News & Analysis
Nonsensical Insistence on Additional 'Bank Capital'
The Federal Reserve is expected to embrace a new global framework that requires giant financial institutions to hold extra capital, said people familiar with the situation. The central bank's decision to accept the rules laid out by regulators in Basel, Switzerland, as part of a draft proposal that could come before Christmas is a defeat for giant U.S. banks that argued the guidelines needn't be so strict. They contended the Basel approach could prompt them to reduce lending and hurt the economy. − WSJ
Dominant Social Theme: Get these banks back on their feet!
Free-Market Analysis: We always have a hard time with things like bank stress tests and demands that banks hold "extra capital." The Wall Street Journal (see excerpt above) is out with a "sourced" story that the Fed will demand large banks hold more capital; a demand that will be made throughout the West.
What it REALLY means, in our view, is ... nothing. We do subscribe to a free-banking philosophy of monetary competition but we are also well aware that for the most part, most of the time, societies have conceived of money as something – salt, beads and more popularly, silver and gold.
In fact, bimetallism has been the standard of choice across the millennia from what we can tell because silver corrects gold and gold corrects silver. When the ratio of the two metals gets out of whack something funny is going on. Bimetallism provides a free-market governor.
But what does it mean to day to have more "assets" backing a bank? What does it mean for that matter for a bank to have a "stress test." Today, money is nothing but pieces of paper or electronic digits. Leaving aside the specifics of a given currency, if someone gave you some nicely printed paper or sent you electronic digits would you feel rich? How about if they sent you gold or silver?
That's the catch, of course. In the past, banks used to back their privately circulated certificates with gold or silver. And when a regulator (were there to have been regulators at the time) wished to conduct a stress test, the idea would have been to find out how much gold and silver the bank had locked up in the safe in the back!
This is what is so strange about modern stress test and central bank mandates that banks hold more assets against their loans. What is really being said here? Quite simply that banks expand the numbers of electronic digits they hold. But so what! How valuable are electronic digits right now? What makes them so? And how about ever-depreciating monetary paper? None of it seems to mean very much to us,
In fact, we would argue it is all a big show. The current monetary system is just a kind of confidence game. The power elite has slyly substituted over the past century "nothing" for something and then carried on as if the system was still solvent. It's not ...
And yet the pretense continues. As we've often pointed out it's like watching a bad episode of the Emperor's New Clothes. Everybody solemnly goes through routines that made sense a hundred years ago when money was backed by something. But today money isn't. Nonetheless, central bankers pretend that their rituals create solvency. Here's part of a summary of the WSJ article, courtesy of Business Digest:
The US Federal Reserve is expected to embrace a new global framework that requires giant financial institutions to hold extra capital, The Wall Street Journal reported Monday. Citing unnamed people familiar with the situation, the newspaper said the Fed's decision to accept the rules laid out by regulators in Basel, Switzerland, could come before Christmas.
It is a defeat for big US banks that argued the guidelines needn't be so strict, the report said. They contended the Basel approach could prompt them to reduce lending and hurt the economy. Internal estimates from the Basel Committee on Banking Supervision showed JP Morgan Chase & Co would have to hold 2.5 percent of extra capital as a percentage of risk-weighted assets, on top of the 7-percent base that all institutions will be required to hold, The Journal noted.
See how cleverly, the point is made that holding extra capital is a "defeat" for big US banks – banks that we are supposed to think are more profligate than the regulators want them to be. But what DO the regulators want? They want the banks to hold more paper money and add electronic digits to their accounting.
How does that truly help anything? Maybe if money were competitive, such measures might build on a market-based belief structure. But people don't usually believe in pure fiat anyway – and there is no such thing in this world today as competitive money. It's all monopoly money – literally and figuratively.
So here's the real deal. Insisting that banks hold MORE useless paper and add more electronic digits to their balance sheets will actually make things WORSE. That's the bottom line. There's not much you can do to build up confidence in the world's failing dollar-reserve system. But you CAN choke off credit?
That's what these stress tests and Basel rules will do! The only positive facet of monopoly fiat is that when it does its inevitable (horrible) damage, you can print MORE of it. Much more. And quickly.
And these stress tests and new rules will choke off the one aspect of fiat money that actually is positive (within the larger negative context). Not only will people have to deal with the monetary inflation that has already been created, they'll have to deal with it within the parameters of a monetary drought.
