘folks’ who work and put our money in their banks.

We don’t count. Our deposits are the foundation of the banks – if we and the companies for whom we all work didn’t trust our money to them, they would suffer, badly. We provide the liquidity they need to keep going, but our importance to them is the equivalent of a pimple on a gnat’s butt.

If you’re an American depositor and if you can’t believe such a communist tool has been put in place, check the fine print on your bank website. It’s boring as hell (that’s what they’re counting on) but in that fine print is a clause that says that they can, if the need is perceived, seize your money. It’s called a ‘bail-in’.

Take a look at this from the Huffington Post in January, 2015:

“Russell Napier, writing in ZeroHedge, called it "the day money died." In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a "haircut," says Napier, deposits are now "just part of commercial banks' capital structure." That means they can be "bailed in" or confiscated to save the megabanks from derivative bets gone wrong.”

http://www.huffingtonpost.com/ellen-brown/new-g20-bailin-rules-now-_b_6244394.html
 

If you want to know who Russell Napier is, what his creds are, check this:

http://www.eri-c.com/russellnapier

Or this:

http://www.valuewalk.com/2015/04/russell-napier-inflation-deflation-and-mean-reversion-slides/
 

Or check out this – my go-to for financial and monetary information:

http://www.zerohedge.com/
 

This is a site where a lot of really smart, financially savvy people write articles.

So, let’s get back to the EU and Greece and the mess there and how it could and probably will affect the rest of us.

What’s already happened in Cyprus, what is going to happen in Greece, could well happen here, in the US or in the UK or any other of the G20 members.

In all cases, the countries have issued bonds. Those bonds are worthless because there are too many of them to ever be paid back. At this stage, they have all the value of the ‘money’ in your Monopoly set on the back shelf of your cabinet or closet or wherever you happen to keep yours.

When the day of reckoning comes for the next country, and the next and the next, the banks will do what they’ve already done in Cyprus and what they’re about to do in Greece. They will steal their depositor's money in order to shore up a failing institution.

It's like stealing a kidney from you to save their kid's life. Doesn't matter if you agree, it's theirs and, by God, they're going to take it! Eventually, it will happen in your hometown, too.

At that point your money, the money that you work for, earn and try to save, is not yours if it’s in a bank someplace. If ‘they’ (those guys in the basement from Gary Larson) decide they need it more than you do, they can and they will take it. And there is not one single blessed thing you can do about it.

This is one reason why there is discussion to do away with money, as we know it, completely. A true cashless society would tie us even more closely to the banks, making us more dependent than we already are, and put us even more in their power.

Denmark will be the test case, the canary in the coalmine.

http://www.economywatch.com/news/Denmark-Announces-Plans-to-Start-Doing-Away-With-Cash-Transactions.05-07-15.html
 

“While the plan to move to a cashless economy may raise concerns about consumer access to necessary goods and services, it does appear as though this movement will gain momentum over the next several years. Sweden and several other Nordic countries have already signaled the intention to move to a cashless system, as well, even if doing so requires pushing consumers into this new way of doing things whether they like it or not.”

Think about that. You may be forced into a cashless system – whether you like it or not. Whatever happened to the idea of individual choice or freedom? Gone apparently, at least in the Nordic countries and, eventually, once it takes root and spreads, elsewhere, too.

Yeah, there are benefits. But!

Let’s say you get robbed. Your wallet or purse is stolen. Your identity is gone – along with your means to pay for anything. How will you get home if you’re traveling? What if, worst case scenario, you’re in Greece. You have no wallet, no ID, no passport, no credit cards, no nothing. What are you going to do?

Let’s say – as is happening in Greece right now – the bank closes down. Electronic transactions are stopped. How will you pay for food? How will you pay for transportation or anything else?

Beyond that, every single transaction you make – whether it’s buying a can of beans at the local grocery story or paying for your kid’s dentist bill or buying pot from the local pharmacy – every single transaction you make is tracked. Big Brother knows precisely what you did, where you did it, and what you bought. Do you really want to give up that privacy?

Let’s take it farther. You’ve just been to the doctor. Obamacare just paid for your physical. You’re overweight, you have high blood pressure, you’ve just been prescribed medication. You decide, ‘what the hell, one last time and then I’ll start my diet.’ You drive to McDonald’s, with every intention of it being your last time through the drive-through. You order, you get to the window and… You’re rejected.

‘Why?’

‘I don’t know, but I can’t accept your payment. It’s been blocked.’

Two hours later you hear a ‘ding’ from your computer. It’s a formal official notice that you have been diagnosed as having health problems that you can no longer eat certain foods or at certain places. How would you like that?

It’s not impossible. It isn’t beyond imagination – obviously, since I just imagined it, and I am pretty darned sure there are lots of smart people out there who would just love to have that much control over our lives.

So there is a danger in getting rid of cash – but that’s what the banks would like to do. It’s cheaper for government – no more printing and distribution. They get absolute control over every single last transaction you make – up to the point of denying a transaction if they don’t think it’s a smart one, or healthy or whatever other criteria they set.

Oh! And your safety deposit box, the contents of it? Those are theirs, too. Not yours, theirs and again, once the doors are locked there is damn-all you can do.

Look at Greece. People who might want or need stuff out of ‘their’ safety deposit box in the past week couldn’t get to it. The banks were closed - locked up tight with no admittance allowed.

There's an old saying: possession is nine points of the law (or nine-tenths, depending on who you listen to). It's true. If they have it in their possession, behind locked doors and gates, what are you going to do? Take them to court? Good luck with that.

