News & Analysis
WSJ – International Banking Is in Crisis
We are confronting a crisis, all right, but it is not a Greek crisis, unless uncertainty as to the date of that country's de facto default counts as a crisis. If the insolvency of that tiny country were the world's only problem, it would be stretching the word "crisis" to apply it to the travails and insolvency of that tiny country. What we have come to call the Greek crisis is, first, an international banking crisis. Like Lehman Brothers, Greece is definitely not too big to fail. – Wall Street Journal
Dominant Social Theme: The fall of the USSR was due to moral failure.
Free-Market Analysis: This is a fascinating article that the famous Irwin Stelzer has written for the Wall Street Journal. In it he makes a lot of points that we have made in the past, though we disagree with his conclusions. Strangely, they do not seem to be up to the incisive level of the rest of the article. We will discuss them, below, after we review the rest of the article itself (excerpt above). Who is Mr. Stelzer. Here's something from Wikipedia:
Irwin M. Stelzer (born 1932) is an American economist who is the U.S. economic and business columnist for the Sunday Times, the Courier-Mail, the Guardian and a contributing editor of the Weekly Standard. He is also an occasional contributor to the Daily Telegraph and the New Statesman. He resides in London and the United States. Stelzer has served as a managing director of the investment banking firm of Rothschild Inc and was co-founder and president of National Economic Research Associates, Inc which became NERA Economic Consulting and which was subsequently sold to Marsh & McLennan, Inc. He is a signatory of the Henry Jackson Society, a senior director and fellow of the Hudson Institute and has edited and introduced a book on neoconservatism. He is a visiting fellow of Nuffield College, Oxford. Prior to joining the Hudson Institute, Dr. Stelzer was resident scholar and director of regulatory policy studies at the American Enterprise Institute.
It is an impressive resume and the article is impressive, as well, in terms of how it gets straight to the point. "We are confronting a crisis," he writes, "but it is not a Greek crisis ..." It is, he writes "an international banking crisis." This is what we've been suggesting regularly. The system of central banking has created perhaps the most monumental bubble ever seen.
There are literally thousands of major banks and bank branches all over the world. The downtowns of every major city in the developed world and the developing world are littered with them. People are so conditioned as to their ubiquity that they don't even notice it.
Imagine if banks were actually ... tire manufacturers. Now imagine entering a strange city and seeing the entire downtown was FILLED with skyscrapers, each one representing a different, competing brand. Imagine the city and the countryside was full of branches, all selling tires. It wouldn't make any sense.
Nor does it make any sense to have so many banks. But they are protected by central banks; they are appurtenances of central banking. Much as a young girl will not ever discard a doll, so central bankers and the Anglosphere elites behind them will never discard a large bank. They may MERGE the bank, but they will never wish to lose it.
Stelzer, who is certainly an elite apologist among other things, will not write something like this of course. But the article is remarkable anyway for its blunt assessment that what is affecting the world today is a banking crisis. In a sense it runs counter to a more obvious elite dominant social theme that one can never have too many banks (big banks anyway) and that they are national and private sector ornaments. After all, they do "God's work."
We don't believe it. We have even suggested the current economic crisis is so bad it has irretrievably destroyed the US dollar reserve currency worldwide. Something else may take it place, but the 20th century economy created at Bretton Woods is probably no more. This is possibly – evidently – a bridge too far for Stelzer. Nonetheless, it is a frank article for the Wall Street Journal – the newspaper of record for mainstream business journalism in the US – to present to the public.
Start with Greek banks, he writes, which hold €70 billion ($99.3 billion) of their government's sovereign debt. If Greek banks were required to admit that markets are valuing Greek government debt at about half the value assigned to this paper, the results would be disastrous. It would constitute a kind of chain reaction. Shareholders would lose investments; banks beyond Greece would have to raise significant capital; depositors would make runs on banks, probably not just in Greece. Such a reaction might even bring down Germany's undercapitalized bank.
What Stelzer is saying, and we have mentioned this too, is that much of the Eurozone's bank-accounting mechanisms are fiction. This is especially true in Spain, as we have pointed out, where observers routinely explain that great country is not as badly off as Greece while glossing over the phony bank accounting of the country's real estate.
If Spain's banks were forced to mark their real-estate portfolios to realty, the banking predicament would become obvious. Spain's banks – the major ones – are apparently bankrupt. But as Stelzer does us the favor of pointing out, it is not just Spain. The banking crisis is spread throughout the Eurozone. To concentrate on Greece is to miss the bigger picture.
