Government-directed solutions? “… as an aside, because debt has been swapped, rather than reduced, aggregate debt in many economies is now higher (relative to GDP) than in 2008.” – Morgan Stanley

(In other words, government-based ‘Central Planning’ is not working.  And will not work in the future…)

The Morgan Stanley report goes on to conclude, “In short, it is impossible for governments to grow their way back to solvency.”  All they can do is shuffle debt around, ostensibly for the benefit of powerful, politically connected  constituencies.

And (brace yourselves…) the IMF advises that “Tightening” is the solution – even though “Tightening Hurts.”

The U.S. Government has provided trillions of dollars of funding (TARP, stimulus programs, bailouts) to major credit institutions and politically-connected constituency groups.

In addition, the Federal Reserve has purchased European debt – of all things.  They have provided trillions of dollars in credit extensions to many of the very domestic and foreign banks that triggered the banking crisis in the Fall of 2008.

One of the more ‘visible’ bailouts came courtesy of the  U.S. Government  on behalf of Goldman Sachs.  Goldman had purchased credit default swaps (CDS’) from AIG and didn’t happen to verify that AIG had adequate reserves to cover the CDS’ (derivatives).  They didn’t.  When the ‘you-know-what’ hit the fan, AIG turned their pockets inside out (no money).  And the U.S. Government (that is to say, ‘taxpayers’) stepped in to ‘cover’ the massive Goldman bet that went sour:

“…according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG”

Read more: http://www.rollingstone.com/politics/news/wall-streets-bailout-hustle-20100217#ixzz21kDwPRyY

And on to the Federal Reserve ‘rescue’ initiatives…

Federal Reserve – credit extensions – allowing two major investment banks (Goldman Sachs and Morgan Stanley) to quickly receive commercial bank charters, allowing them to qualify for near-zero interest rate loans, with which to purchase Treasuries – and earn ‘free money.’  Lots of it.

Federal Reserve – Primary Dealer Credit Facility (PDCF) allowing major banks to pledge sub-investment grade collateral to qualify for additional near-zero interest rate loans – with which to purchase Treasuries and earn more ‘free money.’

Federal Reserve – Temporary Liquidity Guarantee Program (TLGP) for the big money center banks… ‘worth trillions.’

Federal Reserve – Public Private Investment Program (PPIP) – allowing banks to ‘off-load’ worthless assets onto the Fed balance sheet.

Again – government-based ‘Central Planning’ is not working.  And will not work in the future…  America is sinking deeper into the debt hole.  Economic growth is stagnant.  And for all of the trillions of dollars the government has ‘thrown’ at the problem, the average American family has benefited very little, if at all.  In fact you could make a strong case that things are getting worse.

America doesn’t need the type of “Tightening” the IMF and Morgan Stanley are talking about.  America needs liquidity and debt relief at the Family level.

It is time now for a new initiative.

The Leviticus 25 Plan will provide American families with the same access to liquidity (credit extensions) that the Federal Reserve has been granting to the banks.

And The Leviticus 25 Plan will pay for itself over a 10-year period with the ‘recapture provisions.’  And the ‘ripple out’ effect will yield efficient benefits for government tax revenues, small business revenues, the labor market, housing… and even banks – in the long run.

No other plan will deliver such benefits and set America back on course for financial stability and economic liberty for American families.

Kuntsler: “…the world is comprehensively broke in every sphere…”

“We are discovering more and more that the world is comprehensively broke in every sphere, and in every dimension, and in every way.    The governments in every level are all broke, the households are going broke, the banks are insolvent, the money really is not there.   And the pretense that the money is there has been kept going simply with accounting fraud.  And accounting fraud really accounts for most of the so-called “innovation” that we chatter incessantly about…”

More from James Howard Kuntsler interview with Peak Prosperity :  “It seems to me that the whole capital issue is going to accelerate hugely over the summer.  I really do not see how the Europeans can get out of the box they are in… I think the disappearance of money is going to accelerate, and it is going to be all getting sucked into a black hole over the next six months…”

………………………………………………………

ZeroHedge:  The Problem In A Nutshell: Annualized GDP Growth Of 1%; Annualized US Debt Growth of 21%

