Olduvaiblog: Musings on the coming collapse

Home » Posts tagged 'Financial crisis'

Tag Archives: Financial crisis

charles hugh smith-Is the Deep State Fracturing into Disunity?

charles hugh smith-Is the Deep State Fracturing into Disunity?.

(March 14, 2014)

I recently discussed the Deep State and “throwing Wall Street under the bus” with my friend and colleague Jim Kunstler.

When we speak of The Powers That Be or the Deep State, this ruling Elite is generally assumed to be monolithic: of one mind, so to speak, unified in worldview, strategy and goals.


In my view, this is an over-simplification of a constantly shifting battleground of paradigms and political power between a number of factions and alliances within the Deep State. Disagreements are not publicized, of course, but they become apparent years or decades after the conflict was resolved, usually by one faction winning the hearts and minds of decision-makers or consolidating the Deep State’s group-think around their worldview and strategy.

History suggests that this low-intensity conflict within the ruling Elite is generally a healthy characteristic of leadership in good times. As times grow more troubled, however, the unity of the ruling Elite fractures into irreconcilable political disunity, which becomes a proximate cause of the dissolution of the Empire if it continues.

I recently proposed the idea that Wall Street now poses a strategic threat to national security and thus to the Deep State itself: Who Gets Thrown Under the Bus in the Next Financial Crisis? (March 3, 2014)

Many consider it “impossible” that Wall Street could possibly lose its political grip on the nation’s throat, but I suggest that Wall Street has over-reached, and is now teetering at the top of the S-Curve, i.e. it has reached Peak Wall Street.

Consider what the extremes of Wall Street/Federal Reserve predation, parasitism, avarice and power have done to the nation, and then ask if other factions within the Deep State are blind to the destructive consequences:

How The Fed Has Failed America, Part 2 (March 12, 2014)

The Fed Has Failed (and Will Continue to Fail), Part 1 (March 11, 2014)

Can anyone not in Wall Street or the Fed look at this chart and not see profound political disunity on the horizon?


source: Poll Shows Why QE Has Been Ineffective (STA Wealth Mgmt)

I recently discussed the Deep State and “throwing Wall Street under the bus” with my friend and colleague Jim Kunstler: here’s the resulting podcast, which you can download or listen to on whatever device you are using at the moment: KunstlerCast 250 — Chatting with Charles Hugh Smith

Jim’s trademark wit and clarity guide the discussion, and he kindly lets me blather on about the Deep State. I think you’ll find the discussion of interest; you certainly won’t hear this topic being aired elsewhere.

I have covered the Deep State and profound political disunity for many years:

Going to War with the Political Elite You Have (May 14, 2007)

The Shape of Things To Come (July 8, 2011)

The Master Narrative Nobody Dares Admit: Centralization Has Failed (June 21, 2012)

Harold James examines the real story behind the international response to the near-meltdown in 2008. – Project Syndicate

Harold James examines the real story behind the international response to the near-meltdown in 2008. – Project Syndicate.

The Secret History of the Financial Crisis

PRINCETON – Balzac’s great novel Lost Illusions ends with an exposition of the difference between “official history,” which is “all lies,” and “secret history” – that is, the real story. It used to be possible to obscure history’s scandalous truths for a long time – even forever. Not anymore.

Nowhere is this more apparent than in accounts of the global financial crisis. The official history portrayed the US Federal Reserve, the European Central Bank, and other major central banks as embracing coordinated action to rescue the global financial system from disaster. But recently published transcripts of 2008 meetings of the Federal Open Market Committee, the Fed’s main decision-making body, reveal that the Fed has effectively emerged from the crisis as the world’s central bank, while continuing to serve primarily American interests.

The most significant meetings took place on September 16 and October 28 – in the aftermath of the collapse of the US investment bank Lehman Brothers – and focused on the creation of bilateral currency-swap agreements aimed at ensuring adequate liquidity. The Fed would extend dollar credits to a foreign bank in exchange for its currency, which the foreign bank agreed to buy back after a specified period at the same exchange rate, plus interest. This gave central banks – especially those in Europe, which faced a dollar shortage as US investors fled – the dollars they needed to lend to struggling domestic financial institutions.

Indeed, the ECB was among the first banks to reach an agreement with the Fed, followed by other major advanced-country central banks, including the Swiss National Bank, the Bank of Japan, and the Bank of Canada. At the October meeting, four “diplomatically and economically” important emerging economies – Mexico, Brazil, Singapore, and South Korea – got in on the action, with the Fed agreeing to establish $30 billion swap lines with each of their central banks.

Though the Fed acted as a kind of global central bank, its decisions were shaped, first and foremost, by US interests. For starters, the Fed rejected applications from some countries – whose names are redacted in the published transcript – to join the currency-swap scheme.

More important, limits were placed on the swaps. The essence of a central bank’s lender-of-last-resort function has traditionally been the provision of unlimited funds. Because there is no limit on the amount of dollars that the Fed can create, no market participant can take a speculative position against it. By contrast, the International Monetary Fund has finite resources provided by member countries.

The Fed’s growing international role since 2008 reflects a fundamental shift in global monetary governance. The IMF emerged at a time when countries were routinely victimized by New York bankers’ casual assumptions, such as J.P. Morgan’s assessment in the 1920’s that Germans were “fundamentally a second-rate people.” The IMF was a critical feature of the post-WWII international order, intended to serve as a universal insurance mechanism – not one that could be harnessed to advance contemporary diplomatic interests.

Today, as the Fed documents clearly demonstrate, the IMF has become marginalized – not least because of its ineffective policy process. Indeed, at the outset of the crisis, the IMF, assuming that demand for its resources would remain low permanently, had already begun to downsize.

In 2010, the IMF made a play for resurrection, presenting itself as central to solving the euro crisis – beginning with its role in financing the Greek bailout. But here, too, a secret history has been revealed – one that highlights just how skewed global monetary governance has become.

The fact is that only the US and the massively over-represented countries of the European Union supported the Greek bailout. Indeed, the major emerging economies all strongly opposed it, with the Brazilian representative calling it “a bailout of Greece’s private debt holders, mainly European financial institutions.” Even the Swiss representative condemned the measure.