He provides us more facts as well. The rating agencies are now concerned about additional banks in Europe, three French banks and some 29 Italian banks. Mervyn King, Britain's central banker has called such bank problems the "most serious and immediate risk" to the U.K. financial sector.
And what of the US? "It is also obvious that we have no clear idea of the exposure of U.S. money-market funds to Greece's insolvency, or of insurers—remember AIG, anyone? That's why $51 billion has been pulled out of those funds in recent weeks by nervous investors, why America's banks have become reluctant to lend to their European counterparts, and why the Fed is asking U.S. banks about their exposure, including credit default swaps written on European banks."
Wow. Not only is Greece's crisis an international banking crisis, it is one in which the US is apparently a full participant. But for Stelzer it gets even worse. "The ageing of the European population, and the increasing proportion that consists of immigrants not enamored of Western values and free markets, present problems Europe has yet to confront. Nor has it coped with the stifling effect on innovation and growth of the systematic protection of inefficient private and public-sector institutions."
Here are his final points:
If we accept that the politicians have decreed that immediate default is off the table, we can, indeed, must:
• force the banks to recognize that much of what they count as assets aren't, and to recapitalize, even if this slows lending and growth in the short term;
• recognize the need to speak to markets with one voice;
• admit that perpetual dependence on the generosity of Germany is not a sustainable policy;
• remove incentive-numbing high taxes and barriers to innovation in order to generate the growth and tax revenues to support more sensibly constructed welfare states.
For Stelzer, implenting the above suggestions would be, he writes, "a start." But notice nowhere does he write that central banking itself is at fault, that the ability to create money from nothing is what has caused the inevitable, endless crises of capitalism.
Unti the Anglosphere power elites take a step back and acknowledge the fundamental systemic structures they have created are unsustainable, the Internet Reformation will likely continue to expose what's really going on. We would argue that Stelzer's blunt-talk is in part a reaction to the vast wave of articulated repugnance regarding central banking generally.
Conclusion: As a meme, central banking is foundering. As an unquestioned element of modern society, it is losing credibility. As a real-world solution it is failing. Thus the larger systemic crisis, as Stelzer indicates, may get much worse.
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Posted by Leonardo Pisano on 06/28/11 10:51 AM
John, thanks for your insights. I think our ideas are much in line. I agree it will take considerable time for the Ptb to achieve a one-digital currency. My point is that their ultimate goal may very well to go digital-only, effectively REMOVING the cash variant as alternative. It explains a lot. I agree it will take years for them to achieve it, slowly massaging the masses, paired with fear-based promotions and brute force where they can afford to do so. We know they are patient, though. Bartering will emerge to some extent, but that's in many cases ineffective so it will not be a sensible alternative, at least not on the international level.
Of course they cannot be trusted but the masses have short memories and lacking an alternative, what can they do but to play along? Only few understand these money machinations in the first place. Maybe I am too pessimistic?
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Posted by David_Robertson on 06/28/11 10:15 AM
@Dotti:
Click to view link|STRAUSER,%20BARBARA%20J|&type=&show=titles&showitems=
This is the link I posted in my last feedback. The link was somehow cut off but if this one is also then you can always access Barbara's writings under "Authors" which the link does connect to. Just click on 'S' then on Strauser Barbara J.
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Posted by David_Robertson on 06/28/11 09:59 AM
The strategy described by Edwin Vieira gives Americans an opportunity to set up an alternate monetary system today to prepare for the collapse of the banking system and the destruction of their current lifestyle. That is all I meant and I believe in some cases his advice may well be followed, as it should be.
On a personal level effective preparation is more spiritual in nature and this is what you are doing if you continue reading the material at the websites I gave you links to and practising what you read. Another Christian sister's writings that I have found particularly helpful is Barbara Strauser. She began seriously seeking the Lord in the early 1980's and her revelations are profound. Here is a link to her writings: Click to view link|STRAUSER,%20BARBARA%20J|&type=&show=titles&showitems=
I suggest you read "Portion of Manna" first as that was her first book. I am presently reading "Apple of His Eye" and I have read her allegory "Come to Me" as well as her other shorter works. They are all truly inspirational.
One book on spiritual warfare that you should read is here: Click to view link
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Posted by David_Robertson on 06/28/11 09:33 AM
Many years ago I read that Gates' family had connections to the ruling families of the US and it was these connections that facilitated his rise in the computing industry. A friend of Gates' family, a director of IBM, suggested that they ask Gates for an OS for their planned entry into the PC market. The story is that Gates sent them first to Digital Research who owned CP/M the then dominant OS for PCs then when they could not reach an agreement with Gary Kildall the developer of CP/M they returned to Gates and the rest as they say is history.