Submitted by Tyler Durden on 07/16/2012 – 09:57

“While economists may waste lots of hot air debating this, that and the other about the future growth trajectory of the US economy, in the aftermath of Goldman’s cut of US GDP to just a 1.1% annualized rate of growth. And with the fiscal cliff, debt ceiling, Europe, China, and a plethora of other unknowns up ahead, this number will certainly decline further. Now here lies the rub: as the chart below shows total US marketable debt has doubled in the past 4 years, or an annualized growth rate of just above 21%. And as Zero Hedge has shown before, total US Debt/GDP is on the verge of crossing 102%, the highest since WWII. Simply said, the divergence between the two data series will only accelerate as every incremental dollar of debt generates ever less bank for the GDP buck.

And that, from a “sustainability” perspective, is what the problem is in a nutshell.”

………………………………………………………

Liquidity.

The Fed must ‘print.’  Or the U.S. faces a “systemic collapse.”

If, however, the Fed continues to simply ‘print’ (or expand its balance sheet) to monetize debt and to accommodate massive credit extensions and financial backstops to banks and other financial and politically- connected institutions, then the money will continue “getting sucked into the black hole.”  And nothing will be resolved.  There will be an eventual U.S. Dollar crisis phase.  And a large majority of American families will suffer the consequences..

The solution.

The Fed must change course to extend credit directly to American citizens.  This will provide the critical mechanism to reduce / eliminate debt at ‘ground level,’ American families – with concentric ripples of benefits working their way ‘up’ through the banking system and sectors of government (local, state, federal).

Most importantly – this form of direct credit extension to American citizens will advance the cause of economic liberty and self-determination for American families.  And it will re-ignite economic growth.

The Leviticus 25 Plan the benefits:

  1. Provide direct liquidity infusions to American families.
  2. Optimize the allocation of health-care services and spending (including Medicare and Medicaid).
  3. Improve the economic climate for U.S. small businesses.
  4. Improve employment opportunities for all Americans.
  5. Generate a long-term, healthy stream of tax revenue for government (federal, state, local).
  6. Reduce the cost of government.
  7. Stabilize the U.S. housing market.
  8. Stabilize the U.S. banking system – and moderate risk dangers from certain derivatives and rehypothication stratagies.
  9. Reduce the scope of social programs and their control over U.S. citizens.

………………………..

Friedrich August von Hayek (1899-1992):

“To be controlled in our economic pursuits means to be…controlled in everything.”

“The more the state “plans” the more difficult planning becomes for the individual.”

 

 

July 2012 – World Debt levels: Staggering. – Paul Brodsky, QB Asset Management

Globally, there is approximately “$100 trillion in bank assets” (bank assets are primarily comprised of their loan base).  And for the U.S. those bank assets (loans)are about “$20 trillion held in the U.S. and abroad.”

The “Base Money” (which is “currency in circulation plus bank reserves held at Central banks”) behind those massive loan levels amounts to a mere “$8.5 to $9 trillion dollars.”  This degree of leverage in the global banking system means that currently, “We are in a baseless monetary system,” according to Brodsky.

More from Brodsky:  “The marketplace forces deleveraging, and there are two ways to deleverage. One is to let credit deteriorate on its own in the marketplace. And the other is to manufacture new currency or bank reserves. Those are the only two ways to deleverage a balance sheet.

What policy makers do not want to see is bank asset deterioration. That would lead to all sorts of bad things. You would see banks fail. You would see bank systems fail. You would see debtors fail and it would just feed on itself in an accelerating fashion. And so monetary policy makers have no choice but to deleverage in the other way, which is to colloquially print money; to manufacture electronic credits and call them bank reserves.

And to the degree that that extends into the private sector where debtors begin to fail en masse, that would increase failures of the bank assets in turn. And it would end the mortgage bond securities market, for example, and the leveraged loan markets, and end the private sector shadow banking system. So it does not work for anybody to have credit deteriorate. The only way to deleverage an economy is as we are saying: to create new base money with which to do it.”