As fears of a sudden collapse of the eurozone have given way to a prolonged debate about how the costs will be met through bail-ins and write-offs, the IMF’s position will become increasingly convoluted. Though the IMF is supposed to have seniority over other creditors, there will be demands to write down a share of the loans that it has issued. Poorer emerging-market countries would resist such a move, arguing that their citizens should not have to foot the bill for fiscal profligacy in much wealthier countries.

Even the original advocates of IMF involvement are turning against the Fund. EU officials are outraged by the IMF’s apparent effort to gain support in Europe’s debtor countries by urging write-offs of all debt that it did not issue. And the US Congress has refused to endorse the expansion of IMF resources – part of an international agreement brokered at the 2010 G-20 summit.

While the outrage that followed the appointment of another European as IMF Managing Director in 2011 is likely to ensure that the Fund’s next head will not hail from Europe, the IMF’s fast-diminishing role means that it will not matter much. As 2008’s secret history shows, what matters is who has access to the Fed.

Read more at http://www.project-syndicate.org/commentary/harold-james-examines-the-real-story-behind-the-international-response-to-the-near-meltdown-in-2008#EYtp3dyZ7LsmTwgc.99

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”

So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?

Ready?

“Overconfidence.” (no, not “weather”)


Yup. That’s it.

The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.

Actually what is going to sound even more obvious, is that subprime was not contained.

But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.

Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.

But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:

He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.

He concluded that he should “try to simplify the message, but not simplify too much”.

Oh you mean something like this, uttered literally moments ago:

  • LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE

Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.

But don’t worry, it’s the “overconfidence” that did us in…

And then, on to regrets – because Bernanke has a few:

We could have done some things on the margin to mitigate somewhat the crisis.”

“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”

You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.

But wait, because the punchline beckons:

 “My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”

“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”

So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.

* * *

So how much does such profound brilliance cost?

 Bernanke received at least $250,000 for his appearance.

Or, in other words, more than he was paid for one full year as Fed chairman.

And that, ladies and gentlemen, is a wrap.

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”

So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?

Ready?

“Overconfidence.” (no, not “weather”)


Yup. That’s it.

The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.

Actually what is going to sound even more obvious, is that subprime was not contained.

But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.

Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.

But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:

He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.

He concluded that he should “try to simplify the message, but not simplify too much”.

Oh you mean something like this, uttered literally moments ago:

  • LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE

Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.

But don’t worry, it’s the “overconfidence” that did us in…

And then, on to regrets – because Bernanke has a few:

We could have done some things on the margin to mitigate somewhat the crisis.”

“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”

You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.

But wait, because the punchline beckons:

 “My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”

“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”

So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.

* * *

So how much does such profound brilliance cost?

 Bernanke received at least $250,000 for his appearance.

Or, in other words, more than he was paid for one full year as Fed chairman.

And that, ladies and gentlemen, is a wrap.

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge

Bernanke Finally Reveals, In One Word, Why The Financial System Crashed | Zero Hedge.

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that’s what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

Bernanke confirmed as much when he said he could now speak more freely about the crisis than he could while at the Fed – “I can say whatever I want.”

So what was the reason, according to the man who was easily the most powerful person in the world for nearly a decade?

Ready?

“Overconfidence.” (no, not “weather”)


Yup. That’s it.

The United States became “overconfident”, he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

“This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,” Bernanke said.

Actually what is going to sound even more obvious, is that subprime was not contained.

But going back to Bernanke’s explanation, brought to us by Reuters, we wonder: did he perhaps get into the reason for the overconfidence? Maybe such as the Fed’s endless hubris in believing it knew what it was doing, when time after time and especially over the past 30 years, the US central bank has shown that all it now does is lead the nation from bubble to bubble, from crisis to crisis, and replaces one asset bubble, first the dot com, then the housing, with another, even bigger one, until we get to the biggest bubble of all time – the stock market as you see it currently, where the S&P 500 soars to all time highs and when news of an ICBM launch can barely cause a dent in a ridiculous upward ramp driven by, you guessed it, overconfidence.

Only this time it’s different, because the Fed really know what it is doing. Or maybe this time is no different than any other market mania unwinding before our eyes, with the careful nurturing of the the Fed and its chairmanwoman, be it Greenspan, Bernanke or Yellen.

But has Bernanke at least learned something? After all he is supposedly a very smart man from Princeton? Why yes:

He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. “That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can’t do that because the markets do not understand hypotheticals.

He concluded that he should “try to simplify the message, but not simplify too much”.

Oh you mean something like this, uttered literally moments ago:

  • LACKER SAYS UNEMPLOYMENT THRESHOLD CLOSE TO OBSOLETE

Thank you Fed for admitting the whole premise behind the injection of over $1 trillion in the capital markets, the Fed’s “target” of 6.5% unemployment, was really a bizarro bullshit joke perpetrated on the common man, when in reality the threshold was 1900 on the S&P. Or 2000. Or 3000. Or pick some arbitrary nominal number, where people confuse paper assets inflation with real wealth.

But don’t worry, it’s the “overconfidence” that did us in…

And then, on to regrets – because Bernanke has a few:

We could have done some things on the margin to mitigate somewhat the crisis.”

“Although we have been very aggressive, I think on the monetary policy front we could have been even more aggressive.”

You heard that, the $4.1 trillion balance sheet is nowhere near enough. The Fed could have blown up the final bubble even more! Because that’s what you are taught on Clown Keynesian school.

But wait, because the punchline beckons:

 “My natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person,” Bernanke said today in his first public remarks since leaving the Fed in January, referring to the central bank’s mandate from Congress to ensure full employment and stable prices. “The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.”

“The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”

So there it is: the system crashed because we were “overconfident” – nothing to do with system merely having gorged on the reactionary excess to the popping of the dot com bubble – but Bernanke is 100% certain he could have done more to help the average person, because the Fed’s balance sheet trickle down eventually works. And let’s not forget the “overconfidence” about containing inflation in 15 minutes or less. That one will be hilarious to watch unwind.

* * *

So how much does such profound brilliance cost?

 Bernanke received at least $250,000 for his appearance.

Or, in other words, more than he was paid for one full year as Fed chairman.

And that, ladies and gentlemen, is a wrap.

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”

Government Lays Groundwork To Confiscate Your 401k and IRA: “This Is Happening”.

