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CitiBank - No Questions Asked

Tuesday, November 25, 2008, 2:24 PM

When the Big Three automakers were finally settled in their chairs before the Congressional committee investigating whether they deserved a handout of $50 billion, they were asked a defining question; “How many of you flew commercial airlines to get here?

No hands went up and they were sunk. Somehow the hubris of trotting about on private jets while asking for public money was simply too much for a suddenly stingy Congress.

No such questions were asked of the Citi bankers, in fact no hearings were even held, and they were given access to over $306 billion on the most favorable terms you could possibly imagine. This illustrates the power that the banking industry holds over our political process and it is a ruinous power. Why should Citi receive not only special treatment, but exorbitantly preferential treatment at taxpayer expense? I don’t know, but I’d like some answers.

First, check out the terms of the deal:

Citi's Taxpayer Parachute
Another Sunday night, another ad hoc bank rescue rooted in no discernible principle. U.S. taxpayers, who invested $25 billion in Citigroup last month, will now pour in another $20 billion in exchange for preferred shares paying an 8% dividend.

Taxpayers will also help insure $306 billion of Citi's mortgage-backed securities. Citi will cover the first $29 billion in losses on these toxic assets, and then taxpayers will cover 90% of the rest, in exchange for another $7 billion in preferred.

What’s so special about this deal? First, the next $20 billion only provides taxpayers with an 8% yield. This is well below current market rates and, as such, represents a giveaway. I would guess that the cost of capital for Citi should be in the vicinity of 15% (or more) right about now.

So $10 billion of that $20 billion is pretty much of an outright gift. Second, I am concerned about how the toxic assets have been valued when setting this deal. The fair way to do it would have been to mark them to market forcing Citi to eat the losses that are already baked into those assets.

However, the implication in every article I’ve read is that the Citi “assets” were valued at their full cost (not value). This means that they are overvalued by some 30%-50%, almost without a doubt.

But that’s not the worst of it. When I dug into the Treasury Department website the terms of the deal said this:

Treasury Statement on Citigroup
As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

This is the most staggering giveaway I could have possibly imagined. To understand why, let’s review the definition of a non-recourse loan:

A nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance

This means that when, not if but when, Citi defaults on this loan there will be no mechanism for recourse for the taxpayers.

Why am I confident that Citi will default on this particular rescue loan? Because they are smart people and paying it off would be stupid.

The $300 billion of “assets” pledged as collateral for this loan are worth, perhaps, half that. Possibly as little as 10% if Citi has done its job and purged the worst of the worst from its balance sheet to tuck into this sweetheart deal.

So it's very simple. Either Citi makes good on the loan and repays all $300 billion and then takes possession of perhaps $30 billion of damaged assets or it defaults and keeps $300 billion.

What would you do?

I am, again, more than a little angry at this deal. It seems that when productive industries or actual citizens are involved, money is hard to find and difficult questions are asked. When banks need the cash? The results are enormous, immediate, and exceptionally favorable.

 

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52 Comments

mpelchat's picture
mpelchat
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Re: CitiBank – No Questions Asked

WOW

I wonder if SNL is going to have the guts enough to poke fun at this?????

Davos's picture
Davos
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Re: CitiBank – No Questions Asked

Maddening. They get: 

  1. The houses
  2. The cash
  3. The safety net
We "the people" get: 
 
  1. Depreciating property values as a result of distressed comps (51% of ALL sales this past month were distressed up from 16% a year ago)
  2. Higher taxes as a result of lost tax revenues
  3. Higher taxes as a result of having to bail out stupid business decisions
  4. And those who lost their homes because of a contracting economy (and lets be real, since August 2008 OVER 50% of foreclosures are PRIME NOT subprime) get to be homeless
  5. These "Bail Outs" wont work, this will only prolong the mess and excerbate the problem
Sounds pretty American to me? I say toss the CEO's out in the street, seize their homes and their assets and give them to the people. Bottom line, you screw up the banking industry - then you pay for it, not me and my kids and my kids kids.
 
 
Congress is screwing up by not setting a good example, they are rewarding the brain dead with our money.
 
 
Those in Congress voting for this insanity should lose everything. Dr. Bartlett is right, "our" (and I use that loosely I wouldn't vote for this crap) solutions make our problems WORSE! 
 
 

 

mpelchat's picture
mpelchat
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Re: CitiBank – No Questions Asked
Davos wrote:

These "Bail Outs" wont work, this will only prolong the mess and excerbate the problem

Even worse, they get the safty net when hyperinflation happens, us regular people get the soup lines or worse, they get to live the life of kings.
All hail the bankers!
By the way, how can I incorparate myslef and become a bank holding company????  Oh yah I am honest, sorry.
kiwidave's picture
kiwidave
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Re: CitiBank – No Questions Asked

I just wonder how long before the American people take to the streets. Where is the outrage? Here's an idea for a plackard- picture of a cute five year old kid followed by the inscription "JUST PUT IT ON MY TAB HANK"
Cheers,
David

mred's picture
mred
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Re: CitiBank – No Questions Asked

“We had a good country and they ruined it.” --Icelandic citizen

(picked from the Revolt in Iceland forum topic)

Other countries will be joining this painful sentiment...

These deals are not because of the incompetence of the unelected bureaucrats dealing with this stuff. (In any case, elected, unelected, same thing at the end.) This is by design.  I bet that Citi lawyers wrote the terms, no negotiation involved whatsoever. The bankers own this country.

No questions for CitiBank, but I do have some for everyone: when will we make our voices heard? When will we form a movement? Can we? Under what principles and objectives? Are there others out there reading this forum that also think that organization is important or possible? After we raise awareness, what is next?

Damnthematrix's picture
Damnthematrix
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Re: CitiBank – No Questions Asked

yeah..... REVOLUTION!

As I have said many times here, set a date, and STOP MAKING PAYMENTS ON YOUR DEBTS! 

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SkylightMT
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Re: CitiBank – No Questions Asked

I think they were panicked (Paulsen and Bernanke et al) and just threw together whatever they could over the weekend to have something in place that might, just might, help the markets on Monday and keep Citi from going under this week. It lacked insight, thoughtfulness, and any kind of indication they have a realistic grasp of the troubles facing the global economy.

I think Citi is a little bit different because although they are a U.S. based company, they hold enormous global assets, liabilities, and toxic debt. If they fail they will significantly impact the global economy and probably cause a horrible domino effect which hurts many other countries even more than it hurts the US. The US is already being held responsible for the economic crisis worldwide (whether or not rightfully I don't know... it seems to me other financial systems made the same poor decisions we did, and eagerly bought up the same toxic debts our institutions did, even though the toxicity did arise in the US).

I think in their minds there was no time to craft a better deal. And they are probably right - they should have predicted this and could have predicted this but instead they buried their heads in some wishful non-reality based interpretations until the building had already burnt halfway to the ground.

Maybe its the lame duck administration, doing nothing more than being extremely reactive, no proactivity whatsoever, thinking they'll dump the whole mess in the laps of the next administration come January. But things are moving too fast for that.

Goal Digger's picture
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Re: CitiBank – No Questions Asked

Agreed. Wholeheartedly.  In the last week I've asked the following question of many friends and family: "Why is it that Americans across the country march in the street to protest a vote by the majority of Californians banning gay marriage, but we sit idly by as the political establishment robs us blind?"  The answers to my question.  Dumbfounded stares.

People in this country have not a clue as to what is being done to them.  Unless and until there is some John Galt-esque broadcast to the people they will remain clueless.  While I am not a proponent of violence, one has to wonder when such a proponent will have had enough and start the burning, or the shooting in order to stop the looting.  When is enough, enough?

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Re: CitiBank – No Questions Asked

Don't forget about CitiBank Park, the new home of the NY Mets. It's costing CitiBank (us) $20 million a year for the naming rights.I wonder how many jobs you could keep with $20 million? I did a search on "Federal Reserve families" and was amazed, the families are so intertwined with the various federal banks around the country. Now I know why they receive such preferential treatment.

Davos's picture
Davos
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Re: CitiBank – No Questions Asked

Larina/David:

I think Gold Digger hit the nail on the head. I use iGoogle (Big Brother) for news, and it pulls RSS feeds in faster than Bernanke can print funny paper. The food from the blogisphere is like food from Whole Foods and the crap that the mainstream "reports" is like glued together processed chicken from a fast food joint.

I've watched news clips from around the world on the net and from the U.S.

What am I saying: Americans will be mad and I'd bet they won't even know who they should be mad at. The guilty won't hang. The innocent will likely hang each other instead. Like Menscken said, "No one ever went broke underestimating the intelligence of the American public." Sad, but sorry to think, true. 

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Erik T.
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Re: CitiBank – No Questions Asked

I really feel this has come to the point where the mainstream financial and non-financial press are just downright negligent.

As a private investor, this deal is just so crystal clear to me that it hurts: Taking out a non-recourse "loan" pledging assets that everyone knows are worth less than face value is simply not a loan. It's a handout disguised to confuse the average non-financially minded American into thinking there is an intention of repayment when obviously there is none.