Brodsky Summary:  “What policy makers do not want to see is bank asset deterioration. That would lead to all sorts of bad things. You would see banks fail. You would see bank systems fail. You would see debtors fail and it would just feed on itself in an accelerating fashion. And so monetary policy makers have no choice but to deleverage in the other way, which is to colloquially print money; to manufacture electronic credits and call them bank reserves.

And to the degree that that extends into the private sector where debtors begin to fail en masse, that would increase failures of the bank assets in turn. And it would end the mortgage bond securities market, for example, and the leveraged loan markets, and end the private sector shadow banking system. So it does not work for anybody to have credit deteriorate. The only way to deleverage an economy is as we are saying: to create new base money with which to do it.

The point here is you can either monetize debt or you can monetize (sell) assets. Or you revalue an asset on the balance sheet already of the Treasury or the Fed. And obviously that asset, we think, is gold. And that is the monetary asset that they have always reverted in the past. And that is the one we think that currencies, currently baseless currencies will be devalued against.

And so that we think is the mechanism that is ultimately going to play out whether in the marketplace or through some policy administered devaluation. Currencies are going to be devalued and that is where we sit right now. Timing this is impossible. We think the amount it would have to be devalued by, getting back to your original question, has got to be the amount of or something close to the amount of the gap (tens of US$ trillions) between bank assets and bank reserves. So it is a significant number.”

Full article / podcast from Peak Prosperity:  http://www.peakprosperity.com/podcast/79208/paul-brodsky-central-banks-are-nearing-inflate-or-die-stage?utm_campaign=weekly_newsletter_3&utm_source=newsletter_2012-07-07&utm_medium=email_newsletter&utm_content=node_title_79208

The Leviticus 25 Plan would allow American families to unload debt at the family level, before the real ‘debt storm’ hits.

Deriatives Dangers ahead for U.S. Taxpayers

From:  Avery Goodman – Seeking Alpha, “Details Of The $291 Trillion In Derivatives To Which American Taxpayers Are Exposed,”  April 17, 2012

“All the too-big-to-fail (TBTF) banks, with the exception of Morgan Stanley (which uses its SIPC-insured division) are using FDIC-insured depository divisions to house derivatives. That provides them with lower collateral requirements because FDIC depositary units usually have higher credit ratings than investment banks and/or bank holding companies. It also means that, ultimately, the American people will pay for losses.

While no one can determine the exact exposure, it is safe to say is that the risk is astronomical, and imposes a grave risk upon American taxpayers. It is not surprising that FDIC staff is not thrilled with US bank derivative exposures. In fact, Sheila Bair, who until recently ran the FDIC, is as disgusted with the Federal Reserve slush fund and the banking cartel as you and I. A few days ago, she penned a satirical article heavily critical of Fed policy and published it in the Washington Post.

The FDIC staff doesn’t like the fact that the Federal Reserve keeps allowing banks to put their derivatives inside insured depositary institutions. This is mostly for the same reason the banks want to put them there. Insolvency laws provides priority to derivatives counter-parties over the FDIC. If and when a bank is liquidated, the FDIC will be on the hook to repay depositors, but the failing bank will be stripped of all assets.

The US government’s full faith and credit guaranty means massive amounts of new US Treasuries will need to be sold, massive numbers of new counterfeit dollars will need to be printed under color of law, and significant tax hikes will need to be levied to pay the bill.

FDIC opposition, however, has had little to no effect on keeping derivatives out of insured units. The Federal Reserve, and not the FDIC, has the authority to approve the practice and it keeps doing so. The FDIC staff can complain privately, and issue regulations forcing disclosures, but little more. But, because of the disclosure requirements, more detailed information than ever is now available concerning derivatives.

In fact, FDIC has made far more information about derivatives public, over the last 3 years, than the Fed and OCC ever disclosed over decades. The numbers reveal a frightening concentration of risk. Five large “TBTF” US banks hold 96% of derivatives issued in the United States.

But the Bank for International Settlements in Switzerland reports that about $707.6 trillion worth of derivative obligations have been issued worldwide as of the end of 2011. That leaves about $417 trillion worth of derivatives that are not accounted for, in the FDIC records.”