Mac Slavo
February 13th, 2014
SHTFplan.com

uncle-sam-retirement

This morning Reuters obtained a leaked proposal disclosing that European Union officials are looking for new and innovative ways to fund their immense debt levels. As noted by Zero Hedge, they’re no longer turning exclusively to central bankers to simply print more money as needed. Because last year’s bank bail-in forcing the confiscation of funds from average depositors in Cyprus worked so well, EU regulators and bankers have determined that they’ll use a similar method to fund their future endeavors.

In a nutshell, and in Reuters’ own words, “the savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.”

The solution? “The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.”

Mobilize, once again, is a more palatable word than, say, confiscate.

This is what happens when governments run out of money.

But if you think this is limited to just Europe, then consider the words of President Barack Obama in his recent State of the Union address.

For all intents and purposes, a similar groundwork is being laid right here in America.

They’ve already taken over the health care industry… why not nationalize our retirement savings while they’re at it?

(Reprinted with permission from Sovereign Man. You can read the full analysis here.)

This is basically the offer that the President of the United States floated last night.

And like an unctuously overgeled used car salesman, he actually pitched Americans on loaning their retirement savings to the US government with a straight face, guaranteeing “a decent return with no risk of losing what you put in. . .”

This is his new “MyRA” program. And the aim is simple– dupe unwitting Americans to plow their retirement savings into the US government’s shrinking coffers.

We’ve been talking about this for years. I have personally written since 2009 that the US government would one day push US citizens into the ‘safety and security’ of US Treasuries.

Back in 2009, almost everyone else thought I was nuts for even suggesting something so sacrilegious about the US government and financial system.

But the day has arrived. And POTUS stated almost VERBATIM what I have been writing for years.

The government is flat broke.Even by their own assessment, the US government’s “net worth” is NEGATIVE 16 trillion. That’s as of the end of 2012 (the 2013 numbers aren’t out yet). But the trend is actually worsening.

In 2009, the government’s net worth was negative $11.45 trillion. By 2010, it had dropped to minus $13.47 trillion. By 2011, minus $14.78 trillion. And by 2012, minus $16.1 trillion.

Here’s the thing: according to the IRS, there is well over $5 trillion in US individual retirement accounts. For a government as bankrupt as Uncle Sam is, $5 trillion is irresistible.

They need that money. They need YOUR money. And this MyRA program is the critical first step to corralling your hard earned retirement funds.

At our event here in Chile last year, Jim Rogers nailed this right on the head when he and Ron Paul told our audience that the government would try to take your retirement funds:

I don’t know how much more clear I can be: this is happening. This is exactly what bankrupt governments do. And it’s time to give serious, serious consideration to shipping your retirement funds overseas before they take yours.

As former Congressman Ron Paul notes, the government will stop at nothing.

“They’ll use force and they’ll use intimidation and they’ll use guns, because you can’t challenge the State and you can’t challenge the State’s so-called right to control the money,” warns Paul. “It’s already indicated that they will confiscate funds and they will [confiscate] pension funds.”

This didn’t just happen over night. The move to make this reality has been going on for quite some time. The first time it was mentioned publicly in any official capacity was at a 2010 Congressional hearing:

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

Sen. Tom Harkin (D-Iowa), Chairman of the Health, Education, Labor and Pensions (HELP) Committee heard from hand-picked witnesses advocating the infamous “Guaranteed Retirement Account” (GRA) authored by Theresa Guilarducci.

In a nutshell, under the GRA system government would seize private 401(k) accounts, setting up an additional 5% mandatory payroll tax to dole out a “fair” pension to everyone using that confiscated money coupled with the mandated contributions.  This would, of course, be a sister government ponzi scheme working in tandem with Social Security, the primary purpose being to give big government politicians additional taxpayer funds to raid to pay for their out-of-control spending.

You’d think that such an idea would be immediately dismissed by the American public, but it has only gained steam since, as evidenced by a 2012 hearing held at the U.S. Labor Department:

The hearing, held in the Labor Department’s main auditorium, was monitored by NSC staff and featured a line up of left-wing activists including one representative of the AFL-CIO who advocated for more government regulation over private retirement accounts and even the establishment of government-sponsored annuities that would take the place of 401k plans.

“This hearing was set up to explore why Americans are not saving as much for their retirement as they could,” explains National Seniors Council National Director Robert Crone, “However, it is clear that this is the first step towards a government takeover. It feels just like the beginning of the debate over health care and we all know how that ended up.

Such “reforms” would effectively end private retirement accounts in America, Crone warns.

A few years ago the government of the United States of America nationalized nearly 1/6th of our economy when they took over the health care system with forced mandates. In the process they essentially took control of $1.6 trillion in yearly industry revenues.

But that’s nothing compared to private savings. The total amount of retirement assets in America, including 401k, IRA and savings accounts is around $21 trillion. With our national debt coincidentally approaching the same, the government sees big money and potentially a way out of our country’s fiscal disaster.

This will start voluntarily with the MyRA and other state-sponsored programs. But when not enough Americans are making it their patriotic duty to turn over their funds to their government, they’ll mandate compliance with the stroke of a pen just as they did with thePatient Affordable Care Act.

And just like Obamacare it will be enforced by the barrel of a gun. Failure to comply will mean confiscation without recourse and prison time.

All they need now is a trigger.

And that trigger will likely come in the form of another stock market collapse. Wipe out Americans’ in a stock market crash and scare the heck out of them with more economic bad news, and millions of our countrymen will be all too willing to hand it over to Uncle Sam. Panic is a powerful motivator and what better way to get people on board than by threatening them with squalor and destitution in their old age if they don’t go along with it?

Government officials have been actively working to make this a reality for years. The Europeans are doing the same.

You can put your head in the sand or cover your ears and pretend this is not happening, but that won’t change the outcome.

They will take everything they can get their hands on.

Guest Post: Running Away From Reality | Zero Hedge

Guest Post: Running Away From Reality | Zero Hedge.