This transaction is a purchase of assets for way more than they are really worth. Nothing more, nothing less. This sale that undermines the best interests of the people is being disguised as a loan because the word loan suggests an intention of repayment to the average joe.

At the risk of saying something controversial, Citi's executive management can and should be sued by their stockholders if they were ever to do something so profoundly incompetent as to repay any part of this sort of "loan". To do so would be stupid, as Chris said.

It just blows my mind that they use the neuro-linguistic programming technique of reframing so regularly and successfully. This loan is as much a loan as the liberation of Iraq was a libreration. Call it the opposite of what it is, and people buy your story. The primary job of the press is supposed to be to see through this fraud and report with perspective on what the true implications are.

Chris, I'd like to offer you a free gift of one million dollars, today! No strings attached whatsoever, except that I'd like to structure this "gift" from me to you in the form of you paying the money to me. Fair deal? I mean hey, it is a free gift. I just said it was, so it must be. Don't let the minor detail of you having to pay me distract you from this generous offer of a free gift, ok?

I just can't believe this is happening in America. I really think the way that our press has come to compete with entertainment is a core cause of the rapid decay of this nation.

Erik Yell

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Re: CitiBank – No Questions Asked

We neeed someone who has both popular clout, intelligence, and is outside the system to start and stage a "March on Washington". In 1970 we marched on the Pentagon to stop a war; you'd think someone would have the wherewithal to organize a march to prevent the financial destruction of working Americans.

 

SG

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Re: CitiBank – No Questions Asked

Sheer lunacy . . .

 

Treasury, Fed to Unveil Major Consumer Lending Program

Tuesday , November 25, 2008

ADVERTISEMENT

Treasury Secretary Henry Paulson, seeking to ease strains in the consumer credit market, plans to announce Tuesday the formation of a program to increase the availability of auto loans, student loans and credit cards, according to people familiar with the matter.

The lending facility, which will be operated by the Federal Reserve, is expected to provide loans to investors who want to buy securities backed by credit cards, auto loans and student loans, these people said. Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program.

The program is aimed at making it easier for consumers to borrow money. Government officials, including Mr. Paulson, have grown concerned about "distress" in the consumer finance market, as the availability of household loans has ground to halt amid a broader credit crunch.

While the initial focus will be on consumer loans, the facility could eventually be expanded to cover all manner of assets, including mortgages.

Treasury had initially planned to use its $700 billion to buy those types of assets itself but changed plans two weeks ago, deciding instead to concentrate on pumping money directly into banks and other financial institutions. Treasury has set up a $250 billion program to invest in banks.

While the government had hoped to see banks lend that money out, that hasn't happened as quickly as they would have liked. Treasury is trying to find other ways to jump-start the market for lending.

Headless's picture
Headless
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Re: CitiBank – No Questions Asked

Someone needs to put the paper trail together and make a connection that the media (and the general public) can grab onto. This giveaway needs to stop yesterday! I have never been this angry in my life!

And if you weren't mad yet, how about the government guaranteeing Goldman Sachs bonds?

Not too hard to figure out who is benefiting there.

What is Paulson so afraid of that he and Bernanke are willing to risk doing deals in broad daylight that are so patently communistic/exploitative in order to make sure certain banks don't go down?

What would the world learn if Goldman Sachs went down and the books were opened?

Goal Digger's picture
Goal Digger
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Re: CitiBank – No Questions Asked

There is one voice being given air time.  Peter Schiff.  Problem is, he's treated like a kook.  I've been labeled a pessimist, cynic, chicken little in the last couple months, but I've not given up.  And, its not because I want to be able to say "I told you so", or make a buck.  This is insane, but no one wants to hear it.

Even if you're not interested in watching the clip in the link below take a minute or two to page through the many comments.  People are starting to get it.  And, the ones who don't, are starting to ask questions.  There is some hope of an awakening albeit not one that will not occur in the mainstream media.

 http://hotair.com/archives/2008/11/24/guy-who-predicted-the-financial-meltdown-obamas-only-making-it-worse/

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Headless
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Re: CitiBank – No Questions Asked

Erik,

That is so well said, I have to thank you.

If you're not writing for some publication somewhere, you should be.

 

Golddigger,

If you haven't already, you can add Max Keiser to your short list--though you have to watch Al Jeezera English to access him. If you don't know him, he is of the caliber of Nouriel Roubini and Peter Schiff; in fact, you could say he is a combination of Roubini, Schiff, Dave Letterman, Columbo, and Rambo.

 

http://www.maxkeiser.com/ (check out the videos (100's of them on Youtube) that are linked to at the bottom left of the page...

Goal Digger's picture
Goal Digger
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Re: CitiBank – No Questions Asked
Nonzeroone wrote:

Golddigger,

Thanks for the tip.  I had earlier made a note and stuck it in my pocket to search Max Keiser when I'm home tonight and not "at work".

And, please note, its "Goal" Digger.  A reference to my hometown's once glorious days of minor league hockey.  I'd hate to be known as a "Gold" Digger.

Orangedem's picture
Orangedem
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Re: New Fed bailout--$700bn

And where does this money come from? Even the NPR reporter tonight had it right: "The NY Fed is just creating it, just printing it." And of course the NY Fed will do just as good a job removing this $700bn from the money supply when conditions change for the better.Wink

http://news.bbc.co.uk/2/hi/business/7748362.stm

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RedShift
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Re: CitiBank – No Questions Asked

The central bankers and associates are running for the exits before the doors slam shut in January 2009, but not before filling their pockets. The public of Joe "NASCAR" SixPack are not completely ignorant, although tragically misinformed. Sadly, Obama's election triggered a run on the gun stores. Possibly his inaugeration will trigger a cash run on the banks. 2009 will look like 1859.

markarsenal's picture
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Re: CitiBank – No Questions Asked

We neeed someone who has both popular clout, intelligence, and is outside the system to start and stage a "March on Washington". In 1970 we marched on the Pentagon to stop a war; you'd think someone would have the wherewithal to organize a march to prevent the financial destruction of working Americans.

If you said this to most Americans, I bet you'd almost universally hear them say that this is what they thought they were getting with Obama, but then he goes and says this sort of stuff:

 http://news.yahoo.com/s/ap/obama_economy

 

Headless's picture
Headless
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Re: CitiBank – No Questions Asked

Goal Digger,

My  apologies: wasn't wearing my glasses and was skimming full speed...

More for the Righteous Indignation file: http://www.democracynow.org/2008/11/25/naomi_klein_robert_kuttner_and_michael

Naomi Klein, Robert Kuttner and Michael Hudson Dissect Obama’s New Economic Team & Stimulus Plan

(This is a mere one hour program that will make you feel as if you had suffered indignities for years.)

 

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Damnthematrix
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Re: CitiBank – No Questions Asked

Zombie Economics

   Though Citicorp is deemed too big to fail, it's hardly
reassuring to know that it's been allowed to sink its fangs into the
Mother Zombie that the US Treasury has become and sucked out a
multi-billion dollar dose of embalming fluid so it can go on pretending
to be a bank for a while longer. I employ this somewhat clunky metaphor
to point out that the US Government is no more solvent than the
financial zombies it is keeping on walking-dead support. And so this
serial mummery of weekend bailout schemes is as much of a fraud and a
swindle as the algorithm-derived-securities shenanigans that induced
the disease of bank zombification in the first place. The main question
it raises is whether, eventually, the creation of evermore zombified US
dollars will exceed the amount of previously-created US dollars now
vanishing into oblivion through compressive debt deflation.
My guess, given the usual time-lag factor, is that the
super-inflation snap-back will occur six to eighteen months from now.
And the main result of all this will be our inability to buy the
imported oil that comprises two-thirds of the oil we require to keep
WalMart and Walt Disney World running. At some point, then, in the
early months of the Obama administration, we'll learn that "change" is
not a set of mere lifestyle choices but a wrenching transition away
from all our familiar and comfortable habits into a stark and rigorous
new economic landscape.
The credit economy is dead and the dead credit residue of that
dead economy is going where dead things go. It came into the world as
"money" and it is going out of this world as a death-dealing disease,
and we're not going to get over this disease until we stop generating
additional zombie money out of no productive activity whatsoever. The
campaign to sustain the unsustainable is, besides war, the greatest
pitfall this society can stumble into. It represents a squandering of
our remaining scant resources and can only produce the kind of extreme
political disappointment that wrecks nations and leads to major
conflicts between them. I don't know how much Mr. Obama buys into the
current adopt-a-zombie program -- his Treasury designee Timothy
Geithner was apparently in on this weekend's Citicorp deal -- but the
President would be wise to steer clear of whatever the walking dead in
the Bush corner are still up to.

<MORE> http://jameshowardkunstler.typepad.com/clusterfuck_nation/

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Re: CitiBank – No Questions Asked

> Unless and until there is some John Galt-esque broadcast to the people they will remain clueless.