It is very likely in my opinion that the discussions with Kildall were deliberately sabotaged in order to give the business to Gates while making it appear that Gates had acted ethically by referring them to Kildall in the first place. One reason I now believe this is that although IBM did not want to license CP/M from Digital Research and refused Kildall's offer to do so nevertheless they did end up licensing the PCDOS that Gates acquired from Seattle Computer Products.
If you read up on Gates you will soon see the connections. My own belief as I said is that it is impossible for anyone to achieve the market dominance in technology enjoyed by Microsoft and IBM without "help". By their fruits you will know them. If you examine their behaviour you will find certain commonalities of questionable dealings and ruthlessness, qualities that many admire in business but that are profoundly anti-human. This competitive behaviour is then usually balanced by setting up foundations for acts putative public benevolence that can be used to further their commercial and tax avoidance objectives. John D Rockefeller the patriarch of the Rockefeller clan is known to have said that "Competition is a sin" and this trait runs through the behaviour of the ruling class as a whole.
These are not particularly attractive personalities except to those who seek to emulate them.
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Posted by John Danforth on 06/28/11 08:16 AM
"An eloquent statement of realistic optimism!"
My thanks to the DB. For everything here.
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Posted by John Danforth on 06/28/11 08:06 AM
I don't see how they can pretend to be the hurt party. They got handed an unprecedented deluge of digital money to keep them in business, and they end up with title to all the real property as well. The people they are putting on the street are being taxed directly to finance their own evictions.
The only diminution in the ability to plunder is a reflection of the decreased quantity of real wealth being generated, so it is being consumed faster than it is being generated.
The internet is like a wild horse. Attempts will be made to tame it and ride it, maybe even to kill it. So far, everyone has gotten bucked off. The reason is that like currency, information transfer relies on acceptance. The currency of the marketplace of ideas is true, useful ideas, accepted only by persuasion. The effects of the information explosion are that ignorance has become more expensive to produce and more expensive to hold personally, while being less reliable for those who depend on it. In lowering the price of information to almost-free, the rewards for being a liar have come crashing down to earth.
The only strategy left for the PE to counter this tidal wave is to up the ante on the fear component of their fear-based promotions. We shall see how it plays out. I think the people worldwide will call their bluff.
The key aspect of a tool like the internet is that anyone can use it. The PE, the high school student. The PE relies on lies and misinformation, and people are beginning to disbelieve them. Until or unless they find a way to cut off access, they are going to go the way of the dinosaur.
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Posted by John Danforth on 06/28/11 07:44 AM
I agree, they'd really like to go to an all-digital single world-wide currency.
The problem is, all currency relies on acceptance. They already have computers and they can already create any currency by changing a number in a database. It is an easy task to convert fractions between different currencies. There only exist enough physical tokens to satisfy small purchases.
I posit that essentially they already have the control you speak of. Of course it would be more convenient if they only had one currency to worry about, and they could eliminate a lot of clerk jobs. And maybe they dream it would make it easier to push smaller countries around. But the blowback potential probably makes acceptance unlikely. Certainly when currencies begin to fall like dominoes, this will be offered as a solution. Almost as certainly, nation-states will resist, goaded by angry mobs in their capitals. The early arguments against the Euro were that when a nation loses control of its currency, it effectively loses its sovereignty. I believe that is being proved out right now. So, right when they try to push it through, examples of why it is a bad idea will be fresh in peoples' minds.
They already have digital money, and they've blown it. They've already proven that they can't be trusted not to counterfeit it with the tap of a key. What do you think?
Reply from The Daily Bell
An eloquent statement of realistic optimism!
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Posted by John Danforth on 06/28/11 07:27 AM
Thanks for the link.
That's fascinating but there are two rules here:
1. Paper money is paper money. If you want to end the Fed, don't keep any money in banks. The Fed is almost done anyway, people are switching their savings out of cash and into gold and silver. When enough people start doing that, the currency is done.
2. The law is what the man with the gun says it is. What that turns out to be depends on who is watching what he is doing.
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Posted by amanfromMars on 06/28/11 04:21 AM
"Thanks to the Daily Bell for repeatedly hammering home this most basic and simplifying point about the so-called "complicated" banking system, capable of being understood only by the "experts". Any human with a derriere knows what is going on." .... Posted by acudoc on 06/27/11 11:09 PM
And what is going on, acudoc, although that is much more likely now to be, what was going?