From Fernando del Pino Calvo-Sotelo, published originally in Expansion

View from Spain: Running away from reality (pdf)

In a society that’s incessantly pulling all sorts of rights out of its hat, the right to not suffer is the father of them all. We feel entitled to keep our jobs, our health, our home and our leisure, demanding in fact to be carefree. We don’t want our lifestyle to depend on how hard we work or how much we save, and neither do we want our wrong decisions to have any consequences. In our delirium, we feel we have the right to know the future or even to decide when life should start (that of others, of course) and also when death should come (usually that of others as well). In brief, we want the security that we will be able to avoid pain. The problem is that, in life, pain is as undesirable as it is inevitable, and security, in the words of Helen Keller, is “a superstition that does not exist in nature”. However, man persists in his chimerical search for the security that will keep him free from suffering. Citizens demand that from their ruling classes, who promise ever more extravagant rights and certainties, constantly fleeing reality and truth. And in this hysterical, unbridled race to reach an evanescent security, liberty is thrown into the dust like a bothersome burden.

The free man must be responsible for his behavior without being able to blame anyone else when things go wrong. He must live in discomfort and uncertainty and accept the authorship of all his decisions. This is hard. That’s why as soon as the sweet illusion of freedom gives way for the bitter taste of responsibility and effort which that very freedom bears with it, man revolts against the latter. Some 3500 years ago, the Jewish people, having been oppressed for generations by slavery, was freed by Moses, who took them out of Egypt in order to lead them to the Promised Land. But just a few short days after their last minute’s escape from Pharaoh’s claws in the Red Sea, as the harshness of the desert started to put a dent in their spirit, the Jews forgot the humiliations, whippings, hardships and indignity of their slavery, cursed their freedom and blamed their liberator for freeing them, to the extent that Moses was nearly stoned: “Why did we not die at Yahweh’s hand in Egypt, where we used to sit round the flesh pots and could eat to our heart’s content!”. The security of a hot meal and a loaf of bread seemed worth more than the recently recovered freedom.

It goes without saying that throughout History all power seekers and power holders have taken good note of this story. They have come to realize that all they need to have the people surrender their liberty is to promise them security: a certainty – liberty – in exchange for a promise – security; an extremely valuable good in exchange for a chimera. And over and over again, the people have fallen into the same trap.

Today, under the disguise of a promise of physical security, governments treat each of us as if we were suspected criminals and not free citizens with rights: they record our conversations, intercept our mails, take our fingerprints and as many pictures as they deem necessary, do body searches and leave us half naked when we travel as if it were business as usual, and ruthlessly hunt down as traitors those who uncover these practices.

As far as economic security is concerned, totalitarian communism was an extreme of this barter: the people lost their liberty and never found any security, except for the certainty of being poor under a merciless tyranny. The fraudulent Welfare State proposed something similar (do you believe that the wording of Social “Security” is casual?): it promised a paradise of “free” pensions, healthcare and education in exchange for giving up our freedom to save (thus relieving us off the uncomfortable responsibility of doing so). We surrendered our savings to the politicians, those incurable squanderers, well known for anything but respecting either their word or other people’s money! And now that, even after burying us under a mountain of taxes and perpetual debts, public money is scarce and nearing extinction, where is the promised security to be found? We must understand once and forever more that security is not only liberty’s enemy, but an impediment to prosperity. In fact, security and prosperity are antonyms.

The 2008 financial crisis was mostly caused by politicians and central bankers wanting to avoid the suffering caused by economic cycles. Due to the irritating fact that pained voters tend not to reelect incumbent governments, what better promise could they make than that of trying to end recessions and live in a plateau of permanent prosperity? We still believe the charlatans who, in politics or in central banking, assure us that they can get rid of the uncertainty that terrifies us so much. We long for a control that simply does not exist, and these are the consequences: perversely, the chimeric search for security brings much more suffering than what it pretended to avoid in the first place.

In 1891, Pope Leo XIII prophetically forewarned us in his wise Encyclical Rerum Novarum about the evils that are now upon us: “To suffer and to endure, therefore, is the lot of humanity; let them strive as they may, no strength and no artifice will ever succeed in banishing from human life the ills and troubles which beset it. If any there are who pretend differently – who hold out to a hard-pressed people the boon of freedom from pain and trouble, an undisturbed repose, and constant enjoyment – they delude the people and impose upon them, and their lying promises will only one day bring forth evils worse than the present”.

We have to accept insecurity and pain as something inherent to human nature and promptly mistrust anyone promising the opposite, in the conviction that that promise only seeks to fool the unsuspecting. An economic and political system focused on avoiding the inevitable, promising an inexistent security, is due to fail and headed for poverty. That’s why we should make peace with the reality of uncertainty and suffering and not try to escape from both. Only from the deep acceptance of these realities, will the trembling, fragile ember of hope that has always raised the human being up from his falls catch fire again. The history of man is the successful story of a flexible adaptation to an ever changing, ever insecure environment. As a country, we should look suffering in the eye, without fear, and dedicate all our energies to adapting to the new reality instead of continuously running away from it.

Bernanke’s Legacy: A Weak and Mediocre Economy – John P. Cochran – Mises Daily

Bernanke’s Legacy: A Weak and Mediocre Economy – John P. Cochran – Mises Daily.

As Chairman Bernanke’s reign at the Fed comes to an end, the Wall Street Journal provides its assessment of “The Bernanke Legacy.” Overall the Journaldoes a reasonable job on both Greenspan and Bernanke, especially compared to the “effusive praise from the usual suspects; supporters ofmonetary central planning. The Journalargues when accessing Bernanke’s performance it is appropriate to review Bernanke’s performance “before, during, and after the financial panic.”

While most assessments of Bernanke’s performance as a central banker focus on the “during” and “after” financial-crisis phases with much of the praise based on the “during” phase, the Journaljoins the Austrians and John Taylor in unfavorable assessment of the more critical “before” period. It was this period when the Fed generated its second boom-bust cycle in the Greenspan-Bernanke era. In the Journal’s assessment, Bernanke, Greenspan, and the Fed deserve an “F.” While this pre-crisis period mostly fell under the leadership of Alan Greenspan, the Journal highlights that Bernanke was the “leading intellectual force” behind the pre-crisis policies. As a result of these too loose, too long policies, just as the leadership of the Fed passed from Greenspan to Bernanke, the credit boom the Fed “did so much to create turned to mania, which turned to panic, which became a deep recession.” The Journal’s description of Bernanke’s role should be highlighted in any serious analysis of the Bernanke era:

His [Bernanke’s] role goes back to 2002 when as a Fed Governor he gave a famous speech warning about deflation that didn’t exist [and if it did exist should not have been feared].[1] He and Mr. Greenspan nonetheless followed the advice of Paul Krugman to promote a housing bubble to offset the dot-com crash.