It sounds crazy – like some whack-job talking but honest to God, keeping your valuables at home, under your mattress, is safer than keeping it in a bank. At least then, if you get robbed, it’s by an honest robber instead of a criminal robber.

One is honest in his stealing. He makes no bones about why he’s there, in your house, taking your stuff. The other promises your money is safe with them while holding one hand behind their back, their fingers crossed while they pat you on the head.

Buy a safe or two or three (good quality – the ones you get at Costco or the local home improvement store are a joke if someone has a circular saw), keep your money at home, where you know where it is and what it’s doing. After all, you’re not getting interest worth having if it’s in the bank. And, once the black market springs up, the one that accepts cash for that McDonald’s Big Mac that you wanted, you’ll be set and ready to go and participate.

Good luck!

Philippa

Follow me at Twitter: https://twitter.com/PhilippaStories

Greece, Rehypothecation and Slavery

Rehypothecation – do you know what that is? It’s a really great big word that means stealing. Slavery is a hot button word that is alive and well in societies around the world.

The stealing part is what’s happening in Greece right now. It’s what happened in Cyprus two years ago. Puerto Rico is on the verge of bankruptcy, unable to meet its obligations on $70bn of debt. Spain has a weak economy and might be next. Will they follow the examples set by members of the European Union?

As an individual, when you put your money – the dough you earned by working and earning a living – into a bank or mutual fund or other ‘paper’ investment, that money is no longer yours. It is theirs. The place into which you put it takes it. It does not go into a little box with your name on it. It gets pooled with everyone else’s, and then it gets loaned out. On one dollar deposited, they can borrow ten.

Now, if that person or entity to which the loan is made defaults, if they don’t pay their debt, there’s usually an asset of some type. A home loan is made against the physical structure. If the borrower defaults, the bank takes the house. It can resell that house and collect at least some of the money it loaned against it.

In the case of a loan to a nation – like Cyprus or Greece – there is no single physical asset that stands as collateral. Because of that, the loans made to countries with weak economies are bad investments.

Because the European Union, European Central Bank (ECB) and International Monetary Fund (IMF) made loans to economies that were teetering on the edge of default and bankruptcy, the lenders – the other members of the European Union – are in a fix right now. There is nothing they can sell to get back their money – your money, since you’re the one who put the money into the bank in the first place.

Greece, with 26% unemployment and 30% of its citizens retired has more people unemployed or retired than working. More of their working citizens work for the government than for private business. Their debt to GDP ratio is astronomical – they are spending far more than they are earning. It’s like you, earning minimum wage and spending like George Soros.

As a result of its profligate spending (17.5% of GDP) on social benefits – pensions and such - it is in no position to repay the billions of Euros loaned to them in the past few years.

This leaves the ECB, IMF and the Greek government with limited choices.

They can do a public bail-in, like Cyprus did in 2013-2014. That was a very popular move. Take the money from depositors – steal it – so you can shore up a failing institution. Now, out of the kindness of their good little hearts, the bankers didn’t steal the money of the mom and pop depositors. They focused on the big kids – depositors with more than 100,000 Euros – with ample warning beforehand so those big depositors had time to shift the bulk of their wealth off-shore.

Right now, this week, Greece is quietly doing this – without the forewarning Cyprus offered. After all, the wealthy investors from Russia and other European countries probably didn’t make the same mistake twice. Instead of depositing in ‘iffy’ places like the Med, they’ve probably already shifted their deposits to more stable places – like Switzerland, the Bahamas and the Cayman Islands.

In the meantime, hurting those mom and pop depositors the most, banks in Greece are closed this week. The Greek stock market is closed, at least through Tuesday. Depositors who have their savings in the bank, if they wait long enough through the queue and if the reserve isn’t drained by the time they get to the front of the line, may (with the government’s permission), withdraw a whopping 60 EU per day - the equivalent of $66. No checks will be honored. In other words, the money that people have in their bank accounts is no longer theirs. It belongs to the bank and to the ECB and IMF.

Why is it like this? It’s simple. It is because the socialist model doesn’t work. They, the noblesse oblige governments, have run out of other people’s money.

They ran out of their own, from their own citizens, several years ago. Then they turned to the primary members of the EU and held out their hand, ‘help us, please’. The EU obliged by handing over billions of their citizen’s money to failing economies.

Socialism has never worked. Not once. It’s a wonderful ideal – if you’re lazy and don’t want to work hard to earn your keep. Take what others make – the ‘from each according to their ability’ theft of another’s labor.

Socialism is, in its most fundamental definition, slavery.

Stop and study that Marxist ideal: From each according to his ability, to each according to his need.

In other words, simple words, take from those who are able and give it to someone else.

When you have a society that hands out more than it takes in – the second half of the Marx ideal of ‘from each according to their ability, to each according to their need’ – you have a failing system. It is not sustainable.

At a ratio of 2:1 non-workers to workers, it becomes a slave state. Look at Greece.

The one worker is toiling to support two people. Never mind that the worker wants to enjoy the fruits of their labor, too. They do not willingly get up in the morning and go to work so they can be slaves who support the non-workers. At that point, they are slaves; nothing more, nothing less because their effort is given away to support someone else. They are not a free individual, using the gifts given to them by Fate or God or whatever. They Are A Slave.

That’s where Greece is now. The workers are working harder and harder to pay the taxes and the fees and the levies that provide the pension funds to the non-workers.

It didn’t work in the Soviet Union – the Soviet Socialist Republic that died in the 1980’s – a mere 70 years after starting. It isn’t working in Greece now. The only question remaining is how long it will take to collapse and who will be next.