Good luck getting people to listen to anything longer than three sentences, and if it's non-trivial and requires stringing together fact(s) using (gasp) logic, then forget it. Sigh. Glad I'm not cynical.

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Re: CitiBank – No Questions Asked

Frown It just gets more and more frustrating as we go along.  *sigh*

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Citibank biggest drug money launderer on Wall Street


By Michael Ruppert who has been on Citibank for a long time.  This is from an article he published in 2001.   

U.S. Banks and The Dirty Money Empire

Washington and the mass media have portrayed the U.S. as being in the forefront of the struggle against narco trafficking, drug laundering and political corruption: the image is of clean white hands fighting dirty money. The truth is exactly the opposite. U.S. banks have developed a highly elaborate set of policies for transferring illicit funds to the U.S., investing those funds in legitimate businesses or U.S. government bonds and legitimating them. The U.S. Congress has held numerous hearings, provided detailed exposés of the illicit practices of the banks, passed several laws and called for stiffer enforcement by any number of public regulators and private bankers. Yet the biggest banks continue their practices, the sum of dirty money grows exponentially, because both the State and the banks have neither the will nor the interest to put an end to the practices that provide high profits and buttress an otherwise fragile empire.

First thing to note about the money laundering business, whether criminal or corrupt, is that it is carried out by the most important banks in the USA. Secondly, the practices of bank officials involved in money laundering have the backing and encouragement of the highest levels of the banking institutions - these are not isolated cases by loose cannons. This is clear in the case of Citibank's laundering of Raul Salinas (brother of Mexico's ex-President) $200 million account. When Salinas was arrested and his large scale theft of government funds was exposed, his private bank manager at Citibank, Amy Elliott told her colleagues that "this goes in the very, very top of the corporation, this was known...on the very top. We are little pawns in this whole thing" (p.35).

Citibank, the biggest money launderer, is the biggest bank in the U.S., with 180,000 employees world-wide operating in 100 countries, with $700 billion in known assets and over $100 billion in client assets in private bank (secret accounts) operating private banking offices in 30 countries, which is the largest global presence of any U.S. private bank. It is important to clarify what is meant by "private bank."

Private Banking is a sector of a bank which caters to extremely wealthy clients ($1 million deposits and up). The big banks charge customers a fee for managing their assets and for providing the specialized services of the private banks. Private Bank services go beyond the routine banking services and include investment guidance, estate planning, tax assistance, off-shore accounts, and complicated schemes designed to secure the confidentiality of financial transactions. The attractiveness of the "Private Banks" (PB) for money laundering is that they sell secrecy to the dirty money clients. There are two methods that big Banks use to launder money: via private banks and via correspondent banking. PB routinely use code names for accounts, concentration accounts (concentration accounts co-mingles bank funds with client funds which cut off paper trails for billions of dollars of wire transfers) that disguise the movement of client funds, and offshore private investment corporations (PIC) located in countries with strict secrecy laws (Cayman Island, Bahamas, etc.)

For example, in the case of Raul Salinas, PB personnel at Citibank helped Salinas transfer $90 to $100 million out of Mexico in a manner that effectively disguised the funds' sources and destination thus breaking the funds' paper trail. In routine fashion, Citibank set up a dummy offshore corporation, provided Salinas with a secret code name, provided an alias for a third party intermediary who deposited the money in a Citibank account in Mexico and transferred the money in a concentration account to New York where it was then moved to Switzerland and London.

The PICs are designed by the big banks for the purpose of holding and hiding a person's assets. The nominal officers, trustees and shareholder of these shell corporations are themselves shell corporations controlled by the PB. The PIC then becomes the holder of the various bank and investment accounts and the ownership of the private bank clients is buried in the records of so-called jurisdiction such as the Cayman Islands. Private bankers of the big banks like Citibank keep pre-packaged PICs on the shelf awaiting activation when a private bank client wants one. The system works like Russian Matryoshka dolls, shells within shells within shells, which in the end can be impenetrable to a legal process.

The complicity of the state in big bank money laundering is evident when one reviews the historic record. Big bank money laundering has been investigated, audited, criticized and subject to legislation; the banks have written procedures to comply. Yet banks like Citibank and the other big ten banks ignore the procedures and laws and the government ignores the non-compliance.

Over the last 20 years, big bank laundering of criminal funds and looted funds has increased geometrically, dwarfing in size and rates of profit the activities in the formal economy. Estimates by experts place the rate of return in the PB market between 20-25% annually. Congressional investigations revealed that Citibank provided "services" for 4 political swindlers moving $380 million: Raul Salinas - $80-$100 million, Asif Ali Zardari (husband of former Prime Minister of Pakistan) in excess of $40 million, El Hadj Omar Bongo (dictator of Gabon since 1967) in excess of $130 million, the Abacha sons of General Abacha ex-dictator of Nigeria - in excess of $110 million. In all cases Citibank violated all of its own procedures and government guidelines: there was no client profile (review of client background), determination of the source of the funds, nor of any violations of country laws from which the money accrued. On the contrary, the bank facilitated the outflow in its prepackaged format: shell corporations were established, code names were provided, funds were moved through concentration accounts, the funds were invested in legitimate businesses or in U.S. bonds, etc. In none of these cases - or thousands of others - was due diligence practiced by the banks (under due diligence a private bank is obligated by law to take steps to ensure that it does not facilitate money laundering). In none of these cases were the top banking officials brought to court and tried. Even after arrest of their clients, Citibank continued to provide services, including the movement of funds to secret accounts and the provision of loans.

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Re: CitiBank – No Questions Asked

Chris Martenson, armed with a candlestick chart and his head, predicted back in July, the latest, the demise of Citi. Those who say that the Fed & Treasury bureaucrats are just blindly reacting to present events seem to imply that Citi itself didn't know that it was in dire straits. If Chris saw this with a chart, what did the Citi accountants see with the detailed information? It shouldn't stretch the imagination to think that Citi has had all this time to plan and prepare their wishlist. What you should expect is that they were planning on the framework created by the bailout way before the bailout was announced or passed. The "puzzled bureaucrat" view also ignores a simple fact: all those guys are buddies! There is a revolving door between the government and the executive positions of the big banks. They know each other, they play with each other, they plan with each other. They know their business, because it is their business to externalize all costs and reap all profits. And political contributions and staffing the executive branch do buy you some prerrogatives. And that is not going to change of course. Look at Obama's picks: the head of the NY Fed for the Treasury? Larry Summers? Please...

Elaborating more on the movement thing: I am personally not advocating a revolt nor violence. The suspend-debt-payment may sound nice until you realize that there is no need to break stuff that is not broken yet, and that there is still a resemblance of a working economy, at least up to this point, and that not all debts out there were maliciously induced. But what I do advocate is getting people to start making noises in the halls of Congress. The calls, the sending of letters, but in a large-scale and organized way. In the 60's people attempted to get their voices heard. The elites freaked out, they called that the "excess of democracy." There are still some functioning mechanisms through which people can make themselves be heard. That capacity to organize is what freaks out the elites the most. There are many ideas and incipient movements out there, valuable ones, like monetary reform (http://www.honestmoneyreport.com/archives/2006/0305.php but that link is old so I don't even know if it works).

But one can be more pragmatic. A succint analysis like Chris's about the nature of the Citi bailout can be made into a protest letter. Imagine hundreds of those flooding the fax machines and emails and mailboxes of congresspeople, week after week. The letters will change frequently because there is plenty of material to protest about. The raw deals, the unpayable mountains of debt with which this and future generations are being chained. In one of Davos's links yesterday, the one with the hedge fund guy video, this dude confidently expressed that the government is solvent by virtue of its ability to tax. That's right, the full faith and credit of the US government is simply its ability to take EVERYTHING from you when the time comes, to repay debts incurred in your name, without asking. How solvent do YOU feel? We need to use the most prosaic mechanisms available, we need to start somewhere. I bet you that some congresspeople will have their first chance at understanding some of these issues themselves. But the point is not to educate them, the point is to show that people notice, that people care, and that the ultimate "special interest", i.e. the population, wants influence. In the face of that, they can only carry out their shameless behavior for so long.

So much effort now, to give diffusion to the Crash Course, and that is great, we need people to awaken, to generate discussions, to get scandalized. Because this is a scandal. More and more people will come to this site and to others. What will happen when we get critical mass? And critical mass for what? To tell people to get a weapons cache and go to the mountains? Is it every person for his/herself? We can do better than that. If we can mass-produce DVDs we can mass produce letters. If we can share videos and web links we can share specific, concise information that should just make other people catch fire with rage. And all by telling the truth. Little by little.

How many times have I seen in these forums, smart people showing disbelief at the nature of the monetary system and its implications? I don't even know. People catch on. How many of you were as cognizant of these issues a year ago? People CAN wake up.

I am just throwing out an idea, one that seems feasible. There will be community showings of the Crash Course now that the DVDs are out, you'll see reactions, people will want to act, and this is a relatively easy way.  Others may come up with better, workable things. But in this orgy of opinions that we have in these forums, in agreement and disagreement, some common objectives could be identified.  Heck, is this consistent with the intentions that Chris has? I don't even know. But I, for one, am thirsty for a feeling of empowerment by numbers and by organization. It is not enough for me to rant publicly as a matter of catharsis. I doubt that I am alone in this.

At the risk of being redundant, and to lighten things up, here is something I posted in another discussion:

... we do need to notice and we do need to care.

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Re: CitiBank – No Questions Asked

That's all very well mred.....  but you have left out one humungous fundametal issue here: THE DEBTS CAN NEVER BE REPAID.......

Debt has been growing exponentially, one of Chris' hockey sticks.  To repay that debt, more exponentially growing economic growth is required.  Otherwise we have to print more money, also exponentially, and we all know the consequences of doing that.

Whichever way we go, it cannot be done.  We no longer have the resources (particularly the energy) to, say. create another doubling of 'stuff'.  Chris' baseball stadium is full.....  and we cannot make it overflow.  Besides, the 'stuff' we already have is starting to crumble (all over the world BTW), and we're flat out maintaining THAT!

So, as left field as I know it sounds, I still say we will have to cancel the debts.  I've heard all the negative rumblings, I was expecting them.  But no one, absolutely no one, has yet offered up a better solution.

I can't think of one.  Can you? 

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Re: CitiBank – No Questions Asked

I should have added re: "Elaborating more on the movement thing: I am personally not advocating a revolt nor violence. The suspend-debt-payment may sound nice until you realize that there is no need to break stuff that is not broken yet"

Are you kidding?  Not broken yet?  How broken does it have to be before you see it broken?

The Matrix is STUFFED, and beyond all help.  I think even Chris has said so recently if my [poor] memory serves me right... 

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CitiBank – Plunder and Pillage

Martin Weiss has some words of warning about this.

Citigroup collapses! Banking Shutdown Possible

It pains me deeply
to announce that, despite the massive government rescue, yesterday’s
collapse of Citigroup could ultimately lead to a shutdown of the global
banking system. Link

I don't keep more money in a bank than I need for routine expenses, and I keep cash to last for a couple of months. I even have a credit card from the same bank where I do my checking. If those bastards cut off my checking account, they ain't getting paid. In today's environment, it's better safe than sorry.

Take the Citbank and the other bailouts as a warning of worse to come. These people have no inhibitions about taking your savings, your pensions, your 401k, whatever they need to stay afloat. 

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Mark Faber - "Nobody asks whether to do nothing is best option"

Some of you may have already seen the interview with Mark Faber today on Bloomberg TV - I was encouraged to see that he was  given airtime to publicly express his own sense of frustration over the actions taken by the U.S. Treasury and the Fed. 

For the full interview refer to: Mark Faber interview

A sampling of his comments are below:

<starting about half way through the interview..>

Quote:

Actually all observers and economies they think that to do something is the best option.  Nobody has asked the question whether to do nothing would be the best option and in my opinion, to do nothing would be the best option..to let people like Citigroup go bankrupt, let the shareholders lose everything, let the bond holders and the preferred share holders lose everything because it will be lost anyway but the next time it will be lost by the US taxpayer so its better the existing shareholders lose everything, the Government could guarantee the depositors and that would help the country..to support companies who've (made such terrible mistakes) ..is like supporting a criminal rather than putting him in jail..

I strongly agree that doing 'nothing' vs doing what they are doing with Citi is far preferable.  Whether doing nothing at all (from day one of the crisis) would have been the right solution is harder to determine.   However, we are going to spend a LOT of money no matter what choices are made, but spending money so the rich STAY rich galls me no end.  We've put off spending money on the right projects for far too long and the silver lining to this storm looked (at first) like it would be the catalyst to change direction and tackle the important challenges ahead of us.  Now what I seem to hear are the choruses of "Spend baby Spend" by the Treasury and Fed as they strive to find ways to get consumers back on their 'hamster wheel' of debt.  I am becoming disillusioned to the point that marching on Washington (or Wall Street) seems necessary if we are going to get the attention of our leaders and refocus their attention on meeting 'our' priorities and not those of wall street...

Daniel

 

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Re: CitiBank – No Questions Asked

I am overwhelmingly sick over this heinous bailout frenzy.

We have to be heard. the only thing I can hope for is a NATIONAL STRIKE. If even just 50% of Americans went to their businesses and and protested the government robberies taking place I would have hope.

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CitiBank – Plunder and Pillage

Martin Weiss has some words of warning about this.

Citigroup collapses! Banking Shutdown Possible

It pains me deeply
to announce that, despite the massive government rescue, yesterday’s
collapse of Citigroup could ultimately lead to a shutdown of the global
banking system. Link

I don't keep more money in a bank than I need for routine expenses, and
I keep cash to last for a couple of months. I even have a credit card
from the same bank where I do my checking. If those bastards cut off my
checking account, they ain't getting paid. In today's environment, it's
better safe than sorry.

Take the Citbank and the other bailouts as a warning of worse to come.
These people have no inhibitions about taking your savings, your
pensions, your 401k, whatever they need to stay afloat. 

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
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Posts: 458
CitiBank – Plunder and Pillage

Martin Weiss has some words of warning about this.

Citigroup collapses! Banking Shutdown Possible

It pains me deeply
to announce that, despite the massive government rescue, yesterday’s
collapse of Citigroup could ultimately lead to a shutdown of the global
banking system. Link

I don't keep more money in a bank than I need for routine expenses, and
I keep cash to last for a couple of months. I even have a credit card
from the same bank where I do my checking. If those bastards cut off my
checking account, they ain't getting paid. In today's environment, it's
better safe than sorry.

Take the Citbank and the other bailouts as a warning of worse to come.
These people have no inhibitions about taking your savings, your
pensions, your 401k, whatever they need to stay afloat. 

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Re: CitiBank – No Questions Asked

Damnthematrix:

First, don't make the mistake of
lumping together ALL debts. Yes, so the Fed's balance sheet took a
moonshot, yes, federal debt can't be repaid unless in the process of inflation
any wealth you have is stripped from you, or well, by defaulting. But normal people out there
are still in debt, maybe still paying their homes, student loans or
whatever. And you advocate that everyone stop payment on every debt?
That is what you say. And that is going to solve the problems how
exactly? Are there consequences to that that would be better not to
precipitate? The problem with the government's debts is that they are
incurred in your name, without your knowing unless you are paying
attention. Just mortgaging future generations. What does that
have to do with the personal financial commitments that individuals
have made and that still sustain to some degree what remains of our economic
interactions?

Second, no I'm not kidding. Can people
still go to the store to buy food? Do people still get to work in
general? Can people get on a bus and go somewhere? Buy gas? Flip on
the switch and there is electricity still? You get the idea. Things
are still working. I'm sure you have enough imagination to think
about how things will look like when they get really broken.
Furthermore, it is precisely the fact that things are not broken
enough which makes it difficult still to make the average person see
the dimensions of this predicament. It is precisely this what allows
so many people to remain oblivious. The fact that we can guess where things are heading doesn't change this fact.

 

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Re: CitiBank – No Questions Asked

Count me in! As time goes by the need for organization not only gains importance, but becomes less possible. Seriously, notify me when you see hopeful organization, I'll jump aboard.

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Re: CitiBank – No Questions Asked
mred wrote:

Damnthematrix:

First, don't make the mistake of
lumping together ALL debts

Why?  I know Americans are all hung up over their idiot government's indebtedness, but ALL debts, even private ones, need economc growth to pay off the interest. Where's that growth coming from in an energy descent scenario?  And besides, more economic growth simply means that even MORE DEBTS will be needed, and it was debt that got us into this quagmire...  It seems to me a lot of people on this site don't quite seem to have put ALL the stuff in the CC together...  the problems are all hockey stick shaped, not least debt, and we're running out of energy.  The baseball stadium's FULL of drops of water!

mred wrote:

Yes, so the Fed's balance sheet took a
moonshot, yes, federal debt can't be repaid unless in the process of inflation
any wealth you have is stripped from you, or well, by defaulting. But normal people out there
are still in debt, maybe still paying their homes, student loans or
whatever. And you advocate that everyone stop payment on every debt?
That is what you say. And that is going to solve the problems how
exactly?

Being free of debt frees you to do constructive things.  It means you can work a whole lot less, probably at least two days a week for most people, but a whole lot more for those in up to their necks.  It means they have to drive less, which means we will run out of oil a lot later than the current scenario, allowing us to plan to use what's left to build the new sustainable future we so badly need.  It also means less Fossil Fuels (FFs) are wasted on things that are trivial, and can be conserved for farming and transitioning to sustainable farming.

mred wrote:

Are there consequences to that that would be better not to
precipitate? The problem with the government's debts is that they are
incurred in your name, without your knowing unless you are paying
attention. Just mortgaging future generations. What does that
have to do with the personal financial commitments that individuals
have made and that still sustain to some degree what remains of our economic
interactions?

We need a whole new system.  This one's completely stuffed...  It's unsustainable, it won't last no matter what TPTB do...  so why flog a dead horse? 

mred wrote:

Second, no I'm not kidding. Can people
still go to the store to buy food? Do people still get to work in
general? Can people get on a bus and go somewhere? Buy gas? Flip on
the switch and there is electricity still? You get the idea.

And just how long do you think this can all keep going?  IF business as usual continues, next year there will be food and gas shortages....  All this idiotic consumption to pay off interest on debts that should ve canceled has to stop sometime, why not now? 

mred wrote:

Things
are still working. I'm sure you have enough imagination to think
about how things will look like when they get really broken.
Furthermore, it is precisely the fact that things are not broken
enough which makes it difficult still to make the average person see
the dimensions of this predicament. It is precisely this what allows
so many people to remain oblivious. The fact that we can guess where things are heading doesn't change this fact.

True, but people will get seriously pissed off when TSHTF...  will it not be too late then?  Will we not see blood in the streets?

Don't you think that if an internet campaign was started urging people to stop paying their debts off because the banks don't deserve to survive and telling people just how conned they were, that they might just take it up?  It would be a bloodless coup....  no one on the streets even, they all stay home and tear up their bank statements... 

Anyway, I still haven't seen a better proposition from this site. 

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Re: CitiBank – No Questions Asked

In a worst-case situation, when a declining economy simply prevents people from honoring debts, then people will stop payments. Your Draconian proposal, or I should say Solonesque, is redundant in this regard. Of course we need a new monetary system, we need sound money based on a positive value like an asset, and not on a negative one, debt. But to get from here to there we need continuity, we need a transition that is well thought out, with a cool head, some intelligence and some knowledge of economics. To just crash everything by wrecking whatever is left of the credit system would only bring misery and hunger, because a complex society does not deal well with shocks and discontinuities of the sort you propose. That much ought to be obvious. Wreck the system and indeed people will find themselves with more free time in their hands, especially due to explosive unemployment. This is where you would find empty shelves at the grocery store. 

It is not only the present monetary system that demands growth, it is also population. Your proposal would not fix this one bit. People here may understand the Crash Course better than what you think, because people recognize the complex problems, but are not proposing a one-size-fits-all solution that doesn't address any of the complexities.

It also turns out, that in a situation of shock and crisis, the elites stand to gain the most. Crises are always exploited to advance certain agendas, especially the ones that are thought out in advance. The agendas of the elites are quite clear, their goals better defined and their groups more compact than the rest of the population. If you haven't noticed, your enemies, the guys that are screwing you, are pretty smart. You can't gain advantage by being reckless. You would shoot yourself in the foot. Did you notice how much gains are they getting from this crisis? In a panic they will continue to get whatever they want, just faster.

Lastly, you insist that you haven't heard better ideas on "this site". I have seen lots of articles being pointed out by people here on the prescriptions by credible individuals that actually understand economics. The good proposals are out there (most based on the Austrian school view, I think), if you care to study them. Forum participants are pointing all the time to articles by Farber, Jim Rogers, Peter Schiff, etc. And those are just the popular ones. Is yours better than theirs? I don't think so. I even pointed out yesterday to a very interesting proposal for a seamless transition to a new monetary system:

http://www.peakprosperity.com/comment/6211#comment-6211

I would say that this proposal addresses the transition to a non-inflationary monetary system, addresses the important aspect of diluting the power of the elites and giving economic freedom to individuals, and all without creating shocks. This addresses the complexities and would put people in a better position to confront the real challenges of energy and resource depletion. Our current problem is something we should not be facing. But people need to push for something like this to happen. This is where organization is necessary.  We can't complain about the agendas of the bankers if we don't have real, thought-out proposals of our own, and we need to find the ways to push them forward. The proposals should also have appeal for the majority of the population to obtain support, and Draconian proposals rarely do.

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Re: CitiBank – No Questions Asked

What was overlooked here is the sales pitch that was fed to the sheeple.  The mainstream news provided a much different picture of this deal!  Remember this was unlike all those "Sweetheart" deals from before - Citi has to limit dividend payments to its shareholders, and they are limited in their ability to give bonus' to the executives who put this thing together.  WOW, what terrific oversight!

As a result of this well orchestrated marketing scheme, the world has completely bought into this latest rip-off of the taxpayers, and Citi stock is climbing!

I don't want to resort to expletives, but WTF?!

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Re: CitiBank – No Questions Asked

as someone who wrote emails till his hands could not function and called and called and called along with 70% of the american public in opposition to the bailout only to see our efforts get pissed on and our noses continuously rubbed in the manure i have my doubts about a letter writnig campaign accomplishing anything. remember a large number of people are stil drinking obama koolaid. who is going ot start this letter writing campaign?

i suggest you start the campaign right here and start writing the letters we can then email to " our" representatives.

i will be happy to send them off. 

i think your idea of the credit unions and gold and silver backing the currency are good ideas but i see no transition to a system like that. the powers that be will not go along with that. ron paul is an interesting sidlight to this whole drama but who is listening?  the only real change will be a violent revolution.....................imho

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Re: CitiBank – No Questions Asked

Paulson Receives Thank You Card From Carlos Slim 

A guy as savvy (which is probably inapropriatley used, given what we all know about the wealthy) as Carlos Slim, having watched multiple deals (made by Paulson) which knocked 90% off of the price off a stock in minutes, conveniently decides that whatever the Citi deal is, it's suddenly going to be radically different, exorbitantly generous to Citi at the expense of the taxpayer; thus, he (Slim) buys 29 Million shares at the bottom--temporary as it may turn out to be. (And to think that Martha Stewart went to jail for a few hundred thousand in avoided losses--rightfully so, but given the magnitude of the theft occuring today...) 

A Specific Example of Redistribution of Wealth: http://www.bloomberg.com/apps/news?pid=20601086&sid=aoPHoLjgduGY&refer=latin_america

 Every $1 that Paulson's gift to Citi causes the the stock to rise puts $29 Million in the pocket of Carlos Slim.

Thank you Henry Paulson. You are really saving the middle class by sending X multiples of $29 Million to a billionaire in Mexico.

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Re: CitiBank – No Questions Asked
Jconway wrote:

We have to be heard.

Amen to that! I really believe the survival of our nation hinges on the American public waking up and smelling the roses. Obama is going to be a good President, but most Americans are just assuming he'll make it all better. The challenges he faces are (arguably) larger than any President has faced in generations. This is going to be really rough, and the sooner the public wakes up and figures that out, the more chance we have of recovering.

Quote:

the only thing I can hope for is a NATIONAL STRIKE. If even just 50% of Americans went to their businesses and and protested the government robberies taking place I would have hope.

I have to disagree on that point. What I think we need is for the public to stand up and DEMAND ACCOUNTABILITY. A strike won't help. Getting the messages of the Crash Course in front of every voting American will.

I'm very optimistic that we can make a big difference. When we announced the DVD on the blog a week before we could actually process orders, we wanted to make sure we could sell 1000 discs before our partner went ahead and put the money up to produce them. We were'nt sure how ready this community was to really get involved and start a grassroots movement. 

We hoped to get 1000 disc orders before the end of the week. We had over 4000 orders in way less than 24 hours. We have now upped the first run to 10,000 discs.

If we really mobilize around the Crash Course DVD, I think we can start of constructive energy revolution. The problem now is that nobody "gets it". If a majority of Americans got onboard and understood what is really going on, we could change the world.

Ok, ok, I'll get off my soap box now. Laughing

Erik

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Re: CitiBank – No Questions Asked

I say burn baby burn.

Bring on the hyperinflation.

Let the dollar turn to dust.

Poof to all the fixed debt, personal and "governmental" (which I know is personally backed by us our kids, our grand-kids and our great, great, great, grand-kids).

Paying off 53++ trillion of off balance sheet debt and paying off 11 trillion ++ fed. debt would have never happened, not with our retarded idea of a service based loan addicted economy. If we were to do this I bet it would have equated to 1 general, Oboma and maybe a VP for our total government and military. We would have been taxed just to breathe. 

Maybe I'm nuts, but the big O's fire department looks like a f*%#*%g bunch of arsonists armed with blow torches. I don't think anything we do will help, alter or change "our" charted course.

Don't get burned: I'd advocate preparing yourself for anything that can protect you from hyperinflation and the fallout from it.

This is just my simple perspective...It clearly appears to me that these people have a plan and I no longer think that they are bafoons. They are at least smart enough to know to pick a cabinet from the same gene pool - look at the arsonists, one writer said they bring matches - phooey - these are professionals the entire team has blow torches and fire throwers.

"We" will drop the debt in the Empire of Debt.

The best thing I think we can do is educate people so we don't strip every resource the world has after they zero out the debt. 

 

 

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Re: CitiBank – No Questions Asked

mred,

I'm listening.  I like what you have to say.  Please keep it up.

mred wrote:

Lastly, you insist that you haven't heard better ideas on "this site". I have seen lots of articles being pointed out by people here on the prescriptions by credible individuals that actually understand economics. The good proposals are out there (most based on the Austrian school view, I think), if you care to study them. Forum participants are pointing all the time to articles by Farber, Jim Rogers, Peter Schiff, etc. And those are just the popular ones. Is yours better than theirs? I don't think so. 

I don't agree with canceling all debts and I think your thinking along the lines of a transition to a new monetary system.  I think a cash based monetary system would work well and I particularly like local complementary currencies because this keeps wealth circulating amongst the people.

Since joe2baba has separately pointed out the apparent futility of a letter writing campaign, and since awareness through Chris' DVD is the first step, how about we continue to solve the problem with a grassroots approach?  Rather than trying to change the system why don't we just rewrite the rules?  In order to step outside the Matrix we need sustainable farming in rural areas, work on making homes energy efficient, build community networks, homeschooling, using local complementary currencies for trade (and gold and silver coins for those that have a store of wealth), biodiesel projects...  I liked the book Deep Economy by Bill McKibben that points the way in this direction.

I think that this is the direction we eventually are going to end up.  The question is how much pain will it take before the transition is made?  With the world functioning more or less right now it is still possible to make such a Tier 3 transition.

Are we just going to wait until it is evident that this is the path we should have taken?  I'm not waiting and I'd like us all to head in this direction together. 

All the best,

James

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Re: CitiBank – No Questions Asked

hi erik

can i have some of your koolaid

"obama will be a good president"????????????????????????????

you really cant be serious. i guess you missed his appointment to sec of treas.

tim geithner. does that tell you anything? hint he is the current number two man at the federal reserve.

i quess i might as well start drinking my koolaid otherwise i will appear insane

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Re: CitiBank – No Questions Asked

CAN I GET AN AMEN...........................TELL IT REV.

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Re: CitiBank – No Questions Asked

mRed:

Hey, I do agree that we can and should mass produce DVD's and letters.

I'm not saying give up, I'm just trying to be somewhat realistic. I think, like the conferecne call I put up, and like you pointed out, they knew before we did. I think they know now. It's a big garbage truck coming our way, I don't think it is stoppable. But you are right, looting the taxpayers is just plain sick.

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Re: CitiBank – No Questions Asked

I apologize in advance for the length of this post. But hey, nobody is putting a gun to your head to read this... If you suffer from attention deficit, this is not the post for you. Want opinions in empty snippets? Go watch TV.

I heard somewhere that behind every cynic there is a frustrated idealist. To the cynics out there: I feel your pain, believe me, I'm one of you. If we were to make a cynicism contest, I would be a serious contender for the top prize. But I can't believe that thinking cynics can't band together. If I'm going down, I want to do it fighting. Being cynical doesn't mean being a pushover. What kind of wimpy cynics can't take a challenge?

To the extent that we can keep ourselves from going at each other's throats, something which I have practiced myself here, we have or can have a community. If that is so, what are our assets? The foundations are Chris's analysis, his information scouting, and his work of art, The Crash Course. There is the computer infrastructure and quiet human superstructure that supports Chris and makes this possible at all. We have growing numbers of people becoming interested. People willing to do some legwork in promoting some understanding. The Crash Course, a visual, understandable, summarized presentation is a phenomenal hook. Probably none of us would be here if it were not because of it.  I've seen people's reactions to it, in the US and abroad.  But then I have witnessed the powerlessness that people feel regarding how to react, the sense of isolation and the lack of a sense of community at various levels, not only at a local one. This should not be.

joe2baba: I share your sense of frustration. I did not have my eyes closed when I saw the marches and anti-war demonstrations, worldwide. And how as you say, people's noses were rubbed in the manure by having governments act the way they pleased. And it is true that something similar happened with the bailout. But if I may, let me reinterpret some things about those examples (and they are examples, if you are pro-war or whatever this doesn't change what I'm going to say).

Indeed in the prelude of the invasion of Iraq there were loud demonstrations, and people marched with their pickets and music and colorful attitudes. The reaction of the media was one of scorn. The "opinion makers" would edit interviews with participants trying to make the point of how clueless they were (and some were, I'm sure), thus presenting an image of the protesters as a marginal group. The same techniques are used every time there is a demonstration or march, be it in Seattle against the WTO or wherever. Their point is to emphasize the riots (and makes you wonder about who instigates the riots by the way), the loudness and overall obnoxiousness of the protesters. The media could criticize the young protesters' political and philosophical naiveness, to discredit them, but they didn't even need to. My point is, it is relatively easy for those in power to distort and even influence public demonstrations in a way that they lose their appeal in the eyes of the rest of the population. Unless the participation is truly massive and of the majority, demonstrations are ineffective. Lobbyists, for instance, don't demonstrate.

Something different happened during the bailout protests. There were no demonstrations. There were phone calls, letters of outrage and the like. In sufficient numbers, that freaks out politicians, because above all they fear that the beast of the public starts to rumble. In their ideal world they will just take the money from the banks and corporations every day, and every few years they want to get the rubber stamp from a clueless electorate. You see, your role in the elections is symbolic, lending your weight to one or the other establishment-approved candidate, and the rest of the time you are just supposed to go around in a soporific state, or if you are thoughtful, in a grinding-of-the-teeth state. It may be true that if someone took a poll, 70% of the public may have been opposed to the bailout. But you know what? It was not 70% of the population that was calling Congress or sending letters or emails. Be sure of this, politicians are nervous about public perceptions, the elite is, deep inside, afraid of you as a collective. Atomized you are nothing. The highly class-conscious elite will crap its pants if people get organized in large numbers. Free people can organize, free people can defend themselves. The media reaction was interesting. They had no choice but to report on this, they could not spin it by showing some obnoxious dude writing a protest letter. The media lost all pretense of objectivity those days, displaying outright fear mongering to the public, threatening that people would lose their savings. That happened all the same. 

The changes we are witnessing today are so momentous that it would be unforgivable for those who can see a little further ahead to just stand still. If you have a family, you will feel this responsibility in even stronger terms. It is not enough to barricade yourself with weapons inside a food-producing community. You know why? Because the elites will still come after you. Not long ago I read of some community that was starting to do local business with silver coins. Well, the government jumped on them, accusing them of not using "government approved" currency or something like that. I don't know how that case ended. We don't have freedom. When push comes to shove, everything will be taken from you, your savings, your excess food, you name it, you would be taxed to death. The crooks in government are wiping their asses with the Constitution as we speak. The current trends are towards further centralization of the economy, further centralization of the political power, further totalitarianism. If you don't want this for your kids, you have to fight. The first stage of this fight should use the formal and legal mechanisms still at the disposal of the population. There are still nominal democratic mechanisms that people can exploit before everything is taken away from you. You have to preempt. Above all, you must have a position to propose. 

We have all started with friends and family sharing our views, the Crash Course, the youtube videos, the other informative websites. Some people get it, others don't. But as things get messier, more people will get it.  As numbers will increase, the outrage will increase. We have the hook, we can explain much of the problems. But to close the deal we need to offer solutions, ideas, and yes, even a philosophical position and a path to action. This is tricky, I know, because it could alienate some who disagree. The conceptual framework has to be something sophisticated, intelligent, deep, but explainable. The principles are decentralization, freedom, the stuff that you are supposed to understand if you have ever read Jefferson. This is not impossible. The actions should be something simple, accessible; but in numbers that simplicity is powerful. In different places, here and abroad, people are starting to wake up, to ask questions. People are getting hungrier for knowledge. There are plenty of resources, here and out there. Check the materials of the CMRE (Committee for Monetary Research and Education), the essays of Antal Fekete on monetary stuff... lots of things. I'm exploring some of the suggestions that I have read in these forums. But it takes time to assimilate and to synthesize that information. The calling is for the people that are here now, paying attention. If you don't, then who?

James: you are totally right. The vision must be about decentralization, sustainable food production, sustainable energy production, all that stuff. But to decentralize the system and keep your freedom you have to take the establishment head on, making yourself heard. We need to take on the monetary system, the true power base of the guys that are ruining this society if not the world. If you just "do the right thing" on your own, they will trample you all the same, because our economy is not designed for decentralized operation. Have you listened to any talks by Catherine Austin Fitts by any chance? They are great. If you get a chance, read her personal story in http://www.dunwalke.com/ it is a long read, but worthwhile. Her other website is at http://solari.com/, check out the archives, the "Tapeworm" article. She is a smart, admirable woman. There is your pragmatic position about decentralization, about how grassroots community organization is essential. Most important: what are the pragmatic steps to start. Get into it, you'll know what I mean.

Our question then becomes: can we really generate the numbers? Can we attract the number of people that is necessary to push, based on an understanding of the crisis and a sense of community, a solution? What solution(s) would this be? In my view, monetary reform is a great place to start.  Bankers use the crisis to get everything for themselves. The population needs to respond, using the crisis to express their outrage first and demand something second. Demonstrate the outrage by explaining to some congressperson your perception of a particular bailout event, let them in that you understand the corruption; demand to stop this mortgaging of future generations, this incredible transfer (the true redistribution of wealth) of resources from your pockets into the banks, demand monetary reform, demand a repeal the legal tender laws. Allow the introduction of competitive currencies. People will join efforts with you if they understand.

The solutions are out there, we don't even need to be original. But we need to welcome people not only with an understanding of a scary crisis, but with views and actions that they can support. The easiest ones are to send letters. We can write the letters for them. Have downloadable stuff that they just sign and mail. Protests, outrage, stuff that lets representatives know that we are on to them. Express outrage, demand accountability and propose something, relentlessly. We are not there yet, more discussion and arguing will be necessary, but that ought to be a goal. If there is failure at the end of such an effort, you have the moral high-ground to bitch all you want. But not before.

That is all for what ended up becoming the mred manifesto. Erik, it looks like my soapbox kicks the crap out of yours.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: CitiBank – No Questions Asked

www.globalresearch.ca/index.php?context=viewArticle&amp;code=ENG20081124&amp;articleId=11117

Colossal Financial Collapse

The Truth behind the Citigroup Bank "Nationalization"

By F. William Engdahl

On Friday
November 21, the world came within a hair’s breadth of the most
colossal financial collapse in history according to bankers on the
inside of events with whom we have contact. The trigger was the bank
which only two years ago was America’s largest, Citigroup. The size of
the US Government de facto nationalization of the $2 trillion
banking institution is an indication of shocks yet to come in other
major US and perhaps European banks thought to be ‘too big to fail.’

November 25, 2008 "Global Research" -- The
clumsy way in which US Treasury Secretary Henry Paulson, himself not a
banker but a Wall Street ‘investment banker’, whose experience has been
in the quite different world of buying and selling stocks or bonds or
underwriting and selling same, has handled the unfolding crisis has
been worse than incompetent. It has made a grave situation into a
globally alarming one.

‘Spitting into the wind’

A case in point is the
secretive manner in which Paulson has used the $700 billion in taxpayer
funds voted him by a labile Congress in September. Early on, Paulson
put $125 billion in the nine largest banks, including $10 billion for
his old firm, Goldman Sachs. However, if we compare the value of the
equity share that $125 billion bought with the market price of those
banks’ stock, US taxpayers have paid $125 billion for bank stock that a
private investor could have bought for $62.5 billion, according to a
detailed analysis from Ron W. Bloom, economist with the US United
Steelworkers union, whose members as well as pension fund face
devastating losses were GM to fail.

That means half of the
public's money was a gift to Paulson’s Wall Street cronies. Now, only
weeks later, the Treasury is forced to intervene to de facto
nationalize Citigroup. It won’t be the last.

Paulson demanded, and
got from a labile US Congress, Democrat as well as Republican, sole
discretion over how and where he can invest the $700 billion, to date
with no effective oversight. It amounts to the Treasury Secretary in
effect ‘spitting into the wind’ in terms of resolving the fundamental
crisis.

It should be clear to
any serious analyst by now that the September decision by Paulson to
defer to rigid financial ideology and let the fourth largest US
investment bank, Lehman Brothers fail, was the proximate trigger for
the present global crisis. Lehman Bros.’ surprise collapse triggered
the current global crisis of confidence. It was simply not clear to the
rest of the banking world which US financial institution bank might be
saved and which not, after the Government had earlier saved the far
smaller Bear Stearns, while letting the larger, far more strategic
Lehman Bros. fail.

Some Citigroup details

The most alarming aspect
of the crisis is the fact that we are in an inter-regnum period when
the next President has been elected but cannot act on the situation
until after January 20, 2009 when he is sworn in.

Consider the details of the latest Citigroup government de facto nationalization
(for ideological reasons Paulson and the Bush Administration
hysterically avoid admitting they are in the process of nationalizing
key banks). Citigroup has more than $2 trillion of assets, dwarfing
companies such as American International Group Inc. that got some $150
billion in US taxpayer funds in the past two months. Ironically, only
eight weeks before, the Government had designated Citigroup to take
over the failing Wachovia Bank. Normally authorities have an ailing
bank absorbed by a stronger one. In this instance the opposite seems to
have been the case. Now it is clear that the Citigroup was in deeper
trouble than Wachovia. In a matter of hours in the week before the US
Government nationalization was announced, the stock value of
Citibank plunged to $3.77 in New York, giving the company a market
value of about $21 billion. The market value of Citigroup stock in
December 2006 had been $247 billion. Two days before the bank
nationalization the CEO, Vikram Pandit had announced a huge 52,000 job slashing plan. It did nothing to stop the slide.

The scale of the hidden
losses of perhaps the twenty largest US banks is so enormous that if
not before, the first Presidential decree of President Barack Obama
will likely have to be declaration of a US ‘Bank Holiday’ and the full
nationalization of the major banks, taking on the toxic assets and
losses until the economy can again function with credit flowing to
industry once more.

 

Citigroup and the
government have identified a pool of about $306 billion in troubled
assets. Citigroup will absorb the first $29 billion in losses. After
that, remaining losses will be split between Citigroup and the
government, with the bank absorbing 10% and the government absorbing
90%. The US Treasury Department will use its $700 billion TARP or
Troubled Asset Recovery Program bailout fund, to assume up to $5
billion of losses. If necessary, the Government’s Federal Deposit
Insurance Corporation (FDIC) will bear the next $10 billion of losses.
Beyond that, the Federal Reserve will guarantee any additional losses.
The measures are without precedent in US financial history. It’s by no
means certain they will salvage the dollar system.

The situation is so
intertwined, with six US major banks holding the vast bulk of worldwide
financial derivatives exposure, that the failure of a single major US
financial institution could result in losses to the OTC derivatives
market of $300-$400 billion, a new IMF working paper finds. What’s
more, since such a failure would likely cause cascading failures of
other institutions. Total global financial system losses could exceed
another $1,500 billion according to an IMF study by Singh and Segoviano.

The madness over a Detroit GM rescue deal

The health of Citigroup
is not the only gripping crisis that must be dealt with. At this point,
political and ideological bickering in the US Congress has so far
prevented a simple emergency $25 billion loan extension to General
Motors and other of the US Big Three automakers—Ford and Chrysler.
The absurd spectacle of US Congressmen attacking the chairmen of the
Big Three for flying to the emergency Congressional hearings on a
rescue loan in their private company jets while largely ignoring the
issue of consequences to the economy of a GM failure underscores the
utter lack of touch with reality that has overwhelmed Washington in
recent years.

For GM to go into
bankruptcy risks a disaster of colossal proportions. Although Lehman
Bros., the biggest bankruptcy in US history, appears to have had an
orderly settlement of its credit defaults swaps, the disruption
occurred before-hand, as protection writers had to post additional
collateral prior to settlement. That was a major factor in the dramatic
global market selloff in October. GM is bigger by far, meaning bigger
collateral damage, and this would take place when the financial system
is even weaker than when Lehman failed.

In addition, a second,
and potentially far more damaging issue, has been largely ignored. The
advocates of letting GM go bankrupt argue that it can go into Chapter
11 just like other big companies that get themselves in trouble. That
may not happen however, and a Chapter 7 or liquidation of GM that would
then result would be a tectonic event.

The problem is that
under Chapter 11 US law, it takes time for the company to get the
protection of a bankruptcy court. Until that time, which may be weeks
or months, the company would need urgently ‘bridge financing’ to
continue operating. This is known as ‘Debtor-in-Possession or DIP
financing. DIP is essential for most Chapter 11 bankruptcies, as it
takes time to get the plan of reorganization approved by creditors and
the courts. Most companies, like GM today, go to bankruptcy court when
they are at the end of their liquidity.

DIP is specifically for
companies in, or on the verge of bankruptcy, and the debt is generally
senior to other outstanding creditor claims. So it is actually very low
risk, as the amount spent is usually not large, relatively speaking.
But DIP lending is being severely curtailed right now, just when it is
most needed, as healthier banks drastically cut loans in the severe
credit crunch situation.

Without access to DIP
bridge financing, GM would be forced into a partial, or even a full
liquidation. The ramifications are horrendous. Aside from loss of
100,000 jobs at GM itself, GM is critical to keep many US auto
suppliers in business. If GM failed soon most, possibly even all of the
US and even foreign auto suppliers will go under. Those parts suppliers
are important to other auto makers. Many foreign car factories would be
forced to close due to loss of suppliers. Some analysts put 2009 job
losses from a GM failure as high as 2.5 million jobs due to the
follow-on effects. If the impact of that 2.5 million job loss is seen
in terms of the overall losses to the economy of non-auto jobs such as
services, home foreclosures caused and such, some estimate total impact
would be more than 15 million jobs.