As Fed transcripts show, Mr. Bernanke was the board’s intellectual leader in its decision to cut the fed-funds rate to 1% in June 2003 and keep it there for a year. This was despite a rapidly accelerating economy (3.8% growth in 2004) and soaring commodity and real-estate prices. The Fed’s multiyear policy of negative real interest rates produced a credit mania that led to the housing bubble and bust.

For some of the best analysis of the Fed’s pre-crisis culpability one should turn to Roger Garrison’s excellent analysis. In a 2009 Cato Journal paper, Garrison (2009, p. 187) characterizes Fed policy during the “Great Moderation as a “learning by doing policy” which, based on events post-2003, would be better classified as “so far so good” or “whistling in the dark.” The actual result of this “learning by doing policy” is described by Garrison in “Natural Rates of Interest and Sustainable Growth”:

In the earlier episode [dot.com boom-bust], the Federal Reserve moved to counter the upward pressure of interest rates, causing actual interest rates not to deviate greatly from the historical norm. In the later episode [housingbubble/boom-bust], the Federal Reserve moved to reinforce the downward pressure on interest rates, causing the actual interest rates to be exceedingly low relative to the historical norm. Although the judgment, made retrospectively by economists of virtually all stripes, that the Fed funds target rate was “too low for too long” between mid-2003 and mid-2004, it was almost surely too low for too long relative to the natural rate in both episodes. (p. 433)

Given this and other strong evidence of the Fed’s role in creating the credit driven boom, theJournal faults “Mr. Bernanke’s refusal to acknowledge that the Fed made any mistake in the mania years.”

On the response to the crisis, the Journal refrains from the accolades of many who credit the Fed led by the leading scholar of the Great Depression from acting strongly to prevent another such calamity. According to the Fed worshipers, things might not be good, but without the unprecedented actions and bailouts things would have been catastrophic. The Journal’s more measured assessment:

Once the crisis hit, Mr. Bernanke and the Fed deserve the benefit of the doubt. From the safe distance of hindsight, it’s easy to forget how rapid and widespread the financial panic was. The Fed had to offset the collapse in the velocity of money with an increase in its supply, and it did so with force and dispatch. One can disagree with the Fed’s special guarantee programs, but we weren’t sitting in the financial polar vortex at the time. It’s hard to see how others would have done much better.

But discerning readers of Vern McKinley’s Financing Failure: A Century of Bailouts might disagree. Fed actions, even when not verging on the illegal, were counter-productive, unnecessary, and contributed to action freezing policy uncertainty which contributed to the collapse of the velocity of money. McKinley describes much of what was done as “seat-of-the-pants decision-making” (pp. 305-306):

“Seat of the pants” is not a flattering description of the methods of the regulators, but its use is justified to describe the panic-driven actions during the 2000s crisis. It is only natural that under the deadline of time pressure judgment will be flawed, mistakes will be made and taxpayer exposure will be magnified, and that has clearly been the case. With the possible exception of the Lehman Brothers decision … all of the major bailout decisions during the 2000s crisis were made under duress of panic over a very short period of time with very limited information at hand and with input of a limited number of objective parties involved in the decision making. Not surprisingly, these seat-of–the-pants responses did not instill confidence, and there was no clear evidence collected that the expected negative fallout would truly have occurred.

While a defense of some Fed action could be found in Hayek’s 1970s discussion of “best” policy under bad institutions (a central bank) where he argued that during a crisis a central bank should act to prevent a secondary deflation, the Fed actions went clearly beyond such a recommendation. Better would have been an immediate policy to end the credit expansion in its tracks. The Fed’s special guarantee programs and movement toward a mondustrial policy should be a great worry to anyone concerned about long-term prosperity and liberty. Whether any human running a central bank could have done better is an open question, but other monetary arrangements could clearly have led to better outcomes.

The Journal’s analysis of post-crisis policy, while not as harsh as it should be,[2] is critical. Despite an unprecedented expansion of the Fed’s balance sheet, the “recovery is historically weak.” At some point “a Fed chairman has to take some responsibility for the mediocre growth — and lack of real income growth — on his watch.” Bernanke’s policy is also rightly criticized because “The other great cost of these post-crisis policies is the intrusion of the Fed into politics and fiscal policy.”

Because the ultimate outcome of this monetary cycle hinges on how, when, or if the Fed can unwind its unwieldy balance sheet, without further damage to the economy; most likely continuing stagnation or a return to stagflation, or less likely, but possible hyper-inflation or even a deflationary depression, the Bernanke legacy will ultimately depend on a Bernanke-Yellen legacy. Given, as the Journal points out, “Politicians — and even some conservative pundits — have adopted the Bernanke standard that the Fed’s duty is to reduce unemployment and manage the business cycle,” the prospect that this legacy will be viewed favorably is less and less likely. Perhaps if the editors joined Paul Krugman in reading and fully digesting Joe Salerno’s “A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis,” they would correctly fail Bernanke and Fed policy before, during, and after the crisis.

But what should be the main lesson of a Greenspan-Bernanke legacy? Clearly, if there was no pre-crisis credit boom, there would have been no large financial crisis and thus no need for Bernanke or other human to have done better during and after. While Austrian analysis has often been criticized, incorrectly,[3] for not having policy recommendations on what to do during the crisis and recovery, it should be noted that if Austrian recommendations for eliminating central banks and allowing banking freedom had been followed, no such devastating crisis would have occurred and no heroic policy response would have been necessary in the resulting free and prosperous commonwealth.

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

Comment on this article. When commenting, please post a concise, civil, and informative comment.
John P. Cochran is emeritus dean of the Business School and emeritus professor of economics at Metropolitan State University of Denver and coauthor with Fred R. Glahe of The Hayek-Keynes Debate: Lessons for Current Business Cycle Research. He is also a senior scholar for the Mises Institute and serves on the editorial board of the Quarterly Journal of Austrian Economics. Send him mail. See John P. Cochran’s article archives.

You can subscribe to future articles by John P. Cochran via this RSS feed.

Notes

[1] See Joseph T. Salerno, “An Austrian Taxonomy of Deflation — With Applications to the U.S.” Quarterly Journal of Austrian Economics 6, no. 4 (2001).