"The Canadian economist John K Galbraith was Reith Lecturer in 1966. In his lectures, entitled The New Industrial Estate, he attacked the capitalist system, warning that global corporations would increasingly seek to influence political power and subordinate the state to drive their own growth and profit." ...... Click to view link
Sound familiar? And uncannily like ..."This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence - economic, political, even spiritual - is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist." ..... Click to view link
Anyone else having denial of service episodes ..... Oh, how very strange, the Daily Bell comment site acting unusually and not readily accepting content for display and sharing?
Reply from The Daily Bell
Are you sure? Your comment is posted as always - and for the most part as indecipherable as ever.
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Posted by acudoc on 06/27/11 11:09 PM
The Daily Bell strikes at the heart of the dragon:
"For Stelzer, implementing the above suggestions would be, he writes, "a start." But notice nowhere does he write that central banking itself is at fault, that the ability to create money from nothing is what has caused the inevitable, endless crises of capitalism."
Why are these brilliant economists so stupefyingly clever-stupid? Creating money from nothing is one thing, even worse is creating it from debt!---which is the true state of affairs---yet they NEVER EVER address this issue. Listen to, watch, or read any financial dissemination in the MSM, and this elephant in the room is never acknowledged.
To address it would be to make the general public acutely aware that they have been taking it up their you know whats for a lifetime.
Thanks to the Daily Bell for repeatedly hammering home this most basic and simplifying point about the so-called "complicated" banking system, capable of being understood only by the "experts". Any human with a derriere knows what is going on.
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Posted by dotti on 06/27/11 07:55 PM
If I understand you correctly, the Gates family is connected with the same families that control world banking and world politics.
Am I right?
BTW, I also posted feedback to your later post.
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Posted by dotti on 06/27/11 07:54 PM
I just finished reading the interview. Wow! Lots of good stuff in it.
However, I did not find what I expected: "...a way to prepare for the collapse of their way of life in the United States...."
I am particularly interested in your expression of what I suppose I would call Spiritual Warfare. I visited the site you recommended to me last week, but was a bit overwhelmed. I started with the reading on Salvation and how God wanted all to be saved. It's very encouraging to me--I am one who has tried to have the proper faith, but fails miserably for lack of being able to resolve "Christianity" with the Bible--and even, in many cases, the Bible with itself.
I am happy to have that site to go to. I believe it will provide me many answers--I am hopeful based on its re'resentation of the salvation issue.
Thanks.
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Posted by johnblenkins on 06/27/11 06:52 PM
Peace brother, crowns, florins,shillings, francs, marks roubles or rupees,
can be added to your list.Brand new even, pass off what fiat you can back
to pit from whence it's been spued.
dlet60 is in my view bang on. Silver will be street trade King. Weight and purity = a give value regardless of what mint they come from.Many still remember them,500 years of use. Hardly a sea change for the world. Except the bankers!
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Posted by jdb on 06/27/11 06:10 PM
@ John Danforth
"What isn't sustainable will not last."
Greed /glorification of power /lies/ corruption/theft/massmurder/starvation/manipulation/....should I go on?
All been here for thousands of years....and unfortunatly still sustainable.
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Posted by chives on 06/27/11 05:58 PM
DB said " Until the Anglo sphere of power elites are forced to step back and acknowledge....."
Acknowledge what? If nothing where able to acknowledge something, time would not have to correct the situation,now would it.? Do you seriously think that billions of murders have no consequence and it all has to do with central banking. Hey it's all about the stuff!
Moral authority , oh give me a break, moral authority invested in a truncated system, a system based on what? Based on the scientific revolution of course
but you think there was a revolution , a reformation based on the Gutenburg press alone ? The Gutenberg press that allowed local elites to get out from under the thumb of the expanding power of the aristocracy inhabited catholic church.Oh please and what did the Gutenburg press inspired reformation create, more people burned for the state.
Who has forgotten - the tommorrow has not forgotten. There is no control , there is no managing. A parasitic system falls apart. How could it be otherwise, but the fatlady has yet to sing . We live in interesting time do we?
Ha - the veil falls as it has consistently and cumulatively. Europe , the historic contribution is classical music- the industrial revolution happened in opposition . It is Europe's system that is falling,so many burnings over and over again.Blame it all on America, how typical and predictable.
Perhaps America should have a regional nuclear war with Europe, after all it's not like any of the European countries can do anything but sit there and whine while promoting communism.
Hey ,regional nuclear war is your term, it is the Daily Bells term mentioned in another article with regard to South East Asia.Regional nuclear war eh, sure why not, but not your area eh?
