April 8, 2013 by Bob Livingston
The elites love to play us for fools.
European Central Bank President Mario Draghi said the proposal to steal 10 percent or more of the wealth of Cypriot savers in order to bail out the European Union banksters is not a blueprint for what would happen in future bailouts. “Cyprus is no template,” he said, according to the BBC.
After much hue and cry from the island’s masses and almost two weeks of bank holiday, the Cypriot elected class and the EU agreed to “let” Cypriots keep their savings up to 100,000 euros and steal only as much as 60 percent from savers who have more. This decision came, no doubt, after enough time had passed to let the Russian oligarchs remove their money from Cyprus’ jurisdiction — which would explain the sudden silence of Russian President Vladimir Putin after his initial objections to the plan.
Meanwhile, New Zealand’s government is talking about a “deal” for that country’s savers similar to the one originally proposed in Cyprus, which would have seen the bank deposits of all that island nation’s savers looted by as much as 13 percent to prop up failing banks. Closer to home, the Canadian government’s latest budget calls for a “bail-in” regime for systemically important banks. This regime will allow customer accounts to be looted in the “unlikely event” one of the banks “depletes its capital.”
And so we see that the elites who control the world’s wealth are indeed working from one playbook. But perhaps Draghi is just being coy, for we also see that this or a similar plan has been put in place for the U.K. and the U.S.
A look into a joint document produced by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) shows a plan to “assign losses to shareholders and unsecured creditors” as a resolution strategy for failing banks. It also calls for “exchanging or converting a sufficient amount of the unsecured debt from the original creditors [depositors] of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself — thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution.”
The report, “Resolving Globally Active, Systemically Important, Financial Intuitions,” was published in December 2012. It gives no exception for FDIC-guaranteed deposits.
The FDIC “guarantees” deposits up to $250,000. But the initial proposal for Cyprus gave a “haircut” to all accounts, including those guaranteed by government up to 100,000 euros, which indicates government guarantees are worth less than the paper they’re written on — or the strips of paper that represent money.
Of course, the FDIC cannot possibly cover all the current bank deposits should a collapse occur. So this new plan provides cover for the FDIC in the event of massive failure. The savings that savers thought were “safe” in their bank accounts will be seized and replaced by stock in the new bank that replaces the failed one, though only the “highest level” creditors will receive it.
Fractional reserve banking is a confidence game built on sand. Since banks lend out far more than they keep in reserve, the game collapses when confidence is lost. The EU/Cyprus debacle should have removed any confidence that money stored in banks is safe.
The elites are also eyeing pensions, individual retirement accounts and 401(k)s as a means of staving off collapse. There is currently almost $20 trillion in these American retirement funds, and stealing it in exchange for more government funny money would erase the current $16.7 trillion U.S. debt.
Keeping your money in banks and retirement funds accessible by the government and bankster thieves is a fool’s errand. The wonder is why more people have not recognized this — even through the fog of March Madness and “American Idol” — and bank runs in Europe and the U.S. haven’t begun.
The bankster elites know the current system is on borrowed time, even if the masses do not. Countries are now making moves away from the dollar as the world’s currency. Moammar Gadhafi was eliminated in part for this reason. Australia and China recently agreed to trade outside the dollar. China and Russia now trade oil outside the dollar. The BRIC nations (Brazil, Russia, India and China) have been discussing this move as well.
Fed Chairman Ben Bernanke’s money printing has debased the dollar but propped up the stock market, giving a false illusion of a growing economy. As Peter Schiff points out here, those giving Bernanke and/or President Barack Obama credit for sparking a rally are missing (or ignoring) that current market performance is based solely on the Fed’s activities.
Since 2008, the Fed has injected fresh cash into the economy with four distinct shots of quantitative easing and has added two kickers of Operation Twist. In recent months, the Fed has dispensed with the pretense of designing, announcing, and serving new rounds of stimulus and is now continuously monetizing over $85 billion per month of Treasury and mortgage-backed debt. The new cash needs a place to go, and stocks, which now often provide higher yields than long term Treasury bonds, and which offer much better protections against inflation, provide the best outlet.
But the four year rally has been punctuated by several sharp and brief drops. It is no coincidence that these episodes occurred during periods in which the delivery of fresh stimulus was in doubt. If the Fed were ever to follow through on its promise to exit the bond market, we believe the current rally would come to an immediate halt. This provides yet another reason to believe that stimulus is now permanent.
The Fed’s intervention has taken another form as well. It is and has been manipulating the gold price. It is doing so in a last-ditch effort to prop up the value of the dollar and prevent the dumping of the dollar by big holders like China, Japan and others, which would spark hyperinflation. In 2000, it took only $280 to buy one ounce of gold. But 12 years of wars, massive government and money printing debased the dollar to where it eventually took $1,900 to buy one ounce of gold.
Recognizing the danger this debasement represented, the Washington propaganda machine put out the word that gold was in a bubble. The Fed-owned “too big to fails” were ordered to short the precious metals market. This drove down the price to about $1,700, where it stayed until the Fed’s latest action at the beginning of April. It was then that the Fed sent out the word that hedge funds and other large investors were going to unload their gold positions and that people should sell their positions before this occurred. This illegal Fed action drove the price down even further; it’s now below $1,600 per ounce.
For those who recognize gold as a store of value, this presents an opportunity. It is one being taken advantage of by Russia, China and the 1.3 billion people who live in India — and by American gold bugs.
The budget deficit and growing debt can only be covered by money printing for so long. There is obviously no stomach in Washington for reining in spending. The U.S. government and many of the governments around the world are insolvent. Yet Obama continues to press for more spending and more wealth redistribution. His Administration is even encouraging mortgage lenders to loosen credit so as to lend to risky borrowers in an effort to create yet another housing bubble and another illusion that the economy is recovering. Congressional Republicans have offered no serious spending cut proposal either, and are content to play political blame-games with the Democrats.
When governments begin selling off their dollar holdings in quantity, all bets are off. Economist John Williams of Shadowstats believes that could happen as soon as May.
Meanwhile, Americans are being distracted by threats against Iran, threats from North Korea, created crises, assaults on liberties and the 2nd Amendment, and issues not under Federal government purview, like whether gays can marry. These distractions all serve to conceal the warning signs from the people.