[2] See John P. Cochran’s, Bernanke: The Good Engineer? Mises Daily Article, 21 March 2013 and Bernanke: A Tenure of Failure, Mises Daily Article, 31, July 2013.

[3] See John P. Cochran, Recessions: The Don’t Do List, Mises Daily Article, 17 February 2013.

On the Other Side of Collapse: Notes from the Island of Cyprus

On the Other Side of Collapse: Notes from the Island of Cyprus.

by Lakis Polycarpou, originally published by City of the Future  | TODAY

This is an interview with my cousin, Sofia Matsi. Sofia is a health campaigner, artist, permaculture designer and sustainability activist. She lives in Nicosia, Cyprus.

Last year, Sofia witnessed first hand the near complete collapse of the island’s economy–an event which culminated in a highly controversial bailout plan that included an unprecedented confiscation of up to 10 percent of customer bank deposits and the dismantling of the country’s banking industry.

The deal was the fifth Eurozone bailout in recent years–after Greece, Ireland, Portugal and Spain–that was orchestrated by the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB), together called “the Troika” in Greek and Cypriot slang.

Cyprus has been de facto partitioned since 1974, when Turkey invaded and forced Greek Cypriots out of the northern part of the island. In 2004, Cyprus joined the Eurozone, in part as a way to protect the island from further Turkish aggression.

In this interview, Sofia talks about her experience of the crisis, her efforts to develop her father’s land as a permaculture site, and her work to help build “The Movement of Life,” an organization that promotes ecological sustainability, resilience and economic self-reliance for Cypriots.

LP:  Can you tell me about the situation right now in Cyprus? What is the mood of the people now? How has that changed in the past year?

SM:  Well, almost exactly a year ago we gave our first presentation as The Movement of Life here in Cyprus. At that time, those of us in the movement were aware of the danger of a financial crisis; there were new elections coming up, and along with that was the threat of committing Cyprus to the Troika plan.  And that was going to happen with the elections in mid-February.

So we were rushing around, trying to figure out what was going to happen, what the outcome would be. What eventually ended up happening is that we were told as a nation to listen to what Troika was saying. And what Troika was proposing was a huge loan, and we wouldn’t really understand where would that end.

So that brought us to the bailout announcements in March. Some people were surprised, but those of us in the Movement of Life, were already talking about these things.

After that, though, the bailout gave a big push to many, many groups in Cyprus who wanted to to be more independent and self-sufficient. It gave power to groups that were already thinking of working in this direction, like people who were saving seeds, people who had always wanted to start organic farming.

So things started popping up from this — lectures were happening all summer long, lectures on how to create your own organic farm, worm composting, and stuff like that. As a team, we decided to get more practical, and stop just lecturing people, and demonstrating how to. How to compost, how to do worm composting, how to do the seed saving.

What we observed is that before the bailout announcements, people were not so interested. People were like, “yeah, oh well, you’re saying what you’re saying, but I don’t think it affects me, and I don’t think it matters.”

But then after, we saw increased interest from people. People wanted more, wanted to be more independent and self-sufficient. Again, there’s a huge segment of the population who don’t really realize, even now, that there’s a tremendous need to be more independent as Cypriot citizens, and we cannot depend on the lifestyles we had before. Plenty of people keep going with that same lifestyle, but I think the majority, if not all of us, realize that we are in a very tight situation, financially at least.

What’s been the impact of the financial crisis on you and your family?

Well, that’s … a bit strange also. I don’t know if others from the States have heard my family’s news, but what changed for us was that we started realizing — personally, I started realizing–that we cannot maintain the same lifestyle as before.

When the bailout announcement was made, the banks were closed for 10 days. That meant that cash flow got very tight, there were fewer and fewer products at the supermarket, so we started wondering, what does it mean to be sustainable? We couldn’t produce anything at home. Personally, that filled me with panic at that point. Because I realized, I don’t have anything to eat, I don’t produce anything, and I can’t trade anything with anyone.

So that made me want to be more resilient, more independent. And talking to my parents, they also slowly started understanding what was behind this idea of becoming more independent, so permaculture came into the mix. Permaculture was in my life as a concept, but at that point it became more of a need, to learn practically more about permaculture, because it seemed like a very good answer for many of the problems.

So I started searching for workshops [for a permaculture design course], I found one, I talked to you, we narrowed down some options, and I ended up taking a course in Greece. My dad did the same; after I came back, he was convinced that this was a very good solution for the future, because we decided that the land that we have as a family, could be utilized. And why not start very well from the beginning?

Just to be clear, this is land that from your father’s side of the family, in the foothills …

And my mom. My mom has a field in Vysakia. So that land is sitting there, nobody’s using it. There are people who’s biggest problem is that they don’t have the land. So at least we don’t have that challenge. We only have the challenge of getting started!

So yeah, we understood — I personally realized — that we cannot maintain the same lifestyles as before.

And it’s not random. If I had a big job, if I had a big career job, then I would probably not be thinking that way. But I’ve been back from [graduate school in] the US for the three years, and I have been doing like three jobs in order to survive and it’s been exhausting. And I realized, there is no potential. And this was before the crisis. I don’t see any potential in big career jobs for us at this point. It doesn’t matter how many Ph’ds or how many Masters you have. That won’t get you anywhere. I’ve asked for a job, I’ve sent my CV out repeatedly. Every time the semester changed, I would send my CV to local colleges and universities and ask for an art position job, but things weren’t moving. And I realized that must be for a reason also.

Sofia and crew with their recently built greenhouse
Sofia and crew with their recently built greenhouse

So how’s it going with the land? What have you done so far? What do you plan to produce?

Ideally, we would like to produce as many things as we can fit on that land. That would be like a food forest, seasonal vegetables — and because we have space, we would like to make an income out of that. We would ideally like to live off of what we make.

Do you know how much land it is?

It’s 7.5 hectares (about 18 acres).

That’s a good sized piece of land. I imagine a lot of people in Cyprus have some land. In the last generation, both of your parents grew up in villages where people farmed a lot as part of their livelihood. So people in Cyprus do have land. Maybe not everybody.

Yeah, I think most of families have at least a piece of land that they can use. It’s not like other countries where people live in the city and they have no contact with an open piece of land that they can use. That’s not the case with us in Cyprus.