So far in the face of
this staggering prospect, the members of the US Congress have chosen to
focus on the fact the GM chief, Rick Wagoner, flew in his private
company jet to Washington. The Congressional charade conjures up the
image of Nero playing his fiddle as Rome goes up in flames. It should
not be surprising that at the recent EU-Asian Summit in Beijing,
Chinese officials mooted the idea of trading between the EU and Asian
nations such as China in Euro, Renminbi, Yen or other national
currencies other than the dollar. The Citigroup bailout and GM debacle
has confirmed the death of the post-1944 Bretton Woods Dollar System.

The real truth behind Citigroup bailout

What neither Paulson nor
anyone in Washington is willing to reveal is the real truth behind the
Citigroup bailout. By his and the Republican Bush Administration’s
adamant earlier refusal to take an initial resolute action to
immediately nationalize the nine or so largest troubled banks, he has
created the present debacle. By refusing on ideological grounds to
instead reorganize the banks’ assets into some form of ‘good bank’ and
‘bad bank,’ similar to what the Government of Sweden did with what it
called Securum, during its banking crisis in the early 1990’s, Paulson
and company have created a global financial structure on the brink.

A Securum or similar temporary nationalization
would have allowed the healthy banks to continue lending to the real
economy so the economy could continue operating, while the State merely
sat on the undervalued real estate assets of the Swedish banks for some
months until the recovering economy made the assets again marketable to
the private sector. Instead, Paulson and his ‘crony capitalists’ in
Washington have turned a bad situation into a globally catastrophic
one.

His apparent realization
of the error of his initial refusal to nationalize came too late. When
Paulson reversed policy on September 19 and presented the nine largest
banks with an ultimatum to accept partial Government equity ownership,
abandoning his original bizarre plan to merely buy up the toxic waste
asset-backed securities of the banks with his $700 billion TARP
taxpayer money, he never revealed why.

Under the original
Paulson Plan, as Dimitri B. Papadimitriou and L. Randall Wray of the
Jerome Levy Institute at Bard College in New York point out, Paulson
sought to create a situation in which the US ‘Treasury would become an
owner of troubled financial institutions in exchange for a capital
injection—but without exercising any ownership rights, such as
replacing the management that created the mess. The bailout would be
used as an opportunity to consolidate control of the nation’s financial
system in the hands of a few large (Wall Street) banks, with government
funds subsidizing purchases of troubled banks by "healthy" ones.’

Paulson soon realized
the scale of crisis, largely triggered by his inept handling of the
Lehman Brothers case, had created an impossible situation. Were Paulson
to use the $700 billion to buy up toxic waste ABS assets from the
select banks at today’s market price, the $700 billion would be far too
little to take an estimated $2 trillion ($2,000 billion) in Asset
Backed Securities off the books of the banks.

The Levy Economics
Institute economists state, ‘It is probable that many and perhaps most
financial institutions are insolvent today -- with a black hole of
negative net worth that would swallow Paulson's entire $700 billion in
one gulp.’

That reality is the real
reason Paulson was forced to abandon his original ‘crony bailout’ TARP
plan and opt to use some of his money to buy equity shares in the nine
largest banks.

That scheme as well is ‘dead on arrival’ as the latest Citigroup nationalization
scheme underscores. The dilemma Paulson has created with his inept
handling of the crisis is simple: If the US Government paid the true
value for these nearly worthless assets, the banks would have to write
down huge losses, and, as Levy economists put it, ‘announce to the
world that they are insolvent.’ On the other hand, if Paulson raised
the toxic waste purchase price high enough to protect the banks from
losses, $700 billion ‘will buy only a tiny fraction of the 'troubled'
assets.’ That is what the latest nationalization of Citigroup is about.

It is only the
beginning. The 2009 year will be one of titanic shocks and changes to
the global order of a scale perhaps not experienced in the past five
centuries. This is why we should speak of the end of the American
Century and its Dollar System.

How destructive that
process will be to the citizens of the United States who are the prime
victims of Paulson’s crony capitalists, as well as to the rest of the
world depends now on the urgency and resoluteness with which heads of
national Governments in Germany, the EU, China, Russia and the rest of
the non-US world react. It is no time for ideological sentimentality
and nostalgia of the postwar old order. That collapsed this past
September along with Lehman Brothers and the Republican Presidency.
Waiting for a ‘miracle’ from an Obama Presidency is no longer an option
for the rest of the world.

© Copyright F. William Engdahl, Global Research, 2008

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
Joined: Apr 5 2008
Posts: 458
Re: CitiBank – No Questions Asked

I take one exception to Mred's otherwise fine essay.

Demonstrate the outrage by explaining to some congressperson your
perception of a particular bailout event, let them in that you
understand the corruption; demand to stop this mortgaging of future
generations, this incredible transfer (the true redistribution of
wealth) of resources from your pockets into the banks, demand monetary
reform, demand a repeal the legal tender laws. Allow the introduction
of competitive currencies.

Mred- you're the one who posted Carlin's rant on the American Dream at #26. Everybody view it again for as many times as it takes for it to sink in that they don't give a shit. Even the Vietnam War protests had little effect on the conduct of the war.

The federal government of today has gotten much more vicious than the governnment of the 70s. If you send letters, you risk getting yourself on a troublemaker list. If you join open protests, you risk getting fingerprinted, beaten or shot. When martial law comes, you'll be at the top of their hit list when the Gestapo comes breaking down doors.Take heed. The feds will attack anybody they see as a threat to their authority.

My advice is to adopt a guerilla warfare approach. Don't openly fight the system; leave it. Don't vote. Don't cooperate if you are called for jury duty. Make "honest" mistakes in your favor when you do your taxes. Get your savings out of the banking system and into gold and silver. Be prepared to barter them in a black market if they become illegal. Realize that vast majority of people you know in everyday life are incapable of taking action to protect themselves; don't waste your time and energy. Stay in touch with social networks of like minded individuals.

Politcal power is dependent on the cooperation of the clueless masses. By becoming independent from government as much as practically possible, you're actions are steered to taking their power away. That's the best you can accomplish, because you're going to lose of you try to beat them by  their rules.

Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Mission Accomplished

The central bank is simply performing its main reason for existing ---- a lender of last resort to the large NY banks that gave it life. It was JP Morgan and other large bankers that worked behind the scenes to have the Federal Reserve Act passed by congress. Banking laws were shaped by bankers so it naturally favors them.

The US Federal Reserve System was modeled after the Bank Of England which was created to lend money to the King, to fund Wars. The reason Jefferson opposed the establishment of a central bank in the US. The lender of last resort was an added feature to the US system.

 

From Bernanke:

"Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in input and employment, and to promote a stable financial system that serves all Americans well and fairly"

But how might this work in the economy? Here are two core assumptions they work under, and an opposite view ---

(1) Money supply needs flexibility for the economy to grow.

If the supply of produced goods are expanding while the money supply remains relatively stable, it is the buying power of money that will expand, and there is no limit to this. The Fed labels this natural result as the bogeyman deflation, fooling you into thinking it's bad. It simply doesn't fit into their model. They have programmed you into accepting its opposite --- loss of purchasing power (inflation)

(2) The economy will not grow if not artificially stimulated.

If it's good for the government to stimulate, why not the local counterfeiter? If raising the minimum wage helps the poor, why not raise it to $200 per hour? The only time people abstain from using their money is if they don't trust the current environment. Otherwise people save to spend later. Again this very human action doesn't fit in their model so saving is demonized and labeled as hoarding.

The loss of purchasing power and trillion dollar debt our grandchildren can never repay is ignored and treated as collateral damage to be accepted.

But why all the uninterrupted flow of stupid decisions at the federal level?

Because all these decisions are derived mostly from the teachings of Maynard Keynes and the decision makers have been calling plays after plays from the same playbook since 1930s!

Freidrich Hayek has demolished his economic concepts brick-by-brick back in the 1930s But even when Keynes have admittedly changed his views, his concepts are being taught in American universities to this day.

Most of members of Congress who actually studied economics drank from the same punchbowl while attending school. Not their fault, it is what's being served.

James Grant have said he learned of Austrian economic theories everywhere except in school. The Austrian economists are proponents of free markets and sound money. It is the counterpoint to the prevailing economic thought. You hear it every so often and you think it makes sense but runs counter to what you were taught in economics.

Where do we go from here?

We need a law of 100% reserve backing on demand deposits and provide it with legal property rights. This will prevent bank runs arising from the conflict of multiple claims from a single source. Only time deposits should be lent out by banks, under terms of a legal contract.

The market should decide which money is best, as long as it is not under the control of the government. Since gold has been chosen by people for millenia, they might choose it again.

Americans gold that was confiscated by FDR in the 1940s are still locked up at Fort Knox so it must be returned to the people. I was stunned when I first heard this.

 

For a thorough discussion of how we can move away from a fiat currency to sound money, have a look at this book

http://mises.org/books/desoto.pdf

 

 

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