Having caused a rapidly developing depression, the elites behind the world's damnable central banking system are now busily engineering a situation where further capital will not be available (without punitive interest rates) to any but the biggest corporations.
How clever it is, eh? If you want to set up global governance, the first thing you want to do is gain control over money and its issuance. You do this by setting up a global network of central banks.
Having created central banking and the mechanism for printing-money-from nothing, you now print a great deal of it. In doing so you set off a series of great booms and busts that culminate in the greatest boom and bust of all – leading (as it did in the 1930s) to what should be labeled a depression.
Now, once the depression (or "great recession) is underway, you begin to run from bank to bank like a busy bee. You are, in fact, busily engaged in creating a credit squeeze. Having bankrupted middle classes around the world, you are determined to ensure that they will not be able to get their hands on further funds!
If there are any questions (and there will be as people starve in the street), you simply tell them you are ensuring bank solvency via "stress tests" and additional allocation demands! What a beautiful thing this is (if you are part of the Anglosphere power elite trying to create global government). That's how we see it anyway. The big American banks haven't "lost anything." They're nothing but pawns in a larger game. And the game is surely afoot.
They are all in it together, aren't they? So it seems to us. The power elite is a mafia – a cabal – and like the mafia they are sitting down at table even now and dividing up (or re-dividing) the world. They are hoping that the nonsensical monetary system they foisted on the world in the 20th century will hold up in the 21st. Hold up long enough anyway to ensure that they can create a new and even MORE mischievous currency on a fully international scale.
Will it take happen? This is the way "they" work. But our perspective is that what we call the Internet Reformation is interfering with this hucksterism. The Ponzi Scheme that is the modern money system is increasingly well-known to millions even tens of millions in countries around the world.
Conclusion: Here's a litmus test. We'll the know the system is failing once and for all when people read about "stress tests" and "Basel rules" making the banking system safer and ... start to laugh. Hey, it's better than tears!
Posted by Agent Weebley on 12/22/11 11:21 PM
You are very interest . . . ing.
Firstly, your English is so good I had no idea you were Dutch, so I'm already carrying some baggage on our previous dialogue together. Sorry.
I've been called many things, but Mercurial is a first. I like it! . . . and the dreary desert of currency is about to . . . I'll get to that later.
I like to put a spin on things, with some visuals, so here's an olive branch for you.
Click to view link
Go here now
Click to view link
Posted by Anthony Migchels on 12/22/11 07:03 PM
You have a mercurial mind Agent Wheely, whereas I'm plowing in the dreary desert of currency.
Not because I do not thirst for more fun, but because people are creating so much difficulty over such a simple subject... ... .
Please don't mind my crappy language (adds... ... .hmmm): I'm dutch! I try!
Posted by Agent Weebley on 12/22/11 02:17 PM
Finally! Since you didn't get the first joke, I did it again. Being Toni has many meanings, and the "girl" connotation is actually a compiment in my books. So, in effect, I complimented you.
"I have two, but no adds!" - Yowch.
Government printing money and giving it to the people? - that's what they are doing now, but they don't regard the masses as people, so they are out of the loop . . . having no future responsibility for money . . . as far as I'm concerned.
I don't have a system . . . I have an ARG . . . and you're playing in it. Having fun? I like systems, but the ones with multiple inputs from many players are the best, so it becomes somewhat like a fuzzy logic PLC, where the outputs are . . . well we don't have any yet, but it's guaranteed to have many AbFab outputs.
The money shouldn't go back to where it came from. Why end the game?
Anyway, sorry abut the staccato-talk, but I have to get back to work.
Click to view link
Posted by Anthony Migchels on 12/22/11 01:27 PM
I do mind Tony Agent Weebley. I maybe bad at taking BS, but I'm surely no girl... ... ...
Are there adverts on my site? Which one are you referring to? I have two, but no adds!
Great idea! It's more or less what I thought it was.
Social Credit is monetary system where Govt prints money and gives it to the people to spend it into circulation.
Btw, in my own system I for a long time also wanted to give some of the cash away to the participants. But the problem is: how do you get them out of circulation?
In an interest free credit system that's no problem: all the money will in the end be repayed.
