John Swinney, Scottish Cabinet Secretary with responsibility for Finance and Sustainable Growth welcomed the recent announcement that the Royal Bank of Scotland is committing to release £1.7billion worth of mortgages into the Scottish housing market during the next twelve. Swinney was enthousiastic about news claiming that it will be a major stepping stone in re-invigorating the property market north of the border.

Scottish Secretary, Jim Murphy was equally heartened by the news stating that it is the first positive indication that the government’s actions to return stability to the banking sector were starting to bear fruit. .

Includes in the lending package is £500milliom that is released through the Treasury’s Asset Protection Scheme, that was designed to increase levels of financial stability to British banks at the height of the global downturn.

A spokesman for RBS announced that the bank was committed to releasing further funds in an effort to push the housing market in Scotland forward, in line with customer demand. The bank stated their commitment to offer loans of up to 90% to help first-time buyers get their first foot on to the property ladder.

There was a definite mood of optimism on the FTSE yesterday, with the financial sector in particular making up lost ground.

London was boosted by a blistering start to trading on Wall Street this afternoon, with the Dow rising in dramatically in value after

Ironically, shares in the London Stock Exchange (LSE) whilst rising yesterday (32 pence to 402p) have dropped by almost 25% since the beginning of 2009. In happier times, the LSE was a real hot potato, often valued at around 2000p

On a day that saw U.K. stocks rise as high as they have done for the last four quarters, investors seemed to squeezing out a few smiles here and there as the banking sector particularly showed signs of a rebound.

On that wake of optimism, the UK banks certainly took up the baton, with shares in Barclays and HSBC in particular showing healthy increases.

Barclays jumped by almost ten percent, and HSBC by fourteen

The FTSE 100 finished down -0.76% (28.08 points to 3687.15) and the 250 also stuttered a little down 0.04% (2.39 at 5952.41)

On the money markets, Sterling remained stable.

Pound/US dollar 1.3741

Pound/Euro 1.0844

Pound/Japanese Yen 135.39

Pound/Swiss Franc 1.5999

On Tuesday, US stocks enjoyed their best day of 2009 as banking giant Citigroup announced a considerable profit for the first two months of the year.

The news pushed shares in Citigroup 37% higher, and banking stocks led a surge on the US markets.

The Dow Jones index closed up a remarkable 379.44 points at 6,926.49. NASDAQ rose also 89.64 points to 1358.28

In New York, it is expected that disgraced US financier Bernard Madoff will submit a guilty plea to orchestrating a $50bn (£35bn) fraud, according to his lawyer. .

Madoff will plead guilty to several counts of fraud when he appears before a Judge on Thursday. Not expecting a warm welcome, Madoff who is 70 years old is expected to face a prison sentence running into hundreds of years if convicted on all the eleven charges he is being accused of, including three counts of money laundering, securities fraud, mail fraud, wire fraud, false statements and perjury among others. Recently there has been some conjecture that the colossal sum of around $ 50 billion that Madoff had swindled from his unsuspecting clients could be a lot lower.

Asian markets took up where WE and European markets left off with Japan’s Nikkei index rising 4.6% to 7367.12 with banking shares leading the revival.

Other Far Eastern markets performed strongly, with Hong Kong’s Hang Seng index up 2.9% at 12,034.77, and South Korea’s Kopsi index climbing 3%.

The more pessimistic Asian stock analysts pour water on the coals by announcing that he rally was little more than a temporary respite from recent heavy falls in global markets.

In China, there were not too many happy faces as news that exports had plunged by more than a quarter in February from the same period a year ago. The world’s third-largest economy is facing a considerable and continuous drop in demand for their goods.

China’s trade surplus stood at $4.8bn for February, compared with $39.1bn for the previous month.

The continuing global economic downturn means that demand for Chinese goods around the world will continue to suffer, according the Chinese government.