Sofia’s father Alexis working the compost pile
Sofia’s father Alexis working the compost pile. Photo by Sofia Matsi.

So in a way, something like permaculture is particularly useful in Cyprus.

I think so, yeah! I think that it actually makes sense on a big scale. Of course permaculture could make sense in a cityscape too because you can do more collaborative projects in urban spaces. But it actually makes a lot of sense here, because there’s a lot of land that it could be applied to.

I have a lot of memories of  Cyprus, from when we used to go back to visit. There are certain traditional attitudes and  practices there that we’re trying to rediscover in the United States, like the importance of local food, and planting productive trees — I remember the one time our grandparents came to the United States, our grandfather wondered why no one planted  productive trees. In Cyprus people plant olive trees, they plant lemon trees, it’s part of the culture. Do you think that permaculture and other sustainability ideals have an easier sell in a place like Cyprus?

I would say yes. I would say compared to other countries, we are very close to what our grandparents used to do. So functional is a part of our daily life. We have lemon trees and olive trees right down in front of the house over here. What I was sadly observing today though was that I passed by many neighborhoods and I kept seeing unpicked mandarins. It was all over the place, mandarins, mandarins, or orange trees, and they were full of fruit. That’s not a good sign! At least the fruit should be disappearing a bit, every time I pass by, but it seems like it’s the same! So the functional tree is there, but people don’t really care about it.

At least it’s there. Because it takes a lot of years to grow a tree.

Definitely. But that is also a sign that we’re don’t yet have serious hunger problems. That’s why those trees are full of fruit. Slowly, if we really had a problem, those would be utilized.

Last week you were telling me about the impact of the crisis on people’s lives– that at the beginning the media presented it  like a horror movie, but after the bailout there was almost a news blackout, even as people were losing their jobs.

It seems really strange. At the beginning they told us if we didn’t sign the Troika agreement, we were gonna, you know, go without food, we wouldn’t have anything to sustain our country, we would lose everything. And so, they said, we needed to sign those agreements in order to survive.

Now we’ve signed those agreements, and taken steps toward those “logical” solutions. And people have been losing their jobs, ever since, continuously. Nothing has improved on that side. We do have food, now of course. The tragic scenario of not having food because everything is imported in Cyprus, that we don’t produce almost anything, that we cannot sustain our country — those threats were, thankfully, solved, at least in some peoples’ minds.

But actually the situation has another face, that’s slowly leading us in that direction. We are losing our jobs at this point, and we don’t even know what to do with our spare time, because we’re not trained. We’re not trained to use the land, we’re not trained to survive. And we’re not told that that’s something that would be good to do.

The government is not really supporting … even though I have seen that the government now at least has a sponsorship for young farmers. So that’s good news at this point. Pushing that way, at least. No more lawyers, teachers, all of these people who are now unemployed. We need people who know how to do useful things.

Can you tell me about the heirloom seed movement?

We have a local group, it’s called Kyprianou Sporoi, which means Cypriot Seeds. And they are active in saving heirloom seeds from their grandparents, uncles, whoever wants to offer seed to them. They first check whether the seeds are valid–they do it with this test of repeating cycles of growth, and when the product comes out the same two consecutive times, then they know it’s traditional.

seedsaving
Traditional seed saving and exchange. Photo by The Movement of Life

They’ve been active with this silently, but after last year, they came out much stronger, with more focus on creating collective gardens, community gardens in schools, showing people how to be more independent. And they always use their own seeds. They never use hybrid seeds.

We are lucky that we had the chance to collaborate with the largest heirloom seed group in Greece, Peliti. They came and gave us a good solid knowledge of the importance of saving seeds. Because we knew it was important but we didn’t have enough knowledge.

In the past, other local teams had planted community gardens, but with no thought of the seeds they were using; they were just buying plants, ready-made, from nurseries. Now, at least, all of the teams admit that it was a mistake to use all of those hybrids, now we know that we need to return to our traditional seeds. We actually had a meeting today and we talked about how important it is to start finding traditional seeds in Cyprus, saving them and learning how to reproduce them.

So, yeah, it’s an effort, and it’s a whole campaign to convince people — not to convince, but more to make them more sensitive on this part.

To raise awareness.

It’s only a matter of realizing how important it is to not be taken advantage of by the big corporations that sell you seeds to keep you dependent on them. I think it only takes an hour or so for people to understand how urgent this matter is. I think we have made a huge step in making people more sensitive about this.

Winter lettuce in the greenhouse. Photo by Sofia Matsi
Winter vegetables in the greenhouse. Photo by Sofia Matsi

Can you tell me more about the Movement of Life?

I was involved in activating the movement. It’s like, say, the Transition Movement, which is a good theory, it says a lot on the need to change, but if someone doesn’t actually do something about it in their own towns, you can’t really grasp what is the Transition Movement about.

So that’s what we did in Cyprus. The Movement of Life was a good concept, it had a good goal, but nothing was happening, so we felt the need to activate it. We started with a few lectures, and then we started being more practical, with workshops and stuff.

What was the movement’s initial goal?

The original goal was to fight for food for all, water for all, energy for all, sustainable energy, unpatented water; food for all means organic, safe food, non genetically modified, so it’s all those matters that we’re worried about …

I guess what I’m getting at is: Was that connection between financial problems sustainability always there in the movement?

As a concept it was. And we know that we’re not the only movement, and that’ s not the goal, anyway. We just try to act through an organized structure. And then from there on we join other movements so we can have our job done. So we can learn more things. We bring specialists in so they can talk to us about such and such, and I think they also appreciate our more organized action here in Cyprus.

Do you have any last thoughts?

I believe that — what I personally understand, at this point–is that the power to change things is in the hands of each individual. We have the power. Before I was panicking and thinking “it’s all about our politicians, it’s all about the decision makers.”

But at this point, I really feel that we can shift things around. And we have the power. Each individual has the power to control and to change and to demand things. I believe that tools such as permaculture can give you the knowledge and confidence to demand changes.

I do really believe that while we might be unemployed as young people here in Cyprus, while we might be ignored, while we might not have the funds for the desired lifestyle that our parents started living …  I believe that’s also a blessing.