Full articlehttp://seekingalpha.com/article/503761-details-of-the-291-trillion-in-derivatives-to-which-american-taxpayers-are-exposed

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Clearinghouses

U.S. taxpayers now also ‘stand behind’ the potential derivatives losses incurred by Clearinghouses, according to the Wall Street Journal, “The Mess the 45th President Will Inherit – Taxpayers now stand behind derivatives clearinghouses,”  May 23, 2012:

“As we noted in May 2010, the authority for this regulatory achievement was inserted into Congress’s pending financial reform bill by then-Senator Chris Dodd. Two months later, the legislation was re-named Dodd-Frank and signed into law by Mr. Obama. One part of the law forces much of the derivatives market into clearinghouses that stand behind every trade. Mr. Dodd’s pet provision creates a mechanism for bailing out these clearinghouses when they run into trouble.

Specifically, the law authorizes the Federal Reserve to provide “discount and borrowing privileges” to clearinghouses in emergencies. Traditionally the ability to borrow from the Fed’s discount window was reserved for banks, but the new law made clear that a clearinghouse receiving assistance was not required to “be or become a bank or bank holding company.” To get help, they only needed to be deemed “systemically important” by the new Financial Stability Oversight Council chaired by the Treasury Secretary.

Last year regulators finalized rules for how they would use this new power. On Tuesday, they began using it. The Financial Stability Oversight Council secretly voted to proceed toward inducting several derivatives clearinghouses into the too-big-to-fail club.

We’re told that the clearinghouses of Chicago’s CME Group and Atlanta-based IntercontinentalExchange were voted systemic this week, and rumor has it that the council may even designate London-based LCH.Clearnet as critical to the U.S. financial system.

U.S. taxpayers thinking that they couldn’t possibly be forced to stand behind overseas derivatives trading will not be comforted by remarks from Commodity Futures Trading Commission Chairman Gary Gensler. On Monday he emphasized his determination to extend Dodd-Frank derivatives regulation to overseas markets when subsidiaries of U.S. firms are involved.

Readers know Mr. Gensler as the chief regulator of MF Global, which was run into bankruptcy by his old Beltway and Goldman Sachs pal Jon Corzine. An estimated $1.6 billion is still missing from MF Global customer accounts. What an amazing feat Mr. Gensler will have performed if, through his agency’s oversight, he can manage to have U.S. customers eat the cost of Mr. Corzine’s bets on foreign debt and have U.S. taxpayers underwrite bets in foreign derivatives trading.

If there’s one truth we’ve learned about government financial backstops, it’s that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess. And if the 45th president spends his first term whining about his predecessor’s mistakes, he’ll have a point.”

The Leviticus 25 Plan would allow U.S. citizens to unload their debt at the family level – before the ‘storm hits.’

To all of the major Central Banks: “Printing money to save banks” is not the answer.

Your massive, on-going ‘print and transfer’ (to bail out banks) operation is a complete failure.  Your operations are simply devaluing currencies.  Massive debt levels remain (sovereign debt, bank debt, individual citizens debt).

Your operations are serving the financial oligarchs – while providing nothing for individual citizens in any given country.

If the debt hole in each country is so deep, and the potential deflationary pressures so great, that ‘printing’ is the only option to (possibly) avert a deflationary collapse…. then it is imperative that you provide direct credit extensions (liquidity flows) to individual citizens.

This will provide a mechanism for massive debt relief at the ‘ground floor’ where it must all first begin.  The liquidity from these credit extensions will flow from families … to the banks as individual families ‘eliminate’ debt.

Banks will also benefit as ‘distressed loan’ situations improve and delinquent loan situations recover.

Central Banks have solved nothing  – by continuing to print money to keep banks solvent.

And – if Central Banks continue to ‘print and transfer’ to banks (and other ‘money masters’), instead of providing direct liquidity extensions to citizens themselves, then major currency debasements will eventually ‘hit.’  And what follows will be a grand transfer of assets (land, particularly) on a massive scale – to the banks. 

And that will be the end of any pretense of freedom for the average citizen.

It is time to strike out in a new direction:  The Leviticus 25 Plan.

And then real economic recovery can begin.  And economic liberty for families restored.  Worldwide.