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." TheWall 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.
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!
You don’t have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.
When you subscribe to The Daily Bell, you also get a free guide:
How to Craft a Two Year Plan to Reclaim 3 Specific Freedoms.
This guide will show you exactly how to plan your next two years to build the free life of your dreams. It’s not as hard as you think…
Identify. Plan. Execute.Yes, deliver THE DAILY BELL to my inbox!