Monthly Archives: June 2017

Paul Bodsky, QB Asset Management, July 2012: Global debt load – “staggering.” When creditors fail, banks lose.

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A LOOK BACK – July 2012:

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

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Meet America’s great debt neutralizer, offering massive debt reduction in both public and private sectors.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2355)

The answer to America’s liquidity problems: Grant U.S. citizens the same access to direct liquidity extensions that was provided to Wall Street’s financial sector 2008-2012. The Leviticus 25 Plan

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Let’s do a brief review…
 
     During the peak of the housing boom, mortgage tranches were packaged and securitized as Mortgage Backed Securities (MBS)  –  and peddled as income-producing investments by major investment houses.  Participating parties like Goldman Sachs and others also purchased ‘insurance’ to hedge their risk profiles in the event of a housing market ‘swan dive’ – and a potential collapse of the underlying payment streams supporting the value of these MBS investments vehicles.
 
 The ‘insurance’ was purchased (primarily from AIG) in the form of Credit Default Swaps (CDS).  And, thanks to some nifty deregulation orchestrated by Robert Rubin (Treasury Chief under Clinton), AIG was not required to carry any meaningful level of reserves to back the Credit Default Swaps – to pay their counterparties if the Mortgage Backed Securities market… ‘went south.’ 
 
It did just that, and the rest is history.  Housing tanked.  MBS’ tanked.  And AIG had no reserves  with which to pay Goldman and others.  Had normal bankruptcy proceedings prevailed, Goldman Sachs would likely have received just pennies on the dollar in settlement – for placing a huge ‘blind bet’ on an investment that had no reserves backing it up.
 
But – the U.S. Government stepped in, and through an arbitration process, brokered a settlement of 100 cents on the dollar, amounting to a direct cash transfusion of a cool $12.9 trillion – from the U.S. taxpayer – to Goldman Sachs.  
 
And then the real ‘fun’ began.  The investment banking heavyweights, Goldman Sachs and J.P. Morgan, were ‘fast-tracked’ for “federal bank charters.’  Their newly acquired status as commercial banks allowed them to joined in with “Bank of America, Citigroup, J.P. Morgan Chase and other banking titans who could go to the Fed and borrow massive amounts of money” at near-zero percent interest. 
 
“The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008.  “They had no other way to raise capital at that moment, meaning they were on the brink of insolvency,” says Nomi Prins, a former managing director at Goldman Sachs. “The Fed was the only shot.”
 
“In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. 
 
Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.”
 
“You’re borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way,” says the manager of one prominent hedge fund. “It’s free money.” 
(Source:  Wall Street’s Bail out Hustle – Matt Taibbi,  2-17-10)
 
And that is one of the primary justifications for the Leviticus 25 Plan  – granting U.S. citizens the same direct access to the Federal Reserve discount window – that was bestowed upon Goldman Sachs, J.P. Morgan, and certain other banking titans. 
 
After all, it is ‘our money.’  And granting U.S. citizens direct access to liquidity extensions from a Federal Reserve special “U.S. Citizens Credit Facility,”  would clean up liquidity issues at the family level: $75,000 per U.S. citizen at zero percent interest – with a specified  ‘recapture provision.’
 
The Leviticus 25 Plan pays for itself over a 10-15 year period.  It would generate $1.02 trillion budget surpluses each of the first five years.  It would reignite economic growth, providing family income earning jobs, eliminating massive tracts of debt at ground level, and restoring economic liberty in America.
 
America, currently, has no other viable option.

 

“He who will not apply new remedies must expect new evils.” – Sir Francis Bacon

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan 2018 –  $75,000 per U.S. citizen

The Leviticus 25 Plan 2018 (2341) 

     It would “strenghten the base” in America.

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