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Tags: Credit Crunch, Hyper Inflation, Money Management, Mortgage, Mortgages, Royal Bank of Scotland, UK Banks

If you take this to its logical conclusion, 2 things become pretty clear. The first is that the government can’t repay the money it owes to the central bank. If the central bank creates it first transaction at £100m….and if the government never does another transaction, where does the money come from to pay back the interest owed to the central bank? The answer is that it cannot ever be repaid. The only legal currency comes from the central bank so the principle can never be repaid.

If all the money was taken out of the UK financial system tomorrow and given back to the central bank, there wouldn’t be enough because of the debt that has accumulated and which is legally owed to them.

This is why central banks must continue to print more and more money. The extra printing of money is called “inflation” and it must be built into the system in order to repay the bankers the interest that the government (the tax payers) owe to them. Mr Browns current planned spending binge will mean that inflation goes way up as the banks print more money.

Now….if you have been paying attention, you will wonder and scratch your head. How on earth can these central bank guys just print money from thin air and then be able to buy companies, houses, gold…you know, real stuff….stuff that’s actually worth something with little pieces of paper that they create out of thin air?

Well, the politicians have done a little deal with the bankers. You see, the politicians don’t like taxing you because then you will vote them out of their nice job, big post-politics boardroom pay packets and very important positions. The politician’s number one rule is to get re-elected. They just accept the way the whole system works and to be honest, not many of them have figured it out. The end result of the scam is bankruptcy and a hyper inflationary bust as the central bank must print more and more money to give to the government to repay the debts that the government has accrued to the central bank in the interest on the money on the principle it has borrowed from the central bank.

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Tags: Central Bank, Gordon Brown, Hyper Inflation, Inflation, Money, UK Financial System

Let’s start with the first fib Gordon Brown told us to kick off the central bank series of articles…that the business cycle is dead. That mathematically cannot be true as long as there is a central bank which creates money out of debt and charges interest.

This money from debt mechanism, never questioned, is the business cycle. It is also the cause of rising prices and the cause of the slow yet steady devaluation of the currency through monetary inflation.

The central bank is nothing short of a giant ponzi scheme…and the mathematical limits of its ability to perpetuate itself are coming to an end. This is one of the key things that we are seeing right now as this fiat currency system begins to crumble around the world as it’s mathematical limits are approached and the way to fix all fiat currency schemes, which do work for a while, are tried.

 Governments have no other way out than to print more money and borrow until they can’t borrow another penny. This works at the start of a fiat currency scheme, but eventually leads to a hyper inflationary bust.

Now, with all this deflation happening right now, you might think this is odd…but it’s really very simple. The deflationary period comes first, as credit is destroyed after the huge credit bubble. We are seeing the deleveraging of the credit and the ensuing destruction process happening right now as loans and mal investments’ are written off all over the system.

The hyper inflationary element comes as the government attempt out dated Keynesian notions of spending our way out of the current crisis. The huge government spending tries to correct the issue of too much credit with more credit. It’s laughable really to any serious economics student. It can’t work. It has never worked. It created more and bigger problems down the line.  You should be worried about the inflation that Gordon Brown will now create a lot more than if a few banks had failed. It’s a case of the cure killing the patient.

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Tags: Central Banking, Currency, Debt, Gordon Brown, Hyper Inflation, Inflation, Keynesian

The dreaded “H” word….hyper inflation…instils fear into the very soul of Chancellors of the Exchequer and economists everywhere…and with good cause. During periods of hyper inflation, savings, fixed incomes and businesses get decimated. Right now, we have a great model for hyper inflation…Zimbabwe.

In Zimbabwe, the cost of goods in local currency terms has skyrocketed. A can of coca cola costs $100bn Zimbabwean dollars. You read that right….one hundred billion dollars. (move pinkie to corner of mouth a la Austin Powers). How can this cataclysmic situation come to pass?

The answer is simple, and it revolves around the money supply. When a country has to print money to pay off the interest on its debt, the currency slowly gets devalued. Slowly initially…until the devaluation and the money printing reach such epic proportions that bank notes are worth something one day and close to nothing the next day. The most famous example of this is in the Weimar republic where the famous story goes of a woman who was taking a wheel barrow full of currency to the bakers to buy a loaf of bread. Unfortunately, she got mugged and the smart thieves tipped out the currency and ran off with the wheelbarrow!

So in the UK, once we spend all our savings on bailing out banks, we have to turn to raising money from debt….but that debt has to be serviced and interest payments have to be made at regular intervals…so more money is printed to achieve this. At the point where the population can’t be taxed anymore and the debt service payments reach a level that further currency needs to be printed, the slow, then fast devaluation of the currency follows and hyper inflation is just around the corner. Considering how much money Alastair Darling is considering spending in a Herculean attempt to reflate the British economy single handed, hyper inflation may be here sooner than any of us realise.

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Tags: Alastair Darling, Chancellors, Hyper Inflation, UK Banks, Zimbabwe

Here’s are some economists/money managers who saw this crash coming and predicted the interference of the central banks in the market and the result of those interferences. They go as far as to say that the cure could kill the patient

• Marc Faber
• Jim Rogers
• Peter Schiff

 
Here’s what Peter Schiff said last year on CNBC and he was laughed at 
 
Here’s Marc Faber’s book which everyone should read IMO 
 
here’s what Jim Rogers says will happen now 
 
Here’s what they say is going to happen as central banks intervene where they shouldn’t

• The printing presses will be put into overdrive
• Hyper inflation resulting in the loss and maybe even the confiscation of domestic savings and wealth, especially gold is a distinct possibility
• Mass unemployment and a deep depression as a short sharp shock is turned into a deep long shock by central bankers
• Asia will rise to be the new global economic leader
• The US dollar will be massively devalued and America will lose its economic place in the world

 
Here’s what they said should happen to allow the situation to resolve itself

• take the bitter medicine and don’t try to avoid the necessary corrective pain – let the markets work it out and stop meddling in the price discovery mechanism
• Let the weak go to the wall and the strong pick up the pieces
• End the culture of borrowing to consume and replace it with a culture of saving to produce (which made America loved, hardworking and very wealthy).

 
So these guys predicted the event and the central banks reaction to it and they were right.  
 
Apparently, Bernanke and Paulson aren’t able to predict a sunrise but Americans listen to them, (even if the market knows they are clowns…or worse).  
 
They’ve been right along and Bernanke/Paulson have been wrong all along. 
 
Someone please tell me what has happened to make Bernanke/Paulson right this time and why Faber/Schiff/Rogers are wrong.

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Tags: Economy, Hyper Inflation, Jim Rogers, Marc Faber, Money Markets, Peter Schiff

The key cause of hyper inflation is the debasement of the currency, usually through massive money printing programs. Some economists think that we will reach hyper inflation as a result of the huge bailout programs that are currently being undertaken by bankers and politicians. This is how it works. Think of a British pound as a share in UK PLC. Think of printing more bank notes and creating more fiat currency as the company taking on more debt…financed by the tax payers. Once the company we takes on more debt, it can pay less to shareholders since it has to pay interest on the debt. The time comes when we have to pay more and more interest on the debt until eventually the debt interest repayment level eats all the earnings from the company.

Once that happens, the company will be unable to raise more capital and it won’t be able to repay its debt. Once it misses a few debt payments, it’s off to the bankruptcy courts and insolvency follows. The key difference between the debt level of a company and a country is that a country doesn’t disappear from existence.

The debts will still have to be repaid and tax burdens will be increased to do this to a level that makes citizens virtual slaves through forced saving schemes to suck up excess liquidity from the population. In China, this resulted in the rise of communism. Social unrest is never far away once hyper inflation takes control.

It results in an inflation rate measured monthly and in excess of 50% per month. At this rate, it takes 36 months for the price of goods to go up 133 times. It creates massively higher prices and destroys savings and the purchasing power of those on fixed incomes. All pensions get wiped out thanks to LPI, limited price indexation, which is the measure used to increase many private pensions in this country. LPI normally states that pension increases are capped at 5% per annum.

If the governments give a blank cheque to the financial institutions, inflation will be the result. Whether or not it becomes hyper inflation remains to be seen. 

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Tags: British Pound, Debts, Financial News, Hyper Inflation