“¡Qué Quilombo!”

From The Daily Reckoning

By Joel Bowman

According to the Sermon on the Mount, “lusting after another woman” is a sin, even if you never act on that lust. But now comes Argentina’s Minister of the Interior to assert that lusting after another currency is a crime, even if you never actually trade your pesos for that other, temptress currency.

“Hablar del precio del dólar paralelo es un acto de ilegalidad,” el Ministro del Interior, Florencio Randazzo, squawked into the cameras earlier this week. [Rough translation: “To speak of the price of the parallel dollar is an illegal act.”]

The parallel dollar, or “dolar blue,” to which Randazzo refers is the unofficial exchange rate offered by the city’scasas de cambios. And thanks to the government’s draconian capital control measures, this rate is about the only rate you’re likely to get.

The Argentinean government’s policy of theft via inflation has created a demand for the relative safety of US dollars. Obviously, a massive flight from pesos would create considerable headaches for the Argentine State and its efforts to control “its” people…and their taxable income. And so, even though there is no official rule preventing the purchase of US dollars (or any other foreign currency), Argentina’s equivalent to the IRS, AFIP, has made it virtually impossible to do so through regulated channels (i.e., banks).

Therefore, the informal exchange houses do a roaring trade responding to a very real and honest demand for US dollars. And there’s still enough business left over to maintain a vibrant market for the “green rate.” This exchange rate is even less official than the unofficial “blue rate.”

The “green rate” is offered by los arbolitos — i.e. “little trees” — who stand along Florida Street waving their arms (like little trees) and offering their exchange services. That rate, currently at 6.20 pesos to the dollar, is quite literally the “street price” for dollars.

The nearby chart shows the wide — and rapidly widening — gap between the official exchange rate and the blue rate, the most often quoted parallel dollar rate.

CHART1

[To keep abreast of the various exchange rates, minute-by-minute, you can check out http://www.dolarblue.net.]

Exactly as you would expect, the more money the government prints, and the tighter the capital controls they impose, the greater the urgency to swap pesos into dollars…and the higher the unofficial exchange rates soar.

Clearly, this is a trend that cannot continue indefinitely.

The Argentine State is scrambling to outlaw the consequences of its own recklessness. For years now, Argentina’s Central Bank (BCRA) has brought forth freshly inked fiat notes by the billions to pay for unaffordable election promises. Our North American readers will recognize this crafty monetary prestidigitation as “money printing.”

The practice is nothing new, of course — neither here nor in any country where the tyranny of the mobjority — democracy — enjoys the power to decide the cost to be levied on the minority.

What seems peculiar about Argentina’s case is the government’s Herculean effort to ignore the immutable laws of economics in their pursuit of grand larceny. The country has seen five currencies in just the past century, averaging a collapse every twenty years or so. In 1970, the peso ley replaced the peso moneda nacional at a rate of 100 to 1. The peso ley was in turn replaced by the peso Argentino in 1983 at a rate of 10,000 to 1. That lasted a couple of years, and was then replaced by the Austral, again at a rate of 1,000 to 1. To nobody’s surprise, the Austral was itself replaced by the peso convertible at a rate of 10,000 to 1 in 1992. During the past four decades, when all was said and done, after the various changes of currency and slicing of zeroes, one peso convertible was equivalent to 10,000,000,000,000 (10¹³) pesos moneda nacional.

And yet…the president of Argentina’s central bank, Mercedes Marcó del Pont, earlier this year reiterated her commitment and dedication to pathological delusion when she asserted, “It is totally false to say that printing more money generates inflation. Price increases are generated by other phenomena like supply and external sector’s behavior.”

“Phenomena like supply” is correct, of course…specifically the supply of freshly inked fiat notes issuing forth from Marcó del Pont’s printing press.

Like her fellow counterfeiters further north, Argentina’s “Fed Head” maintains a steady program of peso “creation” while bamboozling the population with the kind of nonsensical justifications only a career academic-cum-politician could hope to conjure.

“We’re recovering the sovereign capacity to formulate and implement economic policy,” babbled Marcó del Pont recently before announcing that some pictures will be coming down from the bank’s hall of fame, “beginning with Milton Friedman.”

We imagine Friedman’s oft-quoted observation, “Inflation is always and everywhere a monetary phenomenon,” probably stuck in Marcó del Pont’s Keynesian craw.

This crude behavior is typical of Argentina’s government: If the lessons of history don’t agree with the state’s agenda, simply remove the lessons from the curriculum…or make abiding by them illegal. Which brings us back to Randazzo’s “speech crimes.”

If Randazzo has his way, all discussion of what might well be the gravest challenge facing South America’s second largest economy would be considered illegal; an act, says he, comparable to quoting the price of a stolen stereo.

But if merely talking about something illegal is, itself, and illegal act, would we not have to slap leg-irons onto Randazzo himself? It is, after all, the reckless monetary policies of the Kirchner government, to which he proudly belongs, that provide the very incentive for the establishment of a parallel rate in the first place. Moreover, would we not have to imprison almost every central banker and treasury secretary in the Western world? Aren’t these the same folks who continuously talk about “easing monetary policy”?

That’s just money-printing… and money printing is larceny on the grandest scale. Maybe Randazzo is onto something after all!

But, of course, he is not referring to the Argentine government’s crimes; he is referring to the supposed crimes of every Argentinian who’s simply trying to protect himself from the Argentine government’s crimes.

The soaring peso/dollar exchange rate suggests that the peso’s days are numbered…again. And the government’s characteristically strong-armed response to capital flight suggests that the government’s fiscal position is a mess…again. Therefore, given that most folk here have seen this show before, some will be tempted to ask, “How did it all come to this…again?”

As we know, Fellow Reckoner, in order to build a big mess, one must start with a small mess. After all, Rome didn’t burn in a day. Intervene here…meddle there…regulate this…tax that. Add a little larceny…a pinch of censorship…and a dollop of mind-numbing propaganda “para todos.” Pretty soon, you’ve got a full-scale political and economic disaster on your hands.

“¡Qué Quilombo!” as the porteños say, banging pots and pans from their balconies in protest. “¡Qué Quilombo!”

Regards,

Joel Bowman,

for The Daily Reckoning

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Related:

Cry for Argentina (They took Paul Krugman's advice)

Argentina Loses a Third of Its Dollar Deposits

Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers flee the mad antics of two Argentinian women on a mad spending spree. 
According to Reuters, depositors withdrew a total of about $100 million per day over the last month

Banksters' Conspiracy Facts Of The Day And The 4th Reich Of The Eurocracy

Written by Jeff Nielson,

BullionBullsCanada, Thursday, 07 June 2012

Nearly two and a half years ago, I first began warning readers of the “economic terrorism” which Wall Street had unleashed upon Europe – via the fraudulent manipulation of credit default swaps, and equally fraudulent “ratings cuts” from their accomplices, the ratings agencies. At a time when only Greece had begun to experience financial turmoil, I wrote:

…It will be even more interesting to see what happens next. If the CDS [credit default swap] spreads now begin to “mysteriously” widen for Spain, Portugal, and perhaps other EU members, this will signal that these financial psychopaths are going to continue to simply nuke one vulnerable economy after another.

In fact this is precisely what we have seen transpire. As this made-in-Wall-Street financial holocaust intensified, roughly one year ago I wrote a four-part series (“Economic Rape of Europe Nearly Complete”) where I first explained what had already taken place, and then detailed what was to come.

In Part II of that series, noting how the banking cabal was lusting for the remaining gold reserves of Europe’s debtor-governments; I predicted that part of this “rape” of Europe would be to use these fraudulent bond debts as a pretext for confiscating these nations’ gold. One week ago, UK’s The Telegraph published the article “Europe’s debtors must pawn their gold For Eurobond Redemption”, where it wrote: …Southern Europe’s debtor states must pledge their gold reserves and national treasure as collateral under a €2.3 trillion stabilisation plan gaining momentum in Germany. In Part III of this series I wrote:

…The Oligarchs thus have one more necessary step to irrevocably cement this campaign of economic slavery: the full, economic integration of all Euro-zone economies.

Six months ago, German Chancellor Angela Merkel began her push for precisely that: a European “fiscal union”. Again, suddenly, in the last two weeks Merkel has resumed preaching that message, now on a daily basis. But now that sermon has become even more ominous: Merkel wants a full “political union” – with the fiscal union merely being Stage One.

We all know what happened to Europe (and the world) the last time a German leader tried to impose “unity” on all of Europe. The principal difference between the failed efforts of The Third Reich, and the more promising efforts of Merkel’s Fourth Reich is that while Hitler used tanks and bombs Merkel relies upon bonds and debts. Her message to Europe’s debtor-nations is no less authoritarian than Hitler’s (and almost as menacing): agree to this forced-marriage (under Franco-Prussian rule) or we will bankrupt you by cutting off further access to credit. In Part IV, I wrote that there was one more fiendish element in this plot to economically enslave all of the peoples of Europe: the dreaded “Euro Bond”. To understand the truly evil potential of this debt instrument requires readers to back-up and recall how Europe’s debtors are presently being bankrupted. Through the fraudulent manipulation of credit default swaps, Wall Street bankers can drive the interest rates on the bonds of any particular nation to literally any fantasy-number they desire. The only “limit” is the size of interest payments on that debt which any one economy can sustain. In the case of Greece, the greedy bankers (surprise, surprise) pushed the interest rates on its debt much too high, making debt-default inevitable.

The Wall Street bankers consider this a cumbersome process, however. The problem is that they have to manipulate (and eventually bankrupt) these economies one-by-one. Wouldn’t it be wonderful, mused the bankers, if they only had to manipulate one bond market in order to rape all of Europe’s economies simultaneously? And thus “the Euro Bond” was born.

In this case the banksters’ champion is France. Newly elected pseudo-Socialist French President Francois Hollande was elected with a political platform promising to bring the Euro Bond to the peoples of Europe, and he has been eagerly pimping for Wall Street at any/every political function he has attended since his election victory.

Here it should be noted that only three of Europe’s biggest debtors have been spared the lash of Wall Street’s economic terrorism: the UK, France, and Germany. Note that all three of these nations have significantly higher debt-to-GDP ratios than Spain – the current target of Wall Street’s terrorists (and media propaganda).

The UK has obviously been able to avoid being a Wall Street victim since its own banking empire is inextricably intertwined with that of Wall Street. So how and why have France and Germany been able to avoid falling victim to the same fate as all of Europe’s other Deadbeat Debtors?

You don’t have to be Sherlock Holmes to deduce what has transpired here. As they were finishing the destruction of Greece, the Wall Street terrorists went to France and Germany (the two, dominant “partners” within the EU) and offered those governments a choice: serve the banksters, or be destroyed by them. Clearly France and Germany have opted for “service” ahead of destruction. Before I proceed further, let me clarify one point (and eliminate one myth) which may be in the minds of many readers. As responsible individuals, many of the people who read this will bristle at my suggestion that these bond-debts are “fraudulent”. They have been led (with the help of the mainstream media) into believing that the mass insolvency across the West was totally due to the financial incompetence of Western governments and the reckless borrowing which accompanied it. However this leaves out one enormously important piece of the puzzle: the promises of the bankers (primarily Wall Street bankers). When our idiot-governments made the greatest financial mistake in history, and allowed the bankers to resurrect the derivatives market as a totally unregulated casino, owned and operated by the banking cabal itself; they did so with a gigantic “carrot” being dangled before their naïve eyes.

The banking cabal promised that they could permanently lower borrowing costs (i.e. interest rates) on all the debt of all these governments, forever…all these governments had to do was to allow the bankers to use their magic derivatives: credit default swaps (i.e. betting on nations going bankrupt) and interest rate swaps (betting on interest rates). The entire concept was totally nonsensical as a proposition of simple arithmetic and logic. However, if our modicum of human rationality alone was ever sufficient to prevent us from doing incredibly stupid things then the world would have never seen con-men (and scam-victims).

The “promises” were lies. These same bankers are now facing civil lawsuits and/or criminal investigations on the part of their victims all over the world for this massive derivatives fraud. The debts are fraudulent, in the literal/factual meaning of that term. The idea that the peoples of Europe (and their children, and their grandchildren) should remain as debt-slaves to these fraudulent bonds all their lives is quite literally a crime against humanity.

We now see that it is by no means coincidental that another definition of the word “bond” is:

…something that binds or restrains.

These European fraud-bonds are nothing less than the chains of economic slavery. The European governments seeking to enforce debt-collection from this fraud on their own peoples are committing acts of treason. We cannot overlook the second component to the monstrous lies which the Wall Street bankers fed to our idiot-governments: that (somehow) placing gigantic “bets” on the world’s debt-markets would “reduce risk”. Obviously anyone with an intellect above that of a small child would laugh at the suggestion that any form of gambling could “reduce risk”.

So how did the bankers dupe the idiot-politicians into believing something even more ridiculous than their first promise? They called their credit default swaps “insurance” – one of the most perverse euphemisms in the history of humanity.

At the same time that the bankers were selling their “insurance” to the idiot-politicians, ironically one of Wall Street’s most loyal allies – Warren Buffett - was warning anyone who would listen that derivatives were “financial weapons of mass destruction.” It was perhaps the most prescient and insightful remark which Buffett has ever made in his much-heralded career. Even more ironically, it is the bankers themselves who have now proven that their lie about credit default swaps being “insurance” was false, and that Buffett’s remarks about derivatives being financial “WMD’s” was absolutely true. What did it really mean when the Wall Street terrorists proclaimed themselves “too big to fail” after the Crash of ’08 (which they created) and demanded a hand-out package valued somewhere in excess of $15 trillion? “Give us our money, or we will blow up the world (financially).” Try telling the people of Greece (where the suicide rate doubled in two years) that these economic terrorists don’t kill people. Meanwhile, when Greece recently defaulted on 75% of its national debt, Wall Street’s credit default swap fraud was finally unmasked for the entire world. “We won’t pay,” claimed the insurers who supposedly “back” this $60+ trillion market (casino). Who were those “insurers”? The same cabal of Wall Street banks. Their “reason” for refusing to make their legally required pay-out on this insurance after default took place? The 75% default wasn’t large enough. Imagine “insuring” the possessions in your home against theft, and then suffering a break-in. But your insurance company tells you that they won’t pay-off on your policy – because the thieves ‘only’ took 75% of your possessions? Credit default swaps are not “insurance”. They are “financial weapons of mass destruction”. And the bankers of Wall Street are “terrorists” in any and every sense of the term. Now Europe arrives at its Final(?) Crossroad. All of the major governments of Europe have either been brought to their knees as Wall Street’s victims – and are virtually powerless to fight back – or they willingly serve the bankers in return for being spared from the terrorists’ next financial “bomb”. The Euro Bond is not yet a reality. A European fiscal (and political) union – of slavery – is not yet a reality. Apparently the national gold reserves of these nations still remain intact. Here all eyes have now turned toward Greece. Can the Greek people free themselves from their economic slavery? Can they elect a government which will actually represent the people (instead of bankers and Bond Parasites)? Will they be allowed to do so? If the Greek people can successfully restore democracy to their nation, and follow in the path of Iceland – despite the much more hellish road the Greek people have been forced to take – then this will mark a crushing defeat for the financial facism which Wall Street has envisaged for (first) Europe. On the other hand, if Greece (and its people) are successfully bludgeoned into remaining economic slaves, then the future looks very bleak indeed for the rest of the population of Europe.
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Related:
George Soros on Germany: The Accidental Empire

Nigel Farage – Europe is Collapsing, Buy Gold & Expect QE