For the state this is not so much a big deal: the state will be around for a long time. And if the state gets killed, the people will still be around.
But for a marketplayer, it is a hassle.
Posted by Agent Weebley on 12/22/11 09:49 AM
Hi Anthony . . . mind if I call you Tony?
When I said plastic money, I think you got the wrong end of the shtick . . . I meant plastic coins . . . lenticular 2 sided virtually impossible to counterfeit company coins. . . game pieces for our site . . . game pieces to help teach people what money is all about . . . and will eventually be able to be traded on our site . . . you can't buy these game pieces, you can only get them for free . . . pretty Toni idea, eh?
How come you you have advertising on your site? That means you are beholden to those that finance you.
Click to view link
Posted by Anthony Migchels on 12/22/11 05:24 AM
That would indeed be Social Credit.
Money printing, handing out to the public to spend it into circulation.
In this day and age, it would all be electronic, of course.
Posted by clark on 12/21/11 09:33 PM
A minor technical observation about the blog:
Using Windows and Firefox, the View All Feedback link is not working again, clicking it does nothing but refresh the page.
Posted by Bischoff on 12/21/11 09:20 PM
"But unless we misunderstood you, you were agreeing that adding electronic digits to a bank's balance sheet did little to make the bank healthier in absence of tangible backing ... "
That almost goes without saying... ... ..
Posted by Agent Weebley on 12/21/11 04:42 PM
Phew, that could've got messy! I know nussing. Google me, if the autofill doesn't steer you away to weebly. I'm all over the place. Also google amanfromMars . . . he's all over the place too.
No thanks on more credit. I've got tons of it already . . like a mill . . maybe more . .. don't care. Gold? No thanks on that, as it would leave, never to return, since there is only 0.75oz per humanoid on this planet. And I have 5oz already . . . it's no biggie.
Gimme plastic money . . . for free!
Click to view link
Posted by Anthony Migchels on 12/21/11 03:14 PM
You know what?
I'll lend you some interest free credit, you can buy some gold with that.
Posted by Agent Weebley on 12/21/11 01:02 PM
Ew, yuck. "social/free credit?" Are you a commie? Give it to me, good and hard . . . currency, that is. Then I'd have some debits to my name, like it should be. Anything else is . . . well, you know.
Posted by dave jr on 12/21/11 12:38 PM
You will get what you pay for.
Posted by Anthony Migchels on 12/21/11 12:31 PM
That's why we all want a free market for currencies: they make wearisome debates like these superfluous :-)
Posted by Anthony Migchels on 12/21/11 12:28 PM
The value of currency is not determined by interest, but by the amount of goods (or other currencies, the dollar-euro rate for instance) you can purchase with it.
Legal Tender laws establish a monopoly, not the value of the paper.
Interest rates reflect the price for credit, not the value of the currency.
The fact that Central Banks manage this rate just shows what a monopoly pricing operation looks like.
Posted by Abu Aardvark on 12/21/11 12:22 PM
"The need for legal tender laws is not so much to establish the value of the paper: that is done by the market place, even today."
You really believe this? Fixing interest rates by central banks does not change the "value of the paper"? What?
Posted by Abu Aardvark on 12/21/11 12:16 PM
- If you have 10k Gold and 10k US (FED) Dollars, what will you use to pay your bills with?
- If we have a free market where Banks provide Gold at 5% per year, and Mutual Credit facilities provide their units at 0% per year: where would you go for your mortgage?"
I don't see much potential appreciation for "Mutual Credit facilities" in a real free market. I wonder how anyone can. We'll see ...
Posted by Anthony Migchels on 12/21/11 12:10 PM
If we can negotiate, I'll settle for the units with the lowest usury.
I reckon that'll be a paper based unit.
Not a metal based one.
Posted by Anthony Migchels on 12/21/11 12:08 PM
That sound like Social Credit vs Interest Free Credit.
I'll settle for both, although I prefer Interest Free Credit. For reasons worked out here:
Click to view link
Posted by dave jr on 12/21/11 12:08 PM
Not if usury is negotiable.
Posted by Agent Weebley on 12/21/11 12:03 PM
Hi Anthony Migchels,
". . . than why not lend it out for free?"
Lend it? That implies ultimate ownership of the currency . . . by whom . . . you?
I would say currency needs to be given away, Anthony.