I have been observing Greece a lot lately, and I’ve felt really fortunate to see how many young people react to this crisis in Greece. Many of them stick around Athens, they stick around, living miserable, routine lives, with no cash and working all day long.

But at the same time, you observe these professionals, very hard working young people creating societies from scratch, like the Free and Real. They made an entire community out of nothing. They make their own buildings, they’re engineers, designers, yoga instructors, all the specialties, and they all now live together very professionally and they thrive! They thrive without money, they thrive without anyone having to give them employment! So I feel very optimistic that this crisis/opportunity is actually a gift to us young people who actually want to change things. Because if things were given to us comfortably and with luxury, I don’t think we would easily comprehend the need for change. So, yeah, I think it’s a gift, at this point!

Are We On The Verge Of A Massive Emerging Markets Currency Collapse?

Are We On The Verge Of A Massive Emerging Markets Currency Collapse?.

Currency CollapseThis time, the Federal Reserve has created a truly global problem.  A big chunk of the trillions of dollars that it pumped into the financial system over the past several years has flowed into emerging markets.  But now that the Fed has decided to begin “the taper”, investors see it as a sign to pull the “hot money” out of emerging markets as rapidly as possible.  This is causing currencies to collapse and interest rates to soar all over the planet.  Argentina, Turkey, South Africa, Ukraine, Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia are just some of the emerging markets that have been hit hard so far.  In fact, last week emerging market currencies experienced the biggest decline that we have seen since the financial crisis of 2008.  And all of this chaos in emerging markets is seriously spooking Wall Street as well.  The Dow has fallen nearly 500 points over the last two trading sessions alone.  If the Federal Reserve opts to taper even more in the coming days, this currency crisis could rapidly turn into a complete and total currency collapse.

A lot of Americans have always assumed that the U.S. dollar would be the first currency to collapse when the next great financial crisis happens.  But actually, right now just the opposite is happening and it is causing chaos all over the planet.

For instance, just check out what is happening in Turkey according to a recent report in the New York Times

Turkey’s currency fell to a record low against the dollar on Friday, a drop that will hit the purchasing power of everyone in the country.

On a street corner in Istanbul, Yilmaz Gok, 51, said, “I’m a retiree making ends meet on a small pension and all I care about is a possible increase in prices.”

“I will need to cut further,” he said. “Maybe I should use my natural gas heater less.”

As inflation escalates and interest rates soar in these countries, ordinary citizens are going to feel the squeeze.  Just having enough money to purchase the basics is going to become more difficult.

And this is not just limited to a few countries.  What we are watching right now is truly a global phenomenon

“You’ve had a massive selloff in these emerging-market currencies,” Nick Xanders, a London-based equity strategist at BTIG Ltd., said by telephone. “Ruble, rupee, real, rand: they’ve all fallen and the main cause has been tapering. A lot of companies that have benefited from emerging-markets growth are now seeing it go the other way.”

So why is this happening?  Well, there are a number of factors involved of course.  However, as with so many of our other problems, the actions of the Federal Reserve are at the very heart of this crisis.  A recent USA Today article described how the Fed helped create this massive bubble in the emerging markets…

Emerging markets are the future growth engine of the global economy and an important source of profits for U.S. companies. These developing economies were both recipients and beneficiaries of massive cash inflows the past few years as investors sought out bigger returns fostered by injections of cheap cash from the Federal Reserve and other central bankers.

But now that the Fed has started to dial back its stimulus, many investors are yanking their cash out of emerging markets and bringing the cash back to more stable markets and economies, such as the U.S., hurting the developing nations in the process, explains Russ Koesterich, chief investment strategist at BlackRock.

“Emerging markets need the hot money but capital is exiting now,” says Koesterich. “What you have is people saying, ‘I don’t want to own emerging markets.'”

What we are potentially facing is the bursting of a financial bubble on a global scale.  Just check out what Egon von Greyerz, the founder of Matterhorn Asset Management in Switzerland, recently had to say…

If you take the Turkish lira, that plunged to new lows this week, and the Russian ruble is at the lowest level in 5 years. In South Africa, the rand is at the weakest since 2008. The currencies are also weak in Brazil and Mexico. But there are many other countries whose situation is extremely dire, like India, Indonesia, Hungary, Poland, the Ukraine, and Venezuela.

I’m mentioning these countries individually just to stress that this situation is extremely serious. It is also on a massive scale. In virtually all of these countries currencies are plunging and so are bonds, which is leading to much higher interest rates. And the cost of credit-default swaps in these countries is surging due to the increased credit risks.

And many smaller nations are being deeply affected already as well.

For example, most Americans cannot even find Liberia on a map, but right now the actions of our Federal Reserve have pushed the currency of that small nation to the verge of collapse

Liberia’s finance minister warned against panic today after being summoned to parliament to explain a crash in the value of Liberia’s currency against the US dollar.

“Let’s be careful about what we say about the economy. Inflation, ladies and gentlemen, is not out of control,” Amara Konneh told lawmakers, while adding that the government was “concerned” about the trend.

Closer to home, the Mexican peso tumbled quite a bit last week and is now beginning to show significant weakness.  If Mexico experiences a currency collapse, that would be a huge blow to the U.S. economy.

Like I said, this is something that is happening on a global scale.

If this continues, we will eventually see looting, violence, blackouts, shortages of basic supplies, and runs on the banks in emerging markets all over the planet just like we are already witnessing in Argentina and Venezuela.

Hopefully something can be done to stop this from happening.  But once a bubble starts to burst, it is really difficult to try to hold it together.

Meanwhile, I find it to be very “interesting” that last week we witnessed the largest withdrawal from JPMorgan’s gold vault ever recorded.

Was someone anticipating something?

Once again, hopefully this crisis will be contained shortly.  But if the Fed announces that it has decided to taper some more, that is going to be a signal to investors that they should race for the exits and the crisis in the emerging markets will get a whole lot worse.

And if you listen carefully, global officials are telling us that is precisely what we should expect.  For example, consider the following statement from the finance minister of Mexico

“We expected this year to be a volatile year for EM as the Fed tapers,” Mexican Finance Minister Luis Videgaray said, adding that volatility “will happen throughout the year as tapering goes on”.

Yes indeed – it is looking like this is going to be a very volatile year.

I hope that you are ready for what is coming next.

Wheelbarrow of Money

%d bloggers like this: