How Cheap Money Will Destroy the World

from FinancialSense.com:

Leverage is an essential part of the financial system, and when used properly it allows businesses to borrow funds to invest in growth and expansion, offers opportunities for reasonably priced housing, and much more. But current imbalances in the ways in which leverage is being used by the rich and powerful in the United States and abroad have led to an alarming situation that threatens to shake the global economy to its core.


In Leverage: How Cheap Money Will Destroy the World, well-known market commentator Karl Denninger literally follows the money, tracing the path it has taken through history and discovers a shocking truth—the power to control a nation’s purse strings is addictive, and when that power falls into the hands of only a select few, they will pull the levers of government and policy to enrich themselves at the expense of everyone else. History is littered with the stories of collapsed monetary systems, and in every case the debasement of the currency in question, and the disasters that followed, can be directly blamed on excessive leverage, deployed in ill-intentioned and fraudulent ways by the elite.


The current Great Recession is no exception to this rule. It was no accident, and the politicians and monied interests responsible knew that it was coming. Special interests and other influential individuals have always used leverage to enrich themselves while looting the population at large. Eventually the bill always comes due and then we all have to pay.


With Leverage in hand, we can avoid this disaster, and Denninger shows how. With practical, realistic ideas for fixing the financial system, devising sound energy policies, and more, the book stands between us and a debt we simply can’t afford.
Click Here to Listen to the Interview

Original audio (fsn2012-0118-1.mp3)

Budget of an Interest Slave

From Realcurrencies's Blog 

By Anthony Migchels

The main reason why interest slavery goes largely unnoticed is because most of what we pay is invisible: it is included in prices. Producers cannot avoid capital costs and must pass these on to consumers.
It has been established that 45% of prices we pay are for interest on business loans or other capital costs. No less than 50% of taxes we pay go to servicing the National Debt and capital costs included in prices the Government pays. So what does the budget of a typical interest slave look like?
Here’s one from a young man, 31 years old, living in North Western Europe and working as a civil servant, making €37,200 per year. He has bought his own apartment a few years ago, so most of it is still property of the bank. He has a €10,000 credit line which he has used to decorate his place.
His monthly gross income is €3,100, of which €1,000 goes to income tax and other levies. Of this money, €500 is lost to interest on the National Debt and capital costs included in prices the Government pays.
His net income is €2,100.
Percentages differ per expenditure, depending on the capital intensity of the industry involved. The percentages in the left column are the fractions of the prices that are lost to interest.
So let’s see what his budget looks like:

	Spent	VAT	Excluding VAT	VAT lost to interest	% lost to capital costs excl. VAT
Mortgage, 100%	450	0%	450	0	450
Energy, 45%	100	30%	70	15	31.5
Food, 25%	400	6%	376	12	94
Internet/Telecom, 50%	100	19%	81	9.5	40.5
Interest payments credit, 100%	100	0%	100	0	100
savings	100	0%	100	0	0
Going out, 30%	500	19%	405	47.5	121.5
Clothing, 30%	100	19%	81	9.5	24.3
Transportation, 50%	100	6%	94	3	47
Various, 45%	150	19%	121.5	14.25	54.68
Totals	2100			110.75	963.48
VAT + Income Tax	1221,50
Of which Interest	610,75
Lost to Interest	1574,23

Analysis:

• An astounding €1574,23 (610,75 + 963,48) of a monthly gross €3100,- income is lost to interest!
• Taxation (VAT + Income Tax) is €1221,50, but half of this, about €610,- is lost to interest the Government pays.
• Taxation (corrected for interest) + Interest takes away an incredible 75% of the disposable income.
• This example shows someone with a reasonable income, but a little less than zero net assets. This is quite common throughout the West: 50% of Americans have zero net assets or less.
• Had he rented a place instead of buying his own apartment, he would not have been better off: 75% of the rent we pay is compensation for the landlord’s capital costs.
• All percentages where available are taken from Margrit Kennedy, in the case of clothing and Telecom they have been estimated.

So while it is natural to complain of high taxes, it transpires that no less than half of taxes we pay is lost to interest. We would pay 50% less tax were there no cost for capital.
Worse still: approximately half our own disposable income is lost to interest, on top of the taxes we pay. Combined interest + tax takes 75% of our gross income.
Amazingly, a Medieval serf typically payed only 10% of his gross income to his ‘Lord’. Interest was unheard of then.
Would we end interest, our interest slave’s disposable income would triple: He would be left paying only 25% in taxes, leaving 75% for himself.
The only way we can escape being net payers of interest is by having assets ourselves. But this forces us to exploit others, to compensate for, instead of ending, being exploited ourselves. In this way the Money Power’s methods have become acceptable to the mainstream, whereas Usury has been a taboo for most of human history.
To add insult to injury: all the interest ends up with the rich: after all, they have money to lend, while the poor borrow. Margrit Kennedy also established that 80% of the population pays interest to the richest 10%. But also within the top 10% bracket the redistribution of wealth continues: the ‘poorer’ 8% pay interest to the richest 1% and eventually all ends up with the Plutocracy.
Conclusion
The Money Power has subverted almost every Government on the Globe. It has forced them to surrender their currency monopoly to the Money Power’s Central Banks. They use this monopoly to enslave both Government and us with interest and the boom/bust cycle.
It cares not whether her monopoly is paper or metal based: it owns all Gold and came to power through the Gold Standard. Gold as currency is interest bearing.
But the Government can be reconquered by the People and that’s why they want to consolidate their power in World Government and World Currency, both of which will know no national affiliation.
Our own goal must be to have interest free money. Both by reconquering Government and forcing it to end the Central Bank monopoly and by creating independent currencies, based on interest free credit. Modern Mutual Credit will destroy Federal Reserve Notes and the Euro in the market place.
World Government and Government tyranny are both Money Power projects and to defeat them an interest free money supply is a ‘sine qua non’.

Day of the Dead State

From The Dollar Vigilante,
By Jeff Berwick 

January 17th    

The most surprising thing about the recent downgrading of nine Eurozone countries by S&P is that anyone is surprised to hear that the government debt of any of these countries is risky!

From the Financial Times:

The eurozone debt crisis returned with a vengeance on Friday as Standard & Poor's, the credit rating agency, downgraded France and Austria - two of the currency zone's six triple A rated countries - as well as seven nations not in that top tier, among them Italy and Spain.

S&P, under political fire since it announced a review or eurozone debt in December, gave 14 of 16 countries - including France, Italy and Spain - a negative outlook, which it said meant a one-in-three chance for each country of a further downgrade this year or next.

It seems as though it is only a matter of time before they each fall to bankruptcy, no matter how many bailouts they can muster.  It's almost enough to make us change our logo.  But, we've always said the euro would fall before the US dollar.  The dollar will be the last in what will be a crescendo of currency collapse.

What the students of the Austrian School (aka real economics) have understood since the turn of the 20^th century was that this was the inevitable result of the pursuit of the socialist utopia where humans would not have a worry in the world, cared for from cradle to grave by the all knowing state.

The modern Welfare/Warfare state was born in the in late nineteenth-century Imperial Germany under Chancellor Otto von Bismarck - his intention was clear from the outset:

"My idea was to bribe the working classes, or shall I say, to win them over, to regard the state as a social institution existing for their sake and interested in their welfare"

Bet you never saw that quote in your government run schoolbooks.  Frideric Howe wrote that under the German system, "The individual exists for the state, not the state for the individual." 

We are now witnessing the end result of the institutions of bribery and theft that swept the rest of the world in the first half of the 20^th century.

The most extreme version of socialism implemented under the murderous Soviets collapsed under its own corrupt weight over 20 years ago. Now the "Social Democratic" states of the west that thought they could find a third way with their middle of the road policies are finding that the corruption of socialism has eaten away at their foundations as well.

The social engineers wished to control life, tame the markets and create a predictable, ordered society, directed by enlightened bureaucrats. They wanted to put in place of what Marx called the "anarchy of production" the exclusive monopoly of the state.

The chickens are coming home to roost. And what unrest we have seen is only a taste of the real turmoil to come when the pampered children of the nanny state realize they will have to put food on their plates.

Of course the ratings agencies aren't telling the whole story. They suffer from the same fatal conceit that Central Bankers do - namely that a central planning agency can steer the actions of hundreds of millions of individuals to a predetermined goal. These are the same agencies that had rated subprime paper as triple AAA right up to the moment they weren't, and they do the same now for sovereign debt.  It shouldn't be AAA or AA... it should be an F for all the PIIGS, France, the UK, Japan and the US.... just to name a few.

... Read all

Bob Chapman - National Intel Report - Jan. 17, 2012

Bob Chapman - National Intel Report - Jan. 17, 2012 Bob Chapman talks about the situation in the straight of Hormuz , and the recent announcement by the Russians that if the US touches Iran they have to deal with them , the situation unfolding there is becoming very dangerous , Bob Chapman then talks about gold and silver forecasts and a range of other issues

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 Related:

Spiralling Debt and the Fracture of the European Monetary System