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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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation (growing money supply – a credit boom) and then by deflation (huge credit contraction), the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.” Thomas Jefferson

“A once in a lifetime credit tsunami” – Alan Greenspan on the current market problems.

Jefferson viewed the banks as the mechanisms used by rich and powerful influential men by which productive capacity was siphoned off into private hands through corporate shills and away from the people and into large, bank maintained and bank controlled corporations. Banks are the apex predators of capitalism.

Jefferson foretold the very event we are witnessing right now. The thing that people don’t get about the current situation is that it is much worse than anyone currently realises.  In my opinion, not only are we seeing a move away from a type of mercantile system which was supposed to reward hard work and savings, but we are probably witnessing the move away from a political system…democracy…at least as it was.

Yes, we will still have 2 parties, gloriously slugging it out…but in many ways, the 2 parties were long ago bought and paid for by the New York bankers on that side of the Atlantic and on this side of the Atlantic, by Monarchies…the very form of governance the US founders were fleeing from. Many people in the UK today mistakenly believe that we live in a democracy. We don’t…we live in a Monarchy. The masters of the UK citizens live in Buckingham palace. The Royal family is a figure head institution in many ways, but they still have all the levers of power which they will surely use should the situation not be to their liking.

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Tags: Alan Greenspan, Capitalism., Credit Boom, Credit Crunch, Currency, Inflation, Thomas Jefferson, UK Banks

In Japan, after the Nikkei bust and the infamous Nick Leason made the transition from high flying wide boy to jail bird to become a caring, sharing psychotherapist, the Japanese had what they refer to as the lost decade. Growth was anaemic at best, bad loans were held on banks books and real interest rates were negative. Since 1990, the stock market is still down over 75% and the property market is down over 50%. The world was awash in Japanese savings as traders raced to exploit the Yen carry trade, borrowing cheap yen and buying things like Icelandic Bonds and US treasury bills in what was regarded for a long time as a risk free punt. Bubbles formed on every other continent as mal-investment ran rampant.

Will the UK experience a similar lost decade?

Well, you could argue, not that we are already seeing it…but that we’ve already seen it! The FTSE is down in real terms over the last 10 years when inflation is taken into account. The measure of real returns is seldom looked at in the financial media when looking at the stock markets.

However, as all sophisticated investors know, measuring inflation is a key part to measuring returns. There’s little point in getting 10% returns if inflation is 10%….in reality there has been no appreciation in this scenario. Property could soon follow stocks dismal decade long performance in real terms as the printing presses whirr into high gear. Couple that with shaky looking growth prospects as we look out over the horizon right now and the picture isn’t a pretty one.

As companies struggle in the current climate, corporate earnings are likely to fall further and interest rates look set to continue to come down (in a attempt?) to try and push liquidity into the system. The problem is, as was the case with Japan that everyone is already up to their eyeballs in debt and so pushing liquidity into the system is like pushing on a piece of string…it may eventually find a way into savings as households rebuild their balance sheets….as is currently the case with banks and many large companies.

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Tags: FTSE, Inflation, Interest Rates, Nikkei, Yen

At what point do we put the Fed and the treasury in front of a judge? No point, the bailout bill protected them from prosecution for ever. They could crash the economy, and they will, and they are exempt from prosecution.

The Fed will fail in its bailout attempt…I’d say it’s pretty clear it’s already failed…markets down near 3500 points and credit spreads widening…the exact opposite of what they said would happen. If alarm bells aren’t ringing yet, give it a few months, this is only the start. The only thing they can do now is to pump more liquidity into the system…its kind of like trying to put out a fire with liquid…but the only liquid they have left is petrol. The thing is, they know its petrol…it’s not a mistake.

They would like you to believe that they are stupid or incompetent and that they didn’t see this coming. Many people will believe them. It’s hard to believe them when their moves have been foretold in print in Marc Faber’s book, “Tomorrow’s Gold”…they’ve acted out the playbook line by line. I’ve been preparing for this for quite a while….since I realised what was happening about 3 years ago.

Every single fiat currency system in history has ended with currency printing presses running 24/7…without exception. Every single one. Hyper inflation follows as the central banks print more and more money, devaluing currencies in lock step as they are doing right now with interest rate cuts…but mortgage costs are going up. The system is now openly broken. If you needed any proof that we are in very serious trouble, there it is. Interest rates and borrowing cost that aren’t linked at all. The most basic mechanism of monetary policy is no longer working. It’s like putting your foot on the accelerator of your car and not going anywhere…the signal that something is structurally wrong is that clear.

The end result of the printing presses is a decimated middle class, mass unemployment and mass bankruptcies as the clear out from the boom days is completed. Buy Gold.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Bailout, Banking, Economy, Inflation, Money Markets