All the Kings horse's and all the king's men couldn't put humpty together again.
Reply from The Daily Bell
You seem a bit "all over the map." But you have a point about "forced." We made the correction. As for the Gutenberg press: Something happened. There was a breaking-down of central order after the advent of the press and a rising up, for a while, of the scientific method, or at least its rediscovery. You can deny it as you wish. But we think the evidence, historically, is plain.
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Posted by David_Robertson on 06/27/11 05:47 PM
I found Edwin Vieira's thinking refreshingly practical. He is suggesting something that can actually be done today within the present US system using the powers given to the States by the US Constitution. The digital or electronic PM systems already exist and are well set up within existing laws and practices accepted worldwide. I personally use the Click to view link system and Edwin Vieira was also interviewed by James Turk who runs that company.
Click to view link
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Posted by channa on 06/27/11 05:18 PM
At David Robertson:
From your zero hedge link (great article but should question the electronic form of 'money' he suggests). This sounds like it would play into the demonic hands. They could switch off anyone's access to funds with a click of a mouse.
Here is that part:
"There's not too much the states can do about TSA. There's probably not too much they can do about healthcare, because that would have to be decided in the courts, and god knows that's a wasteland. Immigration is kind of back and forth/up and down, but on monetary reform, if a state passed the right statute, they could potentially bring that about within 30, 60, or 90 days. Especially if they put in one of these electronic gold/electronic silver type systems, which is off-the-shelf technology.
DAVID: How could it work?
EDWIN: Within 90 days of the passage of the statute, you could have everybody in that state with electronic gold debit cards dialed into the price structure in all of the supermarkets and so forth. People could essentially opt out of the Federal Reserve System if they wanted to."
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Posted by Dave Jr on 06/27/11 04:11 PM
As the DB points out, the internet is causing mass information dissemination. I believe the internet to be a construct of the PE for the purpose of monitoring the low pitched rumble of their victim. I also believe they must be shocked over their own underestimation of the intelligence of regular people and their ability to digest the new information the internet is providing. Being rocked back on their heels, they are in an all out information war, spewing as much disinformation, distraction and any other means of damage control possible.
I agree with DBs conclusion. I think the "banking crises" is a rope-a-dope. They are pretending to be the hurt party. The only hurt they are experiencing is a diminished capability to plunder, as the free market is hunkered down. In the thrashing of their death throes, it is uncertain how much more damage they will be able to inflict.
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Posted by dlet60 on 06/27/11 02:18 PM
rmp--I'll see your 800 lb. gorrilla, the central bank, and raise you my 1200 lb gorilla, the black market.
There can be digital banking, every transaction recorded, who cares? There will be trade on the streets, unknown and unrecorded, trade for anything and everything, and the king of the trade will be silver. Have you saved your pre '65 dimes, quarters, halfs and Morgans and Peace dollars? You all better start thinking what is means to be an outlaw in a fascist state. Peace and aloha brothers and sisters, d
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Posted by David_Robertson on 06/27/11 01:37 PM
@DB "Thanks, David, but don't quite understand your point ..."
In your response to Leonardo Pisano's proposal that the PE may have had a hand in the development of the internet for their own purposes you said inter alia "It was the advent of the PERSONAL COMPUTER that turned this modest network into something else. So from our point of view you have to make the case that the PE expected, anticipated and supported the creation of the PC. " Then you further stated "For your theory to be correct, you would have to 1) explain why Xerox abandoned the PC project, and; 2) explain why two kids in a garage created it around the same time. Were they PE enablers even then? "
Your rebuttal seemed to suggest that Jobs and Wozniak (the two kids in a garage) originated the PC and since they were hardly PE material at the time it is unlikely that the PE were involved at that point. My feedback simply rectified the record that it was IBM and Microsoft that launched the PC into the mass market which Microsoft still dominates. They are both well connected to the PE. Indeed the term PC is associated mainly with Microsoft operating system computers in contrast to the Mac from Apple.
I do not believe that the PE are simply a bunch of old fogies completely out of touch with the 21st. century and its technological marvels. They almost certainly play a part in the development of all technology both in supporting trends that suit their purposes and in stopping those that do not. They control all the meaningful sources of capital and all the top universities and research facilities so how could it be otherwise. Once again I will say, do not underestimate your enemy.
Reply from The Daily Bell
Our analysis is a very simple one. We believe modern history is a contest between a handful of elites and the "information society." We do not believe the elites anticipated the Gutenberg press and do not believe they anticipated the Internet. It is not under-estimating; it is a paradigm.
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